



COURT OF APPEAL FOR ONTARIO

CITATION: Ontario (Finance) v. Elite Insurance Company, 2018
    ONCA 809

DATE: 20181009

DOCKET: C64563

van Rensburg, Pardu and Paciocco JJ.A.

In
    the Matter of the Insurance Act, R.S.O. 1990, c. I.8, as amended, and Ontario
    Regulation 282/95 under the
Insurance Act
, and the
Motor Vehicle
    Accident Claims Act
, R.S.O. 1990, c. M.41;

And
    in the Matter of the
Arbitration Act
, S.O. 1991, c. 17;

And
    in the Matter of an Arbitration:

BETWEEN

Her
    Majesty the Queen in Right of Ontario,

as represented by

the Minister of Finance

Applicant (Respondent)

and

AXA
Insurance
    (Canada) and
Elite Insurance Company

Respondents (
Appellant
)

Eric K. Grossman and Meredith A. Harper, for the
    appellant

Marie Sydney, for the respondent

Heard: April 26, 2018

On appeal from the judgment of Justice Peter J. Cavanagh
    of the Superior Court of Justice, dated July 12, 2017, with reasons reported at
    2017 ONSC 3414, allowing an appeal and dismissing a cross-appeal from a
    decision of Arbitrator Scott Demsen, dated May 12, 2016.

van Rensburg J.A.:

A.

OVERVIEW

[1]

This appeal, which is before the court with leave, arises from an
    insurance priority dispute respecting the payment of statutory accident
    benefits to a claimant who was struck by an uninsured vehicle. The dispute is
    between the appellant, Elite Insurance Company (Elite or the appellant),
    the respondent, Her Majesty the Queen in Right of Ontario as represented by the
    Minister of Finance, who funds the Motor Vehicle Accident Claims Fund (the
    Fund or the respondent), and a third insurer, AXA Insurance (Canada)
    (AXA).

[2]

The priority dispute involving Elite was determined as a preliminary
    issue in the arbitration. At issue was whether a policy issued by Elite and
    insuring the claimant remained in force at the time of the accident after Elite
    purported to give notice of non-renewal. The arbitrator concluded that the
    notice of non-renewal was premature, but that in the circumstances of the case,
    s. 236(5) of the
Insurance Act
, R.S.O. 1990, c. I.8 did not extend
    coverage under the policy. As such, the Elite policy was not in force at the
    time of the accident. On appeal to the Superior Court, the appeal judge
    disagreed, concluding that s. 236(5) extends the existing contract until such
    time as a compliant notice of non-renewal is given, with the effect that the
    claimant remained insured under the Elite policy when the accident occurred.

[3]

For the reasons that follow I would allow the appeal. I see no reason to
    interfere with the reasonable conclusion that the notice of non-renewal was
    premature. As for the question of whether the policy remained in force after
    Elites ineffective notice of non-renewal, while I do not agree with all
    aspects of the arbitrators reasoning, his conclusion that the Elite policy was
    not in force at the time of the accident, supported by his interpretation of s.
    236(5) and its application to the facts of this case, was in my view reasonable
    and ought not to have been overturned by the appeal judge.

B.

FACTS

[4]

The material facts are not in dispute and were largely contained in an
    agreed statement of facts.

[5]

Elite issued Arpad Vadasz (the claimant) an automobile insurance
    policy for a six-month term, from September 20, 2009 to March 20, 2010. The
    policy was renewed for a second six-month term ending September 20, 2010.

[6]

The Elite policy was an Autograph policy, which required
    policy-holders to install a device in their car to record driving behaviour. By
    installing the device, the claimant was entitled to a discount on his policy
    premium. Depending on the information concerning his driving behaviour recorded
    by the device, the claimant could be eligible for further discounts. Although
    he knew he was required to register online to receive the Autograph device, the
    claimant never registered and never received or installed the device.

[7]

During the term of the policy, the claimant communicated with Elite on
    multiple occasions, and asked about the Autograph device. He was told that he
    had not yet registered for the device and that he must do so. He was also told
    that Elite would cancel his policy in September 2010 if he did not register for
    the device.

[8]

Elite sent the claimant a letter (the purported non-renewal notice) by
    registered mail, which he received on August 18, 2010. The letter stated that, effective
    September 20, 2010 at 12:01 a.m., [Elite would be] unable to provide automobile
    insurance on the claimants vehicle. The letter indicated that the reason was Rule
    56 of the Declination Rules that Elites parent company, Aviva Insurance
    Company of Canada, had filed with the Superintendent of Financial Services, as
    required by s. 238 of the
Insurance Act
. Rule 56 was set out in the
    letter:

56. The named insured/applicant has not registered, via the
    Internet, to receive the Autograph data-transmitting device, within 2 previous
    terms (12 months).

[9]

On September 21, 2010, the claimant contacted Elite once again to state
    that he had not received the Autograph device. He was told that he had not
    registered online for the device and that his policy had been cancelled
    effective September 20, 2010. He was directed to the broker that had placed the
    Elite policy, to obtain alternative insurance.

[10]

The
    claimant did not pursue any further coverage with Elite after September 20,
    2010. On or about September 23, 2010, he obtained an automobile insurance
    policy from AXA for the same car that had been insured under the Elite policy.
    He cancelled the AXA policy a short time thereafter.

[11]

In
    July 2011, Elite discontinued the Autograph policy program, with the
    Superintendents approval.

[12]

On
    December 29, 2011, while trying to save a parking spot for a friend, the
    claimant was struck by an uninsured vehicle that left the scene.

