Neutral Citation: 1993 ONICDRG 12

File No. A-001347

ONTARIO INSURANCE COMMISSION

BETWEEN:

BRUCE and ELEANOR MCDONALD

Insured Persons

and

STATE FARM INSURANCE COMPANIES

Insurer

DECISION

Issues:

The insured persons, Bruce McDonald and Eleanor McDonald, were involved in a motor vehicle accident on August 9, 1991. Mr. McDonald was killed instantly. Mrs. McDonald was fatally injured and died six days later.

Mr. McDonald had an automobile insurance policy with State Farm. Every Ontario policy for motor vehicle insurance provides for no-fault benefits, including death benefits, as set out in the No-Fault Benefits Schedule (Ontario Regulation 672 under the Insurance Act, R.S.O. 1990, c. I.8).

An application was made for death benefits to be paid to the McDonald's three children, Sarah, Fran and Heather. State Farm paid death benefits to the three children, including $10,000 to each of them under section 11(1)(c) of the No-Fault Benefits Schedule. The position put forward on behalf of the children is that they are each entitled to $20,000 under section 11(1)(c) because they lost both of their parents.

This dispute was mediated, but the mediation was unsuccessful. An application was then made in the names of the insured persons for the appointment of an arbitrator.

The issues to be determined by arbitration are:

(1) Are Bruce and Eleanor McDonald's three children each entitled to $10,000 or $20,000 under section 11(1)(c) of the No-Fault Benefits Schedule?

(2) Should State Farm be ordered to pay a special award under section 282(10) of the Insurance Act because it unreasonably withheld or delayed payments?

A claim was also made in the names of the insured persons for interest on any outstanding amounts and for the costs of the hearing.

Result:

The decision is:

1. Bruce and Eleanor McDonald's three children, Sarah, Fran and Heather, are each entitled to an additional $10,000 under section 11(1)(c) of the No-Fault Benefits Schedule.

2. State Farm is not required to pay a special award under section 282(10) of the Insurance Act.

3. State Farm shall pay interest on the amounts awarded in this decision according to section 24(4) of the No-Fault Benefits Schedule.

4. State Farm will pay the expenses of this arbitration as set out in Ontario Regulation 664, Dispute Resolution Expenses.

Hearing:

A hearing was held at North York, Ontario, on February 11, 1993, before me, David Draper, Arbitrator.

Present at the hearing were:

Representatives for the estates of the insured persons: Gerhard Selzer and Clive Elkin Barristers and Solicitors

Insurer's Representatives: James Flaherty and Catherine Zingg Barristers and Solicitors

Observers: Sarah McDonald and Fran McDonald

The proceedings were transcribed by Elizabeth Monteiro of Professional Court Reporters.

Documents before the Arbitrator:

Exhibits:

Exhibit 1 Statement of Agreed Facts

Exhibit 2 Schedules "A", "B" and "C" with respect to Sarah McDonald.

Exhibit 3 Schedules "A", "B" and "C" with respect to Fran McDonald.

Exhibit 4 Schedules "A", "B" and "C" with respect to Heather McDonald.

Exhibit 5 "Schedule Outlining the Relative Financial Contributions to the Three McDonald Children in the 12 Months Preceding the Motor Vehicle Accident, August 9, 1991".

Exhibit 6 "Schedule of Children's Estimated Rental Expense While at Home for the Twelve Months Preceding the Accident, August 9, 1991".

Legislation, cases and authorities cited:

By the representatives of the estates of the insured persons:

Insurance Act, R.S.O. 1980, c.224, Schedule "C", s.2.

Hui v. Security National Insurance Company, O.I.C. File No. A-000055, (November 15, 1991).

Scavuzzo v. Canadian Home Assurance Company, O.I.C. File No. A-000626 (March 18, 1992), aff'd on appeal to the Director of Arbitrations, O.I.C. File No. P-000626 (June 19, 1992).

Martins v. Gibraltar General Insurance Co. (1984), 1984 CanLII 5962 (ON HCJ), 6 C.C.L.I. 226 (Ont. Co. Ct.).

B.C. Reg. 447/83, s. 95(2) and s.93.

Miller v. Safeco Insurance Co. of America (1984), 1984 CanLII 2019 (ON HCJ), 48 O.R. (2d) 451 (H.C.), aff'd. 1985 CanLII 2022 (ON CA), 50 O.R. (2d) 797 (C.A.).

Pagliarella v. DiBiase Brothers Inc. (1989), 1989 CanLII 4388 (ON HCJ), 71 O.R. (2d) 193, 64 D.L.R. (4th) 519 (H.C.).

