Neutral Citation: 1996 ONICDRG 151

OIC A95-000399

ONTARIO INSURANCE COMMISSION

BETWEEN:

MALCOLM JARVIS (SR.)

Applicant

and

ALLSTATE INSURANCE COMPANY OF CANADA

Insurer

DECISION

Issues:

On July 19, 1993, Malcolm Jarvis Jr. died as a result of injuries he sustained in a motor vehicle accident. The Applicant, Malcolm Jarvis Sr., applied for a "death benefit" payable by Allstate, which had issued an Ontario Automobile Policy to the deceased child's mother, Bernadette Jarvis. The parties were unable to resolve their dispute through mediation and Mr. Jarvis (Sr.) applied for arbitration under the Insurance Act, R.S.O. 1990, c.I.8, as amended.

The issues in this hearing are:

1. Is the Applicant entitled to payment by the Insurer of the death benefit provided for in section 11(2)(d)(i) of the Schedule?¹

2. In the event that the Applicant is entitled to such a benefit, is the Applicant entitled to a special award pursuant to section 282(10) of the Insurance Act?

The Applicant also claims interest on any amounts owing and expenses incurred in the hearing.

Result:

1. The Applicant is not entitled to a death benefit.

2. The Applicant is not entitled to a special award.

3. The Applicant is entitled to his expenses incurred in respect of the arbitration.

Hearing:

The hearing was held in Belleville, Ontario, on July 11, 1996, before me, Stewart McMahon, arbitrator.

Present at the Hearing:

Applicant:

Malcolm Jarvis (Sr.)

Mr. Jarvis (Sr.)'s Representative:

R. Steven Baldwin Barrister and Solicitor

Allstate's Representative:

Joanna Chadwick Barrister and Solicitor

Allstate's Officer:

Hisham Fahmy

Evidence and Findings:

This matter came before me on an Agreed Statement of Facts. The facts are short and I set them out in their entirety:

1. The Applicant and Bernadette Jarvis were married in 1977 and remain married to the present time. They have lived apart since November 1992 and remained apart at the time of the accident.

2. Bernadette Jarvis was the named insured on the automobile policy with Allstate and the policy included optional benefit 1.

3. Malcolm Jarvis Jr. was the son of the Applicant and Bernadette Jarvis.

4. Malcolm Jarvis Jr. was born on May 15, 1978.

5. Malcolm Jarvis Jr. was killed in a motor vehicle accident on July 19, 1993.

6. At the time of the accident Malcolm Jarvis Jr.:

(a) was living with Bernadette Jarvis but spent time with the Applicant;

(b) was financially dependent on Bernadette Jarvis for more than 50 per cent and financially dependent on Malcolm Jarvis Sr. for less than 50 per cent.

7. Allstate paid the death benefit under section 11(2)(d) in the amount of $20,000 to Bernadette Jarvis.

From the above Statement of Facts, the following crucial facts can be distilled:

1. At the time of his tragic death, Malcolm Jarvis Jr. lived with his mother.

2. Malcolm Jarvis Jr.'s natural father was separated from the child's mother, but the couple had not divorced.

3. The child was more financially dependent on his mother than on his father.

As a result of the death of his son, Mr. Jarvis Sr. has applied to his wife's insurer for the death benefit provided for in section 11(2)(d) of the Schedule. Section 11 is found in part III of the Schedule which provides for Funeral Expenses and Death Benefits. Section 10 provides for reimbursement, up to specified maximums, of funeral expenses actually incurred. Section 11 is not linked to any particular expense or pecuniary loss, rather it provides for the payment of specified sums to certain classes of people in the event of an insured person's death. In this case the insured person is Malcolm Jarvis Jr.

Section 11 provides for payment to three groups; namely (i) surviving spouses, (ii) surviving dependants, and (iii) the group which we are concerned with, which for lack of a better label I characterize as the "providers." In this case, because optional benefit 1 was purchased, we are concerned with section 11(2)(d). The entire section reads as follows:

(2) If, as a result of an accident, an insured person dies within the benefit period set out in subsection (3), the insurer will pay with respect to the insured person, if Optional Benefit 1 has been purchased,

(a) $50,000 to his or her spouse, if the deceased is survived by a spouse who was his or her spouse at the time of the accident;

(b) $50,000 to his or her dependants, if the deceased is survived by any dependant who was a dependant at the time of the accident and is not survived by a spouse who is entitled to a benefit under this section;

(c) $20,000 to each of his or her surviving dependants who was a dependant at the time of the accident; and

(d) If, at the time of the accident, the deceased was a dependant, $20,000,

(i) to the person upon whom the deceased was dependent, or if that person is dead, to the surviving spouse of that person if the surviving spouse was the deceased's primary caregiver, or

(ii) to the other surviving dependants of the person upon whom the deceased was dependent if that person and his or her spouse are dead.

