July 01, 2011, Kitchener, Ontario
Posted by: Robert Deutschmann, Personal Injury Lawyer
Arbitrator: Susan Sapin
Decision Date: December 23, 2008
Charanjit Grewal was injured in a motor vehicle accident on April 19, 2004. She applied for statutory accident benefits from Certas Direct Insurance Company payable under the Schedule. Certas determined that Mrs. Grewal was not eligible for an income replacement benefit (IRB) and denied the benefit on August 13, 2004. Mediation was unsuccessful and Mrs. Grewal applied for arbitration at the Financial Services Commission of Ontario. Certas maintained that Mrs. Grewal’s application for arbitration is out of time.
1. Is Mrs. Grewal precluded from proceeding to arbitration because her 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?
2. If Mrs. Grewal is permitted to proceed to arbitration, is Certas entitled to rely on sections 32 and 36 of the Schedule to delay, deny or limit payment of an IRB because Mrs. Grewal failed without a reasonable explanation, to notify it of her intent to apply for a benefit, to provide information within the prescribed time limits, or to elect a benefit?
1. Mrs. Grewal is not precluded from proceeding to arbitration by subsection 281(5) of the Insurance Act and subsection 51(1) of the Schedule.
2. Certas cannot rely on sections 32 and 36 to deny payment of an IRB; however, Mrs. Grewal is not entitled to an IRB between November 16, 2005 and April 21, 2006.
Evidence and Analysis:
The Insurance Act requires an insured person to commence an arbitration proceeding “within two years after the insurer’s refusal to pay the benefit claimed.” The Schedule extends the two-year period by 90 days after the mediator’s report, if the insured person applies for mediation within two years of the refusal.
The jurisprudence is well-established. For an insurer to be able to rely on the time limit to defeat a claim, it must establish on a balance of probabilities that it provided a clear, unequivocal and valid refusal of the benefit claimed, in which case the time limit begins to run as of the date of the refusal.
Certas asserted it provided just such a refusal on August 13, 2004, when it sent Mrs. Grewal an “Explanation of Benefits Payable by Insurance Company” form (“OCF-9”) advising her that she did not qualify for an IRB because she had not worked the 26 of 52 weeks before the accident as required under the Schedule. Certas maintained it is entitled to rely on this refusal, and that Mrs. Grewal’s November 29, 2007 Application for Arbitration missed the time limit by three years and three and half months.
Certas submitted it was entitled to rely on section 32 to deny Mrs. Grewal’s IRB claim because she did not provide sufficient information to determine if she qualified for an IRB, or to calculate an amount, until April 21, 2006, more than two years after the accident, when Mrs. Grewal advised Certas of additional income she had earned prior to the accident.
Mrs. Grewal’s position was that Certas was not entitled to rely on its August 13, 2004 refusal because it did not first fulfill its obligations to her under the Schedule. Certas failed to provide her with information about any possible elections relating to IRB, non-earner and caregiver benefits under subparagraph 32(2)(d) and failed to provide her with the proper form (“Election of Income Replacement, Non-Earner or Caregiver Benefit – OCF-10”) with which to make an election.
Mrs. Grewal argued that the August 13, 2004 denial was therefore invalid and the time limit did not begin to run. She further maintained that she had a reasonable explanation for not providing full details of her pre-accident employment within the time limits set out in section 32 and so, in accordance with section 31, she should not be disentitled to an IRB on that basis.
Certas’ response to this position was that the election of weekly benefits by Mrs. Grewal was irrelevant in light of its clear and unequivocal refusal to pay her an IRB.
Mr. Capano, Certas’ adjuster, testified at the hearing, as did Mrs. Grewal and her former solicitor, Robert Gabor. The parties also filed a joint brief containing documentary evidence relating to the preliminary issues in dispute.
The arbitrator found the following facts to be relevant and not in dispute.
