Arbitrator Awards Attendant Care

David McMichael was a passenger in a taxi that was hit broadside in June of 1998. He was thrown through the rear windshield of the cab and sustained multiple serious injuries including an evulsion skull fracture.

He made an accident benefit claim to Belair Insurance Company under the Statutory Accident Benefits Schedule (SABS). Belair paid various benefits including income replacement benefits (IRBs). IRBs were terminated in November 2002 based on a Disability DAC (a DAC is an independent assessment performed at a Designated Assessment Centre). McMichael filed for mediation and then arbitration.

McMichael also claimed attendant care benefits (AC) from April 2002 ongoing, and sought a finding from the arbitrator that he suffered a catastrophic impairment.

There were several days of hearing in 2004 and David Muir, arbitrator, Financial Services Commission of Ontario, delivered his reasons on Mar. 2, 2005. He noted McMichael was paid AC expenses for a period of time after the accident, initially provided by his wife, then a sister and later by outside help; however, within months of the accident McMichael was able to provide for many of his own personal care needs and AC was no longer required.

McMichael’s complaints at arbitration were both physical and psychological/cognitive, but the debate mainly centred on whether McMichael’s current cocaine addiction was causally related to the motor vehicle accident. It was this addiction, primarily, that formed the basis of his position that he was catastrophically impaired and therefore entitled to AC and IRBs. Belair’s position was that he was a cocaine abuser before the accident and that he had no further entitlement to either benefit.

McMichael’s blood was tested in the hospital after the accident and showed consumption of alcohol and cocaine.

“Discovering the truth of Mr. McMichael’s substance use and/or abuse in the years prior to the accident is complicated by the fact that Mr. McMichael has said quite different things about it at various times since the accident. This lack of clarity or candour on Mr. McMichael’s part has, at a minimum, fuelled suspicion about his claims,” Muir wrote. “Mr. McMichael is an unreliable historian and it is difficult to give much credit to what he has to say about his drug use,” Muir continued, also finding that McMichael and his wife may have underestimated the frequency of his pre-accident cocaine use. The arbitrator concluded that McMichael had a long history of cocaine use, beginning in his late teens, peaking in his early 20’s, and that he was “a recreational user” in the years leading up the accident.

The arbitrator found that McMichael was an active family man prior to the accident, enjoyed sports on a very regular basis, visited his mother and three sisters regularly, maintained steady employment and met his sales targets.

McMichael testified that he used crack cocaine for the first time after the accident after his failed attempt to return to work in October of 1998. Beginning sometime in late 1998, McMichael was unable to abstain from using crack cocaine for more than a few days or weeks at a time and was a binge user, the arbitrator wrote.

“Mr. McMichael pays for his drugs with his CPP disability pension payments as well as an annuity from the tort settlement. This is not enough, and Mr. McMichael has had to find drug money elsewhere. Mr. McMichael has sold all of the jewelry he bought his wife over the years, including her engagement ring and wedding band . . . He has stolen from his mother, Dr. Berry and others who were not identified. He has stolen from complete strangers. He has emptied the family bank account on at least two occasions. At times he has physically abused his wife, demanding she give him money for drugs,” Muir wrote. Further, he gave up sports, became estranged from his son, made his wife’s life a “living hell” and failed in three attempts to return to work.

A CAT DAC completed in April 2002 by an independent assessment team consisting of six medical specialists concluded that McMichael did not meet the criteria for catastrophic impairment. However, the arbitrator, in rejecting the DAC’s conclusion, found that the CAT DAC team had relied too much on clinical testing, had failed to review collateral material such as examination for discovery transcripts, had failed to consider addiction per se, as a disabling impairment, and had failed to require that a workplace assessment be conducted.

In allowing McMichael’s claim for IRBs from November 2002 and ongoing, the arbitrator commented that McMichael’s entitlement to IRBs after 104 weeks rested almost entirely on the fact and consequences of his addiction to crack cocaine. The arbitrator concluded that the drug addiction was a direct consequence of the injuries sustained in the accident.

On the issue of past AC, McMichael’s position was that he did not get the services he needed because Belair refused to pay for them. Belair’s counsel argued that these were not “incurred” expenses the insurer should have to pay because McMichael did not receive, pay for or incur a debt or obligation to pay for AC.

To support his claim for AC at arbitration, McMichael relied on a report and Form 1 dated March 2002 completed by an occupational therapist retained by McMichael. The OT recommended round-the-clock attendant care at the rate of $7 per hour, for a total of $5,056.80 per month to assist McMichael to remain drug free at least until such time as he could be admitted to an in-patient drug rehabilitation program.

