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Spadafora v. Dominion of Canada, 2013 ONSC 182 (CanLII)

Date:
2013-01-17
File number:
11-29354
Other citation:
113 OR (3d) 782
Citation:
Spadafora v. Dominion of Canada, 2013 ONSC 182 (CanLII), <https://canlii.ca/t/fvp3h>, retrieved on 2024-03-28

Spadafora v. The Dominion of Canada General Insurance Company

[Indexed as: Spadafora v. Dominion of Canada General Insurance Co.]

Ontario Reports

 

Ontario Superior Court of Justice,

Reilly J.

January 17, 2013

 

113 O.R. (3d) 782   |   2013 ONSC 182

Case Summary

 

 


Insurance — Actions against insurer — Insured bringing action against insurer for damages for breach of contract after insurer denied insured's claim for non-earner benefits — Insurer's motion for summary judgment dismissing claims for damages for intentional infliction of mental distress and bad faith and for aggravated, punitive and exemplary damages granted — Contract not having object of securing psychological benefit that would bring distress upon breach within the [page783] reasonable contemplation of parties — Degree of mental suffering caused by any breach not of sufficient degree to warrant compensation — Insurer not acting in bad faith and not engaging in conduct that would warrant aggravated, punitive or exemplary damages even if it was wrong in denying claim.


Insurance — Automobile insurance — Statutory accident benefits — Insurer informing insured that he was not eligible for non-earner benefits but not providing written explanation as to basis for denial or written notice of plaintiff's right to dispute denial — Genuine issue requiring trial existing with respect to whether insurer complied with s. 32 of Statutory Accident Benefits Schedule and triggered limitation period — Insurer's motion for summary judgment dismissing action for breach of contract as statute-barred dismissed — Statutory Accident Benefits Schedule — Accidents on or after November 1, 1996, O. Reg. 403/96, s. 32.

The plaintiff submitted an OCF-1 Application for Accident Benefits in 2003. On February 25, 2004, the defendant insurer informed the plaintiff that he was not eligible for non-earner benefits. In May 2010, the plaintiff notified the defendant that he intended to pursue a claim for non-earner benefits. After mediation with respect to those benefits failed, the plaintiff commenced an action for damages for breach of contract, wrongful infliction of mental distress and bad faith. He also sought aggravated, punitive and exemplary damages. The defendant brought a motion for summary judgment dismissing the action, arguing that there was no genuine issue requiring a trial with respect to whether the plaintiff was barred from bringing the claim by operation of the applicable limitation periods and no genuine issue requiring a trial with respect to whether the defendant engaged in such conduct that the plaintiff would be entitled to damages for wrongful infliction of mental distress or bad faith or aggravated or punitive damages.


Held, the motion should be granted in part.


The OCF-9 form of February 25, 2004 purporting to deny the plaintiff's entitlement to non-earner benefits failed to include a written explanation as to the basis for the denial of the benefits or written notice of the plaintiff's right to dispute the denial. There was a genuine issue requiring a trial with respect to whether the defendant complied with the requirements of s. 32 of the Statutory Accident Benefits Schedule, thereby triggering the limitation period. As well, a trial was required to determine whether the plaintiff in fact qualified for non-earner benefits.


An object of the insurance contract in question was not to secure a psychological benefit that would bring distress upon breach within the reasonable contemplation of the parties, and the degree of mental suffering caused by any breach in this case was not of sufficient degree to warrant compensation. The defendant was entitled to summary judgment dismissing the claim for damages for mental distress. The claim based on bad faith should also be dismissed; there was no suggestion of bad faith on the part of the defendant in denying the claim. Finally, even if an award of damages for breach of contract was ultimately found to be appropriate, the defendant's conduct was far from the high-handed, malicious, arbitrary or highly reprehensible conduct that would justify an award for aggravated, punitive or exemplary damages. That claim should be dismissed. [page784]