[13]

The
    claimant applied for, and received, statutory accident benefits from the Fund.
    The Fund gave notice of a priority dispute to Elite and AXA (as the insurer of
    his friends vehicle). The Fund asserted that Elite was higher in priority
    because Elite had issued a motor vehicle insurance policy to the claimant in
    2009. AXA agreed. Although Elite had purportedly refused to renew the policy in
    September 2010, the Fund claimed that its notice of non-renewal to the claimant
    was invalid because it did not comply with ss. 236 and 238 of the
Insurance
    Act
and that, pursuant to s. 236(5) of the
Insurance Act
, the
    Elite policy had not been terminated and remained in force in December 2011
    when the accident occurred.

[14]

The
    matter was referred to arbitration. The parties agreed that the preliminary
    issue to be resolved was whether the Elite policy was in force at the time of
    the December 29, 2011 accident. AXA participated in the arbitration but not the
    subsequent appeals to the Superior Court and to this court.

C.

RELEVANT STATUTORY PROVISIONS

[15]

The
    relevant provisions of the
Insurance Act
are as follows:

236. (1) If an insurer does not intend to renew a contract
    or if an insurer proposes to renew a contract on varied terms, the insurer
    shall,

(a) give the named insured not less
    than thirty days notice in writing of the insurers intention or proposal; or

(b) give the broker, if any,
    through whom the contract was placed forty-five days notice in writing of the
    insurers intention or proposal.

(2) Subject to subsection (4), a broker to whom an insurer has
    given notice under clause (1)(b) shall give the named insured under the
    contract not less than thirty days notice in writing of the insurers intention
    or proposal.

(3) Notices given under subsections (1) and (2) shall set out
    the reasons for the insurers intention or proposal.

(4) Where, before a broker is required to have given notice to
    a named insured under subsection (2), the broker places with another insurer a
    replacement contract containing substantially similar terms as the expiring
    contract, the broker is exempted from giving notice under subsection (2).

(5) A contract of insurance is in force until there is
    compliance with subsections (1), (2) and (3).

(6) This section does not apply to prescribed types of
    contracts in prescribed circumstances.



238. (1) An insurer shall not decline to issue, terminate
    or refuse to renew a contract or refuse to provide or continue a coverage or
    endorsement, except on a ground filed with the Superintendent under this
    section.

[16]

In
    accordance with s. 238(1), Elites parent company filed Declination Rules with
    the Superintendent. The relevant portions are as follows:

If a client does not qualify for the Autograph program, for a
    reason described below, insurance coverage will be offered through another
    member of the Aviva group of companies, subject to that members eligibility
    requirements, and also provided that the requesting broker carries a valid
    contract with another member of the Aviva group of companies.

The Insurer will decline to issue, terminate, or refuse to
    renew a contract where:



54. The Insurer, for any reason, suspends the Autograph
    program, following approval from the Financial Services Commission of Ontario.

55. A policy term is other than 6 months in duration.

56. The named insured/applicant has not registered, via the
    Internet, to receive the Autograph data-transmitting device, within 2 previous
    terms (12 months).

D.

ARBITRATORS DECISION

[17]

The
    priority dispute was referred to a single arbitrator selected by the parties, under
    the
Arbitration Act, 1991
, S.O. 1991, c. 17. In considering the
    preliminary issue, the arbitrator was required to determine first, whether the
    notice of non-renewal was valid; and second, if it was invalid, whether the
    Elite policy remained in force at the time of the accident.

[18]

On
    the first issue, the arbitrator concluded that the August 12, 2010 notice of
    non-renewal was invalid because it was premature. He accepted the Funds
    argument that Rule 56, read in its grammatical and ordinary sense, required the
    non-renewal notice to be sent after 12 months  that is, after the second term
    of the policy had ended without the insured having registered to receive the
    Autograph device. The second term was not complete until September 20, 2010.
    The grounds for non-renewal did not exist at the time the notice was sent and
    the notice of non-renewal was therefore not compliant with ss. 236 and 238 of the
Insurance Act
.

[19]

On
    the second issue, the arbitrator considered s. 236(5) in the light of the
    parties conduct and common law principles.

[20]

He
    accepted the Funds argument that, in the absence of an effective non-renewal
    notice, s. 236(5)

applied to automatically renew the policy.
[1]
However, he did not accept that, unless a proper s. 236 non-renewal notice was
    given, the policy would renew indefinitely on each anniversary date of the
    policy term no matter what occurred after the initial automatic renewal: at p.
    24. Rather, referring to the Supreme Courts decision in
Patterson v.
    Gallant
, [1994] 3 S.C.R. 1080, he concluded that each renewal represents a
    new contract with its own offer and acceptance and that, in the absence of
    agreement between the parties, the policy would renew for at most one more
    term: at p. 37.

[21]

The
    arbitrator stated that the common law principles of contract law apply to
    insurance contracts unless specifically excluded by legislation. He therefore
    considered whether, notwithstanding the ineffective notice of non-renewal,
    there was a mutual intention to continue the policy. The arbitrator said that
    events which occurred after the September 20, 2010 disputed renewal date are
    relevant to the issue of whether the Elite policy was still in force as of the
    December 29, 2011 accident date: at p. 26. The arbitrator found that, although
    the notice was invalid for s. 236 purposes, there was no doubt the claimant
    received the notice and understood Elite did not intend to insure him under its
    policy beyond September 20, 2010. The claimant decided to end his insurance
    relationship with Elite and to pursue insurance coverage with a different
    insurer. The arbitrator concluded that there was a mutual intention to
    terminate the relationship: at pp. 35-36.

