




CITATION:
Ontario (Finance) v. Pilot Insurance
          Company, 2012 ONCA 33



DATE: 20120119



DOCKET: C53694



COURT OF APPEAL FOR ONTARIO



MacPherson, LaForme and Epstein JJ.A.



IN THE
          MATTER of the
Insurance Act
, R.S.O. 1990, c. I.8, as amended, and O. Reg.
          283/95 made thereunder;

AND IN THE MATTER of the
Motor
          Vehicle Accident Claims Act
, R.S.O. 1990, c. M.41;

AND IN THE MATTER of the
Arbitration
          Act
,
1991
, 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 in appeal)



and



Pilot Insurance Company



Respondent (Appellant)



Todd J. McCarthy and Stephanie Zwicker Slavens, for the
          appellant



John Friendly, for the respondent



Heard: October 20, 2011



On
          appeal from the judgment of Justice Peter A. Cumming of the Superior Court of
          Justice dated October 4, 2010, with reasons reported at
2010
          ONSC 5361, 2 M.V.R. (6th) 112
.



H.S. LaForme
          J.A.:



INTRODUCTION

[1]

In Ontario, insurance law designates which insurance companies are
    liable to pay statutory accident benefits in the case of a motor vehicle
    accident.  The priority rules are set out in the
Insurance Act
, R.S.O.
    1990, c. I.8, s. 268.

[2]

Non-occupants who are involved in a motor vehicle accident must first
    submit their claim for statutory accident benefits to their own insurance
    company.  If they do not have insurance, then they must submit their claim to the
    insurer of the vehicle that struck them.

[3]

However, in circumstances where the striking vehicle is not
    insured or where the insurer of the striking vehicle is unknown, and no other
    vehicle was involved, non-occupants have recourse against the Motor Vehicle
    Accident Claims Fund (the Fund), established under the
Motor Vehicle
    Accident Claims Act
,
R.S.O. 1990, c.
    M.41.

[4]

Her Majesty the Queen
    in Right of Ontario as represented by the Minister of Finance administers t
he Fund.  The Fund is considered to be the payer of
    last resort because it provides compensation to people injured in motor
    vehicle accidents when no insurance exists to respond to their claim.

[5]

If, after receiving a
    claim, the Fund discovers that another insurer may be liable, the Fund can
    dispute its obligation to pay statutory accident benefits.

[6]

This appeal examines
whether the Fund can dispute its obligation to pay benefits
    to an injured cyclist with Pilot Insurance Company (Pilot).  This examination
    turns on whether the Fund complied with the requirements of s. 3 of
Disputes
    Between Insurers,
O. Reg. 283/95, when it notified Pilot that it was
    seeking to dispute liability.

BACKGROUND

Relevant provisions

[7]

Sections 2 and 3
of O. Reg.
    283/95 are
relevant to this appeal
.
[1]
O. Reg. 283/95 creates a scheme that applies to insurers disputing who is
    obligated to pay statutory accident benefits.

[8]

Section 2 directs the first insurer that receives a completed
    application for statutory accident benefits to
pay those benefits to the injured applicant
:

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 [
Insurance
    Act
].  [Emphasis added.]

[9]

Section 3(1) gives an insurer 90 days
    from receipt of a completed application to dispute its obligation to pay
    statutory accident benefits:
[2]

3.
(1)    No insurer may
    dispute its obligation to pay benefits under section 268 of the Act unless it
    gives written notice within 90 days of receipt of a
completed application
for benefits to every insurer who it claims is required to pay under that
    section.  [Emphasis added.]

[10]

The 90-day notice period in s.
    3(1) is subject to extension by s. 3(2).  Section 3(2) provides an exception for
    cases in which, despite the reasonable efforts of the insurer seeking
    indemnity, 90 days is not enough to determine whether another insurer is
    liable:

(2)
An insurer may
    give notice after the 90-day period if,

(a) 90 days was not a sufficient
    period of time to make a determination that another insurer or insurers is
    liable under section 268 of the Act; and

(b) the insurer made the
    reasonable investigations necessary to determine if another insurer was liable
    within the 90-day period.

[11]

As emphasized above, receipt
    of a completed application triggers obligations under both ss. 2 and 3.

[12]

This court recently dealt
with the meaning of completed
    application for the purpose of triggering the first insurers obligation to
    pay benefits to the injured person under s. 2 in
ING Insurance Company of Canada v. TD
    Insurance Meloche Monnex
, 2010
    ONCA 559, 103 O.R. (3d) 270
.
[3]


[13]

The case we our
    deciding deals with
the meaning of
    completed application for the purpose of triggering the 90-day notice period in
    s. 3.