Cases referred to


702535 Ontario Inc. v. Non-Marine Underwriters, Lloyd's of London, [2000] O.J. No. 866, 184 D.L.R. (4th) 687, 130 O.A.C. 373, [2000] I.L.R. I-3826, 95 A.C.W.S. (3d) 556, 2000 CanLII 5684 (C.A.); Aguonie v. Galion Solid Waste Material Inc. (1998), 1998 CanLII 954 (ON CA), 38 O.R. (3d) 161, [1998] O.J. No. 459, 156 D.L.R. (4th) 222, 107 O.A.C. 115, 17 C.P.C. (4th) 219 (C.A.); Arsenault v. Dumfries Mutual Insurance Co. (2002), 2002 CanLII 23580 (ON CA), 57 O.R. (3d) 625, [2002] O.J. No. 4, 152 O.A.C. 224, [2002] I.L.R. I-4086, 20 M.V.R. (4th) 165 (C.A.); Carruthers v. Royal & SunAlliance Insurance Co. of Canada, [2002] O.F.S.C.I.D. No. 80, FSCO Appeal P02-00015, affg (2002), FSCO A00-000923; Dawson v. Rexcraft Storage and Warehouse Inc., 1998 CanLII 4831 (ON CA), [1998] O.J. No. 3240, 164 D.L.R. (4th) 257, 111 O.A.C. 201, 26 C.P.C. (4th) 1, 20 R.P.R. (3d) 207 (C.A.); Fidler v. Sun Life Assurance Co. of Canada, [2006] 2 S.C.R. 3, [2006] S.C.J. No. 30, 2006 SCC 30, 271 D.L.R. (4th) 1, 350 N.R. 40, [2006] 8 W.W.R. 1, J.E. 2006-1316, 227 B.C.A.C. 39, 57 B.C.L.R. (4th) 1, [2006] R.R.A. 525, 53 C.C.E.L. (3d) 1, 39 C.C.L.I. (4th) 1, [2007] CLLC Â210-015, [2006] I.L.R. 4521, EYB 2006-107056; Galdamez v. Allstate Insurance Co. of Canada (2012), 111 O.R. (3d) 321, [2012] O.J. No. 3394, 2012 ONCA 508, 294 O.A.C. 133, [2012] I.L.R. I-5313, 36 M.V.R. (6th) 117; Heath v. Economical Mutual Insurance Co. (2009), 95 O.R. (3d) 785, [2009] O.J. No. 1877, 2009 ONCA 391, 249 O.A.C. 164, [2009] I.L.R. I-4838, 73 C.C.L.I. (4th) 31; Irving Ungerman Ltd. v. Galanis (1991), 1991 CanLII 7275 (ON CA), 4 O.R. (3d) 545, [1991] O.J. No. 1478, 83 D.L.R. (4th) 734, 50 O.A.C. 176, 1 C.P.C. (3d) 248 (C.A.); Pizza Pizza Ltd. v. Gillespie (1990), 1990 CanLII 4023 (ON SC), 75 O.R. (2d) 225, [1990] O.J. No. 2011, 45 C.P.C. (2d) 168, 33 C.P.R. (3d) 515 (Gen. Div.); Smith v. Co-operators General Insurance Co., [2002] 2 S.C.R. 129, [2002] S.C.J. No. 34, 2002 SCC 30, 210 D.L.R. (4th) 443, 286 N.R. 178, J.E. 2002-663, 158 O.A.C. 1, 36 C.C.L.I. (3d) 1, [2002] I.L.R. I-4071; Vorvis v. Insurance Corp. of British Columbia, 1989 CanLII 93 (SCC), [1989] 1 S.C.R. 1085, [1989] S.C.J. No. 46, 58 D.L.R. (4th) 193, 94 N.R. 321, [1989] 4 W.W.R. 218, 36 B.C.L.R. (2d) 273, 42 B.L.R. 111, 25 C.C.E.L. 81, 90 CLLC Â14,035 at 12309; Whiten v. Pilot Insurance Co., [2002] 1 S.C.R. 595, [2002] S.C.J. No. 19, 2002 SCC 18, 209 D.L.R. (4th) 257, 283 N.R. 1, J.E. 2002-405, 156 O.A.C. 201, 20 B.L.R. (3d) 165, 35 C.C.L.I. (3d) 1, [2002] I.L.R. I-4048, REJB 2002-28036, revg (1999), 1999 CanLII 3051 (ON CA), 42 O.R. (3d) 641, [1999] O.J. No. 237, 170 D.L.R. (4th) 280, 117 O.A.C. 201, 32 C.P.C. (4th) 3, [1999] I.L.R. I-3659 (C.A.)


Statutes referred to


Insurance Act, R.S.O. 1990, c. I.8, ss. 280 [as am.], 280.1, 281 [as am.], 281.1(1)


Limitations Act, R.S.O. 1990, c. L.15


Limitations Act, 2002, S.O. 2002, c. 24, Sch. B


Rules and regulations referred to


Rules of Civil Procedure, R.R.O. 1990, Reg. 194, rules 20, 20.04, 20.04(2.1)


Statutory Accident Benefits Schedule — Accidents after December 31, 1993 and before November 1, 1996, O. Reg. 776/ 93, s. 71


Statutory Accident Benefits Schedule — Accidents on or after November 1, 1996, O. Reg. 403/96, ss. 2 [as am.], (4), 12 [as am.], 31, 32 [as am.], (1.1)(b), (2), (d), 45, 49 [as am.], 50, 51


Authorities referred to


Financial Services Commission of Ontario, Application for Accident Benefits, OCF-1


Financial Services Commission of Ontario, Disability Certificate, OCF-3


Financial Services Commission of Ontario, Explanation of Benefits, OCF-9


Osborne, Coulter A., Civil Justice Reform Project: Summary of Findings & Recommendations (Toronto: Ontario Ministry of the Attorney General, 2007) [page785]

MOTION by the defendant for summary judgment.

Andrew Rudder, for plaintiff/responding party.


Lisa C. Pool, for respondent/moving party.

 


[1] REILLY J.: — By this motion, the defendant, The Dominion of Canada General Insurance Company, seeks an order granting summary judgment in whole or in part pursuant to Rule 20 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 with respect to the plaintiff/respondent's statement of claim seeking damages for breach of a contract of insurance, damages for wrongful infliction of mental distress, damages for bad faith on the part of the defendant insurance company and aggravated punitive and exemplary damages in the amount of $1 million. The claim for damages was originally triggered by a motor vehicle accident, which took place on December 1, 2003.

[2] In that accident, the plaintiff was the driver of a motor vehicle that was rear-ended by another motor vehicle. At the time, he was insured under a policy of motor vehicle liability insurance issued by the defendant, The Dominion of Canada General Insurance Company ("Dominion"). The policy provided for statutory accident benefits as set out in O. Reg. 403/96, Statutory Accident Benefits Schedule -- Accidents on or after November 1, 1996 (the "Schedule").

[3] On December 1, 2003, Dominion sent a letter to the plaintiff explaining accident benefits to which he was entitled and enclosing various OCF forms and other material that explained the various benefits available. He was asked to return all the forms, including the Application for Accident Benefits, OCF-1 and Disability Certificate, OCF-3.

[4] The plaintiff returned the OCF-1 Application for Accident Benefits signed on December 16, 2003. On this form, he stated that he was, at the time of the accident, employed and working, that he was not a student, that he had not just completed school, that his injuries did not prevent him from working and that he was able to return to work after the accident. He did not complete a caregiver section. When the plaintiff returned the OCF-1 to Dominion, he sent with it an undated letter which Dominion apparently received on January 30, 2004.

