*Since the writing of this blog there was an application for leave to appeal which was dismissed with costs Novermber 15, 2018.
The Court of Appeal has released the long awaited priority decision on the Dominion of Canada General Insurance Company v. Unifund Assurance Company, 2018 ONCA 303. The decision is important to insurers for two reasons: it solidifies the standard of review as reasonableness on all appeals from decisions of arbitrators; and, it affirms that there is no limitation period that applies to an insurer’s obligation to place a claimant on notice regarding a priority dispute.
Dominion commenced its priority dispute against Unifund within the time limits imposed by regulation, but it did not provide notice of the priority dispute to the claimant. About 17 months after it delivered its notice to Unifund, Dominion delivered notice to the claimant. Unifund raised a preliminary issue at the first pre-hearing arguing that Dominion was statute barred from arbitrating the priority dispute where it had failed to notify the claimant of the priority dispute within 90 days of receipt of the Application for Accident Benefits (OCF-1). Unifund relied on sections 3 (1) and section 4 (1) of O. Reg. 283/95: Disputes Between Insurers.
Unifund argued that the purpose of the notice requirement of the insured is so that the claimant has the ability to object to the transfer of the claim to the insurers referred to in the notice in a timely way. Virtual non-existence of a limitation period or timeline to provide notice to the claimant is contrary to the primary purpose of the regulation: to determine priority disputes in the most cost efficient and expeditious way possible.
At first instance, Arbitrator Shari L. Novick, found that Dominion was not statute barred to arbitrate its priority dispute where there was no specific or stated limitation to provide notice to the claimant, pursuant to section 4 (1).
On appeal to the Superior Court, parties agreed that the standard of review was correctness, as the parties contracted to this standard of review
in their arbitration agreement. Mr. Justice M. D. Faieta applied the correctness standard of review. It is worth noting, however, that the Superior Court decision was released prior to the Supreme Court of Canada case of Teal Cedar Products Ltd. v. British Columbia.
Mr. Justice Faieta found that the arbitrator’s decision was incorrect. He analyzed the wording of the regulation in noting that section 4 requires an insurer who has given notice under section 3 to an insurer to “also” give notice to an insured person using a prescribed form. He found that the word “also” required that notice be given in a like manner to the notice provided under section 3. This meant that notice under section 4 must also be provided within the 90 day period described in section 3.
Dominion sought and was granted leave to appeal to the Ontario Court of Appeal.
The parties, again, agreed that the appropriate standard of review was correctness. Despite this, the Court of Appeal rigidly applied the Supreme Court of Canada case of Teal Cedar Products Ltd. v. British Columbia, and found that the appropriate standard of review is reasonableness, despite the parties’ arbitration agreement. Justice Katherine van Rensburg, speaking for a unanimous panel which included Chief Justice George Strathy and Justice Gary Trotter commented: “The arbitrator was a specialized decision-maker engaged in interpreting her home statute and regulation in the context of the determination of a preliminary issue in a priority dispute under the SABS regime.” Thus, in accordance with other Court of Appeal authority, the reasonableness standard was applied even though the arbitration agreement signed by the parties specifically contracted for a correctness standard.
The Court of Appeal found that Arbitrator Shari L. Novick’s decision was reasonable. The panel rejected the Superior Court’s analysis regarding the word “also,” and noted that there is no specified limitation period or timeline for section 4 (1), as opposed to several sections of the regulations that clearly state applicable timeless and limitation periods.
The practical effect of Dominion of Canada General Insurance Company v. Unifund Assurance Company, means that insurers could participate in several pre-hearings, examinations under oath, and even part of an arbitration prior to the insurer seeking to challenge priority being required to give notice to the claimant pursuant to section 4 (1). Insurers could, foreseeably, reach an agreement regarding priority four or five years after the accident, without the claimant having formal notice of the priority dispute. For such an agreement to be binding, however, the insurer must give notice to the claimant. No matter how late into the proceeding the notice pursuant to 4 (1) is sent, the claimant can object to the priority agreement, pursuant to section 5 (3). The claimant can object to the transfer of the claim pursuant to section 5 (1). Additionally, a claimant must initiate arbitration within one year of the date that an insurer notifies a second insurer that the claimant’s accident benefits application should be transferred to the second insurer, pursuant to section 7(3).
In acknowledging the potential scenario described above, the Court of Appeal found that it would be up to the arbitrator to determine whether the notice required by section 4 (1) has been given too late to permit the claimant to exercise the participation rights afforded by the regulation. This approach, however, leaves another issue for insurers to disagree on and arbitrate.
Finally, the Ontario Court of Appeal reiterated Arbitrator Novick’s findings that, where the claimant did not raise an objection regarding the potential transfer of priority, there was no actual prejudice suffered by Unifund, in this case.
Meredith Harper is co-chair of the Appellate Advocacy practice group and the author of this blog. If you have a question about this decision or a similar file, please contact Meredith.