Causation must be a two part test

October 23, 2017, Kitchener, Ontario

Posted by: Robert Deutschmann, Personal Injury Lawyer

State Farm and Sabadash

Decision Date: September 19, 2017
Heard Before: Adjudicator David Evans

TEST FOR CAUSATION: causation; must be the two part test including 'but for' and material contribution to risk; 'but for' test is paramount; any di minis consideration is relevant only when 'but for' has been passed.

APPEAL ORDER       

Under section 283 of the Insurance Act, R.S.O. 1990 c. I.8 as it read immediately before being amended by Schedule 3 to the Fighting Fraud and Reducing Automobile Insurance Rates Act, 2014, and Regulation 664, R.R.O. 1990, as amended, it is ordered that:

1. The appeal of the Arbitrator’s order dated March 7, 2016 is allowed in full. The decision is rescinded, the matter is returned to arbitration, and a fresh hearing will be held before a different arbitrator.
2. If the parties are unable to agree about expenses of this appeal, an expense hearing may be arranged in accordance with Rule 79 of the Dispute Resolution Practice Code.

REASONS FOR DECISION          

State Farm appeals the order of Arbitrator Smith dated March 7, 2016, in which he allowed various claims involving the SABS–2010. However, the Arbitrator failed to recognize the “but for” test regarding causation, as set out by the Supreme Court and recognized by the Court of Appeal. He therefore misdirected himself throughout.

Accordingly, the matter must be returned to arbitration for a fresh hearing before a different arbitrator.

BACKGROUND

Mr. Sabadash was 52 when he was involved in a car accident on March 3, 2011, in Cambridge, Ontario. He had been a store manager with Makita Canada Corporation for less than one month at the time of the accident. Following the accident, Mr. Sabadash continued to work at Makita for about seven months until he was terminated. In July 2012, Mr. Sabadash began working at Tyco Corporation involving the designing and costing of security systems. He was laid off in May 2013 due to Tyco closing its Ottawa office.

Mr. Sabadash had a number of significant pre-accident medical conditions, including a history of childhood sexual abuse that caused him to suffer anxiety, depression and fear. He is also an insulin-dependent diabetic, diagnosed in his mid-20s. His diabetes caused him to suffer from issues with gait, balance, a loss of sensation in his feet and fluctuations in his blood-sugar levels. Mr. Sabadash had claims for income replacement benefits both before and after 104 weeks post-accident, as well as a number of medical claims.

State Farm submitted before the Arbitrator and submits on appeal that causation was the fundamental issue dividing the parties. Indeed, page after page in the transcript shows counsel for the insurer and the Arbitrator discussing the meaning of the relevant causation test. While initially, at the first part of the hearing in May 2015, State Farm relied on the “material contribution” test, there was disagreement on what the test meant. In that regard, the Arbitrator wrote that there was really no legal issue in dispute since “At the beginning of the Hearing, I noted to the parties that I had dealt extensively with the issue of causation in my decision in Ghabn and Dominion.”

However, on the last day of the hearing, State Farm submitted that the relevant test was the “but for” and not the “material contribution” test, relying in particular on the Supreme Court decisions in which, in an accident benefits context, the court referred to the general “but for” test of causation as described by the Supreme Court of Canada in Clements.

The Arbitrator rejected that submission, stating that he could not accept State Farm’s submission that the “but for” test endorsed by the courts in accident negligence cases is to be applied to determination of causation in the statutory accident benefit context. Rather, he found that the correct causation test in determining accident benefits is whether or not the subject accident is a “material contributing factor” in the causation of an applicant’s impairment, relying in particular on the earlier Court of Appeal decision in Monks v. ING Insurance Co. of Canada, 2008 ONCA 269. With regard to the effect to be given to the decision in Blake, he agreed with Mr. Sabadash’s submission that, if the Court of Appeal intended in Blake to reverse itself and depart from the law it set out in Monks v. ING, just seven years before Blake, it would have stated so with unequivocal certainty. Accordingly, the Arbitrator found that, notwithstanding the Blake decision, it is still open to a trier of fact to apply either the “but for” or “material contribution” test depending on the facts of a statutory accident benefits dispute. The Arbitrator also accepted that “material contributing factor” should be defined as any causal factor outside the de minimis range. He relied on a Black’s Law Dictionary Online Legal Dictionary, 2nd edition, definition of de minimis as “a trifling consequence and a matter that is so small that the court does not wish to even consider it.”

