May 03, 2009, Kitchener, Ontario
Posted by: Robert Deutschmann, Personal Injury Lawyer
Arbitrator: Lloyd (J.R.) Richards
Decision Date: April 17, 2009
Timothy J. Wry was injured in a motor vehicle accident on December 16, 2000. He applied for and received statutory accident benefits from Aviva Canada. Mr. Wry submitted applications to Aviva for a determination of whether he had sustained a catastrophic impairment. Aviva assessed Mr. Wry and determined that he had not sustained a catastrophic impairment.
The preliminary issue of this case was to determine if Mr. Wry was prevented from proceeding to arbitration because his application for arbitration was filed beyond the two-year limitation period set out in subsection 281(5) of the Insurance Act and subsection 51(1) of the Schedule.
Timothy Wry was involved in a motor vehicle accident on December 16, 2000. On or about June 19, 2003 Mr. Wry submitted to Aviva an Application for Determination of a Catastrophic Impairment ("CAT Application"). On or about March 17, 2004 Aviva sent notification to Mr. Wry denying that Mr. Wry had sustained a catastrophic impairment. Mr. Wry sent to Aviva subsequent CAT Applications dated July 21, 2006 and April 13, 2007. Aviva refused to consider both subsequent CAT Applications. By application dated February 13, 2007, Mr. Wry filed for mediation on the issues of catastrophic determination and entitlement to the enhanced benefits available to the catastrophically impaired. The Report of Mediator was issued on May 23, 2007. By application dated August 20, 2007, Mr. Wry filed for arbitration on the issues of catastrophic determination and entitlement to enhanced benefits.
Submissions of Mr. Wry and Aviva
Mr. Wry's Position:
Mr. Wry's second application was over two years after Aviva had sent notification to Mr. Wry denying that he had sustained a catastrophic impairment. Subsection 281(5) of the Insurance Act provides that an insured person must challenge an insurer's denial of a benefit within two years of the insurer's denial.
Mr. Wry submitted that he had a right to re-apply to Aviva for a determination of whether he had suffered a catastrophic impairment. Mr. Wry asserted that the limitation provisions in the Insurance Act and the Schedule indicate a two year limitation period in relation to the "insurer's refusal to pay the benefit claimed." Since the application for catastrophic determination was not for a "benefit claimed," but rather, an entitlement test, the limitation provisions did not apply to the issue.
Aviva submitted that lawsuits should be brought within a reasonable period of time. The underlying policy for limitation periods is a recognition that it is not fair that an individual should be subject indefinitely to the threat of being sued over a particular matter. Disputes should not drag on interminably. Further, evidentiary problems arise as time passes.
Aviva did not dispute that the onus is on an insurer to prove the existence of a valid limitation defense on the basis of a "clear and unequivocal refusal." Aviva stated that Mr. Wry received a clear and unequivocal refusal to pay benefits by letter dated March 17, 2004. Furthermore, the March 17, 2004 letter set out the benefits to which Mr. Wry would have been entitled on both the non-catastrophic and catastrophic bases. The March 17, 2004 letter also clearly indicated the two year time limit within which to dispute the refusal.
It was Aviva's position that a cause of action is identifiable when the material facts on which it is based have been discovered by an applicant. Mr. Wry discovered this cause of action when he received the March 17, 2004 letter. Mr. Wry then took almost three years to commence an action or arbitration.
Does subsection 281(5) apply to applications for determination of catastrophic impairment?
The court in Bapoo v. Co-Operators General Insurance Co. set out the applicable approach to statutory interpretation as follows: “There is only one rule in modern interpretation, namely, courts are obliged to determine the meaning of legislation in its total context, having regard to the purpose of the legislation, the consequences of proposed interpretations, the presumptions and special rules of interpretation, as well as admissible external aids. In other words, the courts must consider and take into account all relevant and admissible indicators of legislative meaning. After taking these into account, the court must then adopt an interpretation that is appropriate. An appropriate interpretation is one that can be justified in terms of (a) its plausibility, that is, its compliance with legislative text; (b) its efficacy, that is, its promotion of the legislative purpose; and (c) its acceptability, that is, the outcome is reasonable and just.”
Also to be considered is that insurance legislation is consumer protection legislation and must be given a fair, large and liberal construction and interpretation.
The arbitrator agreed with Aviva that it is accepted policy that lawsuits should be brought within a reasonable time. Limitation periods exist to prevent the unfairness of subjecting individuals to a never ending threat of being sued over a particular matter. The legislation in this case imposes limitation periods to spare insurers the unfairness of a dispute dragging on interminably.
Sections 279 to 283 of the Insurance Act deal with the dispute resolution scheme concerning statutory accident benefits. Sections 279 to 280 state that the insured and insurer must resolve their disputes concerning an insured's entitlement to benefits or to the amount of benefits to which an insured is entitled in accordance with sections 280 to 283 of the Insurance Act and the Schedule. On plain reading, the dispute resolution provisions, specifically sections 279 and 280 of the Insurance Act, contemplate disputes regarding entitlements.
The specific limitation provisions in subsections 281(5) of the Insurance Act and 51(1) of the Schedule do not make reference to entitlement, but rather speak directly to an insurer's refusal to pay a benefit.
