For an accident benefits insurer, the denial of a treatment plan used to be such a simple thing. Under O. Reg. 403/96, an insurer merely had to provide a standard form letter to deny a treatment plan and schedule a mandatory insurer's examination. In an attempt to reduce the costs associated with insurer's examinations, the Ontario Legislature made insurer's examinations optional in O. Reg. 34/10 (the "SABS"). In doing this, however, it introduced new procedural hurdles that insurers must overcome in order to properly deny treatment plans.
Perhaps the most important new requirement is found in subsection 38(8) of the SABS, which states that an insurer must provide the claimant with the "medical reasons and all of the other reasons" for its denial. An insurer that does not provide adequate reasons could be procedurally exposed to fund the goods and services requested in the treatment plan. In my opinion, issues of compliance with subsection 38(8) have been on the backburner since the 2010 amendments. I believe this is caused by the cumbersome Financial Services Commission of Ontario ("FSCO") and Superior Court dispute resolution systems because they tended to create environments that favoured full and final settlements, as opposed to quick resolutions to individual issues.
Ontario will wave goodbye to the old system when the dispute resolution regime converts to the License Appeal Tribunal (the "LAT") on April 1, 2016. The LAT system will utilize strict timelines and, primarily, written hearings to hopefully resolve disputes within a few months of when they arise. I believe this may bring about a new wave of claims seeking funding for treatment plans on the basis of improper denial letters. Insurers should ensure that their claims handlers are aware of the "medical reasons" requirement, as that term has been interpreted by FSCO.
In this article, I will examine three cases that deal with the definition of the term "medical reasons and all of the other reasons". These cases show that insurers should not rely on standard form denials. Instead, the best way for insurers to avoid procedural exposure is to provide reasons that are proportionate to the complexity of the medical issues in the file and the volume of evidence in their possession.
The first case to interpret "medical reasons" was Arbitrator Sapin's decision in Augustin v. Unifund Assurance Company1. In that case, Arbitrator Sapin awarded the full value of two treatment plans because Unifund's denial letters did not comply with the requirements of subsection 38(8) of the SABS. Subsection 38(8) states:
Within 10 business days after it receives the treatment and assessment plan, the insurer shall give the insured person a notice that identifies the goods, services, assessments and examinations described in the treatment and assessment plan that the insurer agrees to pay for, any the insurer does not agree to pay for and the medical reasons and all of the other reasons why the insurer considers any goods, services, assessments and examinations, or the proposed costs of them, not to be reasonable and necessary. (Emphasis added)
Arbitrator Sapin's decision turned on her interpretation of the undefined term "medical reasons". Unifund's denial letter requested an insurer's examination "in order to determine if your [the claimant's] impairment is predominantly a minor injury". Arbitrator Sapin held that this denial letter was inadequate because it merely stated an unsupported belief that the claimant's impairments may be a minor injury. Arbitrator Sapin went on to comment that the "medical reasons" requirement gives the claimant the option of accepting the denial or filing for mediation. Arbitrator Sapin held that the provision of reasons "makes insurer accountable for any initial decision that limits or denies initial treatment." She concluded that "[t]he requirement to provide medical reasons prevents insurers from deciding to refuse treatment arbitrarily or on principle."
Arbitrator noted that the consequence of Unifund's failure to provide "medical reasons" was found in subsection 38(11) of the SABS:
(11) If the insurer fails to give a notice in accordance with subsection (8) in connection with a treatment and assessment plan, the following rules apply:
1. The insurer is prohibited from taking the position that the insured person has an impairment to which the Minor Injury Guideline applies.
2. The insurer shall pay for all goods, services, assessments and examinations described in the treatment and assessment plan that relate to the period starting on the 11th business day after the day the insurer received the application and ending on the day the insurer gives a notice described in subsection (8).
Arbitrator Sapin used paragraph 38(11)(2) to award the full amount claimed in the treatment plan.
