ACCIDENT BENEFITS NEWSLETTER - JANUARY 2006

Catherine Zingg

Daley v. The Economical Mutual Insurance Company, Docket No. C42931, December 14, 2005, O.C.A., Doherty, Cronk and MacFarland JJ.A. - The Court of Appeal allowed the insurer’s appeal and fixed costs at $5,000.00 on the motion and $4,000.00 on the appeal, inclusive of disbursements and GST. The Court found that the Judge’s interpretation of the relevant provisions, namely s.8(3) of the SABS, raised a question of law and was subject to appellate review on a correctness standard following the reasons in Mazur v. Elias (2005), 75 O.R. (3d) 299 O.C.A. It was found that the language, read in its ordinary and grammatical sense, provided a clear and unambiguous formulation for the quantification of Ms. Daley’s income replacement benefit (p.6). The Court rejected the motion judge’s view that the language of s.8(3) was not clear because, in his view, it could yield unfair and irrational results, stating:

I cannot accept this characterization. Income from employment prior to the accident is used to calculate the income replacement benefit in all cases save for insured persons who fall within the category described in paragraph 3 of s.4. That category creates an exception to the general rule, which calculates the income replacement benefit based on actual income from employment before the accident, and allows the insured to calculate the income based on anticipated earnings. In my view, the category of insured created by paragraph three of s.4(1) is designed to ameliorate what could be a harsh result for a person who had a legitimate firm commitment of future employment at the time of the accident, but who did not qualify for income replacement benefits based on employment prior to the accident. The harshness of that result is modified by allowing the insured to base his or her claim on anticipated future earnings. The scheme’s departure from the general approach to the calculation of the income replacement benefit to accommodate a specific situation where the general approach could produce an unduly harsh result can no more render that overall approach unfair or nonsensical than can the tail wag the dog (pp.7 and 8).

The Court went on to find that distinguishing between individuals who have worked the full four weeks and those who have not is no more unfair than distinguishing between individuals who have both worked the full four weeks and have different incomes because one is paid more than the other for the same work (p.8).

Counsel for Ms. Daley urged that the SABS should be interpreted in a manner that reflects Charter values. The Court, however, found that reference to Charter values did not assist in the interpretive process. It remarked that Charter values can elucidate the meaning of legislative provisions where the language is unclear, but Charter values do not justify rewriting the clear language of a statutory provision (p.9). The remedy for a declaration of invalidity is to mount a challenge under s.52 of the Constitution, which Ms. Daley had not done.

Finally, the Court found that there was nothing in the provisions of the SABS that undermine Charter values and in particular the equality values reflected in s.15 of the Charter. It was found that the principle of equality underlying s.15 of the Charter was not offended whenever a distinction is drawn by legislation. Rather, equality is put at risk only when the distinction discriminates against an identifiable group on the basis of the grounds identified in s.15 or on grounds analogous to those identified in s.15 (p.9).

Allstate Insurance Company of Canada (Applicant) v. Motor Vehicle Accident Claims Fund and Manitoba Public Insurance (Respondent), Court File No. 38094/95, November 2, 2005 - Sandra Mattinas, who was a passenger in an uninsured vehicle, was killed in a motor vehicle accident. The other vehicle involved in the collision was insured by Manitoba Public Insurance. Ms. Mattinas had resided with her mother who was an Allstate insured. Ms. Mattinas’ mother applied to the Motor Vehicle Accident Claims Fund for death and funeral benefits and received $20,202.00 from the Fund.

The parties attended before Arbitrator Norman J. Freedman. Allstate challenged the arbitrator’s jurisdiction on the basis that the Fund could not require the respondents to submit the issue to arbitration because the Fund is not an insurer and the Regulation applied only to disputes between insurers (p.2). Section 7(2) of the Regulation states that arbitration can be invoked only by “the insurer paying benefits”. Having reviewed the authorities, the arbitrator concluded that he did have jurisdiction under the Regulation. He found that the deceased was principally dependent on her mother and therefore was insured under the Allstate policy and ordered Allstate to repay the Fund.

