May 13, 2013

Accident Benefits Update – A Lesson in Due Diligence: Arbitrator refuses to consider IRB application


 For the week of May 13 to May 17, 2013

A Lesson in Due Diligence: Arbitrator refuses to consider IRB application

Khalil v Royal and Sun Alliance, Preliminary Issue Arbitration- FSCO 3964, March 28, 2013; Arbitrator Jessica Kowalski

On September 11, 2002, Ms. Khalil was rear-ended while driving.  She returned to work immediately and worked continuously for five and an half years until she was terminated.  In January, 2010, claiming that the termination was related to cognitive injuries from the collision, she sought Income Replacement Benefits (“IRBs”) from the date of termination, February 5, 2008.  She claimed that she could not have applied for IRBs when she had not experienced a loss of income, and that her claim for IRBs did not crystallize until she was terminated in 2008.


Royal and Sun Alliance (“Royal”) denied the claim on several grounds.  First, it had denied IRB entitlement at the outset.  In her accident benefits application, Ms. Khalil indicated that her injuries “partly” prevented her from working.  This was not supported in a disability certificate filed by her family physician.  As a result, Royal sent an explanation of benefits and letter explaining that she was not eligible for IRBs, although she did qualify for other benefits.   Ms. Khalil refused or failed to provide clarification regarding her alleged partial disability despite requests by Royal.  Therefore, a second explanation of benefits and letter were sent to Ms. Khalil, who had retained counsel by this time.


Second, Royal received no notification that Ms. Khalil had lost her job until January 26, 2010 (nearly two years later), despite invitations to her to provide information and updates.  At that time, Ms. Khalil’s lawyer wrote to Royal seeking reinstatement of IRBs pursuant to section 11 of the Statutory Accident Benefits Schedule (“SABS”).  Royal took the position that this provision did not apply; as she had never been entitled to IRBs, there could be no reinstatement.


Third, Royal claimed that Ms. Khalil had failed to give notice of her change in circumstances in accordance with section 32 of the SABS, and had failed to provide a reasonable explanation for this failure, per section 34.


Arbitrator Kowalski agreed with Royal on all counts.  She found that Royal had provided a clear and unambiguous denial of IRBs in response to an application for IRBs filed by Ms. Khalil, and in keeping with the consumer protection principles set out in Smith v Co-operators. She rejected Ms. Khalil’s position that reinstatement of IRBs was appropriate because there had never been a period of entitlement in this case.  As a result, s. 11 did not apply. In any event, even had it applied, the arbitrator found that Ms. Khalil has wilfully or recklessly withheld critical information from Royal for almost two years without a reasonable explanation.  Therefore, she was barred from advancing the claim under s. 32 of the SABS.



This preliminary issue arbitration serves as a stern reminder to SABS applicants and counsel that the duty to provide disclosure in a timely fashion is critical to the AB process, and that, if the applicant is not diligent, she may lose her right to benefits under the SABS.  Had Ms. Khalil informed Royal of her termination promptly and provided appropriate documentation, she would have had at least an arguable case for receiving IRBs.


Accessing Arbitration Decisions

If you would like to read the arbitration decisions for yourself, they can be found at Please contact FSCO at 1-800-517-2332 ext. 7202 to obtain a password to gain access to the site.

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