SCC File No.: IN THE SUPREME COURT OF CANADA (ON APPEAL FROM THE COURT OF APPEAL FOR ONTARIO) -and-

Transcription

1 SCC File No.: IN THE SUPREME COURT OF CANADA (ON APPEAL FROM THE COURT OF APPEAL FOR ONTARIO) BETWEEN: ZURICH INSURANCE COMPANY APPELLANT (Appellant) -and- CHUBB INSURANCE COMPANY OF CANADA RESPONDENT (Respondent) RESPONDENT S FACTUM (CHUBB INSURANCE COMPANY OF CANADA, RESPONDENT) (Pursuant to Rule 42 of the Rules of the Supreme Court of Canada) SUPREME ADVOCACY LLP 340 Gilmour Street, Suite 100 Ottawa, ON K2P 0R3 Eugene Meehan, Q.C. Tel.: (613) Fax: (613) emeehan@supremeadvocacy.ca KANELLAKOS BALLARD MACDONALD LAW LLP 70 University Avenue, Suite 902 Toronto ON M5H 3B3 SUPREME ADVOCACY LLP 340 Gilmour Street, Suite 100 Ottawa, ON K2P 0R3 Marie-France Major Thomas Slade Tel.: (613) Fax: (613) mfmajor@supremeadvocacy.ca tslade@supremeadvocacy.ca Ottawa Agent for Counsel for the Respondent George Kanellakos Tel: (416) Fax: (647) gkanellakos@kbmlaw.ca Counsel for the Respondent

2 ZAREK, TAYLOR, GROSSMAN, HANRAHAN LLP 13th Floor, 20 Adelaide Street East Toronto, ON M5C 2T6 Eric K. Grossman Kate M. MacLeod Tel.: (416) Fax: (416) Counsel for the Appellant GOWLING LAFLEUR HENDERSON LLP Elgin Street Ottawa, ON K1P 1C3 Jeffrey Beedell Tel.: (613) Fax: (613) Ottawa Agent for Counsel for the Appellant

3 TABLE OF CONTENTS PAGE PART I OVERVIEW AND STATEMENT OF FACTS... 1 A. Overview... 1 B. Relevant Factual Background... 3 (i) Motor Vehicle Accident Rented Vehicle... 3 (ii) Rental Vehicle Insured by Zurich Insurance Company... 3 (iii) Chubb Commercial Policy... 3 (iv) Ms. Singh Specifically Declined Optional Coverage... 4 (v) Chubb Never Provided Motor Vehicle Liability Policy to Wheels 4 Rent... 4 (vi) Chubb Never Provided an Insurance Policy to Ms. Singh... 4 (vii) Application for Accident Benefits... 4 (viii) Chubb Responds to Ms. Singh... 4 (ix) Arbitration Proceedings before Financial Services Commission... 4 (x) Zurich Seeks Private Arbitration; Chubb Agrees... 5 (xi) Arbitrator Finds Chubb is Not an Insurer... 6 (xii) Zurich Appeals Ruling... 6 (xiii) Application Judge Opines Chubb is an Insurer... 6 (xiv) Court of Appeal Corrects Errors... 6 PART II QUESTIONS IN ISSUE... 7 PART III STATEMENT OF ARGUMENT... 7 A. Standard of Review... 7 B. Legislative Interpretation, Context & the Statutory Scheme... 9 (i) Purposive Analysis... 9 (ii) Significance of Interpreting Terms in the Entire Context a. Basic Operation of the Legislative Scheme b. Definition of Insurer c. Definition of Motor Vehicle Liability Policy d. Importance of Requiring a Particular Contract e. No Motor Vehicle Liability Policy in the Present Case f. Other Provisions Provide Context... 18

4 -ii- g. Application for Accident Benefits (iii) Limited Case Law on Interpretation of the Regulation C. Purpose of the Regulation & Operation D. Nexus Test E. Problems Arising From Non-Motor Vehicle Insurers Being Subject to Automobile Insurance Regulations F. Policy Change Best Left for the Legislature G. Conclusion PART IV SUBMISSION CONCERNING COSTS PART V ORDER SOUGHT PART VI TABLE OF AUTHORITIES PART VII STATUTORY PROVISIONS... 31

5 1 PART I OVERVIEW AND STATEMENT OF FACTS A. Overview 1. Can a motor vehicle insurer force a non-motor vehicle liability insurer to be responsible for a motor vehicle accident MVA (here, a single vehicle MVA) and thereby make that nonmotor vehicle liability insurer part of Ontario s motor vehicle liability insurance regime? To do so would change a well-ordered, well-organized, well-agreed system into a juridical Rubik s Cube with multi-faceted future problems and issues. 2. The arbitrator-at-first-instance says no (non-motor vehicle liability insurers are not part of the motor vehicle liability scheme). The Court of Appeal below also says no (by majority). 3. This is a mixed fact and law case: Ms. Singh had a single vehicle motor vehicle accident. 1 The accident occurred on September 23, In August, 2009 Zurich began adjusting Ms. Singh s claim. Wheels4Rent was insured under a motor vehicle liability policy issued by Zurich. 2 The Arbitrator determined, based on the facts agreed upon between Chubb and Zurich, that Chubb was not an insurer for the purposes of the Act and the Regulation Section 268 of the Ontario Insurance Act 4 (the Act ) together with s. 2(1) of the Ontario Regulation 283/95 Disputes Between Insurers (the Dispute Regulation ), deems Statutory Accident Benefits ( SABS ) part of every motor vehicle liability policy; and sets out a mechanism to decide which motor vehicle liability insurer pays if there are more than one motor vehicle liability insurer involved. 5. The Dispute Regulation does not define insurer. The sole issue therefore in this appeal is what constitutes an insurer for the purposes of s. 268 (of the Act) and s. 2(1) (of the Dispute Regulation). Does it capture insurers who are not motor vehicle liability insurers? 1 Application judge decision at para. 2, Record of the Appellant (R.A.) [Tab 2]. 2 Application judge decision at para. 5, R.A. [Tab 2]. See also Arbitrator s decision p. 4-6, R.A. [Tab 1]. 3 Application judge para. 7, R.A. [Tab 2]. 4 Insurance Act, R.S.O. 1990, c. I.8, s. 268.

