In Varriano v. Allstate Insurance Company of Canada, the Ontario Court of Appeal (ONCA) addressed whether a medical reason must be included in every denial of statutory accident benefits.
The applicant, Nunzio Varriano, was injured in a motor vehicle collision in September 2015. He successfully applied to his auto insurer, Allstate, for income replacement benefits (IRBs). He returned to work two months later, on December 2, 2015.
In an explanation of benefits letter, dated December 30, 2015, Allstate notified Mr. Varriano that it would stop paying him IRBs because he returned to full-time work.
Approximately 2.5 years later, on July 1, 2018, Mr. Varriano stopped working again. As a result, he again applied to Allstate for IRBs. Allstate refused to pay him. It sent him a letter dated July 30, 2018, which stated: “Income Replacement & Non Earner Benefits – Please refer to our explanation of benefits dated December 30, 2015. Our position remains unchanged.”
Mr. Varriano disputed the denial by filing an application with the Licence Appeal Tribunal (LAT). The issue was whether his application was time-barred under s. 56 of the Statutory Accident Benefits Schedule (SABS). Section 56 states that LAT applications must be commenced within two years of an insurer’s refusal to pay the amount claimed.
Allstate argued that Mr. Varriano’s LAT application was filed more than two years after the December 2015 denial. It is therefore time barred. Mr. Varriano argued, however, that Allstate is required to provide “medical and any other reasons” for its denial under s. 37(4) of the SABS. He further argued that Allstate failed to provide medical reasons and as a result, the denial was invalid and did not trigger the start of any limitation clock. Consequently, his 2018 application is not out of time.
Under s. 37(2) of the SABS, insurers are only permitted to discontinue benefits for certain specified grounds that are listed in paragraphs (a) to (g).
Subsection 37(4) of the SABS then states: “If the insurer determines that an insured person is not 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.”
The ONCA found that an insurer is permitted to stop benefits for one or more reasons set out in s. 37(2). Some of the grounds are medical and some of them are not. In fact, according to the court, s. 37(2) (a), (d), (f) and (g) all provide non-medical grounds to terminate benefits. For instance, s. 37(2)(a) permits an insurer to discontinue paying a benefit when an insured person fails to complete a disability certificate. Paragraph 37(2)(g) allows insurers to terminate benefits for reasons unrelated to the insured person’s impairment. Section 37(2)(f) states that an insurer may stop paying a benefit when an insured person has resumed his pre-accident employment duties. Therefore, an insurer may rely upon only one ground to deny a benefit to an insured person and that one ground may be non-medical in nature.
Additionally, the ONCA held that the word “and” can have both a joint meaning (A and B together) as well as a joint and several meaning (A and B together, or A, or B), depending on the context.
Accordingly, with respect to s. 37(4), the ONCA determined that the requirement for insurers to provide “medical and any other reasons” for its determination does not mean it must always provide a medical reason plus any other reasons it is relying upon. It means that if an insurer is relying upon medical reasons under s. 37(2), then it must advise the insured person of those medical reasons. Where an insurer is relying upon only non-medical grounds, then only non-medical reasons must be provided.
In other words, the phrase “medical and any other reasons” really means “medical and/or any other reasons” as the circumstances dictate. If it were otherwise, then the insurer would be required to provide a medical reason for its denial when it was only relying upon legitimate non-medical grounds under s. 37(2) to terminate a benefit. Such a requirement, according to the ONCA, would be absurd.
This case is under appeal and OTLA is seeking leave to intervene.
