



COURT OF APPEAL FOR ONTARIO

CITATION: Mader v. South Easthope Mutual Insurance Company,
    2014 ONCA 714

DATE: 20141021

DOCKET: C57494

Weiler, Hourigan and Pardu JJ.A.

BETWEEN

Michelle Mader

Plaintiff (Appellant)

and

South Easthope Mutual Insurance Company
,
    Cunningham Lindsey Canada Limited, Dan Vaspori, Lawrence Diamond, Jack
    Wettlaufer, Wayne Tebbatt, Frank Rider, Steven Howell, Daryl Stevenson, Debra
    Gerber, Helen Schildermans, Lloyd Debus, Douglas Wettlaufer, Murray
    Schlotzhauer, Murray McGonigle, Donald Henry and Gordon Gross

Defendant (
Respondent
)

Sean Oostdyk, for the appellant

Bruce Keay, for the respondent, South Easthope Mutual
    Insurance Company

Heard: May 16, 2014

On appeal from the order of Justice Robert J. Nightingale
    of the Superior Court of Justice, dated July 16, 2013, with reasons reported at
    2013 ONSC 2821.

Hourigan J.A.:

Overview

[1]

The appellant, Michelle Mader, appeals an order dismissing her motion
    for partial summary judgment and granting the motion of the respondent, South
    Easthope Mutual Insurance Company, for summary judgment dismissing her claim.

[2]

For the reasons that follow, I would dismiss the appeal.

Facts

[3]

On July 21, 2002, the appellant was involved in a single vehicle motor
    vehicle accident. The appellant claimed that as a result of the accident, she
    sustained a broken ankle, a disc herniation, pain in her neck, shoulder, and
    back, and an adjustment disorder with anxiety and depression. She also claimed
    she was no longer able to work at her job as a customer service representative.

[4]

At the time of the accident, the appellant was insured by the respondent
    under a no-fault policy for accident benefits governed by the
Statutory
    Accident Benefits Schedule  Accidents on or after November 1, 1996
, O.
    Reg. 403/96 (the SABS). On July 30, 2002, the appellant applied for accident
    benefits pursuant to the SABS. On August 1, 2002, she began receiving income
    replacement benefits at a rate of $175.45 per week.

[5]

On April 24, 2003, the appellant received a Notice of Stoppage of Weekly
    Benefits and Request for an Assessment by a Designated Assessment Centre
    (DAC) from the respondent. The notice stated that the respondent would be
    terminating the appellants income replacement benefits as of May 6, 2003. The
    respondent claimed that the appellant was able to resume the duties of her
    pre-accident employment.

[6]

The appellant disagreed with the stoppage and requested a DAC assessment
    in accordance with the SABS in order to assess her entitlement to income
    replacement benefits.

[7]

On May 6, 2003, the respondent stopped paying income replacement
    benefits to the appellant.

[8]

On or about July 14, 2003, before a DAC assessment could take place, the
    appellant signed a Full and Final Release, which released the respondent from any
    obligation to pay accident benefits to the appellant. In exchange, the
    respondent made a lump sum payment of $3,000 to the appellant.

[9]

The appellant and the respondent provided conflicting evidence regarding
    the circumstances surrounding the execution of the release.

[10]

According
    to the appellant, the respondents adjuster went to the appellants apartment
    building and had a conversation with her in the hallway. The adjuster convinced
    the appellant to sign the Full and Final Release in exchange for the $3,000
    lump sum. The appellant alleged that, at the time, she felt that she had no
    other choice but to accept the settlement. The adjuster did not tell her that
    she did not have to sign the release or that she could continue to receive
    benefits from the insurer.

[11]

According
    to the respondent, it was the appellant who first approached the respondent
    with a view to settling her claim due to her ongoing financial difficulties.

[12]

On
    April 8, 2005, the appellant issued a statement of claim, naming the respondent
    as a defendant and seeking the following relief:

·

A declaration that the release signed by the appellant is a
    nullity;

·

$600,000 in damages for breach of contract;

·

$750,000 in damages for conspiracy;

·

$50,000 in damages for mental distress;

·

$100,000 in damages for breach of the duty to act in good faith;

·

$25,000 in aggravated damages; and

·

$2,500,000 in punitive and exemplary damages.