[5] On February 25, 2004, after receiving the application for accident benefits, Dominion sent to the plaintiff an Explanation of Benefits, OCF-9 informing him that he was not eligible for income replacement benefits, non-earner benefits or caregiver benefits. That mailing also included a second request for a completed OCF-3 Disability Certificate. [page786]

[6] Following the accident, the plaintiff continued working at his job in sales at Premier Fitness. He subsequently obtained a different job at Thermal Ceramics in July of 2004, and then in December of 2004, he obtained new employment at Dofasco. There may be some dispute as to medical complaints or problems experienced by the plaintiff during 2004, which need not be addressed for purposes of this motion. It is clear that throughout 2004, Dominion did agree to pay for some medical and rehabilitation benefits, specifically treatment plans for chiropractic treatment and massage therapy. There were no claims by the plaintiff for treatment or benefits in 2005.

[7] On April 8, 2008 and December 29, 2008, Dr. Ernest Hajcser, the plaintiff's physician, completed disability certificates in which he indicated the plaintiff met the disability test for income replacement benefits but did not meet the test for non-earner benefits. He also stated the plaintiff did not suffer from inability to perform his housekeeping and home maintenance activities.

[8] Some 6[cents] years after the original accident (May 25, 2010), the plaintiff notified Dominion that he intended to pursue a claim for non-earner benefits. He applied for mediation with FSCO with respect to these non-earner benefits. At that mediation on May 5, 2011, the issues between the plaintiff and Dominion were not resolved. The plaintiff then issued a statement of claim on August 8, 2011 claiming in part non-earner benefits. The defendant, Dominion, takes the position that there is no medical evidence that as a result of and within 104 weeks after the accident, the plaintiff suffered a "complete inability to carry on a normal life", which Dominion states is the test required to obtain non-earner benefits.

[9] The defendant/moving party takes the position that there is no genuine issue requiring a trial with respect to whether the plaintiff is barred from bringing this claim by operation of the appropriate limitation periods. Further, the defendant/ moving party states that there is no genuine issue requiring a trial as to whether the plaintiff could claim or receive non-earner benefits. Finally, the defendant/moving party states that there is no genuine issue requiring a trial as to whether the defendant engaged in such conduct that the plaintiff would be entitled to damages for wrongful infliction of mental distress, damages for bad faith, for unreasonable conduct in the claims process or for aggravated punitive or exemplary damages. [page787]


The Test for Summary Judgment

[10] As a result of the amendment of former Rule 20 of the Rules of Civil Procedure and the report of the former associate chief justice of Ontario, the Honourable Coulter Osborne, Q.C., in his report entitled Civil Justice Reform Project: Summary of Findings & Recommendations (Toronto: Ontario Ministry of the Attorney General, 2007), the Ontario Court of Appeal sat as a five-judge court to hear five appeals dealing with the application of the now reformed Rule 20. The court was chaired by the chief justice and also had the benefit of five invited amicus curiae (the Attorney General of Ontario, the Advocates' Society, the Ontario Bar Association, the Ontario Trial Lawyers' Association and the County and District Law of Presidents' Association). The Court of Appeal delivered a unanimous judgment.

[11] The court began by stating, in para. 2:

Of the changes introduced, the amendments to Rule 20, which governs motions for summary judgment, were arguably the most important. Simply put, the vehicle of a motion for summary judgment is intended to provide a means for resolving litigation expeditiously and with comparatively less cost than is associated with a conventional trial. Although such motions have long been available in this Province, their utility has been limited in part by a line of jurisprudence from this court that precluded a judge on a summary judgment motion from weighing the evidence, assessing credibility, or drawing inferences of fact. These powers were held to be reserved for the trial judge.

[12] The court then continued, in paras. 3 and 4 and subsequent paragraphs, as follows:

The 2010 amendments to Rule 20 effectively overrule this line of authority by specifically authorizing judges to use these powers on a motion for summary judgment unless the judge is of the view that it is in the interests of justice for such powers to be exercised only at a trial. One of the objectives behind enhancing the powers available to judges on a summary judgment motion was to make this form of summary disposition of an action more accessible to litigants with a view to achieving cost savings and a more efficient resolution of disputes. Indeed the principle of proportionality is advanced by expansion of the availability of summary judgment.

However, it is equally clear that the amendments to Rule 20 were never intended to eliminate trials. In fact, the inappropriate use of Rule 20 has the perverse effect of creating delays and wasted costs associated with preparing for, arguing and deciding a motion for summary judgment, only to see the matter sent on for trial.

[13] The Court of Appeal then went on to a significant discussion of Rule 20 in its former form, including a discussion of the previous well-known and oft-cited jurisprudence, including such cases as Irving Ungerman Ltd. v. Galanis (1991), 1991 CanLII 7275 (ON CA), 4 O.R. (3d) 545, [1991] O.J. No. 1478 (C.A.); [page788] Pizza Pizza Ltd. v. Gillespie (1990), 1990 CanLII 4023 (ON SC), 75 O.R. (2d) 225, [1990] O.J. No. 2011 (Gen. Div.); Aguonie v. Galion Solid Waste Material Inc. (1998), 1998 CanLII 954 (ON CA), 38 O.R. (3d) 161, [1998] O.J. No. 459 (C.A.); and Dawson v. Rexcraft Storage and Warehouse Inc., 1998 CanLII 4831 (ON CA), [1998] O.J. No. 3240, 164 D.L.R. (4th) 257 (C.A.).

[14] This jurisprudence is well known to the court and has been applied on many occasions.

[15] The Court of Appeal then went on to consider the amendments to rule 20.04, specifically rule 20.04(2.1), which states:

20.04(2.1) In determining under clause (2)(a) whether there is a genuine issue requiring a trial, the court shall consider the evidence submitted by the parties and, if the determination is being made by a judge, the judge may exercise any of the following powers for the purpose, unless it is in the interests of justice for such powers to be exercised only at trial:

 1.   Weighing the evidence.

 2.   Evaluating the credibility of a deponent.

 3.   Drawing any reasonable inference from the evidence.

[16] The court then went on to declare, at paras. 37-38:

As we shall go on to explain, the amended rule permits the motion judge to decide the action where he or she is satisfied that by exercising the powers that are now available on a motion for summary judgment, there is no factual or legal issue raised by the parties that requires a trial for its fair and just resolution.

