August 12, 2013

Accident Benefits Update – Appeal Decision More than a Second Opinion

ACCIDENT BENEFIT UPDATE

For the week of August 12 to August 16, 2013

Economical Mutual Insurance Company v. Pries, Appeal P12-00036 before Director’s Delegate David Evans released July 8, 2013

 Mr. Pries was injured on September 3, 2007 and received Income Replacement Benefits (“IRBs”) from his insurer, Economical.

 After IRBs were temporarily suspended, he applied for and received CPP Disability Benefits starting in March 2010.  In the interim, his IRBs were reinstated.  Mr. Pries received a retroactive lump sum payment from CPP and was receiving ongoing monthly payments.

 Under the SABS, CPP benefits are deductible from any IRB entitlement.  While the ongoing CPP benefits were being deducted, the original lump sum had not been.  Economical took the position that Mr. Pries had received an overpayment.  Section 47 of the SABS requires an insured to repay any overpayment of IRBs received as a result of collateral benefits like CPP once the insurer gives notice of the overpayment.  However, absent fraud or misrepresentation, the obligation does not apply unless notice is given within 12 months after the payment is made.  Economical issued a Notice of Repayment in April 2010 for IRBs received from November 2008 to May 2010.  Economical’s position was that it was entitled to seek repayment for the entire duration of the benefit because the lump sum payment was received within 12 months of its Notice.

At arbitration, Arbitrator Wilson held that Economical was barred from recovering any overpayment of the lump sum benefit because it did not request repayment within 12 months of the first IRB payment to Mr. Pries.  In reaching this decision, the arbitrator chose not to follow Trottier v Royal & SunAlliance Insurance Company of Canada, a long-standing Appeal decision on this issue.

On Appeal, Economical argued that Arbitrator Wilson had erred at law by not following Trottier. Director’s Delegate Evans overturned the decision and held that Economical was entitled to recover for twelve months of IRBs to the extent of the CPP benefit.  He affirmed that although it is generally recognized that arbitrators are not bound to follow appeal decisions under the principle of stare decisis, these decisions are nonetheless binding because the legislature intended that there be certainty on issues of law within the authority of the tribunal.  To view it otherwise would reduce the appeal process to providing a “second opinion” for an arbitrator to consider.

Also, although the Director’s Delegate recognized that he was not bound to follow the Trottier appeal, he confirmed that departure at the appeal level from a previous interpretation of statutory or regulatory provision should only occur in clear and cogent circumstances.  He saw such circumstances in this case.

Economical attempted to challenge the meaning of the term “the payment” in s.47, and argued that it referred to the lump sum payment received by Mr. Pries.  Consequently, Economical argued that it had 12 months following payment of the lump sum to require repayment of the IRBs.

Director’s Delegate Evans held that this reading of “the payment” could not be sustained.  What is being repaid in s. 47 is the IRBs.  While it is true that s. 47(3) refers to payment of a collateral benefit, what it actually requires is the repayment of the IRBs to the extent of the deductible collateral benefit. The Director’s Delegate stated that, “Insurers can either be more proactive in encouraging their insureds to seek collateral benefits, or else live with the fact that they may not necessarily get repaid all the IRBs to the extent of the collateral benefits received.”  The insurer could have acted sooner regarding the CPP benefit because Trottier is well known to be the state of the law.

IMPLICATIONS

This is a helpful decision to the extent that it emphasizes the role of precedent in the arbitration process, and should encourage consistency going forward.  On the other hand, it also encourages both insurers and their insureds to proactively seek collateral benefits to which they may be entitled.

Accessing This Decision

If you would like to read the decision for yourself, it can be found at: https://www5.fsco.gov.on.ca/ad

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