Neutral Citation: 1993 ONICDRG 73

File No. A-003621

ONTARIO INSURANCE COMMISSION

BETWEEN:

LAURENT TOUROND

Applicant

and

SASKATCHEWAN GOVERNMENT INSURANCE OFFICE

Insurer

DECISION on the PRELIMINARY ISSUE

The Applicant, Laurent Tourond, a Manitoba resident, was injured in a motor vehicle accident on September 27, 1991 in Ontario. At the time of the accident, he was driving a vehicle owned by a Saskatchewan resident, Scott McLean, with Mr. McLean's consent. The vehicle was insured by Saskatchewan Government Insurance Office. Unfortunately, Mr. Tourond fell asleep at the wheel. He was seriously injured in a single vehicle accident and suffered an incomplete paraplegia of his thoracic spine.

Mr. Tourond applied for accident benefits from the Insurer under Ontario Regulation 672 (the "No-Fault Benefits Schedule"), enacted under the Insurance Act, R.S.O. 1990, c. I.8. However, the Insurer refused to pay, claiming that under the provisions of Saskatchewan's Automobile Accident Insurance Act, R.S.S. 1978, c.A-35, it was not liable to Mr. Tourond.

Mr. Tourond applied for mediation of his claim, but the matter was not resolved. He then applied for arbitration. The Insurer refused to participate in both the mediation and this arbitration.

The preliminary issue in this hearing is:

1. Does the Applicant have recourse against Saskatchewan Government Insurance Office, under section 268 of the Insurance Act, for payment of no-fault benefits?

The Applicant also claims his expenses incurred in the hearing.

The substantive issue of the Applicant's entitlement to care benefits, supplementary medical and rehabilitation benefits and weekly income benefits has been deferred, to be dealt with only if the preliminary issue is decided affirmatively.

Result:

1. Saskatchewan Government Insurance Office is liable to pay no-fault benefits to the Applicant.

Applicant'sKenneth Arenson

Representative:Barrister at Law

The arbitration proceeded without an oral hearing. A list of documents before the arbitrator is appended as Schedule A. The decided cases considered are appended as Schedule B.

Evidence and Findings:

In Ontario, disputes of entitlement to no-fault benefits or the amount of benefits are to be resolved in accordance with sections 280 to 283 of the Insurance Act and the No-Fault Benefits Schedule. This principle is set out in section 279(1) of the Act:

279.--(1) Disputes in respect of any insured person's entitlement to no-fault benefits or in respect of the amount of no-fault benefits to which an insured person is entitled shall be resolved in accordance with sections 280 to 283 and the No-Fault Benefits Schedule.

Section 20(1) and (2) and section 282(3) and (4) of the Act empowers arbitrators and sets out the procedural framework for their decisions.

20.--(1) This section applies with respect to proceedings under this Act before (...) an arbitrator.

(2) A person referred to in subsection (1) has exclusive jurisdiction to exercise the powers conferred upon him or her under this Act and to determine all questions of fact or law that arise in any proceeding before him or her and, unless an appeal is provided under this Act, his or her decision thereon is final and conclusive for all purposes.

(3) ...

282.--(3) The arbitrator shall determine all issues in dispute and such other issues as the parties may agree.

(4) The arbitration shall be conducted in accordance with the procedures and within the time-limits set out in the regulations.

Section 21 of the Insurance Act authorizes the Director of Arbitrations to make rules for the practice and procedure to be observed in arbitrations:

21. Subject to the procedures and time limits for the conduct of arbitrations set out in the regulations, the Director may make rules for the practice and procedure to be observed for a proceeding before him or her or before an arbitrator.

Under that authority, the Dispute Resolution Practice Code was produced.

This arbitration proceeded without an oral hearing, following sections 13 and 14 of the Dispute Resolution Practice Code. Counsel for the Applicant filed written argument and supporting documentation. Although the Insurer refused to participate in this arbitration, it did write to the Ontario Insurance Commission setting out its position in a 7-page letter. In addition, I had before me the documents listed in Schedule A to this decision. The decided cases I considered are D. (...) appended in Schedule B.

