In Varriano v. Allstate Insurance Company of Canada, 2023 ONCA 78 (CanLII) ("Varriano"), the Court of Appeal recently clarified what notice requirements insurers must satisfy to successfully give notice of termination of Income Replacement Benefits ("IRBs") and commence the insured's limitation period to seek review. The Court came to the conclusion that medical reasons for termination are not required unless relied on by the insurer.
Ontario's Statutory Accident Benefits Schedule ("SABS") allow insured individuals harmed in an accident involving an automobile to be paid IRBs if they have suffered an impairment and meet the statutory criteria in section 5.
1. The insured person,
i. was employed at the time of the accident and, as a result of and within 104 weeks after the accident, suffers a substantial inability to perform the essential tasks of that employment, or
ii. was not employed at the time of the accident but,
A. was employed for at least 26 weeks during the 52 weeks before the accident or was receiving benefits under the Employment Insurance Act (Canada) at the time of the accident,
B. was at least 16 years old or was excused from attending school under the Education Act at the time of the accident, and
C. as a result of and within 104 weeks after the accident, suffers a substantial inability to perform the essential tasks of the employment in which the insured person spent the most time during the 52 weeks before the accident.
2. The insured person,
i. was a self-employed person at the time of the accident, and
ii. suffers, as a result of and within 104 weeks after the accident, a substantial inability to perform the essential tasks of his or her self-employment.
In Varriano the plaintiff suffered an injury in 2015 and received IRBs from Allstate for two months before he was able to return to full-time work. However, his impairment resurfaced in 2018 causing him to reapply for benefits which Allstate denied. The plaintiff sought review of Allstate's denial and a key issue became when the limitation period ended.
Under section 37(2)(3), the SABS provide that an insurer can cease paying benefits if the insured has returned to their pre-accident employment. However, the insured may have this decision reviewed within two years of the insurer's denial under section 56. As being advised of benefit termination determines the start of the limitation period, this appeal turned on whether Allstate satisfied all statutory requirements for providing proper denial. In particular, the Court focused on section 37(4) which requires:
(4) If the insurer determines that an insured person is not entitled or is no longer entitled to receive a specified benefit on any one or more grounds set out in subsection (2), the insurer shall advise the insured person of its determination and the medical and any other reasons for its determination.
[Emphasis mine]
Modern statutory interpretation mandates that a court interpret clauses based on the entirety of the document and while taking into account the whole legislation as well as the legislature's intent. The Court of Appeal revisited case law to this effect:
[23] I begin with the observation that the modern approach to statutory interpretation requires that statutes "are to be read in their entire context and in their grammatical and ordinary sense harmoniously with the scheme of the Act, the object of the Act, and the intention of Parliament": Rizzo & Rizzo Shoes Ltd. (Re), 1998 CanLII 837 (SCC), [1998] 1 S.C.R. 27, at para. 26. [...]
Using the modern principle of statutory interpretation, the Court of Appeal ruled that the lower court erred in determining that "and" in section 37(4) was used in a joint and non-severable sense rather than in a several sense. This means that an insurer can satisfy that section by providing medical or other reasons depending on which was actually used in making their assessment. The Court further determined that applying "and" in the joint sense would go against the purpose of the legislation as many of the reasons insurers may deny benefits under section 37(2) are non-medical in nature. Allowing for such an inconsistency would go against modern principles of statutory interpretation:
[23] [...] A statute must not be interpreted in a manner that would result in absurd consequences. An interpretation will be absurd where it leads to "ridiculous or frivolous consequences, if it is extremely unreasonable or inequitable, if it is illogical or incoherent, or if it is incompatible with other provisions or with the object of the legislative enactment": Rizzo, at para. 27. The modern principle of interpretation applies with equal force to regulations: Beaudin v. Travelers Insurance Company of Canada, 2022 ONCA 806, at para. 36.
On this basis, the Court of Appeal ultimately decided that proper notice had been given as medical evidence was only required if it was used to reach the decision. As no medical evidence was relied upon to establish the Plaintiff's lack of entitlement, Allstate had given proper notice and the limitation period had expired.
In practice, this decision means that insurers denying coverage under section 37(2) must be certain that they give the insured all the reasoning used in determining the lack of entitlement. They must provide medical evidence only where it informed their decision. Insurers should be wary as a failure to do so may mean that the limitation period has not started and they may be unnecessarily exposing themselves to claims that would have otherwise expired. A PDF version is available to download here.
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