Neutral Citation: 1995 ONICDRG 95

File No. A-010819 and A-010820

ONTARIO INSURANCE COMMISSION

BETWEEN:

SARAH L. FISHER

Applicant

and

PILOT INSURANCE COMPANY

Insurer

and

SARAH L. FISHER

Applicant

and

STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY

Insurer

DECISION

The Applicant, Sarah L. Fisher, was injured in a motor vehicle accident on December 31, 1993. She applied for and received statutory accident benefits from Pilot Insurance Company and from State Farm Mutual Automobile Insurance Company, payable under Ontario Regulation 672¹. Benefits are being shared equally by both Insurers pending a determination as to which Insurer is liable to respond to Ms. Fisher's claim. 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.

The issue in this hearing is:

Which Insurer is responsible for any Statutory Accident Benefits to which the Applicant is entitled?

The Applicant also claims her expenses incurred in the hearing.

Result:

1. State Farm Mutual Automobile Insurance Company is responsible for any statutory accident benefits to which the Applicant is entitled.

2. The Applicant is entitled to her expenses.

Hearing:

The hearing was held in Kingston, Ontario, on June 20, 1995. The parties made submissions by telephone conference call on June 22, 1994.

Present at the Hearing:

Applicant:

Sarah L. Fisher

Applicant's Representative:

David Fisher

Pilot Insurance Company's Representative:

Grant E. Black Barrister and Solicitor

State Farm's Representative:

Todd McCarthy Barrister and Solicitor

Sarah Fisher was born on December 6, 1975. On the evening of December 31, 1993, when she was 18 years old, Sarah suffered injuries in a motor vehicle accident.

Sarah was driving a vehicle owned by her friend, Dusty Dowdle, and insured by Pilot. Sarah's parents were the named insureds in a policy issued by State Farm. Sarah was listed as a driver in that policy.

Section 268(2)1. of the Insurance Act sets out the rules to be applied for determining which insurer is liable to pay accident benefits. The relevant rules are as follows:

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.

Pilot argues that the State Farm policy provides coverage under sub-paragraph i for two reasons. It says Sarah was insured under the State Farm policy because she was listed in the State Farm policy as a driver. In the alternative, Pilot argues that Sarah was insured under the State Farm policy because she was a dependant of the named insureds (her parents) at the time of the accident. Section 2 of the Schedule defines an "insured person" as including the named insured and any dependant of the named insured.

State Farm argues that Sarah was not insured for accident benefits under the State Farm policy. It argues that the accident benefits coverage did not travel with Sarah while she was an occupant of another vehicle because she was not a named insured under the State Farm policy. State Farm also argues that Sarah was not a dependant of her parents at the time of the accident. Therefore, since accident benefits are not available under section 268(2)1.i, paragraph ii applies and Sarah must seek recourse against Pilot, the insurer of the vehicle of which she was an occupant.

I will first deal with whether the notation of Sarah as a driver in the State Farm policy resulted in her being covered for accident benefits while driving another vehicle. I will then determine whether Sarah was a dependant of her parents at the time of the accident and therefore insured under the State Farm policy.

Notation of Sarah as driver in State Farm policy

The only documentary evidence with respect to the State Farm policy was a State Farm document entitled "Coverage Information". "Vehicle" is described as an "81 Chevrolet Malibu". Under "policyholder name" are the names David and Brenda Fisher. Under "exceptions and endorsements" is typed "Driver Information" followed by four names, David, Brenda, Jay and Sarah Fisher. David and Brenda are the parents of Jay and Sarah. There is no dispute that David and Brenda are the named insureds and that Sarah is not a named insured.

Mr. Fisher testified that he arranged for his two children to be listed as drivers on his policy so that they would be insured while using his vehicle. He did not pay an extra premium for Sarah, although he did pay extra for Jay. He said that he did not learn until after the accident that an insured claims accident benefits from his own insurer.

"Insured" is defined in section 224(1) of the Insurance Act as follows:

"insured" means a person insured by a contract whether named or not and includes every person who is entitled to accident benefits under the contract whether or not described therein as an insured person;

Although there is no privity of contract between an unnamed insured and an insurer, section 270 gives an unnamed insured the right to recover the accident benefits mandated by section 268.

270. 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.

