Case law :

This case is very important with regards to how rule 5(1) of the Fault Determination Rules
(“FDRs”) is interpreted.

Background

The subject accident occurred on May 1, 2009. A car insured by Aviva made a left-hand turn
across the path of an oncoming motorcycle insured with State Farm. The motorcyclist lost
control and fell. There was no actual collision between the vehicles but as a result of the
actions of the left-turning driver, the motorcyclist swerved and lost control.

The Arbitrator heard the oral testimony of both drivers and also had before her the
transcripts of the examination for discovery of the drivers. She weighed the evidence and
made the following findings of fact: 1. The motorcyclist had a clear right of way; 2. the
motorcyclist did not have a full view of the intersection and there was no evidence that the
motorcyclist was travelling at a speed faster than 30 km per hour; 3. the left-turning driver
did not see the motorcyclist before making his left turn although “it was clear the
motorcyclist was there to be seen”; and 4. there was no impact but as a result of the actions
of the left-turning driver the motorcyclist lost control.

Issue

The arbitration proceeded on the basis that fault was to be determined based on rule 5(1) of
the FDRs but the parties were divided as to how the rule was to be interpreted and applied.

The analysis

Rule 5(1) of FDRs states that if an accident is not described in any of the rules the degree of
fault of the insured shall be determined in accordance with the ordinary rules of law. Rule 3
of the FDRs states that the degree of fault of the insured is determined without reference
to the circumstances in which the incident occurs, including weather conditions, road
conditions, visibility or the actions of pedestrians. Further, according to Rule 3, the degree
of fault is determined without reference to the location on the insured’s automobile of the
point of contact with any other automobile involved in the incident.

The Arbitrator concluded that Rule 5(1) calls for an analysis that is distinct from the
approach required in a pure tort analysis. The FDRs are a complete code referenced in s.
275 of the Insurance Act and any fault determination must be informed by Rule 3 which is an
umbrella provision. The Arbitrator stated the Highway Traffic Act and the case law should
not be ignored; she took note that rule 12(5) of the FDRs dictates a finding of 100 percent
fault on the part of the left turning vehicle where there is a collision between the
vehicles. The Arbitrator stated that if this case were to be considered in the context of a tort
action some contributory negligence might be attributed to the motorcyclist based on Nash
v. Sullivan; however, based on her analysis of the loss transfer provisions she found the left-
turning driver 100 percent at fault.

The Arbitrator’s decision was successfully appealed by way of application. The application
judge held that the Arbitrator erred in law when she disregarded the circumstance that
there were cars stopped to the motorcyclist’s left as he approached the intersection. The
application judge held that the motorcyclist was 50 percent liable for failure to stop when
there were vehicles stopped to his left. State Farm appealed to the Ontario Court of
Appeal, arguing that the application judge committed an error in finding that the
motorcyclist was not alert. The Ontario Court of Appeal agreed with State Farm.

The Ontario Court of Appeal enunciated that because the case was not described in any of
the FDRs, rule 5(1) applied. Further, the OCA stated that the “ordinary rules of law” did not
mean the “ordinary rules of tort law” . Resorting to a tort analysis would run contrary to the
purpose of the loss transfer scheme. A tort analysis is contrary to s. 275(2) of the Insurance
Act which states that fault is determined by the FDRs and the FDRs are a complete code in
loss transfer. Using the principles of statutory interpretation, if the legislature wanted fault
to be determined based on tort law, the word “tort” would have been included in rule 5.

Take away:

This decision recognizes the purpose of the loss transfer regime, that being to be more
efficient and expedient. It is a good case in face of arguments on behalf of insurer on the
other side of the file trying to introduce arguably “clever” arguments in face of a clear fact
scenario where the circumstances of the accident fall squarely into one or more FDRs.
In Shaun Edwards v. Optimum Frontier Insurance Company (FSCO A05-002085), the
Applicant was involved in an MVA on March 12, 2003. On September 9, 2005, the Applicant
applied for arbitration. On October 4, 2005, the Applicant and the insurer settled the
Accident Benefit Claim on a full and final basis for $33,000.00. The Applicant was
represented by counsel at all material times during that period.

There seems to have been numerous questionable aspects to the Applicant’s claim, prior to
settlement:

 The Applicant was involved in a 1989 workplace accident and began to receive both
WSIB benefits and CPP disability; he never returned to work
 His family doctor’s CNRs showed that the Applicant was assessed as “approximately
at the same level as he was formerly” before the subject MVA
 His family doctor “fired” the Applicant (having been his doctor since 1993) in 2005:
while in the exam room with the Applicant, his doctor phoned his receptionist who
came into the room with a letter which the doctor presented to the Applicant,
stating that he no longer wanted the Applicant as a patient, and told him to leave
 The Applicant was reported in several assessments at smoking marijuana twice per
day, drinking 4-5 alcoholic beverages per day, and taking a large amount of
prescription medication
 The Applicant underwent a “laminectomy” [removal of the covering of the spinal
canal to relieve pressure] on September 7, 2005 – prior to the initial application for
arbitration, and prior to the settlement. The insurer apparently only indirectly
learned of the back surgery through an OCF-6 submission for hotel expenses related
to same – and the insurer was only advised by then Applicant’s counsel that he was
scheduled to undergo surgery. The Applicant never sent any documentation to the
insurer after his back surgery.

