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Technicalities, Be Gone: Moving Past and Looking Beyond the “Deemed Incurred” Provision of the SABS

By: Mouna Hanna, Reisler Franklin LLP, Toronto

Sadozai and State Farm, (P16-00002, February 22, 2017)watch full Colossal film

The Appeal decision of Director’s Delegate David Evans in Sadozai and State Farm (P16-00002, February 22, 2017) reinforces the principle that an insured must still prove that a Treatment Plan is reasonable and necessary, even if an insurer fails to respond within the timelines prescribed by section 38(11)2 of the SABS.

At issue on Appeal in Sadozai was payment for a Treatment Plan requesting an In Home Assessment. The Treatment Plan was submitted and State Farm failed to respond within 10 business days, per section 38(8) of the SABS. The Treatment Plan was allegedly incurred prior to State Farm responding with a denial.

Based on the evidence presented at the Arbitration, the Arbitrator found that the Applicant failed to prove that the Treatment Plan was necessary or that he required an In Home Assessment. The issue of the Treatment Plan being “deemed incurred” by operation of Section 38(11)2 was never argued or put to the Arbitrator (other than one phase in the Applicant’s counsel’s opening submissions that State Farm did not deny payment for the Treatment Plan). More importantly, however, is that Director’s Delegate Evans went further to explain that even if this argument had been made, Treatment Plans are still subject to a reasonableness test. Director’s Delegate Evans relied on Arbitrator Wilson’s decision in Ying Al Chen and State Farm (A13-003892, May 30, 2016) in reminding us that the SABS is not a lottery for treatment providers where the prize is the deemed approval of a meritless treatment plan. “Reasonable and necessary” are the pre-conditions before an insured can claim indemnity from an insurer.

Unfortunately, prior recent FSCO/ADR Chambers decisions had completely ignored any discussion of whether a treatment plan was reasonable and necessary in favour of applying a strict, technical approach to section 38(11)2 (and the similar provision of the SABS 403/96).1 Slowly, the pendulum starting swinging in the other direction, and Arbitrators started recognizing that insureds, treatment providers and treating facilities should not be allowed to benefit from technicalities, particularly when there is a lack of a clinical indication for why the treatment plans were being submitted.2

Whether the LAT will follow cases like the Appeal in Sadozai, and the Arbitration decision in Chen remains to be seen, although the decision of R.H. and TD Insurance Meloche Monnex (16-000634/AABS, January 17, 2017) suggests that insurers may have to start from scratch in steering Adjudicators away from applying a strict approach to section 38(11)2. We note, however, that the case of R.H. and TD Insurance deals with a MIG determination and may have been considered differently given the benefits at stake. Insurers should take this opportunity to build the foundation, and remind LAT Adjudicators that section 15 of the SABS will always apply and will always be the starting point of any discussion regarding medical benefits, which “shall pay for all reasonable and necessary expenses incurred by or on behalf of the insured person as a result of the accident”. The pre-conditions of “reasonable and necessary” are built right in and should be the first step to an evaluation of whether a treatment plan should be payable, even before we look at how the insurer responded.

1 See for example Lin and State Farm (A12-007466, June 23, 2015) and Li and State Farm (A13-004272, January 29, 2016)
2 See for example Jing and State Farm (A12-005871 & A12-005862, January 15, 2016) and Huang and State Farm (A13-003584, January 25, 2016)

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