The essence of this case concerns the scope to be given to a Power of Attorney and Undertaking signed by officers of the Saskatchewan Government Insurance Office on August 4, 1976 in connection with the Canada Non-Resident Inter-Province Motor Vehicle Liability Insurance Card. The Applicant's counsel contends that the undertaking extends to the present situation; the Insurer argues that the undertaking has no application to no-fault benefits issues whatsoever.

The relevant portion of the Power of Attorney and Undertaking reads as follows:

The Saskatchewan Government Insurance Office aforesaid hereby undertakes:

A. To appear in any action or proceeding against it or its insured in any Province or Territory in which such action has been instituted and of which it has knowledge:

B. That upon receipt from any of the officials aforesaid of such notice or process in respect of its insured, or in respect of its insured and another or others, it will forthwith cause the notice or process to be personally served upon the insured:

C. Not to set up any defence to any claim, action, or proceeding under a motor-vehicle liability insurance contract entered into by it, which might not be set up if the contract had been entered into in, and in accordance with the law relating to motor-vehicle liability insurance contracts of the Province or Territory of Canada in which such action or proceeding may be instituted, and to satisfy any final judgment rendered against it or its insured by a Court in such Province or Territory, in the claim, action, or proceeding, up to

(1) the limit or limits of liability provided in the contract; but

(2) in any event an amount not less than the limit or limits fixed as the minimum for which a contract of motor-vehicle liability insurance may be entered into in such Province or Territory of Canada, exclusive of interest and costs and subject to any priorities as to bodily injury or property damage with respect to such minimum limit or limits as may be fixed by the Province or Territory.

D .(....)

I find that on the plain and ordinary meaning of the undertaking, the Insurer has breached two aspects of its agreement: it has not appeared in this proceeding and it seeks to deny payment to Mr. Tourond by setting up a defence to his claim which might not be set up if the contract had been entered into in Ontario.

I am guided to my conclusion in this case principally by the Ontario Court of Appeal decision in Potts v. Gluckstein¹. In that case, the Insurance Corporation of British Columbia sought to avoid the payment of uninsured automobile coverage to a B.C. motorist who had an accident in Ontario. There the Minister of Financial Institutions argued, as does the Applicant's counsel here, that uninsured coverage is by statute part of an Ontario motor vehicle liability policy; "that no defence would be available to the insurer if the policy had been issued in this province; and that, as a result, I.C.B.C. is bound by its undertaking not to raise a defence against the respondent's claim."

I.C.B.C.'s argument in that case (that uninsured automobile coverage is a form of first party coverage and not "liability" insurance within the meaning of the undertaking) was rejected by the Court of Appeal. Similarly, here, the Insurer contends that the undertaking only applies to third party liability coverages. In the Potts case, the Court of Appeal rejected I.C.B.C.'s submission, which relied on a dictum of Justice Seaton of British Columbia's Court of Appeal in Shea v. Shea. Justice Seaton wrote in that case:

No-fault benefits are payable by an insurer to an injured person irrespective of liability. Provisions for them may be tacked on liability insurance policies, but such provisions are not with respect to liability insurance. They are accurately termed "Accident Insurance Benefits".

Justice Blair writing for our Court of Appeal stated "...the dictum of Seaton J.A. in the Shea case does not apply to Ontario automobile insurance and should not be followed in this province."

The Court of Appeal in Potts also held that because uninsured motorist coverage is mandated by the Insurance Act to be an integral part of our standard motor vehicle liability insurance contract, there was no foundation for the argument that it is not included within the meaning of the undertaking. So also with no-fault benefits. Our law is clear with regard to the obligation to include no-fault benefits in a motor vehicle liability policy:

268.--(1) Every contract evidenced by a motor vehicle liability policy shall provide for the no-fault benefits set out in the No-Fault Benefits Schedule, ...

Since section 268 expands the definition of "motor vehicle liability policy" to include no-fault benefits, it cannot be said that a "liability" policy in Ontario does not include such provisions.

The Court of Appeal in Potts also approved the Divisional Court's interpretation of the word "defence" in the undertaking set out in Schrader v. United States Fidelity & Guaranty Co. There, Justice John Holland, speaking for the court, said (at p. 182 O.R.):

It will be seen that the section clearly dealt with anydefence. This would include any defence that the policy did not include coverages or limits mandated by the Ontario Act.

