Canada: Important Decision On When Catastrophic Accident Benefits Become Overdue

Case Study: Van Galder v. Economical, 2016 ONCA 804

The Court of Appeal has released a decision placing the onus on an insurer for determining whether a claimant is catastrophically impaired. Specifically, if an insurer withholds catastrophic benefits until it receives an OCF-19, then it could be faced with a massive interest award from the date the catastrophic impairment arose (not the date the OCF-19 was submitted or accepted by the insurer).

In this case, Economical appealed the order of the application judge that required it to pay the applicant interest in the amount of two percent per month, compounded monthly, on attendant care, and housekeeping / home maintenance benefits. The amount of interest ordered payable was approximately $500,000.00 on the additional attendant care and housekeeping benefits of $173,561.99, which were paid to the applicant.

Background

Economical paid attendant care and housekeeping benefits under non-catastrophic heading until January 20, 2006, 104 weeks following the applicant's accident. Between 2007 and 2012, the applicant made four applications for a determination that she had suffered a catastrophic impairment as a result of her accident. It is important to note that some of these were incorrectly filled out by the applicant and had technical non-compliances but the application judge held that these were not the applicant's fault.

Following her fourth application, the insurer had its medical examiners evaluate the applicant's injuries and, on July 19, 2013, they conceded that the applicant had sustained a catastrophic impairment within the meaning of the SABS. Although Economical paid the applicant a lump sum for retroactive benefits, it maintained that additional amounts were not overdue absent a catastrophic injury application and determination, which did not occur until July 2013, and as such interest was not payable for that period.

The application judge ordered the insurer to pay interest for the reason that it would be inequitable to deny the applicant interest in the circumstances of this case. The judge allowed the applicant's application, accepting that she had suffered a catastrophic impairment at the time of her accident and ordered that interest was payable on the attendant care and housekeeping and home maintenance benefits.

The application judge's decision was upheld on the appeal. The appellate judge held that this appeal turned on the following question — when did the additional catastrophic benefits become overdue so that interest started to accrue. The appellate judge indicated that the applicant had been catastrophically impaired since the accident and that as such the insurer should have paid and continued to pay the applicant benefits up to the catastrophic impairment ceiling and beyond the 104-week period.

In Summary

It is also important to note that this case holds that benefits only available to catastrophically injured claimants can become overdue (thereby triggering interest) even before an application for determination of catastrophic impairment has been submitted. Further, this suggests that interest on medical and rehabilitation benefits expenses above the non-catastrophic policy limits, housekeeping expenses and post-104 attendant care expenses that are not paid in the time required by the SABS will accrue interest even if the applicant had not yet applied for catastrophic determination.

The application and appellate judges both indicated that the insurer had enough information for years with respect to the applicant to know that she was catastrophic and chose not do anything by relying on technical non-compliances. All in all, the decision is not favourable to the insurers because by not immediately scheduling insurer examinations to address the issue of catastrophic designation, the insurers risk exposing themselves to substantial interest judgments down the line.

Silver Lining

The silver lining in this decision is that the application judge restricted his decision to the particular facts of the case before him, explaining that "this ruling is meant to apply only to the narrow factual situation before the Court; it is not to apply more broadly to allow any insured to obtain interest on amounts left unapplied for after 104 weeks."

Read the full decision here.

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