However, to have any real meaning, the limitation provisions must be read in the total context of the Insurance Act and Schedule. Section 40 of the Schedule, the section dealing with determinations of catastrophic impairment, provides for an entitlement test. When an insured is deemed catastrophically impaired, the insured is then entitled to a greater level of benefits and submits claims to an insurer for the enhanced benefits. Subsection 4 states that the determination by the designated assessment centre is binding on the insured person and the insurer, subject to the determination of a dispute, in accordance with sections 279 to 283 of the Insurance Act, relating to whether the impairment is a catastrophic impairment. These sections, read together, clearly indicate that the limitation provisions apply to assessments concerning the determination of catastrophic impairment. Even though the words "entitlement to benefits" do not appear in the limitation provisions in the Insurance Act and the Schedule, sections 40 of the Schedule and 279 and 280 of the Insurance Act, when read together, make it clear that entitlement tests are to be subject to the dispute resolution process.
Was there a valid refusal?
The court in Smith v. Co-Operators General Insurance Co. set out what a valid refusal, at minimum, should contain. The court stated that an insurer is obligated to communicate to an insured person what the Insurance Act dispute resolution process requires in straightforward and clear language, directed towards an unsophisticated person. At a minimum, this should include a description of the most important points of the process, such as the right to seek mediation, the right to arbitrate or litigate if mediation fails and the relevant time limits that govern the entire process.
Since the limitation provisions in the Insurance Act and Schedule apply to disputes concerning an insurer's refusal to allow entitlement to benefits as well as to an insurer's refusal to pay amounts claimed to an insured, the word "refusal" applied to Mr. Wry's application for determination of catastrophic impairment. The March 17, 2004 letter set out the benefits to which Mr. Wry would have been entitled on both the non-catastrophic and catastrophic bases, and also clearly indicated a two year time limit within which to dispute the refusal. The arbitrator found that Aviva complied with the requirements as laid out in Smith v. Co-Operators General Insurance Co. Mr. Wry received a clear and unequivocal refusal of his request for entitlement to enhanced benefits.
Are multiple applications permitted?
Change in Law
The decision in Kirkham v. State Farm Mutual Automobile Insurance Co. establishes that subsection 281(5) is not a rolling limitation period. The time limit no longer runs from the date the insured's cause of action arises but instead it runs from the insurer's refusal to pay the benefit claimed. The time begins to run after an insurer's refusal. Therefore, for Mr. Wry's argument to have been successful, an application for determination of catastrophic impairment was required to be different from other applications.
In Kirkham, the issue concerned whether an insured could initiate the dispute resolution process once two years had elapsed from the insurer's initial denial of a benefit. Director's Delegate Draper decided that the insured could not do so.
In asserting that a change in the law permitted him to re-apply for determination for catastrophic impairment, Mr. Wry was not relying on a change in his condition. Rather, he was relying on a change in the legal landscape. The Desbiens decision is dated November 17, 2004. Mr. Wry's first application for catastrophic determination was on June 19, 2003, which was denied by Aviva by letter dated March 17, 2004. Mr. Wry had adequate time to consider the change in law within the two year limitation period from Aviva's refusal to pay in March 2004.
It is sound social policy that claims should be adjudicated within the general legal and social context of the time the cause of action arose. The limitation provisions in the Insurance Act and the Schedule strike a balance between allowing applicants to make claims while ensuring that insurers do not face claims indefinitely. A change in law, such as that evidenced by the holistic approach to assessing catastrophic impairments endorsed in Desbiens, can be a factor upon which an applicant can challenge an insurer's determination that he is not catastrophically impaired. A change in the law will not retroactively affect the operation of a clear limitation period. This would lead to an unfair result.
Change in Condition
The Schedule provides for multiple applications for determination of catastrophic impairment in specific cases. Accordingly, a person may apply for determination of catastrophic impairment immediately after an accident if that person suffers serious loss of mobility, limb or sight. The scheme also clearly sets a three year benchmark in recognizing that certain catastrophic impairments will take some time to manifest before a proper assessment can take place.
There appears to be a common thread in the specific provisions in the Schedule relating to catastrophic impairment. The legislation recognizes that degrees of impairment change over time. The legislation allows for a period of time to elapse before assessments should take place and also recognizes that there is a range of impairments that can lead to a catastrophic designation. There is nothing in the legislation precluding an insured from re-applying for benefits in situations where the insured's circumstances change outside of the two year period subsequent to an insurer determining that the insured is not catastrophically impaired.
From this assessment of the legislation, the arbitrator found it reasonable to argue that an applicant can re-apply for determination of catastrophic impairment under the same criterion where his condition changes over time. This approach would be consistent with the broad and liberal interpretation mandated by the consumer protection nature of insurance legislation.
However, in this case Mr. Wry's applications for determination of catastrophic impairment did not indicate that his condition changed. His three applications to Aviva were the same in substance and appeared to be applications all under the same criterion.
Mr. Wry's second and third applications to Aviva did not state that he was applying for a determination of catastrophic impairment on different grounds than the first application to Aviva. Nor did the applications show that Mr. Wry was applying based on a change in condition. In this case Mr. Wry had not demonstrated that his condition had changed.
From the assessment of the legislation and facts of the case, the arbitrator found that Mr. Wry was prevented from proceeding to arbitration because his application for arbitration was filed beyond the two-year limitation period set out in subsection 281(5) of the Insurance Act and subsection 51(1) of the Schedule.