The recent decision in Ferawana and State Farm (FSCO A13-005319, August 29, 2016) came to an interesting conclusion with respect to entitlement to benefits when there has been a breach of section 38 of the Schedule.
Arbitrator Stramwasser found that because State Farm failed to meet its procedural obligations under the Schedule, it was required to pay for certain benefits regardless of whether Mr. Ferawana established causation, whether his impairment was outside the MIG (Minor Injury Guideline) or whether the benefits were reasonable and necessary. The Arbitrator also found that a breach of section 38 with respect to the MIG meant that the Insurer was prohibited from taking the position that the MIG applied, for the duration of the claim.
An issue in dispute at the Hearing was whether State Farm was prohibited from taking the position that Mr. Ferawana had an impairment to which the Minor Injury Guideline applied because of its breach of section 38 of the Schedule.
Section 38(8) of the Schedule imposes four procedural requirements on insurance companies after an Insured person makes a request for benefits in a treatment plan:
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.
In addition, section 38(9) imposes a fifth requirement:
If the insurer believes that the Minor Injury Guideline applies to the insured person's impairment, the notice under subsection (8) must so advise the insured person.
Therefore, the five requirements for an Insurer when faced with a claim for medical and rehabilitation benefits are:
- An Insurer must respond within 10 business days;
- It must say what it will pay;
- It must say what it will not pay;
- It must give medical and other reasons for not paying; and
- If the Insurer thinks that the MIG applies, it must say so.
In Ferawana, the Arbitrator found that State Farm was outside the ten-day limit for providing a proper response to a treatment plan submitted by Mr. Ferawana. As a result, State Farm faced two consequences pursuant to section 38(11):
- The Insurer is prohibited from taking the position that the insured person has an impairment to which the Minor Injury Guideline applies.
- The insurer shall pay for all goods, services, assessments and examinations described in the treatment and assessment plan...
Treatment Plan Payable
Given the above, the Arbitrator found that State Farm's breach of the ten-day deadline for responding to the treatment plan triggered the mandatory payment provisions under subsection 38(11)(2), and there was no need for the Applicant to still show that the request for treatment was "reasonable and necessary." The Arbitrator found that "the payment regime is mandatory" and she had "no jurisdiction to carve out exceptions."
Minor Injury Guideline
Furthermore, having found that State Farm failed to meet its procedural obligations with respect to the disputed treatment plan, the Arbitrator held that it also followed from subsection 38(11)(1) of the Schedule that State Farm was prohibited from taking the position that Mr. Ferawana had an impairment to which the MIG applied.
The Arbitrator found that the wording in clause 1 of subsection (11) referred broadly to "impairment" and not to any particular treatment plan. She further found that the references to a particular treatment plan in subsection (11) were to the notice requirement and to the payment provision — not to the MIG prohibition. The Arbitrator held that:
This interpretation is internally consistent with the rest of the subsection. Had the legislature intended for the remedy in part (1) to apply to just one treatment plan, it would have so specified. In fact, the legislature did so specify at part (2), which refers to just one treatment plan, "[t]he treatment and assessment plan."
It is consistent with the purpose of the MIG for the legislature
to require that, if a company makes a MIG determination, it do so
as soon as possible. It is also consistent with the purpose of the
MIG to prohibit an insurer from raising the MIG at all on a claim
if it fails to do so at the outset...
It is also consistent with the nature of the MIG for a prohibition to apply to the whole claim and not just to one plan. When an insurer makes a MIG determination, it does not apply to just one treatment plan, it applies to the whole claim.
The Arbitrator refused to interpret the statute as suggested by State Farm, which was to narrow the MIG prohibition to the one treatment plan where the Insurer breached its procedural obligations.
In addition, although State Farm argued that even if an Insurer was prohibited from taking the position that the MIG applied, there was no prohibition on an Arbitrator making a finding that the MIG applied; however, the Arbitrator also did not accept this argument, denying that Arbitrators have the "discretion to waive the mandatory language of subsection 38(11)(1)."
Applying the principle that contracts are to be interpreted contra proferentem (or "against the drafting party"), and given that the insurance industry had input into the content of the legislation, the Arbitrator held that if there was an ambiguity in the MIG prohibition clause regarding the extent to which it applied, such an ambiguity had to be resolved in favor of the Applicant.
As a result, the Arbitrator accepted Mr. Ferawana's argument that as a result of breaching section 38, State Farm was prohibited from taking a MIG position on the entire claim.
Prior case law had held that procedural failures in the termination/refusal process did not automatically entitle an Insured person to the payment of benefits.1 The Insured was still required to prove entitlement based on the criteria to receive the particular benefit and by demonstrating that the treatment was reasonable or necessary. This decision appears to hold otherwise when a treatment plan is not denied in accordance with section 38, as it allows an Insured out of the MIG based on a procedural breach and finds the treatment plan payable regardless of reasonableness.
1 Stranges v. Allstate Insurance Co. of Canada, 2010 ONCA 457.
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