[22]

The
    arbitrator stated that, alternatively, the claimant effectively repudiated his
    contract with Elite when he failed to make any effort to comply with the
    essential conditions of the contract and when he secured replacement coverage.
    According to the arbitrator, the policy ended no later than March 20, 2011. At
    p. 36 he said:

In any event, in my opinion,
    putting the automatic renewal argument at its strongest, the s. 236 (5)
    consequence of Elites invalid non-renewal notice is that the claimants policy
    automatically renewed on September 20, 2010 because at that point it was only
    the insurer Elite who had expressed the intention to end the contractual
    relationship. It was not until a few days after September 20, 2010 that there
    was a mutual intention to end the contractual relationship.

[23]

The
    arbitrator concluded that s. 236(5) does not have the effect of making the automobile
    insurance contract continue indefinitely where the parties are not
ad idem
,
    or where they have mutually indicated an intention to end any contractual
    relationship which existed: at pp. 36-37.

[24]

At
    p. 40 of his decision, the arbitrator held that, in the alternative, the Elite
    policy was not in force on December 29, 2011 because Elite had terminated the
    entire Autograph policy program months before:

In light of this, it seems to me
    that it would stretch the application of subsection 236 (5) beyond the breaking
    point to accede to HMQs argument that the claimants Autograph Policy is in
    effect indefinitely, until Elite properly terminates it, or delivers a valid
    notice of non-renewal. This would create the legal fiction of an ongoing
    Autograph Policy contract in circumstances where, by the middle of 2011 with
    the approval of the Superintendent of Insurance, the insurer could not offer,
    and the insured could not obtain, automobile insurance coverage under the
    Autograph Policy program.

E.

APPEAL DECISION

[25]

The
    Fund appealed the arbitrators decision that, notwithstanding an invalid notice
    of non-renewal, the Elite policy was not in force at the date of the accident. Elite
    cross-appealed the arbitrators conclusion that the notice of non-renewal was
    invalid.

[26]

On
    appeal it was agreed that the standard of review of the arbitrators decision
    was reasonableness.

[27]

The
    appeal judge dismissed Elites cross-appeal. Essentially, he upheld as
    reasonable the arbitrators conclusion, based on an interpretation of s. 236
    and Rule 56, that the non-renewal notice was invalid. He agreed with the
    arbitrator that a valid notice could not be given before the expiry of two six-month
    terms of the contract, given the wording of Rule 56.

[28]

The
    appeal judge allowed the Funds appeal, overturning the decision of the
    arbitrator. He concluded that the Elite policy remained in force at the date of
    the accident.

[29]

The
    appeal judge referred to the decision of Matheson J. in
Echelon General
    Insurance Company v. Ontario (Minister of Finance)
, 2016 ONSC 5019, 133
    O.R. (3d) 233 (an appeal from an arbitrators decision that a policy was no
    longer in effect notwithstanding an ineffective notice of cancellation because
    it had lapsed at the end of its six-month term). In that case, Matheson J.
    concluded that the policy had not lapsed because s. 236(5), which provided that
    a contract of insurance was in force until there was compliance with
    subsections (1), (2) and (3), oust[ed] the common law of contract under which
    an insurance policy may otherwise expire on its own terms: at para. 28.

[30]

The
    appeal judge applied this reasoning to the case before him. While he agreed
    with Elite that, under the common law, the failure to give a valid notice of
    non-renewal would require offer and acceptance and a mutual intention by the
    parties for a renewal of the contract, the effect of s. 236(5) was to displace
    the common law principles that would otherwise apply: at para. 31.

[31]

He
    rejected Elites argument that giving the words of s. 236(5) a literal
    interpretation would alter the common law with respect to insurance policies
    by turning insurance contracts into continuous contracts. Rather, the appeal
    judge concluded that s. 236(5) addresses the consequence of an insurer failing
    to comply with the statutory requirement to give a valid notice of non-renewal,
    but does not preclude an insurer or insured from taking permissible steps to
    terminate an insurance contract in accordance with other statutory provisions:
    at para. 33. And he agreed with the appeal judge in
Echelon
that to
    give the words in s. 236(5) their grammatical and ordinary meaning would not
    necessarily cause a contract of insurance to continue in perpetuity because the
    policy continues only until the insurance company discharges the statutory
    notice obligations and the insurance company bears the risk if it makes a
    mistake in the notice process: at para. 34.

[32]

The appeal judge ended his analysis on this issue by concluding that the
    arbitrators determination that there was an automatic renewal of the policy
    under s. 236(5) that was valid at most for a further six months, was not only
    in error, but outside a range of possible, acceptable outcomes because it fail[ed]
    to give effect to the clear words of s. 236(5) when read in their entire
    context and in their grammatical and ordinary sense harmoniously with the
    scheme of the
Insurance Act
and its objects: at para. 41.

[33]

The
    appeal judge therefore declared that Elites policy was in force at the time of
    the December 29, 2011 accident and that, as between Elite and the Fund, Elite
    is the priority insurer responsible for payment of the claimants statutory
    accident benefits.

F.

STANDARD OF REVIEW

[34]

The
    parties agree that the applicable standard of review in the appeal from the
    arbitrators decision was reasonableness. This was the determination of a
    priority dispute between insurers under the statutory accident benefits regime,
    by an arbitrator with special expertise who was selected by the parties: see
Intact
    Insurance Company v. Allstate Insurance Company of Canada
, 2016 ONCA 609, 131
    O.R. (3d) 625, leave to appeal refused, [2016] S.C.C.A. No. 392, at para. 53.

[35]

The
    Fund argued that on this appeal, the courts task is to determine whether the
    appeal judge applied the right standard, and that, once it is satisfied that he
    applied a reasonableness standard, and not a disguised correctness
    standard, this court ought not to interfere with his decision. This is not the
    appropriate standard of review. In a second appeal of the appeal of an
    arbitration of a statutory accident benefits priority dispute, this court is
    required to consider whether the appeal judge chose the correct standard of
    review of the arbitrators decision,
and applied it
    properly
:
Intact
, at para. 33. This requires an examination of
    the reasonableness of the original decision. The issue is therefore whether the
    arbitrators conclusions that (a) Elites notice of non-renewal was
    ineffective; and (b) that the policy had nevertheless terminated, were
    reasonable.

