



COURT OF APPEAL FOR ONTARIO

CITATION: Zurich Insurance Company v. Chubb Insurance Company
    of Canada, 2014 ONCA 400

DATE: 20140515

DOCKET: C57553

Juriansz, Pepall and Pardu JJ.A.

BETWEEN

Zurich Insurance Company

Applicant (Respondent)

and

Chubb Insurance Company of Canada

Respondent (Appellant)

Claude Blouin and George Kanellakos, for the appellant

Kevin S. Adams, for the respondent

Heard: January 27, 2014

On appeal from the order of Justice
Robert
    F. Goldstein
of the Superior Court of Justice, dated April 3, 2013, with
    reasons reported at 2012 ONSC 6363.

Pardu J.A.:

[1]

This appeal concerns the application of the pay first and dispute later
    rules governing insurers that receive an application for Statutory Accident
    Benefits (SABS) following a motor vehicle accident. To reduce delays in
    payments of the benefits, the regulatory scheme requires that the first insurer
    who receives the application for benefits pay them, provided that there is some
    non-random nexus or connection between the claimant and the insurer. If that
    insurer takes the position that another insurer should be responsible for
    payment of those benefits, it must nonetheless pay them, but give notice within
    90 days to the other insurer; and follow the statutory scheme of arbitration to
    determine which insurer should pay the SABS.

[2]

The issue on this appeal is whether any insurer of any kind, or only
    motor vehicle liability insurers are obliged to pay first and dispute later.

Factual background

[3]

Sukhvinder Singh rented a vehicle from Wheels 4 Rent. The rental
    vehicle was insured pursuant to a motor vehicle liability policy issued by
    Zurich Insurance Company (Zurich). Chubb Insurance Company of Canada (Chubb) issued
    an accident policy (the Chubb policy) to Wheels 4 Rent. This policy contained
    no coverage for liability to others as a result of a motor vehicle accident.
    Rather it provided optional death and dismemberment insurance to Wheels 4 Rent
    customers, and extended to death or dismemberment unrelated to a motor vehicle
    accident, provided it occurred during the rental period.

[4]

Ms. Singh did not purchase Chubbs optional coverage. She had a single
    vehicle motor vehicle accident on September 23, 2006. Having at some point obtained
    a pamphlet for the optional Chubb policy made available by Wheels 4 Rent, she
    submitted a claim for SABS to Chubb on November 17, 2006.

[5]

Chubb refused to pay. Zurich ultimately began payment of the SABS and
    the two insurers submitted their dispute to arbitration before Stanley C.
    Tessis.

[6]

The arbitration agreement provided:

1. The arbitrator shall determine all
    matters in dispute among the parties arising out of a dispute regarding
    priority of payment of Statutory Accident Benefits with respect to Sukhvinder
    (Susan) Singh, arising out of a motor vehicle accident which occurred on or
    about September 23, 2006.

2. The questions submitted for
    determination by the Arbitrator with respect to the priority of payment of
    Statutory Accident Benefits with respect to Sukhvinder (Susan) Singh, are as
    follows:

1)

Is Chubb Insurance
    Company of Canada an insurer under Section 268 of the
Insurance Act
and Ontario Regulation 283/95  Disputes Between Insurers;

2)

If it is decided that
    Chubb Insurance Company of Canada is an insurer under Section 268 of the
Insurance
    Act
and Ontario Regulation 283/95  Disputes Between Insurers, then there
    will be an issue as to whether Chubb Insurance Company of Canada has complied
    with the provisions of the Ontario Regulation 283/95; and

3)

What amounts, if any,
    is Chubb responsible for indemnifying Zurich?

3. The Arbitrator shall have the power
    to grant any relief to the facts and circumstances that would be within the
    jurisdiction of a Judge of the (Ontario) Superior Court of Justice at trial in
    that Court.

