STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY V. SUBASHINI YOGESVARAN: INSURED’S MUST PROVE SUBSTANTIVE ENTITLEMENT DESPITE INSURERS NON-COMPLIANCE WITH THE SABS

November 9, 2010

The appeal decision in Yogesvaran and State Farm was recently released. This was the decision where arbitrator Miller awarded IRBs and Housekeeping/Home Maintenance solely because the insurer failed to request a new disability certificate before having the insured attend an IE.

In the appeal decision Director’s Delegate Blackman reluctantly held that the insured had to nonetheless prove that she was entitled to the benefits.

The start of the decision looked very bad for State Farm, Blackman noted that an insurer’s ongoing adjusting of a file must comply with the schedule. Section 37 was not ambiguous – it required the insurer to ask for a disability certificate. The only question is what should the penalty be for non-compliance. Blackman did not agree that disability certificates are of limited assistance. Blackman pointed out that benefits can be denied if an insured fails to provide a disability certificate – it would be unjust then if the insurer’s non-compliance did not have any consequences.

Blackman then discussed the CA decision in Stranges. Stranges was the decision out of Hamilton where the trial judge ruled that the insured was automatically entitled to IRBs because the stoppage did not contain a written explanation on how to dispute the denial. The Court of Appeal held that the inadequacy of the refusal did not entitle the insured to benefits until a proper notice was carried out – the insured still had to prove entitlement.

Blackman revealed that he agreed with the trial judge in Stranges and described the breach in Stranges as “a far more compelling situation”.  Blackman held that he is bound by the Court of Appeal decision in Stranges and thus the insured must establish that she substantively qualified.

However, the reversal did not help State Farm and will be of no practical assistance to insurers moving forward. Blackman took judicial notice of the backlog at FSCO. He discussed how there is prejudice to an insured who is trying to dispute a termination that is not in compliance with the SABS. Blackman held that an adjudicator could make an interim award of benefits under these circumstances and be consistent with the Court of Appeal in Stranges. So Blackman turned Miller’s final decision on a preliminary issue into an interim decision, requiring State Farm to pay IRBs, pending a hearing to determine final entitlement.

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