At the time of the accident Mrs. Grewal was separated from her husband and lived in Windsor with her 14 year old son. The accident took place on Highway 401 on the morning of April 19, 2004 as Mrs. Grewal and her son were returning home from Toronto. The accident was a serious one. Mrs. Grewal suffered a badly fractured left ankle, requiring surgery; a fractured right femur; back and shoulder injuries; and intracranial bleeding and breathing difficulties that led to oxygen deprivation, brain damage and memory loss. Mrs. Grewal was in a coma for three weeks and to this day cannot recall the details of the accident. Her car was destroyed. She spent almost four months in hospital, including the Toronto Rehabilitation Centre, from where she was released on July 2, 2004. Her mother came from California to stay with her son. Mr. Capano acknowledged he was aware of these facts.
Mrs. Grewal submitted her Application for Accident Benefits (“OCF-1”) on June 8, 2004, while still in hospital. She identified herself on the form as “employed and working” 20 – 40 hours per week as a tax associate, and indicated the hourly rate. She did not identify any other employment or income, despite having earned income in the year before the accident from regularly babysitting a boy at her son’s school, and as a bookkeeper for her stepdaughter’s medical practice. This information was not forwarded to Certas until April 21, 2006.
On the OCF-1 submitted June 8, 2004, Mrs. Grewal also completed Part 7, advising “You can apply for caregiver benefits if, at the time of the accident, you were primarily responsible for the care of persons who are living with you . . .” She answered “yes” to the question “Were you the primary caregiver for people living with you at the time of the accident.” Where asked to list the people she was caring for, Mrs. Grewal put down her son Nicholas. Where asked if she suffered a substantial inability to engage in pre-accident caregiving activities, she ticked off the “Yes” box and provided the explanation requested. She further indicated, “I was taking care of my son…, in every way parents do, but after the accident I never made home, and my mother came from California to stay with my son.”
On June 12, 2004, Mr. Capano sent Mrs. Grewal the first of nine OCF-9 forms he would eventually send. The “Eligible for IRB” box was ticked off but the explanation stated she was not eligible because she had not sent him an Employer’s Confirmation of Income form or a Disability Certificate. Mr. Capano requested she send him these two forms. The OCF-9 also indicated Mrs. Grewal did not qualify for caregiver benefits because “you were not a primary caregiver at the time of the accident. You are full time employed, and deemed an employed person.”
Findings – two-year time limit
It was at this point in the claims handling process that arbitrator found Certas failed in its obligations to Mrs. Grewal under the Schedule, in that it is unable to rely on its subsequent August 13, 2004 refusal as a start to the two-year time limit.
It is important to understand what Certas’ obligations under the Schedule were at this point.
Under subsection 32(2) of the Schedule, after the insured person notifies the insurer of his or her intention to apply for a benefit,the insurer is required to promptly provide the person with (a) the appropriate application forms; (b) a written explanation of the benefits available; (c) information to assist the person in applying for benefits; and (d) information on any possible elections.
Under subsection 36(1) of the Schedule, an insured person can only receive one weekly benefit in respect of a period of time. According to subsection 36(2), “if a person’s application indicates he or she may qualify for more than one [weekly benefit], the insurer shall notify the person that he or she must elect within 30 days after receiving the notice which benefit he or she wishes to receive.” The insurer must send the notice within 10 business days of receipt of the application.
Mr. Capano testified that his assumption that Mrs. Grewal was not a primary caregiver, and that she did not qualify for the benefit, was based on his belief that her son “may have been living with her ex-husband at the time.” He did not explain the basis for this belief. Although Mrs. Grewal indicated on her OCF-1, and reiterated in her testimony, that her mother came from California to look after her son, she was not asked on cross-examination if or when her son left their home.
The arbitrator found that Mrs. Grewal was a primary caregiver at the time of the accident and at the time she submitted her OCF-1 to Certas, and that her application for accident benefits contained sufficient information on its face to indicate that, at that time, (June, 2004) she could potentially qualify for either an IRB or a caregiver benefit, as contemplated by subsection 36(2).