The Decisions Below

[7]

The manner in which the parties structured the issues for the arbitrator
    reflects their agreement in correspondence that Chubbs liability depended on
    whether Chubb was an insurer within the meaning of s. 268 of the
Insurance
    Act
.

[8]

The arbitrator concluded that Chubb was not an insurer for the
    purposes of the priority dispute settlement statutory regime because there was
    no sufficient nexus existing between Chubb Insurance Company of Canada and
    Ms. Singh. As a result, Chubb was not obligated to pay her benefits under the
    pay first and dispute later rules. In his view, no nexus existed because Chubb
    had never issued a motor vehicle liability policy to either Wheels 4 Rent or
    Ms. Singh. He noted that Zurich had submitted a number of cases where a
    sufficient nexus had been found, and that:

In all of those cases, the Arbitrators and Judges found a nexus
    or substantial connection because:

(a)     An insurer has at one time or
    at the time of the accident issued a policy of insurance on a motor vehicle,
    regardless of whether statutory accident benefits were payable pursuant to the
    policy; or

(b)     A motor vehicle liability
    policy of insurance had been presented at the scene of the accident or to an
    investigating officer, but the policy had expired or was fraudulent.

In this Arbitration, there is no suggestion that Chubb had ever
    issued a motor vehicle liability policy on a motor vehicle owned by Wheel 4
    Rent or Ms. Singh that had expired or was cancelled, that a Certificate of
    Insurance or Pink Motor Liability Insurance Slip had been produced to Ms. Singh
    showing Chubb as a motor vehicle liability insurer, or that Chubb had issued a
    motor vehicle liability insurance policy for a vehicle somehow connected with
    the accident of September 23, 2006.

[9]

Zurich appealed from this ruling. The application judge allowed the
    appeal, concluding that Chubb was an insurer under the statutory regime,
    because the Chubb policy was a motor vehicle liability policy as defined by
    the
Insurance Act
, R.S.O. 1990, c. I.8, and there was a sufficient
    nexus between Ms. Singh and Chubb to require Chubb to pay the SABS first.

Issue

[10]

The
    sole issue on this appeal is whether the application judge erred in deciding
    that Chubb is an insurer for the purposes of the pay first and dispute later
    rules. If Chubb is an insurer for the purposes of these rules, then it was
    required to pay benefits to Ms. Singh.

[11]

Embedded
    within this issue are the questions of whether (a) the Chubb policy is a motor
    vehicle liability policy for the purposes of s. 268 of the
Insurance Act
,
    and (b) whether there was a sufficient nexus between Chubb and Ms. Singh to
    justify payment.

Standard of Review

[12]

The
    arbitration agreement between Chubb and Zurich provided:

The decision of the Arbitrator shall be binding upon the
    parties, but any party may appeal the Arbitrators decision on a point of fact
    or on a point of law or on a point of mixed fact and law to a Judge on the
    Ontario Superior Court of Justice, without leave of the Court, within thirty
    (30) days of the date of the Arbitrators written decision. The standard of
    review to be applied on appeal with respect to the Arbitrators decision(s) on
    questions of law shall be correctness. The standard of review to be applied on
    appeal with respect to the Arbitrators decision(s) on questions of fact and
    questions of mixed fact and law shall be reasonableness.

[13]

The
    application judge adopted a standard of review of correctness, on the ground
    that there were no factual issues in dispute. Mesbur J. summarized the
    applicable standards of review in
Aviva Insurance Co. of Canada v. Royal
    & SunAlliance Insurance Co.
(2008),
66
    C.C.L.I. (4th) 262 (Ont. S.C.), at para. 7:

First, on a question of law, the standard is one of
    correctness. Second, on a question of fact, the decision below can only be set
    aside on the basis of an overriding and palpable error. Last, on a question of
    mixed fact and law, the standard is one of reasonableness.

