Non-Marine Underwriters, Members of Lloyd's of London v. Goos, 1998 ONFSCDRS 41

Financial Services Commission

Commission des services financiers de lander

Neutral Citation: 1998 ONFSCDRS 41

Appeal P96-00038

OFFICE OF THE DIRECTOR OF ARBITRATIONS

NON-MARINE UNDERWRITERS, MEMBERS OF LLOYD'S OF LONDON

Appellant

and

HENRY A. GOOS

Respondent

and

GENERAL ACCIDENT ASSURANCE COMPANY OF CANADA

Respondent

Before:

Susan Naylor, Director's Delegate

Counsel:

Graeme Mew (for Lloyd's of London)

William C. Goldstein ( for Henry Goos)

James K. Brown (for General Accident)

APPEAL ORDER

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

1. The appeal is dismissed and the arbitrator's orders dated May 9, 1997 and June 12, 1997 are confirmed.

2. Henry Goos is entitled to his appeal expenses, to be paid by Non-Marine Underwriters, Member of Lloyd's of London.

September 25, 1998

Susan Naylor

Director's Delegate

Date

REASONS FOR DECISION

I. NATURE OF APPEAL

This appeal brought by Non-Marine Underwriters, Lloyd's of London ("Lloyd's") relates to two arbitration decisions dated May 9, 1997 and June 12, 1997. They involve claims by Henry Goos who was severely injured in an accident, leaving him quadriplegic. Because the accident was in November 1990, payment of statutory accident benefits is determined under the Insurance Act, R.S.O. 1990, c.I-8 ("the Act") and the Statutory Accident Benefits Schedule - Accidents Before January 1, 1994, R.R.O. 1990, O. Reg. 672¹ ("the Schedule").

The issues determined at arbitration and the subject of the appeal are three-fold:

1. whether Lloyd's or General Accident Assurance Company of Canada, ("General Accident") is responsible for paying Mr. Goos' statutory accident benefits;

2. the value to be attributed to certain fringe benefits (free accommodation, food and cigarettes) in the calculation of Mr. Goos' gross weekly income from employment; and

3. whether Mr. Goos is precluded from contesting the deduction of Canada Pension Plan (CPP) disability benefits.

Lloyd's appeals the arbitrator's ruling holding it liable, the value placed on Mr. Goos' fringe benefits and the non-deduction of CPP benefits. Mr. Goos did not take a position as to which insurer is responsible for paying his benefits.

II. THE ISSUES AND ANALYSIS

1. Which Insurer is Responsible for paying benefits?

A. Facts

The following facts are taken from the arbitrator's decision and the exhibits.

(i) Mr. Goos was driving a vehicle owned by All Car Sales and Service, his father's company. He occasionally helped out in the business and was provided with a vehicle for his regular use by the company.

(ii) The vehicle was insured by General Accident under a standard Garage Policy, (O.P.F No. 4) No. 8-933442.² The application for insurance (renewal) lists the applicant's name as "Adrianus Goos o/a All Car Sales and Service", referring to the applicant "hereinafter called the insured".

(iii) A standard form "Additional Insured Endorsement - Broad Form" S.E.F No. 76³was attached to the policy. It includes the following language:

In consideration of a premium of ..INCLUDED.., it is hereby understood and agreed that paragraph (c) of item 12 of the General Provisions, Definitions and Exclusions of the policy⁴ to which this endorsement is attached, is deleted and replaced by the following:

(c) provided by the insured to any person, for regular or frequent use, except an active partner or a full time employee of the business stated in Item 3 of the application; or the person(s) named below:

The endorsement names Maria Smeitink and Henry Goos and lists their relationship to "the insured" as wife and son, respectively.

(iv) An additional premium of $740 was paid for this coverage. The Premium Computation Statement indicates a charge was levied for third party liability and property damage coverage but does not show that any extra money was paid for accident benefit coverage.

(v) Henry Goos owned a 1976 Mercedes and a 1973 GMC Motorhome. He insured them with Lloyd's.

(vi) Henry Goos first went to General Accident for benefits, but was referred on to Lloyd's. The two insurers ultimately agreed to split the cost of Mr. Goos' benefits between them, pending resolution.

B. The Statutory Scheme

(a) The 1990 rules

S. 268(1) of the Insurance Act requires that every motor vehicle liability policy must provide the statutory accident benefits set out in the Schedule. A Garage Policy is in the form of a combined owner's/non-owner's motor vehicle liability policy, with modifications to cover non-owned vehicles.

S. 268(2) to (5) sets up a priorities scheme for determining which insurer is responsible for paying benefits. Under these rules, an occupant must look first to the insurer of an automobile in respect of which he or she is an "insured" (s. 268(2) 1.i). Where the person is an "insured" under more than one policy, he or she may choose the insurer against which to claim benefits in his or her discretion (s. 268(4)). However, there is an important qualification. If the person is "a named insured" under a policy, he or she must claim under that policy. S. 268(5) states:

Despite subsection (4), if a person is a named insured under a contract evidenced by a motor vehicle liability policy or the person is the spouse or a dependant, as defined in the ...Schedule, of a named insured, the person shall claim statutory accident benefits against the insurer under that policy and, if there is more than one such policy, the person, in his or her discretion, may decide the insurer from whom he or she will claim the benefits.

