In the long awaited July 14, 2022 LAT award rendered in #20-007407/AABS by Vice-chair, Sandeep Johal, the question arose whether an LTD benefit that was not being received could be deducted from an IRB benefit. The upshot was that the deadline for the SABS claimant to apply for the collateral disability benefit had expired. While he was aware of that deadline, he applied late to SunLife and was denied on that technical basis. The conundrum with the ongoing payment of the unreduced weekly IRB in this case was that if the LTD payment was ultimately found to be deductible there would be a substantial repayment claim available to Allstate.
The dispute proceeded by way of written submissions. At issue, per the September 2010 version of the SABS, was whether “other income replacement assistance” was available to the claimant, and had he made an application for same? The claimant argued the auto insurer had a greater part to play in informing him of the requirement to apply for the LTD benefit, offered various reasons for his delay in applying for it and claimed the related SunLife denial was sufficient to deny Allstate the right to deduct.
Allstate relied upon the FSCO case of Li Pan (#A16-003705), which gave that auto insurer the right to deduct a CPP disability benefit where no application had been made for those benefits (and also did not require the level of information from the auto insurer argued by that claimant). To deny the offset, the Schedule would effectively be made the first payor, which is not what was intended by the Ontario Legislature. The Vice-chair found the FSCO precedent persuasive, and the Court of Appeal judgment discussed therein (Wilken) binding, that a claimant must be diligent and exhaust collateral benefits before resorting to the SABS insurer. Failing to apply in time was akin to failing to apply at all, especially when represented. To be sure, the LAT has extended Li Pan in looking at the nature of the LTD denial and not just that a denial was made. Accordingly, it now behooves auto insurers to dig deeper; to know the terms of the LTD contract and assess whether a limitation period has been missed and the true nature of the denial.
In the end, Allstate is entitled to deduct from the IRB the amount of the LTD benefit the claimant could have received had he applied for it in a timely manner (and if it was approved). If claimants apply in a timely way for collateral disability benefits they might receive them and they might not. The auto insurer will be able to deduct in the former scenario but not in the latter. But if they don’t apply in time, the deduction will happen irrespective of the collateral carrier’s decision. Claimants are on notice that they need to have their collateral benefits entitlement decided on the merits to give real effect to the SABS provisions; the way it was meant to be.
Reference is had to a line from a song by the band, Incubus: “Dig me up from under what is covering the better part of me”. Just dig.
Seinfeld’s charm was that it was “a show about nothing.”
Of course, anyone on “the priority circuit” knows that this concept is not limited to TV, and that sooner or later, you have been, or you will be, involved in a priority dispute “about nothing.” You get on the first pre-arbitration/pre-hearing call and one of the lawyers for one of the insurers asks: “so, how much has been paid on this claim that we are all fighting over?” Counsel for the applicant insurer says “nothing.” The answer is met with a collective eye roll and a groan. Eventually, the voice of reason says “Folks, we are fighting over nothing here. Can someone just accept priority?” But nobody accepts priority, and nobody takes any steps either because the cost of getting the information far exceeds the actual amount in dispute, i.e. nothing. So, one insurer proposes a “standstill agreement”. That was Gore’s proposal in Gore and Allstate (Award, January 5, 2022). That’s how things were often done.
However, if inspired by George Costanza himself, the opposite would have to be right: “Yes I will do the opposite. I used to sit here and do nothing, and regret it for the rest of the day, so now I will do the opposite, and I will do something.” In Gore and Allstate, our office acted for Allstate and we decided to do “something” about “nothing.” Allstate brought a motion to dismiss the arbitration on the basis that Gore paid no benefits to the claimant. In Gore and Allstate, Arbitrator Bialkowski held that an insurer who has not paid benefits to the claimant cannot proceed with arbitration.
The “pay now, dispute later” philosophy underlies Ontario’s priority dispute system. However, Gore and Allstate (following Economical v. Intact) takes this principle further to “don’t pay, never dispute.” Justice Chalmers held in Economical v. Intact (2021 ONSC 3249):
“It is my view that Economical cannot bring a priority dispute against Intact when it did not first pay benefits to Ms. Belhumeur. The rationale behind the ‘pay first and dispute priority later’ policy is to promote the timely delivery of accident benefits: see Chubb, at para. 40. To permit Economical to purse a priority dispute without making any payment is inconsistent with this policy. Also, if no payment is made by Economical, there is nothing for Intact to reimburse on a priority dispute.”