G.

arguments on appeal

[36]

The
    appellant asserts that:

(1)

it was unreasonable for the arbitrator (and the appeal judge) to
    conclude that the notice of non-renewal was premature. Essentially, Elite
    argues that Rule 56 does not explicitly state that the notice must be sent
    after the end of two policy terms. Elite also submits that the purpose of Rule 56
    is to give the insured two terms of grace, rather than two terms and 30 days;

(2)

the arbitrators decision that the policy had been terminated, and his
    interpretation of s. 236(5) in the context of the common law and the factual
    circumstances of the case, were reasonable. Elite contends that the appeal
    judge substituted his own decision for that of the arbitrator rather than
    conducting a reasonableness assessment and that he failed to consider the
    factual circumstances that brought the policy to an end; and

(3)

the arbitrators alternative reason for concluding that coverage had
    ended (because the Autograph policy ceased to exist) was reasonable and was not
    addressed by the appeal judge.

[37]

The
    respondent contends that the arbitrators conclusion that the notice of
    non-renewal was premature was a reasonable interpretation of the requirements
    of s. 236 in the context of Ontarios mandatory automotive insurance scheme.

[38]

The
    respondent also argues that the arbitrators conclusions that the common law
    applied to bring the contract to an end or that s. 236(5) operated to renew the
    contract for only one further six-month term were unreasonable because (i) he
    failed to apply the clear wording of s. 236(5); (ii) he failed to consider the
    statutory context; (iii) he applied irrelevant case law and failed to follow
    relevant authorities; and, (iv) he applied the common law which was displaced
    by the statutory regime. Applying s. 236(5), the only reasonable conclusion was
    that the operation of the common law was ousted and the Elite policy remained
    in force at the date of the accident.

H.

Analysis

[39]

The
    Supreme Court directs that, in reviewing a decision for reasonableness, the
    court must recognize that certain questions may give rise to a number of
    possible, reasonable conclusions. A court conducting a review for
    reasonableness must inquire into the qualities that make a decision reasonable,
    including both the process of articulating the reasons and the outcomes. In
Dunsmuir
    v. New Brunswick
, 2008 SCC 9, [2008] 1 S.C.R. 190, at para. 47, the
    Supreme Court of Canada stated:

[R]easonableness is concerned
    mostly with the existence of justification, transparency and intelligibility
    within the decision-making process [and] also with whether the decision falls
    within a range of possible, acceptable outcomes which are defensible in respect
    of the facts and law.

[40]

An
    error in the arbitrators analysis would not necessarily lead to an
    unreasonable decision. A reasonableness review is not an examination of the
    weakest link of a chain of analysis in isolation from the reasons as a whole:
Petro-Canada
    v. British Columbia (Workers Compensation Board)
, 2009 BCCA 396, 276
    B.C.A.C. 135, at para. 56. Nor is it a line-by-line treasure hunt for error:
Communications,
    Energy and Paperworkers Union of Canada, Local 30 v. Irving Pulp & Paper,
    Ltd.
, 2013 SCC 34, [2013] 2 S.C.R. 458, at para. 54. Indeed, a global
    analysis of the arbitrators decision can lead to the conclusion that the
    result falls within acceptable, defensible outcomes, and that the reasons 
    despite their flaws  fulfill the criteria for justification, transparency, and
    intelligibility: see
Syndicat des métallos section locale 7065 c.
    Entreprises de construction de Québec ltée
, 2015 QCCA 1690, D.T.E.
    2015T-771, at para. 69.

[41]

In
    my view, both aspects of the arbitrators decision  that the notice of
    non-renewal was premature, and that the policy, notwithstanding s. 236(5) of
    the
Insurance Act
, had come to an end  were reasonable and
    justifiable interpretations of the relevant statutory provisions and their
    application to the particular facts of this case.

(1)

The conclusion that Elites notice of non-renewal was premature was
    reasonable

[42]

The
    arbitrator concluded that Elite did not comply with the requirements of ss. 236
    and 238 of the
Insurance Act
in notifying the claimant that it did not
    intend to renew the Autograph policy. He accepted the argument of the Fund that
    the reason given in its notice did not constitute a valid ground for
    non-renewal filed with the Superintendent at the time the notice was given
    because the facts required to validate the ground were not yet in existence.

[43]

In
    arriving at his decision, the arbitrator interpreted the wording of Rule 56 in
    its grammatical and ordinary sense. He concluded that the rule requires
    specific timing for such notice, which cannot be validly given before the
    expiry of two six-month terms of the policy. He rejected Elites argument that
    the purpose of the non-renewal notice provision in s. 236 was satisfied in this
    case because the claimant was aware he was no longer insured and took steps to
    replace his insurance coverage. The arbitrator concluded that lack of prejudice
    did not validate the premature non-renewal notice. He also concluded that to
    the extent that the wording of Rule 56 was open to competing interpretations,
    any ambiguity must be resolved in favour of expanding rather than restricting
    coverage.

[44]

While
    there is merit to the argument that Rule 56 admits of an alternative
    interpretation, the question is not whether one interpretation is better or
    more persuasive than the other. The scheme of the statutory accident benefits priority
    dispute mechanism under O. Reg. 283/95, anticipates that an arbitrator selected
    by the parties will determine any dispute between insurers. In this case, the
    arbitrator considered what transpired in the context of the mandatory
    requirements in s. 236 for how an insurer is to give notice of non-renewal.
    Although the claimant had actual notice of the intention not to renew, s.
    236(5) provides that coverage continues until subsections (1), (2) and (3) are
    complied with. The arbitrators interpretation of the requirements of s. 236 is
    consistent with the plain wording of the rule, and to the extent there is any
    ambiguity, favours coverage to the claimant.