A. O'Donnell, Automobile Insurance in Ontario (Toronto: Butterworths, 1991), pp. 94-98. Erickson v. The Guarantee Company of North America, O.I.C. File No. A-000560 (July 16, 1992).

By the representatives for State Farm:

Chevrier et al. v. Zurich Insurance Company, [1985] I.L.R. 1-1919 (Ont. Dist. Ct.), aff'd in part, [1985] I.L.R. 1-1920 (Ont. Ct. App.).

Barnard Estate v. Safeco Ins. Co. of America (1986), 1986 CanLII 2522 (ON HCJ), 23 C.C.L.I. 279 (Ont. H.C.).

Revega v. Western Union Insurance Company, [1975] I.L.R. 1-665 (Albta. S.C.).

Ireland v. Royal Insurance Canada et al., [1992] I.L.R. 1-2837 (Ont. Ct. Gen. Div.).

C.E.D. (Ont), "Statutes", Paragraph 167.

The following documents were before the arbitrator, but not marked as exhibits.

Report of Mediator, dated May 28, 1992.

Application for Appointment of an Arbitrator, dated July 13, 1992.

Response by Insurer, dated August 4, 1992.

Reasons for Decision:

1. Death Benefits:

The primary issue in this arbitration is whether, as a result of losing both of their parents, Sarah, Fran and Heather McDonald are each entitled to receive death benefits of $10,000 or $20,000 under section 11(1)(c) of the No-Fault Benefits Schedule.

On August 9, 1991, Bruce and Eleanor McDonald were involved in a motor vehicle accident. Mr. McDonald was killed instantly. Mrs. McDonald died on August 15, 1991 from injuries sustained in the accident.

Mr. McDonald had a motor vehicle insurance policy with State Farm. As with all Ontario policies, Mr. McDonald's policy provides for the no-fault benefits set out in the No-Fault Benefits Schedule (Regulation 672 under the Ontario Insurance Act, R.S.O. 1990, c. I.8).

At the time of the accident, Mr. and Mrs. McDonald were both gainfully employed, although Mr. McDonald's income greatly exceeded that of his wife. They were survived by three children: Sarah (22), Fran (21) and Heather (17). At the time of the accident, the children were all full-time students.

Their principal residence was their parents' home.

An application for death benefits was made on behalf of the three children. Death benefits are to be paid according to section 11 of the No-Fault Benefits Schedule:

11 (1) If, as a result of an accident, an insured person dies within the benefit period set out in subsection (3), the insurer will pay with respect to the insured person, if Optional Benefit 1 has not been purchased,

(a) $25,000 to his or her spouse, if the deceased is survived by a spouse who was his or her spouse at the time of the accident;

(b) $25,000 to his or her dependants, if the deceased is survived by any dependant at the time of the accident and is not survived by a spouse who is entitled to a benefit under this section;

(c) $10,000 to each of his or her surviving dependants who was a dependant at the time of the accident;

Section 3(2) of the No-Fault Benefits Schedule describes who is a dependant:

3(2) For the purposes of this Schedule, a person is a dependant of another person if the person is principally dependent for financial support on the other person or the other person's spouse.

The parties agreed that Mr. and Mrs. McDonald were both "insured persons" and that State Farm was obligated to pay certain death benefits to the three children (Exhibit 1). In fact, State Farm Insurance paid $80,000 in death benefits to the three children. This amount represented:

1. 25,000 to be divided equally among the three children under section 11(1)(b) of the No-Fault Benefits Schedule based on the death of Bruce McDonald.

2. 25,000 to be divided equally among the three children under section 11(1)(b) of the No-Fault Benefits Schedule based on the death of Eleanor McDonald.

3. 10,000 to each of the three children under section 11(1)(c) of the No-Fault Benefits Schedule.

State Farm's position is that a person can only be "principally dependent for financial support" on one person at any time and, therefore, cannot collect twice under section 11(1)(c). It was submitted that section 11(1)(c) was not intended to create a double indemnity. For the following reasons, I am unable to agree.

As has been stated in previous arbitration decisions, the provisions of the No-Fault Benefits Schedule must be interpreted according to their ordinary and grammatical sense, in context and in light of the scheme and intent of the legislation.

A number of cases were cited on behalf of State Farm as relevant to the interpretation of the term, "principally dependent for financial support". I accept that "principally dependent for financial support" may be a stricter test than "dependent relative", which was used in an earlier version of the no-fault benefits schedule. The term, "principally dependent for financial support" requires more than some dependence. It means that the person claiming benefits must establish that he or she is more financially dependent on the deceased person than on any other source.

