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The case law has not been consistent as to whether a breach of the technical requirements for stoppage will result automatically in an ogoing entitlement. Typically, the jurisprudence favouring automatic reinstatement rely on Gothier J.’s decision in Smith v. Co-operators ( 2 S.C.R.).
In Smith, the insured had been in a motor vehicle accident on April 14, 1994. She claimed and received statutory benefits from her insurer who ceased paying those benefits on May 8, 1996, by letter of that same date. The insured was unable to persuade the insurer to reinstate her benefits and proceeded to the required mediation on August 11, 1997, which failed. The insured issued a statement of claim for ongoing statutory benefits on September 8, 1998. The insurer moved for summary judgment to dismiss her claim on the basis that her claim had been issued more than two years after the insurer’s refusal to pay the benefit claimed.
The majority of the court found that the form sent by the insurer to notify the insured of the refusal to pay her IRBs was inadequate as it did not satisfy the requirement in the SABS. It did not inform the insured of the dispute resolution process in the Insurance Act, which provided how an insured who disagreed with the decision to terminate benefits could challenge that decision. The court determined that without certain basic information on the dispute resolution process, it could not be said that a valid refusal had been given. Since the limitation period only begins to run upon a refusal, the limitation period was not triggered and the insured’s action could continue.
In this case, the Supreme Court of Canada enunciated that “[t]here is no dispute that one of the main objectives of insurance law is consumer protection, particularly in the field of automobile and home insurance.”
However, the case law on this issue has been mixed. The most recent decisions, however, suggest that there is no automatic ongoing obligation to pay, even in the face of a flawed termination process.
The strongest of these cases is the Ontario Court of Appeal decision of Stranges v. Allstate Insurance Company of Canada, (2010 ONCA 457). This case arose out of a motor vehicle accident that occurred on May 18, 1996. The trial judge found that the insurer was required to pay ongoing benefits until the insured was provided a proper notice of termination and a proper Designated Assessment Centre (“DAC”) assessment, as was required by the predecessor Statutory Accident Benefits Schedule – Accidents after December 31, 1993 and before November 1, 1996, Ontario Regulation 776/93. However, the Court of Appeal found that the inadequate notice alone, did not automatically entitle the insured to payment of benefits. The insured was still required to prove her claim.
While the recent decisions tend to follow the Stranges decision, the inconsistencies in the jurisprudence suggest to me that there may well still be the possibility of entitlement to ongoing benefits in the face of a flawed discontinuance of payments.
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