The facts

[14]

A cyclist was injured by an
    unidentified motorist on November 30, 2006.  He had no insurance of his own and
    thus, on December 19, 2006, submitted a signed application for statutory
    accident benefits to the Fund.  He did not attach a police report as he was
    unable to obtain one.

[15]

The Fund received the cyclists application
    on March 7, 2007.  Seeking to dispute its obligation to pay benefits to the
    cyclist, the Fund took steps to determine the insurer of the striking vehicle.

[16]

On May 8, 2007, the Fund obtained a statement from the cyclist.  This
    statement informed the Fund that the driver of the vehicle that struck the
    cyclist made a 911 call on her cell phone to inform police of the accident.

[17]

In September 2007, an investigator for the Fund identified and spoke to
    the police officer who had responded to the accident.  The police officer told
    the investigator that his notes had gone missing and that it was possible he
    had not written an official accident report.

[18]

The police advised the investigator that there were only two ways to
    obtain information about the 911 call:
through a
    Freedom of Information request or by way of a court order.


[19]

The Funds investigator made two
    unsuccessful Freedom of Information requests to obtain the 911 call records. 
    The last of these requests was denied on January 17, 2008.

[20]

On May 22, 2008, the Fund wrote to Kingsway General Insurance Company to
    inquire about Kingsways position on priority with regard to the accident.  The
    Fund had received information suggesting that Kingsway might be liable, but
    this later turned out to be incorrect.

[21]

Kingsway did not respond to the Funds letter.  The Fund turned the
    matter over to its legal counsel.  Counsel served Kingsway with a
Notice of Commencement of Arbitration
on July
    9, 2008.  Then, on August 21, 2008, counsel filed a motion to obtain the
    particulars of the 911 call.

[22]

On September 4, 2008, the Fund obtained an unopposed court order to
    provide the particulars of the 911 call.  On September 8, 2008, the Fund
    received the 911 call records from Toronto Police Services.  The records
    identified the driver of the vehicle that struck the cyclist.

[23]

On September 12, 2008, a driver record and insurance search provided
    contact information for the driver.  On October 8, 2008, the driver confirmed
    her involvement in the accident and that Pilot was her insurer.

[24]

On October 10, 2008, Pilot was put on notice
that the Fund was disputing its obligation to pay
    benefits.

Pilot, therefore, was put on
    notice some one and a half years after the Fund had received the cyclists
    application without the police report, but within 30 days after the Fund had
    identified the driver.

[25]

The Fund then initiated arbitration
    against Pilot, seeking to have Pilot held responsible for paying the cyclists
    statutory accident benefits.

The issue arbitrated

[26]

The issue that proceeded to arbitration was straightforward: did
    the Fund provide written notice of its intent to dispute priority within 90
    days of receiving a completed application for statutory accident benefits, as
    required by s. 3(1) of O. Reg. 283/95, and if not, do the saving provisions of
    s. 3(2) apply?

The arbitrators decision

[27]

The arbitrator held that the Fund had not met the notice requirements
    of s. 3, so Pilot could not be held responsible for covering the costs of the
    cyclists statutory accident benefits.

[28]

The arbitrator relied on
R. v. Lombard Ins. Co. of Canada
,
    2010 ONSC 1770, 100 O.R. (3d) 51, in which Perell J. held that the term
    completed application could have a different meaning for establishing whether
    an insured has made out a claim for benefits (pursuant to s. 2) than it does for
    calculating the deadline for contesting priority between insurers (pursuant to
    s. 3).  When a police report is unavailable, an insured need not submit such a
    report for her application to be treated as complete for the purpose of obtaining
    benefits under s. 2.  However, the application is not treated as complete for
    the purpose of starting the insurers 90-day clock for disputing its liability
    to pay those benefits with other insurers under s. 3 as long as the insurer is
    diligent in investigating the missing information.

[29]

The arbitrator held that the Fund
    had not been
diligent in investigating the missing information and so
    failed to meet the 90-day deadline when it put Pilot on notice on October 10,
    2008.
Following
Lombard
, the arbitrator
    held that the Fund had access to the information that would have been in the
    police report once it obtained the 911 call records in September 2008. 
    However, the Fund was estopped from claiming that it had not received a
    completed application until September 2008 because the Fund delayed in seeking
    a court order to obtain those call records between January 2008 (when its last
    Freedom of Information request was denied) and August 2008 (when it brought the
    motion to obtain the court order).

