Insurance claimants could benefit from SCC intervention

Personal Injury /
M. Steven Rastin
Latest posts by M. Steven Rastin (see all)

By Tony Poland, LegalMatters Staff • Barrie-area litigator Steve Rastin says he is hopeful the Supreme Court of Canada (SCC) will agree to weigh in on a recent court of appeal decision that he believes could have a detrimental effect on insurance claimants if it is not reversed.

In Varriano v. Allstate Insurance Company of Canada, the Ontario Court of Appeal (ONCA) ruled that an insurer is not required to provide a medical reason for terminating income replacement benefits (IRB).

However, Rastin, senior counsel at Rastin Gluckstein, says the decision will only make it more difficult to dispute a termination of benefits. He says he would like to see the SCC provide some guidance.

“My understanding is that the plaintiff in Varriano has sought leave to appeal to the Supreme Court of Canada,” Rastin tells LegalMattersCanada.ca. “It is unlikely it will happen because leave is rarely granted. But I believe insurance companies, claimants, the Licence Appeal Tribunal (LAT) and plaintiff lawyers would benefit from our highest court providing some clarity on what appears to me to be a fundamental incongruence in the law.”

Received accident benefits after 2015 injury

The ONCA was told Nunzio Varriano was injured in a 2015 motor vehicle accident and received income replacement benefits from Allstate. When he went back to work a few months later, Varriano received a notice from the insurer informing him that since he had returned to his full-time job, his benefits would cease. 

In July 2018, he was no longer able to continue working so he filed an application with the Licence Appeal Tribunal disputing the termination of IRBs. The LAT adjudicator accepted Allstate’s argument that the application was time-barred since Varriano had not contested the termination in the required two-year period.

Divisional Court overturned that ruling stating that provisions of the Statutory Accident Benefits Schedule (SABS) required the insurance company to provide medical reasons to justify the stoppage of benefits. 

The OCNA disagreed, stating that since Allstate relied on a non-medical reason to justify the termination of benefits – Varriano’s return to work – they were not required to provide a medical reason in its notice. 

Rastin, who is part of a team that hopes to be granted leave to intervene on behalf of the Ontario Trial Lawyers Association (OTLA) if the Supreme Court decides to hear the case, says he takes issue with the application being time-barred.

“When someone returns to work, everyone can agree that person is not going to be entitled to money from the insurance company,” he says. “However, while he was working, Varriano had no reason to dispute the termination of benefits. But more than two years later, he could no longer handle doing the job. He is either getting worse or he is not getting the accommodation needed from his employer. He is forced to stop working. 

“So, when he leaves the workforce and applies for income replacement benefits, the insurance company basically tells him he was given a termination notice more than two years ago, there’s a two-year limitation period, so you snooze, you lose.”

‘Interesting legal conundrum’

Rastin says the situation creates an “interesting legal conundrum.”

“What should Varriano have done? File a dispute to the Licence Appeal Tribunal when he received notice of termination?” he asks. “Why would he do that? He had returned to work so there was no dispute over benefits.

“He is damned if he does and damned if he doesn’t. If Varriano doesn’t file a dispute when he gets cut off after returning to the workforce, the limitation clock runs on him,” Rastin adds. “And if he does dispute, he is in a situation where he must fight with the insurance company about nothing since he is not claiming any benefits. To me, the real case is the impossible position he is put in of having to dispute a benefit that does not even exist.”

There is a lack of clarity about the cut-off notice, he contends.

The court of appeal should have considered the case “through the lens of Tomec v. Economical Mutual Insurance Company,” he says. 

In that 2019 ONCA case where Rastin successfully intervened on behalf of OTLA, the court found that the two-year time limit to take IRB disputes to LAT is not a “hard limitation” period.

“Tomec dealt with the issue of discoverability regarding statutory accident benefits,” Rastin explains. “The court of appeal could have said that we are governed by the previous decision in Tomec and it isn’t fair to expect an accident victim to file a complaint until they reasonably discover they have something to fight about. 

‘Never going to be allowed to dispute this issue’

“Instead, what they have done defaults back to the old hard limitation period,” he adds. “That basically means if you are in an accident and you return to your job, if you don’t file a dispute for income within two years of the date you went back to work and you lose your job after that period, you are never going to be allowed to dispute this issue.”

He says he does not know whether Varriano would actually qualify for benefits.

“But it seems to me that it is a waste of tribunal resources, insurance company resources and claimant resources to actually say people must be in a situation where they need to dispute a benefit even before the benefit crystallizes into being worth money,” says Rastin. “My thesis is the court of appeal got it wrong in Varriano because they didn’t adequately consider their own court’s decision in Tomec as fulsomely as they should have. 

“What we have is a situation where we have two cases that, on the surface, seem to be incongruent with each other,” he adds. “Tomec to me suggests that you can wait until an actual dispute is discovered to file. Varriano suggests to me that must you dispute it within two years whether you have discovered that is worth money or not.” 

Consumer protection legislation

Rastin points to Smith v. Co-operators General Insurance Co., an SCC case he was involved in that “stood for the proposition that the Insurance Act is a consumer protection legislation and will be given a broad and purposeful interpretation in favour of the consumer.” 

“At the end of Varriano, the appellant court finds Smith v. Co-operators really doesn’t apply to this case. It only applies to cases about insurance coverage,” he says. “I can tell you as one of the counsel who argued the case, that is absolutely wrong. 

“It was a case about benefits being cut off in notice periods and the argument was whether the notice was sufficient,” Rastin continues. “It is a notice case, but the OCNA declines to follow the Supreme Court of Canada. And I believe incorrectly so because Smith v. Co-operators should have the much broader application it was afforded.” 

The end result is uncertainty, he says.

“It is a complete quagmire. If the Supreme Court of Canada decides not to look at this case, we will be left with a situation where the doctrine of discoverability applies to some benefits but not others,” Rastin says. “It is a warning to those who return to work after a claim. If they are struggling, if they think they are going to be fired because they are no longer able to perform their duties, they had better file a dispute within two years of receiving notice. Of course, that means many people are going to end up fighting about nothing.”