[13]

The
    appellant claimed she was unable to lead a normal life and to work, and was therefore
    entitled to income replacement benefits for life, in addition to medical,
    rehabilitation, housekeeping, and attendant care benefits. She alleged that the
    respondent breached its duty of good faith and caused her mental distress by
    unlawfully terminating these benefits.

[14]

In
    a letter dated August 9, 2005, the respondent's counsel informed the
    appellants counsel that the appellant had a statutory obligation to repay the settlement
    funds received and to file her dispute for mediation at the Financial Services
    Commission of Ontario (FSCO) before commencing her action.

[15]

The
    letter also indicated that the respondent was prepared to re-open the file and
    deal with the matter as if the settlement had not taken place. The respondent
    stated that it would reinstate the appellants income replacement benefits and
    pay the arrears owing to date, provided the appellant described her activities
    and earnings since signing the release and agreed to undergo an independent
    medical examination pursuant to s. 42 of the SABS.

[16]

The
    appellant did not respond to the letter and the respondent filed a statement of
    defence. The respondent pleaded that the appellants claim should be dismissed
    because it did not disclose a reasonable cause of action and because the
    appellant did not provide documentary disclosure or satisfy the statutory prerequisites
    to litigation.

[17]

To
    date, the appellant has not repaid her settlement funds or filed for mediation.

[18]

The
    respondent has not arranged or requested a DAC assessment for the appellant. As
    of 2006, DAC assessment facilities no longer exist in Ontario.

[19]

In
    January 2013, the appellant brought a motion for partial summary judgment and a
    declaration that she is entitled to income replacement benefits until the
    respondent complies with its alleged obligation to provide the requested DAC
    assessment.

[20]

The
    respondent also brought a motion for summary judgment, seeking to dismiss the
    appellants action on the grounds that it is statute barred because the
    appellant did not repay her settlement funds and file for mediation prior to
    commencing litigation.

Decision Below

[21]

The
    motion judge dismissed the appellants motion for partial summary judgment and
    granted the respondents motion for summary judgment dismissing the appellants
    claim.

[22]

The
    motion judge held that the appellant was obligated to repay the settlement
    funds and proceed to mediation before she could commence litigation. In
    particular, ss. 279(1) and 281(2) of the
Insurance Act
, R.S.O. 1990, c
    I-8, together require an insured person to seek mediation of a dispute in
    respect of accident benefit entitlements or amounts before commencing a court
    proceeding. That person is also required, under s. 9.1(8) of the
Automobile
    Insurance Regulation,
R.R.O. 1990, Reg. 664, to return any money received
    as consideration for a settlement before commencing mediation.

[23]

The
    motion judge rejected the appellants characterization of her claim as a stand-alone
    action not subject to these mediation requirements. The appellant had argued
    that she was not claiming payment of benefits, which would be covered by the
    mediation process. Rather, she was claiming damages and an order for reinstatement
    of her income replacement benefits since July 2003 due to the respondents
    failure to arrange a DAC assessment, as then required by regulation.

[24]

The
    motion judge found this to be a distinction without a difference. He
    characterized the appellants claim as one concerning her entitlement, or lack
    thereof, to rescind the settlement agreement and to now claim accident benefits
    since the settlement date.

[25]

Characterized
    in this way, the appellants claim was subject to the mandatory mediation
    provisions. Since the appellant had denied the respondent its statutory right
    to have the matter proceed to mediation prior to commencing litigation, the
    motion judge dismissed the appellants action by way of summary judgment.

[26]

The
    motion judge also dismissed the appellants claims for damages for mental
    distress and bad faith. The motion judge held that these claims were in
    respect of the appellants entitlement to accident benefits under s. 279(1) of
    the
Insurance Act
,

and were therefore subject to the mandatory
    mediation requirements found in ss. 280 to 283 of the Act.