6 The Respondent, Chubb, offers an accident policy which provides death and dismemberment insurance optional non-automobile coverage for renters of vehicles. The Appellant, Zurich, specifically insures the rental vehicles pursuant to a motor vehicle liability policy, and Zurich s policy specifically provides for payment of SABS. 7. The insured, Ms. Susan Singh, declined to purchase Chubb s optional non-motor vehicle coverage. However, after she was in an accident she nonetheless decides to send an insurance claim to Chubb. Chubb advised that its policy (which she declines in any case) was not a motor vehicle liability policy, so SABS do not apply. 8. Three years after the accident Zurich adjusts Ms. Singh s claim. Zurich then later commences the underlying arbitration against Chubb. Pursuant to the Dispute Regulation, the first insurer to receive the application is to pay benefits and then afterwards dispute liability where it believes another insurer is responsible. Where an insurer fails to follow the Dispute Regulation, it can be liable for the full amount regardless of its actual responsibility. 9. It is clear here that Zurich is the responsible insurer under section 268 of the Ontario Insurance Act and the Regulations thereunder: it was Zurich that insured this vehicle. Zurich then got into a juridical finger-pointing game, arguing for an interpretation of the Dispute Regulation that would capture any and all insurers, including non-motor vehicle liability policies. This interpretation allows Zurich, despite being responsible to the insured, to duck out and have someone else pay the insurance claim. 10. An expert arbitrator saw through this creativity and held that Chubb was not an insurer for the purpose of the Dispute Regulation; Chubb had never issued a motor vehicle liability policy for any motor vehicle connected to this accident. The application judge overturned this finding, but on appeal, the Court of Appeal restored the arbitrator s ruling. 11. The motor-vehicle statutory and regulatory scheme is operated by a small group of sophisticated motor vehicle liability insurers and it is focused exclusively on SABS. An interpretation of a motor-vehicle regime that captures non-motor-vehicle insurers would upset a lot of currently-stable insurance apple carts which is what Zurich wants to do, and make what is now a well-worked-out insurance regime all tospy turvy. This would create all kinds of legal

7 3 3 and other problems that cannot be solved in this appeal herein. The arbitrator s decision, confirmed by the Court of Appeal below, is both reasonable and correct. B. Relevant Factual Background (i) Motor Vehicle Accident Rented Vehicle 12. Ms. Susan Singh was involved in a single-vehicle motor vehicle accident on September 23, At the time of the accident, Ms. Singh was driving a vehicle that was rented from Wheels 4 Rent. 5 (ii) Rental Vehicle Insured by Zurich Insurance Company 13. The rental vehicle driven by Ms. Singh was insured pursuant to a motor vehicle liability policy issued by Zurich Insurance Company ( Zurich ). 6 (iii) Chubb Commercial Policy 14. Chubb issued a commercial policy of insurance in the form of an accident policy to Baird MacGregor Insurance Brokers Inc. This accident policy provided optional non-auto coverage for renters of vehicles at participating rental companies, including Wheels 4 Rent (the Chubb Policy ) The Chubb policy: provided optional death and dismemberment insurance to Wheels 4 Rent customers, extended to death or dismemberment unrelated to a motor vehicle accident, provided it occurred during the rental period. The Chubb policy provided not coverage for liability to others as a result of motor vehicle accident The Chubb policy did not provide for SABS coverage i.e. income replacement benefits, non-earner benefits, caregiver benefits, medical benefits, rehabilitation benefits, attendant care benefits, case manager services, and housekeeping and home maintenance benefits etc.. 5 Court of Appeal decision at para. 4, R.A. [Tab 4]. 6 Court of Appeal decision at para. 3, R.A. [Tab 4]. 7 Court of Appeal decision at para. 3, R.A. [Tab 4]; Chubb Insurance Company of Canada, Accident Policy dated February 12, 2001, R.A. [Tab 9]. 8 Ibid.

8 4 4 (iv) Ms. Singh Specifically Declined Optional Coverage 17. Ms. Singh chose not to purchase Chubb s optional non-motor vehicle coverage. 9 (v) Chubb Never Provided Motor Vehicle Liability Policy to Wheels 4 Rent 18. Chubb never provided a motor vehicle liability policy to Wheels 4 Rent. 10 (vi) Chubb Never Provided an Insurance Policy to Ms. Singh 19. At no time did Chubb ever issue an insurance policy of any type whatsoever to Ms. Sukhvinder (Susan) Singh. (vii) Application for Accident Benefits 20. Following her accident, Ms. Singh submitted an Application for Accident Benefits for Statutory Benefits to Chubb Insurance Company of Canada ( Chubb). Chubb received Ms. Singh s letter on November 17, (viii) Chubb Responds to Ms. Singh 21. In a letter dated November 21, 2006, Chubb acknowledged receiving Ms. Singh s application for Accident Benefits. In this letter, Chubb advised Ms. Singh that it was unable to accept her claim for accident benefits as its policy was a commercial policy and not a personal automobile policy and thus the coverage of Ontario s statutory accident benefits does not apply. 12 (ix) Arbitration Proceedings before Financial Services Commission 22. After Ms. Singh filed an Application for Arbitration with the Financial Services Commission for Ontario, Chubb served a Response by Insurer On the basis of the above, Chubb initiated a preliminary issue hearing. Chubb took the position that a FSCO arbitrator had the jurisdiction to determine the preliminary issue of whether 9 Court of Appeal decision at para. 4, R.A. [Tab 4]. 10 Court of Appeal decision at para. 3, R.A. [Tab 4]. 11 Court of Appeal decision at para. 4, R.A. [Tab 4]. 12 Application Judge decision at para. 4, R.A. [Tab 2]; Correspondence from Chubb to Tkatch & Associates dated November 21, 2006, R.A. [Tab 12]. 13 Response by Insurer to an Application for Arbitration, Record of the Respondent ( R.R. ) [Tab 3A].

