*Since the writing of this blog, Leave to Appeal was dismissed.

In a recent decision of considerable importance to those of us who do loss transfer work, the Court of Appeal has confirmed in the case of State Farm v. Aviva 2015 ONCA 920 that “quick and dirty” is the order of the day and that “ordinary rules of law” don’t necessarily accord with tort liability principles.

This case considered the interplay between Rules 5(1) and Rule 3 of the Fault Determination Rules R.R.O. 1990 Reg. 668

Rule 5(1) states:

If an incident is not described in any of these rules, the degree of fault of the insured shall be determined in accordance with the ordinary rules of law.

Rule 3 states:

            The degree of fault of an insured is determined without reference to:

a). the circumstances in which the incident occurs, including weather conditions, visibility, or the actions of pedestrians; and

b). the location on the insured`s automobile of the point of contact with any other automobile involved in the incident.

Implicitly, most practitioners in this area (and most arbitrators it would seem) have operated on the assumption that “ordinary rules of law“ refers to tort principles, and therefore Rule 5 operates independent of Rule 3.

The Court of Appeal has made it clear that this is not the case.  Rule 5 is to be read in concert with Rule 3, and its operation must be informed by Rule 3, meaning that the application of the “ordinary rules of law” may result in an outcome that bears little relationship to a pure tort liability analysis.

Specifically, the Court stated as follows at paragraph 69:

A determination of fault  based on tort law rules would necessarily engage a consideration of the circumstances that the legislature purposefully excluded from consideration by rule 3.  Furthermore, as already discussed, resort to pure tort law for the determination of fault would run contrary to the purpose of the loss transfer scheme, which is to provide an expedient and summary way of resolving indemnification claims.

In the present case, the Arbitrator had considered both an analogous Fault Determination Rule and the Highway Traffic Act in her analysis of the applicable “ordinary rules of law”, before finding 100% liability against a left turning driver where tort principles would almost certainly have dictated a liability split.

The Court commented on the Arbitrator`s fault determination analysis as follows:

The arbitrator`s fault determination could be criticized for being insufficiently nuanced.  However, her approach is consistent with the legislative scheme, which is to provide an expedient and summary method of determining fault for the purpose of indemnification…fault determination under the FDRs are done in a gross and somewhat arbitrary fashion, favouring expediency and economy over finite exactitude.

In restoring the Arbitral award of Arbitrator Shari Novick, the Court also affirmed that a deference is owed to a decision maker at first instance on issues of credibility as they inform findings of fact.