The Insurer in this case contended that Ontario has no jurisdiction to legislate SGIO insurance coverage. However, our Court of Appeal in Pottsdealt with this issue and reiterated its position, set out first in MacDonald v. Proctor, that in so interpreting the undertaking, it was not transforming the out-of-province policy into one that is "made in Ontario". Justice Blair in Pottscommented:

MacDonald v. Proctoris entirely different from and not relevant to the present case. It dealt only with the deductibilityof benefits paid to a plaintiff by a Manitoba insurer from damages awarded in Ontario. It did not deal with the present case, as it would have done if the plaintiff had been forced to sue M.P.I.C. in Ontario for no-fault benefits. Then the issue would have been, as it is in this case, whether M.P.I.C. was precluded from setting up a defence in the Ontario action which was not available to an Ontario insurer.

Further, by way of illustration, Justice Blair in Potts commented that if the case of Corbett v. Co-operative Fire & Casualty Co. had been decided in British Columbia, the province where the accident took place, rather than in Alberta, where the contract was made, the Alberta insurer would not have been permitted, by virtue of its undertaking, to raise a defence limiting benefits to the Alberta scale.

Accordingly, I am not persuaded by the Insurer's contention that when section 268 of the Ontario Insurance Act provides that "every contract evidenced by a motor vehicle liability policy shall provide for ... no-fault benefits", it cannot mean out-of-province policies, because Ontario has no authority over such matters. This submission is not responsive to the issue here; the issue in this case is what defences this Insurer can raise in a proceeding in Ontario.

In its correspondence to the Ontario Insurance Commission, the Insurer referred to sections 40 and 50 of Saskatchewan's Automobile Accident Insurance Act ("AAIA"), R.S.S. 1978, c. A-35 and s. 205 of the Saskatchewan Insurance Act, R.S.S. 1978, c. S-26. It asserted that Saskatchewan Government Insurance Office had no statutory authority to file an undertaking relating to other than third party liability insurance. In my view, the document executed by SGIO speaks for itself and our law clearly incorporates no-fault benefits into the law relating to motor vehicle liability insurance contracts.

The Insurer contends that section 31(1) of the Saskatchewan Insurance Act, which would compel a Saskatchewan licensed automobile insurer to comply with Ontario's provisions, does not apply to SGIO because SGIO is not licensed in Saskatchewan. Similarly, section 45(1) of the Ontario Insurance Act, the so-called "reciprocity" section, cannot apply to SGIO, because SGIO is not licensed in Ontario. I concur with these submissions, but the undertaking executed by SGIO stands on its own.

Expenses:

The Applicant seeks an award of the expenses he has incurred in this arbitration. An award for expenses may be made under section 282(11) of the Insurance Act, which provides as follows:

The arbitrator may award to the insured person such expenses incurred in respect of an arbitration proceeding as may be prescribed in the regulations to the maximum set out in the regulations.

The prescribed expenses and amounts are set out in Schedule 1 of the Dispute Resolution Practice Code and in Ontario Regulation 664, R.R.O. 1990, Dispute Resolution Expenses.

In the Ralph McCormick v. Economical Mutual Insurance Company case (O.I.C. File No. A-000139), Arbitrator Susan Naylor made the following comments about expenses, with which I agree:

The discretion to award expenses should be exercised, having regard to the intent and purpose of the legislative scheme. The arbitration process has been established under the Insurance Act, as amended, in order to facilitate applicants' access to relatively inexpensive, speedy and informal adjudication of disputes regarding no-fault benefits. The discretion to award expenses should be exercised in accordance with this objective, having regard to the individual circumstances of each case.

Accordingly, it is appropriate to award an applicant his or her expenses, unless, in the circumstances of the particular case, it is determined that the application for appointment of an arbitrator was manifestly frivolous or vexatious, or that the applicant's conduct unreasonably prolonged the proceedings.

The Director of Arbitrations approved this statement of the principles guiding an award of expenses in the appeal decision in Vito Luigi Calogero v. The Co-Operators General Insurance Company (O.I.C. File No. P-000251, issued February 13, 1992).