[27]

Additionally,
    the motion judge held that the claims of mental distress and bad faith were not
    independent causes of action. Rather, they flowed from the respondents alleged
    breach of the insurance policy. Since the respondent had not been found in breach
    of its obligations and the appellants claim for payment of income replacement
    benefits had accordingly been dismissed, there was no basis for the claims of
    mental distress and bad faith.

[28]

Finally,
    the motion judge dismissed the appellants motion for partial summary judgment.
    He found that summary judgment was not appropriate because unresolved questions
    of fact and law remained. In particular, the motion judge found that the
    evidence conflicted in terms of the appellants ongoing disability and the
    details of her post-accident employment and income earned.

Issues

[29]

This
    appeal raises the following issues:

1)

Did the motion judge
    err in granting the respondents motion for summary judgment?

2)

Did the motion judge
    err in dismissing the appellants motion for partial summary judgment?

Analysis

(1) The Respondents Motion for Summary Judgment

[30]

The
    Supreme Court of Canada made it clear in
Hryniak v. Mauldin
, 2014 SCC
    7, [2014] 1 S.C.R. 87, at para. 81, that, absent an error in law, the exercise
    of powers by a motion judge under the new summary judgment rule attracts
    deference. With respect to the motion judges decision to grant the
    respondents summary judgment motion, I see no basis for appellate
    interference.

[31]

The
    starting point in the analysis is s. 279(1) of the
Insurance Act
which
    provides:

Disputes in respect of any insured persons entitlement to
    statutory accident benefits or in respect of the amount of statutory accident
    benefits to which an insured person is entitled shall be resolved in accordance
    with sections 280 to 283 and the
Statutory Accident Benefits Schedule
.

[32]

Pursuant
    to s. 281(1), the appellant was permitted to choose between an action in the
    court system and an FSCO arbitration. However, the right to bring either type
    of proceeding is limited by s. 281(2), which states that no person may commence
    a court or arbitration proceeding unless he or she has first sought mediation
    and mediation has failed
.

[33]

Mediation
    is central to the statutory scheme for resolving disputes between insured
    persons and their insurers and is a statutory precondition to an insured
    bringing court proceedings:
Hurst v. Aviva Insurance
, 2012 ONCA 837, 356
    D.L.R. (4th) 323, at para. 25;
Younis v. State Farm Mutual Automobile
    Insurance Company
, 2012 ONCA 836, 356 D.L.R. (4th) 318, at para. 3.

[34]

Without
    mediation, the court has no jurisdiction to hear the appellants claim:
Amorini
    v. Select Coffee Roasters Inc
. (2001),
143 O.A.C. 363, at para. 8
(Div. Ct.).

[35]

It
    is not disputed that the appellant has not sought mediation of her claim. She
    contends that her dispute would not be accepted for mediation at FSCO because
    its
Dispute Resolution Practice Code
(the Code)
requires a denial of benefits as a precondition to mediation
    and does not permit mediation where a settlement agreement is in place.

[36]

In
    my view, the appellants dispute is clearly contemplated by the Codes
    mediation procedure, which covers any dispute about an insured persons
    entitlement to accident benefits or the amount of those benefits where a claim
    has been denied or the prescribed period for the insurer to respond to the
    claim has elapsed.

[37]

The
    Code also permits mediation where a settlement agreement is in place in limited
    circumstances, including where the claimant disputes the validity of the
    settlement, such as whether the insurer has complied with the requirements of
    the
Settlement Regulation.
 The appellant submits that this exception
    is inapplicable because it is not her position that the Full and Final Release
    did not comply with the
Settlement Regulation
, but that it was
    obtained through fraud and misrepresentation.

[38]

There
    is no merit to this submission. Clearly, the exception applies in all
    circumstances where the claimant disputes the validity of the settlement. The
    reference to a challenge based on non-compliance with the
Settlement
    Regulation
is merely illustrative. Therefore, there is no valid reason for
    the appellants failure to comply with the mediation requirement.