However, we emphasize that the purpose of the new rule is to eliminate unnecessary trials, not to eliminate all trials. The guiding consideration is whether the summary judgment process, in the circumstances of a given case, will provide an appropriate means for affecting a fair and just resolution of the dispute before the court.

[17] In discussing the types of cases that would be amendable to summary judgment, the Court of Appeal stated, at para. 44:

Moreover, the amended Rule 20 now permits a third type of case to be decided summarily. The rule provides for the summary disposition of cases other than by way of agreement where there is "no chance of success". The prior wording of Rule 20, whether there was a "genuine issue for trial", was replaced by "genuine issue requiring a trial". This change in language is more than mere semantics. The prior wording served mainly to winnow out plainly unmeritorious litigation. The amended wording, coupled with the enhanced powers under Rule 20.04 (2.1) and (2.2), now permit the motion judge to dispose of cases on the merits where the trial process is not required in the "interest of justice".

[18] Although the amended rule entitles a judge and indeed requires a judge to have a "full appreciation of the evidence" to the extent that that is possible on a Rule 20 motion, some of the original principles discussed in the earlier jurisprudence still very much apply. [page789]

[19] In response to evidence supporting a motion for summary judgment, a responding party may not rest solely on the allegations or denials in the party's pleadings but must set out in affidavit material or other evidence specific facts showing that there is a genuine issue requiring a trial. To repeat the oft-cited principle, each party must put his "best foot forward" or risk losing. A party is not entitled to sit back and count only on the party's pleadings with the possibility that more favourable facts may develop at trial.


The Limitation Periods

[20] There are three steps in the claiming of accident benefits. First, the person claiming benefits must notify the insurer that he wishes to make such application. The insurer then provides the application package and the applicant submits the completed application. This is dealt with in s. 32 of the Schedule. The evidence in this case suggests that the plaintiff did indeed notify the defendant, who then provided the application package following which the plaintiff submitted an incomplete application, failing to provide a complete OCF-3 Disability Certificate. Section 32(1.1)(b) of the Schedule requires the insured to notify the insurer no later than the seventh day after the circumstances that give rise to the entitlement to the benefit, or as soon as practical after that day. In this case, the plaintiff has never applied for non-earner benefits as he has never submitted an OCF-3 Disability Certificate indicating that he meets the disability test to receive these benefits. His first notice of intention to apply for non-earner benefits was when his lawyer wrote to Dominion and he applied for mediation, in May of 2010. Section 31 of the Schedule provides: "A person's failure to comply with a time limit set out in this Part does not disentitle the person to a benefit if the person has a reasonable explanation".

[21] The "reasonable explanation" exception was addressed in the case of Carruthers v. Royal & SunAlliance Insurance Co. of Canada (2002), FSCO A00-000923, affd FSCO Appeal P02-00015, [2002] O.F.S.C.I.D. No. 80. As the arbitrator stated, at para. 44:


 

 


--




the onus is on the insured person to establish a "reasonable excuse";



 

-- ignorance of the law alone is not a "reasonable excuse";


 

 


--




the test of "reasonable excuse" is both a subjective and objective test that should take account of both personal characteristics and a "reasonable person" standard; [page790]




--




in the absence of a reasonable excuse, the lack of prejudice to the insurer is not a sufficient basis for extending the 30-day time limit.



 

[22] It is clear that the onus is on the plaintiff to establish a reasonable explanation for not applying for a benefit within the time limit under the Schedule. The defendant/moving party takes the position that the failure of the plaintiff to establish a reasonable explanation for not applying for a benefit within the time limit under the Schedule or a reasonable explanation as to his failure to submit a completed disability certificate with either the application for accident benefits or pursuant to the request in the OCF-9 dated February 25, 2004 should disentitle the plaintiff to the relief which he seeks. The defendant/moving party further states that the failure of the plaintiff to take these steps in a timely fashion, without reasonable explanation, results in a prejudice to the defendant's ability to properly assess any entitlement he might otherwise have.

[23] There is a further limitation period with respect to mediating and litigating denied benefits. Section 281.1(1) of the Insurance Act, R.S.C. 1990, c. I.8 states that a mediation proceeding or evaluation under ss. 280 or 280.1 or a court proceeding or an arbitration under s. 281 must be commenced within two years after the insurer's refusal to pay the benefit claimed. Simply put, mediation and/or litigation must be commenced within two years after the insurer's refusal to pay a benefit.

[24] The Supreme Court of Canada addressed the insurer's obligation to the insured when it refused a benefit. In the case of Smith v. Co-operators General Insurance Co., 2002 SCC 30 (CanLII), [2002] 2 S.C.R. 129, [2002] S.C.J. No. 34, at para. 14, Justice Gonthier, for the court, stated:

In my opinion, the insurer is required under s. 71 to inform the person of the dispute resolution process contained in ss. 279 to 283 of the Insurance Act in straightforward and clear language, directed towards an unsophisticated person. At a minimum, this should include a description of the most important points of the process, such as the right to seek mediation, the right to arbitrate or litigate if mediation fails, that mediation must be attempted before resorting to arbitration or litigation and the relevant time limits that govern the entire process. Without this basic information, it cannot be said that a valid refusal has been given.

[25] Dominion takes the position that although written reasons for its decision were not provided on the OCF-9 dated February 25, 2004, the plaintiff was told of the decision that he was not eligible for non-earner benefits. The denial was clear and he was told about the dispute resolution process and the governing timelines. Thus, he had all of the requisite information to [page791] commence a dispute resolution process, if such would be his intention. He did not do so until more than six years later, when he applied for mediation with respect to non-earner benefits on or about May 25, 2010. This was clearly more than two years after the date of denial, which was February 25, 2004. Thus, Dominion takes the position that the plaintiff is barred from bringing his claim for non-earner benefits by operation of ss. 50 and 51 of the Schedule and s. 281.1 of the Insurance Act.

