Neutral Citation: 1997 ONICDRG 36

OIC A96-001515

ONTARIO INSURANCE COMMISSION

BETWEEN:

KEVIN SCOTT

Applicant

and

MOTOR VEHICLE ACCIDENT CLAIMS FUND - ONTARIO INSURANCE COMMISSION

Insurer

AND BETWEEN:

KEVIN SCOTT

Applicant

and

ROYAL INSURANCE COMPANY OF CANADA

Insurer

DECISION ON PRELIMINARY ISSUES

Issues:

The Applicant, Kevin Scott, was injured in a motor vehicle accident on May 17, 1992. He applied for and received weekly income benefits from Royal Insurance Company of Canada ("Royal") payable under Ontario Regulation 672,¹ from May 24, 1992 until April 3, 1993 when Royal terminated payment of weekly income benefits, based on an exclusion provision in the Schedule. After a failed mediation with Royal, Mr. Scott issued a Statement of Claim in the Ontario Court (General Division) against Royal. He subsequently applied to the Motor Vehicle Accident Claims Fund-Ontario Insurance Commission (the "Fund") for payment of weekly income benefits, which were refused. After a further failed mediation, this time against both Royal and the Fund, Mr. Scott applied for arbitration under the Insurance Act, R.S.O. 1990, c. I.8, as amended (the "Act").

The issues in this preliminary hearing are:

1. Is Mr. Scott precluded from referring to arbitration the issues in dispute specified in his Application for Arbitration against Royal because he has a pending court action against Royal for statutory accident benefits arising from the same accident?

2. Is Mr. Scott precluded from referring to arbitration the issues in dispute specified in his Application for Arbitration against the Fund because such a determination is premature?

All of the parties claim their expenses incurred in the arbitration proceeding.

Result:

1. Mr. Scott is precluded from referring to arbitration the issues in dispute specified in his Application for Arbitration against Royal.

2. The arbitration proceeding against the Fund is adjourned until the Ontario Court (General Division) determines the issue of the exclusion defence in the court action against Royal for statutory accident benefits, subject to any further order of an arbitrator.

3. No expenses are awarded with regard to the arbitration proceeding against Royal. The expenses of the arbitration proceeding as against the Fund are reserved to the future hearing arbitrator.

Hearing:

The hearing was held at the offices of the Ontario Insurance Commission in North York, Ontario, on January 7 and 29, 1997, before me, Lawrence Blackman, Arbitrator.

Present at the Hearing:

Mr. Scott's

Mr. Michael J. Henry

Representative:

Barrister and Solicitor

The Fund's

Mr. David S. Young

Representative:

Barrister and Solicitor

The Fund's

Mr. John Avgeris

Officer:

Royal's

Mr. Marc D. Isaacs

Representative:

Barrister and Solicitor

The Applicant's father, Mr. John Alfred Scott, attended on January 7, 1997.

Witnesses:

No witnesses were called to give evidence at this preliminary hearing.

Exhibits:

Exhibit 1

Copy of Statement of Claim issued in the Ontario Court (General Division) in Toronto, bearing Court File No. 93-CU- 72149.

Exhibit 2

Book of Documents, Tabs 1 - 11, as amended on the consent of counsel.

Exhibit 3

Copy of letter from Messrs. Thomson Rogers, dated January 27, 1997, together with attached Ontario Automobile Insurance Assessment of Claim by Insurer, dated March 19, 1993.

Evidence and Findings:

1. Evidence

Mr. Kevin Scott was injured on May 17, 1992 in a single car accident, while a passenger in an automobile owned by his mother, Mrs. Marie Scott.

Royal, as the insurer of Mrs. Scott's car, initially paid the Applicant weekly income benefits of $501.06. By Assessment dated March 19, 1993, Royal notified Mr. Scott that it was terminating payment of further weekly income benefits, on the stated grounds that Mr. Scott knew that the operator of the insured vehicle was driving without the owner's consent (hereinafter referred to as the "exclusion defence"). Section 17(3)(b) of the Schedule states that in such circumstances, an insurer is not required to pay weekly benefits.

Mr. Scott, in accordance with the Dispute Resolution provisions of the Act, applied for mediation by Application dated December 19, 1994, seeking payment of further weekly income benefits, in addition to other claims. Following a failed March 24, 1995 mediation in respect of the issue of weekly income benefits, Mr. Scott issued (as allowed by section 281(1) of the Act) a Statement of Claim against Royal in the Ontario Court (General Division) in Toronto on March 30, 1995, claiming a broad range of statutory accident benefits, including "disability wage loss benefits." The Applicant acknowledges that the latter are in fact weekly income benefits.