9 5 5 Chubb was an insurer under the Act and, that if it was not an insurer under section 268 of the Act, a FSCO arbitrator had no jurisdiction to order it to pay benefits. 14 (x) Zurich Seeks Private Arbitration; Chubb Agrees 24. Before the preliminary issue hearing, Zurich delivered a Demand to Submit to Arbitration and proposed that the overlapping issues be decided by a private arbitrator up to this point Zurich had refused to participate in the FSCO proceedings Chubb agreed to Zurich s proposal to a dismissal of the FSCO proceedings [against Chubb only] and to submit the matter to private arbitration upon the understanding that the private arbitrator would first determine the preliminary issue of whether Chubb was an insurer in the circumstances of this case in respect of the payment of SABS under section 268 of the Act. Chubb and Zurich agreed that if an arbitrator found in favour of Chubb on the preliminary issue, the dispute would be ended the arbitrator did (find in favour of Chubb), but Zurich appealed anyway (and kept doing so, including up to the Supreme Court of Canada). 26. The lawyer for Zurich drafted the Arbitration Agreement for the parties. Paragraph 2 of the Agreement outlined the following questions/issues in dispute: The questions submitted for determination by the Arbitrator with respect to the priority of payment of Statutory Accident Benefits with respect to Sukhvinder (Susan) Singh, are as follows: 1) Is Chubb Insurance Company of Canada an insurer under Section 268 of the Insurance Act and Ontario Regulation 283/95 Disputes Between Insurers; 2) If it is decided that Chubb Insurance Company of Canada is an insurer under Section 268 of the Insurance Act and Ontario Regulation 283/95 Disputes Between Insurers, then there will be an issue as to whether Chubb Insurance Company of Canada has complied with the provisions of the Ontario Regulation 283/95; and 3) What amounts, if any, is Chubb responsible for indemnifying Zurich? Letter from Arbitrator Susan Sapin, dated March 19, 2009, R.R. [Tab 3B]. 15 Letter from Mr. George Wray to Mr. George Kanellakos with the enclosed Demand to Submit to Arbitration, dated April 22, 2009, R.R. [Tab 3C]. 16 Court of Appeal decision at para. 6, R.A. [Tab 4]; Arbitration Agreement signed September 3 & 4, 2009, at para. 2, R.A. [Tab 16].

10 On April 30, 2009, a FSCO telephone conference/motion occurred. During this conference/motion, it was confirmed that Ms. Singh s Application for Arbitration [against Chubb] would be dismissed and that Zurich would adjust and handle Ms. Singh s claim for accident benefits, subject to the findings of the private arbitrator. 17 (xi) Arbitrator Finds Chubb is Not an Insurer 28. Arbitrator Tessis found that Chubb was not an insurer under section 268 of the Act and the Dispute Regulation. The Arbitrator concluded that since there was no motor vehicle policy, there was no nexus or connection between Chubb and Ms. Singh. As a result, Chubb was not obliged under the Dispute Regulation to pay SABS to Ms. Singh. 18 (xii) Zurich Appeals Ruling 29. Zurich appealed the ruling of the arbitrator. 19 (xiii) Application Judge Opines Chubb is an Insurer 30. The application judge allowed the appeal on the basis that Chubb was an insurer under the statutory regime the Chubb policy was a motor vehicle liability policy as defined in the Act and there was a sufficient nexus between Ms. Singh and Chubb to require Chubb to pay benefits to Ms. Singh. 20 (xiv) Court of Appeal Corrects Errors 31. The Court of Appeal allowed the appeal and an re-instated the arbitrator s decision at first instance. As set out (by a majority of the Court) the issue on appeal was whether any insurer of any kind, or only motor vehicle liability insurers are obliged to pay first and dispute later. 32. The judgment of the Court of Appeal rested on the following analysis: the application judge erred in concluding that the Chubb policy was a motor vehicle liability policy. There was no element of that accidental death and dismemberment policy that insured against liability to others arising out of property damage or injury caused by an automobile or the use or operation thereof. 17 s between Mr. George Wray and Mr. George Kanellakos, dated April 24, 2009, R.R. [Tab 3D]; Letter from Mr. George Kanellakos to Mr. Murray Tkatch and to Mr. George Wray dated April 27, 2009, R.R. [Tab 3E]. 18 Reasons of Arbitrator, at para. 8, R.A. [Tab 1]. 19 Application Judge decision at para. 1, R.A. [Tab 2]. 20 Application Judge decision at paras , R.A. [Tab 2].

