The decision by the Ontario Court of Appeal in Baig v. The Guarantee Company of North America was released on December 5, 2007. The decision overturns a lower court decision that denied Guarantee the right to an examination under oath of its insured pursuant to the Statutory Conditions of the OAP1. This lower court decision was troubling because it seemed to stand for the proposition that the insurer lost its contractual right to an examination under oath simply because the insured had commenced an action. The decision went so far as denying the insurer’s right to the examination when the relationship became “adversarial”.

The decision of the Court of Appeal makes it clear that an insurer retains its right to an examination under oath of its insured notwithstanding the commencement of a civil action against the insurer. This is true for property claims and claims for statutory accident benefits.

The Court of Appeal also favourably cited the decision in Aviva Insurance Company v. Balvers, a decision argued before Madame Justice Stewart which upheld the insurer’s right to an examination under oath pursuant to s. 33(1.1) of the Statutory Accident Benefits Schedule. This lower court decision is itself under appeal by the insured and will be heard by the Ontario Court of Appeal in March 2008.

The decision in Baig can be found here.

The Court of Appeal has proven that logic is not dead! In a reversal of a lower court decision, the Ontario Court of Appeal has ruled that a go-kart, operated on a go-kart track, is NOT an automobile.  The decision in Adams v. Pineland Amusements Ltd. was released December 5th. The decision is available here.

FSCO has issued a cease and desist order against a SABS paralegal named Roland Spiegel.  This Order was recently challenged by Mr. Spiegel and the FSCO tribunal upheld the Order.  The decision can be found by clicking on the following link:
http://www.fstontario.ca/english/decisions/paralegal/R0301-2007-1.pdf

By Donna Ford from Claims Canada, August/September 2007

David McMichael admits to using cocaine before the accident, but claims he only used crack cocaine for the first time after a failed attempt to return to work following the crash.

David McMichael was a passenger in a taxi that was hit broadside in June of 1998. He was thrown through the rear windshield of the cab and sustained multiple serious injuries including an evulsion skull fracture.

He made an accident benefit claim to Belair Insurance Company under the Statutory Accident Benefits Schedule (SABS). Belair paid various benefits including income replacement benefits (IRBs). IRBs were terminated in November 2002 based on a Disability DAC (a DAC is an independent assessment performed at a Designated Assessment Centre). McMichael filed for mediation and then arbitration.

McMichael also claimed attendant care benefits (AC) from April 2002 ongoing, and sought a finding from the arbitrator that he suffered a catastrophic impairment.

There were several days of hearing in 2004 and David Muir, arbitrator, Financial Services Commission of Ontario, delivered his reasons on Mar. 2, 2005. He noted McMichael was paid AC expenses for a period of time after the accident, initially provided by his wife, then a sister and later by outside help; however, within months of the accident McMichael was able to provide for many of his own personal care needs and AC was no longer required.

McMichael’s complaints at arbitration were both physical and psychological/cognitive, but the debate mainly centred on whether McMichael’s current cocaine addiction was causally related to the motor vehicle accident. It was this addiction, primarily, that formed the basis of his position that he was catastrophically impaired and therefore entitled to AC and IRBs. Belair’s position was that he was a cocaine abuser before the accident and that he had no further entitlement to either benefit.

McMichael’s blood was tested in the hospital after the accident and showed consumption of alcohol and cocaine.

“Discovering the truth of Mr. McMichael’s substance use and/or abuse in the years prior to the accident is complicated by the fact that Mr. McMichael has said quite different things about it at various times since the accident. This lack of clarity or candour on Mr. McMichael’s part has, at a minimum, fuelled suspicion about his claims,” Muir wrote. “Mr. McMichael is an unreliable historian and it is difficult to give much credit to what he has to say about his drug use,” Muir continued, also finding that McMichael and his wife may have underestimated the frequency of his pre-accident cocaine use. The arbitrator concluded that McMichael had a long history of cocaine use, beginning in his late teens, peaking in his early 20’s, and that he was “a recreational user” in the years leading up the accident.

