Sending AB application to the wrong insurer a “reasonable explanation” for a delay in reporting the claim to the proper insurer: arbitrator

An Ontario arbitrator has awarded a $5,000 ‘special award’ against Economical Mutual Insurance Company after the company denied a claim on the basis that the claimant, Roda Egal, had not provided a reason for a delay in making her application following her injury in a motor vehicle accident.

Four months after the accident, Egal’s lawyer had provided Economical a reason for the delay — confusion, basically. Approximately three months after her injury, the claimant applied for benefits to the wrong insurer, the American Home Assurance Company, which had approved her treatment plan and began to pay accident benefits.

Economical subsequently took two years to obtain Egal’s file from the firm adjusting the claim.

The claimant was injured on Apr. 29, 2009, while travelling with two friends in a rental vehicle that was struck on the passenger side (Egal was sitting in the front seat). She was taken by ambulance to a Toronto hospital, where she left before receiving treatment, and was bed-ridden for six days.

Egal testified she was away from work for approximately two weeks after the accident, since she could not turn her neck left or right, her chest hurt and she had back pain, knee pain and headaches. She saw a chiropractor every day until the summer of 2010.

Egal originally sent her application for accident benefits in error to American Home Assurance. An adjuster from Crawford Adjusters Canada Inc. was assigned to the file.

In separate correspondence dated Aug. 11 and June 8, 2009, the adjuster acknowledged receipt of Egal’s application and treatment plan, which American Assurance approved in full.

In late August 2009, counsel for Egal forwarded correspondence to Economical with an application for accident benefits and an authorization and direction. On Sept. 2 and 18, Economical requested the reason for Egal’s delay in reporting the claim.

“On Sept. 28, 2009, Ms. Egal’s counsel forwarded an explanation for the delay to Economical stating that Economical failed in explaining Ms. Egal’s rights to her and did not provide her with an accident benefits package,” the arbitrator noted. “Therefore, her application was not forwarded until after she retained counsel.”

Economical said it did not deal with Egal’s claims because of time that had elapsed between the accident and her application. Ontario accident benefits legislation requires that applicants for related benefits must notify their insurers within seven days of the accident, “or as soon as practicable afterwards.”

The saving provision in the legislation is that a person is not disentitled from proceeding with a claim if the applicant has a reasonable explanation.

“I find no merit in Economical’s position that it had no responsibility to adjust Ms. Egal’s file until receiving a reasonable explanation for her delay in applying,” the arbitrator ruled. “Economical received a reasonable explanation for the delay. Economical was also aware that documentation had been sent to the wrong insurer and persisted in refusing Ms. Egal’s claims long before it had received her file.

“I find that Economical failed egregiously in its responsibilities to its first party insured, Ms. Egal. It did not follow up expeditiously in obtaining her file from American Assurance and it made decisions about her entitlement in its absence.”