March 4, 2016

If the Denial Isn’t Clear, You May Not Need To Fear

Falcon v State Farm Mutual Automobile Insurance Company, FSCO A14-000269, Arbitrator Anne Morris


Kasia Kosacka

Kasia Kosacka

MVC May 11, 2008. The issue was whether or not the applicant’s claim for income replacement benefits (“IRBs”) was statute barred pursuant to s. 281.1 of the Insurance Act, and s.51 of the Schedule.

The applicant, Mr. Falcon, received IRBs from one week after the collision for a year, after which State Farm terminated the benefits. State Farm sent two Explanations of Benefits (“OCF-9s”), both dated April 17, 2009. One of them (OCF-9 A) was accompanied by a letter setting out the rebuttal examination process, and one (OCF-9 B) was not. Mr. Falcon sent a rebuttal report to State Farm, following which State Farm sent a further OCF-9. Mr. Falcon applied for Mediation on March 14, 2011, and the Report of Mediation was issued on June 27, 2012. He filed the Application for Arbitration on December 10, 2013. State Farm argued that Mr. Falcon filed the Application for Arbitration more than two years after the benefit in question was denied and over 18 months after the Report of Mediator was issued.

Arbitrator Morris concluded that Mr. Falcon’s claim was not statute barred, as State Farm did not provide a clear and unequivocal refusal to pay a benefit, or inform him of all the steps of the dispute resolution process in straightforward and clear language as required. In arriving at this decision, Arbitrator Morris reviewed the contents of OCFs that were sent to Mr. Falcon. The OCF-9 B stated that State Farm had issued Mr. Falcon’s IRB up to May 18, 2009, and advised him to see the other OCF-9 of the same date for further details. Arbitrator Morris concluded that OCF-9 B did not constitute a clear refusal of benefits. Further, the OCF-9 A did not reference any other steps which an insured person may wish to take should they disagree with the insurer’s decision, such as Mediation and Arbitration, but only mentioned submitting a rebuttal examination. The letter attached to OCF-9 A discussed the rebuttal assessment process, but also did not refer to the options of a Mediation or Arbitration. Due to the emphasis on the rebuttal assessment process to the denial of the benefit, Arbitrator Morris stated that an unsophisticated person might reasonably conclude that this was the most important or even the only step to be taken in the dispute resolution process. As a result, OCF-9 A and OCF-9 B did not provide clear and unequivocal refusals of Mr. Falcon’s benefit and did not inform him of the dispute resolution process in straightforward and clear language.

Arbitrator Morris also concluded that State Farm could not rely on the subsequent OCF-9, dated July 9, 2009 as it referred Mr. Falcon back to the previous OCF-9s.


Although one should never play chicken with limitation periods, the wording of a denial drafted by an insurer may work to extend the time for engaging in a resolution process. However, one should never discount the importance of looking at Explanation of Benefits forms closely in order to ascertain whether a denial is being clearly communicated. This is particularly important for those representing an insured, as unclear communication can then be clarified with the insurer, avoiding costly litigation.


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