The Applicant is entitled to his expenses as set out in Schedule 1 of the Dispute Resolution Practice Code.

Order:

1. Saskatchewan Government Insurance Office is liable to pay no-fault benefits to the Applicant.

2. The Applicant is entitled to his expenses incurred in respect to the arbitration.

November 22, 1993

K. Julaine Palmer

Arbitrator

Date

SCHEDULE A

Documents before the Arbitrator

1. Applicant's written argument, dated September 23, 1993

2. Affidavit of Laurent Tourond, sworn September 20, 1993

3. Letter from P. Rao, M.D., FRCPC, University of Manitoba, Health Sciences Centre, dated October 7, 1993

4. Pre-hearing report from F. Rotter, Senior Arbitrator, Ontario Insurance Commission, dated September 10, 1993

5. Notice of Pre-hearing Discussion, O.I.C., dated August 30, 1993

6. Letter from J.G. Malcolm, Executive Coordinator/Registrar O.I.C., to Mr. K.D. Lerner, Assistant V.P. Litigation Department S.G.I.O., dated August 11, 1993

7. Letter from D.R. Kuss, Litigation Department, S.G.I.O. to O.I.C. dated June 17, 1993

8. Letter from J.G. Malcolm to K. D. Lerner dated June 8, 1993

9. Letter from D.R. Kuss to Sally J. Baker, O.I.C., dated May 19, 1993 (7 pages)

10. Application for Appointment of an Arbitrator dated April 16, 1993

11. Report of Mediator, O.I.C., dated March 10, 1993

SCHEDULE B

Cases Considered by the Arbitrator

1. Administrator, Motor Vehicle Claims Act v. Saskatchewan Government Insurance Office [1981] I.L.R. & 1-1373 (Alta. C.A.)

2. Corbett v. Co-operativeFre & Casualty Co. (1984), 1984 CanLII 1213 (AB QB), 9 C.C.L.I. 300, 34 Alta. L.R. (2d) 158, [1985] 1 W.W.R. 462, 56 A.R. 60, 14 D.L.R. (4th) 531, [1985] I.L.R. 1-1789 (Q.B.)

3. Proctor (1977), 1977 CanLII 50 (ON CA), 19 O.R. (2d) 745, [1979] I.L.R. 1-1164, 86 D.L.R. (3d) 455 (C.A.), affirmed 1979 CanLII 34 (SCC), [1979] 2 S.C.R. 153, [1980] I.L.R. 1-1164, 105 D.L.R. (3d) 169

4. Ministry of Consumer & Commercial Relations of Ontario v. Saskatchewan Government Insurance Office (unreported, Ont. H.Ct., Southey J., Dec. 23, 1981)

5. Potts v. Gluckstein (1992) 1992 CanLII 7623 (ON CA), 14 C.C.L.I. (2d) 175 (Ont. C.A.)

6. Royal Insurance v. Saskatchewan Government Insurance Office (1988) 1988 CanLII 3857 (AB QB), 33 C.C.L.I. 244 (Alta Ct. of Queen's Bench)

7. Schrader v. United Sates Fidelity & Guaranty Co., 1987 CanLII 4150 (ON HCJ), 26 C.C.L.I. 161, 48 M.V.R. 77, [1987] I.L.R. 1-2173, 59 O.R. (2d) 178, 37 D.L.R. (4th) 120, 23 O.A.C. 154 (Div.Ct.), additional reasons at 26 C.C.L.I. 161 at 172, [1987] I.L.R. 1-2219, 59 O.R. (2d) 797, 23 O.A.C. 154 at 160 (Div.Ct.)

8. Shea v. Shea, 1985 CanLII 577 (BC CA), 20 C.C.L.I. 72, (sub nom. Shea v. Insurance Corp. of British Columbia; Shea v. Manitoba Public Insurance Corp.) 66 B.C.L.R. 92, [1985] 6 W.W.R. 641, 21 D.L.R. (4th) 716, [1985] I.L.R. 1-1989 (C.A.)

Footnotes

1. 11992) 1992 CanLII 7623 (ON CA), 14 C.C.L.I.(2d) 175 (leave to appeal to S.C.C. refused). For other case citations, see Schedule B.