1 IN THE MATTER OF THE INSURANCE ACT, R.S.O c. I.8, as amended AND IN THE MATTER OF THE ARBITRATION ACT, S.O. 1991, c.17, as amended BETWEEN: AND IN THE MATTER OF AN ARBITRATION WAWANESA MUTUAL INSURANCE COMPANY Applicant - and - AVIVA and MOTOR VEHICLE ACCIDENT CLAIMS FUND Respondent DECISION WITH RESPECT TO PRELIMINARY ISSUE COUNSEL Chantal M. Brochu Counsel for the Applicant, Wawanesa Mutual Insurance Company Karla Gnanasegaram Counsel for the Respondent, Aviva David A. Scott Counsel for the Respondent, Motor Vehicle Accident Claims Fund PRELIMINARY ISSUE The preliminary issue to be determined is whether the Applicant, Wawanesa Mutual Insurance Company (hereinafter Wawanesa ), has complied with the procedural requirements for notice and initiation of the priority dispute as prescribed by regulation 283/95 against Aviva and the Motor Vehicle Accident Claims Fund (hereinafter MVACF ). FACTS On July 23, 2009, the claimant, Jeremy Durbin, was involved in a motor vehicle accident while operating a bicycle. The collision involved a 1989 Nissan motor vehicle being operated by Audrey Ladouceur. Ms. Ladouceur was also a co-owner of the vehicle. The Motor Vehicle Accident Report indicated that Ms. Ladouceur was insured by Wawanesa.
2 2 As Mr. Durbin did not possess his own policy of automobile insurance, an Application for Accident Benefits (OCF-1) was submitted to Wawanesa and received by Wawanesa on September 29, Wawanesa claims that it was not the insurer of the vehicle driven by Audrey Ladouceur at the time of this accident on July 23, 2009 as their policy had been cancelled effective December 29, As Wawanesa was the first insurer to receive Mr. Durbin s Application for Accident Benefits, it had an obligation to respond in accordance with it s obligations under s. 268 of the Insurance Act. Wawanesa commenced payment of accident benefits to Mr. Durbin in accordance with it s obligations. On December 22, 2009, counsel for Wawanesa (Chantal M. Brochu of Buset & Partners LLP) sent to Aviva and MVACF correspondence dated December 21, 2009, together with a document entitled Notice to Participate and Demand for Arbitration. Copies of these documents are attached to this decision for easy reference. On or about December 21, 2009, counsel for Wawanesa provided the claimant, Mr. Durbin, with correspondence and a document entitled Notice to Applicant of Dispute Between Insurers executed by counsel for Wawanesa. On January 18, 2010, counsel for Wawanesa forwarded correspondence to the MVACF enclosing a copy of the letter to the claimant dated January 18, 2010 (referred to above) and a copy of the Notice to Applicant of Dispute Between Insurers. The copy of the Notice to Applicant of Dispute Between Insurers forwarded to the MVACF was unsigned and undated, although the original Notice to Applicant of Dispute Between Insurers forwarded to the claimant had been signed and dated. The Respondents take the position that Wawanesa has not met the notice and procedural requirements required by Ontario Regulation 283/95 and that Wawanesa s priority dispute application ought to be dismissed. LAW There are many situations which arise where an individual injured in a motor vehicle accident has access to more than one policy of insurance with respect to payment of statutory accident benefits. Section 268 of the Insurance Act, R.S.O. 1990, c.i.8, is a legislative scheme to determine which insurer must pay statutory accident benefits when more than one policy is potentially accessible. If a dispute arises with respect to the application of s.268 then the Dispute Between Insurers regulation (Ontario Regulation 283/95), sets out the specific details that govern how a dispute is to be processed and provides for an Arbitration with regards to this dispute, to be in accordance with guidelines set out in the Arbitrations Act, 1991, S.O. 1991, c.17, as amended. Ontario Regulation 283/95 Disputes Between Insurers, reads as follows: 1. All disputes as to which insurer is required to pay benefits under section 268 of the Act shall be settled in accordance with this Regulation. O.Reg.283/95, s The first insurer that received a completed application for benefits is responsible for paying benefits to an insured person pending the resolution of
3 3 any dispute as to which insurer is required to pay benefits under section 268 of the Act. O.Reg.283/95, s (1) No insurer may dispute its obligation to pay benefits under section 268 of the Act unless it gives written notice within 90 days of receipt of a completed application for benefits to every insurer who it claims is required to pay under that section. O.Reg.283/95, s.3(1). (2) An insurer may give notice after the 90 day period if, a) 90 days was not a sufficient period of time to make a determination that another insurer or insurers is liable under section 268 of the Act; and b) the insurer made the reasonable investigations necessary to determine if another insurer was liable within the 90 day period. O.Reg.283/95, s.3 (2). (3) The issue of whether an insurer who has not given notice within 90 days has complied with subsection (2) shall be resolved in an arbitration under section 7. O.Reg.283/95, s.3 (3). 