



COURT OF APPEAL FOR ONTARIO

CITATION: Arcelormittal Dofasco Inc. v. Industrial Alliance
    Insurance and Financial Services Inc., 2016 ONCA 224

DATE: 20160323

DOCKET: C60904

Laskin, MacFarland and Roberts JJ.A.

BETWEEN

Arcelormittal Dofasco Inc.

Plaintiff (Appellant)

and

Industrial Alliance Insurance and Financial
    Services Inc.

Defendant (Respondent)

Geoffrey D.E. Adair, Q.C. and Gordon McGuire, for the
    appellant

Barry A. Percival, Q.C. and Grant D. Bodnaryk, for the
    respondent

Heard: March 2, 2016

On appeal from the judgment of Justice Grant R. Dow of
    the Superior Court of Justice, dated July 21, 2015, with reasons reported at
    2015 ONSC 3099.

MacFarland J.A.:

[1]

D.C. has a rare life-threatening blood disease. In late September 2009, her
    hematologist prescribed the drug Soliris to manage her condition. The drug is
    very expensive, costing approximately $25,000 per month.

[2]

D.C. promptly applied to the respondent Industrial Alliance (IA), her
    employers group benefits insurer, for pre-approval for the expected cost of
    the drug. The IA policy provided for reimbursement of ninety percent of certain
    prescription drug payments.

[3]

IA denied D.C.s claim. A note on the first page of D.C.s application
    form reads N/E (Hosp. drug) K 2-10-09. As it turned out, IA erroneously
    thought that Soliris was administered in a hospital setting and therefore
    excluded under the terms of its policy. This despite the letter from D.C.s hematologist
    that accompanied her application, which stated that the medication would be
    administered in a private medical clinic.

[4]

Fortunately for D.C., her retired husband had a benefit plan through his
    former employment. This plan was underwritten by the appellant, Arcelormittal
    Dofasco Inc. (Arcel), and managed on Arcels behalf by Great West Life (GWL).
    GWL accepted D.C.s claim and began payment in October 2009.

[5]

It is undisputed that where IAs policy provides coverage, it is the
    primary payor and is required to reimburse D.C. ninety percent of the cost of
    her medication in accordance with the terms of the policy. Arcel is secondary
    payor and provides coverage where the primary insurer does not. The Arcel
    policy covers the full cost of prescription drugs.

GWL begins inquiries

[6]

In October 2010, GWL on behalf of Arcel, after paying benefits for a
    year, began to inquire into why IA denied D.C.s claim. It is unnecessary to
    review the entire lengthy correspondence between the parties  it suffices to
    say that the record clearly demonstrates that IA was stonewalling GWLs
    efforts to understand the basis for IAs decision to deny coverage.

[7]

What is crystal clear in the record is that IA knew at least by December
    15, 2010 that its denial of coverage was inappropriate. In an email dated
    December 15, 2010, Keith Bullock, a Senior Consultant with IA, wrote to his superiors:

Sheila came to me in regards to a claim for Soliris which will
    be approximately $470,000/year (and ongoing). We had originally denied it and
    GW picked it up under their plan as the claimant is the spouse of a member
    covered by GW. After paying for a year GW has now come back to us on our denial
    and which we have now determined was inappropriate. Therefore Sheila was [
sic
]
    asked me to look at and to see if there were was [
sic
] a way to
    continue the denial under the terms of the contract (same [as] I did last year
    with the $600,000 drug claim).

[]

Since we are paying this drug in Montreal it is possibly going
    to create difficulty for us in Toronto in regards to finding a way if possible
    to deny it (and leave it with GW). Please note that failure to do so could
    possibly result in GW coming back against us in regards to the $ they have paid
    out for the drug on the claimant.

[8]

IA also repeatedly ignored or refused requests from GWL and D.C. for the
    wording of the policy. By email dated June 14, 2011, GWL again wrote to IA to
    inquire about the basis for IAs denial of coverage. In her email, Ms. Wilson
    of GWL wrote:

If we do not hear from you shortly, we will be discussing this
    matter further with our Senior Management and Law Dept. with a view to
    escalating the issue with your organization.

