Payment for assessments found to be unreasonable

October 13, 2017, Kitchener, Ontario

Posted by: Robert Deutschmann, Personal Injury Lawyer

Stranges and State Farm

Decision Date: September 14, 2017
Heard Before: Adjudicator Benjamin Drory

PAYMENT FOR ASSESSMENTS: CAT assessment; vested and substantive rights are not to be interfered with lightly; was the right to funding for CAT rebuttal exams vested at the time of the accident for pre-2010 accidents; can this be changed retroactively; vested interests; are assessments reasonable;

Ms. Mary Stranges hurt in a car accident on September 17, 2004. When she sought accident benefits from State Farm and they were unable to resolve their disputes through mediation, she applied for arbitration at the FSCO.

Issues:

1. Is Ms. Stranges entitled to payments for the cost of examinations in the amount of $11,599.99 for a CAT assessment submitted December 4, 2014?

Result:

1. Ms. Stranges is not entitled to payments for the cost of for a CAT assessment submitted December 4, 2014.

Ms. Stranges was in a car accident on September 17, 2004.  She sought entitlement to the cost of examinations for a CAT assessment that was completed in 2015, in the amount of $23,099.99.  State Farm partially approved (and paid) the assessment in the amount of $11,500.00; the balance of $11,599.99 is disputed.

Ms. Stranges submitted that because of the September 17, 2004 accident she had back pain, neck pain, shoulder pain, anxiety, nausea with vomiting, headaches, and concentration difficulties.  On December 4, 2014 she sought funding for CAT assessments.  The evaluation was completed August 19, 2015 the assessors’ opinion was that Ms. Stranges’ impairments reached the threshold of CAT on the basis of a Class 4 (Marked) impairment arising from mental or behavioural disorder.

Ms. Stranges submitted that prior to the September 1, 2010 revisions to the Schedule, insured persons had an opportunity to secure rebuttal reports in response to insurer’s assessments, and these were paid by the insurer.  Post-2010, the right to a catastrophic rebuttal report has been held to be a substantive right.  Further, the Supreme Court of Canada has repeatedly held that in interpreting legislative changes, there is a presumption against interference with vested or substantive rights.  The Supreme Court stated that to have a vested right (i) the individual’s legal situation must be tangible and concrete rather than general and abstract, and (ii) this legal situation must have been sufficiently constituted at the time of the new statute’s commencement, and the contract was signed before the amendment.  It is the contract that creates rights and obligations between the parties. She relied heavily on Director’s Delegate Blackman who found in Federico that a contract of insurance between an insurer and insured created rights and obligations as soon as it was formed, which included interest under the Old Schedule.  These rights would have materialized or become sufficiently concrete as of the date of the accident, in that case four years before the legislative changes.  She cited many other cases that built on or relied on the Federico decision.

Arbitrator Wilson found the importance of a credible rebuttal was critical to Ms. Stranges, and would help the insurer in making a fair determination.  He found previously that the right to funding was vested at the time of the accident, and subsequent revisions to the Schedule did not amend those rights retroactively.  The right to a rebuttal report was expressly recognized as a substantive contractual right, and the legal situation was sufficiently constituted at the time of the accident.  Ms. Stranges therefore submits that her rights under the Old Schedule vested on the date of her accident, and because the right to a catastrophic rebuttal report is a substantive right, there is a presumption against retrospective application of the 2010 amendments.  Nothing in the New Schedule provides that existing, substantive rights were removed by the amendments.

Ms. Stranges submitted that because her accident pre-dated the New Schedule, the Fernandes decision is on point.  There, Arbitrator Alves noted the Old Schedule did not impose a limit relating to rebuttal reports for CAT assessments.  As such, she held that the cost of a rebuttal report “shall be reasonable”.  Therefore, under the Old Schedule, the only requirement for catastrophic rebuttal reports was that of reasonableness—and absent any evidence to the contrary, $23,009.99 was a reasonable amount for five assessors to complete a comprehensive assessment determining CAT.

State Farm submitted that it approved $11,500.00 of the assessment costs under s. 25(5) of the New Schedule, which limits the amount payable to $2,000.00 per assessment, examination, or report.  State Farm submitted no further amount is payable under the legislation, and also that some of the assessments sought were unreasonable and duplicative.