(Emphasis added)

There is no definition of "named insured" . However, the Act provides a definition of "insured" in s. 224(1):

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;

Entitlement to accident benefits is determined by the rules set out in the Schedule. S. 2 lists who is an insured person under a particular policy. It includes: an occupant of the insured vehicle (s.2 (a)), and the named insured, his or her spouse and any dependant of either of them, while the occupant of any other automobile (s.2(c)).

S. 3(1) of the Schedule creates a special rule for individuals supplied with a company car for their regular use or who are renting a vehicle:

3.-(1) 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 Regulation⁵ applies to the individual and his or her spouse and their dependants as if the individual were a named insured.

(Emphasis added)

(b) The post-January 1, 1994 rules

The above provisions have undergone several changes. While the changes do not apply to accidents before January 1, 1994, their significance has been considered in a number of relevant cases.

S. 3(1) of the Schedule was re-enacted in a different form in ss. 91(1) and (2) of the Statutory Accident Benefits Schedule - Accidents after December 31, 1993 and before November 1, 1996, O. Reg 776/93 ("the 1994-SABS). The new provisions distinguished, among other things, between individuals living and ordinarily present in Ontario and others. In the former case, if an insured vehicle was made available for the individual's regular use by a corporation or other business entity or was rented to him or her, the regulation states that "the individual shall be deemed for the purposes of this Regulation to be the named insured". This regulation was amended by O. Reg.635/94, affecting accidents after January 1, 1995. Additional provisions were included. S. 91(4) states that "the individual shall be deemed to be the named insured under the policy insuring the automobile for the purpose of payment of the statutory accident benefits set out in this Regulation." The rule was modified in the Statutory Accident Benefits Schedule - Accidents on or after November 1, 1996, O. Reg. 403/96, s. 66.

C. The Arbitrator's Decision

The parties agreed that Mr. Goos is an "insured" under both policies and is a "named insured" under the Lloyd's policy. The issue is whether he is also a "named insured" under the General Accident policy insuring the company car. If so, General Accident, rather than Lloyd's, would be responsible since Mr. Goos initially sought recourse from General Accident.

In his May 1997 decision, the arbitrator ruled that Mr. Goos was not a "named insured" under the General Accident policy and that Lloyd's was liable under the statutory priority rules. Following a line of Commission decisions, he held that "named insured" in s. 268(5) means the person specified in the contract of insurance as the insured, and that the meaning of the term was not modified by s.3(1) of the Schedule. He also relied on the decision of the Court of Appeal in Warwick v. Gore Mutual Insurance Co. (1997), 1997 CanLII 1732 (ON CA), 32 O.R. (3d) 76, and the companion judgement in Gore Mutual Insurance Co. v. Co-Operators General Insurance Co. (1997), 1997 CanLII 1203 (ON CA), 32 O.R. (3d) 88, in finding that s. 270 of the Act⁶ does not operate to make a person "insured by but not named in a contract" a "named insured" and that the principle of "fair exchange" for the payment of an additional premium to include Mr. Goos under the policy does not override the legislation.

Lloyd's argues that the Commission decisions on s. 3(1) of the Schedule, which treat the question of priorities as separate and distinct from the issue of entitlement to benefits, are wrong in light of Warwick. Lloyd's also distinguishes the facts in Mr. Goos' case, arguing that naming him as an additional insured in the S.E.F. No. 76 endorsement, for which a premium was charged, makes him a "named insured" under the General Accident Garage Policy.

D. ANALYSIS AND FINDINGS

(a) The rule in s. 3(1) of the Schedule

It is clear that Mr. Goos is a person who is named in the endorsement and insured under the General Accident contract of insurance. The question, however, is whether he is a "named insured" under the contract.

The term "named insured" appears in both s.268(5) of the Insurance Act and s. 2 of the Schedule. It, or a variant of the term, also appears elsewhere in the Act and the policy. Nowhere however is it defined. Commission adjudicators have relied on industry usage in interpreting the term "named insured".⁷ "Named insured" has been described, variously, as "the person or entity in whose name the policy is issued"⁸; "the person named in the contract or certificate of insurance as the insured"⁹; and "the person or entity with whom the contract of insurance has been made".¹⁰

Lloyd's argues that the term "named insured" in s. 268(5) has no set meaning and that the arbitrator unduly restricted its scope by excluding individuals treated as if they were named insureds under s. 3(1) of the Schedule. Lloyd's buttressed its arguments by reference to Axa Insurance (Canada) v. Old Republic Insurance Co. (1998), 1998 CanLII 14670 (ON CTGD), 38 O.R. (3d) 630 (Gen. Div), a decision provided to me after oral submissions were heard in this case. In that decision, Justice Lax stated at page 637:

While I agree that s. 224(1) of the Insurance Act recognises a distinction between an "insured" and a "named insured", I do not agree that s. 268(5) purports to fix the class of "named insureds". Nor does any other section of the Insurance Act purport to do this. The legislation specifically refrained from defining "named insured" and the distinction between an "insured" (which is a defined term) and a "named insured" (which is not a defined term) is one which is susceptible to interpretation.

