Neutral Citation: 1995 ONICDRG 68
File No. A-006901
ONTARIO INSURANCE COMMISSION
BETWEEN:
SADEGH MOVAHEDI
Applicant
and
STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY
Insurer
File No. A-008245
AND:
SADEGH MOVAHEDI
Applicant
and
ROYAL INSURANCE COMPANY OF CANADA
Insurer
DECISION
BACKGROUND:
The Applicant, Sadegh Movahedi, was injured in a motor vehicle accident on February 26, 1993, while driving a taxi. He applied to Royal Insurance Company ("Royal"), the insurer of the taxi involved in the accident, for statutory accident benefits, payable under Ontario Regulation 6721. Royal denied the claim and referred Mr. Movahedi to State Farm Mutual Automobile Insurance Company ("State Farm"), the insurer of his personal automobile.
State Farm paid Mr. Movahedi accident benefits from March 5, 1993 to September 3, 1993, when they were discontinued on the basis that Mr. Movahedi no longer suffered a substantial inability to perform the essential tasks of his pre-accident employment.
State Farm also claimed that Royal is the insurer liable to pay Mr. Movahedi's statutory accident benefits, and sought reimbursement of accident benefits it paid to Mr. Movahedi from Royal. Royal disputed liability as well as some of the payments made to Mr. Movahedi by State Farm.
The parties were unable to resolve their disputes through mediation and the Applicant applied for arbitration under the Insurance Act, R.S.O. 1990, c.I.8, as amended.
A pre-arbitration discussion was held in this case on May 31, 1994. It was agreed that the dispute between Mr. Movahedi and the insurer ultimately liable to pay his benefits relates to Mr. Movahedi's entitlement to weekly income benefits after September 3, 1993, the amount of his weekly income benefit and his entitlement to ongoing supplementary medical and rehabilitation benefits.
The parties initially agreed to deal with the preliminary issue of "which insurer?" at a separate hearing, and a date for the hearing was set for September 15, 1994. Subsequent to the conclusion of the pre-hearing, the parties indicated that they preferred to deal with all of the issues arising in this case together, at the same hearing. A new hearing date was set.
The first day of the hearing was held before me, Asfaw Seife, arbitrator, on January 16, 1995, in North York, Ontario.
Present at the Hearing:
Applicant:
Mr. Movahedi
Applicant's Representative:
Mr. Michael Henry Barrister and Solicitor
Insurer's Mr. Representative:
Wayne Edwards Barrister and Solicitor
The proceedings were recorded by Steven Vanalstyne, from Legal Transcript Services. Mr. Jalleh Kermansahahi interpreted in the Farsi language.
At the commencement of the hearing, the parties requested that the preliminary issue of "which insurer?" be heard and decided first.
I heard testimony from Mr. Movahedi, and submissions regarding the preliminary issue from counsel for the two insurers. Written submissions were filed. I reserved my decision and adjourned the hearing on the substantive issues until June 22, 1995.
The preliminary issue in this case is:
Which insurer, State Farm or Royal, is liable to pay any statutory accident benefits to which Mr. Movahedi may be entitled?
Result:
State Farm is liable to pay any statutory accident benefits to which Mr. Movahedi may be entitled.
Facts not in Dispute:
I found no substantial dispute between the two insurers regarding the following material facts in this case.
Mr. Movahedi was involved in a motor vehicle accident on February 26, 1993. At the time of the accident, Mr. Movahedi was driving a taxi-cab, with a fare-paying customer in the taxi.
The taxi-cab was owned by a Mr. Kami Salehi, who is named on the fleet policy for Diamond Taxi, issued by Royal. Mr. Movahedi was not named in this policy.
At the time of the accident, Mr. Movahedi owned a personal motor vehicle, a 1981 Honda Civic, and he was named on a policy of motor vehicle insurance with respect to that vehicle, issued by State Farm.
Mr. Movahedi purchased insurance from State Farm for his personal automobile before he started driving the taxi insured by Royal.