The Ontario Court of Appeal has also commented that on a
    question of mixed fact and law, where the decision is highly dependent on a
    factual finding, the standard is more akin to overriding and palpable error.
    It is noteworthy that this case also dealt with an appeal from an arbitrators
    decision under the provisions of the
Insurance Act
. The court
    commented that arbitrators have a special expertise in evaluating facts for
    determination of dependency for statutory accident benefits entitlement, and
    unless the arbitrator was unreasonable, he is entitled to deference. I infer
    arbitrators have similar special expertise in determining issues of loss
    transfer, and thus their conclusions should be equally afforded deference. [Citations
    omitted.]

[14]

Here
    I would characterize the issue of whether Chubb was a motor vehicle liability
    insurer as a question of law reviewable on the standard of correctness and the
    issue of whether there was a sufficient nexus between Chubb and the claimant as
    a question of mixed fact and law reviewable on the standard of reasonableness.

Statutory Regime

[15]

The
    relevant portions of the
Insurance Act
are as follows:

2. In this Act, except where inconsistent with the
    definition sections of any Part,




insurer
 means the person who undertakes or
    agrees or offers to undertake a contract;




motor vehicle liability policy

    means a policy or part of a policy evidencing a contract insuring,

(a) the owner or driver of an automobile, or

(b) a person who is not the owner or driver
    thereof where the automobile is being used or operated by that persons
    employee or agency or any other person on that persons behalf,

against liability
arising out of bodily injury to or the death of a person or loss or damage to
    property
caused by an automobile
or the use of
    operation thereof; (police de responsabilité automobile)



224.  (1)  In this Part,




contract
 means a contract of automobile
    insurance that,

(a) is undertaken by an insurer that is licensed
    to undertake automobile insurance in Ontario, or

(b) is evidenced by a policy issued in another
    province or territory of Canada, the United States of America or a jurisdiction
    designated in the Statutory Accident Benefits Schedule by an insurer that has
    filed an undertaking under section 226.1;



Statutory accident benefits

268. (1) Every contract evidenced by a
motor vehicle liability policy
, including every such
    contract in force when the Statutory Accident Benefits Schedule

is
    made or amended, shall be deemed to provide for the statutory accident benefits
    set out in the Schedule

and any amendments to the Schedule, subject to
    the terms, conditions, provisions, exclusions and limits set out in that
Schedule
.

[Emphasis added.]

[16]

Disputes
    Between Insurers
, O. Reg. 283/95, governing disputes between insurers
    provides:

0.1 In this Regulation,

application means an application for accident
    benefits (OCF-1) approved by the Superintendent for the purposes of the
    Schedule;



1. All disputes as to which insurer is required to
    pay benefits
under section 268
of the Act shall be
    settled in accordance with this Regulation. O. Reg. 283/95, s. 1.

2. (1) The first insurer that receives a completed
    application for benefits is responsible for paying benefits to an insured
    person pending the resolution of any dispute as to which insurer is required to
    pay benefits under section 268 of the Act. O. Reg. 283/95, s. 2. [Emphasis added.]

Analysis

[17]

This
    court has dealt with these priority disputes in the SABS context a number of
    times.

[18]

In
Kingsway General Insurance Co. v. Ontario (Minister of Finance)
,
2007 ONCA 62
, 84 O.R. (3d) 507, this court stated, at
    para. 19:

Section 2 of Regulation 283 is critically important in the
    timely delivery of benefits to victims of car accidents. The principle that
    underlies section 2 is that the first insurer to receive an application for
    benefits must pay now and dispute later. The rationale for this principle is
    obvious: persons injured in car accidents should receive statutorily mandated
    benefits promptly; they should not be prejudiced by being caught in the middle
    of a dispute between insurers over who should pay, or as in this case, by an
    insurer's claim that no policy of insurance existed at the time.

