Insurer must accept AB application filed 2 years after the accident

Mrs. R. was hurt in a car accident on July 17, 2005. She only placed State Farm on notice of her claim on December 17, 2007, following an episode of severe back pain. The notice was received by State Farm well outside the requirements of section 31 of the SABS which obliges an insured to give notice of any claim within 7 days following the collision or as soon as practicable.

At the time of the collision, Mrs. R. was providing 24/7 attendant care to her husband who had sustained a severe brain injury in a 2001 motor vehicle accident. As a result, Mrs. R. developed depression, anxiety and sleep disruption to the extent that, by the time of her own collision in 2005, she was caring for her husband without any regard for her own well-being. Mrs. R. testified that she did not have the mental/emotional wherewithal to pursue an Accident Benefits claim or treatment for her own injuries until after her husband’s claims had settled.

State Farm denied Mrs. R.’s claim for benefits by relying on the 7-day notice requirement. In response, Mrs. R. argued that State Farm could not deny her benefits as she had a reasonable explanation (under section 31 of the SABS) for her failure to notify State Farm of her claim within 7 days after the accident.

In her decision, Arbitrator Alves identifies the following principles concerning the “reasonable explanation” requirement under section 31:

• The explanation must be determined to be credible or worthy of belief before its reasonableness can be assessed.
• The onus is on the insured person to establish a “reasonable explanation”.
• Ignorance of the law alone is not a “reasonable explanation”.
• The test of “reasonable explanation” is a subjective and objective test that should take into account the personal characteristics and a reasonable person standard.
• The lack of prejudice to the insurer does not make an explanation automatically reasonable.
• An assessment of reasonableness includes: a balancing of prejudice to the insurer, hardship to the claimant, and whether it is equitable to relieve against the consequences of the failure to comply within the time limit.

Mrs. R. was an extremely credible witness at the hearing. She gave detailed evidence of her husband’s condition and the impact it had on her and her son. She filed the clinical notes and records of her treating psychologist and an IE assessor’s report which concluded that her emotional state was causally related to the care she provided to her husband.

State Farm did not adduce any evidence or make submissions to establish that it suffered prejudice as a result of Mrs. R.’s delay. The Arbitrator accepted that prejudice is inherent given the passage of time. However, in this case, Arbitrator Alves acknowledged that while a 2-year 5-month delay was significant, it was not enough to establish prejudice.Arbitrator Alves found Mrs. R.’s explanation for the delay both credible and reasonable and allowed Mrs. R. to proceed with her claim.

The decision in S.R. v. State Farm F.S.C.O. A09-002171 is applicable in all instances where an insured has failed to meet a time limit imposed by the SABS except the 2-year limitation period for mediating and litigating denials. It demonstrates that even where there has been a lengthy delay, the insured is not automatically disentitled to the benefit. While the burden is on the insured to prove that a “reasonable explanation” exists, it is clear from this decision the existence of collateral evidence, such as detailed record keeping by the treatment team is very important to the insured’s success.