State Farm submitted that on September 17, 2004, Ms. Stranges was stopped at a stop sign exiting a shopping plaza, when she was struck by a Hamilton city bus.  The impact was so light the bus driver was not aware a collision took place.  Ms. Stranges went to St. Joseph’s Hospital the next day; X-rays were negative and she was discharged the same day.  State Farm submitted that from a physical perspective, medical assessors agreed Ms. Stranges suffered soft-tissue injuries as a result of the accident; from a psychological perspective, her impairments were not due to the accident.  State Farm submitted that, per s. 25(1)5 of the New Schedule, the fees associated with a CAT assessment must be reasonable, and the onus is on Ms. Stranges to prove the assessment costs are reasonable.  That provision reads:

State Farm referred to FSCO’s Superintendent’s Guideline No. 08/10 which outlines that an assessment or examination can result in multiple reports and still be considered one assessment, and the $2,000.00 amount is an all-inclusive amount, including travel expenses and the preparation of one or more reports.  State Farm submitted that the disputed OCF-18 clearly proposed one assessment process each for the O.T., psychologist, and clinic director.  Ms. Stranges’s characterization of the OCF-18 as contemplating separate assessments, at a cost of $2,000.00 each, was simply an attempt to circumvent the legislation and statutory cap.

State Farm maintained that the testing and assessments proposed in the OCF-18 were part-and-parcel of the same thing, but submitted that even if they were distinct, the balance of the OCF-18 was unreasonable and the cost excessive.  State Farm submitted that the OCF-18 provided no detail about the amount of time the assessors required for the assessment, and was simply submitted as a flat-rate fee at the maximum amount.  State Farm submitted these amounts were excessive and unjustifiable.

State Farm acknowledged Ms. Stranges was entitled to the cost of reasonable s. 25 catastrophic assessments—which it funded, and submitted that the statutory amendments in the New Schedule apply to all existing policies and claims, per s. 268 of the Insurance Act.

State Farm submitted that FSCO’s April 2010 Transition Bulletin confirmed that the $2,000.00 assessment limit applied for fees after September 1, 2010 regardless of whether services were provided before or after that date.   State Farm submitted that entitlement to accident benefits vests at the time of the accident was rejected in Lehman per Director’s Delegate Rogers in Barnes.  It submitted that the legislation creates rights to statutory accident benefits, but only those provided in the regulations, which may be amended from time to time.  Section 268(1) of the Insurance Act expressly contemplates the Legislature may, from time to time, amend or change the accident benefits schedules.

State Farm summarized that assessments are capped at $2,000.00 each, per s. 25(5) of the New Schedule; it approved and funded assessments in accordance thereto; the balance of the assessments were excessive, representing between 22-53 hours of expert time per assessment, or in some cases unreasonable as they were not completed or incurred; the rights to statutory accident benefits change from time to time, and the terms of the policy are not necessarily fixed for the entire duration; and Ms. Stranges’s claim for s. 25 CAT assessments could not have crystallized at the time of the accident, as it would have been impossible to determine if a s. 25 CAT assessment was required on the date of loss.

The Arbitrator reviewed the evidence and the law and concluded that both sides ultimately agree Ms. Stranges is entitled to reasonable reimbursement relating to her CAT examinations.  The Insurer submitted that this is owing to s. 25(1) of the New Schedule, whereas Ms. Stranges attributes it to the Fernandes decision’s interpretation of the Old Schedule.  Regardless, both rationales end up at the same point—i.e., the applicable standard to evaluate Ms. Stranges’s entitlement to the examinations is reasonableness.  The Insurer paid $11,500.00 for the catastrophic assessments; accordingly, the dispute is over whether the $11,599.99 balance is reasonable, and if so, payable.

Both parties made lengthy submissions respecting whether Ms. Stranges had a “vested interest” in the catastrophic assessments at the time that the legislation changed in September 2010.  The Arbitrator noted that the most significant precedent is MVACF and Barnes, submitted by State Farm.  There, Director’s Delegate Rogers considered changes to attendant care provisions in the New Schedule that came into effect in 2014, and whether services provided after the new effective date applied.  The hearing Arbitrator in the case found in favour of Ms. Stranges, and had relied on Director’s Delegate Blackman’s decision in Federico.  In Federico, Delegate Blackman held that the transitional provision that reduced entitlement to interest from 2% to 1% did not apply to the insured person; one of his reasons was that the insured person had acquired a vested right to the higher interest rate.

