In the recent decision of Intact v. Allstate, the Ontario Court of Appeal confirms the overturning of a decision of Arbitrator Ken Bialkowski on appeal by Justice Raikes.

PC and YR were married. According to YR, his marriage with PC had been deteriorating for some time and PC said she was leaving him in June 2010. At this time, PC had been dating KH for a few months and spent most of her time with him. During that time, her daughters were still living with YR. In July 2010, she moved her two daughters to Sarnia to live with KH. All of the witnesses who provided evidence (KH, YR, and PC’s mother) indicated that this move was intended to be a permanent one. KH’s evidence was that “you hope for the best and expect the worst”, not knowing how the relationship would work out in the future, it being in its relative infancy. KH was insured with Allstate.

On August 21, 2010, PC and her two daughters were involved in an accident in a vehicle insured with Intact operated by one of PC’s friends. PC suffered relatively minor injuries, but her daughters sustained catastrophic injuries. The question was if they were dependant on KH or not.

The well defined test from Miller v. Safeco Insurance Co. of America, Liberty Mutual v. Federation and Oxford Mutual v. Cooperators  has been endorsed time and again by the court:

(a) The 51% principle from Liberty Mutual Insurance v. Federation Insurance should be applied. It is not sufficient that the claimant simply be dependent, but rather must be principally dependent. If the claimant had sufficient resources to fund 51% of their financial needs then the person could not be dependent upon others.
(b) The time frame to be looked at may encompass days, weeks or even years. One does not simply look at a “snap shot” of the actual day of the Accident to determine the issue of dependency.
(c) The factors from Miller v. Safeco should be considered:

(i) the duration of the dependency
(ii) the amount of dependency
(iii) the financial or other needs of the alleged dependent
(iv) the ability of the alleged dependent to be self-supporting.

(d) Each case must be factually driven.
(e) The ability to be self-supporting must be taken into account when measuring dependency.

Critical to this case, in the eyes of the Court of Appeal, was the time frame factor. The arbitrator had to two different time frames before him:

a) the seven-week period before the accident then the Claimants were financially dependent on KH
b) the year-long period before the accident, when they were not

The arbitrator reviewed the case law dealing with “short” time frames to determine dependency, and determined:

The common theme through these cases where a short time frame was considered appears to be that each arbitrator wrestled with the question as to whether the relationship existing during that period was of permanence and likely to continue into the future or was it transitional. The same analysis must be done here. 

He made the following determination based on the facts, and the law above, as he saw it:

On the evidence before me Intact has failed to satisfy the onus upon it to establish the relationship between [KH] and [PC] was on the balance of probability likely to be permanent. As a result I find that a seven week time frame for the analysis of financial dependency is inappropriate. Accordingly, one must look at the “big picture”.

On appeal, Intact took the position that the “permanency” aspect of his decision was a legal test that could be appealed. Allstate argued that this was a factual determination of the appropriate timeframe.

The Court of Appeal agreed with Intact, and reviewed that rationale and the resulting outcome.  In a rather long analysis of the standard of review, the Court of Appeal held that the appropriate standard to be applied comes from the Dunsmuir v New Brunswick Supreme Court of Canada decision using an administrative law framework, where the initial decision had been rendered by a non-judicial decision maker.  The standard of review on appeal from the judge’s decision on appeal to the Court of Appeal involves mixed questions of fact and law, and therefore, in accordance with Oxford Mutual v Co-operators from the Court of Appeal, the presumptive standard of review is reasonableness. Delving further, the Court held that the Supreme Court of Canada’s decision  in Sattva Capital Corp. v Creston Moly Corp confirms the appropriate standard of review is indeed reasonableness. Fortunately for Intact, in their arbitration agreement, Allstate and Intact agreed that either could “appeal the Arbitrator’s decision on a point or points of law or mixed fact and law” to a judge of the Superior Court of Justice.

In finding the initial decision of the arbitrator unreasonable, the court found:

The arbitrator failed to conduct the requisite analysis and his “permanence” requirement is simply incompatible with the applicable legal principles.

The arbitrator’s decision is inconsistent with the evidence and the result of indefensible speculation.

The court found the arbitrator was required to look at the relationship between the Claimants and KH during a “period of time which fairly reflects the status of the parties at the time of the accident”, a test that has been adopted by the court several times.

The court goes on to say that the arbitrator made a determination that the relationship was not permanent based on “…the kind of person Paula was.” The court describes this analysis as speculative and unreliable. Because that analysis was the sole basis for his decision, it renders the overall decision unreasonable.

The Court of Appeal developed the time frame test in Oxford Mutual v. Cooperators, and at that time had this to say:

…the true characterization of a dependent relationship at the time of the accident will usually require consideration of that relationship over a period of time, particularly in the case of young adults whose lives are in transition. The parameters of that period will depend on the facts of the case. The time frame chosen will also be influenced by the nature of the relationship between the person providing the care and the person receiving the care.

In the case at hand, the Arbitrator had the discretion to weigh the evidence, and make a determination of the “true characterization” of a dependant relationship. It seems overly harsh to re-weigh that evidence., yet concludes that the arbitrator’s decision was unreasonable.  Thus, the appeal decision, while in error applying a ‘correctness’ standard on appeal, was correct ultimately in overturning the decision since it was unreasonable.  

The issue of permanence is more interesting. The court tells us not to take a snap shot on the day of the accident, but how short could a dependency relationship be and still not be a “snap shot” on the day of loss? How fleeting would the relationship have to be to not be a “true characterization”? The court offers no guidance.

I note that the previous arbitrations that dealt with the status of relationships used the term “transitional” rather than “permanence”, and the Court of Appeal makes no mention of them.

Seemingly as a foot note, after the accident, YR was responsible for the care of PC’s two daughters, and is currently their legal guardian. The relationship between PC and KH was over by January of 2011, a whopping seven months after it started, and five months after the accident. If it wasn’t permanent, maybe it was just transitional.

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