4. An insurer that gives notice under section 3 shall also give notice to the insured person using a form approved by the Superintendent. O.Reg.283/95, s.4; O.Reg.305/98, s (1) An insured person who receives a notice under section 4 shall advise the insurer paying benefits in writing within 14 days whether he or she objects to the transfer of the claim to the insurers referred to in the notice. O.Reg.283/95, s.5(1). (2) If the insured person does not advise the insurer within 14 days that he or she objects to the transfer of the claim, the insured person is not entitled to object to any subsequent agreement or decision to transfer the claim to the insurers referred to in the notice. O.Reg.283/95, s.5(2). (3) An insured person who has given notice of an objection is entitled to participate as a party in any subsequent proceeding to settle the dispute and no agreement between insurers as to which insurer should pay the claim is binding unless the insured person consent to the agreement or 14 days has passed since the insured person was notified in writing of an agreement and the insured person has not initiated an arbitration under the Arbitration Act, O.Reg.283/95, s.5(3). 6. The insured person shall provide the insurers with all relevant information needed to determine who is required to pay benefits under section 268 of the Act. O.Reg.283/95, s (1) If the insurers cannot agree as to who is required to pay benefits or if the insured person disagrees with an agreement among insurers that an insurer other than the insurer selected by the insured person should pay the benefits, the dispute shall be resolved through an arbitration under the Arbitration Act, O.Reg.283/95, s.7(1).
4 4 (2) The insurer paying benefits under section 2, any other insurer against whom the obligation to pay benefits is claimed or the insured person who has given notice of an objection to a change in insurers under section 5 may initiate the arbitration but no arbitration may be initiated after one year from the time the insurer paying benefits under section 2 first gives notice under section 3. O.Reg.283/95, s.7(2). 8. (1) Except as provided in this Regulation, the Arbitration Act, 1991, applies to an arbitration under this Regulation. O.Reg.283/95, s.8(1). (2) The decisions of an arbitrator made under this Regulation shall be public. O.Reg.283/95, s.8(2). 9. (1) Unless otherwise ordered by the arbitrator or agreed to by all the parties before the commencement of the arbitration, the costs of the arbitration for all parties, including the cost of the arbitrator, shall be paid by the unsuccessful parties to the arbitration. O.Reg.283/95, s.9(1). (2) The costs referred to in subsection (1) shall be assessed in accordance with section 56 of the Arbitration Act, O.Reg.283/95, s.9(2). 10. (1) If an insurer who receives notice under section 3 disputes its obligation to pay benefits on the basis that other insurers, excluding the insurer giving notice, have equal or higher priority under section 268 of the Act, it shall give notice to the other insurers. O.Reg.283/95, s.10(1). (2) This Regulation applies to the other insurers giving notice in the same way that it applies to the original insurer given notice under section 3. O.Reg.283/95, s.10(2). (3) The dispute among the insurers shall be resolved in one arbitration. O.Reg.283/95, s.10(3). 11. If the Motor Vehicle Accident Claims Fund receives an application for benefits, sections 4 and 5 do not apply and the insured person is not entitled to initiate or participate as a party in an arbitration under section 7. O.Reg.283/95, s.11. ANALYSIS AND FINDINGS The priority respecting which insurer (or the Fund) should pay statutory accident benefits for a non-occupant of a motor vehicle (as is the fact situation in the case before me) is set out in Section 268(2) of the Insurance Act, R.S.O. 1990, c.i.8 which reads as follows: Section 268 (2) Liability to pay The following rules apply for determining who is liable to pay statutory accident benefits: 2. In respect of non-occupants, i. The non-occupant has recourse against the insurer of an automobile in respect of which the non-occupant is an insured,
5 5 ii. If recovery is unavailable under subparagraph I, the nonoccupant has recourse against the insurer of the automobile that struck the non-occupant, iii. If recovery is unavailable under subparagraph I or ii, the non-occupant has recourse against the insurer of any other automobile involved in the incident from which the entitlement to statutory accident benefits arose, iv. If recovery is unavailable under subparagraph i, ii or iii, the non-occupant has recourse against the Motor Vehicle Accident Claims Fund. Should an insurer who first receives a completed Application for Accident Benefits (OCF-1) wish to dispute its obligation to pay accident benefits, its remedies and the necessary procedures are set out in Ontario Regulation 283/95 as set out at pages 2 to 4 of this decision. The insurer who first received the completed Application for Accident Benefits and wishes to dispute its liability, must provide written notice to any other insurer (or the Fund) within 