[9]

Finally, in a letter dated September 19, 2011, IA provided a copy of its
    policy to D.C.

IA continues to refuse coverage

[10]

In
    the meantime, IA continued to refuse to cover Soliris for D.C. It sent her
    letters in January and February 2011 confirming that Soliris was not eligible
    for benefits. In the February 2011 letter, IA told D.C. that they would not pay
    her claim because expenses which are free of charge and payable by the
    Ontario Government were ineligible for coverage under the IA policy. D.C. was
    directed to apply to Ontario for payment. She did so and was told that she was
    ineligible to receive benefits under the Ontario Drug Benefit program. She
    conveyed this information to IA by letter dated September 19, 2011.

[11]

By
    letter dated November 28, 2011, IA informed D.C. that they would pre-approve
    Soliris as an eligible drug for her under their group plan on an exception
    basis and that coverage would begin January 24, 2011. The letter was
    misleading in a number of ways and did not anywhere indicate that their
    original denial of her claim had been inappropriate, as Mr. Bullock had
    pointed out in the email to his superiors at IA on December 15, 2010. IA
    refused to reimburse GWL/Arcel for any monies it had paid for the cost of
    Soliris.

[12]

The
    Statement of Claim was issued April 4, 2012. Arcel sought reimbursement from IA
    for Soliris payments from October 8, 2009 to November 4, 2011 in the sum of
    $1,280,163.95, representing 90 percent of its payout of $1,422,404.40.

The summary judgment motion

[13]

Arcel
    moved for summary judgment before Dow J. on May 5, 2015. At the outset of the
    argument before the motion judge, the respondent conceded its obligation to pay
    from January 24, 2011, which had the effect of reducing the amount in dispute
    by $488,396.30. Prior to this admission, IA had taken the position that
    although it had approved claims going forward from January 24, 2011:

Even if any of these claims were incurred after January 24,
    2011, Great West Life has already paid them in full. If [Ms. C.] has already
    been fully reimbursed for her claims, she does not have an expense to submit
    under our group policy.

[14]

So,
    even though IA conceded its policy covered the claim, it would only pay D.C. on
    a go forward basis from January 24, 2011. If GWL had already paid any of those
    claims, IA would not reimburse Arcel/GWL for them.

[15]

When
    the motion was argued, the claims that remained in dispute were those incurred
    and paid for by GWL from October 2009 through January 24, 2011.

[16]

In
    setting out his summary of the facts, at para. 2(f), the motion judge said:

The plaintiff reviewed and accepted DCs application and began
    paying the $24,666.48 per month expense. It is important to note GreatWest Life
    was also aware of Industrial Alliances obligation to pay and denial of the
    benefit as of sometime in October, 2009.

And further, at para. 8:

[T]he plaintiff acknowledges, through its agent, GreatWest
    Life, that it was aware of the defendants obligation to pay and rejection of [D.C.s]
    claim as of October, 2009.

The motion judge concluded, at para. 9:

[T]he possible claim against the defendant was discovered by
    the plaintiff as of October, 2009 and the Statement of Claim issued April 4,
    2012 is beyond the time permitted under section 22 of the
Limitations Act
Thus, the defendant is responsible to reimburse the plaintiff for claims going
    back to April 4, 2010 or two years before this action was issued.

[17]

In
    summary, he disallowed any reimbursement claim from October 2009 through April
    4, 2010 but required IA to reimburse the appellant for 90 percent of all
    amounts from April 4, 2010 going forward. Those claims amounted to $609,995.52
    and 90 percent of that amount for which the respondent is responsible amounts
    to $548,995.97.

Appeal on the merits

[18]

In
    this court, the appellant raises two grounds of appeal and seeks leave to
    appeal on the costs disposition made by the motion judge.

[19]

The
    appellant submits:

1.

The motion judges finding of fact that Arcels agent GWL was aware of
    IAs obligation to pay as of October 2009 is a palpable and overriding error.

2.

On the whole of the record Arcel clearly established that its agent GWL
    acting reasonably could not have discovered its claim until on or after April
    4, 2010.

[20]

Counsel
    for the appellant concedes that his client sat on its hands for a year. It
    paid the claim and made no inquiries why IA declined the claim.

