Kathy Lammie v. Royal & SunAlliance Insurance Company of Canada, 1999 ONFSCDRS 22

Neutral Citation: 1999 ONFSCDRS 22

FSCO A98-000853

FINANCIAL SERVICES COMMISSION OF ONTARIO

BETWEEN:

KATHY LAMMIE

Applicant

and

ROYAL & SUNALLIANCE INSURANCE COMPANY OF CANADA

Insurer

REASONS FOR DECISION

Before:

David Evans

Heard:

December 22, 1998, in Kitchener, Ontario.

Appearances:

Alexander R. McIntyre for Ms. Lammie

Derek Greenside for Royal & SunAlliance Insurance Company of Canada

Issues:

The Applicant, Kathy Lammie, is a former spouse of Robert Andrew Brady, who was fatally injured in a motor vehicle accident on January 8, 1997. She is the natural mother of Jennifer Lynn Brady and Kailey Brady. Mr. Brady was an "insured person" under a policy with Royal & SunAlliance Insurance Company of Canada ("Royal"). Ms. Brady applied to Royal for death benefits payable under paragraphs 2 and 4 of subsection 25(2) of the Schedule.¹ Royal alleges that the insured person, Mr. Brady, was not obligated at the time of the accident, to provide support to Ms. Kathy Lammie under a domestic contract or court order, and accordingly Ms. Lammie does not qualify for benefits under either paragraphs 2 or 4. The parties were unable to resolve their disputes through mediation, and Ms. Lammie applied for arbitration at the Financial Services Commission of Ontario under the Insurance Act, R.S.O. 1990, c.I.8, as amended.

The issues in this hearing are:

1. Is Ms. Lammie entitled to death benefits pursuant to paragraph 2 of subsection 25(2) of the Schedule as a person to whom the insured person had an obligation at the time of the accident to provide support under a domestic contract or court order?

2. Is Ms. Lammie entitled to death benefits pursuant to paragraph 4 of subsection 25(2) of the Schedule as a former spouse to whom the insured person was obligated at the time of the accident to provide support under a domestic contract or court order?

In both cases, the entitlement depends upon the meaning of the undefined word "support."

3. Is Royal liable to pay Ms. Lammie's expenses in respect of the arbitration under section 282(11) of the Insurance Act?

4. Is Ms. Lammie entitled to interest on outstanding payments pursuant to subsection 46(2) of the Schedule?

Result:

1. Ms. Lammie is not entitled to death benefits pursuant to either paragraphs 2 or 4 of subsection 25(2) of the Schedule.

2. Royal & SunAlliance Insurance Company of Canada shall pay Ms. Lammie's expenses in respect of the arbitration under section 282(11) of the Insurance Act.

EVIDENCE AND ANALYSIS:

Ms. Kathy Lammie testified that she married Robert Brady on April 8, 1978. They separated in July 1992, and she stayed in the matrimonial home with their children, Jennifer Lynn Brady and Kailey Brady. The parties then signed a domestic contract. Paragraph 5.01(1) of this Separation Agreement dated December 1, 1993 reads: "The Husband and Wife agree that there shall be no support or maintenance payable by one to the other." Pursuant to paragraph 5.02, Mr. Brady did agree to pay his wife the sum of $250 per month per child. Ms. Lammie testified that Mr. Brady provided the child support by means of postdated cheques made out in her name. She deposited them in her general account from which she paid general household expenses such as the mortgage, upkeep, clothing, and items for the children. Her pay cheque was also deposited into this account.

Ms. Lammie testified that the divorce was finalized on July 16, 1994, and she remarried on October 22, 1994. Robert Brady died on January 8, 1997. Jennifer Lynn and Kailey Brady received $20,000 each in death benefits pursuant to paragraph 2 of subsection 25(2) of the Schedule. Furthermore, an additional $25,000 available under paragraph 3 has been paid into court pending the resolution of Jennifer Lynn and Kailey's entitlement to a share in the funds.

The children also have received a Canada Pension Plan survivor's benefit since 1997.

Ms. Lammie testified that this CPP benefit was payable to her for her daughters and taxable in her hands, just as she paid tax on the child support payments from 1994 to 1996.

Ms. Lammie claims entitlement to a death benefit under both paragraphs 2 and 4 of subsection 25(2) on the basis that Mr. Brady was obligated at the time of the accident "to provide support under a domestic contract."

Subsection 25(2) of the Schedule sets out a number of death benefits. Paragraph 1 provides for a payment to the insured person's spouse. Paragraph 2 provides for a payment to the insured person's dependants. If no payment is required under paragraph 1, paragraph 3 provides for an additional payment to the dependants; a former spouse is specifically excluded under paragraph 3. Former spouses may receive payment under paragraph 4. I cite paragraphs 2 and 4 in more detail:

2. A payment to each of the insured person's dependants, and to each person to whom the insured person had an obligation at the time of the accident to provide support under a domestic contract or court order, ...

3. A payment of $10,000 to each former spouse of the insured person to whom the insured person was obligated at the time of the accident to provide support under a domestic contract or court order.