11 7 7 The content of motor vehicle liability policies is highly regulated. These policies must provide for payment of SABS, and a statutory minimum amount of liability coverage. The Chubb policy has none of these characteristics. 21 PART II QUESTIONS IN ISSUE 33. The issues on this Appeal are as follows: Issue I: Whether Chubb is an insurer for the purposes of section 268 of the Insurance Act and Ontario Regulation 283/95 Disputes Between Insurers Chubb is not an insurer for the purposes of section 268 of the Act and the Dispute Regulation. The Regulation only applies to motor vehicle liability insurers and Chubb was not a motor vehicle liability insurer with respect to this matter. Issue II: Whether, where there is a nexus between an insurer and a motor vehicle that gives rise to an accident benefits claim, an insurer can ignore the obligations imposed by the disputes between insurer regulation by unilaterally determining it is not an insurer for that purposes. A. Standard of Review With respect to the Appellant s second issue, a more accurate and neutral statement of the issue is as follows: Even where there is a nexus or relationship between the claimant and an insurer, if the insurer is not a motor vehicle liability insurer are they required to respond and pay the claim pursuant to the Regulation? The Dispute Regulation is not engaged where the insurer is not a motor vehicle liability insurer. As a result there is no requirement to respond or pay the claim pursuant to the Dispute Regulation. PART III STATEMENT OF ARGUMENT 34. Chubb and Zurich agreed to the standard of review in the arbitration agreement: a. On questions of law: correctness b. On questions of fact and mixed fact and law: reasonableness Court of Appeal decision, at paras , R.A. [Tab 4]. 22 Court of Appeal decision at para. 12 [Emphasis Added], R.A. [Tab 4].

12 The application judge adopted a standard of review of correctness stating, Realistically, the Arbitrator was only required to decide a matter of law. 23 The Court of Appeal below adopted correctness and reasonableness: 36. Here I would characterize the issue of whether Chubb was a motor vehicle liability insurer as a question of law reviewable on the standard of correctness and the issue of whether there was a sufficient nexus between Chubb and the claimant as a question of mixed fact and law reviewable on the standard of reasonableness. 24 With respect to the level of deference owed, the Respondent agrees with the characterization by the Court of Appeal below. The Court of Appeal cited the following statement, in part, with respect to deference to arbitration from Aviva Insurance Co. of Canada v. Royal & SunAlliance Insurance Co.: 37. It is noteworthy that this case also dealt with an appeal from an arbitrator s decision under the provisions of the Insurance Act. The [Ontario Court of Appeal] commented that arbitrators have a special expertise in evaluating facts for determination of dependency for statutory accident benefits entitlement, and unless the arbitrator was unreasonable, he is entitled to deference. I infer arbitrators have similar special expertise in determining issues of loss transfer, and thus their conclusions should be equally afforded deference. 25 Since Dunsmuir, this Honourable Court has continued to emphasize deference owed to arbitrators. 26 One issue that has arisen is whether the degree of deference that is extended to labour arbitrators should be the same for other arbitrators. 27 The former being governed by legislation while the latter by agreement. 38. This Honourable Court in Sattva Capital Corp. v. Creston Moly Corp., dealt with a commercial arbitrator. This Court confirmed that the Dunsmuir framework could be applied in the context of an appellate review of a commercial arbitration award: judicial review of administrative tribunal decisions and appeals of arbitration awards are analogous in some respects. Both involve a court reviewing the decision of a nonjudicial decision-maker. Additionally, as expertise is a factor in judicial review, it is a factor in commercial arbitrations: where parties choose their own decision-maker, it may 23 Application judge decision at para. 11, R.A. [Tab 2]. 24 Court of Appeal decision at para. 14, R.A. [Tab 4]. 25 Aviva Insurance Co. of Canada v. Royal & SunAlliance Insurance Co. (2008), 66 C.C.L.I. (4th) 262 (Ont. S.C.) cited by the Court of Appeal below at para. 13, R.A. [Tab 4]. 26 Nor-Man Regional Health Authority Inc. v. Manitoba Association of Health Care Professionals, 2011 SCC 59 at paras , Book of Authorities of the Respondent ( B.A.R. ) [Tab 8]; Communications, Energy and Paperworkers Union of Canada, Local 30 v. Irving Pulp & Paper, Ltd., 2013 SCC 34 at para. 16, B.A.R. [Tab 2]. 27 Loewen v. Manitoba Teachers Society, 2015 MBCA 13 at paras , 54, 69, B.A.R. [Tab 7].

13 be presumed that such decision-makers are chosen either based on their expertise in the area which is the subject of dispute or are otherwise qualified in a manner that is acceptable to the parties 28. From Sattva it is apparent that a reasonableness standard is favoured with respect to most administrative decision-maker and arbitrator decisions. With that there is a significant amount of deference owed to first instance decision-makers on issues within their expertise. 40. The reasonableness standard was described in Dunsmuir as follows: [C]ertain questions that come before administrative tribunals do not lend themselves to one specific, particular result. Instead, they may give rise to a number of possible, reasonable conclusions. Tribunals have a margin of appreciation within the range of acceptable and rational solutions. A court conducting a review for reasonableness inquires into the qualities that make a decision reasonable, referring both to the process of articulating the reasons and to outcomes. In judicial review, reasonableness is concerned mostly with the existence of justification, transparency and intelligibility within the decision-making process. But it is also concerned with whether the decision falls within a range of possible, acceptable outcomes which are defensible in respect of the facts and law Whether the arbitrator s decision fell within the range of possible, acceptable outcomes depends on the context in which the decision was made. Here, the arbitrator took into account the nature of the administrative scheme and the legal and factual context of the legislative scheme and he went on to reach a reasonable conclusion. As was the case in Sattva, significant deference is owed to that decision. B. Legislative Interpretation, Context & the Statutory Scheme (i) Purposive Analysis 42. This Honourable Court has reiterated on many occasions that the object of statutory interpretation is to establish Parliament s intent by reading the words of the provisions in question in their entire context and in their grammatical and ordinary sense, harmoniously with the scheme of the Act, the object of the Act and the intention of Parliament Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53, at para. 105, B.A.R. [Tab 11]. 29 Dunsmuir v. New Brunswick, [2008] 1 S.C.R. 190, at para. 47, B.A.R. [Tab 3] 30 Potter v. New Brunswick Legal Aid Services Commission, 2015 SCC 10 at para. 124, B.A.R. [Tab 9].

