Neutral Citation: 1994 ONICDRG 130
File Nos. A-001897 & A-001898
ONTARIO INSURANCE COMMISSION
BETWEEN:
ASHLEY AND ALISSA CHAPMAN
Applicant
and
ALLSTATE INSURANCE COMPANY OF CANADA
Insurer
and
WELLINGTON INSURANCE COMPANY
DECISION ON PRELIMINARY ISSUE
Issues:
The Applicants, Ashley and Alissa Chapman, are the young children of Paul and the late Laura Chapman. Laura Chapman was killed, and Ashley and Alissa ("the children") were severely injured, in a motor vehicle accident on July 23, 1991. The Chapman children applied for and received certain statutory accident benefits from the Allstate Insurance Company of Canada ("Allstate"), payable under Ontario Regulation 6721.
Allstate claims that it is not obliged to pay accident benefits, since it had cancelled an automobile insurance policy for Paul Chapman prior to the date of the accident. It claims that statutory accident benefits should be provided by the Wellington Insurance Company ("Wellington"), the insurer of the vehicle involved in the accident.
Wellington claims that Allstate is responsible for benefits because Paul Chapman's insurance policy was not validly cancelled in accordance with the Insurance Act, prior to the date of the accident.
The parties were unable to resolve their disputes through mediation, and the Applicants applied for arbitration under the Insurance Act.
The preliminary issue in this hearing is:
Which insurer is responsible for the payment of statutory accident benefits to the Chapman children?
Result:
Wellington is responsible for the payment of statutory accident benefits.
Hearing:
The hearing was held in Toronto, Ontario, on December 9 and December 23, 1993, before me, Frederika Rotter, senior arbitrator.
Present at the Hearing:
Applicants' Father: Paul Chapman
Applicants' Representative: Joseph Pileggi Barrister and Solicitor
Allstate's Representative: James M. Flaherty Barrister and Solicitor
Wellington's Representative: Edmund W. J. Kent Barrister and Solicitor
Witnesses: Lenore Haus Senior Coverage Discrepancy Coordinator, Allstate
Patricia Martinolich Legal Assistant
Documents before the Arbitrator:
Exhibits:
Exhibit 1 Bundle of Documents, including Traffic Accident Report; Letter dated November 7, 1991, from Thomson, Rogers; Letter dated November 13, 1991; Letter dated November 20, 1991, from Wellington; Letter from Thomson, Rogers to Wellington, dated January 28, 1992;
Exhibit 1-A Affidavit of Paul Chapman.
Exhibit 2 Notice of Cancellation for Non-Payment of Premium
Exhibit 3 Post Office Registration Receipt
In addition, the following documents were before the arbitrator:
- Application for Appointment of an Arbitrator, dated November 10, 1992;
- Response by Insurer, dated May 28, 1993;
- Report of Mediator, dated October 2, 1992.
Cases and Authorities Referred To:
Canada Post Corporation Act, R.S.C. 1985, c. C-10, s. 1-4
Clapp v. Travellers' Indemnity Company, (1932) 1931 CanLII 150 (ON CA), O.R. 116 (Ont. C.A.)
Lumbermen's Mutual Casualty Co v. Stone, (1955) 1955 CanLII 55 (SCC), 4 D.L.R. 167 (S.C.C.)
Smart et al. v. Miller et al.; Allstate Insurance Company of Canada (third party), (1988) 1988 CanLII 10387 (ON HCJ), 31 C.C.L.I. 175
Evidence:
Paul Chapman testified that he is the father of the children, Ashley and Alissa Chapman, who were severely injured in a motor vehicle accident on July 23 1991. The children's mother, Laura Chapman, was killed in the accident.
Paul Chapman testified that he had separated from Laura Chapman in or about May 1990. Laura Chapman and the children began living with Mr. Kevin Laurin, of Niagara Falls, Ontario, about one year before the accident. At the time of the accident, Paul Chapman was living in Brampton, Ontario, and paying child support of $700 a month to Laura Chapman, under the terms of a separation agreement.
He testified that he owned a car at the time of the accident, but did not have insurance on it. He had previously been insured with Allstate. Mr. Chapman testified that he thought that his insurance policy had lapsed, because he had not paid the premiums owing. He testified that he had received letters from Allstate advising him that if he did not pay the premiums, the policy would become void.
Mr. Chapman testified that he had never received any correspondence from Allstate specifically stating that his policy was cancelled. He did receive a card from the Post Office advising him that he had a registered letter, but he never picked up the letter from the Post Office.
The accident occurred in or near Bangor, Maine, U.S.A. Laura Chapman was driving a vehicle owned by Kevin Laurin and insured by Wellington.
It was not disputed by the parties that under the priority rules set out in section 268 of the Insurance Act, the Chapman children first have recourse to their father's motor vehicle insurer for statutory accident benefits. If Mr. Chapman has no motor vehicle insurance coverage, the children must look to the insurer of the vehicle in which they were passengers at the time of the accident. Wellington admits it was the insurer of the Laurin vehicle.
