This case arises from a motor vehicle accident that occurred on November 1, 2007. The applicant, C.W., was crossing a street when she was struck by a vehicle. The driver of the vehicle did not advise his insurer, Jevco, of the accident until almost two years later when C.W. commenced a tort claim. Jevco subsequently took a non-coverage position alleging that it never agreed to insure the vehicle involved in the accident which was recently acquired by the driver. Jevco maintained this non-coverage position until September 14, 2014 when it finally accepted C.W’s accident benefits claim.

C.W. sustained catastrophic injuries as a result of the accident including a mild to moderate traumatic brain injury and ligament tears to her knee. She was assessed and found to require $6,000 in monthly attendant care benefits. For various reasons, C.W. did not apply for accident benefits until March 3, 2015 and applied for the attendant care benefit on December 16, 2015 seeking retroactive payment of her benefits to November 9, 2007, the date she was released from the hospital. Jevco agreed to pay for attendant care benefits from the date of the application but refused any prior periods.

C.W. didn’t apply for accident benefits prior to this date for various reasons. Jevco was unaware of the accident until two years after the accident when the tort claim was commenced. The driver never reported the accident to Jevco. Further, there were no other cars involved in the accident and, as a Quebec resident, C.W. was not entitled to accident benefits through the Motor Vehicle Accident Claims Fund and did not know of the right to claim accident benefits.

The LAT wrestled with two main questions. First, the LAT had to determine what C.W. needed to prove in order to claim retroactive attendant care benefits. Jevco relied on s. 42(5) of the SABS which states that “an insurer may, but is not required to, pay an expense incurred before an assessment of attendant care needs…is submitted to the insurer” to argue that no benefits are payable prior to receipt of a Form 1. However, Jevco also noted s. 34 of the SABS which states that “a failure to comply with a time limit set out in this Part does not disentitle the person to a benefit if the person has a reasonable explanation.” The LAT found that no retroactive attendant care benefits were payable unless C.W. could establish some type of “urgency, impossibility or impracticality” prevented her from submitting the Form 1 earlier or that she had a “reasonable explanation” for not doing so. 

Jevco argued that the applicant should have applied for accident benefits once she became aware of Jevco at the initiation of the tort claim regardless of Jevco’s coverage position on the tort claim given the different standards between the tort and accident benefefit regimes. Further, Jevco argued that their tort and AB departments do not share information so it had no way of knowing the applicant existed prior to her application.

The applicant argued that it was not reasonable to expect her to apply to Jevco for AB’s while Jevco was asserting in the tort matter that no relevant policy existed. The applicant argued that she actively pursued her rights by disputing Jevco’s non-coverage position through the tort proceeding. Further, given the emotional and financial costs of litigation, the applicant argued it is not realistic to expect her to have fought the coverage issue in both the tort and accident benefit context simultaneously.

In deciding the issue, the LAT separated the pre-application period in dispute into two different time periods. The first time period extended from the time of the accident until roughly two years later when C.W. initiated the tort claim and learned of Jevco’s involvement. The LAT found that, during this period, it was impossible for CW to apply for attendant care benefits as she was unaware of any insurer she could apply to and she was not covered by the Fund.

The second period extended from November 2009 until the Form 1 was filed. The LAT found that, during this period, it was impractical for the applicant to apply for accident benefits under the circumstances created by Jevco’s non-coverage position. At the very least, the LAT found that Jevco’s position provided a reasonable explanation for C.W’s failure to apply for accident benefits.

Jevco made several technical arguments which were rejected by the LAT. Jevco argued that C.W. ought to have applied for accident benefits at the two year mark when she become aware of Jevco’s involvement. The LAT found that Jevco’s failure to advise the applicant of her right to accident benefits, as it is required to do, was a glaring omission given that Jevco now argued she ought to have applied sooner. In addition, the LAT found that, as Jevco was not taking a limited policy exclusion position, but rather was taking the position that no policy existed at all, it was reasonable for the applicant to wait to apply for accident benefits until the coverage issue was resolved.

Further, the LAT rejected Jevco’s position that it was not aware of C.W’s claim. The LAT found that the typical internal “firewall” that exists between the accident benefit and tort departments of insurers didn’t apply in this case.  Adjudicator Shapiro relied on two cases for this issue.

In Worthington Trucking Inc. v Klingbeil (1999 CanLII 19927), the plaintiff was seriously injured in a car accident. The insurer retained the same law firm to represent it against the plaintiff’s claims for accident benefits and damages in the tort context. On the plaintiff’s motion, the law firm was prohibited from acting for the insurer in both capacities. The insurer appealed.