90 days from receiving the completed application as set out in Section 3(1) of the Regulation, which reads: No insurer may dispute its obligation to pay benefits under Section 268 of the Act unless it gives written notice within 90 days of receipt of a completed application for benefits to every insurer who it claims is required to pay under that section. At risk of oversimplification, the preliminary issue to be dealt with here is whether the correspondence of Wawanesa s counsel dated December 21, 2009 and the attached NOTICE TO PARTICIPATE AND DEMAND FOR ARBITRATION is sufficient to comply with the requirements of Section 3(1) of Ontario Regulation 283/95. The Respondents submit that the correspondence of Wawanesa s counsel dated December 21, 2009 does not comply with the requirements of the regulation as it does not state that Wawanesa is disputing that they are in priority. The correspondence fails to mention a Dispute Between Insurers. The correspondence did not include the Notice to Applicant of Dispute Between Insurers which was sent to the claimant Mr. Durbin on December 21, In support of its position, the Respondents refer to the decision of State Farm Mutual Automobile Insurance Company v. Ontario (Minister of Finance), 2001 Carswell Ont. 953 (S.C.J.). This was a decision of Justice Nordheimer, rendered on March 28, 2001, dealing with an arbitration decision of Arbitrator Guy Jones, dated August 11, 2000, which dealt with the issue of the nature of the notice required in Section 3(1) of Ontario Regulation 283/95. In this arbitration decision, Arbitrator Jones held that a letter sent to the Fund by the law firm representing the claimant within 90 days of State Farm having received the initial application for accident benefits, was sufficient notice to the Fund of a priority dispute. The letter authored by the claimant s law firm stated, amongst other things: Unfortunately, Mr. Greig was not insured at the time of this loss we have placed his father s auto insurer, State Farm, on notice of a claim for medical and rehabilitation expenses, although it has not yet been conceded by the insurer that Gordon Greig was a dependent at the time of the loss.
6 6 We ask that you contact the writer as soon as the file has been opened in order to discuss this matter further. Please accept this as notice that a claim will likely be made against the Fund for medical and rehabilitation expenses or benefits if it is determined that Mr. Greig was not a dependent. The August 11, 2000 decision of Arbitrator Jones was appealed to the Superior Court of Justice and a decision was rendered by Justice Nordheimer on March 28, Justice Nordheimer concluded that the letter outlined above did not constitute proper notice under s. 3(1) of Ontario Regulation 283/95.The Respondents have referred me to several paragraphs of that decision, as outlined hereafter: I have concluded that Arbitrator Jones erred in his analysis and his conclusion. First, I do not accept the proposition that the requirements of section 3(1) of the Regulation are vague. Indeed, Arbitrator Jones, in the above quotation, was able to accurately set out the requirements of the section directly after his acceptance of the proposition that the requirements were vague. Section 3(1) makes it clear that an insurer who wishes to dispute its obligation to pay benefits under section 268 of the Insurance Act must itself given written notice to other insurers within 90 days of receipt of a completed application for benefits. There is nothing vague about that requirement. State Farm did not give such a notice. In my view, State Farm cannot rely on the letter of November 12, 1997 as constituting the notice which it is required to give because State Farm did not send the letter. Indeed, the letter does not even say that it is being sent on behalf of or at the direction of State Farm. Further, it does not say that State Farm is disputing its liability and asserting that another insurer, in this case the Fund, is liable. The letter of November 12, 1997 simply does not comply with the express requirements of section 3(1). at paragraph 19 And I do not see any reason why the parties here should not be held to strict compliance with the requirements of the Regulation. In both of these appeals, we are dealing with three large insurance companies and a branch of the Provincial Government. It goes without saying that these parties are sophisticated and experienced participants in the insurance industry. They have available to them all of the advisors of the highest quality that they could need in order to determine their rights and obligations under the prevailing statutory regime. There is therefore, no unfairness visited upon them by insisting on strict compliance with the notice requirements. At paragraph 22 And In my view, absent receipt by the Fund of a proper notice under section 3(1) from State Farm within the 90 day notice period, the Fund was entitled to consider that any claim arising out of Mr. Greig s accident was no longer going to be advanced against it and the Fund was not entitled to consider the matter closed. Consequently, State Farm was not, and should not be, entitled to proceed with its dispute with the Fund in the circumstances of the case. At paragraph 23