Mr. Scott, had earlier, on October 12, 1993, issued a tort claim in the same court, naming the owner and operator of his mother's car as defendants.

Royal defended the court action for statutory accident benefits in its own capacity, as well as defending the tort action on behalf of the defendant owner. Royal's pleading in the action for statutory accident benefits included a counterclaim for repayment of all weekly income benefits received by Mr. Scott. Mr. Scott delivered in response a Statement of Defence to Counterclaim dated July 14, 1995. The defendant operator in the tort action initially retained her own counsel. She is now defended by counsel retained by the Fund.

Examinations for Discoveries in the two court actions have almost been completed. Mr. Scott was examined on January 15, 1997 in both court actions. The only outstanding examination is that of Royal, which I am advised has been scheduled. Neither court action has been set down for trial.

In the interim, on January 9, 1996, Mr. Scott claimed payment of weekly income benefits from the Fund. Royal had suggested such recourse in its March 19, 1993 Assessment of Claim. The Applicant's position, as I understand it, is that if he is excluded from receiving weekly income benefits from Royal, he may "ratchet down" the priority ladder of section 268 of the Act solely with regard to weekly benefits. This would allow Mr. Scott to seek weekly income benefits from the appropriate insurer on the next applicable priority level (which in this case is the Fund), while continuing to receive all other statutory accident benefits from Royal.

By letter dated January 16, 1996, the Fund refused to pay the benefits claimed. Mr. Scott then applied for mediation seeking ongoing weekly income benefits from April 3, 1993. Two separate Reports of Mediator, both issued June 6, 1996, indicate that mediation on the issue of weekly benefits had failed in respect of both Royal and the Fund.

Mr. Scott then applied for arbitration against both Royal and the Fund by Application dated August 30, 1996. Mr. Scott's claims were restricted to issues of entitlement to weekly income benefits and interest.

In addition to the preliminary issues noted herein, the Fund raised the further preliminary issue of the validity of the Applicant's "ratchet down" claim. Royal raised the issue of its exclusion defence. Both Royal and the Fund also asserted limitation and issue estoppel defences. It was agreed to first proceed with the preliminary issues noted herein, as they were most fundamental to the status of the entire proceeding.

2. Should the arbitration proceeding against Royal be dismissed?

Royal, relying on a number of decisions,² submits that the Ontario Insurance Commission does not have jurisdiction to hear Mr. Scott's arbitration against Royal, as the Applicant had much earlier commenced a far more comprehensive court action which encompasses the same issues as this arbitration proceeding.

When Mr. Scott commenced his proceedings, section 281(1) of the Act allowed an insured person, once mediation had failed, to either bring a proceeding in a court of competent jurisdiction or refer the matter to an arbitrator.

Madame Justice E. Macdonald stated in Gogna that:

It is fundamental that multiplicity of proceedings is to be avoided, wherever possible.

One approach to avoid such a result is to find that once an election has been made by an insured person to proceed in one forum for accident benefits, the insured may not proceed in an alternate forum for the same relief.³ Arbitrator Draper (as he then was) however concluded in Gouliaeff ⁴that "as long as" that Applicant withdrew his prior court action "forthwith," he could proceed with his arbitration proceeding. This decision implies that applicants may, in appropriate circumstances, "re-elect" their dispute resolution forum.

Mr. Scott however submits that he is unable to discontinue the court action for accident benefits against Royal, as Royal is not prepared to waive its limitation defence in this forum, although a limitation defence has not been raised in the court action. He therefore wishes in these circumstances to keep both avenues open to him.

Unlike the Oliveira⁵ decision where the subsequent arbitration was allowed to continue at the same time that a court action for different accident benefits was proceeding, Mr. Scott's arbitration against Royal involves issues already encompassed in the court action.

I therefore find, given the unnecessary expense to Royal of defending two overlapping proceedings, and the very real potential for conflicting determinations against Royal both on the exclusion defence and on the question of entitlement, that it is inappropriate for both proceedings to continue against Royal. The question therefore becomes whether the arbitration proceeding against Royal be dismissed.