Paul Chapman confirmed that he had sworn an affidavit, dated January 27, 1992 (marked Exhibit 1-A to the hearing), indicating that he had no recourse under "any other automobile insurance policy" to accident benefits in respect of his children. This affidavit was provided to Wellington.
Ms. Lenore Haus, Senior Coverage Discrepancy Coordinator at Allstate, testified that she has investigated and reviewed Mr. Chapman's insurance coverage. She works out of Allstate's head office in Markham.
She testified that the records available to her indicated that Allstate issued an insurance policy to Mr. Chapman effective January 18, 1991, and that this policy was cancelled, effective July 9, 1991, for non-payment of premium. Ms. Haus identified Exhibit 2, a computer-generated "Notice of Cancellation for Non-Payment of Premium" form, addressed to Mr. Chapman, advising that his insurance under his policy would terminate on July 7, 1991, at 12:01 a.m., or fifteen days after the date following the receipt of the notice at the post office to which it is addressed, whichever is later. The form is dated June 19 (O619), at the bottom right-hand corner.
Ms. Haus confirmed that this notice was sent to Mr. Chapman by registered mail, and identified an original Post Office Registration Receipt (Exhibit 3) verifying that an item of mail addressed to Mr. Chapman at his address in Brampton was registered. The receipt is dated June 19, 1991, and bears a very faint, barely discernable date stamp which appears to read June 21, 1991.
Ms. Haus testified that insurance accounts at Allstate are handled on a computer system, which identifies delinquent accounts and automatically initiates the cancellation process. The computer-generated cancellation notice is processed by employees in Allstate's mail room, and then sent by courier (together with the registration receipt) to the post office. The post office date-stamps the receipt. Ms. Haus indicated, and it was not disputed, that the faint date stamp which appears to read June 21, 1991 is a post office stamp. However Ms. Haus did not know which post office had stamped the document.
Ms. Haus confirmed that the registered cancellation notice was never delivered to Mr. Chapman, and was returned to Allstate by the post office on August 6, 1991, as unclaimed mail.
Mr. Jake Miller, a Canada Post customer relations officer, testified that the faint stamp on Exhibit 3 appears to be a Post Office stamp, but he was not able to identify the postal station or unit it came from, due to the faintness of the mark.
Mr. Miller explained how the post office would deal with a registered letter from Markham, to Brampton. He testified that from Markham, items of registered mail would be sent to the Toronto south central post office plant (on Eastern Avenue) for processing. Registered items would be transferred from the south central plant to the Gateway plant in Mississauga. Two or three business days later, a registered letter for Mr. Chapman would arrive at the Brampton postal station, a registration clerk would perform the required paperwork, and a postal carrier would then receive the item and attempt to deliver it at the address indicated. If the addressee was not available to receive the item, it would be returned to the Brampton station and sent to the nearest local outlet. The addressee would receive a 'call for' card the next day, advising him that he should pick up the item within fifteen days.
Five days after, a second card would be issued, giving the customer ten more days to pick up the item.
If it was not claimed within the time specified, the item would be returned to its sender.
Mr. Miller indicated that although in the normal course a letter would arrive at the Brampton Post Office two or three days after being sent from Markham, on some occasions mail is lost by the post office, or fails to reach its designated destination on schedule.
Findings:
Allstate claims that it effectively terminated Mr. Chapman's policy of insurance before the accident, in accordance with the legislation.
The Insurance Act sets out the statutory terms of an auto insurance policy, and specifies, at section 234, how such a policy may be terminated. The relevant provisions of section 234 state:
12.-(1) This contract may be terminated,
(a) by the insurer giving to the insured fifteen days' notice of termination by registered mail or five days' written notice of termination personally delivered;
12.-(5) The fifteen days mentioned in clause (1)(a) of this condition commences to run on the day following the receipt of the registered letter at the post office to which it is addressed.
- Any written notice to the insurer may be delivered at, or sent by registered mail to, the chief agency, or head office of the insurer in the Province. Written notice may be given to the insured named in this contract by letter personally delivered to the insured or by registered mail addressed to the insured at the insured's latest post office address as notified to the insurer. In this condition, the expression "registered" means registered in or outside Canada.
Allstate relies on case law which confirms that a cancellation notice need not be actually received by the person concerned to be effective, so long as the notice was "received at the post office to which it was addressed" at the relevant time. In the present case, it claims that the registered letter was received by the post office to which it was addressed in time for the required fifteen day notice period to expire well before the date of the accident.
Wellington submits that Allstate has the onus of proving that the policy was cancelled, in accordance with the legislation, before the date of the accident. It submits that I must find that the policy continues to be in force if Allstate fails to discharge this onus.
In my view, the termination provisions in the Insurance Act were enacted primarily for the benefit and protection of the two parties privy to the contract of automobile insurance. They were not necessarily enacted for the benefit of third party insurers.