Under the terms of s. 3(1), the Schedule applies to Mr. Goos and his spouse and any dependants as if he were a named insured. Lloyd's argues that this makes Mr. Goos a named insured for the purposes of the priority rules. It argues that s. 3(1) informs or modifies the meaning of the term as used in s. 268(5) of the Act.

One early commentator¹¹ concluded this was the effect of s. 3(1). So did the arbitrator in Sittler and Canadian General Insurance Company, Sittler and Pilot Insurance Company, OIC A-000951 & A-004495, (December 3, 1993), upheld on other grounds (OIC P-000951 & P-004495, November 8, 1995). Sittler held that s. 3(1) combined with s. 270 of the Act gave Ms. Sittler the same rights as a named insured for the purposes of s. 268 of the Act. In reaching her conclusion, Arbitrator Makepeace relied on the principle of a fair return for the premium paid.

However, this line of thinking has not been followed in subsequent cases. In Axa Home Insurance Co. v. Western Assurance Co., 1994 CanLII 19785 (ON CTPD), [1994] I.L.R. 1-3033, Justice Roberts held that Sittler was wrong in law. He concluded at p. 2727 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 s. 3(1)."

In Axa Home, Mr. Lazaridis was hurt while driving a company car. Because the company, not Mr. Lazaridis, was named as the insured in the policy, the judge ruled that he must look to his own insurance company for benefits, even though the accident involved the company car.

Since then, Commission adjudicators have consistently followed the approach in Axa Home and have not regarded individuals treated as if they were named insureds under s. 3(1) of the Schedule as "named insureds" for the purposes of the priority provisions in the Insurance Act.¹² Lloyd’s argues that the Warwick case now rules out an approach which separates the issue of entitlement to benefits and the question of priorities. In that case, Ms. Warwick was listed as an occasional driver under her father's policy, but was injured while riding in another vehicle. The issue was which insurance company was required to pay her benefits - the insurer of her father's vehicles, which received an additional premium to list her as a driver, or the insurer of the vehicle in which she was an occupant. The Court of Appeal held that the definition of "insured person" under the Schedule governed, not the arguably broader definition of "insured" under the Act. Since Ms. Warwick was not an "insured person" under her father's policy according to the Schedule's definition, the insurer of the vehicle in which she was an occupant was responsible. At page 83, Laskin J.A. confirmed that:

...to be entitled to no fault-benefits a person must be entitled under a particular contract. Section 268(1) adds the Schedule to every contract of automobile insurance but then delegates to the Schedule-maker authority to define the classes of person insured under any particular contract.

He added:

........ By making contractual entitlement to no fault-benefits "subject to the terms, conditions, exclusions and limits" in the Schedule, the legislature, in s. 268(1) of the Act, intended that entitlement to these benefits would be determined by regulation.

Lloyd's argues that if the terms of the Schedule determine who is an "insured" under s. 268(2) 1. i of the Act, then it is also appropriate to apply the Schedule, and specifically s. 3(1) to interpret, and broaden, the scope of "named insured" under subsection 268(5) of the Act.

The decision in Warwick indicates that the interpretation of the priority provisions is not independent of the Schedule. It holds that the Schedule’s identification of who is an insured person under a particular policy delineates who is an insured for the purposes of the order of payment set out in the Act. The decision leaves open the possibility that the regulations can go further in informing the content of the priority rules, including the meaning of named insured. In Axa Insurance (Canada), Justice Lax held that the amendments to the 1994-SABS did exactly this. The question is whether the 1990 version of the regulations has a similar effect. I conclude that it does not.

That is because the language of s. 3(1) itself is circumscribed. It says: "this Regulation applies to the individual and his or her spouse and their dependants, as if the individual were a named insured". It treats individuals as if they were named insureds but only in the application of the Schedule. S. 3(1) is an interpretation of the definition of insured person, not, itself, a definition of named insured. It does not make the individual a named insured under the policy. On the contrary, the regulation treats individuals, who are not normally named insureds under the business' policy, as if , i.e. as would be the case if, they were named insureds.

The wording of the rule in s. 3(1) has been changed several times. Arbitrator S. M. Malach reviewed the history of the changes in State Farm Mutual Automobile Insurance Company and Canadian Surety Insurance Company, a private arbitration award issued on November 26, 1996. The case involved the amendments to the 1994-SABS, applying to accidents on or after January 1, 1995, which deemed the individual to be "the named insured under the policy insuring the automobile for the purpose of payment of the statutory accident benefits set out in this Regulation". In the course of his decision, Arbitrator Malach commented on the 1990 version of the rule, stating that he agreed that the decision in Axa Home represented the correct interpretation of s. 3(1). He stated at page 7:

The reason for that is that the wording in section 3(1) clearly confines the treatment of the insured person as if he was a named insured to the Regulation itself, by the clear wording in Section 3(1).

