Medical exam expenses not recoverable from second party insurer: Ontario Court

An insurance company cannot recover medical examination expenses from another insurer under the provincial loss transfer scheme, according to a recent 2-1 decision from the Court of Appeal for Ontario.

In the case, Wawanesa v. Axa, the first party insurer (Wawanesa) sought to recover from the second party insurer (Axa) indemnification for multiple medical assessments Wawanesa had paid while adjusting accident benefit claims arising from two separate car accidents.

Fault for the accidents was not at issue and Axa had already paid Wawanesa for benefits under Ontario’s statutory accident benefits schedule (SABS). However, Axa refused to reimburse Wawanesa for the cost of any insurer examinations, relying on a 1995 decision Jevco v. Prudential, which held that insurer examinations are not recoverable under provincial loss transfer legislation.

Wawanesa argued that under section 275 (1) of the Insurance Act, the wording “in relation to such benefits paid” should encompass all expenses incurred in relation to determining whether a certain benefit was payable, including medical examinations.

Wawanesa also took the position that, as a result of the 2006 amendments to the 1996 SABS, insurer generated medical assessments were now mandatory because the first party insurer was required to pay accident benefits within a limited time or request a medical examination of the insured. Thus, the assessments are now part of a comprehensive scheme dealing with benefit entitlement.

At the original arbitration, the arbitrator agreed with Wawanesa’s position on the issue, but held that she was bound by Jevco. Accordingly, she ruled that Wawanesa could not recover any insurer examination expenses from Axa. The appeal judge agreed with Jevco and dismissed Wawanesa’s appeal.

The Court of Appeal dismissed Wawanesa’s further appeal, with a dissent by Mr. Justice Blair. Writing for the majority, Mr. Justice Weiler outlined Ontario’s accident benefits and loss transfer scheme over the past 22 years. He agreed that the ordinary meaning of the words “in relation to” in s. 275 (1) encompasses more than the accident benefits paid by an insurer to its insured. However, he was not satisfied that those words were necessarily broad enough in scope to include insurer generated medical assessments.

“Personally I agree with Wawanesa’s position in this matter for a simple reason: Nothing frustrates me more than when a second party insurer challenges a paid benefit on the basis that it shouldn’t have been paid (i.e., because in its opinion the claimant wasn’t disabled), but then refuses to pay for the cost of an assessment that could support paying less benefits,” notes Daniel Strigberger, a partner at Miller Thomson, in a blog.

However, the ruling will standing unless there is a further appeal by Wawanesa. “Barring a successful leave application/appeal to the Supreme Court of Canada, the current law in Ontario is that the costs of insurer exams . . . are not recoverable in loss transfer,” writes Strigberger.