In Dominion of Canada General Insurance Company v. State Farm Mutual Automobile Insurance Company, 2018 ONCA 101, the Court of Appeal recently reviewed two arbitration decisions, which had been separately appealed to the Superior Court of Justice. These two appeals gave rise to the same main issues: firstly, the standard of review applicable to arbitral decisions resolving priority disputes over responsibility to pay statutory accident benefits; and secondly, the statutory, regulatory and contractual interpretation issues affecting the priority question. Both appeals involved the interpretation of the words “insured person” under s. 3(1) of the SABS.
The central issue was whether the claimant in each appeal, (both of whom were “excluded drivers” under their respective parents’ insurance policies, ) could nonetheless receive accident benefits under those policies due to injuries sustained while they were either driving or occupying vehicles to which their driving exclusions did not apply. The answer to this question would determine the priority dispute as between the two insurers in each case.
Two Superior Court judges had come to different conclusions with respect to the standard of review that should apply to an arbitrator’s decision on the issue of priority, as well as the interpretation of “insured person” under s. 3(1) of the SABS in the context of the excluded driver provisions under the parents’ insurance policies. In the present appeal, it was agreed that the standard of review applicable to the lower court decisions was one of correctness.
In The Dominion of Canada General Insurance Company and State Farm Mutual Automobile Insurance Company (the “State Farm” matter), Arbitrator Ken Bialkowski held that an excluded driver can still be an “insured person” under the SABS. On appeal, Madam Justice K. Wright overturned his decision by applying a standard of correctness. In the appeal before her, the parties did not take issue with this standard of review.
In Belairdirect Insurance and Dominion of Canada General Insurance Company (Travelers) (the “Dominion” matter), Arbitrator Vance Cooper also came to the conclusion that an excluded driver could still be an “insured person” warranting SABS coverage under his parents’ policy. However, he concluded that he was bound by the decision of Madam Justice Wright in the State Farm matter. On appeal, Madam Justice Akbarali held that she was not bound by Madam Justice Wright’s ruling. She instead applied a standard of reasonableness, and held that Arbitrator Cooper’s original interpretation was reasonable.
Summary of Arbitration and Appeal Decisions
1) State Farm Arbitration and Appeal
The claimant was injured while riding as a passenger in his girlfriend’s car. The car was insured by State Farm. The claimant applied for accident benefits through his parents’ insurer, Dominion.
Under Dominion’s policy, the claimant was subject to an “Excluded Driver Endorsement” which meant that if he drove either of the two vehicles insured by Dominion, there would be “no coverage under the policy for property damage and bodily injury, damage to the automobile(s) and most Accident Benefits.” However, he remained a “Listed Driver” under the policy.
Dominion argued that the claimant did not meet the statutory definition of an “insured person” for purposes of the SABS: because he was an “excluded driver” and therefore precluded from driving the vehicles insured under the policy, he was no longer entitled to SABS coverage under that policy as a person “specified in the policy as a driver of the insured automobile.” State Farm took the opposite view and argued that the claimant remained an “insured person” under the Dominion policy despite being an “excluded driver.”
Arbitrator Bialkowski found in favour of State Farm, and held that the legislation was to be given a broad and liberal interpretation, and that any ambiguity was to be resolved in favour of the claimant. He held that, since the claimant was a “Listed Driver” on the Certificate of Insurance, he was still entitled to receive benefits from Dominion as long as he was not injured while driving either of the two vehicles to which the exclusion applied. Therefore, Arbitrator Bialkowski held that Dominion was the priority insurer responsible to respond to the claim.
Dominion appealed, and the appeal was allowed by Madam Justice Wright who held that the claimant was not an “insured person,” and that State Farm had priority to respond to the claim. She held that the “legislation clearly states that an insured driver is one who is specified in the policy as a driver of the insured automobile. Despite being listed as a driver, [the claimant] was clearly not a driver of an insured automobile and thereby not entitled to coverage.”