In the arbitrator’s view, the new language reflected a clear legislative intent to change the previously existing situation.

I do not find that the language of s. 3(1) of the Schedule evidences an intent on the part of the Lieutenant Governor in Council to affect the meaning of named insured under the priority provisions of the Act. In my view, this conclusion is compatible with the decision of the Court of Appeal in Warwick. Despite Lloyd’s able arguments, its appeal on this ground is unsuccessful.

(b) The Effect of the S.E.F No. 76 Endorsement

Lloyd’s position is that, in any event, Mr. Goos is a "named insured" under the contract by virtue of being specifically named as an additional insured in the endorsement. It distinguishes his position from the listing of an occasional driver on the policy (as in Warwick) or where the person driving was not mentioned at all (as in Portch, Movahedi and Adabi-Ghomi). The crux of Lloyd’s position is set out at paragraphs 21 and 22 of its written submissions:

A Garage policy is not intended to provide coverage as a personal insurer of individuals unless those individuals have been specifically identified to the insurer and a premium paid in respect of them. By identifying Mr. Goos on the policy as an additional insured, the policy was extended to provide personal coverage for his day to day use of the vehicle notwithstanding the fact that the vehicle was not being used for the purposes of the business. By naming Mr. Goos as an additional insured in this manner, General Accident agreed to cover him for his personal use of the vehicle in the same manner as if he were the applicant for insurance under the policy. .....

....the effect of the endorsement was to specifically extend personal insurance coverage to Mr. Goos. The endorsement was intended to add Mr. Goos as a named insured.

It is clearly established that listing a non-owner as an occasional or principal driver in an application for insurance under a standard owner’s policy does not make him or her a named insured under the contract.¹³ The situation here is different. Mr. Goos is specifically named in the endorsement. It identifies him and protects him as an additional insured. There is some precedent for treating as a named insured a person who is specified in the policy or endorsement as an insured. Lloyd's relies in particular on the decision of the Manitoba Court of Appeal in Blair v. Royal Exchange Assurance 1968 CanLII 634 (MB QB), [1968] 63 W.W.R. 428 aff d 1968 CanLII 628 (MB CA), [1968] 65 W.W.R. 511 for the proposition that someone covered under an endorsement and driving the vehicle when the accident happens is a named insured under the policy.

The question in Blair was whether a person named as a principal driver in a policy could give consent to a third party to drive the vehicle. The vehicle was owned by the son but insured in his father’s name on the advice of the father’s insurance agent. The son arranged to purchase an endorsement to cover himself, paying a substantial extra premium, and later substituted a new vehicle in the endorsement. He was then involved in an accident in that vehicle. The insurer refused to pay, citing the fact that his father, who did not know that his son had replaced the vehicle, could not have consented to the son driving it. The Court rejected this defence, characterising both father and son as applicants for insurance and "named insureds". It reasoned that each had paid money to the insurer, who clearly intended to insure them both in some manner. The Court held that it would not be fair to allow the company to offer them nothing worthwhile in return for the premiums paid.

A number of cases have considered the reasoning in Blair, but in the context of a driver listed in the application for insurance. In Collins v. Wright (see footnote 11), the Ontario Court of Appeal distinguished the facts in Blair on the basis that the person specified as the driver was the person driving the vehicle at the time of the accident. However, the Court specifically disagreed with the reasoning in Blair to the extent it included a listed driver who is not the owner of the vehicle as the named insured for the purpose of giving consent. Moreover, it is noteworthy that Justice Rosenberg, at first instance, focused his attention on the person with whom the contract was made. At page 26 of his judgment he stated:

Counsel did not refer to any cases where a person named other than the insured had been held to be "the person named therein" or where this issue has been considered. The contract in this case provides that the full name and postal address of the insured are Mrs. Elizabeth Mitro, 129 Emert Street, London, Ontario, N6J 1R6. Accordingly the contract refers to Elizabeth as the insured. In my view [the son] cannot be either the insured named in the contract or "the person named therein" for the purpose of giving his consent.

Other cases, for example, Warren (Guardian ad litem of) v. Martin (1996), 1996 NSCA 193, 40 C.C.L I. (2d) 66 (N.S.C.A.) specifically distinguished Blair on the basis that it dealt with a person named in an endorsement.

In my view, Blair is distinguishable from the case at hand. In Blair, the driver was the actual owner of the vehicle whom the court was prepared to characterise as a co-applicant for insurance with his father. That is not the case here. The issue is not that the policy is deprived of any value, but which of two insurers is liable to pay Mr. Goos' statutory accident benefits.

Despite the able arguments of Lloyd's, an examination of the terms, conditions and exclusions of the policy, (which the endorsement confirms continue to apply, but for the specific exclusion) suggests that the better view is that Mr. Goos does not qualify as a named insured by virtue of being named in the endorsement alone.

The Garage Policy is designed to cover the risks involved in operating an automobile business, including use of business' own vehicles and the use of customers' and other vehicles. The policy excludes coverage of a vehicle supplied for the regular or frequent use of an individual, unless he or she is an active partner or full-time employee of the business.

