Ontario Insurance Commission

Commission des assurances de l’Ontario

Neutral Citation: 1996 ONICDRG 116 Appeal P-96-00045A

OFFICE OF THE DIRECTOR OF ARBITRATIONS

ZURICH INSURANCE COMPANY Appellant

and

THUYEN THI LUU Respondent

Before: Elisabeth Sachs

Counsel: Lee Samis (For Zurich Insurance Company) Michael J. Gillen (For Thuyen Thi Luu)

APPEAL ORDER

Under section 283 of the Insurance Act, R.S.O. 1990, c.I.8, as amended, it is ordered that:

The appeal is allowed and the arbitration order of April 15, 1996 is revoked. Ms. Luu is not eligible to receive benefits under the Statutory Accident Benefits Schedule - Accidents on or after January 1, 1994.
Ms Luu is entitled to her expenses of the arbitration.
Ms Luu is entitled to her expenses of the appeal.

July 4, 1996

Elisabeth Sachs Director of Arbitrations

Date

REASONS FOR DECISION

I. NATURE OF APPEAL

Zurich Insurance Company ("Zurich") appeals from an arbitral decision which held that the respondent, Thuyen Thi Luu ("Ms. Luu") is eligible to receive statutory accident benefits under O. Reg 776/93 as amended by O.Reg. 635/94, the Statutory Accident Benefits Schedule - Accidents on or after January 1, 1994 (the Schedule).

The facts are not in dispute. While vacationing in Vietnam, Ontario residents Ms. Luu and her husband Quang Van Nguyen, were involved in a motor vehicle accident on February 23, 1995. Mr. Nguyen was killed, and Ms. Luu injured.

Mr. Nguyen was insured under a standard motor vehicle liability policy issued by Zurich. Ms. Luu applied for statutory accident benefits under the policy, which were denied by Zurich on the basis that the policy applies only to accidents in Canada, the United States, or on a vessel travelling between the ports of those countries.

The issue for the arbitrator was whether the provisions of the Schedule, which are deemed by section 268 of the Insurance Act, R.S.O. 1990, c.I.8, as amended ("the Act") to form part of the standard policy, operated without territorial limitation to apply to an accident in Vietnam. The arbitrator held they did, finding that the principle behind the Schedule was that coverage followed the insured person, regardless of whether his or her own vehicle was involved in the accident or where the accident took place. The arbitrator analysed the words "outside Ontario" where they occur in the Act, and in the Schedule, concluding "nowhere ...is one constrained to any territorial limit". Further, citing Driedger¹ , she acknowledged governments are presumed not to legislate extraterritorially, unless such intent is clearly stated. She found while it is clear the Act was to operate in such a fashion² in several areas, it was not at all clear the Schedule is so circumscribed. There is no definition in the Schedule of the words "outside Ontario", as indeed there is not in the Act. Hence she concluded, after noting the personal accident insurance scheme of the Schedule³ was imperfectly "grafted" onto the existing scheme of motor vehicle liability insurance, no territorial limitation could be found or implied. Accordingly, she held Ms Luu entitled to receive statutory accident benefits pursuant to the Schedule, in respect of the accident which took place in Vietnam.

II. SUBMISSIONS ON APPEAL

A. The Appellant

Zurich argues there is no conflict, real or perceived, between the territorial provisions of the policy and the terms of the Schedule. It argues that the entitlement to statutory accident benefits is determined by the existence of a valid contract of insurance, evidenced by a motor vehicle liability policy, which provides various coverages, including accident benefits.⁴ Once a contract of insurance exits, its terms are deemed to include the benefits set out in the Schedule, subject to the terms, conditions, provisions, exclusions and limits therein. However, Zurich argues those are not the only terms affecting the contract; there are statutory conditions (s. 234 of the Act) and general provisions applying to the whole contract (s. 1.2 of OAP 1). One of the general provisions is a specific territorial limitation, limiting coverage to incidents occuring in Canada, the United States and on vessels travelling between their ports.