[39]

In
    her claim, the appellant also purports to rescind the settlement agreement. In
    order to do so, she is
required,
pursuant to
    s. 9.1(7) of the
Automobile Insurance Regulation
,
to deliver a written notice to the office of the insurer or
    its representative and to return any money received by her as consideration for
    the settlement.
In addition, the appellant is prohibited, pursuant to s.
    9.1(8), from
commencing a mediation proceeding under
    s. 280 of the
Insurance Act
unless she
    has returned the money received as consideration for the settlement
.


[40]

Therefore,
    the settlement funds must be repaid and mediation must fail before a court
    proceeding may be commenced:
Lindsay v. Martin
,
[2004] O.T.C.
    468, at para. 12 (Ont. S.C.).

[41]

No
    repayment of settlement funds has been made. In this regard, counsel for the
    appellant made a submission on the return of the motions that he had the money
    available for payment. Such an assertion is not evidence. The motion judge was
    correct to reject the submission as proof that the appellant had fulfilled her
    statutory obligation to repay the settlement funds.

[42]

In
    my view, it is clear that the appellant has not fulfilled either of the
    statutory preconditions to the commencement of a court proceeding. The appellant
    submits, however, that she has sued not only for breach of contract, but for mental
    distress, breach of the duty to act in good faith, and conspiracy. She submits
    that these latter three claims do not require an FSCO mediation before an
    action can be commenced.

[43]

It
    is the appellants position that her mental distress and bad faith claims are
    inextricably linked. She alleges that the respondent coerced her into signing
    the settlement and that by persisting in denying her benefits and refusing to
    set up a DAC assessment for seven years, the respondent acted in bad faith. The
    appellant further alleges that the respondent and two of its representatives
    conspired to injure her by closing her file.

[44]

The
    appellant submits, therefore, that her claims result from the respondents
    denial of her procedural rights, rather than the denial of benefits. In other
    words, her mental distress and bad faith claims are independent causes of
    action, which are not in respect of entitlement to or amounts of benefits.
    Accordingly, the appellant submits that she is not required to bring these
    claims to an FSCO mediation.

[45]

In
    some instances, breach of an insurers duty of good faith or intentional
    infliction of mental distress can constitute an independent cause of action:
Whiten
    v. Pilot Inusrance Co.,
2002 SCC 18

[2002] 1 S.C.R. 595, at para. 82;
Prinzo v. Baycrest Centre for Geriatric Care
(2002),

60 O.R. (3d)
    474, at paras. 37-39, 64. However, neither is a separate actionable wrong in
    this case.

[46]

The
    reasoning of this court in
Arsenault v. Dumfries Mutual Insurance Co.
,
    (2002), 57 O.R. (3d) 625 (C.A.), is instructive on this point. The issue in
    that case was whether a claim for bad faith damages arising out of an insurer's
    termination of no-fault accident benefits was subject to the two-year
    limitation period set out in s. 281(5) of the
Insurance Act
. Answering
    this question necessitated a determination of whether bad faith claims were
    caught by s. 279(1) of the Act.

[47]

Justice
    Abella noted that in s. 279, the legislature mandated that disputes in respect
    of any claim to no-fault benefits must be resolved in accordance with ss. 280
    to 283 of the Act. Relying on the Supreme Court of Canadas decision in
Nowegijick
    v. The Queen
, [1983] 1 S.C.R. 29, Abella J.A. commented, at para. 16, that
    the use of the phrase in respect of is probably the widest of any expression
    intended to convey some connection between two related subject matters. She determined,
    at para. 17, that any and all disputes about an insurer's refusal to pay
    no-fault benefits, including disputes which allege the insurer's bad faith in
    connection with that refusal were caught by the scheme in ss. 280 to 283.