[45]

Elite
    did not persuade the appeal judge or this court that the arbitrators decision
    on this issue was unreasonable. Accordingly, there is no basis to interfere
    with the arbitrators conclusion that the non-renewal notice given by Elite was
    premature. The decision on this issue was based on a reasonable interpretation
    of the relevant statutory provisions and the declination rule as applied to the
    facts of the case.

(2)

The conclusion that the Elite policy was not in force notwithstanding
    the invalid notice of non-renewal was reasonable

[46]

The
    appeal judge, at para. 42, asserted that the arbitrator failed to properly
    engage in an interpretive process in respect of s. 236(5) of the
Insurance
    Act
 and that he made findings that were not only in error, but outside
    of a range of possible, acceptable, outcomes because his conclusion fails to
    give effect to the clear words of section 236(5).

[47]

I
    disagree. Although I do not agree with all aspects of the arbitrators
    analysis, the decision does not ignore the relevant statutory provisions.
    Rather, it takes them into account together with the factual circumstances of
    the case, and arrives at what I consider to be a reasonable result.

[48]

The
    issue here turns on the scope and meaning to be given to s. 236(5) of the
Insurance
    Act
, which provides that [a] contract of insurance is in force until
    there is compliance with subsections (1), (2) and (3),
and
its application to the facts of this case.

[49]

The
    arbitrator concluded that s. 236(5) was not exhaustive and determinative of the
    issue before him. He expressed this in terms of the common law continuing to
    apply, unless specifically excluded, and that s. 236(5) did not prevent the
    termination of the Elite policy because of the parties mutual intention to
    bring the contract to an end. The appeal judge, by contrast, considered the
    issue as one of statutory interpretation: section 236(5) prescribed
    consequences for a defective non-renewal notice. Following the literal wording
    of the section, until there is compliance with the non-renewal notice
    requirements, the policy remains in force.

[50]

Before
    turning to why I say the arbitrators approach and conclusion were reasonable, I
    will identify two points on which I agree with the appeal judge that the
    arbitrators analysis departed from the clear wording of s. 236(5) and was
    therefore unreasonable.

[51]

First,
    the arbitrator concluded that the effect of s. 236(5) was that the policy
    renewed at most for one further term (rejecting the Funds argument at that
    stage that the policy would renew indefinitely in the event of non-compliance
    with ss. 236(1), (2) or (3)). It appears that both parties at the arbitration
    stage characterized the effect of s. 236(5) as renewing the policy (an argument
    Elite continued to make to this court). Section 236(5), however, says nothing
    about renewal; it simply provides for the continuation of the policy in force
    until a notice of non-renewal that meets the statutory requirements is given. I
    agree with the Funds current position that s. 236(5) does not create any new
    contract through some form of renewal. The arbitrators conclusion that s.
    236(5) would extend coverage under the policy for no longer than an additional one
    six-month term contradicts the plain wording of the section, which contemplates
    that coverage continues until proper notice is given.

[52]

Second,
    it was unreasonable for the arbitrator, in arriving at his conclusion that the
    policy renewed for only one term, to rely on
Patterson v. Gallant
as
    authority that each renewal of an insurance policy creates a new contract, and
    that any further renewal would therefore require a meeting of the minds on
    terms and offer and acceptance. As the appeal judge pointed out, there was no
    equivalent to s. 236 in the applicable insurance legislation in
Patterson
and
    the Court expressly recognized, at para. 28, that the provisions of the
Insurance
    Act
can override the common law of contract. I agree with the appeal
    judge that the only reasonable interpretation of s. 236(5) is that it overrides
    the common law
with respect to lapsed policies
.

[53]

The
    appeal judge focussed on these parts of the analysis when he stated, at para.
    41, that the arbitrators conclusion that there was an automatic renewal of
    the contract of insurance under s. 236(5) that was valid at most for a further
    six months was not only in error but also unreasonable. As I will explain, the
    fact that these aspects of the arbitrators reasoning are unreasonable, as they
    directly contradict s. 236(5), does not inevitably lead to the conclusion that
    his decision was unreasonable, as the errors were not essential to the result:
    see e.g.
Syndicat des métallos
, at para. 69.

[54]

The
    question at the heart of the dispute was the proper scope for the application
    of s. 236(5), and whether, despite this provision, the parties could bring to
    an end the automobile insurance policy through their conduct after an invalid
    notice of non-renewal was given. In essence, the arbitrator decided this
    question in the affirmative, while the appeal judge treated s. 236(5) as
    determinative for all purposes of what would occur with respect to the policy,
    once a defective notice of non-renewal had been given.

[55]

While
    the only reasonable interpretation of s. 236(5) may well be that the Elite policy
    did not lapse at the conclusion of its six-month term, it is not unreasonable
    to give s. 236(5) a contextual reading, and to conclude that s. 236(5) is
not

exhaustive as to what happens to a policy,
    irrespective of what else might have transpired between the insurer and
    insured, in any situation where there has been a defective notice of
    non-renewal.

[56]

There
    is no question that an insurance policy may come to an end, other than by an
    insurers notice of non-renewal. While insurers are subject to detailed
    statutory requirements for the unilateral termination of a policy, the
    termination may occur at the initiative of the insured, without formality.
Statutory
    Conditions  Automobile Insurance
, O. Reg. 777/93, s. 11(2) provides that
    a policy may be terminated by the insured at any time on request, and there
    are no specific requirements for the content or form of the request. As the
    appeal judge noted, s. 236(5) does not operate to preclude an insurer or an
    insured from taking permissible steps to terminate an insurance contract in
    accordance with other statutory provisions.: at para. 33.