The exclusion (clause 6.17 (O.P.F No. 4)) states as follows:

THE INSURER SHALL NOT BE LIABLE under this policy for loss, damage, injury or death arising from the ownership, use or operation of any automobile, *****

(c) provided by the insured to any person for regular or frequent use, except an active partner or a full-time employee of the business stated in Item 3 of the Application, PROVIDED that this exclusion does not apply while the person is using the automobile in the business stated in Item 3 of the Application.

The S.E.F 76 endorsement deletes this exclusion in respect of the persons named in the endorsement.

Like the arbitrator, I find that the effect of the endorsement is to countermand the exclusion that would otherwise preclude coverage. The endorsement allows the business to supply Mr. Goos with a company vehicle, covering his driving for personal purposes It adds Mr. Goos as an insured under the policy (whereas otherwise coverage would be excluded). It extends coverage, already provided in respect of full-time employees. I doubt it was intended to elevate Mr. Goos to a higher position under the policy.¹⁴ The endorsement itself clearly distinguishes Mr. Goos from "the insured" who is identified as the applicant for insurance, Adrianus Goos a/o All Car Sales & Service.

Lloyd's also relies on the principle of "fair exchange". It argues that the insurer's ability to assess the risk with respect to the identity of the individual being insured and charge an appropriate premium is an important factor in the determination of who is a named insured, and underlies the policy shift making the insurer that provides personal coverage for the insured primarily responsible under the priority rules in the Act. It argues that since General Accident was able to identify Mr. Goos as a driver, assess his personal risks and the risks of the use of his vehicle and charge a substantial premium to include him, he should be treated as a named insured under the policy.

The principle of fair exchange has influenced arbitrators in several arbitration decisions.¹⁵In Warwick, however, the Court of Appeal rejected the view that payment of an additional (although small) premium to cover Ms. Warwick as an "occasional driver" affected interpretation of the provisions in issue or the result in that case. While the Court accepted that payment of a premium could be a factor where liability to pay accident benefits was unclear, it "cannot override the terms of the statute and the Schedule."

In my view, the arbitrator was right in concluding on the facts before him that Henry Goos was not a named insured under the Garage Policy by virtue of being named as an additional insured in the S.E.F. No. 76 endorsement. It is unnecessary to deal with Lloyd's arguments about the effect of a principle of "fair exchange". There is no evidence that any additional premium was assessed for accident benefits coverage. The Premium Computation Statement explaining the basis for rating indicates an additional charge for third party liability and collision damage but not for accident benefits. There was no additional underwriting evidence. It is therefore not obvious that the principle of fair exchange has any application here.

Lloyd’s appeal of the order holding it responsible for paying Mr. Goos benefits is dismissed.

2. The value of lodging, food and cigarettes

Lloyd's disagreed with the arbitrator's calculation of Mr. Goos' gross weekly income. It agreed in principle that Mr. Goos was entitled to include payment-in-kind, but only if he provided adequate proof.

Mr. Goos was the manager of the Cooper Court Hotel, owned by a family-held company of which he was an officer and minority shareholder. The Hotel consisted of a licensed tavern, eating facilities and accommodation. Mr. Goos was in charge of all the operations except the kitchen-restaurant.

Mr. Goos' remuneration consisted of periodic cash draws, plus free accommodation (a three bedroom apartment) and food. The arbitrator also accepted that he received free cigarettes and alcohol as part of his remuneration, although how much was unclear.

The arbitrator fixed the value of Mr. Goos' payment-in-kind at $103.93 a week for accommodation, $109.62 for food and $58.05 a week for cigarettes (two large packs a day). He disallowed any claim for the value of alcohol because he was unable to determine how much liquor was involved.

Lloyd's objects to a number of the arbitrator's findings, particularly his assumption that the value of the board and lodging should be attributed entirely to Mr. Goos rather than divided between Mr. Goos and his wife, Mary-Jean Voutt-Goos. It also appeals his findings regarding Mr. Goos' cigarette consumption.¹⁶

There were certainly problems with the evidence. There was little documentation to support the claim. Mr. Goos did not declare any fringe benefits as income on his income tax returns before the accident, and only did so afterwards, on his own admission, to support his claim for benefits. Even then, the disclosure was incomplete and inconsistent with other documentation. He did not declare the value of any cigarettes and alcohol, or any cash draws, and the value of the board and lodging declared was less than that claimed. There was no documentation at all regarding the provision of free cigarettes and alcohol. The only witnesses were Mr. Goos and his wife and the arbitrator did not accept their testimony as entirely reliable.

Despite the deficiencies in the evidence, which he acknowledged, the arbitrator was entitled to make the findings that he did. In other cases, inadequate documentary records have not necessarily proved fatal provided the applicant is able to offer a satisfactory explanation for his or her claim.¹⁷ It is recognised that not all businesses (particularly small family businesses), keep perfect records or complete tax returns on time or in full. As Director’s Delegate Draper stated in Canadian General Insurance Company and Mills (October 8, 1996, OIC P-005599): " The goal should be finding a reasonable basis for making the calculation, not punishing poor record keepers".