Oddly, though, it seems that the Applicant’s counsel in 2005 failed to provide medical
documentation, including what would have contained the above evidence. It was not
known why the Applicant’s counsel at that time recommended settlement, as he did not
testify at the 2015 Arbitration.

Regardless, on August 4, 2012 the Applicant wrote to his insurer seeking to rescind the full
and final settlement. He took out a loan from LawPro to repay the settlement amount. On
June 12, 2013, the official notice of rescission was issued and the settlement funds returned
to the insurer. This occurred pursuant to the March 2012 FSCO decision of Parveen v. Aviva
Canada, which held that an Applicant could rescind a full and final settlement upon full
repayment of the settlement funds received from the insurer.

As at the start of the 2015 Arbitration, the insurer had paid all amounts to which the
Applicant was entitled to that date. Those amounts were not discussed in the
decision. However, the insurer had paid interest from the rescission date (June 12, 2013) to
the date of payment.

Also of note, at the outset of the 2015 Arbitration, on consent of the parties, an Order was
issued for the insurer to pay Non-Earner Benefits on an on-going basis. The rationale for
same was never addressed in the decision.

There were therefore only two live issues to be decided by Arbitrator Musson:

1. Whether interest was due to the Applicant from the date of the accident for
overdue benefits; and
2. Whether the Applicant was entitled to a special award.

Interest

It was held that interest flows from an overdue benefit; and for a benefit to overdue,
entitlement must be established. It was further held that interest may not run when the
insurer is prevented from determining entitlement to a benefit – and, in this matter, the
only way for the insurer to know that it owed benefits was for the file to be active. Indeed,
“[i]t is not without reason for an Insurer to expect that once a file has been settled, by
definition, all funds have been paid, and by agreement, the file is closed”. But, “[o]nce
rescission occurs,…the Insurer is aware that the file is active and as such must be responsible
for interest from that time moving forward.” Arbitrator Musson concluded with the
statement that “there were numerous issues that unfairly prevented the Insurer from
properly evaluating the claim on an ongoing basis, mainly the Applicant’s prior lawyer
withholding information which would have brought new light to the Applicant’s case.”

It was therefore held that interest only ran from the date of the rescission of the settlement
– which the insurer had already paid.

Special Award

The Applicant’s counsel argued that the insurer should have seen short-comings in doctors’
reports, reliance was placed on questionable medical evidence, and that the terminations of
benefits were improper. Arbitrator Musson held that the Applicant had a responsibility to
be actively engaged in his accident benefit file management. He had a “sound mind” and
functioned at a high level. He had a lawyer of his choosing representing him. There was “no
excuse as to why he or his lawyer never spoke to his insurance adjuster regarding his
concerns relating to his file.”

It was held that “a claim for a Special Award must come down to the Applicant showing that
an Insurer has not treated the Applicant to the best of their ability in good faith”. To make
that assessment, relying on hindsight was not appropriate; but rather, it must be viewed
based on information that was available at the time of the settlement. Earlier in the
decision, Arbitrator Musson held that the insurer had every right to believe that the case
was settled the moment the settlement cheque was deposited and the full and final
settlement agreement filed.

Additionally, while the Applicant’s new counsel attempted to argue an adverse inference
ought to be drawn for the insurer not calling the original adjusters on the file, Arbitrator
Musson held that it would have been nearly impossible to do so; and of limited value given
the 10 years since the file had been settled.

It was held that “[u]ltimately, the most important factor in denying the Applicant’s claim for
interest and a Special Award is that the Applicant failed to prove his case with the evidence
submitted at the Hearing.”

Expenses

The insurer was granted its costs in amounts to be either agreed or assessed.
QUOC NGUYEN AND TD HOME AND AUTO
By Thelson Desamour

This matter had 23 days of hearing between August 12, 2013 and February 2014, at the
Financial Services Commission of Ontario before Arbitrator Alan Mervin, as a result of an
accident which occurred January 14, 2003. The decision was issued on December 24, 2015.

ISSUES IN DISPUTE:

1) Has Mr. Nguyen suffered a catastrophic impairment as a result of a motor vehicle

accident dated January 14, 2007;
2) Is Mr. Nguyen entitled to Income Replacement Benefits from February 4, 2004 and
ongoing;
3) Is Mr. Nguyen entitled to housekeeping and home maintenance benefits;
4) Is Mr. Nguyen entitled to attendant care benefits in the monthly amount of $487.62
from May 22, 2008 to date and ongoing; and
5) Is Mr. Nguyen entitled to a special award with respect to the claim for Income
Replacement Benefits and if so to what quantum.

