Financial Incentives and Efficiency Concerns: The Test for Catastrophic Impairment in Pastore v. Aviva Canada Inc.

In Pastore v Aviva Canada Inc, 2012 ONCA 642, a unanimous Court of Appeal established a new, lower threshold for catastrophic impairment. The decision also permitted the inclusion of chronic pain in the assessment of mental disorder overturning an earlier Divisional Court decision.

Facts

In this case, the Court was faced with a plaintiff injured in a motor vehicle accident. In 2002, Anna Pastore was hit by a car and fractured her ankle. She had numerous surgeries to fix the fracture. The fracture also changed her gait, which led to further surgery to replace her right knee. Prior to the accident, Pastore was fully independent and acted as a caregiver to her husband. In the aftermath, she became dependent on others to meet her basic needs. In 2005, she applied to her insurer, Aviva, to have her injuries designated as “catastrophic impairment.”

The criteria necessary to receive a catastrophic impairment designation is outlined in a. 2 (1.1) of the Insurance Act, Statutory Accident Benefits Schedule – Accidents On or After November 1, 1996, O Reg 403/96 [SABS].

For the purpose of this Regulation, a catastrophic impairment caused by an accident that occurs before October 1, 2003 is,…(g) subject to subsections (2) and (3), an impairment that in accordance with the American Medical Association’s Guides to the Evaluation of Permanent Impairment, 4^th edition, 1993, results in a class 4 impairment (marked impairment) or a class 5 impairment (extreme impairment) due to mental or behavioural disorder. [Emphasis added]

Chapter 14 of the American Medical Association’s Guides to the Evaluation of Permanent Impairment (“the Guides“) sets out a three-stage process guide for assessing catastrophic impairment. This three-stage process guide is, in turn, based on mental disorder, using four categories of functional limitation: activities of daily living; social functioning; concentration, persistence and pace; and deterioration or decompression in work – like settings. The reference to “a class 4 impairment” in s. 2(1.1)(g) means at least one of the four categories of functional limitation must qualify as a marked impairment to functionality. According to the Guides there are five classes:

Class 1: no impairment; class 2: mild impairment, which “implies that any discerned impairment is compatible with most useful functioning”; class 3: moderate impairment, which “means that the identified impairments are compatible with some, but not all, useful functioning”; class 4: marked impairment, which “is a level of impairment that significantly impedes useful functioning”; and class 5: extreme impairment, which “preclude(s) useful functioning” (para 7).

In the proceedings, a major issue was whether an individual needed to suffer marked impairment (class 4) in all four categories of function to qualify.

Procedural history

Aviva did not believe Pastore was catastrophically impaired. To prove her impairment, Pastore undertook a designated assessment team (“DAC”) assessment conducted by a physiatrist, psychologist, psychiatrist and occupational therapist. She was assessed as having one class 4 impairment (marked impairment) in the activities of daily living and an overall assessment of class 3 (moderate impairment). The DAC found that one marked impairment in function constituted catastrophic impairment.  Aviva did not agree. At arbitration, the delegate affirmed the decision of the DAC. The delegate also took into account Pastore’s physical pain in the assessment of her mental disorder. Subsequently, Aviva sought judicial review of the delegate’s decision at the Divisional Court. The Divisional Court held that the delegate had exceeded his jurisdiction and reversed the decision.

Reasoning

At the Court of Appeal, the appellant raised the question of the most appropriate standard of review.  Following the Supreme Court of Canada decision in Dunsmuir v New Brunswick, [2008] 1 SCR 190, the Court held that the reasonableness standard is the appropriate standard of review. In contrast to the Divisional Court, the Court held that the delegate had the authority to interpret SBAS in determining SBAS benefits. Moreover, the Divisional Court held that tribunal decisions are owed deference by courts.

After establishing reasonableness as the appropriate standard of review, the Court went on to address whetherit was reasonable to find that one impairment at the marked level (class 4) is sufficient for catastrophic impairment designation under s. 2(1.1)(g).The Court held that the interpretation of “a class 4 impairment” in s. 2(1.1)(g) as a single functional impairment at a marked level was “within the range of reasonable, acceptable determinations” (para 50).

Finally, the Court considered the reasonableness of including physically-based pain as “due to” mental disorder in the interpretation and application of s. 2(1.1)(g). At arbitration, Aviva made three arguments against including Pastore’s physical pain in the assessment of her mental disorder. First, Pastore’s pain was caused by her physical injuries and should not be included in the assessment of pain “due to” her mental disorder. Second, Pastore’s mental disorder was a response to her physical limitations. Third, Pastore’s physical pain was already assessed, so factoring physical pain into an assessment of her mental disorder constituted a double count.

The delegate held that meeting the statutory test outweighed any medical or non-statutory factors against a finding of catastrophic impairment (Liu v 1226071 Ontario Inc, 2009 ONCA 571). To qualify as catastrophically impaired there must be a mental disorder. In this case, pain disorder must be associated with psychological factors and a general medical condition, rather than proof of mental impairment. The fact that Pastore’s impairment was physical did not preclude her from qualifying under s. 2(1.1) (g).

While the delegate did not follow the Guides, the Court found that the delegate engaged in a multi-disciplinary approach recommended in the Guides for borderline cases like the one at bar. On this basis, the Court found that the delegate’s decision to include physical pain was reasonable.

The Court of Appeal reversed the Divisional Court’s decision and upheld the delegate’s assessment that Pastore met the criteria for catastrophic impairment.

Financial Incentives

The difference in financial support between individuals granted and denied catastrophic impairment designation is profound. While the limit on the amount of compensation for non-minor accidents is $100,000, the limit for those who are catastrophically impaired increases to $1,000,000 (s. 19(1)). Moreover, catastrophically impaired individuals are entitled to the reasonable and necessary costs incurred by family members who care for the individual after their accident beyond the 104 weeks provided otherwise (s. 21(1-3)). The Act is structured to create a high risk, high reward scenario for injured individuals and insurance companies.

The Balancing Act

At the tribunal, the delegate argued that requiring marked impairment in all four areas of functioning was contrary to “the intent and to the plain wording of the Schedule” and would result in “depriving much needed enhanced health care benefits to accident victims in greatest need”  (para 41). On the one hand, Pastore’s injuries and need for financial and medical support are evident. On the other hand, the threshold to meet catastrophic impairment was designed to be high. In the SBAS, other criteria to meet include: s. 2 (1.1)(a) paraplegia and quadriplegia, (b) loss of use to both arms and (d) complete blindness to both eyes. The Court’s decision also loosened the requirements needed to meet the highest degree of harm recognized under the SBAS.

Efficiency Concerns

Pastore’s accident happened 10 years ago. Her claim has been active for 7 years and further appeal is possible. The delay is burdensome to the plaintiff (who will have required intensive medical care throughout the litigation process) and creates uncertainty and inefficiency for the insurance industry. In an ideal system, the Act would provide enhanced benefits to those with more than non-minor injuries and less than catastrophic impairment.  In the interim, we can expect more litigation to clarify who should qualify as catastrophically impaired in the future.