The Ontario Divisional Court ruled that there was no rule or obligation of confidentiality that prevents a person who receives information in confidence from using that information to defend himself against a claim made against him by the same person who gave the confidential information to him. Privilege and confidentiality rights are lost by the plaintiff by the act of suing the recipient of such confidential or privileged information. The Divisional Court ultimately found there was no reason why the same law firm could not represent the insurer in both actions.

The second case relied on by Adjudicator Shapiro was Dervisholli et al. v Cervenak and State Farm Mutual Automobile Insurance Company (2015 ONSC 2286). The plaintiff was injured in a motor vehicle accident. State Farm was sued personally pursuant to the underinsured provisions of the plaintiff’s policy, was the plaintiff’s AB insurer,  and insured the Defendant Cervenak in the tort action. State Farm denied coverage alleging that the plaintiff and defendant staged the accident. State Farm, in its capacity as a statutory third party, and by extension its lawyers, Reisler Franklin, delivered an Affidavit of Documents with EUO transcripts and various other accident benefits documents seeking to rely on them in the tort action.

Dervisholli distinguished the Klingbeil case as an amendment to the Insurance Act, after the Klingbeil decision, required plaintiff’s to apply for accident benefits prior to commencing a tort action. The Plaintiff in Klingbeil  did not have this obligation. This amendment forced plaintiffs to provide medical and other confidential information as well as submit to medical examinations for the purposes of adjusting the AB claim. Given the AB carrier’s duty of utmost good faith when compared to the adversarial position in the tort context, the court concluded that the AB insurer ought to keep its insured’s information private and create a “firewall” between their AB and tort departments subject to the insured’s consent and the ordinary rules of discovery in the tort context. The court found that it did not matter that State Farm would have obtained much of this information during documentary disclosure. The court ultimately concluded that the transmission of information from its AB department to its tort department was an authorized intrusion of the plaintiff’s privacy interests which was contrary to the duty of good faith owed by State Farm to the Plaintiff.   

Adjudicator Shapiro found that this internal “firewall” is supposed to operate to the benefit of the applicant and cannot be used to her detriment as a means to not notify her of her rights under the policy. The LAT opined that when Jevco’s tort department received a claim from a passenger, Jevco ought to have considered whether it was the priority insurer and had a duty to adjust the claim. 

Jevco also argued that, pursuant to O. Reg. 283/95 Dispute Between Insurers, if the applicant had applied for benefits, Jevco would have been required to pay while it sought a resolution  of priority with the correct insurer. The LAT rejected this argument as Jevco was the only possible insurer and the scheme’s purpose, words, and title only require the first insurer to pay when it can be reimbursed from the second, correct insurer. In this case, there was no second insurer so the LAT questioned whether Jevco would actually have a duty to pay in the circumstances. 

Jevco further argued that, by adding itself to the tort matter as a statutory third party under s. 258(14), it admitted that a valid policy was in place and it was only denying coverage to the driver. The LAT rejected this argument as s. 268(2)2 of the Insurance Act  ties the applicant’s accident benefits to an “insurer of the automobile that struck the non-occupant.” Given Jevco’s denial that it insured the subject vehicle, the LAT  rejected this position.

Ultimately, the LAT concluded that C.W. was entitled to payment of her  attendant care benefits retroactively to November 9, 2007. The LAT further considered when interest was payable on these retroactive benefits. The LAT determined interest was payable from the retroactive date of November 9, 2007 (the day the applicant was released from the hospital).

While the decision does not do the calculations of arrears or interest, the dollar amounts here could be staggeringly large.  Here the LAT permitted a $6,000 monthly attendant care claim retroactive to November 2007. The arrears amount to more than 11 years which, for round numbers, is approximately $800,000.  Interest compounded at 2% per month would be in the millions of dollars. 

The message to insurers from this decision is: if a tort claim exists against an insurer, that insurer has a duty to itself to ensure that it does not also have a potential accident benefit exposure, since the knowledge of one part of the company of the potential risk will be imputed on the other side of the company.  The firewall that exists between accident benefit insurer and tort insurer is not one that can be used as a sword to protect an insurer from claims it actually does know about.  This is especially the case where the firewall case law is intended to protect against accident benefit information statutorily mandated to be delivered to the insurer from being shared with the tort side, and not the other way around as is the situation in this case.

Dale Stuckless is a member of Licence Appeal Tribunal practice group and the author of this blog. If you have a question about this decision or a similar file, please contact Dale