In applying s. 9(3) of the Fault Determination Rules to a chain reaction collision involving three moving vehicles and one stopped vehicle, the Superior Court has adopted the Court of Appeal’s analysis of s. 9(4) in State Farm Mutual Automobile Insurance Company v. Old Republic Insurance Co. of Canada to find that there must be a direct impact between a heavy commercial vehicle and the vehicle whose insurer seeks indemnification for loss transfer to apply. The involvement of a fourth “stopped” vehicle in the incident is of no consequence.
Kingsway General Insurance Company v. Dominion of Canada General Insurance Company dealt with a chain reaction involving four vehicles. The first vehicle, insured by Kingsway, was a heavy commercial vehicle (vehicle “C”) which struck a moving passenger automobile (vehicle “B”). Vehicle “B” subsequently struck a second moving passenger automobile, which was insured by Dominion (vehicle “A”). Vehicle “A” then struck a third passenger automobile (vehicle “Z”), the only vehicle which was stopped at the time of the chain reaction.
Dominion paid statutory accident benefits to its insured, the driver of vehicle “A”. On the basis of the involvement of the stopped fourth vehicle in the collision (vehicle “Z”), Dominion sought loss transfer from Kingsway pursuant to the ordinary rules of tort law under s. 5 of the FDRs. Given that s. 9(3) requires all of the automobiles involved in the incident to be “in motion,” Dominion took the position that s. 9(3) did not apply.
At the arbitration level, Arbitrator Novick agreed with Dominion and found that s. 9(3) did not apply on the basis that the fourth vehicle involved in the chain reaction was stopped at the time of the accident. In the absence of specific wording in s. 9(3), she did not accept Kingsway’s argument that the FDRs were required to be approached in “clusters” or “groupings” of three vehicles. Applying the ordinary rules of tort law pursuant to s. 5 of the FDRs, Arbitrator Novick concluded that vehicle “C” was 100% at fault for the collision and that Kingsway was therefore required to indemnify Dominion for all statutory accident benefits it paid out to the driver of vehicle “A”. She added that, even if s. 9(3) did apply, Kingsway would still be required to indemnify Dominion despite the fact that vehicle “C” did not directly collide with vehicle “A”.
In allowing Kingsway’s appeal, the Superior Court adopted the Court of Appeal’s analysis of s. 9(4) in State Farm v. Old Republic that the degree of fault for each collision between two automobiles involved in the chain reaction must be determined without reference to any related collisions involving either of those two automobiles. The Superior Court concluded that it makes no sense to conclude that vehicle “A” was responsible for the whole chain reaction if vehicle “Z” (the fourth vehicle) was moving when it was struck by vehicle “C,” but find that vehicle “B” bears 50% responsibility for the collision with vehicle “A” instead of vehicle “C” if vehicle “Z” was either stopped or not involved.
In reiterating the Court of Appeal’s finding that ss. 9(3) and 9(4) are “parallel provisions [that]… must be read consistently,” the Superior Court concluded that s. 9(3) should only consider vehicles “A,” “B” and “C” as illustrated in the diagram in the FDRs, and not any additional vehicles which may be involved farther down the chain. Applying the standard of review of correctness to the question of law at issue, given that vehicles “A,” “B” and “C” were all in motion at the time of the accident, the Superior Court ruled that the arbitrator erred by refusing to apply s. 9(3) to the collision. Ultimately, the Superior Court accepted the Court of Appeal’s reasoning in State Farm v. Old Republic to conclude that s. 9(3) is not available to apportion liability between vehicles involved in the same chain reaction that do not directly collide.
This decision serves as a strong reminder that, unlike determining liability in tort matters, the loss transfer regime is meant to be applied in an expedient, economical and summary manner. Despite the presence of a fourth vehicle (or more) in the context of chain reaction collisions, the insurer of vehicle “A” still cannot “leapfrog” over vehicle “B” and claim loss transfer against the insurer of vehicle “C”. The involvement of additional vehicles, whether stopped or in motion, does not change the way in which fault is strictly determined under s. 9(3) of the FDRs.
A new Superior Court decision tries to tackle the complicated interplay between a coverage dispute under the SABS and the priority disputes between insurers scheme in section 268 of the Insurance Act and O. Reg. 283/95.
Unifund v Security National involved a claimant who was injured while operating her boyfriend’s ATV on his property. The ATV was a “described automobile” on a policy of insurance issued by Security National. The claimant was a named insured under a Unifund policy, which did not specifically include coverage for ATVs.
