Ipsofactoj.com: International Cases [2003] Part 2 Case 3 [SCC]


SUPREME COURT OF CANADA

Coram

Smith

- vs -

Co-operators General

Insurance Co

McLACHLIN CJ

ARBOUR J

BASTARACHE J

BINNIE J

GONTHIER J

IACOBUCCI J

LEBEL J

28 MARCH 2002


Judgment

Gonthier J

I. INTRODUCTION

  1. This case involves questions of statutory interpretation in the context of limitation periods in Ontario insurance law. The appellant insured appeals against a decision of the Ontario Court of Appeal dismissing her appeal from a summary judgment by the Superior Court of Justice. The latter court allowed the respondent insurer's motion to dismiss the appellant's claim for benefits based on expiry of the limitation period. The general issue raised by this appeal is whether the insurer fulfilled its obligation under s. 71 of the Statutory Accident Benefits Schedule - Accidents after December 31, 1993 and before November 1, 1996, O.Reg. 776/93 ("SABS"), to inform the insured of the procedure for resolving disputes set out in ss. 279 to 283 of the Insurance Act, R.S.O. 1990, c. I.8. This will determine whether there was a proper refusal by the respondent to continue payment of the benefits so as to trigger the limitation period of two years to launch a civil action. For the reasons that follow, I have concluded that the Court of Appeal erred in finding that the insurer had fulfilled its obligations under s. 71 of the SABS. Therefore, there was no proper refusal made and the limitation period did not begin to run. The appellant is not barred from bringing her action. However, I make no conclusion about the merits of her claim, which a trial judge must assess.

    II. FACTS

  2. The appellant was a victim of a motor vehicle accident that occurred on April 14, 1994. She claimed and received statutory benefits from the respondent who ceased paying those benefits on May 8, 1996. The respondent advised the appellant in writing that same day of the reasons for the termination. The form sent by the respondent to the appellant contained the following notation:

    We have assessed your claim for accident benefits. This form tells you how we calculated your benefits. If you disagree with our assessment, please contact us immediately.

    If we cannot settle the application to your satisfaction, you have the right to ask for mediation through the Ontario Insurance Commission. You can contact them in Toronto at (416) 250-6750 or toll free at 1-800-668-0128.

    In a letter sent to the appellant's solicitor on the same day, the respondent wrote, "please be advised that Ms. Smith is no longer entitled to Income Replacement Benefits".

  3. After engaging in correspondence in which she unsuccessfully urged the respondent to reinstate her benefits, the appellant filed for mediation as required by the provisions of the Insurance Act. The mediation was held on August 11, 1997 but failed. The appellant issued a statement of claim on September 8, 1998 for ongoing statutory benefits.

  4. The respondent presented a motion for summary judgment on the grounds that the appellant's claim was time-barred by s. 281(5) of the Insurance Act which requires that any court action or arbitration claiming statutory accident benefits be commenced within two years of "the insurer's refusal to pay the benefit claimed". On June 23, 1999, MacKinnon J. of the Superior Court of Justice allowed the motion for summary judgment and dismissed the appellant's action. The appellant's appeal was dismissed by a majority of the Ontario Court of Appeal on February 21, 2000.

    III. RELEVANT STATUTORY PROVISIONS

  5. Insurance Act, R.S.O. 1990, c. I.8

    281.

    (1)

    Subject to subsection (2),

    (a)

    the insured person may bring a proceeding in a court of competent jurisdiction;

    ....

    (5)

     

    A step authorized by subsection (1) must be taken within two years after the insurer's refusal to pay the benefit claimed or within such longer period as may be provided in the Statutory Accident Benefits Schedule.

    Statutory Accident Benefits Schedule -- Accidents after December 31, 1993 and before November 1, 1996, O. Reg. 776/93

    62.

    ....

    (7)

    When a weekly benefit is first paid under Part II, section 15, Part IV or Part V or the amount of the weekly benefit is changed, the insurer shall provide the insured person with a written explanation of how the amount of the weekly benefit was determined.

    (8)

    If the insurer refuses to pay weekly benefits under Part II, section 15 or Part IV or V, it shall give the insured person notice of the reasons for the refusal,

    (a)

    within 14 days after receiving an application for the benefits, if the refusal occurs before the application is approved;

    (b)

    by the day on which it would have paid the next weekly benefit, if the refusal occurs after the application is approved.

    ....

    71.