The arbitrator found this information triggered Certas’ obligation to notify her at that time, that she was required to elect which benefit she wished to receive. This obligation includes, among other things, providing her with the Election Form (“OCF-10”) with which to make the election, as well as the information to assist her in applying for and electing a benefit under subsections 32(c) and (d).
On the plain wording of section 36, where an application indicates a person “may qualify” for more than one weekly benefit, the insured person must select which benefit to receive. The obligation to choose and the choice of benefit are clearly the insured person’s. It was not open to Mr. Capano to unilaterally conclude that Mrs. Grewal did not qualify for a caregiver benefit or to “deem” her to be employed. Unlike the equivalent section 61 in the previous Schedule, section 36 does not contain a deeming provision.
Mrs. Grewal testified that she did not receive an Election Form OCF-10 or information on possible elections from Mr. Capano. To his credit Mr. Capano candidly admitted that he did not in fact send Mrs. Grewal an OCF-10 until two years later, in July 2006. He agreed on cross-examination that neither did he send Mrs. Grewal any information about possible elections as required by subsection 32(2).
The arbitrator found that Certas’ unilateral decision, based on its own wrong assumption, to treat Mrs. Grewal’s claim as one for IRBs at a point in time (June 2004) when she could potentially qualify for more than one benefit precluded her from electing the weekly benefit she wished to receive. Certas could not then later refuse a benefit, as it did with its August 13, 2004 OCF-9, that was not elected, where the failure to elect resulted from its own failed obligations under subsection 32(c) and (d) of the Schedule.
The refusal is invalid as a result, and Certas is not entitled to rely on it, and the two-year time limit under subsections 51(1) of the Schedule and 281(5) of the Insurance Act does not begin to run. There is ample jurisprudence to support these findings.
The Supreme Court of Canada in Smith v. Co-operators General Insurance Co. clearly established that one of the main objectives of insurance law is consumer protection. In that case, the insurer failed to inform the insured person of the dispute resolution process contained in the Insurance Act, “in straightforward and clear language, directed towards an unsophisticated person.”Consequently, its refusal of benefits was held not to be valid, and the insurer was not permitted to rely on the two-year time limit under the equivalent of the current subsection 281.1(1) of the Insurance Act and subsection 51(1) of the Schedule.
As pointed out by Director’s Delegate Makepeace in RBC General Insurance and Antony, at least three arbitration decisions have applied the principles and reasoning in Smith in the context of section 32, holding that an insurer would not be able to rely on the 30-day time limit for submitting an application for benefits under section 32 unless it has given the insured person notice of the time limit and explained the consequences of noncompliance.
In Horvath, for example, Arbitrator Leitch emphasised the importance of the consumer protection goals as expressed in Smith:
As I understand the Smith decision, the goal of consumer protection is promoted by requiring insurers to provide “basic information” outlining the “most important points of the process” using “straightforward and clear language, directed towards an unsophisticated person.” There is no doubt that the time limit imposed by section 32(3) is one of the most important points or parts of the process for In Horvath, for claiming benefits. In my view, basic information about this time limit includes information about the potential consequences of failing to either comply with it or to provide a reasonable explanation for non-compliance. Without this information, insured persons may think that the only consequence of their own delay will be delay in receiving benefits. As I read the principles enunciated in the Smith case, section 32(2)(c) should be interpreted in a way which protects consumers by requiring insurers to inform insured persons of the far more serious potential consequences of their failure to comply with section 32(3).
In Antony, Delegate Makepeace applied this reasoning to section 36, on the basis that the right to make an informed election is an equally important step in the claims process, and an insurer must advise the insured person about the consequences of an election. In that case, the insured person initially elected caregiver benefits and sought to change her election to IRBs. Delegate Makepeace agreed she was entitled to do so: “An insured person cannot be held to an election that is based on inaccurate or incomplete information provided by an insurer in contravention of s. 32(2)(d).” An election, to be valid at all, must be an informed election.