Delegate Rogers held that any analysis of vested rights in accident benefits must be informed by the context provided by s. 268(1) of the Insurance Act—its language is clear, and establishes three principles.  First, it displaces the concept of a motor vehicle liability policy as a private agreement between an insurer and its insured.  The terms of the agreement are set by the legislation.  Second, it makes the Schedule a part of every policy.  Third, it makes all amendments to the Schedule a part of every policy, including all terms, conditions, provisions, exclusions, and limits.

Delegate Rogers disagreed with the Arbitrator’s conclusion that Ms. Barnes’ “situation” crystallized at the time of her accident.  He felt that could not be accurate—Ms. Barnes had no right to attendant care after February 1, 2014 just because she had been injured in an accident before that date.  Her right to attendant care was contingent upon her ongoing need, the provision of services, and her incurring an expense.  In these circumstances, the amendment fit into the category of legislation that has immediate application; it changed “the future legal effect of an ongoing situation”—which is prospective application of an amendment, not retrospective.

Delegate Rogers found that Delegate Blackman’s ruling on vested rights in Federico was unnecessary to that decision—it was obiter.  Having ruled that the legislation itself prescribed interest at the old rate, there was no need to consider the issue of vested rights.  He found the judicial review of the Divisional Court upheld Delegate Blackman’s decision on the interpretation of the legislation, but made no mention on the issue of vested rights.  He noted Lehman also rejected the idea that rights to accident benefits arise from a private contractual agreement and vest at the time of the accident.

Delegate Rogers found it illogical to apply the concept of vested contractual rights to a relationship in which the parties have no direct input in terms of their relationship, and the terms may be amended from time to time without their input or consent.  He held that the Federico approach is inconsistent with s. 268(1), incompatible with the history of frequent amendments to the Schedules, and that the Arbitrator had erred in applying Federico.

Ultimately the Arbitrator agreed with Director’s Delegate Rogers.  Federico itself was based on the Supreme Court of Canada’s decision in Dikranian.  But Dikranian involved a student who contracted for student loans directly with the provider.  There is little in the context of an individual purchasing automobile insurance akin to the situation in Dikranian; automobile insurance in Ontario is mandatory for all drivers, and no purchaser or insurer has any input into the terms of the Schedule that become incorporated—those terms are solely at the discretion of the Legislature.  Neither contracting party has any opportunity to negotiate them.  The notion of vested contractual rights seems inappropriate to apply to terms that one party is functionally obligated to purchase, and neither party has any input into nor control over.

The provisions considered in Federico (interest) are far more concrete than the cost of examinations arising from an accident.  It would not be plausible to say that at the time of an accident, the examinations that an insured will need are crystallized and clear. The situation is more analogous to Delegate Rogers’ comment in Barnes that Ms. Barnes’ right to attendant care was contingent upon her ongoing need, the provision of services, and her incurring an expense.  Ms. Stranges’s need for catastrophic assessments did not crystallize at the time of the accident, such that it could have been presumed with certainty on September 17, 2004 that Ms. Stranges was going to need the assessments that were sought, and costing over $23,000.

 S. 268 of the Insurance Act gives the Legislature the power to amend the applicable Schedule at its discretion.  And the New Schedule and the Old Schedule are both clear—in sections 2(2)2 and 3, respectively, the $2,000.00 cap (s. 25(5) of the New Schedule) applies to all examinations after August 31, 2010.  In both Schedules, s. 25(5) of the New Schedule is noted as applicable, and s. 24 of the Old Schedule (outlining the former costs of examinations entitlements) is noted as inapplicable.  There is no other way to interpret either provision.  Accordingly, State Farm’s submission that the $2,000.00 cap (s. 25(5)) is applicable to Ms. Stranges’ assessments is correct.

None of the above speaks to whether the disputed assessments were “reasonable”—which would have been the applicable test regardless of whether the Old Schedule or New Schedule applied.  Ms. Stranges made no further submissions on point.  It seemed Ms. Stranges was content to rest her case on the line of case law. State Farm provided substantial submissions that called the reasonableness of the denied assessments into question.  The Arbitrator agreed that on their face the denied assessments appear duplicative, and are inconsistent with the caps outlined in s. 25(5) of the Schedule and the Professional Services Guideline.  It does not seem reasonable that a 9-page summary of assessors’ reports would take 44-53 hours of clinician time, or that the O.T. assessments would require 33-40 hours.

Ms. Stranges has not satisfied her onus to show the reasonableness of the cost of the examinations sought.  Her claim is denied.

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