Appeal Leaves Scarlett Black and Blue

The much anticipated appeal decision in Scarlett v. Belair[1]was released on November 28, 2013. While many in the insurance industry predicted that Arbitrator Wilson’s March 26, 2013 decision would be rescinded, what was unforeseen was the scathing nature of appellate rebuke.

Findings of breach of procedural fairness, application of the wrong test and incorrectly placing the burden of proof on the insurer ultimately led Delegate Evans to remit the case to a new hearing with a different arbitrator. Note here that the original decision arose from a Preliminary Issue Hearing on the question of whether Mr. Scarlett was subject to the Minor Injury Guidelines(MIG)[2]. On this aspect, the Director’s Delegate gave the following caution:

The determination of whether or not an insured is subject to the MIG will often involve determinations of credibility, disputed facts or conflicting medical reports, that is, the same kinds of issues that would come up at a main hearing…I find that this matter should proceed to a full hearing and would discourage similar preliminary issue hearings in the future.

On the appeal itself, Delegate Evans noted that “the Arbitrator raised his own arguments, conducted his own research and reached his own conclusions without providing counsel the opportunity to provide submissions”. Indeed, some 10 cases were identified to have been raised by the Arbitrator on his own volition, and from which he went on to form key findings. Determinations about the onus and sufficiency of proof represented one such exercise, with Delegate Evans finding that the burden of proof always rests on the claimant to show that they fit within the scope of coverage.

As the matter is now remitted to a new hearing, and because the Director’s Delegate refrained from assessing the medical evidence on appeal, where does this leave theMIG? The answer is that there is now some clarity on how to approach section 18 of the Schedule[3]and the MIG. It is premised on Delegate Evan’s finding that the MIG is not just advisory in nature: “the MIG is binding precisely because it is specifically issued pursuant to section 268.3(1.1) of theInsurance Act, the definition of MIG in theSABS refers to section 268.3(1.1), and the MIG is then applied in section 18(1) and (2), thereby incorporating the MIG into the SABS by reference”.

The firstpart of the test set out in section 18(1) deals with the question of whether a claimant’s impairment is predominantly a “minor injury” (which itself is a defined term meaning “one or more of a sprain, strain, whiplash associated disorder, contusion, abrasion, laceration or subluxation and includes any associated sequelae to such an injury”). Delegate Evans held that the burden is on the claimant to show that it is not. He further held that in arguing that an impairment does not fall within the MIG, reasons must be provided as to why it is “separate and distinct” from the claimant’s soft tissue injuries, and is “not the sequelae thereof”. Accordingly, it was incumbent upon Mr. Scarlett to explain why his chronic pain, depressive symptoms and TMJ were separate and distinct from his soft tissue injuries, and were not the sequelae thereof. Delegate Evans noted that this was not addressed at the Preliminary Issue Hearing. He also went beyond this however, stating that “even if some injuries are not clinically associated sequelae, Mr. Scarlett is still subject to the limit…if the impairment ispredominantly a minor injury”.

Alas, the word predominantly remains undefined.However, the Director’s Delegate did provide some guidance by stating that “the relevant test is whether the impairment is predominantly a minor injury, not simply whether any particular injury is a minor injury”. For now, this suggests a step away from a quantitative approach to the assessment of a claimant’s constellation of injuries, and toward a more qualitative approach.

Where a claimant’s impairment is found to be predominantly a minor injury, we move to the second part of the test as set out in section 18(2). The Director’s Delegate explained that “an insured otherwise subject to the MIG may access the exception where, on the basis of compelling evidence, a pre-existing condition would limit recovery if only $3,500.00 is available”. Here, he found that the Legislature’s decision to require provision of “compelling” evidence goes beyond the presentation of just “credible” evidence. He further found that both the English and French versions of theSchedule go beyond “merely encouraging the provision of compelling evidence”. In other words, the claimant not only has the onus of leading proof, but they also bear the burden of presenting compelling evidence.

So, we now await the outcome of the arbitration hearing in Scarlett. Will a legitimate finding of Chronic Pain or psychological injury usher a claimant out of MIG? Will the principles of construction of insurance coverage provisions[4]espoused by the Ontario Court of Appeal in Monks v. ING[5]and adopted by that Court in Henry v. Gore[6]make their way into defining the meaning and scope of the words “predominantly” and “compelling”?

Until then, who would have thought that the MIG could be everything but minor?

[1][2013] O.F.S.C.D. No. 42

[2]Minor Injury Guideline Superintendent’s Guideline No. 02/11

[3]Statutory Accident Benefits Schedule – Effective September 1, 2010,Ont. Reg. 34/10

[4]In Monks, this court considered the interpretation of the word “incurred”…The word “incurred” was not defined in SABS-1996. At para. 51, the court noted that SABS-1996 was incorporated in every standard insurance policy by virtue of s. 268(1) of the Insurance Act, R.S.O. 1990, c. I.8 (the “Act”). The court explained that, as such, the principles applicable to the construction of insurance coverage provisions were applicable to it: insurance coverage provisions are to be interpreted broadly, while coverage exclusions or restrictions are to be construed narrowly in favour of the insured. To the extent that the word “incurred” restricts coverage available to the insured, it must be assigned a narrow meaning.

[5]90 O.R. (3d) 689

[6] 2013 ONCA 480