What Exactly Constitutes A “Denial” From An Insurance Company? A Review Of The Law

Insurance Claim

In Ontario, everyone who operates a motor vehicle on public roads is required under the law to be insured. We assume that automobile insurance is for our benefit. We expect insurers to hold up their end of the bargain which is, in exchange for the insured person’s payment of the insurer’s monthly premium, the insurer will cover the insured’s costs in the event of a collision. However, in practice, it does not always work as smoothly as in theory.

Anyone who has had to deal with auto insurers in Ontario is no stranger to “denials”. Auto insurers routinely deny or refuse to cover a wide variety of requested costs, including medical costs. This is where the lawyer for the insured person comes in to dispute these denials.

The question of what a “denial” exactly is would seem to be straightforward, however, this subject has been at the forefront of much litigation in the courts and tribunals.

Section 56 of the Statutory Accident Benefits Schedule, a regulation under the Ontario Provincial Insurance Act which governs the process of claiming no-fault accident benefits in Ontario, states: An application under subsection 280 (2) of the Act in respect of a benefit shall be commenced within two years after the insurer’s refusal to pay the amount claimed.

Section 280 mentioned above refers to the section in the Insurance Act which allows insured persons to bring an Application (or a “claim”) to the Licence Appeal Tribunal (“LAT”) to resolve a dispute regarding a denied benefit.

These sections, taken together, mean that an insured person has two years from the date of denial of the requested benefit to dispute the denial. Technically then, this means that the clock does not start running until the denial is actually made, and made properly. The denial has to meet certain criteria to be considered a proper denial.

In the Supreme Court of Canada decision of Smith v. Co-operators General Insurance Co. (2002 SCC 30), the Court held that a denial has to be made in clear language that is understood by laypersons, not just lawyers. The denial has to be unequivocal, provide reasons, and the denial must also outline the insured person’s right to dispute the denial, including a short overview of the dispute resolution process that the insured person has to take.

This was beautifully summarized in the 2020 LAT decision of Y.G. v. TD General Insurance Company. Adjudicator, Asad Ali Moten held at paragraph 13, citing Smith v. Co-operators, that: What, then, constitutes a denial? A denial must be in writing and be clear and unequivocal. The Supreme Court of Canada stated that a denial must (i) be straightforward; (ii) be in clear language; (iii) provide information about the different stages of the dispute resolution process, comprehensible by the lay person; and (iv) include information about relevant time limits.

This principle in Smith was also elaborated on in the previous 2017 Financial Services Commission of Ontario decision of Entehabu Berhe v. Security National Insurance Co., where Member, Paulina Gueller held:…The denial date cannot be ambiguous. It is well established law that two requirements must be met: 1) the refusal must be clear, unequivocal and include reasons, and 2) the insured person must be informed of his or her right to dispute the Insurer’s refusal to pay benefits. Failure to meet either test—i.e. the refusal is not clear or unequivocal, or the Insurer failed to explain the Insured’s right to dispute as set out in Smith v. Co-Operators—is sufficient grounds to invalidate the refusal. The onus is on the Insurer to demonstrate that its refusal met these requirements.

In the 2017 LAT decision of M.A. v. Intact Insurance Company, Adjudicator, Thérèse Reilly, at paragraphs 26 to 31, held that both parts of the two-part test must be met for a denial to be considered proper. In that case, the applicant had received a letter from the respondent insurer, stating that “No benefit will be payable until you participate in a rescheduled examination”. She found that this was not clear and unequivocal, and that the wording in this denial merely suspended the benefit as opposed to terminating it. She states in her decision, “this signalled to the applicant that there was a possibility of payment and the insurer had not made a final determination that the benefit was not payable”. She then held that, while part (2) of the test had been met in that the Respondent outlined the dispute resolution options, part (1) was not met, and therefore, The denial is not clear and unequivocal and does not start the running of the limitation. The two year time limit did not start because the refusal [of] said payment would be reconsidered, once the insured re-attended an IE… Accordingly, the applicant is not statute barred from pursuing their claim…

Taking these cases together, one can then argue that, in the case of a denial that did not meet these requirements, such a denial would therefore be improper, and the 2-year limitation clock would have never actually begun to run.

If you are facing denial after denial from your insurance company as a result of a car accident, it is important to act fast to dispute those denials and to fight to ensure that the insurance company holds up their end of the bargain.

To consult with a lawyer who has experience dealing with denials from insurance companies, please contact our team at JEWELL RADIMISIS JORGE LL.P for a free initial consultation at 1 (855) 546-2525.

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