     

    If an insurer refuses to pay a benefit that a person has applied for under this Regulation or reduces the amount of a benefit that a person received under this Regulation, the insurer shall inform the person in writing of the procedure for resolving disputes relating to benefits under sections 279 to 283 of the Insurance Act.

    ....

    84.

     

    Each of the following documents shall be in a form approved by the Commissioner of Insurance:

    ....

    10

    An explanation under subsection 62(7).

    11

    A notice under subsection 62(8).

    IV. JUDGMENTS BELOW

    A. Ontario Superior Court of Justice, [1999] O.J. No. 2484 (QL)

  6. MacKinnon J. allowed the motion for summary judgment and dismissed the claim. He held that the two-year limitation period in s. 281(5) of the Insurance Act began upon the refusal of the insurer to pay, as stipulated by that subsection. Since the appellant did not file her claim within two years of the insurer's refusal, her action was time-barred. According to MacKinnon J., the two-year period begins to run when the benefits have been refused, not when the insurer advises the applicant of his or her rights to mediation and of the existence of the time limit.

    B. Ontario Court of Appeal (2000), 130 O.A.C. 122

  7. A majority of the Court of Appeal (Sharpe J.A., Catzman J.A. concurring) dismissed the appellant's appeal, but for reasons different from those given by the motions judge. They acknowledged that the limitation period in s. 281(5) of the Insurance Act did not start to run unless the requirements imposed by s. 71 of the SABS were complied with. The issue therefore was whether s. 71 was complied with by the respondent. The appellant's contention that the respondent's notice was insufficient because it did not advise her of the existence of the two-year statutory limitation period was rejected by the majority of the Court of Appeal. In Sharpe J.A.'s view, the procedure for resolving disputes under ss. 279 to 283 of the Insurance Act referred to in s. 71 of the SABS was complex, and consequently it was sufficient for the respondent to mention the next step of that process, which was the right to request mediation.

  8. In addition to satisfying the requirements of s. 71, the notice satisfied the consumer protection purpose of the statute and regulations. Sharpe J.A. held that an expansive interpretation of s. 71 would likely defeat its consumer protection purpose since insurers would simply attach copies of ss. 279 to 283 of the Insurance Act to their notices with the result that claimants would be overwhelmed with information. As further support for his belief that claimants are given the information they require regarding the limitation period when the time is appropriate, Sharpe J.A. pointed to the fact that the appellant was advised of the two-year limitation period in the Report of the Mediator sent to her on August 11, 1997 by the Ontario Insurance Commission following the unsuccessful mediation. The majority of the Court of Appeal concluded that the respondent did comply with s. 71 of the SABS and was therefore entitled to assert the limitation defence.

  9. Borins J.A. dissented and would have held that there was insufficient compliance with s. 71 of the SABS. He indicated that the section is clear and unambiguous, and manifests a legislative intention to expand the information that an insurer must provide upon refusal to pay or the reduction of payments. Consistency with the consumer protection purpose of s. 71 requires insurers to completely and clearly provide insured persons with the information needed to enable them to challenge the refusal to pay or the reduction of payments. Borins J.A. stated that mediation is only the first step in the dispute resolution process, and as a result it is not sufficient for the insurer to give information about that step only. While he acknowledged that the dispute resolution provisions are complex, Borins J.A. found the limitation period to be central to the dispute resolution process contained in the Insurance Act since it conveys the need to proceed expeditiously. Complexity of the provisions could not be an excuse for ignoring the plain meaning of s. 71. Borins J.A. prescribed a basic minimum of four points of information that an insurer should provide to comply with s. 71. He concluded that the limitation period did not begin to run and consequently the appellant was not precluded from proceeding with her claim against the respondent.

    V. ISSUES

  10. The questions raised by this appeal are the following:

    1. What requirements are imposed on an insurer under s. 71 of the SABS?

    2. Was there a proper refusal by the respondent so as to trigger the limitation period of two years to launch a civil action?

    VI. ANALYSIS

    A. The Requirements Imposed by Section 71 of the SABS

  11. There is no dispute that one of the main objectives of insurance law is consumer protection, particularly in the field of automobile and home insurance. The Court of Appeal was unanimous on this point and the respondent does not contest it. In Insurance Law in Canada (loose-leaf ed.), Professor Craig Brown observed, "In one way or another, much of insurance law has as an objective the protection of customers" (p. 1-5). I note in this vein s. 279(2) of the Insurance Act which provides that any restriction on a party's right to mediate, arbitrate, litigate, or appeal is void, except as provided in the regulations. True to that purpose of consumer protection, no refusal under s. 71 of the SABS can be said to have been given by an insurer if there has not been adequate compliance with that section.

