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LAT Makes Insurer Pay for Non-Compliant Notice

 Nov 20, 2017 8:00 PM
by Samis + Company

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:

  1. The insurer is prohibited from taking the position that the insured person has an impairment to which the Minor Injury Guideline applies.
  2. 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.

See M.F.Z. v Aviva Insurance Canada, 2017 CanLII 63632 (ON LAT), http://canlii.ca/t/h6cfv


Court of Appeal addresses limitation periods in LTD claims, again

 Nov 14, 2017 2:00 PM
by Samis + Company

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.

See Pepper v. Sanmina-Sci Systems (Canada) Inc., 2017 ONCA 730 (CanLII).



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