There are, of course, practical consequences to being the insurer stuck with an OCF-1 but having made no payments on the claim. However, Justice Chalmers was unpersuaded:
“Economical argues that s. 3(1) of that regulation imposes strict time limits on an insurer to put another insurer on notice of a priority dispute, and it may be necessary for an insurer to provide notice of a priority dispute before it makes a payment to the claimant. Economical argues that paying a claim is not a prerequisite to providing notice pursuant to s. 2.1(6) of Disputes Between Insurers. I acknowledge that there may be circumstances in which notice must be provided before the first insurer makes a payment. Although a payment may not be a prerequisite to providing notice, it is my view that the insurer cannot proceed to an arbitration hearing to dispute priority unless it first makes a payment to the claimant.”
Arbitrator Bialkowski focused a considerable portion of his decision in Gore and Allstate expanding on the problems that insurers would face under a regime where no payment means no dispute. Nevertheless, Arbitrator Bialkowski held that he was bound by Justice Chalmers’ decision and ruled in Allstate’s favour:
On the basis of that set out above, I would find that a payment having been made is not a pre-condition to an arbitration being commenced in accordance with the dispute mechanism set out in O. Reg 283/95. Receipt of OCF-1 Application for Benefits ought to be the pre-condition. Unfortunately, I am bound by the appellate decision in Economical (supra), despite my strong views to the contrary, as I do not believe that the underlying facts in that case sufficiently different so as to make the decision in Economical distinguishable. Justice Chalmers dealt with the PAU and non-payment of benefits separately.
Although Gore did not appeal Arbitrator Bialkowski’s decision, it remains to be seen whether the next decision on this point gets appealed for any of the reasons identified by Arbitrator Bialkowski.
However, as we fondly remember Arbitrator Guy Jones, recall his comment in Zurich v. Cooperators:
“While this may seem unfair… it should be remembered that in the next case that same insurer may be the beneficiary.”
If you are an insurer that has not made a payment on the claim, consider doing so before proceeding with arbitration. If you are a second-tier insurer who has been put on notice or who is responding to an arbitration demand, check whether the first tier insurer/applicant ever made a payment. An insurer confronted with nothing can still do something.
The recent decision of Justice Lemon in Graul v. Kansal weighs in at 182 pages and comes with plenty of teaching moments about defending personal injury claims, weighing the strengths and weaknesses of a claim and the uncertainty of trials.
The plaintiff came to the case as a 52 year old husband and father of 3 grown children. He had a lengthy work history in a supervisory capacity with the City of Guelph working at the Guelph wastewater treatment plant. The decision depicts an individual who lived a full life before the accident – earning $100,000 per year in a job he enjoyed, active in sports and recreational activities and an engaged father and husband who enjoyed excellent health. After the accident, he did not return to work and his recreational pursuits and social life were significantly curtailed. The plaintiff, supported by his doctors and experts retained in the litigation, alleged that he suffered a mild traumatic brain injury with a constellation of related and other symptoms including memory and focus problems, issues relating to his hearing and vision and back and neck pain.
The plaintiff was successful in his claim. The case heard by a judge alone awarded $225,000 in general damages, past and future income losses of $1,300,000 million and future care costs of $735,000. The court accepted that the plaintiff would have worked until he was 70 which accounted for the sizable income loss award.
Of note is that the SABS experts that testified all supported the plaintiff’s general position that there were real injuries that impacted the plaintiff, providing various diagnoses including ‘major depressive disorder’ and confirmed his inability to ‘participate and produce in most work roles in a sustained way’. One of the defendant’s experts agreed that there was a mild TBI and while she did not believe it was accident related, she agreed that it could be. A neuro psychologist retained by the defence gave testimony on the issue of whether the plaintiff sustained a traumatic brain injury but had not been involved in TBI treatment for over 15 years. Despite this, he agreed that the plaintiff’s test results would suggest difficulty working with ‘machines and processes’ which was central to the plaintiff’s pre accident employment. The defence had abundant surveillance which depicted the plaintiff engaged in a variety of daily activities (although not work) but the trial judge put little or no weight on this evidence. The decision makes clear the aspects of the case on which the defendant based its defence. In reading the decision, one has an equally clear idea of how and why the judge discounted that evidence.
There are an embarrassment of riches in this case to dissect by way of a post mortem to see why things went so well for the plaintiff and so badly for the defence. In an alternative universe, with a different judge or with a jury, it may have turned out differently. But not at this time, with these facts and this judge.