Turning to the IRBs, the Arbitrator found that since State Farm had made no submissions on the pre-104 week entitlement, it appeared to at least tacitly concede to Mr. Sabadash’s argument. As for post-104 week entitlement, he found that the undisputed expert testimony of Vocational Rehabilitation Consultant was virtually determinative of the issue because her overall conclusion from her assessment was that Mr. Sabadash was unemployable in any position he might be reasonably suited for at the time of testing. He rejected State Farm’s argument that Mr. Sabadash’s employment with Tyco in the post-104 week period was indicative of his overall employability, since Mr. Sabadash was only doing a portion of the job, and the VRC opined that the Tyco position was an anomaly in the local market place and was unlikely to be replicated in the future.

With respect to causation, the Arbitrator found that the contribution of the accident was more than de minimis.  With respect to the medical benefits claims, the Arbitrator wrote that since the Insurer had failed to identify any evidence which rebutted the legitimacy of Mr. Sabadash’s claims on the basis that they are not reasonable and necessary, and since he had rejected State Farm’s arguments regarding causation, the benefits were payable.

With respect to the claim for a special award, the Arbitrator noted that he had granted an award of interim benefits after the initial part of the hearing in May 2015, and it was not reasonable for State Farm to think that its final two witnesses on the last day of hearing would “turn the tide” in its favour. He also found there was no mitigating factor regarding a novel causation issue, as he had dealt extensively with the issue of causation in his decision in Ghabn and Dominion. Accordingly, he awarded a special award in the high amount of the possible range, fixed at “$30,000.00 plus interest in the usual manner.”

ANALYSIS

State Farm raised a number of grounds for appeal, including that Arbitrator Smith demonstrated bias against State Farm, pre-judged the issue of entitlement to benefits, improperly interfered with the cross-examination and examination-in-chief by counsel for State Farm, misapprehended the evidence on the issue of causation, and failed to keep an open mind with respect to the determination of causation and the ultimate entitlement to benefits. Most importantly, it submits that the Arbitrator erred in applying the wrong legal test to the question of causation.

Arbitrator Evans points to the conclusion that the original Arbitrator stated that Monks was the culmination of a line of cases that had consistently endorsed the “material contribution” test as a correct legal test for causation. He was of the view that, notwithstanding the Blake v. Dominion case, it is still open to a trier of law to apply either the “but for” or “material contribution” test depending on the facts of a statutory accident benefits dispute – without defining what those facts are – but in any event he only applied the “material contribution” test.

However, the Arbitrator’s refusal to rely on the “but for” test because it arose from accident negligence cases is misplaced, considering that Cronk J.A. in Monks relied on a set of principles from Athey v. Leonati, [1996] 3 S.C.R. 458, which was itself an accident negligence case. Cronk J.A. outlined the relevant principles from Athey at para. 85 of Monks:

Athey v. Leonati, supra is the leading Canadian case on causation in tort law. In Athey, Major J. reiterated the following well-established principles:

(1)   The general, but not conclusive, test for proof of causation is the “but for” test, which requires a plaintiff to show that his or her injury would not have occurred but for the negligence of the defendant (para. 14).

(2)   In certain circumstances, where the “but for” test is un-workable, causation may also be established where it is demonstrated that the defendant's negligence “materially contributed” to the occurrence of the tort victim's injury. It is not necessary for the plaintiff to establish that the defendant's negligence was the sole cause of the injury (paras. 15 and 17).

(3)   Liability will be imposed on a defendant for injuries caused or materially contributed to by his or her negligence. That liability is not reduced by the existence of other non-tortious contributing causes (paras. 22 and 23). [Citations omitted.]

Although not cited by Cronk. J.A., Major J. in Athey also stated a contributing factor is material if it falls outside the de minimis range. As noted above, the Arbitrator relied extensively on the de minimis criterion in his decision.

After Athey, the Supreme Court returned to the issue of causation and the “but for” test in Resurfice. In Resurfice, the Court expressed its concern that Athey had been misinterpreted or in any event misapplied in subsequent cases. The Court reiterated that the “but for” test remains the usual test for legal causation. The “material contribution” test was never intended to replace the “but for” test. Athey had simply clarified that a determination based on “material contribution” would be appropriate where it would be impossible to prove the cause of a plaintiff's injuries using the “but for” test. Nonetheless, in Monks, Cronk J.A. stated that she did not understand Resurfice to alter the basic causation principles described above.

However, Arbitrator Evans was not sure that last statement is accurate any more in light of Clements and Blake. Arbitrator Wilson expressed the same concerns in Agyapong and Jevco Insurance Company, (FSCO A11-003445, January 25, 2016), noting that these cases raised significant doubt about the jurisprudence supporting the “material contribution” test as the default in accident benefit matters. Notwithstanding, after finding that the applicant, Mr. Agyapong, did not meet the “but for” test, Arbitrator Wilson went on to find the applicant also failed the “material contribution” test. On appeal, Delegate Rogers did not find it necessary to say which test applied since he found the Arbitrator applied both tests and correctly applied the test upon which Mr. Agyapong relied.

