Financial Services Commission of Ontario Commission des services financiers de l Ontario BETWEEN: ANDONIETTA ZAYA Applicant and STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY Insurer DECISION ON A PRELIMINARY ISSUE Before: Heard: Appearances: Deborah Pressman July 8, 2014, at the offices of the Financial Services Commission of Ontario in Toronto Robert N. Franklin for Ms. Zaya Cary Schneider for State Farm Mutual Automobile Insurance Company Background: The Applicant, Andonietta Zaya, was injured in a motor vehicle accident on October 7, 2010, a month after the legislation changed. She claimed statutory accident benefits from State Farm Mutual Automobile Insurance Company ( State Farm ) under the new Statutory Accident Benefits Schedule Effective September 1, 2010 ( New Schedule ). 1 The parties agree that Ms. Zaya s automobile policy with State Farm qualifies as a transitional policy under the New Schedule. As a result, Ms. Zaya is still able to claim caregiver and housekeeping benefits which are no longer available to non-catastrophic claimants involved in an accident after September 1, 2010. 1 Ontario Regulation 34/10, as amended.
The parties disagree on whether Ms. Zaya s claims for caregiver and housekeping benefits must meet the new incurred expense requirement introduced by the New Schedule. They were unable to resolve their dispute and a preliminary issue hearing was scheduled to determine the following: Issue: 1. Is Ms. Zaya required to comply with the incurred expense requirement in section 3(7)(e) pursuant to the New Schedule? Result: 1. Ms. Zaya is required to comply with the incurred expense requirement in section 3(7)(e) pursuant to the New Schedule. ANALYSIS: An amendment to the New Schedule requires that claims for caregiver benefits under section 13 and housekeeping benefits under section 23 meet the new definition of incurred expenses under section 3(7)(e). Under the Statutory Accident Benefits Schedule (Accidents on or after November 1, 1996) 2 ( Old Schedule ), if a benefit was found to be reasonable and necessary, it was incurred, even if there was merely a promise to pay and the insured had not actually paid for the services. Under the New Schedule, it is necessary to show that the person providing the caregiver or housekeeping did so in the course of his or her regular occupation or profession or sustained an economic loss as a result of providing the goods and services to the insured person. 3 2 Ontario Regulation 403/96, as amended. 3 Section 3(7)(e)(iii)(a) and (b) 2
The new incurred requirement amends benefits in ways that affects the coverage provided in existing policies because the New Schedule is not simply applicable to accidents on or after September 1, 2010, it is effective September 1, 2010. Yet, the legislature s authority to override or amend coverage is constrained by its dependence on clear wording. I find the statutory provisions of the New Schedule, as they apply to existing policies, are clear and Ms. Zaya s claims for caregiver and housekeeping benefits are subject to the new incurred requirement. The New Schedule deals with policies existing at the time it came into effect under sections 2 and 68. Section 2 states: Application and transition rules 2(1) Except as otherwise provided in section 68, the benefits set out in this Regulation shall be provided under every contract evidenced by a motor vehicle liability policy in respect of accidents occurring on or after September 1, 2010. I find the language in section 2(1) to be unambiguous and clear if a motor vehicle accident occurs on or after September 1, 2010, then the statutory accident benefits provided are subject to the New Schedule, with the only exception outlined in section 68. The intent of section 68 is to preserve the availability of specific benefits to claimants involved in an accident after September 1, 2010 who have transitional policies. According to section 68(1), a transitional policy is a motor vehicle liability policy that is in effect on September 1, 2010 until the earlier of its expiry date or its termination. The parties agree that Ms. Zaya s policy is a transitional policy and so this is not at issue. Section 68(2), paragraph 1 is relevant to this case because Ms. Zaya claims caregiver and housekeeping benefits. It states: 3
