KD v. Western Assurance Company, 1999 ONFSCDRS 24

Financial Services Commission of Ontario

Neutral Citation: 1999 ONFSCDRS 24

Appeal P98-00025

OFFICE OF THE DIRECTOR OF ARBITRATIONS

KD Appellant

and

WESTERN ASSURANCE COMPANY Respondent

Before: David R. Draper, Director's Delegate

Counsel: David Hayward (for the KD) Derek Greenside (for Western Assurance)

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 arbitration decision dated June 1, 1998 is confirmed.
2. No appeal expenses are payable.

February 8, 1999

David R. Draper Director's Delegate

Date

REASONS FOR DECISION

I. NATURE OF THE APPEAL

This is an appeal by KD from an arbitration decision dated June 1, 1998, denying her claim for death benefits. She contends the arbitrator erred in concluding she does not qualify as the deceased's "spouse," within the meaning of section 51 of O.Reg 776/93, as amended, the Statutory Accident Benefits Schedule - Accidents after December 31, 1993 and before November 1, 1996 ("the SABS-1994").

II. BACKGROUND

The deceased, a special constable for a regional police force, was killed in a head-on collision on June 19, 1996. At the time of his death, he had been married for more than 12 years and had a son. Shortly after the accident, in July 1996, the deceased's wife applied to their automobile insurer, Western Assurance Company ("Western Assurance"), for death benefits as the sole spousal beneficiary. The arbitrator found that she was unaware of any other potential claim. Western Assurance paid her $107,346.09, the total amount payable based on the deceased's pre-accident income.

In August 1996, after the death benefits were paid, the appellant contacted Western Assurance through her lawyer, claiming death benefits as the deceased's "common law" spouse. She did not claim the full amount, but maintained that she was entitled to share the benefits equally with the deceased's wife. Western Assurance denied her claim, eventually leading to a four-day arbitration hearing in April 1998.

The payment of spousal death benefits is governed by section 51 of the SABS-1994. The dispute involves subsection 51(7), which provides for the sharing of spousal death benefits if the deceased is survived by more than one spouse:

51. (7) If at the time of the accident the insured person had more than one person entitled to claim as his or her spouse, the payment under subsection (1) shall be divided equally between or among such persons who survive the insured person and who at the time of the death were still spouses of the insured person.

This section clearly contemplates an insured person having more than one spouse. However, Western Assurance was not persuaded that the appellant met the definition of "spouse" in section 1 of the SABS-1994, which provides as follows:

1. "spouse" means either of a man and a woman who,

(a) are married to each other,

(b) have together entered into a marriage that is voidable or void, in good faith on the part of the person asserting a right under this Regulation, or

(c) have lived together in a conjugal relationship outside marriage at some point during the previous year and have lived together in a conjugal relationship, outside marriage,

(i) continuously for a period of at least one year, or

(ii) in a relationship of some permanence, if they are the natural or adoptive parents of a child or have demonstrated a settled intention to treat a child as a child of their family;

Western Assurance took the position that the appellant could not meet the definition of "spouse" because for more than 12 years before his death, the deceased was married and maintained a conjugal relationship with his wife that continued up to the time of his death.

The appellant claimed she fit within both parts of subsection (c). First, she maintained that she and the deceased lived together in a conjugal relationship continuously from about May 1995 until his death in June 1996, a period of more than a year. Second, she argued that they lived in a relationship of some permanence and that the deceased had demonstrated a settled intention to treat her daughter from a previous relationship as a child of their family.

At the arbitration hearing, the appellant testified that the deceased was the father of her second child, born in January 1997, after the accident. Western Assurance did not accept that the deceased was the father, although the arbitrator seems to have accepted that he was. In any event, the appellant did not base her claim on this child.

The central difficulty in this case is that the deceased misled both women. The arbitrator accepted that his wife was unaware of any relationship with the appellant. As far as she knew, there was no threat to their ongoing marital relationship. She acknowledged that in the year before the accident, the deceased worked irregular hours and was away two to three days per week. However, she accepted his phony explanation that he was working undercover for the RCMP on dangerous assignments that often took him out of town.

The arbitrator also seems to have accepted the appellant's evidence that although she knew the deceased was married, she understood that he was separated and about to be divorced. The appellant testified that she met him in December 1994 at a bar where she was working part-time. At the time, she was living with another man, the father of her four-month-old daughter, who was on the road much of the time. The appellant claimed that she and the deceased developed a friendship that eventually turned into a sexual relationship on May 18 or 19, 1995, a month or so after her former partner moved out.¹ At that point, she says the deceased began moving his belongings into her home and staying with her most of the time.

It was the appellant's position that the deceased lived with her, spending six nights a week at her house. She understood that he was away one night a week because he had overnight access visits with his son each Tuesday. According to the appellant, this was the consistent pattern unless the deceased was working out of town for the RCMP - the same phony story that he gave his wife. These trips, the appellant testified, happened about once a month for two to five nights.