[19]

Further,
    this court noted in
Kingsway General Insurance Co. v. West Wawanosh
    Insurance Company
(2002), 58 O.R. (3d) 251 (C.A.), at para. 10:

The Regulation sets out in precise and specific terms a scheme
    for resolving disputes between insurers. Insurers are entitled to assume and
    rely upon the requirement for compliance with those provisions. Insurers
    subject to this Regulation are sophisticated litigants who deal with these
    disputes on a daily basis.
The scheme applies to a
    specific type of dispute involving a limited number of parties who find
    themselves regularly involved in disputes with each other.
In this
    context, it seems to me that clarity and certainty of application are of
    primary concern. Insurers need to make appropriate decisions with respect to
    conducting investigations, establishing reserves and maintaining records. Given
    this regulatory setting, there is little room for creative interpretations or
    carving out judicial exceptions designed to deal with the equities of
    particular cases. [Emphasis added.]

[20]

In
    my view the application judge erred in concluding that the Chubb policy was a
    motor vehicle liability policy. There was no element of that accidental death
    and dismemberment policy that insured against liability to others arising out
    of property damage or injury caused by an automobile or the use or operation
    thereof.

[21]

The
    content of motor vehicle liability policies is highly regulated. These
    policies must provide for payment of SABS, and a statutory minimum amount of
    liability coverage. The Chubb policy has none of these characteristics.

[22]

The
    rationale expressed in
Kingsway General Insurance Co. v. West Wawanosh
    Insurance Co.
would not be furthered by requiring insurers other than
    motor vehicle liability insurer[s] to respond to a claim for SABS. An insurer
    providing fire or life insurance or some group or accident or disability
    insurance not having the features of a motor vehicle liability policy may
    have no expertise in adjusting these claims, and should not be expected to
    respond to them where it has not issued a motor vehicle liability policy even
    if there is a nexus or relationship between the claimant and such insurer.

[23]

The
    priority and dispute resolution regime established under O. Reg. 283/95 applies
    to disputes as to which insurer is required to pay benefits
under s. 268
of the
Insurance Act
 (emphasis
    added).

[24]

Section
    268 says every contract evidenced by a motor vehicle liability policy shall
    be deemed to provide for SABS. These benefits are not incorporated into
    insurance policies which are not motor vehicle liability policies and those
    insurers may have no expertise in adjusting these claims.

[25]

All
    of the cases cited in which an analysis is made to ascertain whether there was
    a sufficient nexus between the claimant and the first insurer to review an
    application for SABS are premised on there having been an actual or purported
    motor vehicle liability policy in place at some time.

[26]

For
    example, in
Ontario (Minister of Finance) v. Royal & Sun Alliance
    Insurance Co.
(January 2003, Arbitrator M. Guy Jones), the investigating officer
    was given a certificate of insurance issued by Royal which had expired four
    years earlier and covered a different vehicle. This was found to be a
    sufficient nexus to a motor vehicle liability insurer to justify an obligation
    to pay. In
Ontario (Minister of Finance) v. Progressive Casualty Insurance
    Co. of Canada
, 2009 ONCA 258, 95 O.R. (3d) 219, and
Lombard Canada Ltd.
    v. Royal & SunAlliance Insurance Co.
(2008), 94 O.R. (3d) 62 (S.C.), motor
    vehicle liability policies expired two months before the accident. In these
    cases the claimants choice of recipient of the claim for SABS was not random
    or arbitrary and was connected to a motor vehicle liability policy. Similarly
    in
Danilov v. Unifund Assurance Co.
, [2009] O.F.S.C.D. No. 69 (FSCO
    Arb.), there was a fraudulent pink motor vehicle liability policy slip
    purporting to evidence a motor vehicle liability insurance policy.

[27]

Ms.
    Singhs choice to send her application to Chubb was not random or arbitrary,
    but was based on the optional coverage provided to Wheels 4 Rent customers.
    Nonetheless Chubb was not required to respond as it was not a motor vehicle
    liability insurer, nor had it held out or represented to have ever provided
    such coverage at any relevant time.