There have been a few decisions released since Augustin that grappled with the definition of "medical reasons". Most recently, Arbitrator Chuck Matheson of ADR Chambers released his decision in Larry Ward v. State Farm Mutual Automobile Insurance Company2. I find this decision troubling because it sets the threshold for adequate medical reasons so high that it will be difficult for insurers to issue a compliant denial.
Arbitrator Matheson did not explicitly rule on subsection 38(8), but instead interpreted the phrase "medical reasons and any other reasons" found in subsection 44(5) of the SABS (which requires reasons be given when requesting an insurer's examination). This phrase is also used in subsection 38(8), which suggests Arbitrator Matheson's decision also applies to that provision. State Farm's notice gave the following reasons for requesting an insurer's examination:
State Farm has scheduled this examination for the following reasons:
State Farm has received the Life Care Plan of Alison Meyer dated April 15, 2014 as well as the in home occupational therapy assessment acquired brain injury report of Lindsay Blackwell, Occupational Therapist, dated February 26, 2014 which relate information as to your current physical psychological and cognitive symptoms and impairments. Mr. Ward was last assessed in respect to his entitlement to an income replacement benefit in 2009. The reports of Ms. Meyers and Ms. Blackwell report findings as to your functional limitations and prognosis that appear to be inconsistent with the observations obtained of you in surveillance undertaken between May 21, 2013 and August 10, 2014.
As it has been 5 years since you were last assessed, State Farm seeks an opinion as to the current status of your physical and psychological impairments as a result of the accident and whether you continue to suffer a complete inability to engage in any employment or self-employment for which you are reasonably suited by education, training or experience.
Arbitrator Matheson concluded, without much explanation, that this notice did not provide "medical reasons" to support the insurer's decision. Specifically, Arbitrator Matheson held:
I cannot find any medical reasons contained within the notices. The mere mention of a Life Care Plan and an Occupational Therapist's acquired Brain Injury Report, in itself, does not meet the "medical reasons" test, let alone whether the examinations were reasonable and necessary. In my view, the medical reasons test must tell the Applicant, in an unsophisticated way, why the tests are reasonable and necessary.
Those of us who toil in the wilds of accident benefits will recognize that State Farm's notice is far more detailed than most requests for insurer's examinations and denials of treatment plans. Arbitrator Matheson does not explain why State Farm's reasons were inadequate. In my opinion, this decision penalizes State Farm without explaining why its conduct fell below the standard expected of an insurer. It also suggests that the "medical reasons" requirement sets a very high bar for insurers. I therefore believe Arbitrator Matheson's decision does not adequately reflect the exigencies of accident benefits claims handling.
A more balanced approach comes from Arbitrator Newland's decision in Gao v. State Farm Mutual Automobile Insurance Company3. In Gao, Arbitrator Newland formulated an approach to the "medical reasons" requirement that is better suited to the busy, ever-changing world of accident benefits claims handling.
In Gao, State Farm notified the claim that it was denying a treatment plan and needed an insurer's examination because "based on [the] reported injuries[,] it appears" that the claimant's impairment was a "minor injury". Arbitrator Newland held that this response provided an adequate medical reason because "at the time of this initial response, the only information which State Farm had was the Applicant's report of her own impairments." Arbitrator Newland also held that State Farm was not required to "invent a medical or other reason, where it has not been provided with any medical documentation". He concluded that "in the circumstances of this matter the notice did provide such reasons as were at the time capable of being provided."
I believe the decision in Gao contains an important lesson that insurers should take to heart to avoid procedural exposure to denied treatment plan. Recall that Arbitrator Newland found State Farm's notice was adequate because it provided the best medical reason possible given the amount of information it possessed at the time. In this vein, a brief denial notice may pass muster in the early stages of a claim, but it could be inadequate in a more developed claim where the insurer has reams of medical evidence at its disposal. Therefore, insurers should train their adjusters to shy away from standard form denial letters and provide reasons appropriate to the level of complexity of the claim.
1 FSCO A12-000452, decision dated November 13,
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