The arbitrator agreed with this reasoning and found it applies all the more, where an insured person is not provided with the opportunity or the information required to make an informed election in the first place, as was the case with Mrs. Grewal. Without a valid election, there can be no valid refusal.
Similar reasoning was applied in Nandkumar and Economical Mutual Insurance Compan, which dealt with the equivalents to sections 32 and 36 under the predecessor Schedule. In that case, Ms. Nandkumar was not provided with an OCF-10, and Economical “deemed” her to be entitled to a caregiver benefit, although she was potentially entitled to both caregiver and IRBs.Ms. Nandkumar applied for arbitration on the issue of whether she should be entitled to “change” that election and elect IRBs instead of caregiver benefits. Arbitrator Muir determined that she was entitled to elect IRBs.
Although Economical had provided Ms. Nandkumar with considerably more information than Certas provided to Mrs. Grewal, Arbitrator Muir found that Economical had failed to provide Ms. Nandkumar with the notice to elect under subsection 61(2) (the equivalent of the current subsection 36(2)), and so the time limit to elect did not run, and the deemed election was not triggered.
An informed election is important from a consumer protection point of view. The insurer’s obligation to provide information as required by subparagraphs 32(2)(c) and (d) and notice to the insured person under subsection 36(2) including the appropriate forms, is no less important than the obligation to inform about time limits and the consequences of missing them under subsection 51(1) or section 32. This is because, as stated in Antony:
Given the complexity of the SABS and the early stage at which elections are made, it is easy to imagine a situation where an insured person initially makes a disadvantageous election because she lacks the information required to make the smarter choice. Allowing such a person to re-elect is, in my view, no different than allowing an insured to correct inadvertent errors or provide supplementary information about, for example, her pre-accident income or employment history.
The role of adjuster is to explain the rules well enough to allow an unsophisticated insured person (and her representative, if she has one) to decide which benefit is best for her. This was not done in Mrs. Grewal’s case. Had Mr. Capano provided Mrs. Grewal with detailed information such as was required of the insurer in the Antony decision, including the eligibility requirements of caregiver benefits as compared to IRBs, and including the differing ability tests, the short and long-term consequences of choosing one over the other, and the type of employment income that could be claimed, Mrs. Grewal might have been in a better position to consider her own particular circumstances, and perhaps to advise Certas of her additional employment income in a more timely manner.
Refusal of a weekly benefit claim is invalid, even if technically correct at the time, where the refusal is made before the insured person has fulfilled her obligation under subsection 36(2) of the Schedule to elect the weekly benefit “he or she wishes to receive.” There can be no valid refusal where there has not first been a valid election. As a valid election is an informed election, there can be no valid election where an insurer has not met its consumer protection obligations by providing to the insured person information required by the legislation for an informed election. No time limit based on an invalid refusal, including the two-year time limit under section 51 of the Schedule and 281.11 of the Insurance Act, can begin to run.
A number of the cases relied on by Certas were not helpful to its position. Cases such as Zeppieri, McGuire-Card, Nahasari, and Turner, for example, are distinguished to the extent they turn on time limits defenses based on valid refusals. Garcia can be distinguished on its facts because, as the applicant was found not to have been potentially eligible for more than one weekly benefit in the first place, he was not entitled to elect a benefit.
Findings – delay under sections 31 and 32
Having found that Certas is not entitled to rely on the two-year time limit, the next question was, what consequences, if any, resulted from Mrs. Grewal’s failure to submit additional employment information under section 32 in a timely manner as required by section 31.