[26] The defendant/moving party also claims that the plaintiff is in violation of the general limitation period with respect to the allegation of breach of contract. Such breach is alleged to have occurred in either December 2003, when the defendant provided the application package, or in January and February of 2004, when the defendant responded to the information provided by the plaintiff.

[27] The commencement of a limitation period is a question of fact. The material facts giving rise to a cause of action must be discoverable. The limitation period will run from the time the prospective plaintiff has or ought to have had knowledge of his potential claim. The defendant takes the position that the plaintiff had sufficient facts in 2003 or 2004 at the latest to recognize that he had a cause of action against the defendant. Therefore, at the very latest the limitation period would have expired in December 2009 under the 1990 Limitations Act, R.S.O. 1990, c. L.15 or in 2006 under the current Limitations Act, 2002, S.O. 2002, c. 24, Sch. B. It is arguable that a two-year limitation period would apply pursuant to the decision of the Court of Appeal in Arsenault v. Dumfries Mutual Insurance Co. (2002), 2002 CanLII 23580 (ON CA), 57 O.R. (3d) 625, [2002] O.J. No. 4 (C.A.).

[28] The plaintiff/responding party takes the position that the various limitation periods discussed above must be carefully considered based on the evidence adduced to this point and the evidence that would be adduced at trial. The plaintiff notes the arguable difficulty in the interpretation of "non-earner benefits" pursuant to s. 12 of the Schedule. He notes the definition of "impairment" as defined in s. 2 of the Schedule and the definition of "complete inability" found in s. 2(4) of the Schedule.

[29] I might note in passing that the test for non-earner benefits, which is at the heart of this action, is not simple in application. Perhaps the best test was set out by the Ontario Court of Appeal in the case of Heath v. Economical Mutual Insurance Co. (2009), 2009 ONCA 391 (CanLII), 95 O.R. (3d) 785, [2009] O.J. No. 1877 (C.A.). Madam Justice Simmons, on behalf of the court, set out the test for non-earner benefits, at para. 50. She stated: [page792]

Although s. 12 and s. 2(4) of the 1996 SABS have not been considered extensively by the courts, they have been considered in a number of arbitration decisions. Based on my review of various decisions, as well as a consideration of the language and purpose of the 1996 SABS, and a review of the predecessor provisions, I would adopt the following general principles as being part of a proper approach to the application of these sections:


 

 


--




Generally speaking, the starting point for the analysis of whether a claimant suffers from a complete inability to carry on a normal life will be to compare the claimant's activities and life circumstances before the accident to his or her activities and life circumstances after the accident. This follows from the language of the section as well as a review of the predecessor provisions. That said, there may be some circumstances in which a comparison, or at least a detailed comparison, of the claimant's pre-accident and post-accident activities and circumstances is unnecessary, having regard to the nature of the claimant's post-accident condition.




--




Consideration of the claimant's activities and life circumstances prior to the accident require more than taking a snapshot of a claimant's life in the time frame immediately preceding the accident. It involves an assessment of the appellant's activities and circumstances over a reasonable period prior to the accident, the duration of which will depend on the facts of the case.




--




In order to determine whether the claimant's ability to continue engaging in "substantially all" of his or her pre-accident activities has been affected to the required degree, all of the pre-accident activities in which the claimant ordinarily engaged should be considered. However, in deciding whether the necessary threshold has been satisfied, greater weight may be assigned to those activities which the claimant identifies as being important to his/her pre-accident life.



 

Although this approach differs somewhat from the approach taken in Walker v. Ritchie, 2003 CanLII 17106 (Ont. S.C.), in which the trial judge focused on those activities that were "most important" to the claimant before the accident, in my opinion, it better reflects the high threshold created by the language of the section at the same time allows a claimant-focused inquiry.


 

 


--




It is not sufficient for a claimant to demonstrate that there were changes in his or her post-accident life. Rather, it is incumbent on a claimant to establish that those changes amount to him or her being continuously prevented from engaging in substantially all of his pre-accident activities. The phrase "continuously prevents" means that a claimant must prove "disability or incapacity of the requisite nature, extent or degree which is and remains uninterrupted".




--




The phrase "engaging in" should be interpreted from a qualitative perspective and this meaning more than isolated post-accident attempts to perform activities that a claimant was able to perform before the accident. The activity must be viewed as a whole, and a claimant who merely goes through the motions cannot be said to be "engaging in" an activity. Moreover, the manner in which an activity is performed and the quality of performance post-accident must also be considered. If the degree to which a claimant can perform an activity is sufficiently restricted, it cannot be said that he or she is truly "engaging in" the activity. [page793]




--




In cases where pain is a primary factor that allegedly prevents the insured from engaging in his or her former activities, the question is not whether the insured can physically do these activities, but whether the degree of pain experienced either at the time, or subsequent to the activity, is such that the individual is practically prevented from engaging in these activities.



 

[30] The mere fact that the plaintiff was otherwise employed at the time of the accident or subsequent to the accident does not mean that he is disentitled from non-earner benefits. This was made clear in the recent case of Galdamez v. Allstate Insurance Co. of Canada (2012), 2012 ONCA 508 (CanLII), 111 O.R. (3d) 321, [2012] O.J. No. 3394 (C.A.), where the Ontario Court of Appeal made it clear that a person who does not qualify for an income replacement benefit may well qualify for a non-earner benefit. At para. 29 of the judgment, Madam Justice Simmons, for the court, stated:

In my view it is clear from a plain reading of s. 4 and 12 of the 1996 SABS that a claimant's status as an employed person does not, in itself, establish that the claimant is ineligible for non-earner benefits. Moreover, I do not agree that the motion judge's interpretation of these provisions is supported by the scheme of the 1996 SABS for the purpose of these specific provisions. Instead, I conclude that such considerations support the opposite interpretation to the one he reached.