2) Dominion Arbitration and Appeal
The claimant was driving an uninsured motorcycle when he was involved in an accident with a vehicle insured by Belair. The claimant applied to Belair for accident benefits.
The claimant’s parents were named insureds under a policy issued by Dominion for one vehicle, a Toyota Corolla. The “listed drivers” under the policy were the claimant and his parents. As in the State Farm matter, the claimant here was also an “excluded driver” under the Dominion policy. If the claimant drove the Toyota Corolla, there would be “no coverage under the policy for property damage and bodily injury, damage to the automobile and most Accident Benefits.”
The issue of whether Dominion or Belair had higher priority went to arbitration. Although Arbitrator Cooper stated he would have found that the claimant was an “insured person” under the Dominion policy, he concluded that he was bound by the decision of Madam Justice Wright in the State Farm matter. Therefore, he held that the claimant was not an “insured person” under the Dominion policy.
On appeal, Madam Justice Akbarali held that she was not bound by the decision of Madam Justice Wright in the State Farm matter, and she determined that the appropriate standard of review was reasonableness. She held that Arbitrator Cooper’s initial determination, that the claimant was an “insured person” under s. 3(1) of the SABS, was a reasonable one. Where Arbitrator Cooper felt bound to follow Justice Wright’s decision which held to the contrary, Justice Akbarali restored the arbitrator’s initial determination.
In this regard, Madam Justice Akbarali followed the Court of Appeal decision in Intact Insurance Company v. Allstate Insurance Company of Canada, 2016 ONCA 609, which in her view had definitively determined that the standard of review for insurance arbitrators is reasonableness, recognizing the specialized expertise of such arbitrators. The court in Intact had also stated that there is a presumption that the reasonableness standard will apply where a decision maker is interpreting their home statute, or statutes closely connected to their function.
Analysis of the Court of Appeal
1) The standard of review applicable to insurance arbitral decisions is reasonableness
The outcome of these two appeals effectively turned on the question of whether the judges below had erred in their determination of the appropriate standard of review to be applied to the arbitral decisions in issue.
State Farm submitted that the applicable standard of review from the arbitrator’s decision was one of reasonableness, as held by the Court of Appeal in Intact. Dominion submitted that the court’s decision in Intact had been overtaken by the Supreme Court of Canada’s decision in Ledcor Construction Ltd. v. Northbridge Indemnity Insurance Co., 2016 SCC 37, such that correctness was the appropriate standard of review.
In Ledcor, the Supreme Court held that “an appeal from a trial judge’s interpretation of a standard form contract, that has precedential value and does not require engagement with any meaningful factual matrix, is a question of law that should be reviewed applying a standard of correctness”. In Dominion’s submission, Intact had instead dealt with a situation of “mixed fact and law” which would attract the application of the deferential reasonableness standard, as opposed to the situation in the two matters presently before the court, where in Dominion’s submission the arbitrators were faced with a pure question of law which attracted the correctness standard of review.
In the present appeal, Roberts J.A., writing for the panel which also included Hoy A.C.J.O. and van Rensburg J.A., held that the presumptive standard of review applicable to appeals from insurance arbitral decisions resolving priority disputes under the SABS is reasonableness. In arriving at this conclusion, Roberts J.A. provided a detailed analysis of the reasons why the result reached in Intact was not inconsistent with Ledcor.
Roberts J.A. explained that in Ledcor, there was no expert arbitral decision-maker involved. Instead, the Supreme Court was dealing with an appeal from a trial judge’s interpretation of a standard form contract. Justice Roberts pointed out that in Intact, the Court of Appeal had focused on the nature of the decision maker, and concluded that the administrative law framework associated with the Supreme Court’s decision in Dunsmuir v. New Brunswick, 2008 SCC 9,  1 S.C.R. 190 was applicable to determine the standard of review on appeal from an insurance arbitration decision. This was based on the methodology endorsed by the Supreme Court in Mouvement laique quebecois v. Saguenay (City), 2015 SCC 16,  2 S.C.R. 3, at para. 31.