[57]

Section
    236 only deals with non-renewal or policy variations by an insurer. It
    prescribes the timing and content of notice required to be given. Until these
    requirements are met the contract of insurance remains in force, in accordance
    with s. 236(5).

[58]

As I have already observed, s. 236(5) does not renew a
    policy: it simply extends its coverage  potentially indefinitely  until the
    insurer complies with the notice provisions for non-renewal. As Matheson J.
    noted in
Echelon
and the appeal judge observed here, the plain
    language of s. 236(5) ousts the operation of the common law
with respect to the lapsing of policies
.

[59]

Section
    236(5) may well oust the common law that a policy will lapse when it is not
    renewed, but it does not preclude the consideration of other circumstances that
    may have arisen and brought the policy to an end. In my view, this is a
    reasonable interpretation that does not undermine the policy behind s. 236(5)
    to ensure continuous coverage.

[60]

The
    circumstances that were relevant in this case are the following. The evidence
    is clear that the claimant knew what the insurer was requiring him to do in
    order to continue coverage under the Autograph policy. After he received notice
    (albeit prematurely), he acted to protect his interests. By September 23, 2010,
    he had obtained a replacement policy from AXA. As the arbitrator noted, the
    parties shared a mutual intention that the Elite policy would not continue to
    cover the claimant. Even if this intention was precipitated by the assumption
    that Elites notice of non-renewal was valid and that the Autograph policy had therefore
    ended, the parties acted so as to terminate their relationship and conducted
    themselves in reliance on the termination. The claimant obtained replacement
    coverage, and was no longer charged a premium for the Elite policy.

[61]

The
    appeal judge did not consider whether the parties conduct after the
    ineffective notice of non-renewal may have terminated the Elite policy. He
    treated s. 236(5) as determinative for all purposes of what would occur with
    respect to the policy, once a defective notice of non-renewal had been given.
    In so doing, he relied heavily on
Echelon.
Yet, there is nothing in
    Matheson J.s reasoning or conclusion in that case that is inconsistent with finding
    here that the Elite policy was effectively terminated by what followed the
    invalid notice of non-renewal. In
Echelon
,

the insurer had
    attempted unsuccessfully to terminate the policy but argued that the policy had
    nevertheless lapsed at the end of its term. This argument (based on
Patterson
)
    was precluded by s. 236(5), which operates to oust the common law to prevent a
    non-renewed policy from lapsing.
Echelon
did not, however, deal with
    other circumstances that might have brought the policy to an end, and as such
    was not a complete answer to the question faced by the appeal judge in this
    case.
[2]


[62]

Here,
    accepting that the effect of s. 236(5) is that coverage would continue under a
    policy after an ineffective notice of non-renewal was given, the arbitrators conclusion
    that the policy was brought to an end by the mutual agreement of the parties,
    and was therefore no longer in effect, is not unreasonable.

[63]

First,
    as I have explained, this conclusion is legally defensible and not inconsistent
    with the statutory regime. While it is correct to say that the statutory
    provisions reflect the legislative intent in favour of coverage, that policy is
    not undermined by this analysis on the facts of this case. The fact that the
    claimant obtained a new policy from AXA confirmed his intention to terminate
    the Elite policy, and ensured (at least until the AXA policy was terminated)
    that he had replacement coverage.

[64]

Second,
    this conclusion is consistent with the modern approach to statutory
    interpretation, including the presumption against absurd results. A literal
    interpretation of s. 236(5), applying it to
all
cases where ss. 236(1), (2) or (3) are not complied with, without consideration
    of the factual context, would lead to absurd results. It would keep a policy
    alive indefinitely even where an insured subsequently receives a valid notice
    of cancellation (authorized by other provisions within the insurance
    legislative scheme) or the insured has chosen to terminate and replace the
    policy.

[65]

The
    appeal judge was willing to accept the potentially indefinite continuation of
    insurance coverage when a defective notice is given on the basis that the risk
    of non-compliance with notice provisions should rest with the insurer who has
    the means to avoid the risk. The underlying concern here is that the insurer
    will accept the consequences of its own mistake by providing ongoing coverage,
    where the result would otherwise be an interruption in coverage.

[66]

In
    the present circumstances, the defective notice was followed by conduct that
    led the claimant to obtain a new policy. Because of the operation of s. 236(5)
    there was no interruption in coverage until the claimant cancelled that policy.
    The parties would never have intended that, once the Elite policy was replaced,
    Elite would continue to cover the claimant  with the corresponding obligation
    to pay premiums: see
Insurance Act
,

s. 134. This
    interpretation would not interfere with the detailed regime respecting insurers
    rights to terminate or to refuse to renew auto insurance policies, designed to
    avoid any gap in coverage in a compulsory insurance scheme.

[67]

For
    these reasons, I would uphold as reasonable the arbitrators decision that the
    Elite policy was no longer in force on December 29, 2011, when the accident
    occurred, and that as such, Elite was not required to provide the claimant with
    statutory accident benefits.

(3)

Elites Alternative Argument

[68]

Finally,
    Elite argued that the arbitrator reasonably concluded that its policy was no
    longer in force because the entire Autograph policy program had been terminated
    months before the collision. The Fund responds that this argument fails to
    recognize that a deeming provision, such as s. 236(5), creates a legal effect (here,
    of continuing coverage) irrespective of future factual developments.

[69]

The
    appeal judge did not address this argument. In view of my conclusions
    respecting the reasonableness of the arbitrators decision that the Elite
    policy had been effectively terminated for other reasons, it is unnecessary to
    address this issue in the disposition of this appeal.