7 7 The Respondents claim that the decision of Justice Nordheimer is the only binding authority herein. The Respondents claim that the purported notice letter of Wawanesa s counsel, dated December 21, 2009, fails to state that Wawanesa is disputing its liability and asserting that another insurer or the Fund is liable and as such, compliance with the notice requirements has not been met. The Respondents also take the position that proper notice is a prerequisite to demanding arbitration. The Respondents claim legislation sets up a two step process, namely notice first followed by demand for arbitration whereas Wawanesa has combined it s purported Notice with it s demand for arbitration. The Applicant Wawanesa claims that it has met the notice requirements of Section 3(1) of Ontario Regulation 283/95. Wawanesa states that Section 3(1) does not outline any specific requirements as to the form of the notice to be provided to the other insurers and that all that it indicates is that the insurer has to give written notice within 90 days of receipt of a completed application for benefits. Wawanesa indicates that Section 4(1) of Ontario Regulation 283/95 provides for a separate requirement with respect to notice to be given to the insured, Notice to Applicant of Dispute Between Insurers, which section specifically provides for notice to be given in a form approved by the Superintendent. Section 4(1) applies solely to the notice requirements vis a vis the insured and is not a requirement of the written notice to be given to another insurer pursuant to Section 3(1). Wawanesa relies on the decision of Arbitrator Jones dated February 2004 in CGU Group Canada Ltd. v. Canada Life Casualty Insurance Company and Liberty Mutual Group. The purported notice in that case was a letter signed by the independent adjuster retained by CGU, which stated: With reference to the above noted claim this correspondence is to serve notice in accordance with the Regulations under the Insurance Act of Ontario. Also, as of today s date, we have not received the completed SABS forms with respect to this loss. Therefore, our principals take the position that they are not the correct insurers to entertain this claim. The claim should be paid by Canada Life Casualty Insurance or Liberty Mutual Insurance. Arbitrator Jones indicated that the letter set out the name of CGU s insured, the name of the claimant, the name of each Respondent s insured, Canada Life s policy number and the date of loss. The letter to Liberty did not contain the policy number as it was not known at that time. Arbitrator Jones concluded that the Applicant did comply with the 90 day notice requirement as set out in Section 3(1) of Ontario Regulation 283/95. This decision was not appealed. Arbitrator Jones dealt with the adequacy of the purported notice letter at page 7 of his decision and stated the following: Section 3 of Regulation 283/95 simply requires that the insurer give notice of its intent to dispute payment of the accident benefits. It does not require any
8 8 particular wording or reference to the Regulation. While it would have been helpful if the letter had mentioned the specific Regulation, the letter when read in its entirety makes it clear that they are referring to accident benefit matters and CGU is not the correct insurer to pay and that one of the Respondents should pay the claim. It must be remembered that this letter was sent to insurers whose adjusters handle these matters every day and it seems unlikely that the intent of the letter could have been misunderstood. Accordingly, I find that the letter was sufficient in this regard. Arbitrator Jones also addressed in his decision the requirement of CGU to send to the other insurers notice in the form as set out in the Notice to Applicant of Dispute Between Insurers, in which he stated the following: The Respondents also argued that CGU was required to send the notice in the form as set out in the Notice to Applicant of Dispute Between Insurers. I am unable to agree with this submission. Section 3, which deals with the notice to the insurer by the paying insurer, sets out no such requirement. The only reference to such a form is found in section 4 of the Regulation which deals with notice to the insured by way of the form. It says nothing about giving such notice to the other insurers. On the basis of the documentation and case law provided to me, I am of the view that Wawanesa has properly complied with the notice requirements of Section 3(1) of Ontario Regulation 283/95. The letter from Wawanesa s counsel to Aviva and MVACF, dated December 21, 2009 and the attached NOTICE TO PARTICIPATE AND DEMAND FOR ARBITRATION clearly indicates and sets out the following: Buset & Partners LLP letterhead; It is addressed to Aviva and MVACF; Indicates that Buset & Partners LLP represents Wawanesa; Identifies the matter as being a priority dispute ; Identifies Wawanesa as the Applicant; It identifies Wawanesa s insureds and Wawanesa s policy number; Identifies Aviva s insured and policy number; It states the date of loss; It refers to a claim for accident benefits being advanced by Jeremy Durbin; It refers to section 268 of the Insurance Act and Ontario Regulation 283/95 (the legislation establishing the criteria for determining priority and mechanism for disputing priority) ; It requests an Arbitration be conducted and suggests arbitrators; Attached to the correspondence is a Notice to Participate and Demand for Arbitration which clearly sets out the Applicant and Respondents to the dispute, it identifies the