  12. Borins J.A. was correct in observing that s. 71 is clear and unambiguous. The legislature clearly intended to place an obligation on the insurer to inform the claimant of the dispute resolution process under ss. 279 to 283 of the Insurance Act. The section does not refer only to s. 280(1), which gives the insured the right to refer the dispute to mediation. It refers to the whole process. In fact, having no indication that there is anything beyond mediation would tend to create a misguided sense of discouragement in the claimant.

  13. That said, Sharpe J.A. was also properly concerned that claimants would be overwhelmed should insurers opt to simply attach a verbatim reproduction of ss. 279 to 283 of the Insurance Act to the refusal. In fact, it is questionable whether this would qualify as a valid refusal as it would surely run afoul of the consumer protection purpose of the legislation. However, we are not merely restricted to two options, both of which are at opposite ends of the spectrum of possible information. There is middle ground.

  14. Borins J.A. provided a list of the basic elements of ss. 279 to 283 of the Insurance Act that he thought must be conveyed, and I generally agree with his identification of the most important aspects of those sections. I would caution, however, that it is not the role of this Court to set out the specific content of insurance refusal forms. This task is better left to the legislature. However, it is appropriate for this Court to interpret in general terms what the legislature intended the insurer to convey under s. 71. In my opinion, the insurer is required under s. 71 to inform the person of the dispute resolution process contained in ss. 279 to 283 of the Insurance Act in straightforward and clear language, directed towards an unsophisticated person. At a minimum, this should include a description of the most important points of the process, such as the right to seek mediation, the right to arbitrate or litigate if mediation fails, that mediation must be attempted before resorting to arbitration or litigation and the relevant time limits that govern the entire process. Without this basic information, it cannot be said that a valid refusal has been given.

    B. Was there a Proper Refusal?

  15. Given that s. 71 of the SABS imposes a requirement to inform the claimant of the dispute resolution process as discussed above, and given that the respondent only informed the appellant of the first step of this process, a proper refusal cannot be said to have been given. Since a proper refusal was not given, and since the limitation period under s. 281(5) of the Insurance Act only begins to run upon a refusal, that limitation period was not triggered by the notice sent on May 8, 1996.

  16. The respondent argued that the appellant was informed of the limitation period in any event through the mediator's report. Sharpe J.A. also took note of this, although not for the purpose of invoking it against the appellant as the respondent wishes to do. However, to take this fact into account against the appellant would be to ignore the particular nature of the matter. As I have mentioned above, insurance law is, in many respects, geared towards protection of the consumer. This approach obliges the courts to impose bright-line boundaries between the permissible and the impermissible without undue solicitude for particular circumstances that might operate against claimants in certain cases. Moreover, as previously discussed, the insurer's obligation extends beyond mere communication of the limitation period.

  17. The respondent also invoked the fact that its notice of refusal was in a standard form prescribed by the Commissioner of Insurance (referred to as the Superintendent after July 1, 1998). It argued that by virtue of ss. 94, 62(7), and 62(8) of the SABS, it was mandatory for the respondent to use the form drafted and approved by the Commissioner of Insurance. Section 62(7) imposes an obligation of a written explanation in case of a change in payment, and s. 62(8) imposes an obligation of a notice of the reasons for refusal where the insurer refuses payment. Section 94 requires regulatory approval of the forms used for those explanations and notices.

  18. My own reading of these sections leads to a more nuanced interpretation of the regulatory provisions than the one suggested by the respondent. Section 94 provides that "Each of the following documents shall be in a form approved by the Commissioner of Insurance ...." There is nothing in the provision that requires that the documents be in a form issued by the Commissioner. Section 94 simply indicates that whatever form the insurer uses, it must be approved by the Commissioner. Moreover, s. 94 makes no reference to s. 71. Consequently, its applicability in this case is rather doubtful. The use by the insurer of a prescribed form does not detract from its obligations under s. 71.

  19. Notwithstanding my own reading of the provision, the issue is largely irrelevant to the matter since the industry practice of using the form prescribed by the Commissioner cannot somehow be a substitute for conformity with s. 71 of the SABS. Section 71 clearly states that it is the insurer who "shall inform the person in writing" of the dispute resolution procedure. 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.