Very little evidence and time was spent discussing the mechanics of the subject accident and
whether or not there was causation. The Claimant was employed as a cleaner immediately
prior to the subject accident. Mr. Nguyen is Vietnamese and spoke little English. On January
14, 2003, the Claimant was driving his vehicle when he was rear ended by a pick-up
truck. He was taken to the hospital by ambulance and released the same day. The
Claimant claims to have sustained significant soft tissue injuries to his head, neck and back in
the accident. He has not worked since the accident. The Claimant lives with his wife, their
children and grand children.

PARTY POSITIONS
According to his family, Mr. Nguyen mostly stays in his room and watches television. He can
not speak intelligibly and when he tries to speak it consists of utterings mumbling
sounds. When he is hungry he points to his stomach for food, often requiring a family
member to spoon feed him for fear he would otherwise starve. According to his family he
requires assistance toileting for fear he may soil himself. When attending assessments, the
majority of responses where given by his daughter or wife.

In contrast to the evidence put forward on Mr. Nguyen’s behalf, TD Home presented several
days of video surveillance of Mr. Nguyen which were made between 2004 and 2008. The
videos portray demeanour that is markedly different from how Mr. Nguyen presented at
assessments and at the hearing.
Mr. Nguyen’s counsel objected to the admission of the surveillance evidence is based on his
allegation that he was unaware until recently that there had been some handwritten notes
made by some of the investigators at the time the videos were taken and these notes were
not produced.

Arbitrator Mervin decided that the surveillance evidence should be entered into evidence,
as the Claimant was given the written reports as well as video years prior to the
hearing. In addition, the handwritten notes by the investigators did not differ from the
evidence presented. Furthermore, the Claimant was able to cross examine some of the
investigators. Arbitrator Mervin determined based on section 81.1 to admit the evidence.

DECISION
With regards to all the issues in dispute, Arbitrator Mervin also decided in favour of the
insurer.

REASON FOR DECISION

In the hearing, Mr. Nguyen appeared “oblivious and uninvolved” at times. The Claimant’s
counsel asserted that he was catastrophically impaired with limited cognitive abilities. The
Claimant’s wife gave evidence that her husband started talking to himself days after the
accident and would point to his stomach when he was hungry. She gave evidence that he
was home- sedentary and that if he went for walks it was only for about 1.5 hours.

The Claimant’s wife new very little of the surveillance that the insurer had, and appeared to
know little about the places her husband visited on the video. Surveillance footage taken on
August 20, 2004 and August 23, 2004, the Claimant was seen helping someone move and he
was going for over 5 hours on both days.

Arbitrator Mervin stated, “it is difficult to believe that the Claimant’s wife would not be
concerned about her husband’s whereabouts, the length of time he had gone or the fact
that he was driving, given the level of care she claimed her husband required”. Arbitrator
Mervin stated that it appeared the Claimant’s wife was attempting to rationalize the
inconsistency between her evidence and that of the surveillance and as a result found her
answers not credible.
The Claimant’s daughter gave similar evidence and as well as gave evidence that her father
did not drive. However, after viewing the surveillance of her father driving, she commented
that on several of these occasions she was unaware that he had been driving.

The IME doctors for the insurer did not see the surveillance video prior to their assessments,
and seemed shocked by the level of activity portrayed by the Claimant, in comparison with
the reports that they were given about the Claimant’s condition.

Dr. Eisen had given evidence on behalf of the insurer that the Claimant did not have a
catastrophic impairment. Dr. Eisen did view the surveillance and found that the surveillance
evidence supported his view.

Dr. Eisen was taken through the surveillance in detail and asked to explain how the
applicants activities would fit within the four domains of impairment. For example, the
video of the Claimant in a mall carrying on a phone conversation after dialing 35-40 digits
using a calling card to make a long distance phone call. Dr. Eisen’s evidence was that focus,
concentration and organizational skills were all necessary to perform this task and was
evidence of cognitive ability. The Claimant was also seen to drive complex routes using the
400 series highways.

Based upon the clear evidence demonstrated by the surveillance, Arbitrator Mervin found
for the insurer on all issues.

TAKE AWAY: Good surveillance and full disclosure of the same can be a pivotal piece of
evidence which can turn a case in your favour (a picture is worth a thousand words).
This is an appeal decision by Delegate Blackman which rescinds the decision of June 10, 2015
(summary set out below). The matter has been sent back to arbitration for a new hearing by
a different arbitrator. The analysis to grant the appeal is as follows:

1.There is no statutory requirement to access the relief under subsection 3(8) that the
insured person communicate to the first party insurer his or her financial inability to pay.

2.Section 3(8) speaks to the insurer unreasonably withholding or delaying payments.