Subsection 31(1) states that “A person’s failure to comply with a time limit set out in this Part does not disentitle the person to a benefit if the person has a reasonable explanation.” Subparagraph 32(1.1)(b) states that a person shall notify the insurer of his or her intention to apply for a benefit “no later than the seventh day after the circumstances arose that give rise to the entitlement to the benefit, or as soon as practicable after that day . . .”
Subsection 32(6) provides that if a person fails without a reasonable explanation to notify an insurer of his or her intention to apply for a benefit within “the time required under subsection (1), the insurer may delay determining if the person is entitled to a benefit under section 35 . . .” (Section 35 deals with payment of weekly benefits and housekeeping expenses.)
Mrs. Grewal’s pre-accident employer, sent Mr. Capano an “Employer’s Confirmation Form – OCF-2” on July 5, 2004, indicating Mrs. Grewal had been employed for 10 of the 52 weeks preceding the accident. On that basis, Mr. Capano determined, correctly, that Mrs. Grewal was not eligible for an IRBand sent her the August 13, 2004 refusal on which it relied in this preliminary hearing, denying the benefit, but considering her potentially eligible for a caregiver benefit.
A notice of stoppage of caregiver benefits dated October 19, 2004 (“OCF-17”) and three further OCF-9s sent by Mr. Capano between October 2004, and April 27, 2005 indicated that he proceeded to treat the claim as one for caregiver benefits during that time, despite the fact that Mrs. Grewal had yet to make an informed choice and elect the type of benefit she wished to receive.
On April 21, 2006, Robert Gabor, Mrs. Grewal’s former solicitor, forwarded to Mr. Capano an OCF-2 dated April 16, 2006 prepared by Dr. Anita Grewal, Mrs. Grewal’s stepdaughter, to the effect that Dr. Grewal had paid Mrs. Grewal $7,000 in the year before the accident in exchange for bookkeeping services. Mr. Gabor also forwarded a letter dated November 16, 2005, from Joel Baker, an accountant, confirming the payment and that Mrs. Grewal had claimed the income on her 2004 tax return. Mr. Gabor testified at the hearing but did not explain why he waited until April 13th, 2006 to write to Mr. Capano with this information.
Mr. Capano responded to this new information by letter dated May 9, 2006, requiring Mrs. Grewal to submit an election and advising her of the potential consequence of failing to comply with this request:
This is further to my letter of Aug. 12, 2004 in which I requested that you submit the following
– Election Form As you have failed to respond, I am now requesting the submission of the document(s) under Section 33 of the Statutory Accident Benefits Schedule (a copy is enclosed). In accordance with Section 33, you are required to submit the above-noted document(s) within 14 days of your receipt of this letter. Please be advised that a failure to comply with this request will result in the benefit(s) not being paid until you have complied with our request.
Mr. Capano never sent the election form in question. He testified that he sent the above letter in error. He stated that, if he received the information about the bookkeeping employment at the same time as Mrs. Grewal’s initial application for benefits, he would have sent her an election form and calculated the IRB at that time. As noted above the arbitrator found Mr. Capano ought to have sent the election form after receiving Mrs. Grewal’s application because the application itself indicated she was potentially eligible for more than one weekly benefit.
Mr. Capano testified he believed he sent Mrs. Grewal an election form some time in June or July, 2006 after receiving a paystub for the bookkeeping income. Mrs. Grewal eventually submitted an OCF-10 on August 23, 2006, electing an IRB. Mr. Capano then calculated an IRB based on her bookkeeping employment only, leaving out the income earned from H & R Block. He sent Mrs. Grewal an OCF-9 dated September 7, 2006 refusing the benefit, citing as reasons the August 13, 2004 refusal and Mrs. Grewal’s “failure to comply with s. 32 as no intent disclosed until recently.” Mr. Capano further requested a “reasonable explanation” under subsection 31(1) of the Schedule “regarding late notice of intent.”
