*Since the writing of this blog the decision was affirmed in 2019 (not overturned).
In Stegenga v. Economical Mutual Insurance Company, released on March 6, 2018, the Honourable Justice Ramsay of the Ontario Superior Court of Justice heard the defendant insurer’s motion under Rule 21 for an order to strike the statement of claim on the ground that it disclosed no reasonable cause of action, and to determine whether the plaintiff’s claim was within the exclusive jurisdiction of the Licence Appeal Tribunal.
The plaintiff pled that she was injured in a car accident, that the defendant is liable to pay her Statutory Accident Benefits, and that the defendant had shown bad faith, negligence and fraud in administering her claim. The defendant insurer submitted that the claim was barred by s. 280 of the Insurance Act.
Section 280, in part, reads:
280 (1) This section applies with respect to the resolution of disputes in respect of an insured person’s entitlement to statutory accident benefits or in respect of the amount of statutory accident benefits to which an insured person is entitled. 2014, c. 9, Sched. 3, s. 14. (emphasis added)
(2) The insured person or the insurer may apply to the Licence Appeal Tribunal to resolve a dispute described in subsection (1). 2014, c. 9, Sched. 3, s. 14.
(3) No person may bring a proceeding in any court with respect to a dispute described in subsection (1), other than an appeal from a decision of the Licence Appeal Tribunal or an application for judicial review. 2014, c. 9, Sched. 3, s. 14.
The plaintiff submitted that the legislation prevented her from suing for accident benefits, but does not bar her independent claims for bad faith in the administration of accident benefits.
The statutory interpretation issue before Justice Ramsay was whether a dispute “in respect of an insured person’s entitlement to statutory accident benefits or in respect of the amount of statutory accident benefits to which an insured person is entitled” includes a claim for administration of accident benefits fraudulently, negligently or in bad faith.
In considering the Fighting Fraud and Reducing Insurance Rates Act, Justice Ramsay emphasized the “object of the legislation”, which is “designed to provide a cost efficient and fair mechanism for resolving disputes between insurers and insured in respect of Accident Benefits.” Justice Ramsay found that this was done by “mandating that disputes be heard at first instance by a tribunal and limiting the involvement of the court to appeals and review.” Justice Ramsay held that the exclusive jurisdiction of the tribunal is essential to the goal of reducing the cost of litigation.
In addressing the plaintiff’s submission that her claim was not barred by the Insurance Act because it is an independent claim for bad faith, Justice Ramsay found that he was bound by the authority of the Court of Appeal’s decision in Arsenault v. Dumfries, which stands for the proposition that the Insurance Act is applicable to any claim where the denial of accident benefits is an essential part of the claim. This remains true whether or not a stand alone bad faith claim exists.
Justice Ramsay ordered that the statement of claim be struck without leave to amend, and that the Licence Appeal Tribunal has exclusive jurisdiction to decide the claim at first instance. Ultimately, the Court found that the Legislature intended to deprive a claimant access to the courts at first instance, no matter how the action is framed, where the ultimate basis for the claim is the denial of accident benefits.
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