Here, the arbitrator was dealing with a family-owned hospitality business. Given the nature of the business, it is no surprise to find that arrangements were loose and poorly documented and that payment-in-kind was a significant component of the remunerative package. It was also clear to the arbitrator that in return for what he was paid, Mr. Goos worked long and hard in the business. The arbitrator had the advantage of hearing from Mr. Goos and his wife directly. Although he did not accept their testimony in its entirety, he accepted it in part. I do not even have a transcript of what they said. That puts me at a considerable disadvantage.

Prior cases have clearly established that the arbitrator’s factual findings should not be disturbed unless he has made a serious error, such as making findings that are unsupported on the evidence.

I do not find that to be the case. The fact that I, or another arbitrator, might have weighed the evidence differently and reached another conclusion is not sufficient reason to interfere.

Lloyd's main objection is that the arbitrator included the entire value of the accommodation and food in Mr. Goos income rather than splitting it between him and his wife. The arbitrator found that:

The accommodation and food provided by Cooper Court were as a result of the services provided by Mr. Goos and solely as a result of his position.

There was no evidence as to the hours Mrs. Voutt-Goos worked in the business or as to the value of the respective services provided by Mr. Goos and his wife. The arbitrator concluded, therefore, that he could not allocate the food and lodging benefit between them based on the value of work they each did.

Mrs. Voutt-Goos sporadic, voluntary assistance would be fairly compensated for by the unlimited beer and cigarettes provided to her by the business.

Lloyd's disputes these findings. It characterises the operation of the hotel as a family business, involving a joint venture between husband and wife. It argues that the arbitrator’s decision to allocate 100% of the value of accommodation and food to Mr. Goos and treat the provision of free alcohol and cigarettes as Mrs. Voutt-Goos remuneration, is arbitrary and illogical. It asks how the arbitrator can make such a finding in the absence of evidence as to the value of Mrs. Voutt-Goos' services and the value of the cigarettes and alcohol she consumed. It argues further that the arbitrator failed to apply a proper standard of proof in finding in favour of Mr. Goos on this point in the absence of evidence as to the hours his wife worked or the value of their respective services.

While Lloyd’s complaints have some merit, ultimately they do not affect the result. I agree with the arbitrator that the determining factor is the degree to which the benefits were earned as a consequence of employment, not the extent to which they were enjoyed. The arbitrator found that the free accommodation and food was provided solely as a consequence of Mr. Goos' employment and his managerial position. This was a key finding. It renders the other findings Lloyd’s complains of, largely redundant.

Mr. Goos worked long hours managing the bar. His wife was not a shareholder or an employee of the business and was employed as a nurse elsewhere. According to her evidence as accepted by the arbitrator, Mrs. Voutt-Goos helped out in her husband’s bar, but only on a voluntary and sporadic basis. While the arbitrator may not have felt comfortable delineating her exact contribution to the business, he was clearly able to assess her involvement globally and compare her contribution to that of her husband's. He was not required to go further than this.

The arbitrator gave Mr. Goos credit for the value of some cigarettes (two large packs a day), although not as many as Mr. Goos claimed. Lloyd’s objects to this finding citing the absence of reliable independent evidence to corroborate Mr. Goos account and the fact the arbitrator had to rely on evidence as to Mr. Goos smoking habits after the accident to arrive at his level of consumption before it.

The arbitrator heard the testimony of Mr. Goos and his wife as to his cigarette consumption, and accepted it to a degree. He weighed the details of Mr. Goos' smoking habits against the evidence as a whole, including evidence of how much Mr. Goos smoked after the accident, and accepted that the latter likely represented a rough approximation of Mr. Goos' pre-accident usage. In my view, this conclusion was open to him.

Lloyd’s argues that the arbitrator attempted to make up for the deficiency in the evidence about Mr. Goos' cigarette consumption by balancing it against "some level of pre-accident alcohol consumption, which is not otherwise being compensated." In my view, however the arbitrator's comments were not central to his core finding and do not reflect the application of a standard of proof at variance with that required in law. Although he may have had some reservations as to the precise number of cigarettes Mr. Goos consumed, he was not required to fix a number with exactitude, only to assess the value of the cigarettes provided to his satisfaction, on the balance of probabilities. I find that he did this.

I conclude that there is no basis to interfere with the arbitrator's findings as to the value of fringe benefits Mr. Goos received as payment-in-kind. Therefore, Lloyd’s appeal on this ground fails.

3. CPP BENEFITS

The last issue relates to the arbitrator's treatment of Mr. Goos' CPP benefits.

While the amount of Mr. Goos weekly income benefits was a central issue at the arbitration, no issue was taken as regards the insurer's right to deduct CPP benefits paid to the date of the hearing. The parties explained their positions at that time in an agreed statement of facts filed before the arbitrator:

At the commencement of the hearing of the arbitration, counsel for Henry Goos delivered to insurer’s counsel and filed a Schedule showing Canada Pension Plan Disability benefits received by Henry Goos to the date of the hearing. Counsel agreed [Lloyd's emphasis] that the deductibility of Canada Pension Plan Disability benefits received by an insured was not an issue. The state of the law at that time was clear in that Canada Pension Plan Disability benefits received by an insured were deductible from the income replacement benefit payable to the insured.

