In Echelon Insurance v. Zenith Insurance Company, 2026 ONSC 1214, the Ontario Superior Court of Justice overturned Arbitrator Bialkowski’s decision that a 90-day notice period under the Priority Dispute Regulations did not constitute a limitation period for the purposes of Ontario’s Covid emergency regulations. In doing so, the court illuminated the importance of properly identifying and giving effect to the legislature’s intentions when interpreting remedial legislation enacted in response to historic events.
Facts
On July 9th, 2020, the claimant was a passenger when she was injured in a motor vehicle accident. On August 18th, she submitted an initial OCF-1 accident benefits claim form to Echelon, the insurer of the vehicle in which she was injured. Crawford & Company, acting for Echelon, sought further information and the claimant submitted a new claim form on September 2nd.
An examination under oath (EUO) held on December 3rd, 2020, revealed that she was financially dependent on her mother, and subsequent investigation revealed that her mother was insured through an automobile policy provided by Zurich.
On December 8th, 2020, Crawford faxed a Notice of Priority Dispute to Zenith advising of Echelon’s position that Zenith was obligated to pay the claimant’s accident benefits. Echelon subsequently served Zurich with a Notice to Participate and Demand for Arbitration in accordance with Ontario Regulation 283/95 (“Priority Dispute Regulation”) created under the Insurance Act, and retained an arbitrator to resolve the dispute pursuant to subsection 7(1) of these same regulations.
Positions of the Parties
Before the arbitrator, Zenith took the position that Echelon failed to abide by the 90-day notice period prescribed by the Priority Dispute Regulation. On this basis, it argued that Echelon’s claim should be dismissed, since the notice period expired on either November 15th or December 1st, depending on when the claimant’s completed application was received by Echelon.
In response, Echelon argued that the 90-day notice period was suspended by the Covid Limitation Regulation enacted by the Ontario legislature in March 2020. These regulations had the effect of pausing all limitation periods in the province until they were repealed six months later on September 14th, 2020. Therefore, Echelon argued it had until December 14th, 2020, to serve its Notice of Priority Dispute upon Zenith.
Relevant Law
Subsection 3(1) of the Priority Dispute Regulation provides that no insurer may dispute its obligation to pay accident benefits unless it provides written notice within 90 days of receipt of a completed application for benefits to any insurer which it claims is obligated to pay the benefits. Subsection 3(2) permits notice after the 90-day period only where (a) 90 days is insufficient to determine whether another insurer is liable and (b) the insurer took reasonable steps to investigate whether such an insurer existed within the 90-day period.
In turn, section 1 of the Covid Limitation Regulation implemented a suspension of any “provision of any statute, regulation, rule, by-law or order of the Government of Ontario establishing any limitation period” (emphasis added), retroactive to March 16th, 2020. Section 2 provided that “Any […] regulation […] establishing any period of time within which any step must be taken in any proceeding in Ontario, including any intended proceeding, shall, subject to the discretion of the […] decision-maker responsible for the proceeding, be suspended […]”. This provision was also retroactive to March 16th, 2020.
The Arbitrator’s Decision
Deciding on the issue of whether the 90-day notice period was subject to the suspension imposed by section 1 of the Covid Limitation Regulation, the arbitrator held that the 90-day notice provision did not constitute a limitation period. Therefore, the 90-day notice period expired prior to Echelon serving Zenith with the Notice of Priority Dispute on December 8th, 2020.
The arbitrator also determined that the notice provision constituted a step in a proceeding and was therefore subject to section 2 of the Covid Limitation Regulation. However, upon reviewing Echelon’s handling of the priority dispute, the arbitrator exercised his discretion and refused to find that the notice period had been suspended. Echelon appealed.
Before the Superior Court
Justice Shaw began her analysis by identifying the following key issues:
- Did the arbitrator err in finding that the 90-day notice period in the Priority Dispute Regulation is not a limitation period pursuant to section 1 of the Covid Regulations?