Additionally, Zurich submits the terms and conditions of the contract itself are to be set out in forms approved by the Commissioner of Insurance under s. 227 of the Act ( Part VI - Automobile Insurance). Indeed, insurers must use the form so approved, and cannot to vary it. Section 227(2) allows the approval of forms having other terms "even if those terms are inconsistent with, vary, omit or add to any provision or condition of this Part". To the extent that the contract is potentially inconsistent with the Schedule, which Zurich says it is not, the approved contract prevails. Zurich also submits as the Schedule is a regulation made under Part II (General Provisions Applicable to Insurers) of the Act, it is not deemed to be incorporated into Part VI (Automobile Insurance) notwithstanding the wording of s.268.

As well, while several provisions in the contract have restrictions on the scope of coverage from which accident benefits are specifically exempted, the territorial limitation of s.1.2 OAP 1 is not one of them.⁵ The OAP 1 superceded the OPF 1, with similar limiting provisions.

Zurich also argues the Schedule recognizes the primacy of the approved contractual terms to which it applies. Part I - Interpretation, s. 1 states in part:

In this Regulation, ...

"insured person", in respect of a particular motor vehicle liability policy means,

(a) the named insured, any person specified in the policy as a driver,...the spouse of the named insured....if...

(i) involved in an accident...outside of Ontario

(emphasis added).

Zurich says the territorial limit is expressly stated in the contract. It is the "particular motor vehicle liability policy" to which the benefits in the Schedule are deemed to apply. It is thus submitted there is no repugnancy in the coexistence of the standard policy and Schedule.

In any event, Zurich argues that while the arbitrator recognized the principle of statutory construction that the legislature is deemed not to legislate with extraterritorial effect unless a clear intention is shown, she ultimately ignored that rule. She did so by placing a construction on the Schedule which would have it do exactly that, notwithstanding the recognition that the approved contract reflects the true intention of the scheme of coverage for the reasons noted above.

Finally Zurich submits that the issue of a "tradeoff'' of tort rights statutory accident benefits is not an apt analogy as justifying an extra territorial extension to the regulation. Section 267.1 of the Act, in Zurich's view, confirms the intent of the overall scheme. Nothing prevents persons injured in countries not designated in the Schedule, or outside the parameters of the section, in pursuing any tort rights they may have regardless of their connection to Ontario. When enacting s. 267.1, the Legislature must have been aware of s. 268, and they operate harmoniously.

Other arguments were made in the context of public policy but, in my view, are not essential to the decision.

B. The Respondent

Ms. Luu's arguments essentially followed the reasoning adopted by the arbitrator in her decision. Specifically, Ms. Luu argues there is no choice, or no right of contract, in respect of the basic terms and conditions of the standard motor vehicle liability policy. Insurance coverage is mandatory, with insurers offering "the preordained product at a stipulated price, and the customer either buys it from that insurer or another, or does not drive" (Respondent's Factum, para. 5). The "contract" must use the form approved by the Commissioner, who has the authority to extend that insurance by s. 227 (3) of the Act, but not to limit it. The use of s. 227(2) to purport to limit the benefits incorporated into the policy by s. 268(1) would be beyond the powers of the Commissioner and contrary to the provisions contained in that section. It is thus argued that if the contract limits the benefits, terms or conditions of the Schedule which itself contains no such limitation, it is void and of no effect. The "cascading value" of authority governing insurance in Ontario starts with the Act, followed by its regulations, and finally by the Commissioner's approval process under s. 227. That process, as noted above, cannot limit the clear rights found in the Schedule.

Ms. Luu notes there are territorial limitations in the Act and the Schedule. It is submitted that in the Act, these relate to third party liability and damage to or loss of the vehicle (s. 243). In the Schedule, the definition of "insured person" makes reference to territoriality in paragraph (a) in relation to the "insured automobile" and residency status. To the extent Ms. Luu's claim does not fall into one of these limited categories, there is no restriction on her right to claim benefits. The Schedule governs entitlement and the contract, approved as it is, cannot take that authority away.

