In Continental Casualty Company v. Chubb Insurance released on June 19, 2019, Mr. Justice Stinson ruled on a priority dispute appeal involving one insurer that provided basic mandatory medical and rehabilitation coverage of $1 million (Chubb Insurance) to the insured person, and a second insurer that provided optional enhanced coverage of $2 million for medical and rehabilitation (Continental Casualty Company).
The underlying facts involved the claimant Peter Eckstein who was struck as a pedestrian by a motor vehicle, thereby sustaining injuries that left him with catastrophic impairments. At the time of the July 12, 2015 accident, he was a named insured under a motor vehicle policy with Chubb Insurance.
At the time however, Mr. Eckstein was also the owner, President and CEO of a forest products company that maintained a fleet of vehicles. While he was listed as a driver on a schedule of company vehicles insured by Continental, the evidence failed to establish that he had ever driven one of those vehicles. Most of those were vehicles tractor trailers, but some included passenger-type vehicles such as trucks and vans.
Initially, Mr. Eckstein sought to apply to Continental for accident benefits, but Continental erroneously advised him that he was not eligible to claim benefits under the Continental policy because he did not operate a company vehicle nor did he have access to one. He was not in the course of his employment when injured and he was not actually operating a vehicle insured by Continental at the time of the loss. Continental also erroneously advised Mr. Eckstein that he did not have optional benefits available under the Continental policy. As a result, Mr. Eckstein applied to his personal insurer, Chubb. Chubb also served notice on Continental of a priority dispute.
At first instance, this dispute was decided by Arbitrator Bialkowski. He found that although Mr. Eckstein did not ordinarily drive company vehicles, and he was not a named insured under the Continental policy, he was still a “person specified in the policy” because his name appeared on a schedule of drivers, such that he was an “insured” under the policy.
Arbitrator Bialkowski further considered, and held, that Mr. Eckstein was a “deemed named insured” under the Continental policy in accordance with s. 3(7)(f) of the SABS. As a “deemed named insured” under the Continental policy he was entitled to elect as between Chubb and Continental. Arbitrator Bialkowski applied equitable principles, determining that because optional enhanced medical and rehabilitation benefits were available under the Continental policy but not the Chubb policy, Mr. Eckstein would have applied first to Continental had he been aware of this fact, and in effect, he was re-electing to pursue Continental for payment of benefits.
On appeal before Mr. Justice Stinson, Continental challenged the arbitral decision.
In their responding submissions, both Chubb and Mr. Eckstein raised the new argument that the Continental policy had an OPCF-47 endorsement which, they argued, effectively precluded Continental from relying on the priority framework under s. 268 of the Insurance Act. In reply, Continental conceded that Mr. Eckstein was covered under the OPCF-47. As a result, Mr. Eckstein was entitled to look to Continental for payment of the $1 million of enhanced medical and rehabilitation coverage. However, Continental maintained that a contract could not override statutory rights under s. 268 of the Insurance Act regarding insurers’ liability for payment of basic benefits as between themselves. As such, Continental had a right of indemnity from Chubb for recovery of basic level benefits paid to Mr. Eckstein up to $1 million.
After holding that the standard of review was one of reasonableness based on Intact Insurance Company v. Allstate Insurance Company of Canada, 2016 ONCA 609 and Dunsmuir v. New Brunswick, 2008 SCC 9, Justice Stinson held that the finding of Arbitrator Bialkowski that Mr. Eckstein was a deemed named insured under the Continental policy was unreasonable. Justice Stinson distinguished prior arbitral decisions in Dominion v. Federated, 2012 CarswellOnt 17947 (Arbitrator Scott Densem) and Dominion v. Lombard, 2013 CarswellOnt 19270 (Arbitrator Ken BialkowskI) on the basis that in the present case there was no evidence that any company vehicles were “being made available for Mr. Eckstein’s regular use”, such that Arbitrator Bialkowski had failed to follow the analytical approach set out in such cases as ACE INA Insurance v. Co-operators General Insurance Co., [2009] CanLII 13625.
Although not argued before Arbitrator Bialkowski, Justice Stinson next analysed Continental’s obligations under the OPCF-47, and it’s right of indemnity vis-a-vis Chubb.
Here, Justice Stinson noted the dichotomy between Mr. Eckstein’s rights to SABS coverage under the two insurance policies and the rights and obligations of the two insurers to pay benefits and seek repayment of benefits paid as between themselves. The former were governed by the insurance policies, while the latter were governed by the statutory regime to resolve priority disputes between insurers. He noted that the result of his finding that Arbitrator Bialkowski had erred in concluding that Mr. Eckstein was a “deemed named insured” under the Continental policy would mean that Continental’s legal obligation to pay SABS would be “at odds” with Chubb’s obligations to do so under ss. 268(5) of the Insurance Act.
Relying on s. 45(5) of the Arbitration Act, Justice Stinson reviewed and adopted the analysis and conclusions of Arbitrator Lee Samis in Echelon and Cooperators, released January 20, 2015. That decision addressed the interaction between the priority rules as between insurers and those insurers that have issued an OPCF-47. Specifically, Justice Stinson noted Arbitrator Samis’ conclusion that there was no provision that precluded an insurer that had issued the OPCF-47 and was paying SABS under an enhanced optional policy from seeking reimbursement from another insurer at higher priority under s. 268 of the Insurance Act, at least up to the level of basic mandatory minimum benefits of the second insurer. Justice Stinson also adopted and endorsed Arbitrator Samis’ view that the priority dispute mechanism should not be utilized for “offloading the continued handling of the claim” on the basis that the “higher priority insurer, having only a partial obligation to respond, would necessarily be the appropriate insurer to continue the file handling”. Justice Stinson also endorsed the following from Arbitrator Samis:
[T]he net result is that the obligation for the mandatory benefits ultimately rests with the insurer having the highest ranking under section 268 of the Insurance Act. This is entirely appropriate. It supports the legislative intention of making optional benefits available at reasonable cost. Any other interpretation would have the effect of unduly loading costs onto the optional benefit insurers and would discourage individuals from purchasing that coverage for their protection.”