The arbitrator found that McMichael was an active family man prior to the accident, enjoyed sports on a very regular basis, visited his mother and three sisters regularly, maintained steady employment and met his sales targets.

McMichael testified that he used crack cocaine for the first time after the accident after his failed attempt to return to work in October of 1998. Beginning sometime in late 1998, McMichael was unable to abstain from using crack cocaine for more than a few days or weeks at a time and was a binge user, the arbitrator wrote.

“Mr. McMichael pays for his drugs with his CPP disability pension payments as well as an annuity from the tort settlement. This is not enough, and Mr. McMichael has had to find drug money elsewhere. Mr. McMichael has sold all of the jewelry he bought his wife over the years, including her engagement ring and wedding band . . . He has stolen from his mother, Dr. Berry and others who were not identified. He has stolen from complete strangers. He has emptied the family bank account on at least two occasions. At times he has physically abused his wife, demanding she give him money for drugs,” Muir wrote. Further, he gave up sports, became estranged from his son, made his wife’s life a “living hell” and failed in three attempts to return to work.

A CAT DAC completed in April 2002 by an independent assessment team consisting of six medical specialists concluded that McMichael did not meet the criteria for catastrophic impairment. However, the arbitrator, in rejecting the DAC’s conclusion, found that the CAT DAC team had relied too much on clinical testing, had failed to review collateral material such as examination for discovery transcripts, had failed to consider addiction per se, as a disabling impairment, and had failed to require that a workplace assessment be conducted.

In allowing McMichael’s claim for IRBs from November 2002 and ongoing, the arbitrator commented that McMichael’s entitlement to IRBs after 104 weeks rested almost entirely on the fact and consequences of his addiction to crack cocaine. The arbitrator concluded that the drug addiction was a direct consequence of the injuries sustained in the accident.

On the issue of past AC, McMichael’s position was that he did not get the services he needed because Belair refused to pay for them. Belair’s counsel argued that these were not “incurred” expenses the insurer should have to pay because McMichael did not receive, pay for or incur a debt or obligation to pay for AC.

To support his claim for AC at arbitration, McMichael relied on a report and Form 1 dated March 2002 completed by an occupational therapist retained by McMichael. The OT recommended round-the-clock attendant care at the rate of $7 per hour, for a total of $5,056.80 per month to assist McMichael to remain drug free at least until such time as he could be admitted to an in-patient drug rehabilitation program.

However, despite his participation in several drug treatment programs, McMichael “has failed to stay clear of crack cocaine . . . ” according to the arbitrator. He relapsed within days of his discharge from an in-patient program and was “essentially incapable of attending the out-patient programs,” Muir wrote. Despite this, the arbitrator ordered that McMichael was entitled to an AC benefit of $5,056.80 per month from April 2002 and ongoing, plus interest.

Belair’s appeal to Nancy Makepeace, the Office of the Director of Arbitrations at FSCO, was dismissed on Mar. 14, 2006. Belair submitted an application for judicial review (on the issue of past AC from April 2002 to February 2005) of Makepeace’s decision to the Ontario Divisional Court, which was dismissed by Justices Lane and Swinton May 17, 2007.

Makepeace commented in her reasons that if McMichael recovers from his addiction and no longer requires AC that Belair could apply for revocation or variation of the order; if a relapse then followed, McMichael could apply to have his AC benefits reinstated.

Overall, this case left a bad taste in my mouth for several reasons: The arbitrator’s finding that this was a catastrophic impairment caused by the accident; the arbitrator ordering the insurer to write a cheque for over $175,000 plus interest for past attendant care services that were never performed to an abuser of illegal drugs; the lack of any evidence that McMichael’s “self-medication” with crack-cocaine was prompted by any refusal by Belair to authorize proper and necessary medication; and the strong feeling that justice had not been done at FSCO or by those reviewing the arbitrator’s decision. Moreover, there is a fundamental flaw in the Arbitrator’s interpretation of what can and should be an “incurred” expense.

