A short limitation period should have the effect of sparking a lawyer or an adjuster into quick action. In the realm of priority disputes, moving quickly is essential for success. Section 3(1) of O. Reg 283/95 (Disputes Between Insurers) sets out:
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.
Subsection 2 provides a narrowly-interpreted exemption to this strict limitation period:
(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.
But what constitutes a “reasonable investigation”? In the recent decision of Dominion and Axa (Hunter), private Arbitrator Ken Bialkowski reviewed the actions of Dominion in it’s attempt to determine the proper insurer to put on notice for the accident benefit claim of Mr. Hunter. Arbitrator Bialkowski ultimately made a finding that the Motor Vehicle Accident Claims Fund was required to adjust the claim of Mr. Hunter, but in doing so, he analyzed the “reasonable investigation” of Dominion to determine if the Fund was entitled to a special award.
Mr. Hunter was a pedestrian who was struck by a vehicle insured by Dominion, which asserted that coverage for the vehicle had been cancelled three months prior to the accident. At the time of the accident, Mr. Hunter was 57 years old, and reportedly had the intellect of a 9 or 10 year old. He was living on his own, and paying for his needs from his ODSP funding. His sister was his power of attorney. Dominion sought to investigate Mr. Hunter’s potential dependency on another policy holder. Through its initial investigation, it determined that Axa insured Mr. Hunter’s sister, and it also put the Fund on notice.
For accidents after September 1, 2010, section 3.1 of O.Reg. 283/95 requires an insurer to complete a reasonable investigation to determine if any other insurer or insurers are liable to pay benefits in priority to the Fund, and to provide particulars to the Fund of the results of such investigations prior to putting the Fund on notice. The question before Arbitrator Bialkowski was whether Dominion conducted a reasonable investigation prior to putting the Fund on notice.
Arbitrator Bialkowski held that a reasonable investigation will depend on the facts of each case, but for the case at hand, reasonable inquiries might include the following:
- Did the claimant have his own policy of automobile insurance?
- Was he a listed driver on someone’s automobile policy?
- Was he the spouse of someone with an automobile policy?
- Was he dependent on someone with an automobile policy?
- Did he have “regular use” of another vehicle with insurance?
- Did the driver of the uninsured vehicle have personal coverage?
- Were there other “involved vehicles” that may be insured?
Arbitrator Bialkowski examined both what Dominion did and did not do to conduct a “reasonable investigation”. He held that jurisprudence interpreting “reasonable investigation” found in subsection 3(1) should apply equally to the interpretation of “reasonable investigation” in subsection 3(2). He acknowledged that the standard is not one of perfection, and that there should be a recognition that adjusters are extremely busy handling more than one complex matter at the same time.
Arbitrator Biaklowski found it reasonable that Dominion did not seek a statement from Mr. Hunter given his mental challenges. It was also reasonable for Dominion to conclude that the claimant did not own a motor vehicle, was not licensed, and did not have regular use of a motor vehicle. The only remaining issues to investigate were dependency, whether insurance was available to the driver, and a determination of whether other vehicles were involved in this loss.
It was held that Dominion should have made an attempt to obtain a statement from the sister to determine the specifics of Mr. Hunter’s income, expenses, and any financial contributions she was making to her brother. In this regard, a more thorough investigation of dependency ought to have been completed before putting the Fund on notice.
Arbitrator Bialkowski found that Dominion’s investigation of other “involved vehicles” was also reasonable in that the police report made no mention of other vehicles, and there was nothing to suggest that any other vehicle was causally linked to the accident.
Dominion’s investigation was insufficient when it came to investigating other insurance available to the driver of the subject vehicle. It was important for Dominion to determine what insurance coverage might have been available to the driver, which may have extended accident benefit coverage to Mr. Hunter as pedestrian. A statement from the driver was not obtained until after Dominion put the Fund on notice.
Overall, Arbitrator Bialkowski held that Dominion did more than a cursory investigation. Nonetheless, Dominion’s efforts were not reasonable, as it had overlooked an avenue of possible insurance coverage that might be available to the driver of the vehicle. While Dominion was still able to pursue a priority arbitration against the Fund, and was successful in establishing that the Fund stood in priority to Dominion, Arbitrator Bialkowski held that subsection 7(6) of O. Reg 283/95 gave him discretion to make a special award. While he found that the Fund was obligated to adjust the claim of Mr. Hunter, as a matter of deterrence to other private insurers in similar situations, he held that Dominion would not be entitled to it’s costs of the arbitration given Dominion’s failure to conduct a “reasonable investigation” before putting the Fund on notice.
If you have any questions about this blog or a similar file, please contact our Loss Transfer and Priority Disputes group.