Subsection 282(1) of the Insurance Act uses the same words. S. 3(8) does not require as a
pre requisite to waiving the paragraph 3(7)(e) incurred requirement that an insurer know
that its insured is impecunious and cannot afford the attendant care services in the Form
1. It is noted that the purpose of 3(8),consistent with 282(10) of the Insurance Act is to,
“punish insurers that unreasonably fail to pay accident benefits promptly” and “deter that
company and others from acting similarly in the future.” The prohibition against an insurer
unreasonably withholding or delaying benefits, as with its positive duty of utmost good faith,
applies to all of its insureds. The decision notes that, “consistent with the legislative intent
of punishing unreasonable insurer conduct, the exercise of adjudicative discretion under 3(8)
of the 2010 Schedule is not restricted to the deserving poor, properly approaching their first-
party insurer, cap in hand, like some waif from a nineteenth century Charles Dickens’
serialized novel. The prerequisite for the application of 3(8) is simply that “an expense was
not incurred because the insurer unreasonably withheld or delayed payment of a benefit in
respect of the expense.” That includes, but is not necessarily restricted to, impecuniosity.

It was found to be an error in law to add a pre condition of the insurer’s actual knowledge of
the insured person’s impecuniosity. It was held to be a further error of law by adding an
additional pre-requisite that the insured person was responsible for clearly communicating
impecuniosity to the insurer. Further, the case states that this was not an exercise of
discretion in accordance with principles of fairness and natural justice. It was the exercise of
discretion based on a wrong principle and resulting in an injustice.

3. If there is an error in finding that 3(8) that there is no pre-requisite that 1) the insurer
knows that its insured was impecunious and could not afford the ATC in the Form 1 or that
2) the insured clearly communicate impecuniosity to the insurer, Delegate Blackman held
that in the absence of supporting evidence and on the basis of conjecture, the Arbitrator
erred in law in finding that the Applicant did not clearly communicate her impecuniosity.

4. The Arbitrator’s decision that it was not unreasonable for the Respondent to take the
Appellant out of the MIG for two years “based upon information received at the PreHearing”
is simply conclusory, and made in the absence of supporting oral or written evidence and on
the basis of conjecture.

5.The Arbitrator erred in law by awarding legal expenses to the Respondent.

It was found to be appropriate to remit the matter back to arbitration for a new hearing, to
be heard by another arbitrator.

The Appellant was awarded her legal appeal expenses of $6,423.19,inclusive of all fees,
disbursements and taxes.
Jody Falcon (Dmytryshyn) v. State Farm Mutual Automobile Insurance Company – Decision
on a Preliminary Issue

Take-Away

An insurer attempts to rely on the limitation period for commencing arbitration (i.e. 2 years
after denial and/or 90 days after Report of Mediator), where the applicant filed for
arbitration more than 4 years after the denial, and 18 months after the Report of Mediator
was issued. The arbitrator found that the insurer could not rely on the limitation due to
improper wording in an otherwise acceptable OCF-9 denying IRB’s. In the letter
accompanying the OCF-9, the insurer emphasized the applicant’s right to submit a rebuttal
report, but did not mention the rights to mediation or arbitration. Although these rights
were referred to in the OCF-9 form itself, the OCF-9 was held to be “equivocal” with regard
to the dispute resolution process, and therefore could not be relied upon. The insurer failed
to inform the insured of the dispute resolution process in straightforward and clear
language, directed toward an unsophisticated person, as required in Smith v. Co-Operators.

Insurers therefore must make sure that their denial letters include reference to the
complete dispute resolution process, including mediation and arbitration, in language that
would be comprehensible to an unsophisticated person.

Background

This preliminary issue hearing stemmed from an MVA that occurred on May 11, 2008. The
main issue was whether the applicant’s IRB claim was statute barred pursuant to the time
limitation period contained in s.281.1 of the Insurance Act and s.51 of the 1996
SABS. Arbitrator Anne Morris concluded that the claim for IRB was not statute barred.

Facts

The dates are of importance in this matter because the central issue relates to timing. The
relevant facts are as follows (though some are slightly unclear):

- The applicant applied for IRB which was paid beginning May 18, 2008.
- The IRB was stopped effective May 18, 2009 following a s.44 examination.
 - The insurer sent out two OCF-9’s, both dated April 17, 2009 related to the stoppage
of IRB , one of which included a letter setting out the rebuttal examination process,
and the other did not.
- The applicant sent a rebuttal examination (report?) dated June 8, 2009 to the
insurer (unclear what this said, but probably argued in favour of more IRB).
- The insurer sent another OCF-9 dated July 9, 2009 (presumably reiterating the
stoppage of benefits?).
- The applicant’s former counsel applied for FSCO mediation on March 14, 2011.
- The insurer received a Report of Mediator dated June 27, 2012, on that date
(seemingly this was when mediation took place).
- The former lawyer claimed to have filed an Application for Arbitration on October 3,
2012, however there was no record of this.
- The applicant retained new counsel in early 2013. That lawyer requested the
complete FSCO file on November 20, 2013.
- The applicant’s new counsel filed an Application for Arbitration on December 10,
2013, which was received by FSCO on January 7, 2014.