I also accept that the cases cited on behalf of State Farm conclude that a person can only be "principally dependent for financial support" on one source, although it might be argued under section 3(2) that spouses are to be treated as a single source. Each of the cited cases dealt with disputes about whether the applicant was principally dependent on the deceased person, or was independent or principally dependent on another source. In my view, these cases are clearly distinguishable. In this case, State Farm conceded, at least for the purposes of this arbitration hearing, that the three children were principally dependent for financial support on Mr. McDonald, or perhaps jointly on Mr. and Mrs. McDonald. If they were not, State Farm would have had no obligation to pay them any death benefits under section 11.

In my view, it is critical to note that two separate terms are used in section 3(2): "dependant" and "principally dependent for financial support". "Dependant" [emphasis added] is the noun. Section 3(2) defines who qualifies as "a dependant". "A dependant" is someone who is "principally dependent for financial support on the other person or the other person's spouse". The plain meaning of section 3(2), in my view, is that if the children were principally dependent on either of their parents for financial support, or perhaps on both of them jointly, then they are dependants of both parents.

It is helpful to plug the names into section 3(2). Using Sarah McDonald as an example:

Is Sarah McDonald a dependant of Bruce McDonald?

3(2) For the purposes of this Schedule, Sarah McDonald is a dependant of Bruce McDonald if Sarah McDonald is principally dependent for financial support on Bruce McDonald or Eleanor McDonald.

Is Sarah McDonald a dependant of Eleanor McDonald?

3(2) For the purposes of this Schedule, Sarah McDonald is a dependant of Eleanor McDonald if Sarah McDonald is principally dependent for financial support on Eleanor McDonald or Bruce McDonald.

I conclude that Sarah, Fran and Heather each were dependants of their father and of their mother. As stated above, the parties agreed that Mr. and Mrs. McDonald were both "insured persons" within the meaning of the No-Fault Benefits Schedule. Section 11, therefore, must be read for each of them. Section 11(1)(c) provides for benefits for "each of his or her surviving dependants who was a dependant at the time of the accident" [emphasis added]. In my view, State Farm is asking that I read section 11(1)(c) as if it read, "$10,000 to each of his or her surviving dependants who was principally dependent of the deceased person at the time of the accident".

In the face of language that can reasonably be interpreted according to its ordinary meaning, it would be inappropriate to interpret the section by reading in additional words. I conclude, therefore, that sections 11(1)(c) and 3(2) are not ambiguous; the ordinary meaning of the sections can be applied in context without strain. Sarah, Fran and Heather each were dependants of their father and of their mother and, as a result, are each entitled to receive death benefits of $20,000 under section 11(1)(c) of the No-Fault Benefits Schedule.

2. Special Award:

It was submitted that State Farm should be ordered to pay a special award under section 282(10) of the Insurance Act:

(10) If the arbitrator finds that an insurer has unreasonably withheld or delayed payments, the arbitrator, in addition to awarding the benefits and interest to which an insured person is entitled under the No-Fault Benefits Schedule, shall award a lump sum of up to 50 per cent of the amount to which the person was entitled at the time of the award together with interest on all amounts then owing to the insured (including unpaid interest) at the rate of 2 per cent per month, compounded monthly, from the time the benefits first became payable under the Schedule.

The issue, therefore, is whether State Farm "unreasonably withheld or delayed payments". I conclude that no special award should be ordered in this case.

State Farm paid death benefits of $80,000 and there was no suggestion that they were not paid in a timely manner. It refused to pay the additional $30,000 based on a clearly stated interpretation of section 11(1)(c) and 3(2) of the No-Fault Benefits Schedule. Although I have not accepted State Farm's interpretation, I believe that its position was arguable and that it was entitled to assert its position. I am influenced in this decision by the fact that no previous arbitration decision has considered the proper interpretation of sections 11(1) and 3(2) of the No-Fault Benefits Schedule. In addition, no court decision was provided to me which clearly determined the issue.

3. Expenses:

Under section 282(11) of the Insurance Act, an insured person may be awarded expenses incurred in respect of an arbitration proceeding. Arbitrators have consistently held that expenses should be awarded to the insured person unless the claim was manifestly frivolous or vexatious, or the person's conduct unreasonably prolonged the proceedings. In this case, the claim made in the name of the insured persons was successful and, therefore, an award for expenses is appropriate.

Order:

1. State Farm shall pay an additional $30,000 death benefits under section 11(1)(c) of the No-Fault Benefits Schedule, plus interest calculated according to section 24 of the No-Fault Benefits Schedule.

2. State Farm shall pay the expenses that the other party has incurred in respect of this arbitration hearing, in accordance with Schedule 1 of Regulation 664, Dispute Resolution Expenses.

March 11, 1993

David Draper Arbitrator

Date