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Shaikh and Aviva Canada – SPECIAL AWARD – Award could be sought by insured for unreasonable delays in payments by insurer, even where insurer subsequently makes up the delayed payments and there is nothing owing at time of arbitration. February 20, 2010, Kitchener, Ontario Posted by: Robert Deutschmann, Personal Injury Lawyer Arbitrator: Arbitrator John Wilson The striking out of an issue in an application for arbitration prior to a full hearing in the arbitration system is not an ordinary event in FSCO arbitrations. The Dispute Resolution Practice Code which applied to arbitration is not as comprehensive. In fact there is no specific foundation for a motion to strike a part of a pleading in the Code.
However, given Rule 1 of the Code which provides for "most just, quickest and least expensive resolution of the dispute," the arbitrator found that not only is the absence of a Rule not only not a barrier to such motions but that in appropriate situations, such a procedure may provide the "most just, quickest and least expensive resolution of the dispute.” Although arbitrators are statutory tribunals and not judges with a full panoply of inherent powers, the Insurance Act and the Statutory Powers Procedure Act endow arbitrators with considerable direct and implied jurisdiction over the issues and parties in dispute. Like FSCO, various courts in Canada have specific dismissal provisions in their rules of practice, while others do not. Whether or not specifically provided for in their rules all courts in Canada exercise this jurisdiction to dismiss matters or elements of pleadings as part of their inherent jurisdiction. The arbitrator accepted that there is jurisdiction for an arbitrator to dismiss a matter or strike out a portion of a claim, other than after a full hearing on the merits, where the continuation of the claim would constitute an abuse of process. In this case the abuse of process would have been to advance a claim that had no possibility of success. The arbitrator found, therefore, that if a pleading, or an element of a pleading, in this case, the claim for a special award, can be characterized beyond any doubt, incapable of success, then the arbitrator may exercise a discretion to strike out that part of an arbitration claim. In this case Aviva relied on the wording of section 282(10) to claim that no special award could issue in a situation where, as in the present case, there were no outstanding benefits "to which the person was entitled at the time of the award.” According to Aviva no special reward could ever issue in such circumstances.
For reasons which are elaborated on below, the arbitrator was not convinced that, on the basis of the facts in this case, a claim for a special award was "certain to fail." The special award has been part of the present accident benefit scheme since its inception. Early on the provision was accepted and applied by arbitrators in a straightforward manner. It was clearly perceived to be a means of addressing the difficulties caused to an insured by unreasonable delay or a failure by an insurer to pay accident benefits. It seemed clear that the intention of creating the special award was to a degree to replace both aggravated damages and punitive damages, which would no longer be available to an insured who opted to take a dispute to arbitration. The special award fills the gap covered by the absence of both aggravated damages and punitive damages. As Arbitrator Palmer noted in Plowright, the threshold for a special award is not terribly high. It requires no proof of intent by an insurer, no demonstration of malice, only an unreasonable withholding of benefits. The claimant must only demonstrate the unreasonableness of the withholding or delay of benefits. While, as in the case of the interest provisions of the Schedule, in the special award there is an element of punishment for the delay in paying accident benefits, a special award is more than just "punishment' of an insurer. A key concept in accident benefits is "prompt payment of an income benefit." Until the issuance of the Persofsky appeal decision there was a general consensus that: 1. A Special Award was mandatory once a finding was made of unreasonable delay or withholding of payments.
2. The Special award could be based on the overall value of the award made. 3. The quantum of the award could be expressed as a percentage of the total award. 4. A Special Award was not avoided by the Insurer paying up the outstanding amounts prior. 5. A Special Award could be in issue either at the instance of the insured, or the arbitrator hearing the matter, provided only that fair notice is given. There was a shift of focus in appeal decisions to the punitive aspects of the special award, as well as what seems in retrospect to be a purposeful reduction in the availability and amount of special awards.
The new approach as outlined in Persofsky was that an arbitrator should:
1. Determine the benefits owing to the insured person, including interest calculated under the applicable version of the SABS;
2. Decide whether the insurer unreasonably withheld or delayed the payment of these benefits. If so, the insurer will be ordered to pay a lump sum amount in addition to the benefits and interest calculated in #1;
3. If the insurer did not act unreasonably in respect of all the benefits owing under #1, determine the amount of the benefits that were unreasonably withheld or delayed, and the interest payable on these benefits under the applicable version of the SABS.
4. Determine the maximum special award that can be awarded under s. 282(10), or at least a reasonable approximation. This is done by taking the amount in #1 or #3, whichever is applicable, and adding the additional interest component in s. 282(10) C two per cent per month, compounded monthly. To be clear, this calculation includes interest on the unpaid SABS interest. The maximum special award is 50 per cent of this total. Expressed as a formula, the calculation is as follows:
Maximum special award = 50% x (benefits that were unreasonably withheld or delayed + interest on these benefits calculated under the SABS + compound interest calculated according to s. 282(10))
5. Consider all relevant factors (discussed below) to determine an appropriate lump sum special award, not a percentage, that responds to the facts of the case and bears a reasonable relationship to other special awards, and does not exceed the maximum.