Submissions

The insurer submitted that the application for arbitration was statute barred, as it was
received by FSCO more than the allowable two years after the benefit was denied (almost 3
years and 9 months), and more than the alternatively allowable 90 days after the Report of
Mediator was issued (over 18 months in that case).

The applicant’s counsel submitted that: 1) the insurer did not provide a “clear and
unequivocal refusal” or outline the steps of the dispute resolution process; 2) the applicant
somehow did not receive the Report of Mediator and therefore the s.281.1(2) time limit did
not begin to run; 3) the applicant’s former lawyer already sent an earlier Application for
Arbitration to FSCO on October 3, 2012, despite there being no record of this document (we
note that this is 98 days after the Report of Mediator however).

Decision

The arbitrator accepted the first of the applicant’s submissions, while rejecting the latter
two.

With respect to the latter two submissions, the arbitrator quite correctly concluded that
there was no evidence to support the assertions (while implying, also probably correctly,
that the file was mishandled by the applicant’s prior lawyer, who also provided vague and
unhelpful evidence).
The arbitrator then analyzed the claim denial of April 17, 2009, in light of Chung Park v.
Dominion of Canada General Insurance Company (FSCO A12-000712), which held that for an
insurer to rely on a limitation period, “the refusal must be clear, unequivocal and include
reasons, and the insured person must be informed of his or her rights to dispute the
insurer’s refusal to pay benefits”. The analysis includes the two OCF-9’s, and the letter
attached to one of these. The second OCF-9 refers to the first and is not relevant.

The first OCF-9 discusses two s.44 reports that conclude the applicant does not suffer a
substantial inability to perform the essential tasks of his employment, and that benefits are
discontinued. It also states “Should you disagree with State Farm’s decision, you may submit
a rebuttal examination report for consideration”, and refers to the attached letter “which
outlines the rebuttal procedure”. The OCF-9 itself sets out the applicant’s dispute rights,
including mediation and arbitration, however the attached letter only discusses a rebuttal
report, not mediation or arbitration. The arbitrator finds that the emphasis in the OCF-9 and
the letter on a rebuttal report, and their failure to also mention mediation or arbitration,
meant that the insurer failed to properly inform the applicant of the dispute resolution
process.

The arbitrator points to the Supreme Court of Canada decision in Smith v. Co-Operators
[2002] 2 S.C.R. 129, which requires that a limitation period with regard to an insurance
denial only runs upon issuance of a “valid refusal”. A valid refusal of a benefit by an insurer
must include informing the insured person of the dispute resolution process “in
straightforward and clear language, directed towards an unsophisticated person”.

The arbitrator writes as follows:

“In my view, and unsophisticated person might reasonably conclude from this emphasis on
the rebuttal process as a response to the denial of the benefit, that that was the most
important or even the only step to be taken in the dispute resolution process. An
unsophisticated person might at least conclude that the refusal of benefits was not
complete until the Insurer’s consideration of the rebuttal assessment was completed if one
was obtained (as it was in this case).”

Therefore, the denial was “equivocal” with regard to the dispute resolution process, and
could not be relied upon to form the basis of a limitation defence.
Analysis

One cannot be blamed for concluding that this is yet another FSCO decision where the
insurer and applicant are held to vastly different standards, despite each being represented
by counsel.

The decision turns on a minor (and perhaps unforeseeable) mistake in the emphasis of the
insurer’s claim denial wording. This is especially unintuitive considering that the applicant’s
dispute rights were outlined in the OCF-9 itself, even though they were not specifically
referenced in the accompanying letter.

Also frustrating is the fact that there appears to be serious file mishandling by the
applicant’s prior lawyer, which resulted in the missed limitation period in the first
place. Indeed the arbitrator found that lawyer’s testimony to be unreliable, but still decided
in the applicant’s favour.

An insurer must be careful to word denials in such a way as to make the entire dispute
resolution process very clear to an unsophisticated person, regardless of the reality that the
specific claimant is represented by counsel who should already be very familiar with their
options.
Little and Pembridge, 2016 (FSCO A11-001373) – Preliminary Issues #1

This is a preliminary issue hearing to determine the following:

1) Is the applicant disentitled from non-earner benefits from June 9, 2010 to October
14, 2014 based on a failure to comply with section 33 of the SABS based on failure to
produce requested documents?

2) Was the insurer examination reasonably required and should the arbitration be
stayed until the applicant attends?

Facts

The applicant was injured in a motor vehicle accident on October 16, 2008. The initial OCF-3
was provided on December 1, 2008, prior to the end of the waiting period for the NEB, on
April 16, 2009. On May 1, 2010, the applicant demanded payment of the NEB. On June 9,
2010, Pembridge requested an updated OCF-3 and clinical notes and records of the GP from
3 years pre-accident to date. Pembridge requested these documents 2 more times. These
were provided on October 14, 2014. Once received, Pembridge arranged an IE for October
27, 2014. The Applicant did not attend.