[Italics added]

I will deal with paragraph 4 first, since it is simpler to interpret than paragraph 2.

Can the Separation Agreement be interpreted to provide "support" to Ms. Lammie, notwithstanding the specific exclusion of spousal support? To bolster this proposition, Ms. Lammie referred to paragraph 5.02 of the Agreement, which ends as follows: "The support payments shall be deemed to be taxable in the hands of the Wife and deductible in the hands of the Husband, pursuant to the Income Tax Act." However, paragraph 5.02 is entitled "Child Support and Maintenance." I find that in this context "support" refers to child support.

Ms. Lammie submits that the child support payments nonetheless fit within paragraph 4 because "support" can mean any kind of support, whether child or spousal. If the Legislature had intended to limit the test to spousal support, it could have inserted the word "spousal." It did not do so because the custodial parent gains an economic benefit from the child support payments.

Ms. Lammie referred to Paras v. Paras, 1969 CanLII 72 (SCC), [1970] 1 O.R. 130 (C.A.), in which the court recognized that an appropriate formula for determining child support would tend to preserve a higher standard of living in the custodial home, thus providing an indirect benefit to the custodial parent.

However, if Ms. Lammie received an indirect benefit from the child support payments, then it follows that she also received an indirect benefit from the death benefits the children received. I am not convinced that such an indirect benefit can be construed as "support." I find that paragraph 4 requires the following condition: that at the time of the accident Mr. Brady was providing support to Ms. Lammie pursuant to a domestic contract or court order. I find that in this context "support" refers to spousal support; that is, support to Ms. Lammie. That condition has not been met.

Royal cited AXA Insurance Company of Canada v. Prince (1998), 1998 CanLII 7123 (ON CA), 40 O.R. (3d) 66 (C.A.). In that case two "spouses" were claiming the equivalent of the paragraph 1 spousal benefit under the previous Schedule² The insured and the first spouse had separated in 1990 and signed a separation agreement in 1992, some three years before the husband's death in 1995. In considering the relevance of the parties' separation agreement and its "clean break philosophy," Osborne J.A. wrote that "their agreement should be taken into account to determine if the claimant spouse ... is entitled to an equal share of the death benefit." That relevance is even stronger where, as here, the legislation specifically refers to the agreement of the parties. The parties agreed that there would be no spousal support, and the legislation requires spousal support as a condition for payment. Accordingly, I find that Ms. Lammie is not entitled to payment under paragraph 4.

Turning to paragraph 2, as the "obligation to provide support" tests in paragraphs 2 and 4 are identical (I find no difference between the phrase "had an obligation" in the former and the phrase "was obligated" in the latter), a former spouse failing the paragraph 4 test also fails the paragraph 2 test. Accordingly, I find that Ms. Lammie is also not entitled to payment under paragraph 2.

In light of these findings, I do not have to determine whether an ex-spouse who qualifies under paragraph 4 also qualifies under paragraph 2. If so, then paragraph 4 appears redundant. Perhaps the phrase "other than a former spouse of the insured person" used in paragraph 3 has to be read into paragraph 2 to make sense of the legislative scheme. However, that is not for me to decide.

EXPENSES:

On January 18, 1999, I confirmed my decision to the parties on this matter, other than expenses. Rule 73.2 of the Dispute Resolution Code — Third Edition sets out criteria under which I can award expenses to either party. The parties responded with written submissions.

I find that, although Ms. Lammie was not successful, her counsel presented a novel issue requiring interpretation efficiently and concisely. I believe these factors offset the fact that Mr. Greenside for Royal had suggested conducting the hearing by way of telephone conference call. Ms. Lammie's testimony was short, and Mr. McIntyre submitted that her expenses would only be marginally greater as a result of her testifying.

Accordingly, I exercise my discretion to award Ms. Lammie her expenses incurred in this arbitration.

January 29, 1999

David Evans

Arbitrator

Date

Neutral Citation: 1999 ONFSCDRS 22

FSCO A98-000853

FINANCIAL SERVICES COMMISSION OF ONTARIO

BETWEEN:

KATHY LAMMIE

Applicant

and

ROYAL & SUNALLIANCE INSURANCE COMPANY OF CANADA

Insurer

ARBITRATION ORDER

Under section 282 of the Insurance Act, R.S.O. 1990, c.I.8, as amended, it is ordered that:

1. Ms. Lammie is not entitled to death benefits pursuant to either paragraphs 2 or 4 of subsection 25(2) of the Schedule.

2. Royal & SunAlliance Insurance Company of Canada shall pay Ms. Lammie's expenses in respect of the arbitration under section 282(11) of the Insurance Act.

January 29, 1999

David Evans

Arbitrator

Date

Footnotes

1. 1The Statutory Accident Benefits Schedule —Accidents on or after November 1, 1996, Ontario Regulation 403/96, as amended by Ontario Regulations 462/96, 505/96 and 551/96.
2. 2Ontario Regulation 776/93, the Statutory Accident Benefits Schedule —Accidents After December 31, 1993 and Before November 1, 1996