How Expenses are “Incurred”

New definitions of “incurred” and “minor injury” in Ontario’s new Minor Injury Guideline (MIG) are the hottest issues in the new Statutory Accident Benefit Schedule (SABS) according to plaintiffs’ personal injury lawyer, Stephen E. Firestone.

Firestone of Lackman, Firestone Law Offices was a speaker and panel moderator on the topic of the new SABS at the tenth annual Oatley-McLeish Guide to Motor Vehicle Litigation, which took place in January at the Law Society of Upper Canada.

There is no question that the new SABS, which took effect on Sept. 1, 2010, reduced the accident benefits available in non-catastrophic cases, Firestone said. FSCO cases have not yet interpreted these various provisions, but “the changes aren’t as restrictive as they first appear,” he said.

New definition of “incurred” expenses

Firestone offered some suggestions when dealing with the definition of “incurred,” which applies to med-rehab benefits, caregiver benefits, attendant care benefits, housekeeping-home maintenance and case management services.

A posting on law firm Thomson Rogers Lawyers’s website notes that between 1991 and 1994, “the definition of incurred expense for the purposes of obtaining attendant care required families to retain professional caregivers in order to qualify for reimbursement under the SABS.” In subsequent years, the law firm says, “the requirement to use professional caregivers was removed and the courts interpreted the word ‘incurred’ in a manner that was more favourable to the insured.” Some trial lawyers say the new definition of “incurred” as of Sept. 1, 2010 swings the pendulum back to the period of 1991-94.

Section 3(7)(e)(iii)(B) of the new SABS says an insured person has not “incurred” expenses for goods and services unless people providing the goods and services have “sustained an economic loss as a result of providing the good or services to the injured person.”

Referring to this section, Firestone said: “If it was to be restricted to loss of income, it would have said ‘loss of income.’ I say economic loss is much broader.”

For example, Firestone said: “What about a homemaker or a grandparent who sustains an out-of-pocket expense in providing the service to their family members? Surely, I say, the SABS were not meant to restrict and exclude the very family members who are in the best position to provide the goods and services as they did before—grandparents, homemakers, etc.”

Section 3(7)(e)(iii)(A) says an insured person has not incurred expenses for goods and services unless the person who provided the goods or services “did so in the course of the employment, occupation or profession in which he or she would ordinarily have been engaged, but for the accident.” Firestone said it is important that the section says “but for the accident,” and not “before the accident.”

In a paper related to his speech topic, Firestone writes it is important to note s. 3(7)(e)(ii) states the insured person need not have actually paid the expense. “It is sufficient that only a ‘promise to pay the expense’ [has happened] … or that he/she is ‘otherwise legally obligated to pay the expense,’” he writes.

Firestone says cases like Monks and ING, McMichael and Belair and Smith and Wawanesa clearly held that a broad and liberal meaning of incurred has to be applied to legislative provisions contra proferentem (this refers to the doctrine of contractual interpretation, according to which any ambiguity about a term is resolved against the party that imposes the provision in the contract).

“In fact, in Monks, the Court of Appeal specifically said that the phrase ‘incurred’ does not require the insured to finance, pledge or credit to be incurred or actually have received the goods and services to be incurred as defined,” Firestone said. “It was sufficient that the necessity of the service and cost be determined with some certainty. This legislation is really the government’s attempt to go beyond that and basically nullify what was said in the Monks case.”

New definition of minor injury

The new definition of “minor injury” in the SABS “means one or more of a sprain, strain, whiplash associated disorder, contusion, abrasion, laceration or subluxation and includes any clinically associated sequelae to such an injury.”

This definition clearly refers to a grouping or class of impairments, Firestone says. For example, if one or more of a specific listed group falls within it, it is a minor injury. “The group together is a minor injury,” he said.

The $3,500 cap on auto insurance payments for minor injuries applies if the impairment, as defined in the minor injury definition, is “predominantly” a minor injury, Firestone said. “It’s a very confusing section,” he said.

“If a person has four impairments that fall within the minor injury definition, but one that clearly doesn’t — say a serious fracture with hardware and scarring — do you count the number of injuries? Or do you look at which single impairment is the most restrictive and is that the ‘predominant’ injury?”

Firestone then outlined the following scenario: an accident victim has one injury in a group of injuries that doesn’t count as “minor.” In this instance, “are you out [of the MIG] for all of the injuries, like the case in tort Meyer and Bright, which clearly held that if you have one injury that crosses the threshold, you’re out for all injuries, even though they themselves are not threshold crossing injuries?” Firestone asked. “Or are you in MIG for some and out for the ones that by themselves are not MIG injuries?”

Firestone believes insurers’ counsel have adopted the latter approach in many of his files. And this approach is “dead wrong,” he says.

Adds Dale Orlando, a plaintiffs’ personal injury lawyer with McLeish Orlando LLP: “How can you argue that the other injuries would be limited to the $3,500 if you’re still dealing with ‘one accident’?”

Insurers’ lawyer Eric Grossman of Zarek Taylor Grossman Hanrahan LLP suggested the director of arbitrations at the Financial Services Commission of Ontario (FSCO) should state a case to the Ontario Divisional Court before a three-judge panel and get the court’s guidance on how we should be dealing with the MIG and the definition of incurred.

Plaintiff and defence lawyers agreed the one-year mediation backlog at FSCO was unacceptable, but disagreed on possible solutions.

Orlando suggested looking at both section 280(3) of the Insurance Act and Rule 13 of the Dispute Resolution Practice Code. The Rule provides that mediation must be concluded within 60 days of filing the application for mediation. He said standard practice is that FSCO sends counsel a form and the mediation is adjourned on consent, whether counsel responds to the form or not. If counsel doesn’t agree to an adjournment of the mediation, “you can take the position that the mediation has failed if it hasn’t been conducted within 60 days and then simply file your Statement of Claim and let the judge decide whether or not you needed to wait the additional 10 months to have your mediation heard,” Orlando said.

“I personally think that the FSCO mediation process is dead, thank God,” said seminar co-chair and plaintiffs’ personal injury lawyer Roger Oatley of Oatley Vigmond LLP. It was one of the worst “failures that’s screwed up insurers and insureds alike and the government and FSCO did nothing about it des
pite us pleading with them,” Oatley said. “And now that there’s this 60-day process pretty much accepted, we just issue a Statement of Claim in the Superior Court on an issue or you can arbitrate if you want. But we don’t arbitrate anything in our office.”

Grossman said insurers’ lawyers are governed by their clients’ instructions on this issue. He did not agree the approach proposed by Orlando and Oatley is universally accepted.

The Insurance Act provides that mediation is a mandatory step to be taken, Grossman said. It’s within the insured’s rights to seek a mandatory order if they want to get a mediation happening, compelling FSCO to appoint a mediator within the time frames, although those remedies haven’t been widely pursued, Grossman said.

“There are cases when you actually put the parties together, they can get the issues resolved,” Grossman said.

Oatley agreed, and added, “Justice delayed is justice denied.”

Who says that plaintiff and defence lawyers can’t agree on anything?