The Ontario Court of Appeal has allowed Allstate’s appeal from the Divisional Court decision in Varriano v. Allstate Company of Canada.
The claimant, Nunzo Varriano, was injured in a motor vehicle accident on September 30, 2015, and paid IRBs from October 7, 2015, until he returned to work. On December 30, 2015, Allstate provided Mr. Varriano with and Explanation of Benefits that stated:
Your Income Replacement Benefit has been stopped on December 2, 2015, as you returned to work fulltime on December 2, 2015. No further Income Replacement will be paid after this date.
This was the only reason given for the stoppage of the IRB. More specifically, no medical reasons were provided.
Mr. Varriano continued working until July 2018. He filed an application with the LAT on September 28, 2018, disputing the denial of his IRB. Allstate took the position that Mr. Varriano’s application was limitation barred, having been filed more than two years after the denial of December 30, 2015. At a preliminary issue hearing Adjudicator Boyce found that Allstate’s letter met the requirements of the SABS and the principles established by the SCC in Smith v. Cooperators General Insurance Co., 2002 SCC 30  2 S.C.R. 129, for a valid denial. The Application was statute barred. This decision was upheld on Reconsideration.
On appeal to the Divisional Court, it was held that Adjudicator Boyce erred in his interpretation of s. 37(4) of the SABS, finding that the phrase “medical and any other reasons” required the Insurer to provide BOTH medical and other reasons. The Divisional Court found that this requirement met the purpose of the notice provisions of the SABS and was consistent with the requirement that insurance coverage provisions be interpreted broadly.
In a decision released on February 5, 2023, the Court of Appeal disagreed with the Divisional Court ruling, finding the lower court made two key errors in its approach to interpreting s. 37(4).
First, the ONCA found that the Divisional Court’s interpretation did not accord with the modern principle of statutory interpretation, which requires statutes to be read “in their entire context and in their grammatical and ordinary sense harmoniously with the scheme of the Act, the object of the Act and the intention of Parliament” (Rizzo & Rizzo Shoes Ltd. (Re),  1 S.C.R. 27.
When read contextually, the ONCA found the word “and” in “medical and any other reasons” was intended in its joint and several sense and not limited, as the Divisional Court suggested, to just its joint sense. The 2010 amendment which added the phrase “medical and any other reasons” codified the underlying purpose of the notice provision set out by the SCC in Smith, and by the ONCA in Turner v State Farm Mutual Automobile Insurance Co., (2005) 195 O.A.C. 61 (Ont. C.A.), to provide a sufficient reason(s) for the denial which permits the insured to decide whether or not to challenge the denial of benefits.
Secondly, the ONCA found that the Divisional Court erred in finding that s. 37(4) was an insurance coverage provision.
The ONCA also stated that it is important to note that s. 37(4) specifically states that the insurer may rely on “any one or more grounds set out in s 37(2)” in terminating benefits, such that the Divisional Court’s interpretation is not harmonious with sections 37(2) and 37(4) of the SABS, and particularly s. 37(2)(g), which states:
(g) The insured person is not entitled to the specific benefit for a reason unrelated to whether he
or she has an impairment that entitles the insured person to receive the specified benefit. [emphasis added]
This settles the issue of whether an insurer has to provide a medical reason to deny a specified benefit pursuant to s. 37. The answer is No. However, it is less clear if this answers the question of whether an insurer must provide “medical AND any other reasons” (plural) for denying benefits under the many other sections of the SABS that use this phrase but do not contain the same contextual language seen in s. 37.
In any event, when defending a “medical and any other reasons” dispute, insurers can, and should, avail themselves of the same arguments that the word “and” should be interpreted in both its joint and several grammatical meaning, as well as the fact that a single medical OR other reason can be sufficient to meet the purpose of the notice provisions.
See Varriano v. Allstate Insurance Company of Canada, 2023 ONCA 78 (CanLII).
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