On May 4, 2013, seven days shy of his 27th birthday, MB  lost control of his motorcycle and was in a serious motor vehicle accident. He suffered catastrophic injuries and was in a coma for eight months. Ms. J, the mother of the claimant, contacted TD insurance after recovering a pink slip in his wallet for the policy period of February 25, 2013 to February 25, 2014, and reported that her son had been in an accident and was in hospital and in coma as a result of his injuries.

Initially, Ms. J was advised that TD was not his current insurance provider. She followed up the next day and indicated that she was certain that TD was his insurance provider. A claim number was assigned and Ms. J was advised that two adjusters would likely be assigned to the file, one for property damage and another for injuries. A property damage adjuster was assigned; however, the file was never directed to the accident benefits department on the basis that the policy had not yet been proven to be “valid”.

The property damage adjuster gave assurances to Ms. J that an investigation would be conducted, and that police would be contacted. An internal inquiry was completed and the property adjuster advised Ms. J that there was no valid policy in effect, and that her son had cancelled his policy with TD and moved to PC Financial. It was later determined that while the policy had been cancelled, the claimant had never been insured by anyone other than TD.

At no point during his conversations with the claimant’s mother, did the adjuster offer to send her the application forms for accident benefits, or any information on how to file an AB claim with TD.

In his decision Arbitrator Bialkowski considered the following issues;

(a)Was the claimant principally financially dependant on his parents at the time of the accident so as to make State Farm the priority Insurer?
(b) did TD, which was the first insurer approached, “deflect” the claim in breach of s.2.1 of O. Reg 283/95?
(c) If TD did deflect the claim, what is the sanction, if any, and is TD responsible for accident benefits payments to and on behalf of the claimant on a permanent basis?

Arbitrator Bialkowski found that the claimant was not principally financially dependant, and State Farm was not the priority insurer. He also determined that based on the evidence before him, he could not find that there had been a deliberate systematic attempt to avoid/deflect this claim. However, he did conclude that while not deliberate, there was a clear breach of section 2.1 of O. Reg 283/95, and a deflection occurred when TD failed to forward an accident benefits package to the claimant’s mother.

With respect to the issue of sanctions, the Disputes Between Insurers legislation includes a provision for sanctions in the case of a breach, including deflection. Section (2.1)(7) of O.Reg.38/10. S. 3. states:

An insurer that fails to comply with this section shall reimburse the Fund or another insurer for any legal fees, adjuster’s fees, administrative costs and disbursements that are reasonably incurred by the Fund of other insurer as a result of the non compliance.

While Arbitrator Bialkowski found that TD’s conduct and deflection warranted a sanction, he was reluctant to order TD to indemnify State Farm and to assume carriage of the adjusting and payment of the ongoing AB claim. He concluded that TD was responsible for the full indemnity costs of both the MVACF and State Farm as well as the arbitrator’s costs with respect to the proceeding to date. However, he left the issue of valid cancellation of the TD policy prior to the date of the subject accident to be determined at a later date.

In order to prevent the claimant from being bumped from one insurer to another, counsel was asked to provide a timeline on the resolution or hearing of the TD policy cancellation issue. Arbitrator Bialkowski reserved his right to order indemnity and/or assumption of carriage of the claimant’s AB file until he heard from counsel with respect to the cancellation issue and a final determination on priority.

If you have any questions about this blog or a similar file please contact our Loss Transfer and Priority Disputes practice group.