Neutral Citation: 1995 ONICDRG 137
P-001347
OFFICE OF THE DIRECTOR OF ARBITRATIONS
BETWEEN:
BRUCE and ELEANOR MCDONALD
Insured Persons (Respondents)
and
STATE FARM INSURANCE COMPANIES
Insurer (Appellant)
Before:
Elisabeth Sachs
Counsel:
James M. Flaherty (for the insurer, Appellant)
G.K. Selzer, Q.C. (for the insured persons, Respondents)
APPEAL DECISION
I. NATURE OF PROCEEDINGS
By Notice of Appeal filed April 6, 1993, State Farm Insurance Companies (the appellant) appeals from the decision of Arbitrator David Draper, dated March 11, 1993 which determined the three surviving children of Bruce and Eleanor McDonald (the respondents) are each entitled to a payment of $10,000 under s.11(1)(c) of Ontario Regulation 6721 in respect of the death of Eleanor McDonald. Further, in its Reply to the Response filed, the appellant asked the Director to state a case in writing for the opinion of the Divisional Court (now Ontario Court (General Division)) under s.285(1) of the Insurance Act, R.S.O. 1990, c.I-8 (the Act) on the question of law raised by it in this appeal.
In the Response, it is noted the arbitrator did not order a special award under s.282(10) of the Act and the Director is requested to apply s.283(7) and make the order on appeal, on the basis that the appellant unreasonably withheld payment of the disputed benefit in the face of an allegedly unambiguous provision of the Schedule and as a general deterrent to the bringing of similar appeals by insurers.
After receiving written argument from both parties, I disposed of the request to state a case on the record in written reasons given to the parties. I found there was no extraordinary issue or circumstance in this appeal which compelled me not to exercise the exclusive jurisdiction to determine questions of law in a proceeding conferred on the Director by s.20 of the Act. The appeal proceeded thereafter on written and oral submissions of the parties.
II. ISSUES
The issues raised are:
The interpretation and application of sections 3(2) and 11(1)(c) of the Schedule; and
Whether the Director should order the appellant to pay a special award under s.283(7) of the Act.
III. SUBMISSIONS AND ANALYSIS
1. Interpretation of Schedule
An Agreed Statement of Facts was filed. Bruce and Eleanor McDonald were considered "insured persons" under the terms of a motor vehicle insurance policy with the appellant. While both were employed, Mr. McDonald's income was significantly larger. Immediately prior to the accident, three children, Sarah, Heather and Fran, who were full-time students, lived together with their parents as a family unit. After a tragic motor vehicle accident which caused the death of their parents, the children applied for benefits under s.11 of the Schedule.
The appellant paid benefits in respect of Bruce and Eleanor McDonald under s.11(1)(b) of the Schedule in a total amount of $50,000.00. Each child also received one payment of $10,000.00 under s.11(1)(c). The appellant states this latter payment is the only one to be made on death of both parents in that a person can only be "principally dependent for financial support" on one person at any one time. Given the specific facts of this case, that person was Bruce McDonald. The appellant further states no benefit should be payable under s.11(1)(c) in respect of Eleanor McDonald, as that would create a double indemnity.
The definition of "dependant" in s.11 harkens back to s.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 arbitrator found, using the rules of statutory interpretation, that if the children were principally dependent on either Bruce or Eleanor McDonald for financial support, or on both of them jointly as a single source, then they are dependants of both insured persons and entitled to payment under s. 11(1)(c) for each. The arbitrator further found s.3(2) and s. 11(1)(c) were not ambiguous, and the natural and ordinary result of reading the sections together meant each child was entitled to a further sum of $10,000.00 for the death of their mother.
The appellant argues the starting point for interpretation of the sections is the existence of a dependency relationship, conditioned by the phrase "principally dependent for financial support" found in s.3(2). The appellant relies on the decision Chevrier et. al. v. Zurich Insurance Company (1985) I.L.R. 1-1920 (Ont.C.A.) upholding, without elaboration, the trial judgment wherein Di Salle, J. states:
"Principally dependent has to mean one person, there cannot be more than one principally responsible for someone."