[31] Madam Justice Simmons continued, at para. 31, to state:

The language of s. 12(1)1 is clear: an individual can only qualify for a non-earner benefit if he or she does not qualify for income replacement benefit. However the language of s. 4(1) 1 is equally clear. Employment status at the time of an accident is only one part of the test for qualifying for an income replacement benefit; a claimant must also demonstrate that he or she meets the relevant disability standard -- namely, a substantial inability to perform the essential tasks of his or her employment.


[Emphasis in original]

[32] Madam Justice Simmons continued, at para. 39, to state:

However, s. 2(4) of the 1996 SABS stipulates that to qualify for a non-earner benefit, it is necessary only that the person be continuously prevented "from engaging in substantially all of the activities in which the person ordinarily engaged before the accident" (emphasis added). "Substantially all" does not mean all.

[33] Madam Justice Simmons continued, at paras. 43 and 44, to clarify what she meant by her previous comments:

Although I consider it unlikely that persons who can work at their pre-accident jobs following an accident will often meet the disability standard for non-earner benefits, I do not rule out such a possibility.

For example, in jobs where mobility is not a requirement (e.g.: department store greeter, telemarketer, etc.) and the job was not of great importance to the claimant's pre-accident life, it may be possible for a claimant who [page794] returns to his or her pre-accident employment following an accident to satisfy the test for non-earner benefits.

[34] I note that the plaintiff was assessed by Dr. M. Rathbone, a neurologist, on September 10, 2012, who concluded in his report dated October 3, 2012 that the plaintiff met the test for non-earner benefits.

[35] The plaintiff/responding party was also evaluated by Dr. Annette Lorenz (psychologist), Dr. E. Savelli (neurologist) and Kathryn Bourelle (vocational rehabilitation counsellor) in May and June of 2010 for an independent medico-legal evaluation. These three possible expert witnesses also concluded that the plaintiff met the legal test for non-earner benefits.

[36] I return now directly to the defendant/moving party's position that the plaintiff failed to comply with the appropriate limitation periods. I note s. 32(2) of the Schedule states that the insurer shall promptly provide the applicant with (1) the appropriate application forms; (2) a written explanation of the benefits available under the Regulation; (3) information to assist the person in applying for benefits; and (4) information on any possible elections relating to income replacement, non-earner and caregiver benefits.

[37] The insurer's obligation to provide this information as noted above is the second step in a three-step claims process mandated by s. 32 of the Schedule. It is a precondition to the third step because an insured person cannot be expected to make a timely application for benefits unless he has been given the appropriate forms and information to enable him to do so.

[38] The insurer cannot hold an insured person to a 30-day time limit for election or re-election if the required information has not been provided. For the same reason, an insured person cannot be held to an election that is based on inaccurate or incomplete information provided by the insurer in contravention of s. 32(2)(d). A valid election must be an informed election. The respondent takes the position that he was never given an explanation as to why he was not eligible for non-earner benefits. The Supreme Court of Canada, in the case of Smith v. Co-operators General Insurance Co., supra, made it clear that an insurer's obligation goes beyond mere communication and requires straightforward and clear language directed towards an unsophisticated person. The prime objective is consumer protection. The plaintiff/respondent states that the reference by the defendant to "non-earners" as "those who have no income" would be and indeed was misleading to the plaintiff since the legal test for the non-earner benefit is not dependent only on income. This is confirmed, maintains the plaintiff, by the letter in response to the solicitor for the plaintiff's lawyer on May 31, 2010 which [page795] expressly states that Dominion would not consider payment of a non-earner benefit as the plaintiff was employed prior to the motor vehicle accident. The plaintiff also takes the position that the defendant misstated the law when Dominion described the legal test for non-earner benefits as "a complete inability to carry on your normal activities". Instead, the correct test is "a complete inability to carry on a normal life" and has been defined as being "continuously prevented from engaging in substantially all of the activities you engaged in prior to the accident". As noted above, "substantially all" does not mean "all".

[39] Essentially, the plaintiff/responding party takes the position that the defendant's denial of non-earner benefits on February 25, 2004 is not in compliance with s. 49 of the Schedule and thus no limitation period was triggered. Section 49 of the Schedule states:

49. If an insurer refuses to pay a benefit under this Regulation, or reduces the amount of a benefit that a person is receiving under this Regulation, the insurer shall provide the person with a written notice concerning the person's right to dispute.

[40] In the case of Smith v. Co-operators General Insurance Co. (cited above), the Supreme Court of Canada clearly held that s. 49 (then s. 71 [of Statutory Accidents Benefits Schedule -- Accidents after December 31, 1993 and before November 1, 1996, O. Reg. 776/93]) of the Schedule must be complied with in full in order to trigger a denial upon which the insurer could rely as triggering a limitation period. In this case, the OCF-9 form of February 25, 2004 purporting to deny the plaintiff's entitlement to income replacement benefits, non-earner benefits and caregiver benefits failed to include any written explanation as to how the income replacement benefit was calculated, a written explanation as to the basis for the denial of benefits and any written notice of the insured's right to dispute the denial, either the fact or the right or the procedure to follow thereto. The plaintiff/ respondent takes the position that neither s. 45 or s. 49 of the Schedule was complied with on February 25, 2004. In refusing the benefits, this was not a valid refusal pursuant to the Supreme Court of Canada's decision in Smith v. Co-operators and therefore no limitation period applies to either the denial.