I.

DISPOSITION

[70]

For
    these reasons, I would allow the appeal and restore the decision of the
    arbitrator on the preliminary issue in the arbitration of the statutory
    accident benefits priority dispute. I would award costs to the appellant of
    this appeal in the sum of $15,000, inclusive of disbursements and HST.

K.
    van Rensburg J.A.

I
    agree. David M. Paciocco J.A.

Pardu J.A. (Dissenting):

[71]

Neither
    the insurer nor the insured complied with the statutory requirements for non-renewal
    or termination of an insurance policy. Nonetheless, the arbitrator concluded
    that because of the conduct and subjective assumptions of the parties, the
    insurance contract was at an end. I agree with the decision of the reviewing
    judge that this decision was unreasonable. The decision of the arbitrator was
    unreasonable because he failed to give effect to the statutory language, failed
    to consider legislative purposes, and adopted an interpretation that has no
    logical connection to the statutory language.

[72]

Section
    236(1) of the
Insurance Act
, R.S.O. 1990, c. I.8 provides that if an
    insurer does not intend to
renew
a contract the insurer shall give the
    named insured not less than 30 days notice of its intention. The insurer must
    set out the reason for the non-renewal in the notice (s. 236(3)).

[73]

Section
    236(5) provides that [a] contract of insurance
is in force
until there
    is compliance (emphasis added) with the notice requirements.

[74]

O.
    Reg. 777/93 mandates Statutory Conditions that apply to all contracts of
    automobile insurance. It specifies in great detail the steps an insurer must
    take to terminate a contract, and in s. 11(2) also provides that an insured may
    terminate a contract at any time
on request
.

[75]

I
    agree with the observations of the reviewing judge that s. 236(5) of the
Insurance
    Act
,

when read in the context of
    provisions addressing termination or non-renewal of contracts of insurance, and
    when given [its] grammatical and ordinary sense harmoniously with the scheme of
    the
Insurance Act
, mean[s] what [it] say[s]: that a contract of
    insurance is in force until there is compliance with ss. 236(1), (2) and (3).
    Subsection 236(5), in my view, clearly displaces the common law principles
    applicable to renewals of lapsed contracts. I agree with the statements made by
    the appeal judge in Echelon that this interpretation is consistent with the
    scheme and purpose of the
Insurance Act
and related legislation, and
    is also consistent with the objectives of a compulsory insurance regime:
    Echelon, at paras. 17-27.

[76]

One
    of the purposes of the compulsory automobile insurance regime established by
    the
Insurance Act
and related legislation is to protect third parties.
    The existence of a policy of insurance has consequences that extend far beyond
    the interests of the contracting parties. A pedestrian who, for example, is hit
    by an insured driver may have recourse to that drivers policy of insurance.
    Certainty as to whether that policy is in existence is an important step in
    resolving claims for injuries resulting from accidents and may have significant
    consequences where, for example, the limits under the insurance policy are higher
    than the statutory minimum.

[77]

As
    pointed out by Matheson J. in
Echelon General Insurance Company v. HMQ
,
    2016 ONSC 5019, 133 O.R. (3d) 233, at paras. 25 and 26,

This interpretation is consistent with scheme and purpose of
    the
Insurance Act
and related legislation. Section 236 was introduced
    in 1990 as part of a group of reforms to Ontarios compulsory automobile
    insurance regime:
Insurance Statute Law Amendment Act
, S.O. 1990, c.
    2, s. 47. As put in
Matheson v. Lewis
, 2014 ONCA 542, 121 O.R. (3d)
    641, at para. 36, the compulsory automobile insurance regime is clearly
    intended to protect innocent victims of automobile accidents from having no
    means of seeking damages from persons who might have caused those damages
    without having the protection of automobile insurance. The
Compulsory
    Automobile Insurance Act
, R.S.O.  1990, c. C.25, s. 2(1) prohibits an
    owner of a motor vehicle from operating it on a highway unless the motor
    vehicle is insured under a contract of automobile insurance.

The additional notice obligations
    introduced as part of the 1990 reforms are consistent with the objectives of a
    compulsory insurance regime. The s. 236 notice provisions facilitate continuity
    of insurance by requiring that insurance companies take additional steps to draw
    to a policyholders attention that their policy is about to lapse, and by
    providing that the insurance remain in force until the notice obligation has
    been fulfilled.

[78]

Interpreting
    s. 236(5) as requiring that a contract of insurance remain in force until there
    is compliance with the notice requirements is consistent with the objective of
    providing some certainty as to when a policy is in force. It is also consistent
    with that objective to make the insurer responsible for compliance with the
    statutory conditions for non-renewal or its termination of a policy, as an
    insurer has control over the steps required to initiate and complete that
    process.

[79]

However,
    this important legislative purpose was not considered by the arbitrator. An
    adjudicator must assess the extent to which an interpretation supports
    legislative objectives. Failure to do so may be a factor leading to a
    conclusion that the decision was unreasonable.

[80]

The
    ordinary meaning of a statutory provision is also important. As noted in
Teal
    Cedar Products Ltd. v. British Columbia
, 2017 SCC 32, [2017] 1 S.C.R. 688,
    the modern principle of statutory interpretation requires that due importance
    be given to the ordinary meaning of a statute:

[111] The modern principle of statutory interpretation is
    well-established:

Today there is only one principle
    or approach, namely, the words of an Act are to be read in their entire context
    and in their grammatical and ordinary sense harmoniously with the scheme of the
    Act, the object of the Act, and the intention of Parliament.