Furthermore, Ms. Luu submits the entire Schedule was brought into the policy as governing entitlement, which is reflected in s. 4.1 of OAP 1. By so doing, the policy has incorporated a specific application which must take precedence over the general territorial restriction of s. 1.2 of OAP 1.⁶ It is argued further that the Schedule itself has been incorporated into the Act (s. 268) and the power to approve forms granted to the Commissioner by s. 227 does not include the right to restrict the provisions of the Schedule. Any limitation in the policy and s. 243 of the Act then necessarily refers to insurance of the automobile, not the person.

Although the application of the Canadian Charter of Rights and Freedoms and the Ontario Human Rights Code to the provisions of the Act was raised by Ms. Luu, it was not strenuously argued nor, for the purposes of the appeal, particularly relevant.

III. ANALYSIS AND DISPOSITION

In my view, the argument boils down to whether, by not specifically limiting its own territorial application and by virtue of s.268 of the Act, the Schedule achieves a life of its own, over, above and beyond the contract of insurance, such that it stands in isolation. I do not believe it does.

The contract of insurance is created within the parameters of the Act. The Act requires motor vehicle liability policies to include statutory conditions, coverage for liability under s. 243, and by s. 268, inclusion of accident benefits set out in the Schedule, subject to the terms of the Schedule. The Commissioner approves the form of the policy (as provided for in s. 227 of the Act) and that policy must include accident benefits. The policy so approved in this case contains a blanket territorial limitation, limiting coverage to accidents taking place in Canada, the United States or on vessels travelling between the ports of those countries. Is that policy term repugnant to the accident benefits and terms set out in the Schedule?

The Act and the policy deal with territorial limitations of the contract. The Schedule does not in the same sense. What is covered is limited by the Schedule itself. The Schedule refers to insured persons in a specific context; that of a particular motor vehicle policy. As to where persons involved in accidents are covered, it merely says, in part, " in or outside of Ontario". No further definition is given on what "outside of Ontario" means. Yet the policy defines a territory of operation outside Ontario, and the mere silence of the Schedule cannot be seen as governing. If it were so, then by simple omission of a definition, a dramatic change in the way motor vehicle liability policies operate has been achieved through regulation alone. I do not believe that expansion of coverage can be obtained under the regulation-making authority of the Lieutenant Governor in Council. The words "outside of Ontario" must be seen in the entire context of the automobile insurance system and accident benefits scheme of the Act.

Still, has the policy included a limitation which it could not? In my view it has not. The policy and the Schedule operate in tandem - that is clear from the wording of the Act and of the OAP 1. The Schedules definition of insured person is not violated, as it too recognizes the policy context.

The scheme of first party benefits has been said to be trading of tort rights for that of statutory accident benefits.⁷ That being so, s. 267.1 of the Act makes abundantly clear what has been bargained for. In return for giving up the right to sue in respect of accidents in Canada, the United States or any other country designated in the Schedule, first party benefits are provided. No other country has been designated. In my view, this section confirms the thrust of the scheme of statutory accident benefits and how they are to be provided. The intent is to restrict tort rights in a limited fashion, while replacing them with first party benefits for the same accidents to the same extent. Nothing prevents persons injured or affected by accidents elsewhere to sue in tort in those places, subject to the local law. It does not follow that the benefits of the first party system follow persons wherever they may go. As a result, the appeal is allowed, and the arbitration order is revoked.

IV. EXPENSES

The arbitrator awarded Ms. Luu her expenses of the arbitration. The parties have not suggested, nor do I see, any reason to revoke that part of the arbitrator's order. Accordingly, I confirm Ms. Luu is entitled to her arbitration expenses.

The parties agreed Ms. Luu was entitled to her expenses of the appeal, whatever the outcome, subject to my discretion in awarding those expenses. I find Ms. Luu is entitled to her reasonable appeal expenses.

In either case, should the parties be unable to agree on the amount of expenses, they may be assessed by filing written submissions with the Registrar.