December 23, 2014

SABS Update: Interest Rates, Special Awards, And The Insurance Act As Consumer Protection Legislation

Nicolle v. State Farm Mutual Automobile Insurance Company, FSCO A13-003207, Arbitrator Harvey Savage, November 27, 2014.

MVC February 10, 2009. A dispute arose concerning the reasonableness and necessity of a treatment plan dated June 29, 2011. State Farm denied the treatment plan on August 2, 2011. They ultimately paid the amount of the treatment plan, plus interest at the rate of 1% compound monthly, on July 15, 2014, 6 days before the Arbitration was set to commence. The Arbitration proceeded on two issues:

1)    Was Ms. Nicolle entitled to interest at the rate of 2%?
2)    Was Ms. Nicolle entitled to a special award?

Interest Rate

The Arbitrator agreed with the insured’s submission that State Farm Mutual Automobile Insurance Company v. Federico and R.J. v. Dominion of Canada General Insurance confirm substantive contractual rights crystallize at the time the insurance policy is bought. In this case, regardless of the date of the treatment plan, the medical benefit category under which the treatment plan was submitted was a right that vested under the Old Regulation. For benefits that vested under the Old Regulation, interest on overdue payments continues to be calculated at the rate of 2% compounded monthly, regardless of the type of benefit or whether the payment arose before or after September 1, 2010.

Special Award

The insurer argued the Arbitrator had no jurisdiction to make a special award in this case, citing s. 282(1) of the Statutory Accident Benefits Schedule, as in order to do so benefits must still be outstanding at the time of the hearing. Arbitrator Savage disagreed. In his reasons, he acknowledged there were FSCO Arbitration decisions to the contrary, but he also indicated:

I am cognizant that the Insurance Act is consumer protection legislation. It is a fact that almost three years after its denial, State Farm sent the Applicant a cheque covering the outstanding amount in the treatment plan and interest calculated at 1%. This is precisely the reason for the Special Award being a standalone claim at the hearing.

Arbitrator Savage noted entitlement to a special award is based on the unreasonableness of the insurer’s behavior. The Arbitrator noted a consistent pattern of lateness in responding to treatment plans, which constituted unreasonable behavior on the part of State Farm. The fact of an almost four year delay in making the payment itself, absent any reasonable explanation, was also persuasive of unreasonableness on the part of State Farm. The Arbitrator stated:

When one adds to this that the disputed 2011 treatment plan was paid just days before the hearing, it all describes a history of neglect by State Farm, culminated in a wish to produce a situation where the Special Award is a standalone issue designed to deprive an arbitrator of jurisdiction.

The Arbitrator awarded a Special Award of $4,500.00. The original treatment plan in dispute totaled$4,421.04.


For collisions that occurred prior to September 1, 2010, regardless of when the benefit entitlement arises, late payments continue to be subject to an interest rate of 2% compounded monthly. Special Awards continue to be based on the facts of the case, not simply the facts surrounding the particular issue in dispute but the conduct of the insurer throughout the adjustment of the claim.

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