(E. A. Driedger, Construction of Statutes (2nd ed. 1983), at p.
    87)

[112] This principle requires that
    statutes be read to give the words their most obvious ordinary meaning which
    accords with the context and purpose of the enactment in which they occur:
CanadianOxy
    Chemicals Ltd. v. Canada (Attorney General)
, [1999] 1 S.C.R. 743, at para.
    14;
Rizzo & Rizzo Shoes Ltd. (Re)
, [1998] 1 S.C.R. 27, at paras.
    21-22. The plain and ordinary meaning of a statutory provision is the natural
    meaning which appears when the provision is simply read through.

[81]

Use
    of different words implies a legislative intention to express different
    meanings: Ruth Sullivan, Sullivan on the Construction of Statutes, 6th ed.
    (Markham: LexisNexis Canada, 2014), at p. 218. The arbitrators conclusion that
    s. 236(5) provides for
automatic renewal
is inconsistent with this
    principle. While s. 236(1) speaks of an intention not to
renew
a policy,
    s. 236(5) says the contract
is in force
until there is compliance with
    the notice provisions. Section 236(5) does not say that the contract is
renewed
until there is compliance.

[82]

Additionally,
    the arbitrators conclusion that upon renewal, an automobile insurance
    contract is like any other contract in that each renewal represents a new
    contract and requires its own offer and acceptance flies in the face of the
    plain language of s. 236(5), which provides that the contract continues to be
    in force absent compliance with the statutory requirements for non-renewal. 
    There is no basis in the relevant statutory provisions to conclude, as the
    arbitrator did, that failure to give proper notice of non-renewal meant that
    the policy was renewed for one further six-month term.

[83]

Disagreement
    with the arbitrator and agreement with the reviewing judge is not the end of
    the inquiry. The reviewing judge could only set aside the arbitrators decision
    if the latters decision was unreasonable. The appellant argues that the
    reviewing judge in fact applied a correctness standard of review, although he
    articulated his conclusion by applying a reasonableness norm.

[84]

What
    is it that makes a decision interpreting a statute unreasonable? Some
    provisions admit of more than one reasonable interpretation. Choosing one
    reasonable interpretation over another does not make the decision unreasonable,
    even where the reviewing tribunal disagrees with that choice:
Teal Cedar
    Products Ltd.; and McLean v. British Columbia (Securities Commission)
,
    2013 SCC 67, [2013] 3 S.C.R. 895. In some circumstances, the autonomy of
    arbitrators may result in divergent lines of interpretation, both of which are
    reasonable.

[85]

However,
    as pointed out in
McLean
,

[38] It will not always be the
    case that a particular provision permits multiple reasonable interpretations. 
    Where the ordinary tools of statutory interpretation lead to a single
    reasonable interpretation and the administrative decision maker adopts a
    different interpretation, its interpretation will necessarily be unreasonable 
    no degree of deference can justify its acceptance; see, e.g.,
Dunsmuir
,
    at para. 75;
Mowat
, at para. 34.  In those cases, the range of
    reasonable outcomes
(Canada (Citizenship and Immigration) v. Khosa
,
    2009 SCC 12, [2009] 1 S.C.R. 339, at para. 4) will necessarily be limited to a
    single reasonable interpretation  and the administrative decision maker must
    adopt it.

[86]

Given
    the statutory language and context, there was only one reasonable
    interpretation here. The interpretative question in this case does not require
    a heavily context dependent application of a normative question such as
    reasonableness. This is not an area where arbitral pluralism is desirable.

[87]

I
    agree with the conclusions of the reviewing judge at para. 41 of his reasons:

I conclude that the Arbitrator
    failed to properly engage in an interpretative process in respect of s. 236(5)
    of the
Insurance Act
by taking into account the text, context and
    purpose of this provision. The Arbitrators conclusion that there was an
    automatic renewal of the contract of insurance under section 236(5) that was
    valid at most for only a further six months was, in my view, not only in error,
    but outside of a range of possible, acceptable, outcomes which are defensible
    in respect of the facts and law, because this conclusion fails to give effect
    to the clear words of section 236(5) when read in their entire context and in
    their grammatical and ordinary sense harmoniously with the scheme of the
Insurance
    Act
and its objects.

[88]

The
    arbitrator failed to give effect to the plain language of the section. He did
    not consider the purposes of the legislation, and did not consider the effects
    on persons who were not parties to the contract. His application of the notion
    of repudiation was flawed, as there was no communication of acceptance of
    repudiation by another contracting party. The insurer did not purport to
    rescind the policy by attempting to rely on common law authority to do so. 
    There was no communication between the insured and the insurer that could be
    construed as a mutual agreement to terminate the policy.  Moreover, to allow
    subjective assumptions by either party to lead to a conclusion that there was
    no contract of insurance, in the face of statutory requirements for non-renewal
    or termination of such contracts, was unreasonable.

[89]

I
    would dismiss the appeal.

Released: October 9, 2018                                                        G.
    Pardu J.A.





[1]
The Fund did not make this argument on appeal to this court. Rather, the Fund
    argued instead that the effect of s. 236(5) is to extend the existing contract
    through statutory deeming, not to create a new or successive new contracts by
    automatic renewal: see Factum of the Respondent at para. 16.



[2]

Indeed, after the appeal decision in
Echelon
, the
    matter returned to the arbitrator for consideration of another argument  that
    after the ineffective notice of termination was given, the policy was
    terminated at the insureds request. The arbitrator considered the evidence and
    this argument (which had not been raised earlier in the proceedings) and agreed
    with it:
Echelon General Insurance Company v. Her Majesty the Queen in Right
    of Ontario, as represented by the Minister of Finance (The Motor Vehicle
    Accident Claims Fund)
, 2017 CarswellOnt 19967, (Arbitrator: Shari L.
    Novick). The decision was upheld on appeal to the Superior Court at 2018 ONSC
    5029.