Analysis

1) Section 33: The first two requests under section 33 did not comply with the insurer’s
obligations to provide the Applicant its right to request the documents and her obligations
to provide them and the consequences of failing to comply, in straightforward and clear
language. The third request, in October 2014, did not provide information about the saving
provisions regarding the reasonable explanation in section 33(4). Further, the third notice
could not “breathe life into the two earlier deficient requests”.

2) Insurer Examination attendance: In the case of a first IE, the burden on the insurer of
establishing that the IE was reasonable is readily discharged. This was the first NEB insurer
assessment. Case law states that it is appropriate for an arbitrator to consider prejudice to
an Applicant where the IE is arranged so late that it delays the hearing. Here, the hearing
was scheduled to take place 7 months after the IE, which is sufficient time for receipt of the
IE report and a responding report of the Applicant.

Decision

The applicant is not precluded from receiving NEB between June 9, 2010 and October 14,
2014. The insurer examination was reasonably required and the arbitration is stayed until
the applicant attends.
Economical Mutual Insurance Company v. Caughy, 2016 ONCA 226

At issue on this appeal is whether the application judge erred in finding that the respondent
was involved in an "accident", as that term is defined in s. 3(1) of the Statutory Accident
Benefits Schedule – Effective September 1, 2010 in relation to an incident where the
respondent was injured when he tripped over a parked motorcycle.

Facts

The respondent was playing tag with his daughter and her friend around midnight when he
suffered an injury from running into a parked motorcycle on the pedestrian walkway. The
motorcycles were not blocking the walkway initially, however, after nightfall, and without
the respondent’s knowledge, the motorcycles were moved and parked on the walkway. The
respondent suffered serious spinal cord injuries as a consequence of the fall. He was also
intoxicated at the time of the incident. The respondent sought accident benefits from his
insurer, the appellant, which were denied on the basis that the incident did not meet the
definition of accident as found in the Statutory Accident Benefits Schedule – Effective
September 1, 2010, O. Reg. 34/10.

The application judge found that that the temporary parking of the motorcycle that evening
on the walkway constituted an ordinary or well-known use of the vehicle. In addition, he
found that the temporary parking of the motorcycle that evening was the dominant feature
in the incident, and not ancillary to it. The application judge concluded that the incident
satisfied the test for an accident under the SABS as articulated by the Supreme Court of
Canada in Amos v. Insurance Corp. of British Columbia.

Analysis

The term “accident” is defined in s. 3(1) of the SABS as follows:

An incident in which the use or operation of an automobile directly causes an

impairment or directly causes damage to any prescription eyewear, denture, hearing
aid, prosthesis or other medical or dental device.

In Amos, the Supreme Court provided a two-part test for interpreting s. 3:

 1) Did the accident result from the ordinary and well-known activities to which
automobiles are put?
2) Is there some nexus or causal relationship (not necessarily a direct or proximate
causal relationship) between the appellant’s injuries and the ownership, use or
operation of his vehicle, or is the connection between the injuries and the
ownership, use or operation of the vehicle merely incidental or fortuitous?

This two-part test summarizes the case law interpreting the phrase “arising out of the
ownership, use or operation of a vehicle”, and encompasses both the “purpose” and
“causation” tests posited in the jurisprudence.

Citing Greenhalgh v. ING Halifax Insurance Co., 2004 CanLII 21045 (ON CA) and Martin v.
2064324 Ontario Inc. (Freeze Night Club), 2013 ONCA 19 (CanLII), the Court found the
“causation test” was modified. As such, an insured must:

1) establish that the use or operation of an automobile was the cause of the injuries;
and
2) satisfy the court there was no intervening act(s) that resulted in the injuries that
cannot be said to be part of the “ordinary course of things”.

In other words, the question (under the causation test analysis) is whether it could be said
the use or operation of the vehicle was a “direct cause” of the respondent’s injuries.

As per the purpose test, the Court of Appeal held the “sole question” is whether the incident
in issue resulted from ordinary and well-known activities to which an automobile is put.

The appellant argued the judge erred by failing to conclude there must be an active use of
the vehicle to meet the purpose test component of Amos. In other words, the parked
motorcycle was “nothing more than the venue for the incident, in the same way a tree trunk
would be if someone tripped over it”.

For the Court of Appeal, parking a vehicle is not “aberrant” to its use as a vehicle (as per
Binnie J. in Amos). After all, says Hourigan J.A., “A vehicle is designed to be parked. Indeed, it
is safe to say that most vehicles are parked the most of the time. I would conclude,
therefore, that parking a vehicle is an ordinary and well-known activity to which vehicles are
put”.
Moreover, while the active use of the motorcycle certainly would qualify under the test, the
Court of Appeal held there is no requirement that the vehicle be in active use for an incident
to count as an accident under the SABS.

While Hourigan J.A. agreed with the result and general conclusions of the application judge
below, he found the following errors in the analysis:

1) the purpose test is not designed to determine whether a vehicle is involved in

an incident; and
2) it is inappropriate to rely on the liability sections of the Ontario Automobile
Policy (O.A.P. 1) in support of the analysis.