Insureds are to be protected from termination without due notice, but insurers are also provided with a mechanism for termination which is not overly cumbersome or impractical. In Lumbermen's Mutual Casualty Co v. Stone, (1955) 1955 CanLII 55 (SCC), 4 D.L.R. 167 (S.C.C.), Justice Rand pointed out (at p. 168) that 'ordinarily a notice terminating a contract must be brought home to the other contracting party'. He further observed that:
The reluctance of courts to give other than the strictest interpretation to such terms arises from the fact that a failure of actual notice misleads the insured; he relies upon the continuance of the contract.
However, Justice Rand also found that insurers had "a substantial interest" in the termination provisions. He noted that in some cases an insured
... could, by being absent from his place of abode, compel the maintenance of a risk which the insurer seeks to end; and it is to meet such a situation that the clause is provided.(emphasis added)
In the Lumbermen's case, it was found that the insurance contract was effectively cancelled by sending notice by registered mail, as required by the statute, even though such notice was never personally received by the insured.
Wellington relies on the case of Smart et al. v. Miller et al.; Allstate Insurance Company of Canada (third party), (1988) 1988 CanLII 10387 (ON HCJ), 31 C.C.L.I. 175. In that case, the court was asked to determine whether the defendant's insurance policy had been terminated at the time of the accident. Ms. Miller, the defendant, had moved and a renewal notice was forwarded to her at her new address. She sent a cheque which was not received by the Insurer. The Insurer subsequently sent her a notice of termination addressed to her old address. This notice was not delivered to Ms. Miller and was returned to the Insurer.
The accident in Smart occurred only eighteen days after the Insured's notice of termination was sent out. Although the court had evidence about when the notice was sent, it had no evidence when the notice was received at the "post office to which it is addressed". It was not possible to infer from the passage of time, in that case, that the notice must have reached the designated post office early enough to permit the required fifteen days' notice prior to the date of the accident.
In Smart it was held that the defendant had the onus of establishing that the insurance policy was still in effect, since she was seeking to uphold it. The court found in the defendant's favour, in the absence of any evidence, that the statutory termination conditions had been met by the Insurer. The Insurer based its case solely on the effectiveness of its termination notice, and the court held that there was no evidence of effective termination before the date of the accident.
I have carefully considered the reasoning in Smart but find that it is not directly applicable in the present case. Smart concerned a dispute between an Insurer and its insured, in a case where the insured reasonably believed that her policy was in effect and the Insurer failed to provide evidence of effective termination.
In the present case, neither of the parties privy to the contract of insurance seeks to assert its existence. Mr. Chapman had no belief that the policy was in effect. On the contrary, he reasonably believed he had no insurance, as he had not paid his premiums. Both parties to the contract considered that it was effectively terminated.
Here, the dispute is not between the Insurer and its (former) insured, but between two insurers. I find that Allstate does not bear the onus of proving effective termination. I find that the onus is on Wellington to prove that the contract was not terminated pursuant to the statutory requirements. As in the Smart case, the onus must be borne by the party seeking to assert the continued existence of the contract.
I find that Wellington has failed to discharge that onus. The evidence strongly suggests that the termination notice itself was registered on June 21, 1991. I find, on the balance of probabilities, that the faint stamp distinguishable on the registration receipt is a post office stamp, confirming registration on the date indicated -- i.e. June 21, 1991.
June 21, 1991, was a Friday. The evidence of Mr. Miller, the post office representative, is that in most instances registered mail is received at the post office to which it is addressed two or three business days after the date of registration. Allowing two or three business days for delivery, the registered letter would have arrived at the Brampton post office on June 25, or 26, 1991. According to the legislation, the fifteen days' required notice would start to run "on the day following the receipt of the registered letter at the post office to which it is addressed" -- i.e. here, June 27, 1991. By my calculations, therefore, the fifteen days would have expired on July 11, 1991 -- well before the accident date of July 23, 1991. Even allowing an extra week for irregularities in postal service, the contract would have been terminated before the date of the accident.
Wellington's representative suggested, in oral submissions, that postal interruptions occurred in the summer of 1991, or that the registered letter might not have arrived at its destination in accordance with the expected time frames, in the ordinary course. Wellington brought no evidence to prove the alleged postal interruptions, or to otherwise show that it was more likely than not that the registered letter failed to arrive at the post office to which it was addressed in the ordinary course. On the balance of probabilities, I am satisfied that the post office handled the registered letter pursuant to its normal procedures.
Accordingly, I conclude that in this case, Wellington has failed to prove that the statutory conditions for termination were not complied with. I find that Allstate's contract of insurance with Mr. Chapman was validly terminated before the date of the accident. Accordingly, Wellington is required to provide statutory benefits to the applicants in this case.
Order:
Wellington is responsible for the payment of statutory accident benefits to Ashley and Alissa Chapman.
Frederika Rotter Senior Arbitrator
Date