Muir wrote with respect to AC expenses claimed, “It is well established that an applicant need not actually receive the items or services claimed in order to be entitled to an expense. To do otherwise would allow the insurer to set up the inability of an insured to pay for a benefit as a shield from its obligation under the policy of insurance. It is sufficient that the reasonableness and necessity of the service be established and that the amount of the expenditure can be established with certainty.”

Did the evidence (disclosed in the arbitrator’s reasons) meet this standard? I suggest that it did not. The arbitrator relied on the Form 1 and the report of the occupational therapist, which did not specify who would perform the services, but provided, “In an effort to assist Mr. McMichael to remain drug free, he requires immediate intervention via ongoing supervision either by family, friends or an ‘attendant’.”

While the arbitrator referred to McMichael having physically abused his wife, he didn’t say if his wife had the ability or willingness to supervise McMichael (even though she testified at the hearing). His reasons also referred to McMichael having ended contact with most of his birth family, except for his mother whom he still saw regularly. We don’t know if any of his relatives would have been willing or able to carry out the AC services. Was it possible to hire effective “attendants” for the $7 per hour fee recommended by the occupational therapist? Did the family make inquiries? We don’t know. There is nothing in his Muir’s reasons to suggest he had directed his mind to any of these critical points before concluding that these were “incurred” expenses and that the insurer must pay.

It’s not enough, when claiming “incurred” expenses at arbitration, to simply say, “If you had given me the money, I could have found appropriate help.” The evidence fell far short of establishing the expenditure with “certainty.”

If an insured claims to be catastrophically impaired, CAT assessments cost the insurer many thousands of dollars; however, the actual determination by an arbitrator or judge that someone is catastrophically impaired has even bigger financial implications. (A catastrophic determination enhances the benefits that an insured can receive, although it does not entitle the insured to any particular benefit.) Attendant care payments are generally capped at $72,000, and med/rehab at $100,000, but the cap is raised to $1 million in each category if there is a catastrophic determination. Similarly, housekeeping and income replacement benefits can be payable for life for the catastrophically impaired.

Belair filed an Application for Variation in April of 2007 on the basis that there has been a material change in McMichael’s circumstances with regard to his apparent need for attendant care. According to Arbitrator Joyce Miller in a recent decision on a preliminary issue, Belair has submitted, in its variation application, that it has surveillance of McMichael showing him being active without attendant care contrary to arbitrator Muir’s decision that McMichael requires round-the-clock attendant care.

If I were a Belair policyholder, this case would have me feeling that my pocket had been picked. A favourable ruling for Belair in the upcoming variation application would help alleviate that feeling — but only very slightly.

Donna Ford is a chartered insurance professional, member of the Law Society of Upper Canada, and a freelance writer who worked for years in the insurance industry.

By Donna Ford from Claims Canada, April/May 2007

Yes, says FSCO. But insurers hope for successful appeals against two recent FSCO arbitration decisions in slip-and-fall cases

Two recent arbitration decisions from the Financial Services Commission of Ontario (FSCO) are heading for appeal: Webb and Lombard General Insurance Company of Canada and Mariano and TTC Insurance Company Limited. Both cases involve slip-and-fall accidents on the roadway outside of vehicles. The cases, in my view, represent costly precedents in terms of widening the definition of an “accident” for the purposes of collecting accident benefits under the Statutory Accident Benefits Schedule (part of Ontario’s Insurance Act).

In Webb, the claimant was a front-seat passenger in a cab that took her to a hotel in March 2005. The driver stopped the cab under a carport awning that extended out from the area of the main lobby entrance. The passenger side of the cab was facing away from the hotel.

The claimant, Webb, paid the driver, exited the front passenger seat and started walking around the cab. She noticed little patches of ice under the cab but she did not slip. When she reached the back of the cab, she turned to walk toward the lobby entrance. She noticed more big patches of ice.