Decision

Appeal dismissed.
Subject: Sabadash v. State Farm FSCO A14-001839

Arbitrator Smith held that the Applicant (mva March 3, 2011) was entitled to pre and post
104 week IRBs. He was also entitled to payment for assistive devises in the amount of
$2,176.56, OT treatment in the amount of $3,597.96 and the costs of a neuropsychological
assessment in the amount of $1707. State Farm was held to be liable to pay a special award
of $30,000 because it unreasonably withheld or delayed payments to the Applicant. Interest
and expenses were ordered to be payable.

The Applicant returned to work after the accident because he could not afford to be fired.
He did not apply for IRBs initially because he did not know they were available. He was
terminated from his job approximately 7 months after the accident. He consistently
underperformed at the job and was fired because of his inability to complete the critical
tasks expected of him, which was to learn how to repair tools and assist with at least 40% of
the shops repair work. In the five years since the accident the only other work was a ten
month period starting July 2012. He was laid off through no fault of his own in May 2013.

The case notes that he had difficulty paying for prescription medications. None of his
symptoms have improved since the accident and most of them have worsened. He stopped
looking for work because his medical advisors told him that he shouldn’t be working or even
looking for work.

It was held that the Applicant met the test for an IRB both pre and post 104 weeks with
respect to his function in the workplace.

Causation was a fundamental issue in this case. It was not accepted that the “but for” test
endorsed by the Courts in accident negligence cases is to be applied to determination of
causation in the SABS context. It was held that the correct causation test in determining
Schedule benefits is whether or not the subject accident is a “material contributing factor” in
the causation of the Applicant’s catastrophic impairment. The case of Greenhalgh v. Douro-
Drummer was cited for this finding. The Arbitrator agreed with the Applicant that there is no
clear direction from the Court that the material contribution test is no longer applicable to
statutory accident benefits disputes. The Arbitrator noted that it is clear that,
notwithstanding the Blake v. Dominion decision, it is still open to a trier of law to apply
either the “but for” or “material contribution” test depending on the facts of a statutory
accident benefits dispute.
The Arbitrator also accepts that “material contributing factor”, as explained by the Ontario
Court of Appeal in Monks v. ING, should be defined by any causal factor outside the de
minimis range. De minimis is defined as “a trifling consequence and a matter that is so small
that the court does not wish to even consider it.” With that, the Arbitrator noted that the
remaining question, thus becomes: was the subject car accident contribution to the
Applicant’s in ability to work outside the de minimis range? The Arbitrator found, the
evidence, on a balance of probabilities, supports the finding that the subject accident was a
“material contributing factor” in the Applicant’s employability.

The Arbitrator accepted the Applicant’s explanation that he had a gap in treatment because
he did not want to miss work, and his delay in discussing the accident with his treating
psychiatrist was because of his perception that the doctor’s function was to deal with his
emotional issues and past trauma issues, and not issues related to the accident such as pain.
Further, the Arbitrator rejected the submission that the Applicant was in part malingering.

On a preponderance of evidence the Arbitrator concluded that the subject accident was a
material significant factor well beyond the de minimis range in the causation of the
Applicant’s ability to work pursuant to section 5 and 6 of the Schedule. It was also held that
the Applicant is entitled to receive payment for the assistive devices, occupational therapy,
and neuro-psychological assessment claimed.

A special award of $30,000.00, plus interest, was ordered on the basis that the denial of the
IRB was unreasonable. The hearing was adjourned in May 2015 leaving two witnesses to
testify . The applicant requested interim IRBs until the resumption of the hearing, and the
insurer refused the request. The Arbitrator had made an order for the payment of interim
IRBs on the basis of the Applicant’s need and that he had made out a prima facie case for
benefits. The Arbitrator noted that there were no mitigating factors in the manner in which
the insurer litigated this matter.

Interest on the IRBs and Medical Benefits are also payable.

Economical Mutual Insurance Company v. Northbridge Commercial Insurance
Company 2016 ONSC 458

The issue in this appeal was whether the $2,000 deductible under s. 275(3) of the
Insurance Act, R.S.O. 1990, c. I.8 applies to a claim for loss transfer by a first party
insurer for each person to whom it has paid statutory accident benefits rather than
only to a claim for statutory accident benefits that it has paid to its named
insured. (one deductible or multi-deductibles)

Importance: It was held by the Ontario Superior Court that under s. 275(3) of
the Insurance Act that a deductible of $2,000 applies to a claim for loss transfer
by a first party insurer for each person to whom it has paid statutory accident
benefits. (Multi-deductibles)

This decision overturns the 1994 Superior Court decision of Progressive Casualty Co.
v. Jevco Insurance Co.[1994] O.J. No 3152 which upheld the Arbitration decision
dated October 12, 1994 decided by Arbitrator Richard E. Holland that found that only
one deductible applied.

Background

Economical issued a notice to initiate arbitration against Northbridge pursuant to s.

