Mr. and Ms. Bharat both suffered injuries in a motor vehicle accident on March 26, 2010. They claimed accident benefits from their insurer, State Farm Mutual Automobile Insurance Company, including housekeeping and home maintenance. State Farm started paying the benefits.

In 2011, after the 2010 Statutory Accident Benefits Schedule (“SABS”) amendments were brought in place, State Farm sent the Baharts notices requiring their attendance at insurer examinations, wishing that the Bharats would attend.

The 2010 amendments to the SABS include Part VIII, which governs the procedures for claiming benefits, and Part IX, which governs the procedures for paying benefits. Section 44 of Part VIII sets out the ability of an insurer to request insurer examinations. Section 55 of Part IX sets out mandatory compliance with an insurer examination request before commencing mediation.

The Bharats failed to attend insurer examinations arranged by State Farm in accordance with section 44. State Farm then sent the Bharats a claims form advising them that their benefits were being stopped for that failure. The claims form set out the alleged steps for the Bharats to follow to dispute the stoppage of benefits, and provided them with a two-year limitation period to arbitrate. The Bharats filed for mediation two years after State Farm sent the denials.

State Farm moved to dismiss the claims for mediation for failure to meet the prescribed time limit. However, there was an issue with the forms used by State Farm. Under section 277 (1) of the Insurance Act, the Superintendent mandates claims forms for insurers to use, and an insurer shall not use a claims form unless it has been approved by the Superintendent.

The Superintendent issued Bulletin No. A-13/10, entitled “Revised Accident Benefit Claims Forms and New Attendant Care Hourly Rate Guideline” on June 16th, 2010. The Bulletin, among other things, changed claims forms by deleting both references to a rebuttal examination and  the use of a form known as the OCF-9, Explanation of Benefits.

The claims forms that State Farm sent to the Bharats were OCF-9s, which the Superintendent mandated no longer be used.  The OCF 9 form also  included a reference to a retbuttal examination, another process eliminated by the 2010 amendments.  These claims forms, therefore, were in breach of section 277 (1) of the Insurance Act, as they were not claims forms approved by the Superintendent.

The alleged missed limitation due to failure to act within two years of the denial came before an Arbitrator. The Arbitrator relied on Smith v. Co-operators General Insurance Company, [2002] 2 S.C.R. 129 (“Smith”) in making his decision. In Smith, the Court found that the refusal form sent by the insurer to the insured was not valid because it only informed the insured of the first step in the dispute process. In the Bharats instance, there was a detailed explanation of the steps involved in the dispute resolution. Due to this differentiation, the Arbitrator found that the refusals in the OCF-9 sent to the Bharats were valid.

At Appeal, a Smith-type error was found. Delegate David Evans stated that most of step 1 in the OCF-9 sent to the Bharats referred to the nonexistent rebuttal process. Delegate David Evans stated that, like in Smith, the claims forms sent did not accurately describe the dispute resolution process.

Delegate David Evans ultimately concluded that the Arbitrator erred in finding that the OCF-9s delivered to the Bharats validly denied them benefits, as the OCF-9s sent did not accurately describe the steps in the dispute resolution process. Rather, they referred to a nonexistent rebuttal process.

Since the denial notices given to the Bharats were deemed invalid, the limitation period had not started to run, and their applications for mediation were not filed outside the limitation period.

It will be interesting to see if this decision will be expanded to denials that that speak to the right to mediate where such a right was removed.

Nathan Fabiano is an associate at ZTGH and author of this blog. If you have a question about this decision or a similar issue, please contact Nathan or Eric Grossman.