Introduction
The following two LAT decisions by Adjudicator Derek Grant address the substantive requirements that insurers must meet to affect a proper denial of statutory accident benefits. Adj Grant reached diametrically opposite conclusions in M.K. v TD General Insurance Company and Q.S.Z v TD. General Insurance Company. Both cases arise from disputes concerning whether TD provided the applicants with a proper denial, thereby triggering the limitation clock.
Decision 1. M.K. v TD General Insurance Company (2020 ONLAT 19-003616/AAB)
Background
In M.K. Adj Grant outlines the principles of a proper denial and the circumstances in which an insurer may pre-emptively deny an applicant’s entitlement to benefits.
In its Explanation of Benefits letter, TD denied the applicant’s entitlement to a non earner benefit (NEB) because her OCF-1 had indicated that she was employed at the date of loss. Three years later, the applicant argued before the LAT that TD’s denial was improper, and thus, her claim was not statue-barred because; 1) she never applied for a specific benefit (her application did not include a completed OCF-10); and 2) the words “not eligible” used in TD’s Explanation of Benefits letter is not a clear and unequivocal indication of a denial.
To determine if the limitation period was triggered, Adj Grant was required to address two preliminary issues:
- Was TD’s denial letter proper?
- Was an election of benefits form necessary?
1. Principles of a Proper Denial
Adj Grant outlined the principles of a proper denial from the leading authority Smith v TD General Insurance Company [2002] 2 SCR 129 at para 14:
“Notices of refusal to pay benefits must contain straightforward and clear language, must be directed towards an unsophisticated person, must outline the dispute resolution process and the relevant time limits that govern the process and must provide valid medial or other reasons for the denial”.
Adj Grant held that TD’s denial letter satisfied the basis requirements of Smith because it stated the reasons for denial (the applicant was employed and working) and it provided, in straightforward language, the dispute process available to the applicant. Further, Adj Grant held that the “not eligible” language serves as a clear indication of a denial.
2. Pre-Emptive Denial of Benefits
Adj Grant cited Bonaccorso v. Optimum Insurance Company Inc. (2016 ONCA 34) as authority for the principle that a benefit can be denied pre-emptively (even when an applicant has not yet applied for a specific benefit/made an election).
Adj Grant determined that an OCF-10 is not required to complete an application for benefits. Rather, an application is considered complete when an OCF-1 and OCF-3 are submitted and the relevant boxes are checked. Adj Grant found that on receipt of the OCF-1 and OCF-3s completed by the applicant and her doctors, TD was within its rights to decide on eligibility for a NEB based on the information it had available at the time. In particular, that the applicant was employed on the date of loss and had been for some time.
Adj Grant ultimately concluded that the applicant was statute-barred from proceeding with her application for a NEB as TD issued a valid denial that triggered the limitation period.
Decision 2. Q.S.Z v. TD General Insurance Company, 2020 ONLAT 19-000403/AABS
Background
In Q.S.Z., TD wrote the applicant several letters requesting that she submits a completed OCF-2 in order to calculate her entitlement to IRBs. Several months later, the applicant advised TD of her intent to return to work and that she did not intend to pursue IRBs. Then, a few months later, the applicant notified TD that she resigned from her employment and would once again be claiming entitlement to IRBs. TD argued before the LAT that the applicant’s claim was statute-barred because: 1) its letters regarding IRBs contained clear and unequivocal denials; and 2) a non-compliance under Section 33 of the Insurance Act can unilaterally trigger the limitation clock.
1. Was TD’s Letters Regarding the IRBs a Clear & Unequivocal Denial?
In contrast to the M.K. decision, Adj Grant found that none of TD’s letters to the applicant indicated that her IRBs claim was denied. The letters contained no notice that payment of benefits would be withheld if the applicant continued to be in non-compliance under s. 33 of the Insurance Act. In contrast, the letters continually suggested that IRBs were payable to the applicant upon receipt of her OCF-2. Although each of TD’s letters contained the right to dispute information, Adj Grant held that such notice was insufficient to satisfy the Smith test, stating that:
“If an insurer can write any letter and attach a standard right to dispute notice to rely on as a clear and unequivocal denial has far reaching and problematic implications for all potential persons who receive any correspondence from their insurer.”
2. Can Non-Compliance under S.33 of the Insurance Act Trigger the Limitation Clock?
Adj Grant rejected TD’s argument that a s.33 non-compliance can unilaterally trigger the limitation clock. Rather, a s.33 non-compliance cannot trigger the limitation clock but the refusal to pay a benefit that stems from a s.33 can.
Adj Grant ultimately concluded that the applicant was not statute-barred from proceeding with her application for IRBs as TD failed to issue a valid denial that triggered the limitation period.
Takeaway
The diametrically opposite conclusions reached by the same Adj Grant involving the same insurer on the same issue, in a matter of days illustrates that clarity and specificity are substantial components of a proper denial. In M.K., TD indicated in plain language the denial of the applicant’s NEB claim and the reasons thereof. In contrast, in Q.S.Z. TD was simply requesting documents from the applicant in support of her IRBs claim.
In addition to the substance of a proper denial, Adj Grant’s decision in M.K. provides guidance as to the when an insurer can deny an applicant’s entitlement to benefits. Adj Grant is clear in that an application for benefits is complete upon receipt of the OCF-1 and OCF-3, thereby enabling the insurer to decide on the applicant’s eligibility for benefits. Further, if an insured refuses to pay a benefit for a s.33 non-compliance, it must expressly state as such in its Explanation of Benefits letter to the applicant. We know from other decisions that a section 33 non compliance letter is a suspension rather than a termination of benefits, and as such if a termination is intended, the insurer best be clear and unequivocal in communicating that intention.
When insurers decide to deny benefits for whatever reason, however, the best practice would be to expressly use the word “denied” in its Explanation of Benefits letter. In doing so, insurers may better insulate themselves from having to incur the time and expense of having to respond to disputes for denials brought by non-diligent insureds.
Jonathan Beiles is an associate and author of this blog. If you have questions about this decision or a related file, please contact Jonathan at [email protected] or 416-777-7389.
