Creeping Cat

The Financial Services Commission of Ontario (FSCO) Appeals Unit has upheld the arbitrator’s 2013 decision in Do v. Guarantee, finding that an insurer’s denial of a catastrophic impairment application does not trigger a limitation period to dispute that determination.

The claimant, Dong Do, was injured in a motor vehicle accident on October 9, 2005. In December 2006, Do submitted an application to The Guarantee Company of North America for a determination that he sustained a CAT impairment. On May 2, 2007, the insurer determined that the claimant did not sustain a catastrophic impairment and sent him an Explanation of Benefits form (OCF-9), along with information about his right to obtain a rebuttal report.

After receiving a rebuttal report and a further addendum from the independent medical examination (IME) doctor, The Guarantee sent the claimant an OCF-9 on April 10, 2008. The form reiterated its position that the claimant had not sustained a catastrophic impairment. Accordingly, the claimant applied for mediation, and subsequently arbitration at FSCO.

The Statutory Framework

Sections 279 to 283 of Ontario’s Insurance Act govern disputes over an insured’s entitlement to, or quantum of, statutory accident benefits. Section 281.1(1) of the provincial act contains a two-year limitation period for these disputes, as noted below: 

281.1(1) A mediation proceeding or evaluation under section 280 or 280.1 or a court proceeding or arbitration under section 281 shall be commenced within two years after the insurer’s refusal to pay the benefit claimed. (emphasis added)

Section 56 of the Statutory Accident Benefits Schedule (SABS), which came into force on September 1, 2010, also contains a two-year limitation period:

56.(1) A mediation proceeding or evaluation under section 280 or 280.1 of the Act or a court proceeding or arbitration under clause 281(1)(a) or (b) of the Act in respect of a benefit shall be commenced within two years after the insurer’s refusal to pay the amount claimed. (emphasis added)

The arbitration decision

The Guarantee raised a preliminary limitation issue. The arbitrator was asked to decide whether the May 2007 or April 2008 OCF-9 forms triggered the limitation period. If the limitation period was triggered in May 2007, as The Guarantee alleged, the claimant’s applications for mediation and arbitration were time-barred. If it was triggered on the later date of April 2008, as the claimant alleged, both applications were timely.

Arbitrator Suesan Alves concluded that neither the May 2007 nor the April 2008 OCF-9 forms triggered the commencement of the limitation period. The basis for the arbitrator’s conclusion was as follows:

Section 281.1 of the Insurance Act prescribes a two-year limitation period for commencing a mediation or arbitration application from the refusal of a benefit. That period is extended by a further 90 days from the date of the Report of Mediator, if the mediation is commenced within the two-year period.

The arbitrator noted the insurer’s determination that the insured person did not sustain a catastrophic impairment was not a “refusal of a benefit.” In any event, the arbitrator held that the insurer failed to communicate clearly that the two-year limitation period ran from the date the CAT designation was refused.

Alternatively, she found that if the limitation period had been triggered, it was triggered by the April 10, 2008 Explanation of Benefits that followed the claimant’s rebuttal report.

The appeal decision:

Dollars and cents

On appeal, The Guarantee argued, among other things, that a denial of a CAT designation is a refusal of a benefit. To find otherwise would mean there would not be a limitation period for CAT denials, which would be contrary to the importance of limitation periods, as stated in the jurisprudence.

The Guarantee also argued in the alternative the Limitations Act, 2002 provided a “catch-all” limitation period of two years, starting from the date the claimant discovered that his claim (denial of catastrophic impairment) was denied.

Director’s Delegate Lawrence Blackman dismissed the appeal and held that the arbitrator was correct.

Blackman agreed that, at first glance, the insurer’s refusal of a catastrophic determination should trigger a limitation period. However, he held that the language in section 281.1(1) of Ontario’s Insurance Act is clear; the specific limitation period does not begin to start until the insurer refuses to pay a benefit claimed.

Blackman found that although a CAT determination entitles an insured to claim a greater level of benefits, the determination itself does not bestow any monetary award on a claimant.

With respect to the pith and substance of the dispute resolution system, Blackman stated:

The substance of this system, as stated in subsection 279(1) of the the Insurance Act, is the resolution of disputes in respect of entitlement to, and the quantum of, statutory accident benefits to which an insured is entitled. It is about dollars and cents. It is about defined benefits sought by accident victims as a result of injuries sustained in a motor vehicle accident. That is the legislative context. It is hardly “onerous,” to cite Boussali1, or requiring a “standard of perfection,” to cite Turner2, to require an insurer, in order to trigger the limitation period regarding a specific benefit, to specify the benefit or amount claimed it is refusing to pay.

Blackman also rejected the insurer’s argument that the Limitations Act, 2002 applied to disputes under sections 279 to 283 of Ontario’s Insurance Act. He held that the insurer could not defeat the legislative intent of the SABS and the Insurance Act, including consumer protection, highlighted in the Supreme Court of Canada’s decision, Smith v. Co-operators General Insurance Co., by carving out a new limitation period under section 4 of the Limitations Act, 2002.

Of note, Blackman agreed with the arbitrator that the insurer’s communications to Do were not sufficient to start a limitation period in any event. He held that the communications failed to advise the claimant that claims for housekeeping or attendant care benefits were being denied.

He also disagreed with the arbitrator that the limitation period would have started once the insurer responded to the rebuttal report. 

The aftermath of Do

A claimant who is denied a catastrophic impairment designation can dispute that determination more than two years after the determination. This could have serious implications for insurers who deny catastrophic determination applications, as they will not benefit from the “finality” that limitation periods afford to defendants/respondents.

It is clear from the appeal decision that the two-year limitation period does not start until the insurer refuses to pay a benefit. What is unclear is whether an insurer can use the opportunity to refuse a CAT determination to also refuse to pay the claimant’s entitlement to catastrophic-level benefits, such as caregiver, housekeeping or post-104 week attendant care benefits.

For example, if the insurer denies a catastrophic determination after the 104-week mark, can it advise in the same letter that no further housekeeping/attendant care benefits will be considered or payable? Would that be considered a “refusal to pay a benefit claimed” in cases where the claimant has yet to claim those benefits?

In Do, the insurer sent the claimant a letter on September 4, 2007, advising that housekeeping expenses, attendant care benefits and expenses for visitors would cease at the 104-week mark as the claimant’s injuries did not meet the CAT definition. However, Director’s Delegate Blackman held that the letter did not mention the two-year limitation period or the dispute resolution process, as required by Smith v. Co-operators.

This might suggest that had The Guarantee’s letter compl
ied with Smith, the insurer might have been able to establish that it denied the benefits claimed in this letter.

That said, Blackman also states in Do that “it would seem to be an absurd consequence that the limitation period begins to run prior to a benefit even being claimed, as the Appellant concedes regarding housekeeping expenses.”

Is there anything more we can Do?

(1) Boussali and Zurich Insurance

(2) Turner and State Farm Mutual Automobile Insurance Company