14 A purposive interpretation is nevertheless one that is consistent with the words chosen by Parliament. As this Court emphasized in R. v. Conception, the starting point is the text of the provisions in their grammatical and ordinary sense The application judge below focused on the general definitions in the Act and failed to consider Part VI of the Act dealing specifically with automobile insurance. By doing so, his interpretation did not read the words of the provisions in their entire context. In contrast, the arbitrator and Court of Appeal properly recognized the context and scheme of the Act. (ii) Significance of Interpreting Terms in the Entire Context 45. a) Basic Operation of the Legislative Scheme Section 268(1) of the Act requires that every motor vehicle liability policy shall be deemed to provide for payment of SABS. The Dispute Regulation requires the first insurer receiving an application for accident benefits to pay the insured person benefits subject to resolving which insurer is actually required to pay. 46. b) Definition of Insurer insurer : 47. Section 1 of the Act provides, in part, the following general definitions of contract and 1. In this Act, except where inconsistent with the definition sections of any Part, contract means a contract of insurance, and includes a policy, certificate, interim receipt, renewal receipt, or writing evidencing the contract, whether sealed or not, and a binding oral agreement; ( contrat ) insurer means the person who undertakes or agrees or offers to undertake a contract; ( assureur ) Part VI of the Act, entitled Automobile Insurance, does not provide for an additional definition of insurer. It does, however, provide another definition for contract as well as definitions which speak to the scheme of the Act with respect to automobile insurance: 224. (1) In this Part, contract means a contract of automobile insurance that, 31 R. v. Conception, 2014 SCC 60 at para. 14, B.A.R. [Tab 10].

15 (a) is undertaken by an insurer that is licensed to undertake automobile insurance in Ontario, or (b) is evidenced by a policy issued in another province or territory of Canada, the United States of America or a jurisdiction designated in the Statutory Accident Benefits Schedule by an insurer that has filed an undertaking under section 226.1; ( contrat ) insured means a person insured by a contract whether named or not and includes every person who is entitled to statutory accident benefits under the contract whether or not described therein as an insured person; ( assuré ) statutory accident benefits means the benefits set out in the regulations made under paragraphs 9 and 10 of subsection 121 (1); ( indemnités d accident légales ) Statutory Accident Benefits Schedule means the regulations made under paragraphs 9 and 10 of subsection 121 (1). ( Annexe sur les indemnités d accident légales ) Idem (3) Every contract to which subsection 268 (1) applies shall be deemed to have been amended on the 22nd day of June, 1990, to include statutory accident benefits in accordance with the Statutory Accident Benefits Schedule. The definitions in s. 1 are drafted broadly in that they apply to insurance generally. The definitions in s. 224 are drafted more narrowly to deal with motor vehicle insurance and SABS as they fall under Part VI Automobile Insurance. 49. The term insurer for the purpose of s. 1 of the Act means: the person who undertakes or agrees or offers to undertake a contract (with contract defined as any contract of insurance). 50. Section 224 (of Part VI) of the Act defines contract to mean a contract of automobile insurance. Therefore, it is reasonable to conclude that the term insurer for the purpose of Part VI means: the person who undertakes or agrees or offers to undertake a contract of automobile insurance. 51. To hold that insurer has the same meaning in s. 1 as it does under Part VI ignores the fact that contract has a different definition under Part VI.

16 Turning to the Dispute Regulation, the issue is which definition of insurer applies. The Dispute Regulation itself only defines five terms in s. 0.1, including benefits which means statutory accident benefits as defined in subsection 224(1) of the Act. 53. Section 1 of the Dispute Regulation provides that [a]ll disputes as to which insurer is required to pay benefits under section 268 of the Act shall be settled in accordance with this Regulation. Sections 224 and 268 both fall under Part VI Automobile Insurance. 54. On the basis of the definitions, it is clear that the Dispute Regulation is designed specifically to deal with Part VI Automobile Insurance and SABS disputes (as opposed to disputes arising from other parts of the Act or with respect to non-motor vehicle insurance). 55. To account for the entire context and scheme of the Act, the definition of insurer as it is used in the Dispute Regulation must take its meaning not exclusively from s. 1 of the Act, but also from Part VI of the Act. In that circumstance, insurer for the purpose of the Dispute Regulation means a person who undertakes or agrees or offers to undertake a contract of automobile insurance. 56. The Ontario Court of Appeal in Kalinkine v. Ontario (Superintendent of Financial Services) 32 confirmed that only the class of insurers specified under s. 268 of the Act are required to pay SABS: 57. 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 Court in Kalinkine decided that the Motor Vehicle Accident Claims Fund was not an insurer for the purpose of the Act or the Dispute Regulation. A few years later, the Court corrected the statement made in Kalinkine regarding the Fund in Allstate Insurance Company of Canada v. Motor Vehicle Accident Claims Fund 33 : In its reasons, however, this court did say that the Fund was not an insurer under Regulation 283. I consider that statement to be incorrect. The Fund is an insurer under Regulation 283 and, where it disputes its obligation to pay benefits, it must resolve that 32 Kalinkine v. Ontario (Superintendent of Financial Services Commission), 2004 CanLII 48058, at para. 3, B.A.R. [Tab 5]. 33 Allstate Insurance Company of Canada v. Motor Vehicle Accident Claims Fund, 2007 ONCA 61, at para. 47, B.A.R. [Tab 1]