The claimant applied for benefits to Security National, to which she was entitled (as an occupant of the vehicle at the time of the accident). Security National commenced a private arbitration against Unifund, arguing that Unifund was higher in priority pursuant to section 268 (2) of the Insurance Act. In the usual course, Unifund would stand higher in priority because the claimant was its “named insured”, whereas she was merely an “occupant” of the ATV insured by Security National.
Unifund resisted the priority dispute on the basis that the ATV would not be considered an “automobile” under its policy. Section 2(1) of the SABS (2010) indicates that accident benefits are available under a motor vehicle liability policy in circumstances of an “accident”, which is defined in part as “the use or operation of an automobile”. Based on the existing legal framework, an ATV is not considered to be an “automobile” when being operated on private property belonging to its owner.
Referring to the “is it an automobile?” test that the Court of Appeal established in Adams v. Pineland Amusements, Arbitrator Bialkowski found, correctly, that the claimant had been involved in an “accident” as it concerned the Security National policy. He found that the ATV was defined in the Security National policy as an “automobile”, satisfying part two of the Adams test.
However, he declined to consider whether the ATV incident would amount to an “accident” under the Unifund policy. His rationale was that the priority scheme in section 268 was an independent process to be engaged once a valid accident benefits claim had been established.
On appeal, Matheson J. found that insurers may resort to the priority regime in section 268 “if more than one policy provides for statutory accident benefits”. Therefore, Matheson J. considered it necessary to determine whether each of the relevant policies would have deemed the ATV incident to be an “accident”.
Matheson J. agreed with the arbitrator and found that the ATV incident would have been considered an “accident” under the Security National policy. However, she found that it would not meet the definition of “automobile” under the Unifund policy. She held:
The Adams test also underscores the need to consider each policy separately. That case did not consider multiple insurance policies. However, by describing the second part of the test as whether the vehicle is defined as an automobile in the wording of the insurance policy, it properly focused on a single insurance policy. Otherwise, and this is the effect of the Arbitrator’s decision, the terms of another insurance policy are permitted to meet the second part of the test and require coverage.
In this case, accident benefits were only available through the Security National policy, which defined the ATV as an “automobile” and not through the Unifund policy, which did not define the ATV to be an automobile. Accordingly, Security National did not have recourse to the section 268 priority regime because the Unifund policy could never provide coverage for this loss. Unifund’s appeal was granted, effectively overturning arbitrator Bialkowski’s decision.
This case raises questions as to the appropriate handling procedures if the circumstances were reversed. For instance, if Unifund was the first insurer to receive the OCF-1, would it have been obligated to handle the accident benefits claim and pursue priority, even though the particular loss was not covered under its policy? Or could it have denied the claim on the basis that the claimant was not involved in an “accident”?
Matheson J.’s policy-specific approach would seem to support Unifund denying the accident benefits claim if it was the first insurer to receive the OCF-1. However, this would also seem to contradict the Supreme Court of Canada decision in Zurich Insurance Co. v. Chubb Insurance Co. of Canada, which found it inappropriate for Chubb to deflect an accident benefits application where the claimant had a subjective reason to believe that benefits were available through Chubb. In that case, Chubb had merely offered a non-automobile policy to the claimant. Chubb’s argument was, in part, that the policy did not provide accident benefits coverage. Would it be any different for an insurer to argue that its policy does not cover ATVs, when in other circumstances it does insure ATVs? Is the logic endorsed by Matheson J. therefore inconsistent with the overriding intention of the SABS to provide speedy benefits to a claimant who is elsewhere entitled to accident benefits?
A significant distinguishing factor between the Unifund and Chubb cases is that in Chubb, there was no issue that the claimant was entitled to accident benefits, having been involved in a car “accident”. There was no question that her loss was covered under the SABS as an “automobile” “accident” under any auto policy that might have insured the claimant. However, in Unifund, the claimant’s entitlement to accident benefits under a specific policy turned on whether the vehicle in question was an “automobile” that triggered entitlement to any accident benefits under that specific policy. Therefore, an insurer in Unifund’s position might have a reasonable argument that although there might be a nexus between the claimant and the insurer for a particular loss, the obligation to actually pay benefits and pursue a priority dispute cannot be triggered unless the claimant sustains a type of loss that is covered under the policy
The Unifund v. Security National case supports that a priority dispute is only proper if the claimant would have access to accident benefits under each policy involved in the dispute. For now, this reminds us to be vigilant when responding to a priority demand. However, that proposition might ultimately be incorrect as Zurich v. Chubb does not support that coverage under multiple policies is necessary to engage the Section 268 priority regime. Nor is it explicitly required by Section 268. The proper question for an insurer receiving an OCF-1 might be, among other things, whether the claimant’s loss would be covered under the SABS for the particular loss with respect to that policy. The insurer should not determine whether the claimant is an “insured person” under the policy (for example, whether the claimant is a dependant or a spouse), as that is a question reserved for the priority dispute scheme. But the insurer could consider whether the claimant was involved in an “accident” that would otherwise be covered under the SABS.