[21]

In
    my view, the appellant acted properly in the face of the respondents denial of
    coverage. It accepted the claim and began payment for this drug. This was not a
    claim for aspirin  this was an extraordinarily expensive drug. However, a
    reasonable second paying insurer, while accepting the claim for payment, would
    have begun immediate inquiries as to the basis for the primary insurers denial
    of coverage. There is a corresponding obligation on the primary insurer to
    respond to any such inquiry promptly and in a meaningful way.

[22]

The
    record discloses that the appellant began its inquiries in October 2010 but it
    was not until September 2011 that IA, after repeated requests, finally produced
    a copy of its policy. It produced the policy not to the appellant but to D.C.

[23]

The
    appellant argues that there is no evidence to support the motion judges
    finding that Arcel/GWL  was aware of the defendants obligation to pay  as
    of October, 2009.

[24]

I
    agree. In my view, it is clear that in October 2009 all the appellant knew was
    that IA, the primary insurer, had refused to pay D.C.s claim on the basis that
    there was no coverage under its policy. As second payor, the appellant accepted
    the claim and began payment.

[25]

In
    late October 2010, when the appellant made its initial inquiry as to the basis
    for the denial of the coverage, IA responded:

Kathie we have declined the prior auth drug Soliris back in
    Oct. 2009 as our PBM has this drug listed as a hospital drug and we dont cover
    based on that information.

[26]

On
    November 1, 2010, the appellant asked for the contract wording which supports
    the Soliris decline. Despite follow up emails from the appellant, IA did not
    respond until December 14, 2010  but did not provide the policy wording
    requested. IA indicated it was investigating the matter and would let the
    appellant know the result. The appellant next wrote to IA by email dated
    January 13, 2011 by way of follow up and said in part:

Our records show this drug is being administered in a private
    clinic which means that it may be eligible for reimbursement under your plan.
    We have been contacted by a patient advocate for Soliris who we are reluctant
    to speak with until we resolve the coverage issue under your plan. This matter
    is now becoming critical and we would like to resolve it as soon as possible.

[27]

At
    this point in time, IA knew that the basis upon which it had declined coverage
    was inappropriate yet it refused to provide the policy wording either to the
    appellant or to D.C. for another eight months. The appellant could not confirm
    the basis for IAs denial of coverage until it had an opportunity to review the
    policy wording.

[28]

While
    I accept that the appellant was anything but diligent in initiating its
    inquiries about the basis for IAs decision to decline coverage, I am satisfied
    on this record the appellant could not reasonably have known that it had a
    claim against the respondent until it had the opportunity to review the policy
    wording. Further, I am persuaded that even if it had begun its inquiries in
    October 2009, based on the respondents conduct after October 2010, it is
    highly unlikely it would have received the policy wording before September of
    2010.

[29]

Accordingly,
    I would conclude that, contrary to the motion judges finding, the appellant did
    not know and could not reasonably have known it had a claim until after
    September 19, 2011, which was the date that the policy was disclosed to D.C.
    The finding of the motion judge is not supported by the evidentiary record and
    is a palpable and overriding error. The appellants action was therefore
    commenced within two years of its discovery of its claim and accordingly none
    of the claims for which it sought reimbursement from the respondent are
    statute-barred.

[30]

I
    would set aside the judgment below and in its place judgment shall issue
    requiring that the respondent pay the appellant the sum of $1,280,163.95 which
    is 90 percent of $1,422,404.40 and represents reimbursement to the appellant
    back to October 2009. Counsel have indicated they will be able to agree on the
    necessary calculations for prejudgment interest to be added to the principal
    amount.

Costs appeal

[31]

The
    appellant seeks leave to appeal the costs disposition made by the motion judge.
    In view of the fact that the judgment below is, as the result of this decision,
    set aside, so too is the costs disposition made in relation to that judgment
    and leave to appeal is not required.

[32]

The
    motion judge awarded the appellant $50,000 inclusive of fees, disbursements and
    HST for the costs of the action including the summary judgment motion.