Past the midway point of the vehicle’s rear, one of her feet slipped on the ice. She reached out with her right hand and her fingertips touched the bumper, but she was unable to break her fall. She fell on both knees. She testified she fell “maybe one minute” after she exited the cab.

On Nov. 10, FSCO arbitrator Robert Bujold found the use and operation of the cab was one of the direct causes of Webb’s slip and fall. He found the location, orientation and continued presence of the vehicle clearly initiated and directed an uninterrupted chain of events that led Webb to the point where she fell.

FSCO made a similar finding in Mariano, which also analyzed a slip-and-fall case. Arbitrator Joyce Miller decided on Sept. 15, 2006 that Victor Mariano, a cleaner, was entitled to accident benefits after a slip-and-fall incident immediately following a city bus ride.

Mariano boarded a Toronto Transit Commission bus heading northbound in the early morning on his way to work in May 2005. He intended to switch to a westbound bus on Bloor Street. But when his northbound bus arrived at Bloor Street, the driver could not stop at the bus bay because of an illegally parked truck. As a result, Mariano was discharged onto the roadway.

After exiting from the rear door, Mariano testified at the hearing that he took two steps on the roadway when his right foot tripped over a raised hump in the asphalt. He fell forward and hit his head on the curb. It was still dark outside, and he fell within one to two seconds after he got off the bus.

In the legislation under which Webb and Mariano made their claims, an accident “means an incident in which the use or operation of an automobile directly causes an impairment or directly causes damage to any prescription eyewear, denture, hearing aid, prosthesis or other medical or dental device.” This wording, introduced in 1996, replaced the wording in earlier legislation that allowed for such accidents caused “directly or indirectly” through the use or operation of an automobile.

Neither Webb nor Mariano were insured under their own auto insurance policies. Therefore, TTC Insurance Company Limited will pay Mariano’s claim and the cab’s insurer, Lombard, will pay Webb’s claim. The appeals of these decisions will be watched closely by auto insurers and personal injury lawyers in Ontario.

The issue of what constitutes an “accident” under the insurance legislation has been tested many times in court and at arbitration.

In 2002, Ontario Court of Appeal Justice John Laskin wrote in Chisholm and Liberty Mutual Group: “The legislative history of the Schedule shows an intent to differentiate between direct and indirect cause. Undoubtedly, as a cost-saving measure, the 1996 Schedule limits coverage to incidents in which the use or operation of an automobile directly causes an injury.”

In Clementina Pinarreta and ING Insurance Company of Canada, FSCO arbitrator Rosemary Muzzi decided in 2005 that Pinarreta was involved in an “accident” when she slipped and fell while exiting a TTC bus. The arbitrator made this finding even though Pinarreta had placed both of her feet outside the bus onto a snow bank present at the bus stop.

A parallel fact situation led to an entirely different result in Andrew Mahadan and Co-Operators General Insurance Company. In Mahadan, FSCO arbitrator Joyce Miller decided in 2001 that Mahadan was not entitled to accident benefits. He had parked his car in his usual spot in the parking lot of his condominium, took his groceries out of the trunk, closed the trunk and turned away from the car. He fell when his left foot twisted in a groove cut out of the pavement. As he fell, his right arm hit the trunk of the vehicle.

Arbitrator Joyce Miller found that what caused Mahadan to trip and fall was the crack in the pavement, not the use and operation of the motor vehicle.

Assuming the injuries to Webb and Mariano were not caused as a “direct” result of an “accident” within the meaning of the legislation, the insurance industry would therefore be hoping the appeals are successful.

The Webb appeal is scheduled for Apr. 27, 2007, and Mariano for July 11, 2007, both at the Financial Services Commission of Ontario.

Donna Ford is a chartered insurance professional, member of the Law Society of Upper Canada, and freelance writer who worked for years in the insurance industry.

KIRK MAKIN From Globe and Mail, October 20, 2007 at 12:43 AM EDT

A Toronto motorist who suffered life-altering injuries when a boulder was dropped on his car by two intoxicated thrill-seekers cannot be compensated under their insurance policies, the Supreme Court of Canada ruled Friday.