Further, the court in Intact had already determined that the existing jurisprudence had established that the reasonableness standard was presumptively applicable to questions of law that are within the specialized experience and expertise of insurance arbitrators in interpreting insurance law. Specifically, the Supreme Court had determined that in appeals from commercial arbitrations restricted to questions of law, the presumptive standard of review is reasonableness: Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53  2 S.C.R. 633, at para 106. Justice Roberts also pointed out that in “Ledcor, the Supreme Court articulated the interpretation of a standard form contract as an exception to the court’s holding in Sattva that contractual interpretation by a specialized arbitrator is a question of mixed fact and law subject to deferential review on appeal”.
2) Application to the State Farm and Dominion Appeals
In the present appeals, Roberts J.A. held that the arbitrators were required to apply their specialized expertise in the context of their home statute, and were not simply interpreting a standard form contract, as was the case in Ledcor. Specifically, the arbitrators were tasked with determining whether the claimants in each appeal qualified as an “insured person” under the SABS in order to resolve the priority disputes under s. 268(2) of the Insurance Act. In turn, and absent an “exceptional question” that would rebut the reasonableness standard, the appeal judges were required to review the arbitrators’ decisions with deference as articulated by D.M. Brown J. (as he then was) in Zurich Insurance Company v. The Personal Insurance Company, 2009 CanLii 26362, at para.20:
Reasonableness is the deferential standard and flows from the recognition that “certain questions that come before administrative tribunals do not lend themselves to one specific, particular result,” but “to a number of possible, reasonable conclusions”: Dunsmuir, para. 47. Reasonableness is concerned mostly “with the existence of justification, transparency and intelligibility within the decision-making process,” as well as “with whether the decision falls within a range of possible, acceptable outcomes which are defensible in respect of the facts and law”: Dunsmuir, para 47. As re-iterated by the [Supreme] Court in Khosa, when applying a reasonableness standard:
[A]s long as the process and the outcome fit comfortably with the principles of justification, transparency and intelligibility, it is not open to a reviewing court to substitute its own view of a preferable outcome.
Based on her conclusions, Roberts J.A. allowed the State Farm appeal., finding that Madam Justice Wright had erred in reviewing the arbitrator’s decision for correctness, as Arbitrator Bialkowski was applying his home statute and exercising his specialized expertise. As such, deference was owed to the arbitrator’s decision and the reasonableness standard should have been applied.
Roberts J.A. dismissed the Dominion appeal, finding that Madam Justice Akbarali had appropriately applied the reasonableness standard of review, and that she had correctly concluded that the arbitrator’s underlying conclusion was a reasonable one falling within a range of possible, acceptable outcomes. In making such a finding, the Court of Appeal has aligned both decisions to create one cohesive ruling that unless someone named on a policy as an excluded driver was driving the vehicle they are excluded from driving at the time of the accident, they will be considered an insured person under that policy for priority purposes.
This Court of Appeal decision has displaced any ambiguity with respect to the standard of review for arbitral decisions concerning priority disputes between insurers by confirming that absent an “exceptional question”, the standard of review will presumptively be one of reasonableness. The distinction was illustrated by the court in two recent cases, one of which is Intact Insurance Company v. Federated Insurance Company of Canada, 2017 ONCA 73, 134 O.R. (3d) 241, leave to appeal refused,  S.C.C.A. No. 98. In that case, and unlike the present appeals, the correctness standard was held to apply because the insurance arbitrator was determining general issues of law regarding the Ontario Evidence Act and the common law doctrine of abuse of process, which did not require the application of specialized expertise, and did not involve the interpretation of the arbitrator’s home statute.
Moreover, it has established that where insurers embark upon a private arbitration to deal with priority or loss transfer, and choose their own arbitrator based on expertise, they ought do so carefully, where that arbitrator is likely to be given great deference on their decision.
Lastly, this decision confirms that an excluded driver can indeed be covered for accident benefits as an “insured person” under a policy so long as they do not sustain injury while driving a covered vehicle that they are excluded from driving at the time of the accident.