[30]

The arbitrator held that the Fund should
    have moved for the court order far earlier than it did  by February 2008 at
    the very latest  and 90 days from that date would have been sufficient time to
    obtain the information.  So the Fund did not come within the saving provisions
    of s. 3(2).


The application judges
    decision

[31]

The application judge allowed the Funds appeal, holding that the Fund
    had met the notice requirements of s. 3.  The application judge agreed with the
    arbitrator that the principles set out in
Lombard
apply to this case;
    however, he held that the arbitrators ruling did not accord with those
    principles.

[32]

At para. 29 of his reasons, the application judge expressed the law as
    follows:

The case law recognizes
    that receipt of an application may be functionally adequate so as to be
    treated as a completed application for the purpose of paying benefits under
    s. 2 while not being functionally adequate so as to be treated as a
    completed application under s. 3 for the purpose of triggering the 90 day limitation
    period to exercise its legislated rights to determine the priority obligation
    as between competing insurers.

[33]

The application judge concluded that the Fund did not have a functionally
    adequate application  so as to be treated as a completed application under s.
    3  until the Fund obtained the 911 call records in September 2008, and thus
    met the 90-day deadline when it put Pilot on notice on October 10, 2008.  This was
    because, until the 911 call records were obtained, the Fund did not have
    sufficient information to identify the insurer of the unidentified motorist.

[34]

The arbitrators conclusion that the Fund did too little
    between January and August 2008 to locate the motorist did not, in the
    application judges view, result in the Funds receiving a completed
    application prior to September 2008.
The application judge found the
arbitrators
conclusion to be
inconsistent with
    the evidence that, during that time, the Fund was pursuing the possibility that
    another insurer might be responsible.

[35]

The application judge also held that the
evidentiary record did not support the arbitrators finding that the Fund was
    estopped from asserting that it did not have a completed application until
    September 2008.  In his view, the elements of estoppel by representation had
    been made out.

NATURE OF THE
APPEAL

[36]

The issue on appeal is whether the
    application judge erred in reversing the arbitrators decision that the Fund
    did not comply
with the notice requirements under s.
    3
.

[37]

Pilot argues that the application judge erred because the Fund
    had a functionally adequate application on March 7, 2007
when the Fund received the cyclists application
. 
    On that date, the Fund had sufficient information to conduct investigations
    within 90 days with the assistance of an investigator or counsel.  At that time
    the Fund could have and should have, applied for a Freedom of Information request
    or applied to the court for an unopposed order to produce the 911 call records
    from the police.  In other words, it should have conducted the same process in
    March 2007 that it successfully conducted early in the second half of 2008.

[38]

The Fund makes two arguments. 
    First, it argues that the application judge was correct to hold that the Fund did
    not receive a functionally adequate application until it received the 911
    call records in September 2008.

[39]

Second, the Fund argues that, even
    if the 90-day notice period began on March 7, 2007, it would have been
    impossible, on the facts as found, for the Fund to have put Pilot on notice
    within 90 days of that date.  The Fund relies on s. 3(2) to say that the notice
    period could not have expired at that point as the Fund exercised due diligence
    to determine if another insurer was liable and 90 days was not a sufficient period
    of time in which to do so.

[40]

For the following reasons, I would allow Pilots appeal.

[41]

I agree with the decision of the
    arbitrator.  As I will explain, the arbitrators evidentiary findings support
    the conclusion that the Fund had a functionally adequate application, and
    therefore a completed application, in September 2008.  However, because the
    Fund was not diligent in investigating the missing information, it cannot claim
    that it did not receive a completed application until September 2008.  Rather,
    the Fund ought to have pursued the information by at least February 2008 and
    was required to put Pilot on notice under s. 3 by May 2008.

ANALYSIS

[42]

I would adopt the approach that
    has developed through the jurisprudence  particularly as set out by Perell J.
    in
Lombard
 to determine when an insurer has received a completed
    application for the purposes of s. 3 of O. Reg. 283/95.  That is to say, and
    as I will discuss below, a completed application is one that is:

(1)

genuinely complete;

(2)

functionally adequate for its legislated purpose; or

(3)

treated as complete based on the conduct of the first
    insurer.

