In the late summer, the appeal was heard in Leone v. State Farm and State Farm’s appeal was dismissed. The decision concluded that mediation was deemed to have failed because it did not occur within 60 days of the application being filed and the parties could not extend the time limit on consent once the 60 days had expired.
Director’s Delegate Evans stated that “I agree with the arbitrator that Mr. Leone did not need to attach the report of mediator to his application for arbitration where mediation has failed by statutory definition, but no report of mediator is available…Mr. Leone should not be prevented from proceeding to arbitration where through no fault of his own, s.280(8) has not been complied with.”
Today, a decision was released in Cornie v. Security National (this case is also listed as Hurst v. Aviva Insurance Company) where 4 plaintiffs commenced litigation against their insurers after the 60 day period had passed. All 4 insurers appealed the decision in Cornie (“the appellants”).
All 4 plaintiffs (“the respondents”) suffered serious injuries as a result of motor vehicle accidents and filed for mediation as a result of disputes against their accident benefits providers. All of the respondents waited at least 60 days after filing for mediation for FSCO to appoint a mediator and for a mediation to take place. No mediator was appointed and no mediation took place in any of the 4 cases. They took the position that mediation had failed because the prescribed time for mediation had expired. Each wrote a letter to FSCO requesting a mediator’s report declaring that the time for mediation had elapsed and that mediation had failed according to s. 281(2) of the Insurance Act.
Subsection 281(2) of the Act prevents insured persons from resorting to court actions against their insurers unless they first sought mediation and mediation failed.
FSCO refused to issue a report of mediator, taking the position that the time limit for conducting mediation did not commence until an application had been assessed and found to be complete. Each of the respondents then commenced a court action. Each insurer brought motions to strike or stay the actions, arguing they were barred by s. 281(2), and all motions were heard by Sloan (J) who dismissed the motions.
The respondents took the position that mediation must be completed within 60 days of their applications to FSCO, relying on the Act, the SABs and the Dispute Resolution Practice Code.
Rule 19 of the DRPC states that “mediation must be concluded within 60 days” of the filing of a properly completed application for mediation, unless the parties agree otherwise.
At paragraph 26, R.G. Juriansz J.A. writes,
[26]The appellants support their argument by examining the functioning of FSCO. FSCO’s services resolve some 75% of cases mediated. FSCO also eliminates from the system claims that are incomplete, vexatious, or barred by statutory limitation periods. Fresh evidence tendered by the IBC indicates that FSCO received a total of 36,492 applications for mediation in 2011. As of April 1, 2012, 21,023 of 26,240 active applications that had not yet been referred to mediation were more than 60 days old. Dismissing the appeal would allow these disputes to proceed in court or arbitration, when 75% of them would have been resolved by mediation before FSCO. The resulting costs could be immense. Insurers pay a filing fee of $500 for mediation, and $3,000 for arbitration. If all of the claims that would have otherwise gone to mediation are forced into arbitration, the cost to the insurance industry from the additional filing fees alone could amount to $83 million. When one considers the additional costs of court proceedings and legal fees, which are not so easily calculated, it is inevitable that there would be upward pressure on insurance premiums.
And at paragraph 38:
[38] I do not accept that the 60-day clock does not begin to run until FSCO has assessed an application as complete. Such an interpretation, which would allow FSCO to accumulate a backlog of any length, would ignore the legislative purpose of providing a speedy mediation process. As noted in s. 10 of the regulations, a mediator is required to attempt to effect a settlement of a dispute within 60 days after the date on which the application for the appointment of a mediator is filed. Rule 6 of the DPRC provides that a document that is required to be filed “must be delivered to the Dispute Resolution Group” by one of several methods of delivery permitted under Rule 7. Clearly, the word “filed” is used in the legislative scheme in its ordinary sense.
And the conclusion:
[56] The legislative scheme for resolving disputes about statutory accident benefits requires that insured persons resort to a mandatory mediation process before commencing a court proceeding or submitting their disputes to arbitration. The Act, the regulations and the DRPC make it clear that this process is intended to be completed within 60 days from the filing of an application for mediation with FSCO, unless the parties agree to an extension of time. The scheme postpones the right of insured persons to commence civil actions against their insurer in order to allow the mediation process to be completed within the time prescribed, but leaves them free to commence actions once that period has expired.
The appeals were dismissed and costs were awarded in favour of the respondents in the amount of $10,000 against the appellants (the insurers) and against the Insurance Bureau of Canada in the amount of $6,584 including disbursements and costs.
A decision was also released in Younis v. State Farm where the plaintiff commenced litigation shortly after an application for mediation was filed. State Farm brought a motion to stay the proceedings in Younis until an actual mediation was held. The motion was heard in February 2012, which was more than 60 days after the application for mediation was filed. The motion judge followed the decision of Cornie v. Security National and concluded that s. 281(2) of the act allowed an insured person to commence a civil action if mediation was sought and not completed within 60 days of filing an application.
The motion judge considered the circumstances and declined to stay the proceedings. The Court of Appeal, however, allowed the appeal and determined that the circumstances differed from Cornie as the plaintiff had brought a civil action a week after filing for mediation.
At paragraph 12 & 13, R.G. Juriansz J.A. states,
[12] I would allow the insurer’s appeal. The motion judge evidently approached the motion as one that called upon the court to exercise its inherent jurisdiction to stay an action. However, the insurer’s motion called upon the court to apply a statutory bar to the commencement of an action. The terms of s. 281(2) of the Act are clear. No person may bring a proceeding until mediation has failed. The respondent jumped the gun and brought this proceeding before that had occurred.
[13] I appreciate that by the time the motion to stay came before the court the 60-day time period had expired. From the practical perspective adopted by the motion judge, there would seem to be no reason to require the respondent to start again. However, the respondent commenced his action in contravention of the statute and the statute must be applied. Insured persons cannot commence civil actions until mediation has failed. To conclude otherwise would allow all insured persons to immediately commence civil actions knowing that the insurers’ motions to stay are not likely to be heard until after the expiration of the 60 day time period. The statute does not permit this stratagem.
The Court of Appeal also ruled that as the commencement of the action was statute-barred, it is quashed. No costs were awarded.