On the appeal, the parties agreed that the standard of review on the question of law was correctness. The issue to be determined by the Court was whether the Fund was entitled to recover the benefits paid by invoking the arbitration provisions of Regulation 283/95 or whether the Fund was restricted to claiming repayment in an action or application.

The Court found that it was bound by the decision of the Ontario Court of Appeal in Kalinkine v. Ontario (Superintendant of Financial Services) (2004) O.J. No. 1521, O.C.A. In that case, the Fund sought to reclaim from an insurer the accident benefits the Fund had paid a claimant in a court action. It was held that the Fund had the right to pursue this claim in a Court proceeding in accordance with the reasons in Ontario (Minister of Finance) v. Allstate Insurance Company (2001) O.J. No. 1181 (MacFarland J.). The decision was appealed by the defendant insurer, which argued that the Fund could not make the claim in a Court proceeding because it was restricted to the arbitration scheme prescribed by Regulation 283/95 (p.6).

The appeal was dismissed, with the Court of Appeal making the following findings:

First, s.1 of the Regulation establishes that it applies only to “insurers” that are required to pay SABS under s.268 of the Insurance Act. The Fund is not an “insurer” for the purpose of the Insurance Act or the Regulation.

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Second, and in any event, nothing in the Regulation purports to remove the Fund’s right to seek restitution through the Courts in a proper case.

Considering the case before him, Judge Ferguson stated:

The issue in the present case is not whether the Fund and the insurer may arbitrate if they both agree to do so. The issue is; does the Regulation require Allstate to submit the dispute to arbitration if the Fund wishes to arbitrate? In my view the reasons in Kalinkine clearly say the answer is no (p.7).

Accordingly, he found that the arbitrator erred in law in finding that he had jurisdiction in the case. The appeal was allowed with respect to this issue and the decision of the arbitrator was set aside.

Although the judge found that the decision in Kalinkine was binding on him, he went on in obiter to explain why he disagreed with it. He found that the overall scheme for paying accident benefits contemplates the Fund being treated as an insurer for the purpose of determining who should pay the benefits, which would include the issue of determining whether the Fund or an insurer should pay (p.8). The Judge anticipated that parties would go to Court to obtain orders that the parties submit to arbitration. He noted that the Kalinkine decision had recently produced that outcome in Ontario (Minister of Finance v. State Farm Mutual Automobile Insurance Company (2005) O.J. No. 2425 O.S.C. (Pitt J.). He found that it was not reasonable to conclude that the Lieutenant Governor in Council intended such a wasteful proceeding (p.11).

Liberty Insurance Company of Canada v. Stewart, P04-00038, December 7, 2005 - The insurer’s appeal of an arbitration decision in which it was found that Mr. Stewart was the spouse of Anna Pyles at the time of her fatal accident and was entitled to spousal death benefits under s.25(2)(1) ii was allowed. Director’s Delegate Makepeace found that the arbitrator erred in law by relying on a presumption that “once a child is born...cohabitation in a relationship of some permanence continues despite changes in living arrangements, until either natural parent takes concrete or legal steps to terminate the relationship” (p.1). In reviewing the decision, the Delegate noted that, rather than asking herself whether Mr. Stewart had proven that he cohabitated with Ms. Pyles in a relationship of some permanence at the time of the accident, the arbitrator seemed to have asked a different question - whether the insurer had proven the couple had decided to end their relationship (p.23). While the arbitrator had rejected Mr. Stewart’s explanations about the problems in his relationship with Ms. Pyles, the arbitrator had found that this was unhelpful “in determining whether the couple at any time decided to permanently sever their relationship” (p.23). The Delegate was unable to determine whether the Arbitrator could have reached the same conclusion had she applied the law correctly and accordingly the matter was sent back for a rehearing. As the arbitrator’s findings with respect to interest and special award orders depended on the finding of spousal status, those issues were not decided.