17 dispute, not in the court, but in accordance with the arbitration process under the Regulation. Despite this change in position regarding the Fund, the fact that the Dispute Regulation only applies to insurers that are required to pay SABS under s. 268 of the Act remains true. The Court in Allstate had simply found that the Fund was liable for accident benefits and was deemed an insurer for the purpose of paying those accident benefits The Court referred in Allstate to the integrated nature of the legislation: Section 268 of the Insurance Act, s. 6(2) of the Motor Vehicle Accident Claims Act and O. Reg. 283/95 comprise an integrated legislative and regulatory scheme for the payment of accident benefits This comment confirms the importance of interpreting the Dispute Regulation in terms of Part VI of the Act and not solely on the basis of s. 1 of the Act. c) Definition of Motor Vehicle Liability Policy 61. Another way to approach the issue is to consider the meaning of motor vehicle liability policy and whether such a policy existed in the present case. This approach, which was adopted by the Court of Appeal below, leads to the same conclusion as above: not all types of insurers or insurance contracts are required to pay SABS it is only those contracts that are evidenced by a motor vehicle liability policy that are required to pay SABS. 62. The Dispute Regulation provides: 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 (1) The first insurer that receives a completed application for benefits is responsible for paying benefits to an insured person pending the resolution of any dispute as to which insurer is required to pay benefits under section 268 of the Act. From ss. 1 and 2 of the Dispute Regulation, it is clear that it only applies to disputes regarding SABS pursuant to s Subsection 268(1) provides 268. (1) Every contract evidenced by a motor vehicle liability policy, including every such contract in force when the Statutory Accident Benefits Schedule is made or 34 AllState, ibid. at para. 38, B.A.R. [Tab 1]. 35 AllState, ibid. at para. 38, B.A.R. [Tab 1].

18 14 14 amended, shall be deemed to provide for the statutory accident benefits set out in the Schedule and any amendments to the Schedule, subject to the terms, conditions, provisions, exclusions and limits set out in that Schedule. 64. The definition for motor vehicle liability policy is found in s. 1 of the Act: motor vehicle liability policy means a policy or part of a policy evidencing a contract insuring, 65. (a) the owner or driver of an automobile, or (b) a person who is not the owner or driver thereof where the automobile is being used or operated by that person s employee or agent or any other person on that person s behalf, against liability arising out of bodily injury to or the death of a person or loss or damage to property caused by an automobile or the use or operation thereof; ( police de responsabilité automobile ) As was seen with the meaning of insurer described above, the term contract is defined differently in ss. 1 and 224 of the Act. In s. 1 it is general, while in Part VI it is specific to automobile insurance. The effect of this difference is that motor vehicle liability policy for the purpose of s. 268 under Part VI, and therefore the Dispute Regulation, means a contract of automobile insurance. Where a contract of automobile insurance is not present, the Dispute Regulation does not apply. 66. d) Importance of Requiring a Particular Contract In Warwick v. Gore, 36 the Ontario Court of Appeal found that a person entitled to SABS must be a person entitled under a particular contract. This contractual entitlement is not created by the mere fact that an insurance company is authorized to write automobile policies. There must be a particular contract of motor vehicle liability insurance that creates an entitlement to SABS. 67. In Warwick, the Court of Appeal considered a priority dispute between two motor vehicle liability policy insurers. Writing for the majority, Justice Laskin stated: Persons injured in car accidents in Ontario are entitled to receive certain benefits whether or not they are responsible for the accident. These no-fault benefits are set out in the No-Fault Benefits Schedule ) (now called the Statutory Accident Benefits Schedule 36 Warwick v. Gore Mutual Insurance Co., 1997 CarswellOnt 566, (ON CA), 32 OR (3d) 76, B.A.R. [Tab 12].

19 15 15 ), which is a regulation made under the Insurance Act, R.S.O. 1990, c. I.8 (the Act ), and is authorized by s. 121(1), para. 9 of the Act. Section 268(1) of the Act makes this Schedule a part of every contract of automobile insurance in Ontario. It does so, however, subject to the terms, conditions, provisions, exclusions and limits contained in the Schedule. Section 268(1) states: 268(1) Every contract evidenced by a motor vehicle liability policy shall provide for the no-fault benefits set out in the No-Fault Benefits Schedule, subject to the terms, conditions, provisions, exclusions and limits set out in that Schedule. The Schedule lists the persons insured under a particular contract of automobile insurance and thus entitled to receive no-fault benefits for a particular accident Justice Laskin further determined that: But s. 224(1) also affirms that to be entitled to no-fault benefits a person must be entitled under a particular contract. Contractual entitlement to no-fault benefits is determined by s. 268(1) of the Act and s. 2 of the Schedule. 69. By making contractual entitlement to no-fault benefits subject to the terms, conditions, provisions, exclusions and limits in the Schedule, the legislature, in s. 268(1) of the Act, intended that entitlement to these benefits would be determined by regulation. Section 121(1), para. 9 of the Act expressly states that the Lieutenant Governor in Council may make regulations establishing benefits for the purposes of Part VI that must be provided under contracts evidenced by motor vehicle liability policies and establishing terms, conditions, provisions, exclusions and limits related to such benefits. In short, the statute authorized the arguably narrower definition of insured person in the Schedule. neither s. 270 nor s. 224(1) can be used to expand the classes of persons entitled to nofault benefits under s. 268(1) of the Act and s. 2 of the Schedule. 38 The failure to recognize a particular contract of motor vehicle liability insurance that creates an entitlement to SABS creates a slippery slope for all insurers. To find otherwise allows anyone to make a claim for SABS against virtually any insurance company in Ontario. Thus, for example, if this Honourable Court disregards the requirement for a particular contract of motor vehicle liability insurance, any person could simply chose to submit a claim for accident benefits to his/her home insurer or life insurer. Such a claim would clearly offend the statutory and contractual provisions. 37 Warwick at paras [Emphasis Added], B.A.R. [Tab 12]. 38 Warwick at paras. 19, 20, 23 [Emphasis Added], B.A.R. [Tab 12].