Pursuant to Clements, the primary causation test is the “but for” test because, even if it is appropriate to apply the “material contribution to risk” test as discussed in Clements, the plaintiff or insured still has to pass the “but for” test. So if an applicant fails the “but for” test, there is no fallback position to turn to a “material contribution” test. The Supreme Court found that the “but for” test was applied in Athey as well.

In Clements, the Supreme Court re-examined cases like Athey and Resurfice. In doing so, it clarified what “material contribution” means and when it is appropriate to apply that test: “While the cases and scholars have sometimes spoken of ‘material contribution to the injury’ instead of ‘material contribution to risk,’ the latter is the more accurate formulation. As will become clearer when we discuss the cases, ‘material contribution’ as a substitute for the usual requirement of ‘but for’ causation only applies where it is impossible to say that a particular defendant’s negligent act in fact caused the injury.”

The court went on to say that simply failing to meet the burden of establishing “but for” causation on the evidence does not meet the impossibility requirement, because then in any difficult case the plaintiff would be able to claim impossibility of proof of causation. It is this analysis which is stricter than that in Resurfice, where it was suggested that “impossibility” may arise due to lack of scientific knowledge. Rather, “impossibility” can arise when there are a number of tortfeasors:

All are at fault, and one or more has in fact caused the plaintiff’s injury. The plaintiff would not have been injured “but for” their negligence, viewed globally. However, because each can point the finger at the other, it is impossible for the plaintiff to show on a balance of probabilities that any one of them in fact caused her injury. However, even in that case of “impossibility,” the “but for” test still had to be met where material contribution to risk may be applicable, as set out in its summary at para. 46.

What is more relevant and helpful to look at is Major J.’s application of the principles to the circumstances of that case. Now, although there were two defendants, all parties proceeded as if there were only one defendant and only one accident, and no attempt was made to apportion fault between the defendants or between the accidents, as they admitted liability. The only issue was whether the disc herniation was caused by the injuries sustained in the accidents or whether it was attributable to Mr. Athey’s pre-existing back problems. The situation thus exactly paralleled a typical accident benefits claim like Mr. Sabadash’s where there were pre-existing conditions before an accident. At para. 41 Major J. then set out when the “but for” test applies (item 2 below) and when the material contribution test applies (item 3). I have italicized the relevant portions, including the sentence that the Arbitrator relied upon to state that he could use either the “but for” or material contribution test:

41  The applicable principles can be summarized as follows. If the injuries sustained in the motor vehicle accidents caused or contributed to the disc herniation, then the defendants are fully liable for the damages flowing from the herniation. The plaintiff must prove causation by meeting the “but for” or material contribution test. Future or hypothetical events can be factored into the calculation of damages according to degrees of probability, but causation of the injury must be determined to be proven or not proven. This has the following ramifications:

1.      If the disc herniation would likely have occurred at the same time, without the injuries sustained in the accident, then causation is not proven.

2.      If it was necessary to have both the accidents and the pre-existing back condition for the herniation to occur, then causation is proven, since the herniation would not have occurred but for the accidents. Even if the accidents played a minor role, the defendant would be fully liable because the accidents were still a necessary contributing cause.

3.      If the accidents alone could have been a sufficient cause, and the pre-existing back condition alone could have been a sufficient cause, then it is unclear which was the cause-in-fact of the disc herniation. The trial judge must determine, on a balance of probabilities, whether the defendant’s negligence materially contributed to the injury.

The “but for” test applies where both the pre-existing condition and the injury arising from the accident were necessary contributing causes for the impairment to arise. What the Supreme Court did in Clements was restore the idea that the “material contribution” test is only necessary to apply where either of two causes could be the sufficient cause of the injury (or impairment).

In any event Arbitrator Evans was satisfied that the evidence and the trial judge’s reasoning and findings support his conclusions on the basis of a “but for” analysis. As to the de minimis test, it is only after the “but for” test has been answered in the affirmative that it might have a role.

In conclusion, the Supreme Court has reaffirmed that the primary causation test is the “but for” test, and the Ontario Court of Appeal accepted that in Blake. A proper understanding of Athey shows that it is not true that an adjudicator can simply choose between the “but for” test and a material contribution to risk test. Rather, the “but for” test is paramount. Any de minimis consideration is only relevant once the “but for” test has been passed.

The appeal is therefore allowed, Since the Arbitrator misdirected himself throughout, the matter must be returned to arbitration for a fresh hearing before a different Arbitrator.

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