Transitional, optional benefits 68(2) The following benefits are deemed to be included in the motor vehicle liability policy and are applicable to an insured person in respect of the motor vehicle liability policy: 1. The optional caregiver, housekeeping and home maintenance benefit referred to in paragraph 2 of subsection 28(1). Subsection 28(1), paragraph 2 allows for optional caregiver and housekeeping benefits to remain available to non-catastrophic claimants in the circumstances described in section 13 (caregiver) and section 23 (housekeeping) of the New Schedule. 4 In my opinion, the legislature s choice to reference section 13 and section 23 in its optional benefits provision is determinative of its intent for the New Schedule, including the new definition of incurred expenses, to apply to all accidents occurring on or after September 1, 2010. As a result, Ms. Zaya, due to her transitional policy, may still claim caregiver and housekeeping benefits but her claims are subject to the requirements outlined in section 13 (caregiver) and section 23 (housekeeping), including the new incurred definition in section 3(7)(e) of the New Schedule. FSCO s non-binding bulletin 5 on the transition to the New Schedule supports my view of how section 2 and section 68 are to be read and applied to transitional policies. It states that the New Schedule will apply to all accidents after September 1, 2010 and holders of transitional policies, like Ms. Zaya, will find the amounts of their benefits unchanged in accordance with the Old Schedule. I also find it telling that the bulletin explicitly exempts old accidents from the incurred requirement. 6 4 Under the Old Schedule, these benefits were available to non-catastrophic claimants. 5 Transition to the New Statutory Benefits Schedule Effective September 1, 2010, dated April 26, 2010. 6 The rules in section 3(7)(e) and section 3(8) of the New SABS concerning incurred expenses will not apply to old accidents (Old SABS s. 3(1.4); New SABS. 2(2)(2)., at page 2. 4
In my opinion, the New Schedule, as it applies to existing policies is clear, and therefore, Ms. Zaya s claim for caregiver and housekeeping benefits is subject to the new incurred requirement introduced by the New Schedule. However, if I am wrong and the wording of the New Schedule as it applies to transitional policies is ambiguous, then according to Ms. Zaya, I must determine whether the incurred amendment is procedural or substantive because substantive amendments should not be allowed to have retroactive application. This is not a difficult exercise. The Court of Appeal in Henry v. Gore Mutual Insurance Company 7 recognized the incurred expense requirement as a threshold issue. Moreover, practically speaking, a claimant will be barred from claiming and/or proving entitlement to a benefit if the new incurred requirement is not met and an insurer will have a complete defence to the claim. 8 Therefore, this amendment to the incurred definition is a substantive change. The key task in determining the temporal application of the amendment at issue lies not in labelling the incurred provisions procedural or substantive, but in discerning whether it affects substantive rights and is therefore subject to the presumption against the retrospective application. 9 So the real question, then, is when does an accident benefits claim become sufficiently concrete for a substantive right to materialize? Although the parties did not provide me with any submissions on this issue, the case law is clear. According to Director s Delegate Blackman in State Farm Mutual Automobile Insurance Company and Federico 10, an accident benefits claim becomes sufficiently concrete for a right to materialize on the date of the accident. This is both a reasonable and logical conclusion as accident benefits are not provided or claimed until an accident occurs. For Ms. Zaya that date is October 7, 2010. 7 2013 ONCA 480 8 I do not agree with State Farm s submission that the incurred requirement is a procedural change that is merely another layer of proof to prove expenses are incurred and should be viewed as a change in the adjusting process. 9 An ambiguous and unclear legislative amendment will not apply retrospective to substantive rights. See Angus v. Sun Alliance Insurance Company, [1998] 2 S.C.R. 256 10 (FSCO P12-00022, June 12, 2012), Appeal 5
In this case, Ms. Zaya has no vested right to the more flexible incurred requirement under the Old Schedule because her right to claim accident benefits materialized and became sufficiently concrete on the day of her accident, October 7, 2010, a month after the New Schedule was in effect. Therefore, Ms. Zaya s claim for caregiver and housekeeping benefits is subject to the New Schedule and she must comply with the incurred expense requirement outlined in section 3(7)(e). EXPENSES: I reserve the issue of expenses to the hearing arbitrator. If the parties resolve the dispute without a further hearing, but are unable to agree on the issue of expenses, either party may request that I reconvene this hearing to resolve the issue, no later than 30 days after all other issues have been resolved. Deborah Pressman Arbitrator November 28, 2014 Date 6
Financial Services Commission of Ontario Commission des services financiers de l Ontario BETWEEN: ANDONIETTA ZAYA Applicant and STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY Insurer ARBITRATION ORDER Under section 282 of the Insurance Act, R.S.O. 1990, c.i.8, as amended, it is ordered that: 1. Ms. Zaya is required to comply with the incurred expense requirement in section 3(7)(e) pursuant to the New Schedule. Deborah Pressman Arbitrator November 28, 2014 Date