20 In order to determine whether SABS are payable, there must first be a preliminary determination that a company is an insurer for the purposes of section 268 of the Act and the Dispute Regulation. Establishing whether there is an insurer for the purposes of s. 268 and whether there is a motor vehicle policy is a straightforward inquiry. The regulatory scheme set out in the Act and the Dispute Regulation is meant to facilitate resolution among sophisticated parties. The Court of Appeal below explained the nature of the parties involved in Ontario (Minister of Finance) v. Progressive Casualty Insurance Co. of Canada: 71. The Dispute Regulation targets a very specific kind of dispute that arises where insurers or the Fund have competing views as to who should bear the responsibility of paying those benefits. The injured person's entitlement to the benefits is not in issue in these disputes. The insurers and the Fund, the usual participants in a s. 268 dispute, are members of a small community of well-informed, sophisticated entities. These entities routinely interact on a variety of automobile insurance matters and regularly address the kinds of problems that give rise to s. 268 disputes. 39 The arbitrator and Court of Appeal below were both able to make the appropriate determination: the Chubb policy does not provide for SABS, as the policy is not a motor vehicle liability policy. As there is not motor vehicle liability policy, Chubb is not an insurer as defined in Part VI of the Act or pursuant to the Dispute Regulation. 72. e) No Motor Vehicle Liability Policy in the Present Case When considering the Dispute Regulation and SABS, deference ought to be given to Part VI and the definitions therein. An interpretation that accords with the scheme and objects of the Act is one that accounts for the Act in general, Part VI specifically, and the Dispute Regulation it is an integrated legislative and regulatory scheme. 73. The Ontario Court of Appeal endorsed deference to Part VI in Keelty v. Bernique. In dealing with the issue of whether an umbrella policy was a motor vehicle liability policy, Justice Rosenberg stated: In my view, the coverage provided by Option W does not come within either. Option W provides uninsured/underinsured coverage but is not part of a motor vehicle liability policy. Motor vehicle insurance is highly regulated in this province under Part VI of the Insurance Act, R.S.O. 1990, c.i.8. Under s. 227, the Commissioner must approve the form of the policy, endorsement or renewal of automobile insurance. The umbrella 39 Ontario (Minister of Finance) v. Progressive Casualty Insurance Co. of Canada (2009), 2009 ONCA 258, at para. 38, Book of Authorities of the Appellant ( B.A.A. ) [Tab 16].

21 policy and Option W are not part of that scheme. Sections 239 and following in Part VI under the heading Motor Vehicle Liability Policies set out the requirements of a motor vehicle liability policy. The State Farm Fire umbrella policy and Option W do not comply with those requirements. For example, it does not provide liability coverage to the limits required by s. 251 or coverage with respect to the benefits set out in the No Fault Benefits Scheme. 40 In short, when considering a motor vehicle liability policy, Part VI cannot be ignored that context is integral to the interpretation. 75. Further warranting the deference to Part VI instead of solely looking at meaning in s. 1 of Act is that motor vehicle liability policies are thoroughly addressed in sections 239 to of the Act these sections set out what must be made explicit in a motor vehicle liability policy. Any analysis of the words motor vehicle liability policy should be informed by Part VI. 76. A review of the Chubb Policy in the present case is telling it does not contemplate the specific provisions of the Act required for a motor vehicle liability policy. For example: 77. Insurance Act there is a requirement that a motor vehicle liability policy provide coverage up to the statutory minimum limits of the prescribed province, which in Ontario is $200,000 pursuant to s. 251(1). Chubb Policy the policy provides for a total aggregate amount of coverage of not more than $150,000 per vehicle for any one accident. The SABS regulation mandates that the insurer referred to under s. 268 of the Act provide coverage for, inter alia, income replacement benefits, non-earner benefits, caregiver benefits, medical benefits, rehabilitation benefits, attendant care benefits, case manager services, and housekeeping and home maintenance expenses. The SABS also provide for Maximum Limits. For example, the sum of the medical and rehabilitation benefits paid in respect of an insured person shall not exceed, for any one accident, (a) $100,000; or (b) if the insured person sustained a catastrophic impairment as a result of the accident, $1,000,000. O. Reg. 403/96, s. 19 (1). The amount of the attendant care benefit paid in respect of an insured person shall not 40 Keelty v. Bernique, [2002] O.J. No. 83 (C.A.), para. 25 [Emphasis Added], B.A.R. [Tab 6].

22 18 18 exceed, for any one accident, (a) $1,000,000, if the insured person sustained a catastrophic impairment as a result of the accident; (c) $72,000 in any other case. 78. In this regard, the Court of Appeal below stated the following: In my view the application judge erred in concluding that the Chubb policy was a motor vehicle liability policy. There was no element of that accidental death and dismemberment policy that insured against liability to others arising out of property damage or injury caused by an automobile or the use or operation thereof. 79. The content of motor vehicle liability policies is highly regulated. These policies must provide for payment of SABS, and a statutory minimum amount of liability coverage. The Chubb policy has none of these characteristics. 41 f) Other Provisions Provide Context As an integrated scheme, it is difficult to point to only a few provisions in order to provide context for interpretation. The provisions above are most relevant to the definitions at issue, but there are a number of other provisions which help paint the regulatory picture. 80. Section 226 of the Act, under Part VI, provides as follows: Application of Part 226. (1) This Part does not apply to contracts insuring only against, (a) loss of or damage to an automobile while in or on described premises; (b) loss of or damage to property carried in or upon an automobile; or (c) liability for loss of or damage to property carried in or upon an automobile. 81. Idem (2) This Part does not apply to a contract providing insurance in respect of an automobile not required to be registered under the Highway Traffic Act unless it is insured under a contract evidenced by a form of policy approved under this Part. Idem (3) This Part does not apply to a contract insuring solely the interest of a person who has a lien upon, or has as security legal title to, an automobile and who does not have possession of the automobile. These exclusions demonstrate the narrow confines of the automobile insurance scheme pursuant to Part VI. The intent is to not capture contracts of insurance outside of very specific motor vehicle liability policies. Where Part VI explicitly excludes particular contracts, it would 41 Court of Appeal decision at paras , R.A. [Tab 4].

