By Julia Cohen

On September 20th, 2014, Mr. Asiedu was involved in a motor vehicle accident. Mr. Siddioui had made a left turn in front of Asiedu’s car and was charged with violating s. 141(5) of the Highway Traffic Act. At the time of this accident, Mr. Asiedu was insured with the Applicant in this Loss Transfer arbitration, Unifund Insurance Company (“Unifund”), while Mr. Siddioui was insured with the Respondent, Chartis Insurance Company of Canada (“Chartis”). 

After the accident, Unifund began making accident benefits payments to and on behalf of the applicant. Thereafter, Chartis agreed to indemnify Unifund for loss transfer on a 100% basis consistent with Rule 12(5) of the Fault Determination Rules. Unifund settled the applicant’s accident benefits claim at mediation for $630,000, all inclusive, and a request for indemnification was sent by Unifund to Chartis for this amount on April 10th, 2019. Chartis refused to indemnify Unifund for this amount on the basis that the payment did not satisfy the “reasonableness of payment” requirements.  The central issue before Arbitrator Kenneth Bialkowski was the extent to which Chartis must indemnify Unifund for the amount of $630,000. 

Arbitrator Bialkowski cited the court’s decision in Jevco Insurance Company v Gore Mutual Insurance Company, which held that “the onus is a strict one, and the second party insurer must demonstrate that the first insurer either acted in bad faith or grossly mishandled the claim such that the amounts paid out that it is seeking to recover are grossly unreasonable.” Chartis had claimed that Unifund had grossly mishandled many components of the accident benefits claim when resolving the underlying claim through a lump-sum settlement, including assessments for: income replacement, housekeeping, attendant care, and medical/rehabilitation. Arbitrator Bialkowski noted that the settlement component for medical/rehabilitation benefits did pose some challenges in the analysis: while the adjuster obtained authority for $220,000, the medical/rehabilitation claim settled at mediation for $480,000. As such, “Chartis claimed that settlement for more than double that recommended by counsel and that sought for authority by the adjuster, represented a ‘gross mishandling’ of the claim.” It was determined that while the $480,000 allocated to past and future rehabilitation was unreasonable, the overall settlement of $630,000 was reasonable. This raised the following question: in a lump sum full and final settlement, to determine “reasonableness of payment”, should each component of the claim be analyzed individually, or should the claim be assessed on the basis of the global settlement amount? 

Arbitrator Bialkowski determined that “when assessing the issue of ‘reasonableness of payments’ in the context of a full and final lump sum settlement of all accident benefit components, it is the overall amount of the settlement that must be looked at rather than the individual components.” He held that “to require a review of the ‘reasonableness’ of each component of a full and final settlement of an accident benefits claim as set out in a Settlement Disclosure Notice, would severely restrict an insurer’s flexibility and general ability to resolve matters, and would consequently lead to a disservice to claimants who would like their claims resolved once consensus has been reached as to the overall settlement number.”

The arbitrator ultimately concluded that no evidence existed to support the contention by Chartis that any of the settlement payments by Unifund amounted to “gross mishandling.” In this case, the overall settlement was a reasonable one, and could not be said to have amounted to a “gross mishandling.” The strict onus on Chartis to demonstrate “gross mishandling or bad faith” was not met. Unifund was therefore entitled to indemnity for the full amount of $630,000.

Julia Cohen is the author of this blog.