  20. There is some doubt in my mind as to whether the notice given by the respondent in this case would even be considered a refusal in a non-technical sense, absent the refusal letter sent to the appellant's solicitor. The notice says, inter alia, "If you disagree with our assessment, please contact us immediately. If we cannot settle the application to your satisfaction, you have the right to ask for mediation ....". There is an equivocal sense of indeterminacy in the decision of the insurer giving the reader the impression that the insurer may very well change its stance if it is contacted for a discussion of the matter. The letter to the solicitor in this case removes any doubt by clearly stating, "Ms. Smith is no longer entitled to Income Replacement Benefits". However, if it were not for this letter there might have been another ground, apart from the requirements of s. 71, on which this notice's status as a refusal could be impugned.

    VII. DISPOSITION

  21. For the foregoing reasons, I would allow the appeal with costs throughout.

    Bastarache J

    (dissenting)

  22. I agree with my colleague Gonthier J. that the adoption of s. 71 of the Statutory Accident Benefits Schedule - Accidents after December 31, 1993 and before November 1, 1996, O. Reg. 776/93 ("SABS"), in 1993 creates a right of access to the dispute resolution process and that it must be interpreted in a purposeful manner. This is why I share the view that the notification given in response to s. 71 in the standard form used was insufficient to advise the appellant as prescribed in s. 71. As stated by my colleague, this section clearly places upon the insurer the obligation to inform the claimant of the most important points of the dispute resolution process contained in ss. 279 to 283 of the Insurance Act, R.S.O. 1990, c. I.8.

  23. The respondent's argument that it used the form provided by the Commissioner of Insurance is, on the facts of this case, irrelevant. The form used by the respondent, entitled "Explanation of Assessment by Insurance Company", was approved for the purpose of advising the claimant of the refusal of benefits. No form was either provided or approved for the purpose of advising the claimant of the right to dispute. As I will explain in greater detail below, the duty imposed on the insurer by s. 62(8) of the SABS to notify the claimant of the refusal of benefits is an obligation that exists separate and apart from the duty of the insurer under s. 71 of the SABS to inform the claimant of the right to dispute the refusal.

  24. My colleague accepts the Court of Appeal's conclusion that the insurer's duty to inform the claimant of the right to dispute in s. 71 is linked inextricably with the insurer's duty to notify the claimant of the refusal of benefits pursuant to s. 62(8) of the SABS. He reasons that a proper refusal is not made until the claimant is informed about the dispute resolution process. In turn, the limitation period under s. 281(5) of the Insurance Act does not begin to run until a proper refusal is made. According to this logic, if the claimant is not informed of the dispute resolution process as part of the refusal of benefits, the limitation period does not begin to run.

  25. In my view, neither the language of the SABS nor the language of the Insurance Act supports the above conclusion. I agree that it is well established in the jurisprudence that the limitation periods set out in s. 281(5) of the Insurance Act and s. 72(1) of the SABS do not begin to run until the insurer has properly notified the claimant of the insurer's refusal to pay: see for example Kirkham v. State Farm Mutual Automobile Insurance Co.,1998 CarswellOnt 2811 (Div. Ct.), leave to appeal refused, [1998] O.J. No. 2872 (QL) (C.A.). This interpretation is based on the precise and unambiguous language of the legislation. Section 281(5) of the Insurance Act provides that proceedings "must be taken within two years after the insurer's refusal to pay the benefit claimed or within such longer period as may be provided in the Statutory Accident Benefits Schedule" (emphasis added). Section 72(1) of the SABS provides that "[a] mediation proceeding under section 280 of the Insurance Act or an arbitration or court proceeding under section 281 of the Act in respect of a benefit under this Regulation shall be commenced within two years from the insurer's refusal to pay the amount claimed ...." (emphasis added). Both provisions clearly link the running of the limitation period with the insurer's refusal to pay the claimant.