The Law:
The priority rules for statutory accident benefits are set out in section 268(2) of the Insurance Act, which provides, in part:
268.- (2) The following rules apply for determining who is liable to pay no-fault benefits:
- In respect of an occupant of an automobile,
i. the occupant has recourse against the insurer of an automobile in respect of which the occupant is an insured,
ii. if recovery is unavailable under subparagraph i, the occupant has recourse against the insurer of the automobile in which he or she was an occupant,
Subsection 268(4) of the Insurance Act provides that in certain circumstances, an insured person who has recourse against more than one insurer may choose from which insurer to claim benefits. This is qualified by subsection 268(5), which provides that an insured person who is a named insured under a policy must claim benefits against the insurer under that policy and cannot exercise the choice provided in subsection 268(4).
Is Mr. Movahedi an "Insured" Under State Farm's Policy:
Royal takes the position that although Mr. Movahedi is an "insured" in both its policy and the one issued by State Farm, he is a "named insured" only in the State Farm policy. According to the priority rules under section 268(5) of the Act, therefore, his recourse is against State Farm only.
State Farm admits that Mr. Movahedi is "named" in its policy; however, it takes the position that it is not the insurer of an automobile in respect of which Mr. Movahedi is an "insured". It argues that Mr. Movahedi is not an "insured" under its policy, and consequently, he has no recourse against State Farm. State Farm maintains that Mr. Movahedi's recourse is against Royal, pursuant to section 268(2)(1)(ii) of the Act.
Therefore, before proceeding to consider whether Mr. Movahedi is a "named insured" under either policy, I must determine whether he is an "insured" in respect of the policy issued by State Farm.
Section 224(1) of the Insurance Act states:
"insured" means a person insured by a contract whether named or not and includes every person who is entitled to statutory accident benefits under the contract whether or not described therein as an insured person; [emphasis added]
As I understand it, State Farm's argument is that Mr. Movahedi does not meet the above-stated definition of "insured", because he is not an "insured person", or someone who is entitled to statutory accident benefits under the policy issued by State Farm.
Royal has made no submissions with regard to State Farm's policy-based argument that Mr. Movahedi is not an "insured" in the State Farm policy.
State Farm's argument, as I understand it, is as follows:
In the circumstances of this case, since Mr. Movahedi was not an occupant of the automobile described in State Farm's policy, the only definition of an "insured person" in section 2.2.3 of the policy that could possibly apply to Mr. Movahedi is the one in section 2.2.3(c): "the named insured, his or her spouse and any dependant of either of them while the occupant of any other automobile".
Part E (General Provisions, Definitions and Exclusions) of O.P.F. 1 provides a definition of "the automobile", as it applies to Part B (Accident Benefits) of the policy. This definition includes the automobile described in the policy and any other automobile, "...provided that the other automobile is not used for carrying passengers for compensation or hire or for commercial delivery at the time of the loss";
The taxi-cab which Mr. Movahedi was driving at the time of the accident is not "any other automobile", within the meaning of the term in the policy; therefore, Mr. Movahedi was not "an occupant of any other automobile", consequently he fails to meet the definition of "insured person" under section 2.2.3 (c) of the policy.
Section 5.12(c), Part E, provides that the insurer shall not be liable under the policy while "the automobile is used as a taxicab...". Mr. Movahedi was involved in an accident while operating a taxi-cab as a taxi-cab, therefore, he is not entitled to statutory accident benefits under the terms of that policy.
Since Mr. Movahedi is not an insured person or someone entitled to statutory accident benefits under the State Farm policy, the definition of "insured" in section 224(1) of the Act does not bring him within the coverage of the State Farm policy.
I do not agree with State Farm's argument.
The relevant parts of section 5.2.2 of the policy state as follows:
"the automobile", except where otherwise stated, means: for purposes of Parts A (Third Part Liability), B (Accident Benefits), C (Loss of or Damage to Insured Automobile) and D (Uninsured Automobile Coverage):
(i) the DESCRIBED AUTOMOBILE: an automobile or trailer described in this Policy;
(iv) any OTHER AUTOMOBILE: other than the described automobile, which is of a gross vehicle weight of 4, 500 kilograms or less, while personally driven by the insured or by his or her spouse if residing in the same dwelling premises as the insured, provided that
(f) the other automobile is not used for carrying passengers for compensation or hire or for commercial delivery at the time of the loss.