275(4) of the Insurance Act in regards to an accident that occurred on July 16, 2010
whereby a “heavy commercial vehicle” insured by Northbridge rear-ended a
passenger vehicle insured by Economical. Economical made statutory accident benefit
payments to or on behalf of 4 claimants. Northbridge applied a deductible under s.
275(3) of the Insurance Act to the first $2,000 requested by Economical for each of
the 4 claimants. Otherwise Northbridge reimbursed Economical for the loss transfer
sought to date. The parties agreed that Northbridge was entitled to apply at least one
$2,000 deductible to the amounts paid by Economical.

At arbitration, the question for the arbitrator was whether Economical was entitled to
reimbursement from Northbridge for $6,000 in respect of the deductible applied to the
other three claimants ($2,000 each).
The Arbitrator, Lee Samis, decided that he was bound by the earlier decision in Jevco
Insurance Co. that was upheld on appeal by the Ontario Superior Court. As noted
above, in Jevco, the Court found that the right to a loss transfer payment under s. 275
of the Act was subject to only a $2,000 deductible in respect of the operator of the
insured vehicle rather than a $2,000 for each person that was paid no fault benefits.
The Court dismissed the appeal and confirmed Arbitrator Holland’s finding that, “It
would have been simple for the persons drafting subsection (3) of section 275 to
provide that no indemnity is available in respect of the first $2,000 of no-fault benefits
paid in respect of an “insured person”, instead of “in respect of a person described in
subsection (2)”. He stated that in that event, the deductible would have applied to
both the owner and the passenger (occupant). But that is not what was done and by
linking the deductible to “a person described in subsection (2)” (i.e. “the insurer’s
insured”) he stated that the drafters must have intended that the deductible only apply
to the named insured.…” Justice Somers in Jevco stated that in his view that
Arbitrator Holland was correct in his reasoning.

In the case at hand, although Arbitrator Samis disagreed with the Jecvo decision, he
followed the decision as he stated that he was bound by the 1994 Court decision.

However, in his written decision, Arbitrator Samis disagreed with Jevco, and reasoned
that in his view deductibles should be applied for each insured claimant. He stated
that this is consistent with the usages of trade in the business of insurance and it
furthers the goal of simplicity. It was also his opinion that it introduces proportionality
to the loss transfer disputes by removing the smaller disputes and it is consistent with
the claimant centric features of loss transfer legislation and regulations. He also noted
that it is the easiest rule to administer.

On appeal, in coming to the determination that the deductible would apply per
claimant, the Superior Court reviewed Arbitrator Samis’ decision by applying a
standard of correctness based on Wawanesa Mutual Insurance Co. v Axa Insurance
(Canada) and used the principles of statutory interpretation to interpret s. 275 of the
Insurance Act noted below.

275. (1) The insurer responsible under subsection 268 (2) for the
payment of statutory accident benefits to such classes of persons as
may be named in the regulations is entitled, subject to such terms,
conditions, provisions, exclusions and limits as may be prescribed, to
indemnification in relation to such benefits paid by it from the insurers
of such class or classes of automobiles as may be named in the
regulations involved in the incident from which the responsibility to
pay the statutory accident benefits arose.
 Idem

(2) Indemnification under subsection (1) shall be made according to

the respective degree of fault of each insurer’s insured as determined
under the fault determination rules.

Deductible

(3) No indemnity is available under subsection (2) in respect of the

first $2,000 of statutory accident benefits paid in respect of a person
described in that subsection.

The purposive approach to statutory interpretation requires the court to take the
following three steps (1) it must examine the words of the provision in their ordinary
and grammatical sense; (2) it must consider the entire context that the provision is
located within; and (3) it must consider whether the proposed interpretation produces
a just and reasonable result.

Using the above approach, The Judge turned to the question “Does the $2,000
deductible under s. 275(3) of the Insurance Act only apply to claims for indemnity of
statutory accident benefits paid to a named insured?’

1. In terms of the ordinary and grammatical meaning of the words, the Judge
disagreed with Arbitrator Holland in Jevco that the drafters must have
intended that the deductible only apply to the named insured. He states that the
interpretation applied in Jevco and advanced by Economical would place the
narrowest, rather than the widest, scope on the meaning of the phrase “in
respect of” in s. 275 (3) by limiting the deductible to only one person’s claim
for statutory accident benefits when there may be other claims.

2. When considering the entire context of the provision, the Judge agreed with
arbitrator Samis that the interests of both the first party insurer and second
party insurer to avoid transaction costs of small claims is served if the
deductible is applied in respect of each SABs claimant. In his view, the
application of the $2,000 deductible in respect of each SABs claimant
promotes the “expediency and economy” objectives of the loss transfer
provisions.

3. In considering whether the proposed intention produces a just and reasonable

result, the Judge found that interpreting the deductible provided by s. 275(3)
of the Insurance Act to apply to each claim of indemnification for statutory
accident benefits paid to each person involved in an automobile is a just and
reasonable result and held that a deductible applied per claimant.