The arbitration was heard on September 17 and 18, 1996 and the decision was reserved. On October 21, 1996, the Divisional Court rendered its decision in Cugliari v. White et al. (1996), 1996 CanLII 11778 (ON CTGD), 31 O.R. (3d) 42 which held that CPP disability benefits are not payments received or available for loss of income and, hence, not deductible from the award of damages under s. 267(1) (c) of the Insurance Act.

In February 1997, while the decision was still pending, Mr. Goos' lawyer wrote to the arbitrator asking that the hearing be re-opened to allow him to address the deduction of CPP benefits in light of Cugliari. Both parties made additional written and oral submissions. Lloyd's took the position that the parties had entered into a binding settlement disposing of the CPP issue, that tied both Mr. Goos and the arbitrator’s hands.

The arbitrator rejected this argument in a decision dated June 12, 1997. He cited the absence of evidence that Lloyd’s had given any consideration for the position taken by Mr. Goos or that Mr. Goos intended to permanently restrict his right to litigate the issue. He therefore went on to deal with the issue and applied the reasoning in Cugliari, concluding that CPP benefits were not deductible under s. 12(4)(b) of the Schedule. The Court of Appeal has since upheld the Divisional Court's ruling in a decision reported at (1998), 1998 CanLII 5505 (ON CA), 38 O.R. (3d) 641, thereby resolving any issue regarding the substance of the Divisional Court's ruling.

Lloyd’s submits that the parties had negotiated to narrow the issues in the arbitration, with give-and-take on both sides, and had agreed, among other things, that CPP would be deducted. It argues that the arbitrator should not have gone behind the agreement in order to attempt to isolate the consideration given for this single concession. It relies on Canadian Superior Oil Ltd. v. Murdoch (1969), 1969 CanLII 767 (AB SCAD), 4 D.L.R. (3d) 629 (Alta C.A.) aff d (1969), 4 D.L.R. (3d) 464 (S.C.C.) 86. In that case, the parties settled a law suit over an oil and gas exploration lease by confirming the validity of the lease. Later on, one of the parties attempted to revoke the settlement, after subsequent case-law confirmed that the lease would have been invalid. The Court held that the parties were bound by their agreement: "The agreement settled the dispute by the parties agreeing that the lease would be treated as good no matter what the ultimate result of the litigation might be" (p. 637). In other words, the agreement between the parties is intended to allocate the risks of possible defences.¹⁸

The Court rejected arguments that there was no mutuality or consideration for the covenant that the lease was valid. It found that the defendant paid a monetary sum in exchange for the discontinuance of the action and the execution of a unit agreement.

In my view, the facts in Canadian Superior are distinguishable. That case involved a resolution of the law suit between the parties on clear and unequivocal terms, for direct monetary consideration. That is not the case here.

One of the principal goals of the dispute resolution process is early, consensual resolution of issues before arbitration. The enforceability of agreements reached between the parties in this process is governed by the rules of contract and equity, modified by statutory safeguards. Not all accommodations or compromises made in the course of adjudication are in the form of binding contracts. While every contract requires agreement, not every agreement is a contract.¹⁹ In essence, a contract is a bargain with an exchange of values:

Whether consideration rests on the idea of quid pro quo, that is giving something in exchange for something else, or upon the idea that there must be a bargain, it is clear that, for an agreement to be a contract, the promise must somehow have been "bought" by the promisee. (Fridman, p. 9).

Here, the arbitrator had little evidence. An agreed statement of facts, which stated that counsel "agreed" that the deductibility of CPP benefits was not an issue and gave as the reason the then state of the law, was prepared as an aid for the arbitrator. However, there was no record of the terms of a broader agreement and no further evidence was adduced.

It is clear from the record that while the overall amount of Mr. Goos' benefits remained in issue, the parties were able to narrow the focus of the arbitration to certain discrete questions. There is no evidence, however, that they considered the deduction of CPP benefits to be part of a package of concessions. In fact, there is no indication that the deductibility of CPP benefits was ever a point of contention between the parties. Given the then state of the law, they appeared to view the treatment of CPP benefits as a "given". That being the case, I agree with the arbitrator's characterisation of what happened as a gratuitous acknowledgement of the state of the law at that time, rather than part of an enforceable exchange of concessions intended to narrow the scope of the arbitration.

The arbitration proceeded on the central issue of the amount of Mr. Goos' benefits. The effect of his receipt of CPP benefits was integral to the calculation of the amount of benefits. The arbitrator clearly had the jurisdiction to address the question in order to determine the amount of Mr. Goos benefits.

It is not disputed that arbitrators have a broad discretion to reopen a hearing before their final order is issued.²⁰ It is likewise indisputable that the subsequent legal developments were sufficiently important to warrant re-opening the hearing. There is no suggestion that Lloyd’s relied on Mr. Goos initial position to its detriment or that the manner in which the hearing was re-opened was procedurally unfair. That being the case, I find no error in the arbitrator’s determination.