Mr. Capano acknowledged that, by the time Mrs. Grewal responded to his request that she elect a weekly benefit under subsection 36(2), she was already out of time if Certas was relying on its August 13, 2004 refusal. As that refusal is invalid, and as Mrs. Grewal did not receive an election form from Certas when she should have, in June 2004, the only issue to be determined is whether Mrs. Grewal’s delay in providing employment information, if she has no reasonable explanation for it, entitles Certas to delay paying her an IRB.
Certas submitted that Mrs. Grewal delayed “disclosing” her “intent” to claim an IRB by not submitting employment information to support her eligibility until April 2006, and this delay prejudiced its ability to properly investigate the claim and conduct insurer medical assessments to determine if she met the eligibility tests under the Schedule, in particular whether she was mentally and physically substantially unable to engage in her employment activities as a result of the accident. Certas further submitted that the explanation for the delay, provided on Mrs. Grewal’s behalf by her solicitor, that “given Mrs. Grewal’s significant brain injury, she was unable to provide full details [of her pre-accident employment], is not reasonable, given Mrs. Grewal’s ability to provide detailed descriptions of her pre-accident activities on numerous other occasions.
In Horvath, in dealing with the prejudice occasioned by delay and whether an explanation under subsection 31(1) is reasonable, Arbitrator Leitch reviewed the jurisprudence and explained that an assessment of reasonableness includes, in part, determining whether the explanation proffered is believable, and balancing the prejudice to the insurer and hardship to the claimant, and whether it is equitable to relieve against the consequences of the failure to comply with the time limit.
The arbitrator agreed with Certas that it was difficult to reconcile Mrs. Grewal’s explanation that she did not think to provide Certas with details of her pre-accident employment other than her job with the accounting firm when she first sent in her application for benefits because of her brain injury, with her detailed descriptions of her activities. However, there is no dispute that she looked after a child after school, and that she worked as a bookkeeper, both of which she claimed as income on her 2004 tax return. Although Certas may not have been aware of it, Mrs. Grewal qualified for an IRB on that basis.
The arbitrator found the more reasonable explanation for Mrs. Grewal’s failure to provide the information, is that she did not appreciate its importance to her entitlement to an IRB over a caregiver benefit, because Certas never provided her with information to make an informed decision in her own best interest. The arbitrator dismissed Certas’ contention, that Mrs. Grewal should not be relieved of the consequences of missed time limits, because she was represented by counsel. Since Smith it is abundantly clear that the fact that an insured person is represented by counsel has no bearing on whether an insurer has met its statutory obligations.
There is also no doubt that Certas has been prejudiced, albeit by its failure to act, and Mr. Gabor did not explain why he waited until April 21, 2006 to forward to Mr. Capano information about Mrs. Grewal’s pre-accident employment when it appears Mrs. Grewal sent him this information in November 2005.
A final factor to consider, was the hardship to Mrs. Grewal, who was paid some caregiver benefits for four months after the accident, and nothing further in terms of weekly benefits. Given the very limited evidence about the extent of her brain injury but taking into account Mrs. Grewal’s testimony and the opinion of Dr. E.V. Ranjit that she likely sustained long-term brain injury, it would appear Mrs. Grewal’s employment future may be uncertain.
The arbitrator found the fair thing to do would be for Certas to calculate the amount of Mrs. Grewal’s IRB taking into account all of her pre-accident income from H & R Block, babysitting and bookkeeping, and for Certas to be entitled to suspend benefits from November 16, 2005 and April 21, 2006.
Counsel for Certas submitted that Mr. Gabor’s explanation for the delay (significant brain injury) implies that she was unable to competently and fully instruct him on how to proceed with her claim. Although the arbitrator was not presented with any medical evidence to support the assertion that Mrs. Grewal lacked, or ever lacked, the mental capacity to proceed with her claims the arbitrator pointed out that an inability to recollect events or details as a result of an injury to the brain did not necessarily equate to mental incapacity. As capacity was presumed and there was no evidence to the contrary, the issue as raised by Certas had no bearing on this proceeding