In my view, the words "any other automobile" in section 5.2.2 of the policy are used for the purposes of extending the definition of "the automobile" to certain automobiles other than the one described in the policy. However, as used in the definition of "insured person" in section 2.2.3(c), they must be read in their common and ordinary sense.
The words "any other automobile" are also found in section 2 of the Schedule, which defines "insured person":
"insured person", in respect of a particular motor vehicle liability policy, means,
(a) in respect of accidents in Ontario, an occupant of the insured automobile,
(c) the named insured, his or her spouse and any dependant of either of them while the occupant of any other automobile.
It should be noted that "insured person" is defined in identical language under section 2.2.3(c) of the policy and section 2(c) of the Schedule.
If one accepts State Farm's argument, in order for Mr. Movahedi, his spouse or any of their dependants to be an "insured person" under its policy, it is not sufficient that they be "the occupant of any other automobile"; they must also be personally driving the other automobile. This is a stricter requirement than that provided in section 2.2.3 of the policy. For example, if Mr. Movahedi and his family are injured in an accident while passengers in a friend's personal automobile on the way to a family picnic, according to State Farm, they would not qualify as insured persons under State Farm's policy for accident benefits because they were not "personally driving" this automobile.
The Ontario Automobile Policy - Form 1 (O.P.F. 1) is a standard form containing insuring agreements and provisions approved by the Commissioner under section 227(5) of the Act . It is published as a regulation, for use by insurers in general. Section 227(5) of the Act stipulates that the contents of the standard form must be in conformity with Part VI (Automobile Insurance) of the Act.
Section 268(1) of the Insurance Act provides that every contract evidenced by a motor vehicle liability insurance policy shall provide for the statutory accident benefits as set out in the Schedule, subject to the terms, conditions, provisions, exclusions and limits set out in that Schedule.
It is clear therefore that any terms, conditions, provisions, exclusions, and limits set out in the standard policy with regard to statutory accident benefits must be consistent with those set out in the Act and the Schedule.
This means that in the event of an inconsistency between the provisions of the policy and those of the Act or the Schedule pertaining to statutory accident benefits, the provisions of the Act and the Schedule must prevail.
"Any other automobile" is not defined in the Schedule. In my view, the words "any other automobile" in both the policy and the Schedule must be read in their entire context, in their plain and ordinary sense and must be understood to refer to any motor vehicle other than "the automobile" (under the policy) or the "insured automobile", (under the Schedule).
Considering the structure and wording of the definitions of "insured" in the Act, and "insured person" in the Schedule and the policy, and given the relationship described above between the Act, the Schedule, and standard policy, I find a named insured who is involved in an accident while an occupant of any automobile, is an "insured" under the particular policy in which he/she is a named insured.
With regard to State Farm's argument under section 5.12(c) of the policy that it is not liable "while the automobile is used as a taxicab", I do not agree that the taxi-cab which Mr. Movahedi was driving at the time of the accident qualifies as "the automobile", as the term is defined in the policy.
The definition of "the automobile", excludes the taxi in the facts of this case. Accordingly, the "EXCLUDED USES" of "the automobile" under section 5.12(c) can only refer to Mr. Movahedi's personal automobile insured by State Farm.
Does this mean that if Mr. Movahedi was injured while he was operating his own personal automobile as a taxi-cab he would be excluded from claiming statutory accident benefits from State Farm? My answer is no.
As stated above, section 268(1) of the Act stipulates that statutory accident benefits required to be provided in an automobile policy are subject to the terms, conditions, provisions, exclusions and limits set out in the Schedule. The provisions in the policy that exclude an insured person from entitlement to statutory accident benefits are set out under sections 2.40, 2.41 and 2.42. These provisions, which are identical to those under section 17 of the Schedule, do not exclude an insured person from entitlement to statutory accident benefits because the accident occurred while he/she was driving an automobile not covered under the policy in question. There is no provision in the Schedule equivalent to that found in section 5.12(c) of the policy.