N.B. – Matheson J. held that the appropriate standard for review on appeal of a question involving mixed fact and law was “reasonableness”. This is consistent with the recent Court of Appeal decision in Intact Insurance Company v. Allstate Insurance Company of Canada. A “reasonableness” standard entails a higher level of deference to the hearing arbitrator than the standard of “correctness”. This may cause concern amongst insurers as the appeal process could have less teeth moving forward. However, Matheson J.’s decision is a step in the right direction as she did not shy away from delving into the substantial legal issues to find that arbitrator’s decision was unreasonable.
The OPCF-47 has been in existence since 1997, however, has not been the subject of significant litigation until recently. With the 2010 changes to the Statutory Accident Benefits Schedule, and with the upcoming amendments in June 2016, there has been increasing demand for optional benefits to provide additional coverage in case of a motor vehicle accident.
To date, there have only been two private arbitration decisions that deal with the effect of the OPCF-47 on priority disputes between insurers. The recent decision in Jevco Insurance Company v. Chieftain Insurance Company was released on March 11, 2016, by Philippa Samworth.
In this case, the claimant was involved in a serious motor vehicle accident while riding his motorcycle, insured by Jevco. He also owned a personal motor vehicle insured by Chieftain and had purchased optional benefits under the Chieftain policy. As such, an OPCF-47 form was in place on the Chieftain policy. Upon receiving notification of the accident, both insurers forwarded accident benefits packages to the claimant. The claimant, through his Power of Attorney, submitted his Application for Accident Benefits (OCF-1) to Jevco.
Jevco subsequently advised the claimant that it believed that his claim should be handled by Chieftain. The claimant’s lawyer then submitted a letter to Chieftain stating that the claimant was re-electing to receive accident benefits from Chieftain. He did not submit a new OCF-1 to Chieftain.
Jevco commenced a priority dispute against Chieftain on the basis that the OPCF-47 optional benefits endorsement placed Chieftain in higher priority to handle the claim as the normal priority rules were inapplicable. Chieftain denied the claim on the basis that the claimant submitted his Application for Accident Benefits to Jevco and, therefore, the OPCF-47 was not engaged and, as the claimant was an occupant of the insured motorcycle at the time of the accident, Jevco was the priority insurer.
This matter went to a hearing before Arbitrator Samworth who determined that Jevco was the priority insurer.
Arbitrator Samworth stated that the purpose of the OPCF-47 endorsement is that an optional benefits insurer who receives the Application for Accident Benefits first gives up any rights to pursue another insurer for priority that would otherwise have existed. She noted that the wording of the OPCF-47 endorsements clearly presumes that a claimant will apply first to their optional benefits insurer following an accident. Arbitrator Samworth also noted that an insured person can only file one Application for Accident Benefits and there was no option to re-elect.
Arbitrator Samworth also considered the four conditions outlined by Arbitrator Samis in the only other OPCF-47 priority decision, Echelon v. Co-operators. These conditions, all of which must be met before the OPCF-47 will be engaged, are:
Are optional Statutory Accident Benefits purchased?
Are the optional Statutory Accident Benefits applicable to the claimant?
Has the claimant claimed SABS under the optional benefits policy?
Has the claimant agreed not to make a claim for SABS under another policy?
Notably, Arbitrator Samworth found that the claimant did not meet condition (3) as he had submitted his Application for Accident Benefits to Jevco first. Therefore, the OPCF-47 was not engaged and she did not need to address whether he met condition (4).
In Echelon v. Cooperators, Arbitrator Samis had also suggested an optional benefits insurer could potentially commence a priority dispute against the proper priority insurer for the “mandatory benefits” that are payable. Arbitrator Samworth disagreed with this position, stating that the correct interpretation of the OPCF-47 suggests that, not only will the optional benefits insurer not deny the claim for the mandatory or optional statutory benefit coverage based on the priority of payment of rules, but that they will also not seek to pursue a priority claim under Section 268 of the Insurance Act.
Julianne's practice areas of interest encompass a wide range of insurance defence matters, including accident benefit litigation and arbitrations, subrogation, bodily injury litigation and priority and loss transfer disputes.
Our lawyers have worked through the maze of complex litigation and coverage issues, managed the class action juggernaut, and represented employees of insurers that come under attack by plaintiff`s litigation. Some of the problems we face are front page news, most are not. They are all problems that are important to our clients, and to us.