- Did the arbitrator err in applying his discretion under section 2 of the Covid Limitation Regulation and refusing to suspend the notice period?
Justice Shaw held that the first question is a question of law and is therefore subject to the standard of correctness upon review. The second issue was a question of mixed fact and law, and therefore reviewable on the more deferential standard of palpable and overriding error.
Is the Notice Period a Limitation Period?
The terms “limitation period” and “step in the proceeding” were not defined in the regulations. As such, Justice Shaw resorted to the principles of statutory interpretation to determine whether the notice period in section 3(2) of the Priority Dispute Regulation constituted a limitation period under section 1 of the Covid Limitation Regulation. In doing so, she noted that the Covid Limitation Regulation was remedial in nature and should be interpreted in a fair and liberal manner.
Expanding on the reasoning behind this, Justice Shaw provided an insightful analysis into the context in which the Covid Limitation Regulation was passed. In response to the uncertainty and unknown risks associated with the newly arrived COVID-19 pandemic, the courts suspended all regular operations except urgent and emergency matters. Additionally, businesses, including law offices, were operating on a limited basis. As Justice Shaw explained, “we cannot forget the fear that gripped the world as we were ordered by the government to stay home.”
Given this immense uncertainty, the government sought to limit the spread of the disease, and the risk of COVID 19-related deaths. To limit the side effects of these largescale shutdowns, the Ontario government passed the Covid Limitation Regulation in March 2020. The purpose of these regulations was to prevent litigants from losing their substantive rights due to the regular operation of statutory deadlines when the pandemic had resulted in significant delays.
Form or Function?
Justice Shaw held that, while the 90-day notice provision is nominally just that, the provision is effectively a limitation period, since a failure to comply with it will bar the insurer from proceeding with their claim. In light of the remedial purpose of the Covid Limitation Regulation, it was this functional effect of the provision that was determinative.
Justice Shaw further held that the arbitrator failed to give effect to this remedial purpose when defining “limitation period” under section 1. Justice Shaw noted that the arbitrator cited various arbitration and court decisions wherein the 90-day notice period was described as distinct from limitation periods. However, some of these decisions failed to substantively address this issue, instead relying on an agreed upon characterization of the notice period between the parties.
In another decision relied on by the arbitrator, State Farm v. Ontario, 2001 ONSC 28051, the court stated that “the 90-day notice period would be more accurately described as a notice period and not as a limitation period.” However, Justice Shaw found that this comment was obiter, and therefore not binding. Additionally, the arbitrator failed to consider the decision as whole, which cited Bannon v. Thunder Bay (City), 2000 ONCA 5708, in support of the following proposition:
“The notice requirement is, however, akin to a limitation period in that failure to comply with the section constitutes a bar to the action just as failure to commence the action within the limitation period constitutes a bar. The notice requirement also promotes the same interests served by limitation periods.”
Justice Shaw concluded by emphasizing the function of the notice period over its nominal form. Given the functional impact of the notice provision on the substantive rights of parties, she concluded that notice provisions constitute limitation periods for the purposes of section 1 of the Covid Limitation Regulation.
Therefore, the notice period in this case was automatically stayed until September 14, 2020, and Echelon had therefore served Zenith with the Notice of Priority Dispute afterwards on December 8, 2020, which was within the applicable 90-day time limit.
Arbitrator’s Discretion under Section 2
Examining the arbitrator’s refusal to exercise its discretion to suspend the notice period pursuant to section 2 of the Covid Regulations, the court held that there was no basis for the court to overturn his decision. However, given Justice Shaw’s findings with respect to the application of section 1 of the Covid Limitation Regulation, properly interpreted, Echelon’s appeal was allowed.
Conclusion
Priority disputes between insurers are subject to strict rules governing the conduct of the parties involved. While deadlines under the Priority Dispute Regulation are often strictly enforced, circumstances such as those arising from the COVID-19 pandemic may call for relief in rare circumstances.
Daniel Hinds is an articling student at ZTGH and the author of this blog. If you have any questions about this blog, please contact Daniel by email at [email protected].