George and State Farm Mutual Automobile Insurance Company, P04-00028, December 6, 2005 - Director’s Delegate Evans dismissed the insured’s appeal of an arbitration order which held that Mr. George was not catastrophically impaired as defined in the SABS. Mr. George was struck by a car while a pedestrian on November 30, 1999 and suffered a serious injury to his left thigh, causing muscle atrophy and requiring him to use a cane. Attendant care and housekeeping benefits where terminated in December 2001 at the post 104 week mark, given that the insured’s impairment was not “catastrophic” Mr. George the attended a DAC assessment in January 2003 in which it was held that Mr. George was not catastrophically impaired, and his whole person impairment (WPI) was found to be 30%. His mental/behavioural impairment (MBI) was considered, but found to be only a mild impairment for activities of daily living and concentration ability. Class 3 moderate impairments (compatible with some, but not all, useful functioning) of social functioning and adaptation were also found.

In dismissing the appeal, the Director’s Delegate found the DAC’s assessment was binding on Mr. George until an arbitrator determined whether or not the impairment was catastrophic. Mr. George argued that the Arbitrator should have declared that the assessment was “not binding” without independently finding that he was catastrophically impaired. The Delegate found that there was no basis in the law for this proposition.

The Delegate did express concern for the high standard the arbitrator required of Mr. George to raise issues regarding the DAC (p.6). For example, it was found that Mr. George should have raised the absence of a psychologist among the examiners before he consented to the plan for the DAC, and should have raised the lack of the Assessor Practice Summary before the assessors examined him. The Delegate found that Mr. George was entitled to raise these issues after the DAC assessment, but he found the problem was that Mr. George did not raise them until the hearing itself (p.7). With respect to Mr. George’s submission that the arbitrator should have asked the Director to state a case to the Divisional Court under s.285 of the Insurance Act it was noted that the referral to the Divisional Court can only be made by the Director as an arbitrator does not have that power. Moreover, it was observed that once the applicant had elected under s.281 of the Insurance Act to resolve the dispute with the insurer by way of the Dispute Resolution process he should not seek to substitute the view of the Court, following the reasoning in Salmon and Toronto Transit Commission, P-00235, June 15, 1992.

Royal & Sunalliance v. Volfson, Shuster and FSCO, Court File No.553-03, Div. Court, October 24, 2005 Lane, Jennings and Molloy, JJ.

The Divisional Court quashed the decision of the Director’s Delegate, which had found that the arbitrator did not have jurisdiction to add the representative as a party in order to compel him to pay the expenses of the insurer and the Shusters (the insureds). The Delegate’s decision was made on August 7, 2003. Section 282(11.2) of the Insurance Act which explicitly gives arbitrators the power to order representatives to pay expenses personally came into effect on October 1, 2003. The Court confirmed the decision of the Arbitrator and remitted the matter to her to assess the expenses of the insurer and the Shusters. The Court stated:

The effect of the decision of the Director’s Delegate on the hopefully rarely occurring factual situation that is before us is to limit the tribunal, having been forced by the bogus applicant to put the innocent insured and insurer to the expense of a hearing to determine the legitimacy of the application, to admonishing the abuser to go and sin no more. It is, with respect, illogical to suggest that to control abuse the tribunal is limited to denying the abuser the right to bring the application for arbitration. So limiting tribunals in the face of abuse cannot have been the intention of the legislation when it gave to the tribunals the powers in s.23(1) to control process. Volfson already did not have the right to bring the application, by virtue of the legislation itself, but that did not stop him from bringing it anyway and causing considerable expense and inconvenience to all involved. It is inconsistent with the purpose of s.23 of the Statutory Powers Procedure Act to leave the tribunal without any power in the face of such abuse. I therefore conclude that the arbitrator did have the jurisdiction to prevent abuse of the tribunal’s process by requiring the abuser to compensate those who have been caused expense as a result of the abuse of process (p.11).