A decision that an insurer's denial of benefits
provided incomplete reasons for the denial as it did not enclose
the report of a medical examiner relied on for the denial and that
the limitation period did not start to run was held to be
reasonable on judicial review.
The applicant, Allstate Insurance Company of Canada
("Allstate"), sought judicial review of a decision of the
Director's Delegate that the two year limitation period under
section 281.1(1) for an insured person to commence mediation for
benefits under the Statutory Accident Benefits Schedule (the
"Schedule") did not commence to run until a medical
report which the insurer relied upon in its decision to deny
benefits was provided to the insured.
The insured, Edna Klimitz, was injured on November 7, 2003 and
submitted her Application for Accident Benefits to Allstate in
January 2004. At Allstate's request, she was examined by an
orthopaedic surgeon and a neurologist. Section 37(5) of the
Schedule required that Allstate, within five days after receiving
the reports from the examinations, provide the insured with a copy
of the reports and its determination with respect to the specified
benefit. On May 31, 2004, Allstate sent the insured a denial notice
relying on the neurological evaluation and the orthopaedic
evaluation and purporting to enclose both reports. However, no
report from the neurologist was enclosed. Allstate provided the
insured with copies of two reports from the neurologist on July 18,
2006 and the insured filed her Application for Mediation on July
A preliminary issue arbitration was held and the arbitrator
determined that the insured was precluded from the proceeding to
arbitration and that Allstate's denial of benefits conformed
with the requirements for a valid termination because the denial
notice was clear and unequivocal and to require that Allstate
provide the neurologist's report as part of its reasons for
denial would amount to holding it to a standard of perfection. The
insured appealed this decision to the Director's Delegate (the
"Delegate"). The Delegate noted that an insurer's
notice of refusal to pay benefits must provide: (1) a clear and
unequivocal refusal; (2) reasons for the insurer's
determination; and, (3) an adequate explanation of the right of the
insured person to dispute the refusal and the process for doing so.
He found that the denial notice was a clear and unequivocal refusal
of the claim but that the arbitrator had erred in law when she held
that to require Allstate to provide the insured with a copy of the
neurologist's report as part of its reasons for denial would
amount to holding the insurer to a standard of perfection.
Requiring Allstate to provide an actual copy of the medical report,
upon which it was basing its refusal, was not an onerous task nor
did it hold the insurer to a standard of perfection. As a result,
the insured was not precluded from proceeding to arbitration
because the two year limitation period did not commence to run
until the neurologist's report was provided to her.
Allstate sought judicial review of the Delegate's decision.
It argued in essence that the obligation to provide the insured
with a clear and unequivocal denial did not include a requirement
to provide the insured with copies of the medical reports within
five days of receipt as required by the Schedule. The court noted
that the standard of review was reasonableness and found that the
Delegate's decision was reasonable. The finding that the
reasons provided by Allstate in the denial notice were insufficient
was supported by the evidence that Allstate did not provide a copy
of the neurologist's report which formed part of the reasons
for the denial as set out in the denial notice. In coming to this
conclusion, the Delegate relied on established case law regarding
the purpose of the insurer's obligation to give reasons for a
refusal of benefits, which stated "The purpose of the
requirement to give reasons is to permit the insured to decide
whether or not to challenge the cancellation." The court held
that it was entirely reasonable for the Delegate to conclude that
Allstate was required to produce the neurologist's report as
part of its reasons for refusing benefits. Allstate obviously
relied on the report because it said so in the denial notice. It
had also failed to comply with the statutory obligation to provide
the insured with a copy of the report and as a result, the insured
received incomplete reasons explaining the denial of her claim. Her
ability to decide "whether or not to challenge the
cancellation" was seriously limited. In the result, the
application for judicial review was dismissed.
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