[28]

Both
    the plain meaning of s. 268 of the
Insurance Act
and O. Reg. 283/95,
    and the underlying policy behind the legislation, favour excluding non-motor vehicle
    liability insurers from the obligation to pay first and dispute later.

Disposition

[29]

Accordingly,
    I would allow the appeal. I would set aside the order of the application judge
    of April 3, 2013, setting aside the decision of Arbitrator Stanley Tessis and
    awarding costs to Zurich, and substitute an order dismissing the application
    and awarding costs in favour of Chubb in the sum of $7,149.00.

[30]

I
    would award Chubb the costs of this appeal fixed in the agreed upon sum of
    $12,000 inclusive of all disbursements and H.S.T.

G.
    Pardu J.A.

I
    agree S.E. Pepall. J.A.




Juriansz J.A. (Dissenting):

[31]

I
    have read the decision of Pardu J.A. and, with respect, I am unable to agree
    with either the reasons or the result. I would simply apply the established
    nexus test to determine whether Chubb, as the first insurance company to
    receive a completed application for benefits, was obliged by O. Reg. 283/95
    (the Regulation) to pay those benefits while disputing coverage.

[32]

There
    is a mature and stable jurisprudence relating to the nexus test and the
    application of the Regulation. Both the courts and arbitrators of the Financial
    Services Commission of Ontario have applied the nexus test on numerous
    occasions to determine whether an insurance company must pay benefits under s.
    2: see, for example,
Allstate Insurance Co. of Canada v. Brown
(1998),
    40 O.R. (3d) 610 (Div. Ct.);
Lombard Canada Ltd. v. Royal & SunAlliance
    Insurance Co.
(2008), 94 O.R. (3d) 62 (S.C.);
Kingsway General
    Insurance Co. v. Ontario

(Minister of Finance)
, 2007 ONCA 62, 84
    O.R. (3d) 507;
Rozmerets v. Wawanesa Mutual Insurance Co.
, [2002] O.F.S.C.D.
    No. 99 (FSCO Arb.);
Bianca v. Wawanesa Mutual Insurance Co.
, [2004]
    O.F.S.C.D. No. 185 (FSCO Arb.);
Vieira v. Royal & SunAlliance Insurance
    Co. of Canada
, [2005] O.F.S.C.D. No. 7 (FSCO Appeal). It is, in my view,
    both unnecessary and unwise to adopt a new and different interpretation of the
    Regulation.

[33]

Further,
    I am unclear as to the meaning of the term non-motor vehicle liability
    insurer, which Pardu J.A. introduces in concluding that [b]oth the plain
    meaning of s. 268 of the
Insurance Act
and O. Reg. 283/95, and the
    underlying policy behind the legislation, favour excluding non-motor vehicle
    liability insurers from the obligation to pay first and dispute later.

[34]

If
    the term non-motor vehicle liability insurer were used broadly to denote an insurer
    that does not offer motor vehicle liability policies to the public, I would
    agree with Pardu J.A. that the legislature could not have intended that the
    Regulation would apply to such insurers. The scope of the Regulation does not
    permit a nexus to be found between a claimant and an insurer that does not
    write motor vehicle liability policies in Ontario. However, counsel for Chubb
    acknowledged that Chubb does regularly write motor vehicle liability policies
    in Ontario. Chubb is not a non-motor vehicle liability insurer in the broad
    sense.

[35]

