The Divisional Court released its judicial review decision in Sabadash v. State Farm et al., commenting on the correct test for causation in accident benefits cases. The Court confirmed that the “but for” test is the correct test to be used in an accident benefits context. Indeed, both parties agreed on this issue prior to the appeal.
The claimant argued that the evidence before Arbitrator Smith substantially met the “but for” test and that a new hearing before a different arbitrator was not necessary. The claimant also argued that Director’s Delegate Evans incorrectly heightened the causation test required by misstating the “but for” test.
In writing for the three judge panel which included Justices Swinton and Copeland, Justice Julie Thorburn found that Director’s Delegate Evans did misstate the “but for” test in the FSCO Appeal Decision of State Farm and Sabadash (P16-00029). The Divisional Court found that the Director’s Delegate incorrectly raised the causation standard by stating:
The default test is “but for,” and only in rare situations will the material contribution test be relevant, and even then, both elements have to be sufficient causes (meaning they both passed the “but for” test). In the accident benefit context, a sufficient cause means that the injury arising from the accident must be enough to directly cause an impairment. “ [Emphasis Added]
State Farm argued that that the Director’s Delegate was correct in holding the above as the words “directly causes an impairment” come from the SABS themselves:
“Accident” is defined in the SABS as “an incident in which the use or operation of an automobile directly causes an impairment or damage…” The wording appears to suggest that the accident in issue must be sufficient in itself to have caused the impairment – that it must be “the cause” as opposed to “a necessary cause.”
The Divisional Court relied heavily on Clements v. Clements, 2012 SCC 32 (CanLII), and Monks v. ING Insurance Company of Canada, 2008 ONCA 269 (CanLII), in summarizing the correct approach to the causation analysis in accident benefits cases (at paragraph 33 of the decision):
- Causation is a factual determination made on a balance of probabilities: Clements at paragraph 46;
- The test for establishing causation is the “but for” test;
- The Supreme Court in Clements held that, “As a general rule, a plaintiff cannot succeed unless she shows as a matter of fact that she would not have suffered the loss “but for” the negligent act or acts of the defendant. A trial judge is to take a robust and pragmatic approach to determining if a plaintiff has established that the defendant’s negligence caused her loss. Scientific proof of causation is not required.” See Clements at paragraph 46;
- “There is no indication in the SABS of a legislative intent that an insurer’s liability for the accident benefits in issue in this case should be subject to discount for apportionment of causation due to an insured’s pre-existing injuries … The SABS simply states, in clear and unambiguous language, that an insurer ‘shall pay an insured person who sustains an impairment as a result of an accident, medical, rehabilitation and attendant care benefits.’”: See Monks at paragraphs 94 to 96;
- In exceptional circumstances, where (i) the plaintiff establishes that her loss would not have occurred “but for” the negligence of two or more tortfeasors, each of whom could be responsible for the loss; but (ii) the plaintiff is unable through no fault of her own, to show that one tortfeasor is the “but for” cause of her injuries because each tortfeasor can point to the other as the possible “but for” cause of the injury, a plaintiff may establish liability against one defendant if that defendant’s conduct materially contributed to the plaintiff’s risk of injury: See Clements at paragraph 46;
- This is because public policy dictates that a defendant should not be permitted to escape liability by pointing the finger at another wrongdoer, thereby defeating a finding of causation on a balance of probabilities against anyone: See Clements at paragraphs 13 and 46;
- A material contribution to the risk of impairment is one that falls outside the de minimis range: See Athey v. Leonati,  3 S.C.R. 458 at paragraph 44.
The Divisional Court ultimately referred the matter back for a new hearing before a new Arbitrator after concluding that both Arbitrator Smith and the Director’s Delegate Evans misstated the test for causation.
In commenting on the issue of standard of review, the Court acknowledged that decisions of the Director’s Delegate are protected by a privative clause found at section 20 (2) of the Insurance Act, thus deference is owed and a standard of review of reasonableness is required. However, where the Divisional Court found that Director’s Delegate Evans erred in law in misstating a legal test developed by jurisprudence in common law (an issue outside of the expertise of the specialized administrative tribunal like FSCO), the standard of review was correctness. This aspect of the decision seems to be slightly at odds with other Divisional Court and Court of Appeal decisions on the application of the standard of review, but given the fact that the issue was fully re-aired at the end of 2018 in the Supreme Court of Canada, and the decision is under reserve, the question of when and how deference is owed to tribunals is yet to be finalized.