However, despite his participation in several drug treatment programs, McMichael “has failed to stay clear of crack cocaine . . . ” according to the arbitrator. He relapsed within days of his discharge from an in-patient program and was “essentially incapable of attending the out-patient programs,” Muir wrote. Despite this, the arbitrator ordered that McMichael was entitled to an AC benefit of $5,056.80 per month from April 2002 and ongoing, plus interest.

Belair’s appeal to Nancy Makepeace, the Office of the Director of Arbitrations at FSCO, was dismissed on Mar. 14, 2006. Belair submitted an application for judicial review (on the issue of past AC from April 2002 to February 2005) of Makepeace’s decision to the Ontario Divisional Court, which was dismissed by Justices Lane and Swinton May 17, 2007.

Makepeace commented in her reasons that if McMichael recovers from his addiction and no longer requires AC that Belair could apply for revocation or variation of the order; if a relapse then followed, McMichael could apply to have his AC benefits reinstated.

Overall, this case left a bad taste in my mouth for several reasons: The arbitrator’s finding that this was a catastrophic impairment caused by the accident; the arbitrator ordering the insurer to write a cheque for over $175,000 plus interest for past attendant care services that were never performed to an abuser of illegal drugs; the lack of any evidence that McMichael’s “self-medication” with crack-cocaine was prompted by any refusal by Belair to authorize proper and necessary medication; and the strong feeling that justice had not been done at FSCO or by those reviewing the arbitrator’s decision. Moreover, there is a fundamental flaw in the Arbitrator’s interpretation of what can and should be an “incurred” expense.

Muir wrote with respect to AC expenses claimed, “It is well established that an applicant need not actually receive the items or services claimed in order to be entitled to an expense. To do otherwise would allow the insurer to set up the inability of an insured to pay for a benefit as a shield from its obligation under the policy of insurance. It is sufficient that the reasonableness and necessity of the service be established and that the amount of the expenditure can be established with certainty.”

Did the evidence (disclosed in the arbitrator’s reasons) meet this standard? I suggest that it did not. The arbitrator relied on the Form 1 and the report of the occupational therapist , which did not specify who would perform the services, but provided, “In an effort to assist Mr. McMichael to remain drug free, he requires immediate intervention via ongoing supervision either by family, friends or an ‘attendant’.”

While the arbitrator referred to McMichael having physically abused his wife, he didn’t say if his wife had the ability or willingness to supervise McMichael (even though she testified at the hearing). His reasons also referred to McMichael having ended contact with most of his birth family, except for his mother whom he still saw regularly. We don’t know if any of his relatives would have been willing or able to carry out the AC services. Was it possible to hire effective “attendants” for the $7 per hour fee recommended by the occupational therapist? Did the family make inquiries? We don’t know. There is nothing in his Muir’s reasons to suggest he had directed his mind to any of these critical points before concluding that these were “incurred” expenses and that the insurer must pay.

It’s not enough, when claiming “incurred” expenses at arbitration, to simply say, “If you had given me the money, I could have found appropriate help.” The evidence fell far short of establishing the expenditure with “certainty.”

If an insured claims to be catastrophically impaired, CAT assessments cost the insurer many thousands of dollars; however, the actual determination by an arbitrator or judge that someone is catastrophically impaired has even bigger financial implications. (A catastrophic determination enhances the benefits that an insured can receive, although it does not entitle the insured to any particular benefit.) Attendant care payments are generally capped at $72,000, and med/rehab at $100,000, but the cap is raised to $1 million in each category if there is a catastrophic determination. Similarly, housekeeping and income replacement benefits can be payable for life for the catastrophically impaired.

Belair filed an Application for Variation in April of 2007 on the basis that there has been a material change in McMichael’s circumstances with regard to his apparent need for attendant care. According to Arbitrator Joyce Miller in a recent decision on a preliminary issue, Belair has submitted, in its variation application, that it has surveillance of McMichael showing him being active without attendant care contrary to arbitrator Muir’s decision that McMichael requires round-the-clock attendant care.

If I were a Belair policyholder, this case would have me feeling that my pocket had been picked. A favourable ruling for Belair in the upcoming variation application would help alleviate that feeling — but only very slightly.

Donna Ford is a chartered insurance professional, member of the Law Society of Upper Canada, and a freelance writer who worked for years in the insurance industry.