The appeal is dismissed. Mr. Goos is entitled to his reasonable appeal expenses, to be paid by Lloyd' s.

September 25, 1998

Susan Naylor

Director's Delegate

Date

Footnotes

1. 1The title was substituted by O. Reg. 779/93, s. 1.
2. 2The exhibits refer to S.P.F No. 4 which was superseded by O.P.F No. 4
3. 3The exhibits refer to S.E.F No.76, which was superseded by O.E.F No. 76.
4. 4O.P.F. No. 4, paragraph 6.17(c).
5. 5O. Reg. 779/93, s. 2(1) replaced "this Schedule" with "this Regulation"
6. 6S. 270 provides "Any person insured by but not named in a contract to which section.... 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."
7. 7Construing the language in accordance with industry usage is consistent with accepted principles of statutory interpretation, which include consideration of the words' popular sense "meaning ...that sense which people conversant with the subject matter with which the statute is dealing would attribute to it." See Dreidger on the Construction of Statutes, 3rd ed. by Ruth Sullivan, (Toronto: Butterworths, 1994), p. 21
8. 8Portch and Markel insurance Company of Canada; Portch and Royal Insurance Company of Canada, (OIC A-007701 & A-008360, March 20, 1995) p. 19
9. 9Royal Insurance Company of Canada and Markel Insurance Company of Canada and Portch (OIC P-008360 & P-007701, December 17, 1996 ), p. 26
10. 10Movahedi and State Farm Mutual Automobile Insurance Company; Movahedi and Royal Insurance Company of Canada, ( OIC A-006901 & A-008245, June 13, 1995) p. 11
11. 11A. O'Donnell, Q.C, Automobile Insurance in Ontario, (Toronto: Butterworths, 1991) p. 85
12. 12These decisions include Portch and Markel Insurance Company of Canada; Portch and Royal Insurance Company of Canada, (see note 6 and 7); Movahedi and State Farm Mutual Automobile Insurance Company, Movahedi and Royal Insurance Company of Canada, (see note 8); Adabi-Ghomi and Allstate Insurance Company of Canada, Adabi-Ghomi and Wellington Insurance Company, (OIC A-013683 and A-014141, June 28, 1996) appeal dismissed (OIC P96-00065, October 27, 1997); Addai -Agyekum and Coachman Insurance Company; Addai-Agyekum and Citadel Insurance Company, (OIC A-006961 and A-009690, October 13, 1995) appeal dismissed (OIC P96-000013, October 27, 1997, ); Boateng and Coachman Insurance Company; Boateng and Progressive Casualty Insurance Company of Canada, (OIC A-9571 and A009580, January 3, 1996). The arbitrator in Crosbie and Co-Operators General Insurance Company; Crosbie and Pilot Insurance Company, (OIC A-009908 and A-012239, October 16, 1995) and Aujla and Progressive Casualty Insurance Company of Canada; Aujla and Old Republic Insurance Company, (OIC A-951629 and A-951628, March 20, 1996) appeal dismissed (OIC P96-00037, October 27, 1997), decided under the 1994-SABS which deems the individual to be a named insured for the purpose of the Regulation, reached a similar conclusion.
13. 13Collins v. Wright (1988), 1988 CanLII 10406 (ON HCJ), 31 C.C.L.I. 19, (H.C.J.) aff'd [1989] O.J. No. 2416, Doc. 303/88 (December 1, 1989) (C.A)
14. 14The policy documents before me indicate that the business' premium is payroll-based; they do not list the names of any employees. Paragraph 6.13 of the policy lists, under the heading "additional insurers", and subject to certain exceptions, anyone driving or operating an automobile in connection with the business, and "drive-other-vehicle coverage" for active partners and full-time employees supplied with a company vehicle for their regular use, their spouses and the insured's spouse, who are driving another vehicle for pleasure.
15. 15See e.g. Cattrysse and The Westminster Mutual Fire Insurance Company; Cattrysse and Anglo Canada General Insurance Company, (OIC A-001618 and A-001789, June 21, 1993) upheld on other grounds ( OIC P-001618 and P-001789, April 12, 1998)
16. 16The total value of the board and lodging and the price of cigarettes was arrived at through Statistics Canada data and accepted by the parties.
17. 17See e.g. Canadian General Insurance Company and Mills, (OIC P-005599, October 8, 1996); Agha and General Accident Assurance Company of Canada, (OIC A009703, May 31, 1995) appeal dismissed (OIC P-009703, February 27, 1997); Canadian Surety Company and Sebastian, (FSCO P96-00032, July 28, 1998)
18. 18S.W. Waddams, The Law of Contracts, 3rd ed. (Toronto: Canada Law Book, 1993), at p. 263
19. 19G.H.L. Fridman, Q.C. The Law of Contract in Canada 2nd ed. (Toronto:Carswell, 1986), at p. 5
20. 20Dispute Resolution Practice Code, s. 39