In my view then, under the Act, Sarah is an unnamed insured under the State Farm policy. Although Sarah is "named" in the policy in the sense she is referred to, she is not "named" in the sense of being the named policy holder who entered the contract with the insurer. I therefore refer to her as an "unnamed insured". Pursuant to section 270, as an insured under the State Farm policy, she is entitled to recover accident benefits under that contract to the same extent as if named therein as the insured. On its face then, section 268(2)1.i applies and Sarah's first recourse for accident benefits is against State Farm.

However, the definition of "insured person" in section 2 of the Schedule does not apply to someone, who, as a listed driver, is an unnamed insured under the policy but not an occupant of the vehicle insured by that policy at the time of the accident.

Section 2 of the Schedule defines "insured person" as follows:

"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,

(b) in respect of accidents outside Ontario, a person living and ordinarily present in Ontario who is 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,

(d) any person who is not the occupant of an automobile or of rolling stock that runs on rails who is involved in an accident in Ontario involving the insured automobile,

(e) the named insured, his or her spouse and any dependant of either of them who is not the occupant of an automobile or of rolling stock that runs on rails who is involved in an accident,

(f) the named insured, his or her spouse and any dependant of either of them who is not involved in an accident but who suffers psychological or mental injury as the result of an accident involving a physical injury to his or her spouse, child, grandchild, parent, grandparent, brother or sister or a dependant of the named insured or of his or her spouse.

The use of the word "means" denotes that the definition is closed. If the drafters of section 2 of the Schedule had intended to include an unnamed insured described as a driver in a policy as an "insured person" they would have expressly said so. If the Schedule definition of "insured person" prevails over the definition of "insured" in section 224(1), then Sarah has accident benefit coverage under the State Farm policy only if I determine that Sarah is a dependant of her parents within the meaning of section 2(c) and section 3(2) of the Schedule.

State Farm argues that if I determine that Sarah was an insured under the State Farm policy for the purpose of accident benefits while an occupant of a vehicle other than the one described in the State Farm policy, I would be giving Sarah the status of a named insured, something which is not authorized by the law. Counsel for State Farm referred me to AXA Home Insurance Company v. Western Assurance Company, Ontario Court, February 16, 1994 and Collins v. Wright, 1988 CanLII 10406 (ON HCJ), [1988] I.L.R. 1-2319 (S.C.).

If I accept State Farm's argument, then the word "insured" used in section 268(2)1.i must not include unnamed insureds. However, section 268(5) refers to named insured, and section 224(1) defines "insured" as including both named and unnamed insureds. If the Legislature had intended that "insured" in section 268(2)1.i refer only to named insureds, it would have said so. Clearly, "insured" in that section includes unnamed insureds.

There appears to be an unavoidable conflict in the application of the statutory and regulatory provisions in the case of a person who is listed as a driver and therefore insured under one policy, and who is injured while an occupant of a vehicle insured under another policy. The Act gives the described driver the right of recourse for accident benefits against the insurer of the automobile in which the driver is noted as a driver. The Schedule does not include this unnamed insured in the definition of "insured person" for the purpose of claiming on the policy in which the person is described as a driver. Such an unnamed insured must therefore qualify under the Schedule definition of "insured person" as an occupant of the insured automobile under paragraph (a) or as the spouse or dependant of the named insured under paragraph (c).

Two arbitration decisions refer to the different definitions of "insured" in the Act and "insured person" in the Schedule.

In Cattrysse² the Applicant was described as the principal driver in a policy held by his parents. He was injured while a passenger in a friend's insured motor vehicle and the issue was which insurer should pay accident benefits. Arbitrator Palmer concluded that the applicant was entitled to accident benefits under the policy in which he was described as a principal driver.

She said:

Section 224's definition tells us that "insured" includes people entitled to no-fault benefits under the contract whether or not described therein as an insured person. The definition is expansive. It draws a wider circle than those persons described in section 2 of the Schedule.[Emphasis added by Arbitrator Palmer]

Later she said:

When Westminster Mutual accepted the premium for the 1987 Mustang, it did so knowing that section 268 of the Insurance Act sets out rules for determining which insurer is liable to pay no-fault benefits. The underlying principle of section 268 is that persons insured under contracts of automobile insurance in Ontario will look to the insurer chosen by them for accident benefits should they be so unfortunate to be injured in an accident. To paraphrase the relevant part of the section -- after an accident, an occupant of an automobile looks first to the insurer of an automobile in respect of which he is an insured, that is, his own insurer. [Emphasis added by Arbitrator Palmer]

In Tripone³ the applicant was struck by a motor vehicle while riding his bicycle. He was listed as the principal driver of a vehicle owned by his father. Senior Arbitrator Rotter found that the applicant was an "insured" under his father's policy and therefore entitled to accident benefits under that policy. She said:

I find that the definition of an "insured person", as set out in the Schedule, cannot be considered without reference to the provisions and definitions set out in the Act. A basic principle of statutory interpretation is that subordinate legislation must be construed in the context of and in harmony with the general scope and purpose of the Act.