However, in dismissing the plaintiffs action, the trial judge found both the deceased mother and the plaintiff child were welfare recipients so the issue of loss of financial support did not arise. Although the plaintiff was incapable of managing finances on her own (the deceased provided this service), her financial support came from an external source. Her dependancy status was not as a result of being financially dependent on the deceased. The trial judge's statement must be seen as obiter, in that context.
The appellant says the words "principally dependent" mean you are either dependent on one person or you are not. One has to look at the claimant's source of financial support and determine whether it is chiefly, primarily or mainly from the person in respect of whom the benefit under s.11 is claimed. On this analysis, the benefit is payable only in respect of the greater financial provider - that being Bruce McDonald.
Finally, the appellant urges I find the Schedule to be a restrictive code of benefits, relying in part on comments in Steele and Zurich Insurance Company (OIC File No. A-001024, December 3, 1992), and that the interpretation of these sections requires viewing the unique facts of this case from a restricted, rather than an expansive perspective.
The appellant notes that s.3(2), refers to dependency "on the other person, or the other person's spouse". It argues the word "or" creates a choice, that is the principal dependency is "on the other", as a single source, or "on the other's spouse", again as a single source. This interpretation, it is submitted, is reinforced by the Chevrier decision noted above, and the concept of the Schedule as a restrictive benefit structure.
In answer, the respondents' position is that the issue is not whether the dependency relationship is based on someone being "principally dependent for financial support" on a single source or a single person, but rather the key is the dependency as it is found under the Schedule. The respondents distinguish between the definition of a dependant and someone who is the dependant of another because he or she is chiefly dependent on that person for financial support. The respondents argue a child can be a dependant of both parents, as here, even though she may be only "principally dependent for financial support" on the highest income generating parent.
The respondents also argue as the appellant conceded both parents were insured persons under the Schedule and indeed dependant death benefits were paid in respect of Bruce McDonald, the children are still dependants of their mother by virtue of the unambiguous wording of s.3(2).
To illustrate the meaning, the respondents say it is necessary only to insert the name of a child in the section. Once done, there are four interpretations possible. These are that the children are "principally dependent for financial support" on:
(a) their father; or
(b) on their mother; or
(c) on both their mother and father as a single source; or
(d) some other source.
In his decision, the arbitrator adopted this approach. By inserting the name of a child as well as the names of the parents in s.3(2), the following was obtained:
"For the purposes of this Schedule, Sarah is a dependant of Eleanor McDonald, if Sarah is principally dependent for financial support on Eleanor McDonald, or Bruce McDonald."
As a practical application, this methodolgy makes sense and does not offend any rule of statutory construction. Which of the parents is the larger financial provider becomes irrelevant when considering whether these children are the dependants of their mother, because of the wording of the section. The entitlement to the benefit exists in respect of both parents because the children were either principally dependent for financial support on their father, or their mother, or both of them. As a result, the payment under s. 11(1)(c) follows in respect of both parents.
Finally, the respondents say the Schedule is remedial legislation which is to be broadly and liberally interpreted in a manner that best achieves the intent of the legislation, in accordance with the rules of statutory interpretation. Simply saying the Schedule is a "restrictive code" doesn't answer the question of whether a person is entitled to more than one payment under s.11. I agree. While the Schedule does not compensate for all situations arising from a motor vehicle accident, as I stated in Morin and The Personal Insurance Company of Canada (OIC File No. P-000468), it is not to be read as limiting an otherwise obvious result which is not contrary to the spirit and intent of the legislation.