[48]

Abella
    J.A. went on to conclude, at paras. 19 and 21:

If I am wrong in concluding that bad faith claims in connection
    with no-fault benefits refusals are subject to the procedures and time limits
    set out in
ss. 280
to 283 of the
Insurance Act
, I
    am nonetheless of the view, based on the pleadings, that this appellant's claim
    is not an independent, actionable wrong, but is in fact exactly the kind of
    dispute over no-fault benefits entitlements contemplated by the dispute
    resolution scheme in the Insurance Act... Moreover, had the dispute been
    arbitrated, it was open to the arbitrator under
s. 282(10)
, if it was
    found that the insurer had "unreasonably withheld or delayed
    payments", to award an additional lump sum.



Ms. Arsenault's characterization of the insurer's refusal as
    bad faith conduct is merely an attempt to circumvent the mandatory requirements
    of the dispute resolution scheme in the
Insurance Act
through the
    guise of linguistic reformulation. Her allegations, distilled, are that the
    refusal was inappropriate in the circumstances, the very issue contemplated for
    resolution under the scheme, and a claim that is clearly subject to the two
    year limitation period set out in
s. 281(5)
.

[49]

This
    analysis applies in the present case. The claims asserted by the appellant all
    flow from the denial of benefits. At their essence, they amount to nothing more
    than a claim that the appellant was wrongly denied benefits to which she
    believes that she is entitled to receive. This is precisely the type of claim
    contemplated for resolution by the procedure in ss. 280 to 283 of the
Insurance
    Act
.

[50]

Indeed,
    s. 282(10) of the
Insurance Act

provides that if the parties
    proceed to arbitration and the arbitrator finds that an insurer has
    unreasonably withheld or delayed payments, the arbitrator shall award, in
    addition to the benefits to which an insured person is entitled, a lump sum of
    up to 50 per cent of the amount to which the person was entitled at the time of
    the award. This subsection makes clear that the procedure in ss. 280 to 283 is not
    restricted solely to claims for benefits, but is also designed to include
    claims related to the manner in which benefits were administered.

[51]

The
    pleading of a conspiracy does not transform the appellants claim into an
    independent actionable wrong. The facts underlying the appellants conspiracy
    claim are the same as those underlying the rest of her claims. The object of
    the alleged conspiracy was to deny the appellant her benefits.

[52]

In
    summary, the appellant has failed to establish that the motion judge made any
    error of law in his analysis. There is, therefore, no basis for appellate
    interference with the motion judges decision to grant the respondents motion
    for summary judgment dismissing the appellants claim.

(2) The Appellants Motion for Summary Judgment

[53]

The
    appellant brought a motion for partial summary judgment, asserting that she was
    entitled to payment of benefits until the respondent complies with its
    obligations under the SABS to arrange the requested DAC assessment.

[54]

DAC
    assessments have not been part of the statutory benefits regime since 2006.
    Therefore, the order sought by the appellant would be an order in perpetuity.

[55]

The
    denial of the appellants motion for partial summary judgment is an interlocutory
    order, from which an appeal lies to the Divisional Court, with leave:
Courts
    of Justice Act
, R.S.O. 1990, c. C-43, s. 19(1)(b). Only if leave is
    obtained from the Divisional Court can the appeal be combined with an appeal
    that lies to Court of Appeal in the same proceeding under s. 6(2) of the
Courts
    of Justice Act
:
Cole v. Hamilton (City)

(2002), 60 O.R. (3d) 284, at paras. 11, 15.  Since no
    leave was obtained, this court has no jurisdiction to hear the appellants
    appeal from the order dismissing her motion for summary judgment.

[56]

Even
    if the appellant was in the right court, all of her claims, including the claim
    that was the subject of her motion for partial summary judgment, were properly
    dismissed on the respondents summary judgment motion.

[57]

It
    follows that the appellants appeal of the dismissal of her motion for partial
    summary judgment must fail.

Disposition

[58]

I
    would therefore dismiss the appeal.

[59]

With
    respect to costs, the parties agreed that the sum of $6,000, all-inclusive, is the
    appropriate award. Accordingly, I would order that the appellant pay the
    respondent $6,000 in costs, all-inclusive.

Released: October 21, 2014 KMW

C.
    William Hourigan J.A.

I
    agree K. M. Weiler J.A.

I
    agree G. Pardu J.A.