Genuinely complete

[43]

A genuinely complete application
    is one that is filled out on the Application for Accident Benefits (OCF-1) form
    and contains any required attachments.  Part 11 of the OCF-1 form requires
    three documents to be attached to the applicants form  one of which is a
Motor
    Vehicle Accident (Police) Report  in cases where
the applicant, as a last resort,
applies to the Fund for the payment of
    accident benefits
.

[44]

The cyclist in this case clearly
    did not submit a genuinely complete application, as the police report was
    missing.

[45]

However, the jurisprudence dealing
    with the interpretation of completed application in s. 3 as well as in s. 2
    of O. Reg. 283/95 has looked beyond the plain meaning of this phrase and
    interpreted it purposively.

Functionally adequate

[46]

An application for benefits that
    is not genuinely complete can nevertheless constitute a completed application
if it
is
    functionally adequate for its legislated purpose.  This interpretation applies
    to both ss. 2 and 3.

Section 2

[47]

In
ING
, this
    court held that a functionally adequate application constitutes a completed
    application under s. 2.  In doing so, at para. 51, this court
endorsed the following proposition set out in
Liberty
    Mutual Insurance Co. v. Commerce Insurance Co.
(2001), 36 C.C.L.I. (3d) 269
    (Ont. S.C.):

[A]n application for accident
    benefits need not be on a certain form in order to be valid  it need only
    provide sufficient particulars to reasonably assist the insurer with processing
    the application, identifying the benefits to which the applicant may be entitled,
    and assessing the claim  the insurer only needs sufficient information to
    meaningfully move forward or commence the process of adjusting the claim...

[48]

This court went on to hold, at para. 60 of
ING
, that [o]nce
    an insurer has received sufficient information that it can obtain any further
    necessary information, it must obtain that additional information and begin to
    pay benefits.  The insurer is not permitted to rely on shortcomings in
    written documentation as grounds for refusing to pay benefits.

[49]

This court
held that this
    flexible approach to determining whether certain documents amount to a
    completed application  as opposed to a formalistic one  furthers the
legislative goal of
pay now, dispute later,
    as it encourages the prompt payment of benefits to injured applicants.

Section 3

[50]

Consistently, a
functionally adequate application constitutes a completed
    application under s. 3.  An insurer is not permitted to rely on shortcomings
    in written documentation as grounds for claiming that the 90-day notice period
    has not commenced.  As soon as the insurer has sufficient information
to
    notify another insurer that it is disputing liability to pay the benefits, the
    90-day notice period starts running.

[51]

This interpretation advances
    the goal of resolving disputes between insurers in a timely and efficient
    manner.

[52]

In this case, Pilot
    and the Fund agree that a functionally adequate application is sufficient to
constitute a completed application under s. 3.  They
    agree that a
completed application may be different
    for purposes of s. 2 and s. 3.  They agree that the application judge applied
    the correct test.  Where they part company is on when a functionally adequate
    application existed.

Determining when an
    application is functionally adequate

[53]

The purpose of the
section of
O. Reg. 283/95
that
    is being considered (
i.e.
, s. 2 or s. 3) will determine whether an
    application is functionally adequate.

[54]

As set out in
ING
,
to be functionally adequate for the purpose of s. 2  and
    thus trigger the first insurers obligation to pay benefits to the injured
    person  an application must
contain
    sufficient information to allow the insurer to assess and process the injured
    persons claim for benefits.

[55]

To be functionally adequate for the purposes
    of s. 3  and thus trigger
the 90-day period an insurer has to notify
    another insurer that it is disputing its obligation to pay benefits  an
    application must
contain sufficient information to allow the
    first insurer to
give notice of dispute to another insurer
. 
    This interpretation applies in this case.

Application to this case

[56]

The Fund had
    sufficient information to give written notice to Pilot for the purpose of s. 3
    when the 911 call information was obtained in September 2008.  Before this, the
    Fund did not know the identity of the
motorist who struck the cyclist
    and so could not determine the insurer of the motorists vehicle.  Once it
    obtained the missing information of the motorists identity, the Fund had
    sufficient external information to supplement the standard OCF-1 form and make
    it complete.  At this point, the Fund had an application that was functionally
    adequate for the purpose of notifying Pilot.

[57]

The
    analysis, however, does not end there.

Completed
    application based on the first insurers conduct

[58]

Another
    principle that has developed in the jurisprudence involves circumstances where
    the fi
r
st insurer receives an
    inadequate application but is treated as if it had received a completed
    application because of its conduct.
Waiver,
    estoppel, delay and deflection have all been seized on as examples of such
    conduct.

