Canadian Underwriter

Insurers don’t need a medical reason for denying IRB: Appeal Court

February 9, 2023   by David Gambrill


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An auto insurer does not have to state a medical reason for terminating a claimant’s income replacement benefits (IRBs) if there is another legal, non-medical ground for doing so (such as a return to work, for example), the Ontario Court for Appeal has confirmed.

Although this seems like something Captain Obvious might say, Ontario’s divisional court came up with an alternate ruling that—according to a Licence Appeal Tribunal (LAT) adjudicator—would have forced auto insurers to invent a medical excuse if there wasn’t one.

“This settles the issue of whether an insurer has to provide a medical reason to deny a specified benefit pursuant to s. 37 [in Ontario’s Statutory Accident Benefits Schedule]. The answer is No,” Lisa Armstrong of Strigberger Brown Armstrong LLP wrote in a blog for Mondaq published Thursday.

“…When defending a ‘medical and any other reasons’ dispute, insurers can, and should, avail themselves of the same arguments that the word ‘and’ should be interpreted in both its joint and several grammatical meaning, as well as the fact that a single medical OR other reason can be sufficient to meet the purpose of the notice provisions.”

Ontario’s auto accident benefits legislation lists seven grounds for terminating a claimant’s IRB payments, some of which are medical and some of which have nothing to do with a person’s impairment. Section 37.(4) of SABS specifically states:

If the insurer determines that an insured person is not entitled or is no longer entitled to receive a specified benefit on any one or more grounds set out in subsection (2), the insurer shall advise the insured person of its determination and the medical and any other reasons for its determination.

The operative words in this paragraph are “medical and any other reasons.” An auto insurance dispute over how the word “and” should be interpreted made it up to Ontario’s highest court.

Nunzo Varriano was injured in a motor vehicle accident on Sept. 30, 2015. Allstate Insurance Company of Canada paid him IRBs from Oct. 7, 2015, until he returned to work.

On Dec. 30, 2015, Allstate provided Varriano with a note and an Explanation of Benefits that stated: “Your Income Replacement Benefit has been stopped on Dec. 2, 2015, as you returned to work fulltime on Dec. 2, 2015. No further Income Replacement will be paid after this date.”

This was the only reason given for the stoppage of the IRB. No medical reasons were provided.

Varriano applied for a reconsideration, but the insurer rejected the claim for the same reason. Varriano appealed the insurer’s decision to the LAT, arguing the insurer was required by SABS to provide a medical reason for terminating the benefits. Without it, the insurer’s termination of the benefits did not follow the requirements of the law, Varranio argued.

LAT’s adjudicator found in favour of Allstate. As Ontario’s Appeal Court put it: “[the LAT adjudicator] found that Mr. Varriano’s interpretation…would require Allstate to provide a medical reason to deny benefits even if there was none, [which] would result in insurers fabricating reasons. This would result in ensuing disputes and bad faith allegations.”

The Ontario divisional court overturned LAT’s decision, saying a plain reading of s. 37(4) supported the interpretation of the word “and” in the phrase “medical and any other reasons” as bearing a conjunctive meaning. In other words, both elements — medical and other reasons — had to be present in the insurer’s IRB denial notices.

The divisional court observed s. 37(4) of the SABS was introduced as a way to require insurers to provide at least some reason for terminating someone’s IRB payments.

“The [divisional] court held that an impaired person would not be able to assess the ‘full impact’ of a stoppage decision if the insurer did not provide their position on the insured’s medical impairment,” as the Appeal Court characterized the Divisional court’s argument. “Finally, the court concluded that interpreting s. 37(4) as requiring both medical and other reasons was consistent with the proposition that insurance coverage provisions are to be interpreted broadly.”

But the Appeal Court overturned this finding, saying the divisional court’s interpretation did not consider the full context of s. 37(4) of the SABS legislation.

“In my view, in giving a conjunctive meaning to the word ‘and’ in the phrase ‘medical and any other reason’ in s. 37(4), the Divisional Court failed to properly apply the modern principle of statutory interpretation,” Ontario Appeal Court Justice Steve A. Coroza wrote. “That interpretation failed to acknowledge that the grammatical and ordinary usage of the word ‘and’ can include both the joint sense and the several sense.

“When the phrase ‘medical and any other reason’ in s. 37(4) is read contextually, it becomes clear that the ordinary meaning of the word ‘and’ was intended in its several sense.”


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