6. Provide reasons for concluding that the special award is payable, and for the amount of the award.
7. In the order, express the special award as a specific, lump sum amount. No interest is payable on this amount, except as part of the enforcement process.
The element of delay was addressed to a large degree by the statutory interest provisions which were viewed as complementary to a punitive special award, and to be considered in setting the value of such. That portion of section 282(10) dealing with the quantum of the award provides that an arbitrator calculate the award to a maximum of: “50 per cent of the amount to which the person was entitled at the time of the award together with interest on all amounts then owing to the insured (including unpaid interest).”
Taken separately from the rest of the provision, this section appears to imply that there must be an entitlement "at the time of the award" for any amount to be ordered. A literal interpretation of this section would lead one to believe that an insurer could pay up a benefit any time prior to the decision of making the award, with no consequence. Since no amount that was merely delayed could be outstanding at the time that a special award was made, the amount of the award could only be zero. A zero award is no award at all.
As has been noted before there is a tension between this provision and the first part of section 282(10) which mandates a special award to be made not only where an amount was withheld unreasonably but where "an insurer has unreasonably withheld or delayed payments.”
A delayed payment is one that is actually made, but at a date later than when it was due. Since it was only "delayed" and not withheld, a literal interpretation of "at the time of the award" would make an award solely for a delayed payment impossible. Clearly a strict reading of the section would produce a tension between the mandatory special award for delay in payment, and the necessarily zero quantum of such an award if the amounts owed are paid up prior to adjudication. Such would be an absurdity. Avoiding absurdity is only one of the interpretive tools available. Indeed even the resolution of absurdity must be done in the context of the overall spirit of the legislation. The mandate of the accident benefit scheme is consumer protection. The provisions are to be interpreted in a broad and liberal manner. It is clear that the unavailability of either punitive or aggravated damages in statutory arbitration means that part of the trade-off included incorporating these heads of damages under the rubric of special award. It is clear that not only is section 282(10) internally inconsistent but that a literal reading of its provisions would run counter to both the consumer protection mandate, and the goal of providing accident benefits to injured persons in a timely manner.
Mandating a special award but requiring that it be zero, if it relates to unreasonable delay, simply does not encourage the timely payment of benefits. As such it is inconsistent with both the consumer protection mandate, and the mandate to provide some sort of compensation to those insured whose payments were unreasonably delayed. The problem then becomes how to apply the internally inconsistent legislation. While Mr. Shaikh's entitlement to a special award for delayed payments could have been rendered nugatory if the hearing arbitrator strictly followed the spirit of the scheme set up in Persofsky, limiting a special award to those benefits actually withheld, and owing at the time of the award, such an approach would have run contrary to the jurisprudence at the Commission, including decisions issued by the former Director himself.
Given that Mr. Shaikh still had some other outstanding claims against Aviva, it was not out of the realm of possibility that a positive special award could be made calculated as a percentage of those claims, provided that an arbitrator accepts them, since those claims could well constitute an amount to which the person was entitled at the time of the award. From the point of view of providing a timely, efficient and cost-effective manner of resolving disputes, striking the issue of special award would not necessarily have the effect envisaged by the Insurer. An arbitrator always retains the discretion to raise the issue of a special award, subject only to the rules of natural justice with regard to notice, and the opportunity respond to the issue. Thus whether the Applicant's claim for a special award is struck at his point in the proceedings, it may well re-appear at the instance of the arbitrator should he or she be satisfied that the pre-conditions of such an award exist. An applicant may discover further and possibly different grounds to advance a claim for a special award. Consequently, a decision striking the issue of a special award at the early stage of the process would not necessarily be more efficient. The arbitrator concluded, given a finding of unreasonable delay or withholding of benefits, it was altogether possible that an arbitrator could order some sort of special award, whether under the traditional jurisprudence (pre-Persofsky), or based on a contextual and purposive interpretation of the provisions of section 282(10) of the Insurance Act.
Given such a finding, it was not "plain and obvious" that the claim for a special award would not succeed. Consequently this motion was dismissed. About Paquette Travers & Deutschmann Paquette Travers & Deutschmann serve South-Western Ontario with offices in Kitchener-Waterloo, Cambridge, Woodstock, Brantford, Stratford and Ayr. The law practice of Robert Deutschmann and Doug O’Toole focuses almost exclusively in personal injury and disability insurance matters. For more information, please visit www.deutschmannlaw.com or call us toll-free at 1-866-414-4878. It is important that you review your accident benefit file with one of our experienced personal injury / car accident lawyers to ensure that you obtain access to all your benefits which include, but are limited to, things like physiotherapy, income replacement benefits, vocational retraining and home modifications. |
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“Paquette Travers” and “Deutschmann and Associates PC” practicing in association as Paquette Travers and Deutschmann. |
Paquette Travers & Deutschmann Law concentrates its practice in matters of personal injury, disability insurance claims and medical malpractice including car accidents, hospital negligence, whiplash, fibromyalgia, scarring, chronic pain, depression, fractures, orthopedic injuries, catastrophic injury, brain injury, spinal cord injury, wrongful death, slip and falls, dog bites, defective products. Serving Kitchener, Waterloo, Cambridge, Brantford, Ayr, Woodstock, Ontario. |
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