  26. While I accept that the limitation period cannot begin to run until the claimant has been properly notified of the refusal of benefits, I disagree with my colleague that this notification is incomplete until the claimant is informed of his or her right to dispute pursuant to s. 71 of the SABS. In my view, the legislation establishes no clear link between the notification of the right to dispute and the notification of the refusal to pay benefits, the latter of which must be given before the limitation periods set out in s. 281(5) of the Insurance Act and s. 72(1) of the SABS will begin to run. Had the legislature intended to tie the insurer's obligation to notify the claimant of the right to dispute to the running of the limitation period, it could have amended s. 281(5) of the Insurance Act and drafted s.72 of the SABS differently when it adopted s. 71 of the SABS in 1993. I am not persuaded that it is appropriate to read into s. 72(1) and s. 281(5) what was obviously left out by the legislature.

  27. In my view, it is not necessary to resort to an interpretation that is so remote from the "grammatical and ordinary sense of the words", to use the expression of the appellant, in order to make it mandatory for the insurer to fully inform the claimant pursuant to s. 71. I think that the purpose of s. 71 is simply to give access to the right to dispute, as the subheading indicates. Section 71 reinforces the claimant's right to dispute a refusal of benefits and obligates the insurer to inform the claimant of this right. The appropriate sanction for the insurer's non-performance of its duty to inform the claimant of the right to dispute is to bar the insurer from resisting a request for mediation, which is the first step in the dispute resolution process. Until the notice of the right to dispute is given, the claimant may at any time resort to mediation. Once the claimant is informed of the right to dispute, then pursuant to s. 72(1), she has two years to proceed to mediation.

  28. This interpretation also protects the claimant's right to arbitrate or to litigate. Pursuant to s. 72(2), an arbitration or a court proceeding under section 281 of the Insurance Act may be commenced within 90 days after the report of the mediator is issued. As stated above, the claimant has a right to proceed to mediation at any time up to the point at which she is informed of the right to dispute, after which she has two years to proceed to mediation. Section 72(2) insures that the right to arbitrate or litigate is not lost until the claimant has exercised her right to mediate and a report has been issued.

  29. My colleague expresses doubt that in this case the appellant was given clear notice of the insurer's decision to discontinue benefits. I disagree. The appellant had applied for and received accident benefits, including income replacement benefits, from the respondent. The respondent sent the appellant an "Explanation of Assessment by Insurance Company" form on May 8, 1996. Under the heading "Income Replacement Benefits" (at point 1 of the form) the respondent had placed a clear checkmark in the box labelled "Not Eligible". In a box below labelled "Notes on calculating your income replacement benefit, including income or payments from other sources" the respondent wrote by hand:

    The Disability Designated Assessment Centre's report was received May 6/96 at our office. Please be advised that you no longer meet the test of disability that entitles you to receive income replacement benefits. As such your benefits have been terminated effective May 8th, 1996.

  30. In addition, in the present circumstances, the appellant did proceed to mediation. Pursuant to s. 72(2) of the SABS, she had the option to institute a civil claim within 90 days of the issuance of the mediator's report. Following the completion of the mediation, the appellant was provided with a copy of the mediator's report. In accordance with the practice of the Ontario Insurance Commission, the cover letter accompanying the report clearly informed the appellant that she had the right to proceed to arbitration or to initiate a court action. The letter also informed the appellant of the limitation periods associated with the options presented to her.

  31. Given the above, there is no injustice in applying s. 281(5) of the Insurance Act and s. 72(1) of the SABS to bar the appellant's action in the present case. She was not denied access to the dispute resolution procedures, nor was she prevented from instituting a civil action for lack of notice of the limitation period applicable at the relevant time.

  32. For these reasons, I would dismiss the appeal with costs.


Cases

Kirkham v. State Farm Mutual Automobile Insurance Co., 1998 CarswellOnt 2811, leave to appeal refused, [1998] O.J. No. 2872 (QL) (C.A.).

Legislations

Insurance Act, R.S.O. 1990, c. I.8, ss. 279, 280, 281(1), (2), (5) [rep. & sub. 1996, c. 21, s. 37], 282, 283.

Statutory Accidents Benefits Schedule -- Accidents after December 31, 1993 and before November 1, 1996, O. Reg. 776/93, ss. 62(7), (8) [rep. & sub. 781/94, s. 16], 71, 72, 94 [am. 304/98, s. 7].

Authors and other references

Brown, Craig. Insurance Law in Canada, vol. 1, loose-leaf ed. Scarborough, Ont.: Carswell, 1999.

Representations

Andrew R. Kerr and M. Steven Rastin, for the appellant (instructed by Ferguson Barristers, Midland, Ontario).

Bruce Keay, for the respondent (instructed by Malach & Fidler, Richmond Hill, Ontario)


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