An injured man was denied income replacement benefits (IRBs) under his ‘no fault’ accident insurance following a serious snowmobile accident. The accident victim’s benefits were terminated in response to inaccurate medical information that was submitted with a second Disability Certificate. Then, his vehicle insurer, State Farm Insurance Company, refused all subsequent attempts to accept any new medical information substantiating that the plaintiff was genuinely unable to work.
In a 2019 trial, a jury concluded that the plaintiff was disabled and State Farm owes him payment of income replacement benefits. The jury’s decision was based on a finding that the plaintiff “was substantially unable to perform the essential tasks of his self-employment” for the first two years after being injured and was completely unable to work in any employment “for which he was reasonably suited by education, training or experience” after the two year period until the present time. Accordingly, the plaintiff is entitled to the net sum due during this period, minus any income he was able to earn. And, in a further action, Dewitt v. State Farm Mutual Automobile Insurance Co. (2019), the Court ruled that the plaintiff is also entitled to interest on the amount due.
The following timeline describes the events that led up to the resolution of this case.
- Dec 2002 – The plaintiff broke his back and fractured his spine during a single snowmobile accident. After spinal surgery, he developed an infection and sepsis in his spine, which led to bacterial endocarditis and the need for open heart surgery to replace his mitral valve. The sepsis also caused cerebral abscesses and some brain damage.
- Jan 2003 – The plaintiff submitted an Application for Accident Benefits to State Farm, which included an OCF-3 Disability Certificate completed by his family physician stating that the plaintiff is unable to work for several months.
- Feb 2003: State Farm begins paying Income Replacement Benefits (IRB).
- Summer 2003: The plaintiff returns to work on a limited basis, but is able to perform only light duties.
- Dec 2003: State Farm requests that the plaintiff submit a new Disability Certificate.
- Jan 2004: Based on the plaintiff’s description of his ability to function, the plaintiff’s physician forwarded the OCF-3 indicating that the plaintiff is now “working normally at 100% capacity”.
- Feb 2004: State Farm sent the plaintiff a notice of stoppage of weekly benefits and a Request for Assessment (OCF-17). Soon afterwards, the insurer terminated his benefits.
- Aug 2004: State Farm filed an application to FSCO requesting that the plaintiff return benefits that were overpaid.
- Jan 2005 – The plaintiff submitted an Application for Determination of Catastrophic Impairment, completed by another physician. This report led to multiple medical assessments on behalf of State Farm and rebuttal assessments on behalf of the plaintiff.
- March 2006 and March 2007 – In mediation by the FSCO, the plaintiff and defendant were unable to resolve their disagreement on whether the plaintiff suffered a catastrophic impairment and whether (and how long) he was owed IRBs.
- July 2007 – The plaintiff filed a Statement of Claim to seek judgement on owed Accident Benefits. State Farm then filed a counterclaim to seek reimbursement for overpaid IRBs, but the insurer dropped their claim at trial.
- March 2010 – The plaintiff’s physician wrote to the plaintiff’s lawyer saying that he believed the plaintiff had underreported his symptoms and injury, and the Disability Report submitted on January 2004 did not accurately reflect his true condition.
- Jan 2012 – The plaintiff’s lawyer submitted an OCF-18 Treatment Plan to State Farm, in which the plaintiff’s family doctor stated that the plaintiff’s impairments impact his ability to perform his job; he has memory problems; and he is only able to work half the amount compared to before the accident. State Farm did not reply to this document.
- May 2018 – The plaintiff submitted further Treatment Plans (as assessed by Total Healthcare), which were declined by State Farm on the grounds that the plaintiff fails to meet the threshold for catastrophic impairment.
- Feb 2019 – In a trial to resolve the plaintiff’s claim for unpaid IRB’s, the jury rules that the plaintiff is indeed disabled and unable to work due to the accident and is therefore entitled to benefits.
In December 2019, a further trial was held to determine the amount of interest that is owed to the plaintiff due to the delayed payment of his IRBs. In this case, a considerable amount of interest could have accrued for the 15 years between Feb 2004 and 2019, particularly if the Court finds that the plaintiff should be awarded compound interest. Under the Statutory Accident Benefits Schedule (SABS) s. 46, if an insurer fails to pay owed benefits within the required time, the insurer “shall pay interest on the overdue amount for each day the amount is overdue  at the rate of 2 per cent per month compounded monthly”. This amounts to a significantly greater amount of interest than in cases where statutory pre-judgement interest applies, which is 4.5 per cent per year (non-compounded) on outstanding IRB payments.
In the current case, the Court acknowledged that, in February 2004, State Farm had reason to terminate benefits in the belief that the plaintiff was no longer disabled. However, by March 2006, State Farm was made aware that the plaintiff was disputing termination of his benefits and was seeking a determination of Catastrophic Impairment. And, the plaintiff submitted to comprehensive medical assessments a few months later.
Given the inaccurate medical information that was submitted to State Farm in 2004, the Court ruled that it would be unfair to require the insurer to pay the high interest rate set out in SABS s. 46(2) for the period between Feb 2004 and March 2006. For that time period, State Farm is ordered to pay only pre-judgement (simple) interest, pursuant to the Courts of Justice Act.
However, from March 30, 2006 to the present time, the total principal of income replacement benefits was owed to the plaintiff, since under SABS s. 35(3), an insurer is obligated to pay income replacement benefits “within 10 business days after the insurer receives the application and completed disability certificate”. Accordingly, beginning March 30, 2006 when the total principal was due, State Farm is obligated to pay compound interest, pursuant to SABS s. 46(2).
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