It appears to me that the likely source of section 5.12(c) of the policy is section 250(1)(c) of the Act which states:
250.-(1) The insurer may provide under a contract evidenced by a motor vehicle liability policy, in one or more of the following cases, that, except as provided in the Statutory Accident Benefits Schedule, it shall not be liable while,
(c) the automobile is used as a taxicab, public omnibus, livery, jitney, or sightseeing conveyance or for carrying passengers for compensation or hire.
[emphasis added].
Section 5.12(c) of the policy is different from the above only in one respect. It does not incorporate the exception in 250(1)(c) of the Act. The standard policy is subsidiary to the provisions of the Act. In my view, the drafters of the policy could not have intended to override the provisions of the Act by providing for exclusions from entitlement to statutory accident benefits that are not sanctioned under the Act or the Schedule.
Accordingly, I find that section 5.12(c) is not applicable in the circumstances of this case. For all the above reasons, I find that Mr. Movahedi is a person described as an "insured" person and entitled to statutory accident benefits under both the State Farm and Royal policies.
Is Mr. Movahedi a "Named Insured" in the Royal Policy?
Section 3(1) of the Schedule provides:
If the insured automobile is made available for the regular use of an individual, whether or not a resident of Ontario, by a corporation, unincorporated association, partnership, sole proprietorship or other entity or is rented to an individual who is a resident of Ontario, this Schedule applies to the individual and his or her spouse and their dependants as if the individual were a named insured.
State Farm contends that section 3(1) of the Schedule applies to Mr. Movahedi and gives him the status of a "named insured". In support of its argument, State Farm cited the arbitration decision in the case of Dorothy Sittler and Canadian General Insurance Company and Pilot Insurance Company, December 3, 1993, OIC File Nos. A-000951 and A-004495.
There appears to be no dispute between the parties that the taxi-cab was "rented" to Mr. Movahedi or "made available" for his "regular use", so as to bring him within section 3(1) of the Schedule. However, Royal takes the position that this does not make Mr. Movahedi a "named insured" under its policy. Royal contends that while section 3(1) gives Mr. Movahedi the status of a named insured for the purposes of statutory accident benefits, it does not extend the definition of "named insured" for the purpose of determining priority under section 268 of the Act. Royal cited Axa Home Insurance Company and Western Assurance Company, Ontario Court General Division, unreported decision, dated February 16, 1994.
It is clear that the person or entity with whom the contract of insurance has been made is a "named insured". In this case, Mr. Movahedi is a named insured under the State Farm policy. However, the status and meaning of "as if a named insured" is less clear. This question was addressed directly in the two cases cited above and the decision Brian C. Portch and Markel Insurance Company of Canada and Royal Insurance Company of Canada, March 20, 1995, OIC File Nos. A-007701 and A-008360, issued by Arbitrator David Draper subsequent to the conclusion of this case. This decision was brought to the attention of both insurers who were invited to make written submissions. All of the cases deal with similar fact situations.
In Sittler, the applicant was injured while driving a taxi-cab owned by another individual and insured under an automobile policy issued by Canadian General Insurance Company, listing the owner as the named insured. Mrs. Sittler's name was not listed on that policy. Mrs. Sittler owned a personal vehicle that was insured under a policy with Pilot Insurance. She was named on that policy.
The issue in Sittler was whether Mrs. Sittler, who the arbitrator found was "as if a named insured" in the policy issued by Canadian General Insurance, had the option of claiming accident benefits from Canadian General under section 268(5) of the Act, as a "named insured". Arbitrator Nancy Makepeace considered the expectations of the parties and the fact that it was Canadian General - not Pilot - that assessed the risk involved in Mrs. Sittler driving the taxi-cab, and concluded:
I find that subsection 3(1) of the Schedule creates a new class of insureds, who are "as if a named insured". The provision gives these individuals the same rights as a named insured for purposes of no-fault benefits. These rights include the right, under subsection 268(5) of the Act, to elect from which insurer to claim benefits, if the insured person is named (or "as if named") under more than one policy.
After the Sittler decision was issued, Mr. Justice Roberts of the Ontario Court General Division, released his reasons for judgment in the AXA Home case. In that case, AXA Home had issued an automobile policy to Rotex Electrical Limited for a pick-up truck. Rotex owned the truck, but made it available for the regular use of Mr. Lazaridis. Mr. Lazaridis had his own automobile insurance policy with Western Assurance for his personal vehicles. He was the named insured under this policy.
