Amending Claims During Ongoing Mediation

The recently released case by Justice Guy DiTomaso in Kohl v. ING Insurance Company of Canada, 2011 ONSC 2138, discusses the ability to amend a claim while arbitration is still pending.

The Plaintiff, Roy Kohl, was involved in a car accident when his car hit a brick wall on October 18, 2005. Ian Hu of Oatley Vigmond LLP commenced an action on his behalf for accident benefits and damages for bad faith and mental distress on December 10, 2008 against his insurer, ING Insurance Company of Canada, represented by Deborah Neilson of Carroll Heyd Chown.

Background

The Plaintiff also sought a determination that he was catastrophically impaired under the Statutory Accident Benefit Schedule (SABS). The parties attended a Financial Services Commission of Ontario (FSCO) mediation on September 18, 2008 to determine whether the Plaintiff was catastrophically impaired.

The Plaintiff then applied to FSCO on three other dates in 2010 for further mediation of benefits. He received a letter from FSCO on June 23, 2010, stating,

Please note that we are currently experiencing an increase in processing time. Complete applications are taking longer to be assigned to a mediator as a result of the large volume of applications which we continue to receive.

Once a mediator was appointed FSCO was expected to contact the parties. However, at the time of this motion on March 23, 21011, the Plaintiff had not yet heard anything from FSCO.

After the Defendant was examined for discovery on September 24, 2010, the Plaintiff sought to amend his claim for medical and rehabilitation benefits pursuant to SABS from August 4, 2010 onward, for further behavioural therapy, physiotherapy and income replacement benefits.

Pleadings

The Defendant opposed these amendments of the claim because they were premature and were not yet the subject of a failed FSCO mediation. The Defendant claimed that the courts do not have jurisdiction to hear the claim until a mediation takes place. Section 281 of the Insurance Act states,

Litigation or arbitration

281. (1) Subject to subsection (2),

(a) the insured person may bring a proceeding in a court of competent jurisdiction;
(b) the insured person may refer the issues in dispute to an arbitrator under section 282; or
(c) the insurer and the insured person may agree to submit any issue in dispute to any person for arbitration in accordance with the Arbitration Act, 1991. 1996, c. 21, s. 37.

Limitation

(2) No person may bring a proceeding in any court, refer the issues in dispute to an arbitrator under section 282 or agree to submit an issue for arbitration in accordance with the Arbitration Act, 1991 unless mediation was sought, mediation failed and, if the issues in dispute were referred for an evaluation under section 280.1, the report of the person who performed the evaluation has been given to the parties.

The Defendant also relied on Amorini v. Select Coffee Roasters Inc., [2001] O.J. No. 581, and Christakos v. Dominion of Canada General Insurance, [1997] O.J. No. 1279 (Ont. Gen. Div.).

In Christakos, the court required a SABS claimant to mediate a dispute before commencing an action. Justice Susan Greer stated,

8 …It is the position of the plaintiff that he ought not to be restricted under this provision of the Act to bring each and every issue to mediation. It is the position of the insurer that the section of the Act reads that the plaintiff is not entitled to bring a proceeding in the court unless mediation of that issue has been sought and failed. There are arbitration cases which make it clear that if the plaintiff has firstly chosen to bring the dispute by way of action in the court, the plaintiff is not then entitled to ask for arbitration. The opposite is also true. Once the arbitration has been chosen, that route must be proceeded with.

9 The issue of the income replacement benefits for the period February 1 to February 7, 1996 has not been mediated. The insurer is therefore entitled to a declaration that the court does not have the jurisdiction to deal with that issue as set out in the paragraph 1(a) of the plaintiff’s Statement of Claim and I so declare.

10 The issue of loss of earning capacity benefits has not been mediated under the provision of section 282(2) of the Act. Therefore the insurer is entitled to a declaration that the court lacks jurisdiction to adjudicate on whether the plaintiff is entitled to loss of earning capacity benefits and I so declare.
[emphasis added]

In Amorini, the court held that the statutory precondition of a mediation within a two-year period denied the court jurisdiction to hear the claim. The court in Amorini also held that failure to mediate was not imperfect compliance, but rather non-compliance, denying any relief against forfeiture provided under Section 129 of the Insurance Act.

The Plaintiff relied on Woodman v. State Farm Mutual Automobile Insurance Company, [1999] O.J. No. 521, and Royal Insurance Co. of Canada v. Pisani, [1994] O.J. No. 2616 (Gen. Div.). The Plaintiff’s position was that it did not make sense to start a separate action for the additional claims, and they should be dealt with in the existing action.