The
    policy that Chubb offered to Ms. Singh in this case was not a motor vehicle
    liability policy as it did not provide liability coverage. However, it is also
    apparent that Pardu J.A. does not use the term non-motor vehicle liability
    insurer in the narrow sense to denote an insurer who, as a matter of fact, has
    not issued a motor vehicle liability policy that provides coverage to the
    applicant. To apply this narrow sense of the term would effectively overturn
    existing case law under the Regulation. Instead, Pardu J.A. avoids overruling
    the earlier case law by suggesting that the Regulation will continue to apply
    to an insurance company that has not issued a policy to any relevant person so
    long as there was purported or represented coverage. On this basis, she
    distinguishes
Danilov v. Unifund Assurance Co.
, [2009] O.F.S.C.D. No.
    69 (FSCO Arb.), which involved a fraudulent insurance certificate, and
Ontario
    (Minister of Finance) v. Royal & Sun Alliance Insurance Co.
(January
    2003, Arbitrator M. Guy Jones), which involved a long-expired certificate that
    covered a different vehicle. Justice Pardus use of the term non-motor vehicle
    liability insurer does not exclude such insurers despite the fact they have
    not issued a relevant motor vehicle liability policy.

[36]

I
    expect that adjudicators in future cases will struggle with determining whether
    an insurer is a non-motor vehicle liability insurer. They will have difficulty
    reconciling the conclusion that the plain meaning of the Regulation excludes non-motor
    vehicle liability insurers with the proposition that the pay first obligation will
    continue to apply in cases where there is no actual coverage, but only purported
    or represented coverage.

[37]

In
    the earlier cases, the rationale for applying the Regulation in cases of purported
    or represented coverage was that the applicant chose the insurance company
    based on a non-arbitrary belief that the insurance company provided coverage on
    the relevant vehicle. This is the crux of the nexus test. If the claimants
    non-arbitrary but mistaken belief is a basis for requiring the insurance
    company to pay benefits in cases of purported or represented coverage, I
    see no reason to treat claimants differently if their non-arbitrary beliefs are
    based on information other than a false representation. In my view, it would be
    best to allow adjudicators to continue to consider whether there is some
    connection between the parties as set out in the familiar and established nexus
    test. I now turn to the application of that test.

[38]

With
    the advantage of hindsight, it is evident that, as a matter of fact, Zurich is
    the motor vehicle liability insurer of Wheels 4 Rents vehicles, and Chubb is
    not. However, there is no hint in the record that Ms. Singh knew anything about
    the relationship between Wheels 4 Rent and Zurich when she was injured in the
    rental car or when she applied to Chubb. The application judge reasoned that:

The connection between Ms. Singh and Chubb may have been
    remote, but it was not arbitrary. Ms. Singh rented a vehicle from Wheels4Rent.
    Wheels4Rent was insured by Chubb. Chubb made the optional policy available to
    Ms. Singh through Wheels4Rent. Although Ms. Singh did not take up the optional
    policy, the obvious inference that the parties agree can be drawn is that she
    learned of it through Wheels4Rent when she rented the vehicle.

[39]

The
    mistaken inference that Chubb insured Wheels 4 Rents vehicles could not be
    described as completely arbitrary. Justice Pardu states that Ms. Singhs
    choice to send her application to Chubb was not random or arbitrary. I agree.
    Given the non-arbitrariness of Ms. Singhs choice of insurer, I see no reason
    why the result should be different than it would have been had someone falsely
    represented to her that Chubb was the insurer.

[40]

The
    overriding public policy of the Regulation is to
provide
    timely delivery of benefits to all persons injured in car accidents in Ontario,
    despite the inconvenience to insurance companies who must provide benefits
    immediately and seek reimbursement from the correct insurance company later. As
    Laskin J.A. said at para. 21 of
Kingsway General Insurance Co. v.
    Ontario

(Minister of Finance)
,

I am inclined to agree[o]nly in the most extreme cases, where the
    connection with the insurers is totally arbitrary should the insurer refuse to
    pay
. In my view, that public policy would be seriously eroded
    by allowing an insurance company that writes motor vehicle liability policies
    in Ontario to argue, in a case in which the nexus test is satisfied, that it is
    a non-motor vehicle liability insurer.

[41]

For
    these reasons, I would apply the established nexus test and find that it is
    satisfied on the facts of this case. Consequently, I would dismiss the appeal.

Released: May 15, 2014

(G.P)                                                                     R.G.
    Juriansz J.A.


