Medical Reasons Required to Terminate Income Replacement Benefits
The Divisional Court’s decision in Varriano v. Allstate, 2021 ONSC 8242, demonstrates the importance of insurers providing medical reasons for terminating income replacement benefits in statutory accident benefits claims.
Allstate paid the claimant income replacement benefits between October 7, 2015 and December 2, 2015. On December 30, 2015, Allstate sent to the claimant an Explanation of Benefits form indicating: “Your Income Replacement Benefit has been stopped on December 2, 2015, as you returned to work full-time on December 2, 2015. No further Income Replacement will be paid after this date”.
On July 1, 2018, the claimant advised Allstate that he was forced to stop working because of his injuries arising from the motor vehicle accident. Allstate denied his claim for further income replacement benefits, referring to its previous Explanation of Benefits.
At the Licence Appeal Tribunal, the adjudicator held that Allstate’s termination of income replacement benefits was proper and that Allstate was not required to provide medical reasons. The adjudicator further held that the limitation period had expired for the claimant to pursue income replacement benefits.
The Divisional Court overturned this decision on appeal. The Court held that the correct interpretation of section 37(4) of the Statutory Accident Benefits Schedule requires insurers to advise insured persons of the medical reasons for the determination to discontinue income replacement benefits. The provision in question refers to “medical and any other reasons”, and the court indicated that the word “and” is to be read conjunctively.
The Court indicated that an insured person will not be able to assess the full impact of a stoppage of benefits if they are not provided with current and ongoing disclosure of the insurer’s position on their disability or medical impairment.
Since Allstate’s denial did not contain medical reasons for stopping income replacement benefits, the Court held that the claimant was not able to assess the full impact of Allstate’s denial on his future rights.
As a result, the Court concluded that the termination of benefits was invalid and that Allstate’s Explanation of Benefits did not trigger the running of the limitation period.