In Pisani, the Plaintiff counterclaimed for additional benefits, which were denied by the Defendant for non-compliance with s. 281. Justice Wendy MacPherson stated,

24 … there has been mediation between the parties in relation to the matters raised by Royal in its statement of claim. That mediation has failed. To require the Pisanis to go back through another round of mediation with respect to their insurance claims arising out of the same accident would be, in my view, an overly technical interpretation of s. 281(2) of the Insurance Act. It would also create unnecessary delay and expense.
[emphasis added]

Justice Michel Charbonneau helped interpret Pisani in his ruling in Woodman,

8 MacPherson J. appears to be of the view that if some accident benefit claim arising out of an accident has been mediated and mediation has failed there is not need to go through mediation again for other benefits under the same policy arising out of the same accident.

Charbonneau J. also discussed a similar ruling in Pilon v. Zurich, [1998] O.J. No. 333 (Gen. Div.), where Justice Douglas Cunningham held that the declarations sought in the statement of claim were beyond the scope of the dispute resolution provisions in Section 279(1) of the Insurance Act. Cunningham J. stated,

5 Without delving too deeply into the history of this troubled relationship, suffice it to say that although the defendant has paid to the plaintiff significant sums for income replacement, medical expenses and rehabilitation, there have been, I am satisfied, significant delays in respect of many of these payments and other attitudinal matters which have caused a degree of discomforture for the plaintiff leading him to the conclusion that the defendant has seriously mishandled it’s file. A number of different adjusters have been involved. Putting it mildly, their attitude towards Mr. Pilon, his injuries and indeed his future prospects, have been varied.
[emphasis added]

Charbonneau J. considered Christakos, and a case that followed its holding, Whitaker v. Dominion of Canada, [1998] O.J. No. 2981 (Gen. Div.), but ruled in Woodman,

11 The legislator appears to have set up a comprehensive scheme for the orderly resolution of accident benefits claim and it should normally be followed. In the present case, however, as in the Pilon and the Pisani cases, I see valid reasons not to hold the plaintiff to the strict technical adherence to the requirements of the section…

Charbonneau J. also added some important points relating to the multiplicity of proceedings,

14 I agree with the defendant that the plaintiff may not pursue both the arbitration and this action. On the other hand, it is also clear that the plaintiff only sought arbitration in view of the position taken by the defendant on this motion combined with the expiration of the limitation period. Counsel for the plaintiff indicated that it was not the plaintiff’s intention to proceed with the arbitration if this action was allowed to proceed.

15 As a result thereof, there will be an Order staying this action until such time as the plaintiff withdraws his request for arbitration.

Decision

DiTomaso J. distinguished Amorini because the Plaintiffs in that case took no steps to mediate the dispute. The statutory preconditions applied in that summary judgment was the failure to seek mediation within two years of the denial of benefits. DiTomaso J. held that the Plaintiff here had complied with Section 281(2) of the Insurance Act because a mediation was held, and the Plaintiff requested a mediation for the additional benefits denied by the Defendant. The additional claims were substantially connected to the Plaintiff’s claim of catastrophic impairment.

Instead, DiTomaso J. applied the holding in Woodman, which he held were closer to the facts in this case because of the history of benefit payment until termination. The two-year limitation period under the insurance policy to bring an action had not elapsed as in Woodman. He had participated in a failed mediation, as in Pisani, and,

[31] …There is no need to go through an additional mediation for the other benefits being the subject of the amendment which are dealt with under the same insurance policy arising out of the same accident and which are also directly related to the claim for catastrophic impairment. In my view, it would create unnecessary expense and certainly unnecessary delay as we do not know how long it will take before any further mediation can take place before FSCO regarding these other claims. To wait for an undetermined period of time for further mediation to take place without further amendment to Mr. Kohl’s Statement of Claim would be prejudicial. However, ING will suffer no prejudice as a result of the proposed amendments. I find that the amendments are fair, necessary and just. It is entirely appropriate that these proposed amendments be dealt with within the context of these existing action for the reasons stated at this time. To make Mr. Kohl wait for an unspecified period of time to amend in these circumstances makes no sense and is not in the interests of justice.

The court did not address the multiplicity of proceedings issue that arose in Woodman, and there was no direction to withdraw the application for additional benefits, but the court did state,

[26] …Mr. Kohl is prepared to proceed to mediation in respect of these other claims but there is no telling when any such mediation will ever take place. Mr. Kohl finds himself in a state of suspended animation not of his own creation regarding further mediation of his additional claims.

Based on this case and the holding in Woodman, it appears that strict technical application of Section 281 of the Insurance Act may be overlooked in an application to amend a claim, especially where any number of the following factors may be present:

• the Plaintiff advises of the claim in advance
• there has been a failed mediation in the same accident
• the reason for a delay is not the fault of the Plaintiff
• the amendments are fair, necessary and just
• a limitation period expires because:
  • the Defendant continues to negotiate the matter
  • the Defendant consents to adjournments
  • the Defendant pursues attempts to settle