FSCO arbitrator rules stoppage of benefits form invalid

An arbitrator for the Financial Services Commission of Ontario recently ruled that a form used in the past by auto carriers to notify claimants that their income replacement benefits are being stopped is confusing and unclear.

FSCO arbitrator Jessica Kowalski ruled June 5 that a claimant with Western Assurance Company who had income replacement stopped seven years ago may now proceed to arbitration.

She also ruled that a notice of stoppage of weekly benefits and request for assessment (Form OCF-17), dated July 29, 2004, is void. Western Assurance had argued that it was a valid stoppage form.

FSCO records indicate that the claimant, who was rear-ended in August 2001 by a dump truck, received income replacement  benefits to August 13, 2004. The previous month, he was given an OCF-17 form, which is no longer in use.

The issue is whether the July 29, 2004 OCF-17 was “sufficient to start the running of the two-year limitation period,” and if so, whether the claimant was barred by law from proceeding with his claim for income replacement. The carrier had argued that he was barred.

The two-year limitation period she referred to is Section 281 of the Insurance Act, which states that a mediation, evaluation, court proceeding or arbitration “shall be commenced within two years after the insurer’s refusal to pay the benefit claimed.”

Form OCF-17 included the reason the claimant’s benefits were being stopped, as well as information on mediation and the right to arbitrate if mediation fails.

The main problem, Kowalski suggested, was part 5 of OCF-17, which is titled “applicant request and signature.” This is where the claimant was asked to sign the form, which notes the claimant disagrees with the stoppage of benefits and requests an assessment at a designated assessment centre (DAC) to determine whether he or she continues to have a disability that entitles the claimant to receive benefits.

“Rather than describing the DAC as an option available to the insured person, it tells an insured person that if he or she does not sign the portion of the form requesting an assessment by a DAC, then he or she cannot continue on to mediation or more if she or he disagrees with the stoppage of benefits,” Kowalski wrote. 

However, Kowalski noted the law did not require the claimant to request or attend a DAC before applying for mediation.

“While he had a right to request a DAC, it was not a prerequisite to disagreeing with the insurer’s decision to stop benefits.”

Therefore, she wrote, Part 5 of OCF-17 “imposed a requirement on an insured person that was not required” by the Statutory Accident Benefits Schedule (SABS), the form “did not constitute a proper refusal” and therefore the two-year limitation period did not begin to run in July of 2004.

Quoting from the Supreme Court of Canada decision in 2002 in the case of Smith versus Co-operators General Insurance Company, Kowalski noted that when refusing benefits, insurers must “inform insured persons of the dispute resolution process in straightforward and clear language directed towards and unsophisticated person.”

The Supreme Court of Canada ruling was in the case of Bernadette Smith, who was in an accident in 1994. Her carrier stopped paying benefits in May, 1996. Mediation started in 1997 but failed, and she sued the carrier in 1998.

The carrier had asked for a ruling that Smith’s claim was time-barred. This motion was granted in 1999 and upheld in 2000 by the Ontario Court of Appeal.

But the highest court in the land overturned that ruling, even though The Co-operators had used a form prescribed by the Commissioner of Insurance.

“The industry practice of using the form prescribed by the Commissioner cannot somehow be a substitute for conformity” with SABS, which requires that insurers refusing benefits shall inform the claimant of the dispute resolution process, Mr. Justice Charles Gonthier wrote on behalf of the majority of the Supreme Court of Canada at the time. “There is no indication that insurers are legally prevented from adding to the prescribed form so that it is in conformity with the legal requirements.”