The court said that it would twist insurance law and simple logic to find a close link between the car used to transport the boulder and the injuries suffered by Michael Vytlingam – who now requires 24-hour-a-day care.

In a companion case Friday, the court also denied insurance benefits to Harold Herbison, whose hip was blown apart in 1998 by a hunter who had mistaken him for a deer.

The shooter, Fred Wolfe, was leaning against his vehicle and used his headlights to illuminate a flashing object on the other side of a darkened field when he shot Mr. Herbison.

Both cases turned on the question of whether the injuries the victims suffered were sufficiently connected to the use of motor vehicles. In unanimous judgments, the court rejected an overly liberal approach that would “invite indemnification claims for everything from stag party assaults to self-immolations.”

“The Supreme Court got it right,” said Donna Ford, an expert in insurance law. “It was almost to the point in our legal system where if you could see a car when you were injured, you had a claim.”

Alan D’Silva, a lawyer for the Insurance Bureau of Canada, said it is now clear that auto policies “cannot be used as a pool of funding to cover losses unrelated to auto use – including criminal acts simply because an automobile was used to get to the scene.”

Mr. Vytlingam, 18, and his father were on a marathon haul through the United States on March 14, 1999, returning from Florida after spring break, when Todd Farmer and Anthony Raynor dropped the boulder from an overpass in North Carolina.

As sympathetic as one might be to the victim, Mr. Justice Ian Binnie wrote for the court, “insurance policies must be interpreted in a way that gives effect to the reasonable expectations of both insured and insurer.”

He equated the situation to that of an individual who gets drunk and uses her car as a diving platform from which to spring head-first into shallow water, breaking her neck. “She could not reasonably expect coverage from her motor vehicle insurer, even though, in a sense, she ‘used’ her motor vehicle,” Judge Binnie said.

In the Herbison case, the victim and his nephew were walking across a farmer’s field to their designated hunting stand shortly before dawn on Nov. 2, 1999, when Mr. Wolfe fired at them. Mr. Wolfe had left the engine of his 1987 Nissan pickup truck running, his headlights illuminating the field, after he thought he had spotted the flash of a deer’s tail.

“However, in an act independent of the ownership, use or operation of his truck, Wolfe interrupted his motoring to start hunting, thereby breaking the chain of causation,” Judge Binnie said.

At the same time, the court explicitly rejected an Insurance Bureau of Canada submission that coverage can be denied whenever an injury is caused by criminal activity.

“This is not so,” Judge Binnie said. “Innocent drivers, or pedestrians, should not be denied indemnity if struck by (to give a further example) a getaway car ‘transporting’ bank robbers from the crime scene.”

OFFERS AND THE DEDUCTIBLES: NEW COURT OF APPEAL CASE

This case will change the way in which we draft offers to settle in motor vehicle tort cases. Offers must now apparently reflect the actual damages being offered before the deductibles are applied. To take advantage of the cost consequences we will have to run the risk that the plaintiff will accept and defence will have to pay actual damages set out in the defence offer.

To view the actual decision, click here

Todd McCarthy will argue an important motion on September 24 and 25 in a case that has received national attention. On behalf of The Personal Insurance Company, Todd will bring a motion before a Judge in Ottawa for a determination of a litigant’s right to trial by jury, notwithstanding the complexity of the evidence.

If successful, a defendant in a bodily injury claim would no longer fear losing the opportunity to have the case heard by a jury as a result of a motion by plaintiff’s counsel at the outset or in the middle of a trial.

At a trial in the Spring of 2007, Todd was two weeks into a jury trial when the Judge, following a motion by the plaintiff, chose to release the jurors on the grounds that the evidence had become too complex for jury to understand. The trial has been held in abeyance until the resolution of this important issue.

Both the Advocates Society and the Ontario Trial Lawyers Association has successfully obtained Intervenor status and will make submissions.

We will keep you posted as to the outcome.