23 19 19 be inconsistent to interpret the Dispute Regulation as including those contracts (or insurers who provide them). 82. The Chubb policy in this case falls under s. 226(1)(b) or (c). Motor vehicle insurers operating in this regulatory scheme would be well aware of this and would know that by offering such a policy Chubb is not a motor vehicle insurer. 83. Another provision that speaks to the scheme is s Section 268(1), discussed above, declares that all motor vehicle liability policies are deemed to provide for the SABS set out in the Statutory Accident Benefits Schedule. The other subsections deal with rules for resolving priority disputes and liability for payment: Liability to pay 268(2) The following rules apply for determining who is liable to pay statutory accident benefits: 1. In respect of an occupant of an automobile, i. the occupant has recourse against the insurer of an automobile in respect of which the occupant is an insured, ii. if recovery is unavailable under subparagraph i, the occupant has recourse against the insurer of the automobile in which he or she was an occupant, iii. if recovery is unavailable under subparagraph i or ii, the 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 occupant has recourse against the Motor Vehicle Accident Claims Fund. 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, ii. if recovery is unavailable under subparagraph i, the non-occupant has recourse against the insurer of the automobile that struck the nonoccupant, iii. if recovery is unavailable under subparagraph i or ii, the non-occupant has recourse against the insurer of any 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 nonoccupant has recourse against the Motor Vehicle Accident Claims Fund.

24 Liability (3) An insurer against whom a person has recourse for the payment of statutory accident benefits is liable to pay the benefits. Section 268(2) of the Act provides rules for determining against which insurer an injured occupant of a vehicle has recourse for the payment of the benefits. Section 268(3) provides that an insurer against whom an occupant has recourse is liable to pay those benefits. 85. In every instance, it involves an insurer of an automobile or as a last resort the Motor Vehicle Accident Claims Fund. It is automobile insurers (or the Fund), and only those parties, that bear the liability to pay statutory benefits pursuant to s It would be inconsistent with the intent of the legislation to interpret the Dispute Regulation so as to bring other parties, non-automobile insurers, into the regulatory scheme. 87. Section 268(1) incorporates the Statutory Accident Benefits Schedule regulations into the scheme. Relevant to this case is Statutory Accident Benefits Schedule - Accidents on or After November 1, 1996, O Reg 403/96 which applies to accidents up until September 1, Sections 2 and 3 of the SABS provides, in part, that: 2. (1) In this Regulation, insured automobile, in respect of a particular motor vehicle liability policy, means any automobile covered by the policy; ( automobile assurée ) insured person, in respect of a particular motor vehicle liability policy, means, (a) the named insured, any person specified in the policy as a driver of the insured automobile, the spouse of the named insured and any dependant of the named insured or spouse, if the named insured, specified driver, spouse or dependant, (i) is involved in an accident in or outside Ontario that involves the insured automobile or another automobile, or (ii) is not involved in an accident but suffers psychological or mental injury as a result of an accident in or outside Ontario that results in a physical injury to his or her spouse, child, grandchild, parent, grandparent, brother, sister, dependant or spouse s dependant, (b) in respect of accidents in Ontario, a person who is involved in an accident involving the insured automobile, and (c) in respect of accidents outside Ontario, a person who is an occupant of the insured automobile and who is a resident of Ontario or was a resident of Ontario at some point during the 60 days before the accident; ( personne assurée )

25 (1.1) Subject to subsection (1.3), the benefits set out in this Regulation shall be provided under every contract evidenced by a motor vehicle liability policy in respect of accidents that occur on or after November 1, 1996 and before September 1, (3) Benefits payable under this Regulation in respect of an insured person shall be paid by the insurer that is liable to pay under subsection 268 (2) of the Insurance Act. The SABS regulation is similar to the Disputes Between Insurers regulation in that both deal with SABS under s. 268 and neither provide for a definition of insurer. From the provisions immediately above, as well as the fact it operates pursuant to Part VI, it is evident that in the SABS insurer is referring to an insurer with respect to a particular motor vehicle liability policy. It would promote legislative coherence to interpret the term insurer in both regulations to have a similar meaning. 89. g) Application for Accident Benefits In addition to the legislation, the Accident Benefits Application Package approved by the Superintendent of Financial Services for the purposes of the Statutory Accident Benefits Schedule assists with interpretation. 42 It provides an example of the legislation in practice. In the instructions as to where to send the form, the following insurers are listed as options: 1. If You Own, Lease, or Have Regular Use of a Company Automobile...insurance company that insures this automobile....insurance company of the vehicle in which you were an occupant at the time of the accident....insurer of either vehicle (you choose). 2. If You are a Listed Driver...insurance company that issued the policy you are listed on. 3. Occupant of Somebody Else s Automobile...insurance company that insures this automobile. 4. Pedestrian or Bicyclist...insurance company of the automobile that struck you. 42 Accident Benefits Application Package including Application for Accident Benefits (OCF-1), B.A.R. [Tab 13].