Our lawyers have worked through the maze of complex litigation and coverage issues, managed the class action juggernaut, and represented employees of insurers that come under attack by plaintiff`s litigation. Some of the problems we face are front page news, most are not. They are all problems that are important to our clients, and to us.
In Mabe Canada Inc. v. United Floor Ltd., the Ontario Court of Appeal weighed in on the standard of care in the context of contractual duties and industry practices.
Mabe sustained damages when a drainage pipe that ran underneath a floor installed by United Floor caused a flood in Mabe’s warehouse. United Floor was hired by First Gulf to build the warehouse in 2004. First Gulf is not a party to the action. The flood was caused by two holes in the drainage pipe that ran below the concrete floor.
At trial, Mabe’s alleged that the holes were caused by United Floor when installing the floor. None of the building drawings showed a drainage pipe in the location where the damaged pipe was found. In addition, the pipe was installed much shallower than it ought to have been under industry standards.
The trial judge dismissed Mabe’s claim in negligence. The trial judge found that United Floor damaged the drainage pipe by puncturing it with a stake it used to brace its concrete floor. However, United Floor should not have anticipated that it was as shallow as it was. There was no reason for United Floor to be concerned that there would be a shallow pipe in the location where the damaged pipe was found. United Floor did not breach the standard of care.
Mabe submitted to the Court of Appeal that the trial judge failed to take into account the United Floor’s contractual duties in determining the standard of care; erred in his foreseeability analysis; and erred in failing to determine whether relevant industry practice was itself negligent and should not have been followed.
The Court of Appeal held that, although contractual duties may, in some circumstances, modify the standard of care that would otherwise apply, the trial judge’s findings precluded such a finding in this case. The contract required United Floor to notify First Gulf in writing if the subsurface conditions differed significantly from those specified in the contract. The trial judge found that United Floor should have been aware that a pipe ran underneath the floor, but he accepted expert evidence that the United Floor had no reason to foresee that the pipe would be at a shallow depth. As a result, the respondent’s duty to notify First Gulf under the contract did not arise.
The trial judge was held not to have erred in his foreseeability analysis. He accepted expert evidence offered by United Floor that there was no reason not to put a stake in the ground at the subject location. It was the plumber’s responsibility to alert First Gulf to the shallow depth of the pipe and First Gulf’s responsibility to notify United Floor. First Gulf failed to do so.
It was accepted by the Trial Judge that a flooring contractor would not have expected to have a pipe running through the subfloor at the position it was in. United Floor’s expert testified that drainage pipes would normally be set two to three feet into the subfloor, well below the reach of the 18 inch stakes used by United Floor. The trial judge rejected the Mabe’s expert evidence and found that there were no other factors that should have alerted United Floor to the possibility of puncturing a pipe.
The Court of Appeal held that, although it is clear that conformity with standard practice in an industry does not necessarily insulate a defendant from a finding of negligence, as the Supreme Court explained in Neuzen v. Korn, , a practice will be judged negligent “only where the practice does not conform with basic care which is easily understood by the ordinary person who has no particular expertise in the practices of the profession” – only where it is “fraught with danger”. Mabe’s expert provided the only evidence supporting the submission that industry practice was negligent in this case. But it was rejected by the trial judge, who preferred the evidence of United Floor’s experts in concluding that the United Floor had no obligation to do more than it did to determine the location of the drainage pipe. There was no basis for the Court of Appeal to interfere with the trial judge’s decision concerning the expert evidence and the weight to be attached to it.
On reconsideration of a decision at the License Appeal Tribunal (LAT), Executive Chair Linda Lamoureux has confirmed that an insurer’s deficient notice under Section 38 of the SABS will have strict consequences.
The decision, M.F.Z. v Aviva Insurance Canada, dealt with two claims, which the insurer treated within the Minor Injury Guideline (MIG). When denying a claimant’s application for medical and rehabilitation benefits, Section 38 requires that the insurer’s correspondence include specific information. The LAT has generally followed the FSCO decision of Augustin v. Unifund (2013) when determining the proper content of a Section 38 notice. If the insurer’s denial correspondence fails to satisfy the Section 38 notice requirements, subsection (11) provides for two consequences:
The insurer is prohibited from taking the position that the insured person has an impairment to which the Minor Injury Guideline applies.