Further on she said:

The general scheme of the legislation, as set out in section 268, requires that individuals look first to their own carrier of insurance for statutory accident benefits. Section 268 specifically provides that "[every contract evidenced by a motor vehicle liability policy" should provide for the statutory accident benefits set out in the Schedule.

It is a principle of statutory interpretation that in the case of conflict, the statutory provision prevails over the regulatory provision. Accordingly, I find the definition of "insured" in section 224(1) of the Act prevails over the definition of "insured person" in section 2 of the Schedule and Sarah's first right of recourse for accident benefits is against State Farm, the Insurer of the automobile in respect of which she is an unnamed insured.

This conclusion is consistent with arbitration decisions which have held that the intention of the accident benefits legislation is that in a first party system, an insured looks first to his own insurer for coverage.

In Movahedi⁴ Arbitrator Seife said:

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.

The Collins and Axa decisions do not apply to this fact situation because I am not conferring on Sarah the status of named insured or creating a new status of "as if named insured".

As I have found that Sarah was an insured under the State Farm policy and is entitled to accident benefits pursuant to section 268(2)1.i from State Farm, it is unnecessary for me to determine whether Sarah is an insured under the State Farm policy as a dependant of a named insured in that policy. However, since I heard evidence on the issue, I will deal with it.

Is Sarah a dependant?

Section 3(2) of the Schedule provides as follows:

3(2) For the purpose of this Regulation, 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 determination of whether Sarah was principally dependent for financial support on either of her parents is to be made having regard to her actual financial circumstances at the time of the accident (Raffoul⁵). According to Donohue⁶, the examination of the financial circumstances is not to be confined to a "snapshot" of the circumstances at the date of the accident. Each case is to be determined in accordance with its own particular facts.

Sarah Fisher was born on December 6, 1975. At the time of the accident on December 31, 1993, she was 18. On October 14, 1993, two and a half months before the accident, Sarah's father, David Fisher, ordered Sarah out of the family home. Pilot argues that Sarah remained principally dependent for financial support on her parents. State Farm argues that Sarah no longer relied on her parents for financial support. The evidence on Sarah's financial circumstances was uncontroverted except for statements given by Sarah to the Pilot and State Farm insurance adjusters as to where she resided at the time of the accident.

From the age of 14, Sarah and her parents had difficulties. Sarah did not always come home at night and on numerous occasions she stayed away for one or two weeks at a time. Mr. Fisher said that when Sarah was 14 or 15 he ordered her out of the house three or four times. He said most times he knew who she was staying with. On other occasions he advised Family and Children Services that Sarah was "on the street" again. Sarah quit school in grade 10 at the age of 16.

Mr. Fisher paid Sarah an allowance of $30 per week. At times he cut off the allowance when Sarah failed to comply with his rules. Sarah said that she used the allowance for cigarettes, alcohol and entertainment.

Mr. Fisher testified that the order expelling Sarah from the house on October 14, 1993 was different from past orders because he could no longer tolerate Sarah's behaviour. Sarah took a pair of diamond earrings that belonged to her mother and sold them in a bar. Mr. Fisher contacted the police and Sarah was charged with theft over $1,000. Mr. Fisher was particularly concerned because Sarah would not assist the police in getting the earrings back. At her first Court appearance Sarah pleaded guilty to the charge.

On being expelled from the house, Sarah first went to live in the home of a friend, Laurie Rafter, and her parents. Laurie testified that the two of them shared a bedroom and that Sarah lived there about two months. The Rafters said they would charge $20 per week for room and board. Sarah only paid one week and the Rafters never asked for more. Mr. Fisher knew that Sarah was at the Rafters. He did not give Sarah or the Rafters any money.