In the Gogna decision, Madame Justice Macdonald, guided by Victoria Property and Investment Co. (Canada) Ltd. et al v. Vatznau Management Ltd. et al. (1978) 1978 CanLII 1286 (ON HCJ), 8 C.P.C. 38, set out the following considerations in determining which proceeding should go forward:

(1) which action began first;

(2) who has the chief burden of proof;

(3) which is the most comprehensive in scope.

In this case, the court action was commenced first, and is well advanced, the discovery of Mr. Scott having been completed. Although the Applicant argues that it would be prejudiced by being forced to proceed in court, which in its submission does not provide "the quickest, most just and least expensive resolution of the dispute,"⁶ this would not be the fault of Royal. It was the Applicant who elected to proceed to court with its statutory accident benefits claim, nearly two years after Royal's refusal to pay further weekly income benefits. Furthermore, it was the Applicant who then waited another year to commence this arbitration proceeding, while still maintaining his court action for statutory accident benefits.

Regarding Madame Justice Macdonald's second consideration, I find that the Applicant has the chief burden of proof in both proceedings.

Lastly, I find that the court action for accident benefits, which includes a far broader prayer for relief, is more comprehensive in scope.

I am not persuaded by Mr. Scott's submission that the proceedings before the Commission are more comprehensive as they include both Royal and the Fund, nor am I persuaded that proceedings against the two must proceed together so as to avoid different determinations on the question of the exclusion defence and on the question of entitlement. Although the Commission's practice has been to include all potentially liable parties in priority disputes, there is no reason why the Fund must be involved in the determination of Royal's exclusion defence. Once the court determines the exclusion defence between the Applicant and Royal, that issue cannot subsequently be litigated between the Applicant and the Fund. However, prior to the court's determination, if the Fund feels that it may be adversely affected by a court judgment, it has its remedy under Rule 13.01 of the Rules of Civil Procedure to seek leave to intervene as an added party.

Regarding the potential for conflicting decisions on the substantive issue of entitlement, if the court does not accept the exclusion defence, then Royal is liable for payment of weekly income benefits, and hence any possible claim against the Fund ceases. Alternatively, if the court accepts the exclusion defence, it may consider it unnecessary to make a determination on the then moot question of entitlement against Royal for weekly income benefits, Royal presently being the only defendant in the court action for accident benefits. I find that the possibility of conflicting decisions resulting from dismissing the Royal arbitration to be far less than the obvious potential for inconsistent findings if both the arbitration and court actions against Royal are allowed to proceed.

In any event, if the Applicant had truly considered it necessary to proceed jointly against both Royal and the Fund, he could have done so when he issued his 1995 court action for statutory accident benefits, or subsequently, by adding the Fund as a defendant in that action.

Accordingly, applying the considerations in Gogna to the facts of this case, I find that it is appropriate that Mr. Scott's arbitration proceeding against Royal be dismissed.

3. Should the arbitration proceeding against the Fund be dismissed?

The Fund submits, relying on the decision of Madame Justice Dunnet in Peake v. Canadian Surety Co. et al., (1993), 1993 CanLII 8480 (ON CTGD), 13 O.R. (3d) 344 (Gen. Div.), that Mr. Scott's arbitration against it should be dismissed as it is presently premature. The Fund argues that any possible claim against it only crystallizes once there has been a determination in favour of Royal's exclusion defence.

The Peake decision was on a motion on a question of law as to whether a plaintiff was entitled to claim no-fault benefits from the Fund, if it was subsequently found that the plaintiff was not an insured under a Canadian Surety policy of automobile insurance. Madame Justice Dunnet dismissed the motion because it was premature, "the factual underpinnings with respect to available no-fault benefits" (that is whether the plaintiff was indeed an insured with Canadian Surety) having not yet been determined.

The action however against the Fund in that case was not dismissed. Rather, Madame Justice Dunnet indicated that should the plaintiff's claim against Canadian Surety fail at trial, she was prepared to determine the plaintiff's entitlement to recover accident benefits from the Fund. In essence, the question of entitlement from the Fund was put on hold.⁷

In the present case, "the factual underpinning" of the claim against the Fund is that the exclusion clause applies. Having found that it is appropriate in the circumstances of this case to dismiss the arbitration proceeding against Royal, the claim against the Fund can only crystallize when the General Division determines that Royal has a valid exclusion defence. Until that determination, the Applicant's claim against the Fund is merely hypothetical.