[59]

This case is concerned
    with whether an insurer has failed to act diligently to obtain information that
    is missing from an application form when a police report is not available.  The
    90-day clock will start to run when an insurer fails to fulfill its obligation
    to take steps to ascertain the missing information:
Lombard
, at para.
    63.

[60]

In this case, the evidentiary record
    supports the arbitrators conclusion that the Funds delay in pursuing the 911
    call information forms the basis for treating the Fund as if it had received a
    completed application in February 2008.

[61]

The
    arbitrators finding that
the
    Fund failed to diligently investigate the claim is owed deference, as is his
    finding that the Fund should have moved for the court order
to obtain the 911 call records
in
February 2008 at the very latest
.

[62]

The arbitrator found that the Fund
    was aware of the two possible ways to acquire the 911 call information in this
    case: (1) through a Freedom of Information request, or (2) through a court
    order.  When the last Freedom of Information request was denied in January
    2008, the Fund was obligated to continue to pursue the information using other
    means.  T
he arbitrator found that the Fund delayed
    unnecessarily in seeking a court order to obtain the 911 call records that
    revealed the information necessary to proceed against Pilot.  In my view, these
    findings
were entirely
    reasonable given the evidence before the arbitrator.

[63]

The application
    judges observation, at para. 18 of his reasons, that the Fund did take some
    steps to investigate between May and August 2008, is not sufficient to disturb
    the arbitrators findings.

[64]

The Fund was required to exercise
    reasonable diligence in pursuing the missing information.  The Fund was one
    step away from turning an incomplete application into a functionally adequate application,
    but did not act to obtain the court order for more than seven months after the
    Freedom of Information route proved unsuccessful.  Given the short notice
    period established by s. 3, it would be contrary to the legislative intent to
    allow the Fund to sit on the application without adequate investigation for
    months at a time.

[65]

I agree with the application judge
    that the elements of estoppel by representation were not made out.
There is no suggestion that Pilot
    detrimentally relied on the Funds conduct  I imagine that Pilot had no idea
    that the accident had occurred.  However, in my view, the application judge
    misinterpreted the arbitrators reference to estoppel as referring narrowly to
    estoppel by representation.  The arbitrator indicated that he was relying on
Lombard
for the principle that the first insurer should be treated as receiving a
    completed application when it does not act diligently in attempting to obtain
    missing information.  The arbitrators findings relate to the Funds failure to
    exercise diligence in obtaining the missing information.  The arbitrator made
    no reference to the elements of estoppel by representation.  In my view, the
    arbitrator relied on the Funds delay in investigating the missing information,
    not on estoppel by representation, as the basis for his conclusion.

S
aving provisions

[66]


Given this result and the reasons for it, the Fund
    cannot rely on the saving provisions in s. 3(2).

DISPOSITION

[67]

For these reasons, I would allow the appeal. 
    The order of the arbitrator  that
it is the responsibility of the Fund
    to pay accident benefits to or on behalf the cyclist  should be restored.

[68]

I would award the appellant its
    costs of the appeal in the agreed upon amount of $7,500, inclusive of
    disbursements and HST.  Given the result, I would also award the appellant its
    costs before the application judge fixed in the agreed upon amount of $5,000
    inclusive of disbursements and HST.

RELEASED:

JCM                                                            H.S.
    LaForme J.A.

JAN 19 2012                                               I
    agree M.C. MacPherson J.A.

I
    agree G.J. Epstein J.A.





[1]
This regulation was amended in 2010 by O. Reg. 38/10.  Sections 2 and 3 were
    amended with respect to accidents that occur on or after September 1, 2010.



[2]
The 2010 amendments to the regulation now provide that [i]f the dispute
    relates to an accident that occurred on or after September 1, 2010, the Fund
    may give a notice under subsection (1) after the 90-day period and is not
    required to comply with subsection (2). O. Reg. 38/10, s. 4.



[3]

ING Insurance Company of Canada v. TD Insurance Meloche Monnex
was released after the two main cases that the arbitrator and application judge
    relied upon, namely,
R. v. Lombard Ins.
    Co. of Canada
,
2010 ONSC
    1770, 100 O.R. (3d) 51,
and
ING Insurance Co. of Canada v. State Farm Insurance Companies
(2009), 97 O.R. (3d) 291 (S.C.).