In the result, Justice Stinson held that Continental had to pay both standard and optional SABS benefits to Mr. Eckstein, but was also entitled to reimbursement from Chubb for all payments and expenses related to paying and administering the standard benefits paid to Mr. Eckstein.
Echelon and Cooperators released January 20, 2015 was the first of two decisions of Arbitrator Samis in this area of the law, and notably, he did not cite it in the second of his two decisions (see: Echelon and Co-operators released March 2, 2018). Ironically, both cases were between the same insurers represented by the same counsel, but they arose from separate losses.
Further and in the interim, Arbitrator Philippa Samworth had released a decision with a different result; see: Jevco and Chieftain released on March 11, 2016. It is unclear why this decision is not cited by Justice Stinson in the case before him, as it arguably would have been to the benefit of Continental to advance similar arguments in the present case.
In Jevco and Chieftain, Arbitrator Samworth acknowledged that there is a compelling legislative intent that an insured person who pays an extra premium for optional benefits should actually receive those enhanced benefits. However, she noted that the OPCF-47 pre-supposes that those individuals will actually apply to the insurer obligated to pay those enhanced benefits. This had not happened in the case before her. She viewed the wording of the OPCF-47, promulgated in 1997, as being “antiquated” in the context of the development of accident benefits law in Ontario that had made it impossible for an insurer to refuse to pay benefits on the ground that they are not the priority insurer. In her view, this rendered the wording of the OPCF-47 that guarantees that the insurer will not deny the claim on the basis of priority under section 268 of the Insurance Act as “meaningless”.
On the facts before her, Arbitrator Samworth held that the OPCF-47 did not become operational because the claimant had applied to Jevco (the equivalent of Chubb in the present case), not Chieftain (the equivalent of Continental in the present case). She reviewed the four criteria in the OPCF-47 enumerated by Arbitrator Samis in his first decision on the subject, and held that the first requirement was met because the claimant had clearly purchased optional benefits from Chieftain. She held that the second requirement was also met because the claimant was a named insured under the Chieftain policy (in the present case, Mr. Eckstein was not a named insured of Continental, only a person listed on the policy).
However, Arbitrator Samworth held that the third requirement had not been met because no claim had been made under the Chieftain policy. While it was therefore unnecessary for her to decide the applicability of the fourth requirement, she nonetheless observed that “arguably”, having already applied to Jevco, the claimant would not meet this last criteria either because he had already applied under a policy other than the one providing optional benefits. She therefore disagreed with Arbitrator Samis in his conclusion that “the OPCF-47 does allow in appropriate circumstances for there to be a priority dispute between insurers in the face of an operational and activated OPCF-47.” She observed that to find otherwise, the result would involve the “creation of some complicated system for reimbursement” that in her view would “unduly complicate the process contemplated by the endorsement”.
In this regard, Arbitrator Samworth cautioned that she was not deciding the claimant’s rights under his policy with Chieftain, which “is for another forum”. However, she stated her belief that “the regulation and the endorsement was intended to simplify the process for the insured’s receipt of optional benefits in certain circumstances and to pre-empt private disputes between insurers on this issue and not to set up a complex scheme for priority disputes, reimbursements between various insurers nor placing the administration of a Statutory Accident Benefit claim with an insurer who would not be actually making the payments”.
Ultimately, it appears that Mr. Justice Stinson has ruled that when read together, the s. 268 priority rules in the Insurance Act and the OPCF-47 do create a system of reimbursement between insurers that are contractually bound to pay enhanced optional benefits and those bound to pay mandatory basic benefits even where the latter insurer is at priority to the former under s. 268 of the Insurance Act. Further, it appears that he has made this ruling regardless of whether the claimant has submitted their accident benefit application to the insurer that is contractually bound to pay enhanced optional benefits, or to the insurer bound to pay mandatory basic benefits. Finally, it appears that Justice Stinson has authorized a system whereby the ongoing handling of an accident benefit claim is to be transferred from the insurer that is contractually bound to pay basic minimum benefits to the insurer bound to pay enhanced optional benefits even where the claim was initially submitted to the insurer required to pay basic minimum.
Notably, both Arbitrator Samis and Arbitrator Samworth commented that this area of the law lacks clarity in their respective decisions. To date however, there has been no legislative intervention. Continental Casualty Company v. Chubb Insurance appears to be the first Court decision in this area of the law, and it may become the subject of further review by the Ontario Court of Appeal. While Justice Stinson’s decision represents a pragmatic solution to the problem of claimants receiving enhanced benefits where that level of coverage has been obtained, it is not one that will necessarily be accepted by the insurance industry, in part because of the conflicting decision of Arbitrator Samworth in Jevco and Chiefain.
Bill Sproull is of counsel at the firm and is a member of the priority and loss transfer practice group. If you have a question about this decision or a similar file, please contact Bill.