[33]

The
    appellant had claimed $102,709.87 on a partial indemnity basis and $166,301.75
    on a full indemnity basis. Both numbers take into account and give credit for a
    $5,000 costs award made by Myers J. on April 1, 2015 as the result of a last
    minute adjournment request by the respondent. The appellant's disbursements
    total $12,276.85.

[34]

While
    it is for this court to consider the costs of the action afresh, in light of
    the appellant's success on appeal, in the circumstances of this case, where
    there was partial success below, the costs disposition made by the motion judge
    will be a relevant factor.

[35]

In
    this court, the appellant submits that the motion judge considered only the
    partial success and that the respondents bill of costs was for a much lower
    amount than the appellant's and failed to consider other relevant factors in
    making his costs award. The respondent's full account for the services of its
    counsel totalled $67,366.96.

[36]

In
    his reasons dealing with costs, the motion judge noted at para 14:

...the time and amounts claimed by the plaintiff is excessive,
    particularly the lack of complete success on the part of the plaintiff...

So it appears there were three factors that influenced
    the motion judge's decision  excessive time, excessive amounts and the lack of
    complete success.

[37]

It
    is reasonable to infer that had the appellant achieved full success below the
    costs awarded would have been in a higher amount. The only question is how much
    higher the award should be.

[38]

The
    appellant had carriage of the matter as plaintiff and accordingly the
    obligation, to borrow the words of counsel, "to carry the ball".
    Pleadings were exchanged, significant  though not voluminous  documentary
    production was made, examinations for discovery were held and there were a
    number of scheduled motions in addition to the motion for summary judgment. The
    judgment amount is almost $1.3 million.

[39]

The
    appellant's claim was based on equitable contribution and fraudulent
    concealment. The motion judge allowed the claim in part on the basis of
    equitable contribution and in relation to the claim of fraudulent concealment
    said, at para. 10:

[W]hile the conduct of the defendant was clearly substandard,
    the defendant did eventually acknowledge its responsibility as set out in its
    letter of January 11, 2012 without litigation having commenced and, as such,
    its conduct does not equate to the requisite fraudulent concealment[.]

[40]

While
    the appellant raised the issue of fraudulent concealment in this court, it was
    not pressed. Without endorsing the motion judge's finding on this issue, the
    point made earlier in these reasons bears repeating on the issue of costs. The
    appellant did nothing for a year after it accepted this claim as second payor.
    However, once it began to make inquiries, the obligation of the respondent was
    to immediately respond to those inquiries in a meaningful way and provide the
    basis for its denial of the claim. Instead it delayed, ignored and obfuscated
    in relation to the legitimate requests of the appellant. It is the sort of
    conduct that attracts the court's disapproval and of a type not to be
    encouraged among insurers. That said, it is a factor but only that, absent a
    finding of fraud.

[41]

It
    is also important to bear in mind that it was not until the argument on the
    summary judgment motion was about to begin that the respondent acknowledged and
    conceded its liability to reimburse the appellant for the amounts it had paid
    to D.C. after January 24, 2011. The concession came too late for any costs
    savings to the appellant.

[42]

The
    discrepancy in the hours spent between the appellant and the respondent is
    significant even allowing for the fact that the appellant had carriage of the
    matter  approximately 400 hours for the appellant compared to approximately
    180 for the respondent. While the appellant's office involved some eight
    lawyers on the file, the respondent's had only two. There is no explanation why
    the appellant needed the involvement of eight lawyers. Partial indemnity hourly
    rates claimed were $360 for appellant's senior counsel and $400 for the
    respondent's. It would appear from this brief comparison that time is the
    overriding factor that accounts for the discrepancy between the accounts.

[43]

Accepting
    that the appellant has had complete success on the appeal and taking all other
    factors into account, I would award the appellant $90,000 for all costs of the
    action. This figure is inclusive of disbursements and HST.

Disposition

[44]

In
    the result, the appeal is allowed and the judgment below is varied in
    accordance with these reasons.

[45]

Costs
    of the appeal to the appellant in the agreed sum of $10,000 inclusive of
    disbursements and HST.

Released: March 23, 2016 JMacF

J.
    MacFarland J.A.

I
    agree John Laskin J.A.

I
    agree L.B. Roberts J.A.


