Insurer terminated income benefits because injured person returned to full-time work
The Ontario Court of Appeal has ruled that an insurer is not required to provide a medical reason for terminating income replacement benefits (IRB).
In Varriano v. Allstate Insurance Company of Canada, 2023 ONCA 78, Nunzio Varriano sustained injuries in a motor vehicle accident in 2015. He applied for income replacement benefits (IRB) under the Statutory Accident Benefits Schedule (SABS) from his insurer Allstate Insurance Company of Canada.
Allstate initially paid the IRBs to Varriano. However, when Varriano returned to full-time work, Allstate sent a letter notifying him that his IRBs would stop. The insured disputed Allstate’s termination of his benefits before the License Appeal Tribunal (LAT).
Allstate argued that Varriano’s application was time-barred because he filed it for more than the 2-year limitation period from when Allstate sent the letter terminating his benefits. LAT ruled in favour of Allstate.
Varriano elevated the matter to the divisional court, which overturned the LAT’s decision, finding that Allstate’s letter failed to meet the legislative requirements under s. 37(4) of the SABS. The divisional court ruled that the law required Allstate to provide medical reasons in its benefits letter for the stoppage of Varriano’s benefits. Allstate then brought the case to the Ontario Court of Appeal.
Notice requirement
The appeal court explained that under the SABS, an insurer could terminate an insured’s benefits for specified reasons, including the fact that the insured has returned to their pre-accident employment duties. If it decides to terminate the insured’s benefits, the insurer must give notice to the insured containing the reasons for their decision. A 2-year limitation period commences upon issuance of a valid notice to the insured.
Medical reason is not required
The divisional court ruled that Allstate’s benefits letter was insufficient to trigger the limitation period because it did not specify Varriano’s medical condition or the specific provision of the SABS that the insurer relied upon to deny the benefits.
On appeal, the court ruled that an insurer is not always required to provide a medical reason when denying benefits under the SABS. The court applied the principles of statutory interpretation in understanding the notice required under s. 37(4) of the SABS. The court found that the insurer must determine the basis for disqualifying the insured from receiving benefits and communicate such cause to the insured. The court emphasized that the insurer could rely on medical or non-medical grounds or both.
The court said that if the insurer relies on medical and non-medical reasons to deny benefits, the insurer must advise the insured of both reasons. However, suppose the insurer depends on a non-medical ground, the SABS requires that the insurer provides notice of the cancellation of the benefits and provide the insured with the non-medical reason for that determination. The appeal court further said that the 2010 amendments to the SABS codified the requirement to provide a sufficient reason or reasons for the insurer’s decision.
The appeal court also noted that s. 37(4) of the SABS providing for the notice requirement is not an insurance coverage provision and does not in any way determine whether a person is entitled to coverage under the SABS. The only issue to be resolved was whether that notice provision had been complied with. The court said that a correct interpretation of s. 37(4) requires an interpretation that is in line with the purposes of the SABS—timely submission and resolution of claims and permitting the insured to decide whether to challenge the denial of benefits. Accordingly, the court found that Allstate’s notice complied with the SABS requirement.