I heard no evidence of Sarah working prior to October 14, 1993. In November 1993, Sarah started work as a dancer in a striptease club. She worked about eight nights before Laurie persuaded her to leave. Sarah said that she earned $800. She immediately corrected this to $1,300. She then found work at a retail store for four days a week. She quit that job after about four weeks. Her gross employment income from that job was $508. The T-4 form indicates that Sarah's address is that of her parents'. Sarah's mother drove Sarah to the store nearly every day and drove her back to the Rafter's nearly every night. Sarah said that her mother gave her $5 to $20 over this period which she used for lunches.

Laurie told Sarah to leave the Rafter's house shortly after December 6, 1993. Sarah moved some of her clothes to the residence of a new friend, Dusty Dowdle. Dusty testified that in the remaining weeks of December, Sarah stayed more than ten nights with her. Dusty believed that Sarah spent the rest of the time with a male friend. As well as providing accommodation, Dusty loaned Sarah $300. She agreed that Sarah could stay with her past the end of December if Sarah could get welfare and pay rent. To that end, Dusty gave Sarah a receipt marked "$350 for rent for one month", which Sarah submitted in an application for social assistance.

Mr. Fisher said that he hoped Sarah would return home. He said that she would have to change her attitude and either return to school or find employment.

As a result of the injuries she sustained in the accident, Sarah was hospitalized for a number of weeks. Her mother was continually with her for the first five days while she was in intensive care.

While in hospital Sarah gave statements to adjusters from Pilot and State Farm. She told the Pilot adjuster that at the time of the accident, she was living at both her parents' place and Dusty's place. She told the State Farm adjuster that she resided at home with her parents and that she stayed occasionally with Dusty.

Although her parents wanted her to return home, Sarah went to stay with Dusty Dowdle on being released from the hospital. After two days, the two had a violent argument and Sarah left. Sarah then went to a rehabilitation hospital and on being discharged, went to her parents' home.

In March 1994, Sarah was discharged from the rehabilitation hospital. From March 1994 to September 1994, Sarah lived both with her parents and with the parents of her boyfriend.

I do not attach any weight to the statements Sarah gave to the adjusters in the hospital as to where she lived in the months prior to the accident. I accept Sarah's evidence that she told the adjusters that she lived partly at home because she mistakenly thought that she would not have accident benefits coverage if she admitted that she no longer lived with her parents. The other evidence is consistent and clear that she did not live with her parents from October 14, 1993 until she was discharged from the rehabilitation hospital.

I find that at the time of the accident, Sarah was not principally dependent on either of her parents for financial support. There was no indication that she slept in her parents' house in the previous two and a half months. She had two meals there; one on her birthday and one at Christmas. The only financial support from her parents was the rides to work, Christmas and birthday presents and $5 to $20 in lunch money. Otherwise, Sarah supported herself through her own work and the help of friends. Although her parents hoped that she would change her ways and return home, at the time of the accident Sarah was making plans to obtain social assistance so that she could live with Dusty.

Expenses

Mr. Fisher acted as Sarah's agent for the hearing in Kingston and telephone conference. I award the Applicant her expenses of this hearing.

Order

1. State Farm Mutual Automobile Insurance Company is responsible for any Statutory Accident Benefits to which the Applicant is entitled.

2. The Applicant is entitled to her expenses to be shared equally between State Farm and Pilot.

July 17, 1995

William J. Renahan Arbitrator

Date

Footnotes

1. 1Prior to January 1, 1994, Ontario Regulation 672 was called the No-Fault Benefits Schedule. After that date it became the Statutory Accident Benefits Schedule - Accidents Before January 1, 1994. In this decision, the term "Schedule" will be used to refer to Regulation 672.
2. 2D. Cattrysse and Westminster Mutual Fire Insurance Company and Anglo Canada General Insurance Company, June 21, 1993, OIC File Nos. A-001618 and A-001789.
3. 3Dani Tripone and Guardian Insurance Company and Liberty Mutual Fire Insurance Company, May 16, 1994, OIC File No. A-004757.
4. 4Sadegh Movahedi and State Farm Mutual Automobile Insurance Company and Royal Insurance Company of Canada, June 13, 1995, OIC File Nos. A-006901 and A-008245.
5. 5Dianne Raffoul and State Farm Mutual Automobile Insurance Company, September 21, 1994, OIC File No. A-004476.
6. 6Frank Donohue and State Farm Mutual Automobile Insurance Company, August 31, 1994, OIC File No. A-006756.