The Fund therefore urged me to dismiss Mr. Scott's application against it, arguing that the Applicant cannot bring his claim until the appropriate determination of the exclusion defence. The Fund was very candid in admitting that by that time they would have a much stronger limitation defence argument. Such a result would clearly be unjust to the Applicant.

On the other hand, I did not receive any argument that there would be any injustice in adjourning the arbitration against the Fund until the Ontario Court (General Division) determines the exclusion argument.

Accordingly, I find that it is appropriate to adjourn the arbitration against the Fund until the Ontario Court (General Division) determines the exclusion defence, subject to any further order of an arbitrator. I do so pursuant to rule 65.2 of the Dispute Resolution Practice Code (which allows an adjudicator to adjourn a hearing on his or her own initiative), and pursuant to section 21 of the Statutory Powers Procedure Act, R.S.O. 1990, c. S.22, as amended (which allows a tribunal on its own motion to adjourn a hearing if the adjournment is required to permit an adequate hearing to be held). I find that an adequate hearing can only be held once the "factual underpinnings" of the claim against the Fund have been established.

4. Expenses

Royal firstly asked that the Applicant pay Royal the amount of $2,000.00 pursuant to section 281(11.2) of the Act, on the ground that Mr. Scott had commenced an arbitration against it that was "frivolous, vexatious or an abuse of process." I find that this arbitration proceeding was an endeavour to rectify an earlier strategic error of commencing a less expeditious court proceeding (to accompany an already existing tort action), rather than an abusive tactical move. If Royal had waived its limitation defence in this proceeding, the Applicant would have been able to undertake to withdraw its court action. Substantively, Royal would have lost nothing by waiving its defence, as there was no suggestion that the court proceeding had not been commenced in time.

However, there were other reasons Royal wished to have the court action continue, including an overlap in issues between the tort and the statutory accident benefits actions, as well as its counterclaim in the latter action, which made its opposition to a change in forum not unreasonable. Considering all of the circumstances of this case, I find it appropriate to exercise my discretion not to award any expenses in the arbitration proceeding against Royal.

Royal also asked that the Commission refund its $2,000.00 assessment. Although Royal cited cases where arbitrators had ordered that the insurer's assessment fee be refunded,⁸ I was not referred to any statutory power giving me jurisdiction to do so. I therefore decline to make such an order.

The question of expenses in the arbitration proceeding against the Fund is reserved to the further hearing arbitrator.

Order:

1. The arbitration proceeding is dismissed against Royal.

2. The arbitration proceeding against the Fund is adjourned until the Ontario Court (General Division) determines the issue of the exclusion defence in the court action against Royal for statutory accident benefits, subject to any further order of an arbitrator.

3. No expenses are awarded with regard to the arbitration proceeding against Royal. The expenses of the arbitration proceeding as against the Fund are reserved to the future hearing arbitrator.

February 28, 1997

Lawrence Blackman

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 On or Between June 22, 1990 and December 31, 1993. In this decision, the term "Schedule" will be used to refer to Regulation 672.
2. 2These include Citadel General Assurance Company v. Gogna [1992] O.J. No. 1996; Barrow and Guardian Insurance Company of Canada, December 23, 1993, OIC A-006082; Bapoo and Co-operators General Insurance Company, October 3, 1994, OIC A-006212; Barrett and Economical Mutual Insurance Company, September 21, 1995, OIC A-951153; Tombolini and Jevco Insurance Company, September 24, 1996, OIC A96-000142.
3. 3This is implied in Bapoo. In Sacco et al and Wawanesa Mutual Insurance Company, October 1, 1996, OIC A95-000349, Arbitrator Palmer held that "the election to go to court should be a final one."
4. 4Gouliaeff and Commercial Union Assurance Company of Canada, August 26, 1993, OIC A-003996.
5. 5Oliveira and Markel Insurance Company of Canada, February 9, 1995, OIC A-006434.
6. 6Citing section 1.1 of the Dispute Resolution Practice Code.
7. 7The Fund argued that Peake stands for the proposition that section 268 of the Act requires an insured person to have a claim determined against an insurer which is potentially higher in priority, before an initial claim for statutory accident benefits can even be made against the Fund. If that is the ratio of Peake (which I do not believe it is) then I respectfully disagree. Such determinations by a court could well extend far beyond the requisite limitation periods. I find that the legislation would require clear and unambiguous wording to allow the exercise of the priority rules to defeat a valid claim on limitation grounds.
8. 8e.g. Barrow, supra.