Recent Decisions - Deemed Failure of Mediations

Two recent decisions, one of the Ontario Superior Court, the other an arbitral decision of the Financial Services Commission, have interpreted the "60 day" mediation provisions at section 19 of the Dispute Resolution Practice Code as mandatory. Where mediation does not occur within 60 days, the mediation is deemed to have failed, and the insured person may pursue arbitration or litigation.

While the full impact of these two decisions remains to be seen, it is easy to predict that a significant portion of the current backlog of Applications for Mediation at FSCO will now be deemed failed, and insurers can anticipate an onslaught of Applications for Arbitration and Statements of Claim.

Cornie v. Security National, 2012 ONSC 905 (CANLII)

Four plaintiffs injured in motor vehicle accidents filed Applications for Mediation, waited 60 days and then requested a mediator's report stating that the mediation had failed because a mediation was not held within 60 days as required by sections 19 and 21 of the Dispute Resolution Practice Code, section 10 of Regulation R.R.O, 1996, Reg. 664 pursuant to section 280(7) of the Insurance Act, R.S.O. 1990, c.I.8, as amended. FSCO declined to issue such a report. Each plaintiff then issued a Statement of Claim for Statutory Accident Benefits.

The defendant insurers brought a joint motion requesting that the Statements of Claim be struck or stayed as mediation had not been conducted and failed. They argued, and the Court agreed, that until there has been a failed mediation the courts have no jurisdiction. However, J. Sloan dismissed the defendants' motion holding that the plaintiffs' mediations had failed because they were not conducted within the 60 day time period prescribed by section 10 of Regulation 664, R.R.O. 1990 and section 19.1 of the Dispute Resolution Practice Code.

J. Sloan found that the 60 day time limit was mandatory. He held that the 60 day time limit begins on the date an Application for Mediation is delivered, not the date a mediator is assigned by FSCO. Finally, J. Sloan noted that FSCO had been backlogged for years and its options were to retain sufficient mediators to comply with the 60 day time period, seek a change in the 60 day time period or ask for some legislative discretion to extend the 60 day period in appropriate circumstances.

Leone and State Farm Mutual Automobile Insurance Company, FSCO A11-002197 (February 10, 2012)

Mr. Leone delivered an Application for Mediation to FSCO under a cover letter dated September 28, 2010. FSCO acknowledged receipt by return letter dated September 30, 2010. Mr. Leone delivered an Application for Arbitration on March 18, 2011; 169 days after FSCO acknowledged receipt of Mr. Leone's Application for Mediation. State Farm argued that Mr. Leone could not proceed to Arbitration because a mediation had not "failed." Mr. Leone claimed that as a result of the delay, the mediation was "deemed to have failed" and he could proceed to arbitration without participating in a formal mediation.

Arbitrator Jeffery Rogers ruled on February 10, 2012 that Mr. Leone's Application for Mediation was filed when it was delivered to FSCO and that mediation was deemed to have failed 60 days after the filing and therefore before he filed his Application for Arbitration.

This conclusion was premised on the definition of "file" found in the Dispute Resolution Practice Code's Rules of Procedure, and found to be consistent with the object of the Insurance Act, R.S.O. 1990, c.I.8, as amended, and The Statutory Accident Benefits Schedule—Accidents on or after November 1, 1996, Ontario Regulation 403/96 as amended.

Notably, Arbitrator Rogers held that any other result would "render meaningless the requirement in the Act and the Rules for the prompt appointment of a mediator". He also noted that the Legislature could not have intended the "absurd result" that an insured person's limitation period to commence a claim could expire while waiting for a mediator to be appointed.