SABS Update: When Language Conquers Logic, Injured People Pay the Price
Kulaveerasingam v. State Farm Mutual Automobile Insurance Company; FSCO A13-004423; Arbitrator D. Pressman
This arbitration arose from an accident that occurred on October 29, 2010 after the Statutory Accident Benefits Schedule — Effective September 1, 2010 (“SABS 2010”) came into force. Implicit in the reasons is that the insured’s policy of insurance in place on September 1, 2010 had not yet expired, and as such, the transitions provisions in sections 2 and 68 applied.
At issue were the insured’s entitlement to ongoing income replacement benefits and the rate of interest for overdue payments of those benefits. The insured argued that, since her existing policy had not yet expired at the time she became entitled to income replacement benefits, the old rate of interest applied (2% compounded monthly). State Farm argued that the new rate of interest applied (1% compounded monthly) since the accident occurred after September 1, 2010.
The arbitrator agreed that the rate of interest was 1%. She reviewed the transition provisions. Section 2(1) of the SABS 2010 provides:
2(1) Except as otherwise provided in section 68, the benefits set out in this Regulation shall be provided under every contract evidenced by a motor vehicle liability policy in respect of accidents occurring on or after September 1, 2010.
Section 68 provides that certain benefits that were mandatory before but became optional benefits after September 2010, as well as certain optional benefits purchased before the SABS 2010 came into force, would continue until the earlier of the first expiry date of the policy or the date the policy is terminated.
The arbitrator held that interest was neither included nor available as an optional benefit under section 68 such that it would form part of the exception referenced in subsection 2(1). The arbitrator was not convinced that the presumption against retroactive application of legislation was dispositive. The insured’s right to claim for benefits materialized on the date of the accident which was after September 1, 2010 when the SABS 2010 was in effect. The arbitrator also rejected the argument that the SABS 2010 could not reach back in time and interfere with an insured’s contractual expectations. She held that the terms of the policy were not fixed since section 268 of the Insurance Act provides that every policy is deemed to provide for statutory accident benefits set out in the Schedule and any amendments to the Schedule.
Some benefits that were available under policies purchased before September 1, 2010 (and not expired at that time) continued until expiry of the policy then existing. They include certain caregiver benefits, housekeeping and home maintenance benefits, medical and rehabilitation, and attendant care benefits that were previously included in the standard policy, as well as increased optional benefits for income replacement, caregiver, attendant care, and death and funeral benefits. (See December 2014 newsletter New Definition of Incurred Applies to Old Contracts of Insurance? We Don’t Think So). In this case, since the interest related to a benefit that was not excluded (IRB), the result is likely correct. Arguably, the analysis should not turn on whether or not sections 2 or 68 specifically mention interest. Had the interest related to an excluded benefit, logically any interest payable on such an overdue benefit should also accrue in accordance with the old contract. Unfortunately logic, and the goal of ensuring injured people promptly receive benefits to aid in recovery, sometimes do not find their way into the language of the regulation, and consequently, the analysis of the real life effect of an interpretation that rewards denials over timely payment of benefits.
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