In order to establish entitlement to a benefit pursuant to section 11(2)(d)(i), the Applicant must prove that he is "the person upon whom the deceased was dependent." An examination of this question starts with the definition of "dependent." Section 3(2) of the Schedule provides:

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.

Accordingly, to qualify for the death benefit, the Applicant must as a pre-condition establish either: (a) the child was "principally dependent for financial support" on him, or (b) he was the spouse of the person upon whom the child was principally dependent for financial support. In the first case the Applicant must establish actual dependence, in the latter, the status is conferred simply by virtue of his spousal relationship with the person upon whom the child is dependent.

Was Malcolm Jarvis Jr. principally dependent for financial support upon the Applicant?

The Insurer takes the position that a person can only be "principally dependent for financial support" upon one person and, in this case, as his mother provided more financial support than the father, the child was principally dependent upon the mother rather than the father.

Counsel for the Applicant maintains that an individual can be principally dependent on more than one source, and that I ought to find that the child was principally dependent for financial support on both his mother and father.

I agree with the view expressed by Sr. Arbitrator Naylor, as she then was, in Singh v. State Farm (June 4, 1993), OIC A-001525 and A-001526 at p.12, that a person must "chiefly or for the most part derive his or her financial support from the other person" in order to be principally dependent. In my view, the phrase "principally dependent" also connotes dependence on a single primary source. Obiter comments in both the arbitration and appeal decisions in McDonald and State Farm (March 11, 1993), OIC A-001347 and (September 29, 1995), OIC P-001347 (appeal decision), appear to suggest that where the children and the parents live in the same household, in some circumstances it would be appropriate to treat the children as principally dependent upon the parents(plural) as a single source. That case is not before me. In the circumstances of this case, where the child lived with his mother and was more dependent upon the mother than the father, I have no hesitation in finding that the child was "principally dependent" upon the mother and not the father.

Was Malcolm Jarvis Sr. the mother's spouse at the time of the child's death?

Section 224 of the Insurance Act, supra, defines spouse for the purposes of Part IV of the Act (Automobile Insurance) as meaning:

either of a man and woman who

(a) are married to each other,

(b) have together in good faith entered into a marriage, or

(c) are not married to each other and have cohabited continuously for a period of not less than three years, or have cohabited in a relationship of some permanence if they are the natural or adoptive parents of a child.

In light of the fact that Malcolm Jarvis Sr. and Bernadette Jarvis were separated but not divorced, it follows that at the time of Malcolm Jarvis Jr.'s death, his parents were married and are accordingly spouses for the purposes of Part IV of the Insurance Act.

As stated above, Malcolm Jarvis Jr. was principally dependent upon his mother. The Applicant, Malcolm Jarvis Sr., remains the spouse of the mother, and accordingly, within the expanded definition of "dependant" provided for in section 3(2), Malcolm Jarvis Jr. was at the time of his death a dependant of the Applicant

The parties' respective positions on the proper interpretation of Section 11

The Applicant contends that section 11(2)(d)(i) contemplates that both he and the child's mother are entitled to the benefit, as both are by virtue of the expanded definition of dependent, "the person upon whom the deceased was dependent..." In support of the Applicant's position, counsel relies upon a number of decisions including McDonald v. State Farm Insurance Company, Supra. and Catherwood v. Young Estate (1995), 1995 CanLII 7254 (ON CTGD), 27 O.R. (3d) 63 (O.G.D.), which stand for the proposition that pursuant to subsection 11(c), children of separated but not divorced parents would be entitled to a death benefit in the event of either parent's death. Counsel argues that if the children of a separated parent are entitled to a benefit in the event of the parent's death, it should follow that a separated parent should be entitled to a benefit in the event that the child should die.

For her part, counsel for the Insurer concedes that as a general proposition, children of separated spouses are dependants of both by virtue of the expanded definition of dependant, and that given the wording of subsection (c), as dependants they would be entitled to a benefit in the event of either parent's death. Ms. Chadwick sought to distinguish McDonald and Catherwood on the basis that contrary to subsection (c), subsection (d) speaks in the singular and provides for a benefit to one person only. Ms. Chadwick pointed to the opening words in subsection (d) which provide for payment to "the person(singular) upon whom the deceased was dependent." She also pointed to the latter part of the section which provides that if that person is dead, the benefit is paid to the surviving spouse, but only if the surviving spouse was the deceased's primary caregiver. Counsel submitted that these latter words are intended to limit payment of the benefit to only one of the child's parents.