The insurer shall pay for all goods, services, assessments and examinations described in the treatment and assessment plan that relate to the period starting on the 11th business day after the day the insurer received the application and ending on the day the insurer gives a notice described in subsection (8).
The M.F.Z. reconsideration request raised two distinct legal issues in circumstances where an insurer’s notice fails to comply with Section 38. First, Aviva challenged the finding that the insurer is forever precluded from relying on the MIG after one deficient notice letter. Second, Aviva argued that the disputed OCF-18, for which an improper denial notice was given, should not be automatically payable without consideration as to whether it was reasonable and necessary.
E.C. Lamoureux held that the SABS completely bars an insurer from ever taking the position that the MIG applies following a deficient Section 38 notice. Where deficient notice has been given, E.C. Lamoureux also held that there ought to be no consideration as to whether the disputed OCF-18 was “reasonable and necessary”.
With regards to one of the disputed OCF-18s, E.C. Lamoureux found that the claimant was automatically entitled to the treatment incurred during the period of deficient notice. Although the initial denial was deficient, Aviva’s subsequent letter serving the Section 44 report was proper notice which “cured” the defect. Section 38(11)2 only provides for “automatic” entitlement up to the date the insurer provides proper notice. There was no discussion as to how benefits incurred after the defect is cured are to be treated.
The M.F.Z. decision is being further appealed to the Divisional Court. For the time being, insurers should be aware that the LAT will be strictly applying the consequences outlined in Section 38(11)2. Insurers should always take care when drafting denial letters to ensure compliance with Section 38. However, subsequent correspondence (e.g. a letter providing a copy of the Section 44 report) should also be carefully drafted to fully explain the insurer’s decision. Such letters which arise in the ordinary course of handling may go a long way to minimize the damage flowing from “automatic” entitlement.
In the recent decision of Pepper v. Sanmina-Sci Systems (Canada Inc)., the Ontario Court of Appeal dismissed a plaintiff’s long term disability claim as limitation barred, reversing the summary judgment...
In the recent decision of Pepper v. Sanmina-Sci Systems (Canada Inc)., the Ontario Court of Appeal dismissed a plaintiff’s long term disability claim as limitation barred, reversing the summary judgment motion judge’s decision. The Court found that the limitations clock began to run once payment of benefits ceased.
The facts of the initial motion were largely uncontested. The plaintiff was receiving long term benefits due to an injury on March 13, 2005. On February 20, 2007 the Insurer advised the plaintiff that effective September 19, 2007, he would no longer qualify for long term disability benefits. The Insurer advised there was no evidence that he had an impairment that prevented him from engaging in “any occupation” that he was reasonably suitable for by training, education, or experience. In good faith, the Insurer agreed to pay benefits until October 31, 2007 to assist the plaintiff with the transition back to work. The Insurer also advised the plaintiff that he could “appeal” the decision by providing more medical documentation. Of importance, the long term disability policy did not contain a specific mechanism or right to appeal. There was also no statutory right to appeal.
The benefits stopped effective November 1, 2007. The plaintiff commenced a claim on February 17, 2010.
The Insurer brought a summary judgment motion to have the plaintiff’s claim dismissed as limitation barred. The plaintiff brought a cross motion for a declaration that he was not limitation barred and to dismiss the Insurer’s limitation defence. The plaintiff’s cross-motion was granted. The Insurer appealed.
On appeal the Insurer was successful. The Court found it was an error in law to not recognize that November 1, 2007 was the date on which the limitation period commenced. Despite the Insurer’s representations that it would continue to review additional documentation if provided, the plaintiff’s claim had been discovered as of November 1, 2007 when the payments stopped. The Court found that once payments had ceased and the Insurer had “closed” the claim, it would have been appropriate to commence an action and accordingly it was “discovered”. The fact that there was no internal appeal process specifically included in the Policy appears to have factored into this. The Court also noted that the plaintiff had retained counsel in January, 2008, suggesting that he did have an appreciation that a lawsuit was appropriate.
As a result, the plaintiff’s claim was dismissed as statute-barred. This decision seems to support my previous comments regarding the efficacy summary judgment motions in long term disability claims, as discussed in blog posts here and here. It appears that in the long term disability setting, barring something exceptional, once an Insurer stops payment and advises that a claim is closed, the clock starts to run.