Mr. Lazaridis was injured while driving the Rotex truck. Mr. Justice Roberts found that Mr. Lazaridis was "an insured" under both policies. It was admitted that he was a "named insured" under the Western Assurance policy. The issue was whether he could claim accident benefits from AXA as a named insured by virtue of section 3(1) of the Schedule. Mr. Justice Roberts concluded that Mr. Lazaridis must apply to Western Assurance for accident benefits:
I find that Section 3(1) deals solely with the identification of persons covered by the no-fault provisions. It does not extend the definition of "named insured" for any other purposes and, in particular, does not extend the definition of "named insured" under Section 268(5) to include those persons eligible for no-fault benefits as defined in Section 3(1).
I specifically find that the attempt [in Sittler] to extend the definition of named insured in the above manner by the Ontario Insurance Commission was incorrect in law.
In Portch, having found that the applicant was a "named insured" under the policy issued by Royal, and "as if a named insured" under the Markel Insurance policy, Arbitrator Draper had to decide whether he was also a "named insured" in the Markel policy, for the purposes of section 268(2) of the Act. He preferred the approach taken in Axa Home Insurance and concluded that the applicant was not a "named insured" under the Markel policy.
Arbitrator Draper found that section 3(1) creates a category of "as if a named insured" for purposes of entitlement to accident benefits, and that it does not extend the meaning of "named insured" in section 268(5) of the Act.
He stated:
The priorities determination is separate from the issue of entitlement to accident benefits. Section 268(2) of the Insurance Act sets out the rules for determining which insurer is responsible for paying accident benefits. The provisions of the Schedule are relevant, but only for specific purposes. The definition of "insured" in section 229 [sic] of the Act requires reference to entitlement under the Schedule. In addition, section 268(5) of the Act incorporates the definitions of "spouse" and "dependant" from the Schedule. "Named insured" is not defined, and nothing in section 268 suggests that its meaning depends upon the Schedule.
State Farm submitted that the decision in Portch should not be followed. It argued that in providing coverage to a customer, an insurer must be able to properly assess the risk involved, and that, in this case, when Mr. Movahedi purchased insurance from State Farm for his personal vehicle, State Farm was not insuring him as a taxi driver, nor did it have any knowledge that at some future time he would be so employed.
State Farm's argument is essentially the same as that raised by Canadian General Insurance in the Sittler case and accepted by Arbitrator Makepeace.
I have some sympathy for the position that the company which insures the risk and collects the premium should pay the benefits. However, as stated in Portch, the result that the personal automobile insurer pays benefits related to injuries arising out of the use of a commercial vehicle that was covered by a commercial policy is consistent with the principle that the injured person must first look to his own insurer for accident benefits.
As stated in several arbitration decisions, the introduction of statutory accident benefits has introduced a fundamental change in insurance coverage. Traditionally automobile insurance policies followed the insured vehicle, and indemnified the owner of the vehicle against liability arising out of the use or operation of the vehicle. The principle behind the statutory accident benefits scheme is that the coverage follows the insured person who looks first to his or her own insurance company, whether or not his or her vehicle is the one involved in the accident.
In my view, the interpretation given to section 3(1) of the Schedule in AXA Home and Portch is more consistent with this principle than that pronounced in the Sittler case. Accordingly, I find that section 3(1) of the Schedule does not extend the definition of named insured for the purposes of determining priority of insurers under section 268(5) of the Act.
This conclusion is supported by the wording of section 270 of the Act, which states:
Any person insured by but not named in a contract to which section 265 or 268 applies may recover under the contract in the same manner and to the same extent as if named therein as the insured, and for that purpose shall be deemed to be a party to the contract and to have given consideration therefor. [emphasis added]
Accordingly, I find that Mr. Movahedi is not a named insured in the Royal policy for the purposes of section 268(5) of the Act. State Farm is liable to pay any statutory accident benefits to which Mr. Movahedi may be entitled under the Schedule.
June 13, 1995
Asfaw Seife Arbitrator
Date