Counsel for the Applicant suggested that these latter words are designed not to limit the benefit to one person, but rather to expand it to provide a benefit to both natural parents, and to a step-parent in the event that (a) the natural parent is dead, (b) the step-parent is the primary caregiver, and (c) the child was not dependent upon the step-parent within the meaning of section 3(2).

Finally, counsel for the Insurer submitted that if the Legislature had intended to provide for the payment of a benefit to both spouses, the section need only have been worded "to persons (plural) upon whom the deceased was dependent." By virtue of the expanded definition of dependent, this wording would capture both spouses.

Analysis

I agree with the Insurer's submission that if the drafters had intended the benefit to be payable to both parents, the plural would have been used. In subsection (c), which provides that each of the beneficiaries receives the full benefit, the words "to each of his or her surviving dependants..." is used. In subsections (b) and (d)(i), which provide for a division of the benefit amongst the beneficiaries, the plural "dependants" is used, and a later subsection provides that in the event of more than one beneficiary, the benefit is to be divided. In subsection (a), the singular "spouse" is used, but a later subsection provides that in the event more than one individual qualifies as the insured's spouse, the benefit is to be split equally. Presumably the singular was used, because in contrast to dependants, we would normally only expect one person to qualify as the deceased's spouse. However the important point is that the drafters stipulated how the benefit was to be treated in the event of multiple recipients. In contrast to the above sections, subsection (d) is drafted in the singular, and no provision is made for how the benefit is to be treated in the event that there is more than one recipient. In my view this supports the conclusion that only one person is entitled to receive the benefit.

In addition, in my view, the latter half of the subsection, which provides for a benefit to a spouse in the event of the death of the person upon whom the deceased was dependent, must be given some real meaning and purpose. If the general intent of the section is to provide a benefit to each of the spouses, the limiting words of the section are redundant, if not contradictory. While it is possible, as suggested by counsel for the Applicant, that the phrase was intended to provide for a benefit to a step-parent, the wording would only have application to the rarest of cases. In my view, when read in conjunction with the use of the singular "person," it is more plausible that the latter part of the subsection was intended to limit the benefit to one spouse.

In light of my conclusion that the section contemplates payment to only one person, I conclude when the drafters speak of "the person upon whom the deceased was dependent...," they intended the payment to be made to the person upon whom the deceased was actually dependent, rather than to a person upon whom the deceased can be said to be dependent by virtue of his or her spousal relationship with the other parent.

Conclusion

Based upon the above analysis, I conclude that the benefit provided for in section 11(2)(d) was properly paid to the deceased's mother, Bernadette Jarvis, and the Applicant does not qualify for the benefit.

Special Award

In light of the fact that no benefit is owing, it follows that there is no basis for a special award. In the event that I am wrong in my interpretation of section 11(2)(d) and a benefit is owing, I consider the request for a special award.

Section 282(10) of the Insurance Act provides:

If the arbitrator finds that an insurer has unreasonably withheld or delayed payments, the arbitrator, in addition to awarding the benefits and interest to which an insured person is entitled under the No-Fault Benefits Schedule, shall award a lump sum of up to 50 per cent of the amount to which the person was entitled at the time of the award together with interest on all amounts then owing to the insured (including unpaid interest) at the rate of 2 per cent per month, compounded monthly, from the time the benefits first became payable under the Schedule.

Counsel for the Applicant sought the award on the sole basis that the Insurer withheld the benefit due to a misinterpretation of the Schedule, and that the withholding was therefore unreasonable.

In my view that is not a basis upon which an arbitrator could consider a special award.

The use of the word unreasonable in section 282(10) implies either delinquency or malfeasance on the part of the insurer. On the Agreed Statement of Facts neither existed in this case. Simply put, the parties had a disagreement over the interpretation of a section that had not yet been considered by the Commission or the Courts.

The Legislature, in its deliberations, determined that certain rehabilitation benefits are so critical that even when the insurer disputes the insured's entitlement, it will be obliged to pay the expense pending resolution of the dispute. All other benefits are payable only upon a determination of the matter by the Commission or the Courts. With respect to these latter benefits, if the dispute concerns the proper interpretation to be given to the Insurance Act or Schedule, in the absence of evidence that the Insurer was advancing an argument so totally devoid of merit, such that it could be characterized as acting in bad faith, I am of the opinion that no special award can be levied simply on the basis that the Insurer's interpretation was rejected.²

Expenses

The Applicant advanced an arguable position on a novel legal point. I exercise my discretion to award the Applicant his expenses. In the event that it is necessary, I may be spoken to concerning an assessment.

Order:

1. The Applicant is not entitled to a death benefit.

2. The Applicant is not entitled to a special award.

3. The Applicant is entitled to his expenses incurred in respect of the arbitration.

September 10, 1996

Stewart McMahon 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. 2See also Plows and Jevco (January 16, 1992), OIC A 000175 and A 000588