Remarkably, on the same day as Arbitrator Ken Bialkowski released his decision in Certas Direct v. ACE INA, which is the subject of an earlier blog dated January 31st. Arbitrator Philippa Samworth released her preliminary issue decision in Wawanesa Mutual Insurance Company v. ACE INA Insurance on virtually the same issue.
Some might say there is irony in the fact that two different arbitrators reached the same conclusion on the same issue involving the same insurer on the same day, apparently unknowingly.
In Arbitrator Samworth’s case, the issue that was put forward was whether Wawanesa was entitled to seek loss transfer from ACE INA. Once again, the two insurers proceeded on an agreed Statement of Fact. Among other things, it was agreed that a City of Toronto tractor trailer insured by ACE INA was a “heavy commercial vehicle” as defined by O. Reg. 664 to the Insurance Act; that the February 29, 2012 accident occurred when the truck collided with a Ford Explorer insured by Wawanesa; and that a Side Agreement existed between the City and ACE INA at the time providing for a $5,000,000 deductible per occurrence.
The Side Agreement incorporated various provisions, including one that the City was responsible for all expenses including adjusting and legal expenses incurred in the handling of claims within the deductible in exchange for a reduced premium payable to ACE INA that was “more than zero”. However, ACE INA retained the right, upon written notice, to assume control of any claim, in which case the City would be required to reimburse ACE INA 100% of all claims, losses and associated expenses with the $5,000,000 deductible. Loss transfer indemnity was not a class of claims identified in the Side Agreement.
Similar to the position taken by Certas Direct before Arbitrator Bialkowski, Wawanesa took the position in this case that the Side Agreement was irrelevant, and that ACE INA could not affect another insurer’s right to pursue loss transfer indemnity by virtue of any such agreement. Both Wawanesa and ACE INA were an “insurer”, the vehicle insured by ACE INA was a “heavy commercial vehicle” while the vehicle insured by Wawanesa was not, and Wawanesa had paid accident benefits pursuant to section 268(2) of the Insurance Act.
Similar to the position it took before Arbitrator Bialkowski, ACE INA argued the “purposive approach” in Wawanesa Mutual Insurance Company v. Axa Insurance (Canada), 2012 ONCA 592 (CanLII) in its submissions to Arbitrator Samworth, and that the loss transfer scheme was introduced to provide an appropriate balance between the insurers of various classes of vehicles other than automobiles in meeting the costs of providing accident benefits to injured motorists. Arbitrator Samworth noted that Wawanesa was not arguing against these principles; rather the outcome of their application to the facts of this particular case.
Just as in Certas Direct v. INA, the decision of Arbitrator Densem in St. Paul Fire & Marine Insurance Company v. Intact Insurance was once again the focus of the analysis. Arbitrator Samworth did not accept the argument by ACE INA that while Wawanesa did pay accident benefits, a finding of loss transfer indemnity entitlement would result in ACE INA paying out monies to Wawanesa that ought properly to be paid by the City of Toronto due to the provisions of the Side Agreement. She did not accept the argument that to allow Wawanesa’s loss transfer claim to succeed would not further the objective of the loss transfer scheme, but would instead penalize ACE INA where the scheme of the Insurance Act is to produce a fair distribution of risk or loss.
In applying the “purposive approach” to interpretation, and the dictum from the Court of Appeal in Jevco Insurance Company v. York Fire & Casualty, 27 O.R. 3d (483) that the scheme of loss transfer is to “spread the load among insurers in a gross and somewhat arbitrary fashion favouring expedition and economy over finite exactitude”, Arbitrator Samworth held that section 275 of the Insurance Act is a complete code that governs loss transfer between insurers that fall within it’s provisions. She found that Wawanesa was the insurer responsible for payment of accident benefits under section 268(2), that the City of Toronto vehicle was a heavy commercial vehicle as defined under O. Reg. 664, and that ACE INA had issued a policy of automobile insurance to the City of Toronto that included statutory accident benefits that covered the vehicle involved in the accident. But for the deductible and claims handling side agreement, ACE INA would have no argument that Wawanesa could be prevented from claiming loss transfer indemnity from ACE INA.
Arbitrator Samworth distinguished the decision of Arbitrator Densem, upheld on appeal by Justice Whitaker, on the basis that on the facts of that case, St. Paul Fire was advancing a claim for loss transfer, and Intact was resisting it because it was the City of Mississauga, not St. Paul Fire, that had actually paid benefits to injured bus passengers pursuant to the Side Agreement between St. Paul and Mississauga. She held that there was “nothing under Section 275(1) using the purposeful approach that allows ACE to avoid it’s obligations under the loss transfer scheme”, and that the manner in which ACE INA and the City of Toronto choose to make their private arrangement with respect to payment and reimbursement of accident benefits “has no bearing on the right of Wawanesa to pursue a proper claim for loss transfer pursuant to Section 275(1).” To hold otherwise would lead to a “foolish and pointless” result that could not have been intended by the Legislature.
Just as Arbitrator Bialkowski had noted that his decision might be overturned on appeal in Certas Direct v. ACE INA, Arbitrator Samworth noted that there could be an appeal of her decision in this case. It is understood that her decision has been appealed, which raises the question of whether ACE INA is also appealing the decision of Arbitrator Bialkowski. However, given the outcome of the appeal in St. Paul Fire, to the effect that private Side Agreements are irrelevant in cases that otherwise fulfill the necessary criteria for loss transfer indemnity between two insurers licensed to transact automobile Insurance in Ontario, it is difficult to see how ACE INA can be successful on appeal in either of these cases.
The author, Bill Sproull, is Co-Chair of the Loss Transfer and Priority Dispute practice group. If you have questions about this blog or a loss transfer file, please contact him here.