[41] I agree that this is a contentious point which must be considered in the context of the evidence as a whole and which will require determination by a trial judge. Therefore, with respect to the principal claim for breach of contract, I conclude there is a genuine issue requiring trial for its resolution and I dismiss the application for summary judgment with respect to the principal claim for breach of contract. [page796]

[42] To summarize my conclusion, with respect to the claim for breach of contract, a trial judge will have to determine, based on the facts presented at trial, whether the defendant company complied with the requirements of the Statutory Accident Benefits Schedule (and specifically s. 32 of the Schedule) thereby triggering the limitation period. Depending on the evidence called and accepted by the court, it could be that the limitation period never did begin to run. As well, a trial is necessary to determine whether the plaintiff did or does indeed qualify for non-earner benefits.


The Remainder of Relief

[43] Apart from damages for breach of contract for failure to pay the non-earner benefit under the contract of insurance, the plaintiff has also claimed damages in the amount of $100,000 for the defendant's alleged wrongful infliction of mental distress upon the plaintiff by the use of unlawful claims practices, damages in the amount of $100,000 for bad faith for unreasonable conduct in the claims process, and aggravated punitive and exemplary damages in the amount of $1 million.

[44] There is no question as a matter of law that a claim for intentional infliction of mental distress may be combined with a claim for breach of contract, when the contract is a so called "peace of mind" contract, for insurance coverage. I note the case of Fidler v. Sun Life Assurance Co. of Canada, 2006 SCC 30 (CanLII), [2006] 2 S.C.R. 3, [2006] S.C.J. No. 30. The judgment of the court was delivered by Chief Justice McLachlin and Madam Justice Abella. The court stated, at para. 2:

Since mental distress of the kind experienced by Ms. Fidler was reasonably within the contemplation of the parties when they entered into the contract of disability insurance, we see no reason to deny her compensation for the damages for mental distress directly flowing from the breach.

[45] At para. 43, the court went on to state after citing Vorvis v. Insurance Corp. of British Columbia, 1989 CanLII 93 (SCC), [1989] 1 S.C.R. 1085, [1989] S.C.J. No. 46:

The view taken by this court in Vorvis that damages for mental distress in "peace of mind" contracts should be seen as an expression of the general principle of compensatory damages of Hadley v. Baxendale, rather than an exception to that principle, is shared by others.

[46] At para. 44, the court continued to state:

We conclude that damages for mental distress for breach of contract may, in appropriate cases, be awarded as an application of the principle in Hadley v. Baxendale: see Vorvis. The court should ask "what did the contract promise?" and provide compensation for those promises. The aim of compensatory damages is to restore the wronged party to the position he or she would [page797] have been in had the contract not been broken. As the Privy Counsel stated in Wertheim v. Chicoutimi Pulp Co., [1911] A.C. 301, at p. 307: "the party complaining should, so far as it can be done by money, be placed in the same position as he would have been in if the contract had been performed". The measure of these damages is, of course, subject to remoteness principles. There is no reason why this should not include damages for mental distress, where such damages were in the reasonable contemplation of the parties at the time the contract was made. This conclusion follows from the basic principle of compensatory contractual damages: that the parties are to be restored to the position they contracted for, whether tangible or intangible. The law's task is simply to provide the benefits contracted for whatever their nature, if they were in the reasonable contemplation of the parties.

[47] The court then continued, at paras. 45 through 48:

It does not follow, however, that all mental distress associated with a breach of contract is compensatable. In normal commercial contracts, the likelihood of a breach of contract causing mental distress is not ordinarily within the reasonable contemplation of the parties. It is not unusual that a breach of contract will leave the wrong party feel frustrated or angry. The law does not award damages for such incidental frustration. The matter is otherwise, however, when the parties enter into a contract, an object of which is to secure a particular psychological benefit. In such a case, damages arising from such mental distress should in principle be recoverable, where they are established on the evidence and shown to have been within the reasonable contemplation of the parties at the time the contract was made. The basic principles of contract damages do not cease to operate merely because what is promised is an intangible, like mental security.

This conclusion is supported by the policy considerations that have led the law to as eschew damages for mental suffering in commercial contracts. As discussed above, this reluctance rests on two policy considerations -- the minimal nature of mental suffering and the fact that in commercial matters, mental suffering on breach is "not in the contemplation of the parties as part of the business risk of the transaction": MacGregor on Damages, at p. 63. Neither applies to contracts where promised mental security or satisfaction is part of the risk for which the parties contracted.

This does not obviate the requirement that a plaintiff prove his or her loss. The court must be satisfied: (1) that an object of the contract was to secure a psychological benefit that brings mental distress upon breach within the reasonable contemplation of the parties; and (2) that the degree of mental suffering caused by the breach was a degree sufficient to warrant compensation. These questions require sensitivity to the particular facts of each case.

While the mental distress is a consequence of breach it must reasonably be contemplated by the parties to attract damages, we see no basis for requiring it to be the dominant aspect or the "very essence" of the bargain. As the House of Lords noted in Farley, the law of contract protects all significant parts of the bargain, not merely those that are "dominant" or "essential". Lord Steyn rejected this common distinction as "a matter of form and not substance" (para. 24). Lord Hutton added:

I can see no reason in principle why, if a plaintiff who has suffered no financial loss can recover damages in some cases if there has been a breach of the principle obligation of the contract, he should be denied damages for breach of an obligation which, whilst not the principal [page798] obligation of the contract, is nevertheless one which he has made clear to the other party is of importance to him. [para. 51]

[48] I have no hesitation in concluding (1) that an object of the contract of insurance was not to secure a psychological benefit that would bring mental distress upon breach within the reasonable contemplation of the parties and, perhaps more importantly, (2) that the degree of mental suffering caused by any breach in this case was not of sufficient degree to warrant compensation. Thus, the defendant's claim for summary judgment for an alleged wrongful infliction of mental distress is allowed. That claim is dismissed. So too do I dismiss the claim for alleged bad faith for unreasonable conduct in the claims process. The position taken by the defendant insurance company in denying the claim under the contract may or may not be justified at trial. However, there is no suggestion of bad faith on the part of the insurance company in denying the claim. The concept of good faith was dealt with thoroughly in the case of 702535 Ontario Inc. v. Non-Marine Underwriters, Lloyd's of London, [2000] O.J. No. 866, 2000 CanLII 5684 (C.A.) by the Ontario Court of Appeal. The court stated, at paras. 27-29:

The relationship between an insurer and an insured is contractual in nature. The contract is one of utmost good faith. In addition to the express provisions in the policy and the statutorily mandated conditions, there is an implied obligation in every insurance contract that the insurer will deal with claims from its insured in good faith: Whiten v. Pilot Insurance Company (1999), 1999 CanLII 3051 (ON CA), 42 O.R. (3d) 641 (Ont. C.A.). The duty of good faith requires an insurer to act both promptly and fairly when investigating, assessing and attempting to resolve claims made by its insureds.