The context of this appeal is unusual. Only one other case was cited by counsel in which spouses, the parents of the plaintiff, were both killed in a motor vehicle accident. In Martins v. Gibraltor General Insurance Co. (1984), 1984 CanLII 5962 (ON HCJ), 6 C.C.L.I. 226 (Ont.Co.Ct.), the main factual and legal issue was whether the plaintiff was principally dependent for financial support on one or both of his parents. The court held the plaintiff was a dependant of both his late father and mother, and as such was entitled to be paid the death benefit under the then "Schedule C". A very restrictive meaning of "dependant" applied - the plaintiff had to be a relative of the head of the household, or of the spouse of the head of the household; residing in the same dwelling premises; and principally dependent upon the head of the household, or the spouse of the head of the household, for financial support. The Court found the plaintiff was a dependant of both his father and his mother at the date of the accident. The Court accepted the dependency with respect to both parents, not just one of them, where the financial aspect of the relationship was indeed primarily or chiefly with one of them.
In my view, nothing in the wording of s.3(2) suggests that a dependant is excluded from qualifying as a dependant of the spouse of the person on whom he or she is principally dependent for financial support. There is no provision which says a person who is entitled as a dependant of the person on whom they are principally dependent for financial support, cannot also claim the dependant benefit as a result of the death of that person's spouse. It does not necessarily follow a "double indemnity" is being created where the Schedule is compensating for the loss of an insured person by providing that the benefit will be paid to each of the insured person's surviving dependants as long as a dependancy relationship existed at the time of the accident. Inserting the claimants' and insured persons' names in the section shows the payment is for the loss of each of the person, and the person's spouse, in the limited circumstances presented by the facts found here. This result conforms to the natural and ordinary meaning of the sections, is in accord with the remedial nature of the Schedule and not repugnant to principles of statutory interpretation. Accordingly, the appeal on this issue fails.
2. Special Award
The respondents ask that I order a special award against the appellant for the allegedly unreasonable refusal to pay the disputed benefit. The respondents argue the unreasonableness is demonstrated in the appellant's acceptance of both deceased persons as "insured" and payment of $50,000.00 under s.11(1)(b) in respect of both parents, coupled with a subsequent refusal to pay the benefits for both under s. 11(1)(c), when the same word "dependant" appears throughout.
For its part, the appellant points out the arbitration on this issue was a matter of first instance and based on a real disagreement about statutory interpretation of a section on which there was an almost complete absence of caselaw. The appellant points out the dispute itself was reasonable, and the question is not whether a payment was being "unreasonably" withheld but rather whether payment over which a legitimate dispute on a novel point of interpretation existed should be made at all. The appellant further points out the respondents' allegation that they have been put to time and expense in pursuing the arbitration and defending the appeal can be adequately dealt with in a consideration of expenses.
Neither party, it seems to me, addressed the fundamental issue which is whether the Director should interfere in the exercise of an arbitrator's discretion in applying s.282(10) of the Act to the case before him or her.
The Act provides an arbitrator shall make a special award if he or she finds, as a first step, that an insurer has "unreasonably" withheld or delayed payments. A finding of unreasonableness can only be made having regard to the specific facts of each case, based on the objective evidence properly before the arbitrator, as well as assessments of credibility, the nature of the parties' conduct toward each other and any other relevant circumstances surrounding the dispute. The arbitrator must then exercise his or her discretion and come to a conclusion as to whether the insurer's conduct is unreasonable in that instance. From the vantage point of an appeal, to interfere in that process, I must conclude the arbitrator misdirected himself, or fundamentally misconstrued the nature of the case before him. At page 10, the arbitrator says:
"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...no court decision was provided to me which clearly determined the issue."
He also noted all other payments were made promptly and that the appellant at an early stage, and consistently, asserted a position which was not based on any frivolous or irresponsible application of the Schedule. The arbitrator correctly, in my view, applied the facts he found to s.282(10) of the Act. Accordingly, I am not prepared to disturb the ruling denying a special award to the respondents.
IV. ORDER
The decision of Arbitrator Draper dated March 11, 1993 is hereby confirmed.
The respondents are entitled to their expenses of this appeal to be assessed, if so required, by written application to the Office of the Registrar.
September 29, 1995
Elisabeth Sachs Director of Arbitrations
Date