9 9 legislation being relied upon, it further indicates that the Arbitration is with respect to a priority dispute as it relates to accident benefits paid and/or claimed by Jeremy Durbin as a result of the motor vehicle accident which occurred on July 23, 2009 and the policy of insurance issued by Aviva and/or a matter involving MVACF. I am satisfied that any insurer receiving a letter including the information contained in the correspondence of Wawanesa s counsel, dated December 21, 2009 and the attached NOTICE TO PARTICIPATE AND DEMAND FOR ARBITRATION would easily recognize that Wawanesa was disputing priority and looking to that insurer to assume priority. I am of the view that the appeal decision of Justice Nordheimer in State Farm Mutual Automobile Insurance Company v. Ontario (Minister of Finance) is clearly distinguishable from the present case. The letter referred to in the State Farm decision (supra) and purported to be a proper notice to MVACF was sent by the claimant s law firm at the suggestion of State Farm. It was not notice provided by the insurer paying the accident benefits, an adjuster acting on its behalf, or a law firm representing their interests. Furthermore, in the State Farm decision (supra) the letter did not state that State Farm was disputing it s liability and asserting that the MVACF was liable as priority insurer. The letter does not even confirm that an application for benefits (OCF-1) had been forwarded to State Farm or that they had commenced paying benefits. The Fund having received this letter might only conclude that the initial Application for Benefits might be forwarded to them in due course as opposed to State Farm. I too would have reached the same conclusion as Justice Nordheimer based on the purported notice letter in that case. In contrast, the letter directed to Aviva and MVACF by Buset & Partners LLP in the subject dispute clearly indicates that it is being sent on behalf of the Wawanesa. The letter of Buset & Partners LLP clearly states in its reference line re: priority dispute, clearly identifying the matter as that of a priority dispute. The notice attached to the letter indicates that Wawanesa is disputing its liability and asserting that another insurer, ie. Aviva and/or MVACF, is liable for payment of accident benefits to Jeremy Durbin. Automobile insurers in Ontario are regularly faced with priority disputes. When one reviews the documentation provided by Wawanesa s counsel as a whole, the inescapable conclusion to be reached is that Wawanesa intended to dispute liability to pay accident benefits and that it was looking to Aviva or MVACF to assume priority. As was the case in CGU (supra), this letter was sent to insurers whose adjusters handle these matters every day. I am of the view that it is unlikely that the intent of the letter would have been misunderstood. In my view, the test is a simply one, namely whether an insurer receiving a letter and notice containing the information as provided by Wawanesa s solicitors, would recognize that priority was being disputed and that Wawanesa was seeking that Aviva or MVACF assume priority. I see no reason why both the notice and the demand to participate in an arbitration to determine priority cannot be made in a single piece of correspondence. I further find that it is not necessary for the insurer to provide a copy of it s Notice to Applicant of Dispute Between Insurers to those it claims ought assume priority within 90 days although it is conceivable that a Respondent insurer might move to stay a priority dispute arbitration if such notice had not been sent to the claimant giving the claimant an opportunity to participate in the priority dispute arbitration if he or she chose to do so. All in all, I am satisfied that Wawanesa has herein strictly complied with the notice requirements under Section 3(1) of Ontario Regulation 283/95. ORDER
10 10 I hereby order that the correspondence and Notice provided by Wawanesa s counsel dated December 21,2009 is adequate and in compliance with the requirements of s. 3(1) of Ontario Regulation 283/95. I order that the priority dispute as between the Applicant and Respondents proceed to arbitration. I order that the Respondents equally pay the Arbitrator s costs with respect to the preliminary issue determination. I order that the Respondents each pay half of the partial indemnity costs of Wawanesa s counsel with respect to the determination of the preliminary issue. If agreement cannot be reached with respect to costs I would be pleased to receive written submissions. DATED at TORONTO this 19 th ) day of May, ) KENNETH J. BIALKOWSKI Arbitrator