The first part of this duty speaks to the timeliness in which a claim is processed by the insurer. Although an insurer may be responsible to pay interest on a claim paid after delay, delay in payment may nevertheless operate to the disadvantage of an insured. The insured, having suffered a loss, will frequently be under financial pressure to settle the claim as soon as possible in order to redress the situation that underlies the claim. The duty of good faith obliges the insurer to act with reasonable promptness during each step of the claims process. Included in this duty is the obligation to pay a claim in a timely manner when there is no reasonable basis to contest coverage or to withhold payment[.]

The duty of good faith also requires an insurer to deal with its insured's claim fairly. The duty to act fairly applies both to the manner in which the insurer investigates and assesses the claim and to the decision whether or not to pay the claim. In making a decision whether to refuse payment of a claim from its insured, an insurer must assess the merits of the claim in a balanced and reasonable manner. It must not deny coverage or delay payment in order to take advantage of the insured's economic vulnerability or to gain bargaining leverage in negotiating a settlement. A decision by an insurer to refuse payment should be based on a reasonable interpretation of its obligations under the policy. [page799]

[49] The court went on to say, at para. 31:

What constitutes bad faith will depend on the circumstances in each case. A court considering whether the duty has been breached will look at the conduct of the insurer throughout the claims process to determine whether in light of the circumstances, as they then existed, the insurer acted fairly and promptly in responding to the claim.

[50] The Ontario Court of Appeal also dealt with the obligation of an insurer to act in good faith in the oft-cited case of Whiten v. Pilot Insurance Co. (1999), 1999 CanLII 3051 (ON CA), 42 O.R. (3d) 641, [1999] O.J. No. 237 (C.A.). In the Ontario Court of Appeal, Laskin J.A. stated, at p. 650 O.R.:

[I]n every insurance contract an insurer has an implied obligation to deal with the claims of an insured in good faith. That obligation to act in good faith is separate from the insurer's obligation to compensate its insured for a loss covered by the policy. An action for dealing with an insurance claim in good faith is different from an action on the policy for damages for the insured loss. In other words, breach of an insured's obligation to act in good faith is a separate or independent wrong from the wrong for which the compensation is paid.

[51] Although there may be a difference of opinion between the plaintiff and the defendant as to the plaintiff's entitlement to damages based on the insurance contract, there is no suggestion and no evidence of bad faith on the part of the defendant insurance company. Thus, the claim for damages for bad faith, for unreasonable conduct in the claims process, is dismissed.

[52] So too do I dismiss, without reservation, the claim for aggravated punitive and exemplary damages in the amount of $1 million. In the leading case of Whiten v. Pilot Insurance Co., 2002 SCC 18 (CanLII), [2002] 1 S.C.R. 595, [2002] S.C.J. No. 19, the Supreme Court of Canada set out the principles governing punitive damages, at para. 94:

(1)   punitive damages are very much the exception rather than the rule;

(2)   imposed only if there has been high-handed, malicious, arbitrary or highly reprehensible misconduct that departs to a marked degree from ordinary standards of decent behaviour;

(3)   where they are awarded, punitive damages should be assessed in such an amount reasonably proportionate to such factors as the harm caused, the degree of the misconduct, the relative vulnerability of the plaintiff and any advantage or profit gained by the defendant;

(4)   having regard to any other fines or penalties suffered by the defendant for the misconduct in question; [page800]

(5)   punitive damages are generally given only where the misconduct would otherwise be unpunished or where other penalties are or are likely to be inadequate to achieve the objects of retribution, deterrents and denunciation;

(6)   their purpose is not to compensate the plaintiff; but

(7)   to give a defendant his or her just dessert (retribution), to deter the defendant and others from similar misconduct in the future (deterrence), and to mark the communities collective condemnation (denunciation) of what has happened;

(8)   punitive damages are awarded only when compensatory damages, which to some extent are punitive, are insufficient to accomplish these objectives; and

(9)   they are given in an amount that is no greater than necessary to rationally accomplish their purpose;

(10)      the jury should be told that while normally the state would be the recipient of any fine or penalty for misconduct, the plaintiff will keep punitive damages as a "windfall" in addition to compensatory damages;

(11)      judge and juries in our system have usually found that moderate awards of punitive damages, which inevitably carry a stigma in the broader community, are generally sufficient.

[53] The conduct of the defendant in this case, even if an award of damages for breach of contract is ultimately found to be appropriate at the end of trial, is far from the "high-handed, malicious, arbitrary or highly reprehensible" conduct that would justify an award for punitive or aggravated damages. Therefore, I dismiss the claim for aggravated, punitive and exemplary damages.

[54] In the result, I dismiss the defendant's claim for relief as it relates to para. 1(a) of the statement of claim. I grant the defendant relief with respect to paras. 1(b), (c) and (d) of the statement of claim. These claims are summarily dismissed. If the parties cannot agree on costs of this motion, they may make brief written submissions to me at chambers in Kitchener within 60 days of publication of this judgment. I thank counsel for their assistance on this motion and commend them for their preparation.


 

 


Motion granted in part.



 


End of Document