At the arbitration hearing, both parties called witnesses to support their version of the facts. Western Assurance called the deceased's wife, two of her neighbours, a friend of the deceased's wife, and the appellant's previous partner. The appellant called her mother and father, three friends, a co-owner of her house, a tenant in her house, a real estate agent, and two people who knew the deceased through work and recreation.

The arbitrator accepted that the appellant and the deceased had a relationship, including a sexual relationship, from about May 1995 until the accident in June 1996. However, she concluded that the appellant failed to prove that it amounted a "conjugal relationship," or that the deceased had a "settled intention" to treat the appellant's first child as a child of his family. A major reason for these conclusions was the arbitrator's finding that the deceased continued to live with his wife in a conjugal relationship.

III. ANALYSIS

The appellant does not challenge the arbitrator's factual findings. She claims, however, that too much emphasis was placed on the deceased's subjective intention. In support of this argument, she refers to the following paragraph from page 18 of the decision:

I am therefore convinced by the evidence before me that at the time of his death, the deceased did not intend to leave his wife and for this reason, could not have formed an intention to continuously cohabit with the Applicant. (Emphasis added)

With respect to the "settled intention" test, the appellant claims the arbitrator made a similar error:

Given my finding that the deceased remained at the time of the accident in a conjugal relationship with his wife, I find that he could not have formed a "settled" intention to treat the Applicant's daughter as a child of their family. (p.19, emphasis added)

The appellant argues that the arbitrator erred in rejecting the possibility of two simultaneous relationships. In her submission, the purpose of spousal death benefits in the SABS-1994 is to provide assistance to persons who, due to their relationship with the deceased, are assumed to be economically disadvantaged. She contends, therefore, that the focus should have been on her - was she cohabiting in a spousal relationship that she reasonably believed was mutual? She argues that the legislation does not also require her to prove that the deceased was not cohabiting with anyone else. On the contrary, it specifically contemplates an insured person having more than one spouse.

In my opinion, there is some strength to the appellant's legal argument. However, for reasons that follow, I am not persuaded that the result is undermined even if the arbitrator overstates the importance of the deceased's continuing relationship with his wife. The appellant's position at arbitration was that the deceased had separated from his wife and was living with her. Western Assurance responded, understandably in the circumstances, that there was no separation and, therefore, the appellant could not qualify as the deceased's spouse. The focus was not on simultaneous cohabitation, if that was argued at all. The arbitrator's findings, read in this context, are sufficient to sustain the conclusion that the appellant did not prove her claim.

1. The Law

The law relating to spousal status has been in transition for some time, with a trend toward protecting people from the consequences of integrated, but non-marital, relationships. This is seen in both legislation and judicial decisions. For example, the SABS-1994 introduced a new definition of "spouse" for accident benefits. It reduced the period of cohabitation (or living together in a conjugal relationship) from three years to one year, and changed the wording of paragraph (b), making it clear that some who innocently enters a void or voidable marriage is entitled to spousal status.²

The courts have also acted to protect those involved in non-marital relationships. In Miron v. Trudel (1995), 1995 CanLII 97 (SCC), 2 S.C.R. 418, 124 D.L.R. (4th) 693, [1995] I.L.R. ¶1-3185, the Supreme Court of Canada was asked to decide whether restricting automobile insurance coverage to married spouses was discriminatory, contravening subsection 15(1) of the Canadian Charter of Rights and Freedoms. In a 5-4 decision, the Court held that the legislation was discriminatory and "read up" coverage for unmarried couples by importing a later amendment to the Insurance Act expanding the definition of "spouse" beyond marriage.

The decision in Miron v. Trudel is based on a recognition that not everyone involved in relationships analogous to marriage have chosen to avoid marriage. Justice McLachlin (Sopinka, Cory and Iacobucci JJ. concurring) notes that there are various reasons that couples involved in long-term relationships might not marry, including "the reluctance of one's partner to marry," leaving marital status "beyond the individual's effective control" (p.3427).

Justice L'Heureux-Dubé, deciding with the majority but writing for herself, also rejected the assumption that unmarried couples are exercising a "free choice" not to marry. At page 3417, she states:

In my respectful view, this assumption may mischaracterize the reality of a significant number of persons in non-traditional relationships. This silent and oft-forgotten group constitutes couples in which one person wishes to be in a relationship of publicly acknowledged permanence and interdependence and the other does not:

The two partners in a relationship may not have similar views: while one partner may value personal autonomy, that view may not be shared by the other. One may in fact be anxious to marry, while the other resists it. Whose view of the relationship is to prevail? . . . The flip side of one person's autonomy is often another's exploitation.

[Emphasis added in the original]

(W. Holland, "Marriage and Cohabitation - Has the Time Come to Bridge the Gap?" in Family Law: Roles, Fairness and Equality, Special Lectures of the Law Society of Upper Canada 1993, 369, at p.380.) It is small consolation, indeed, to be told that one has been denied equal protection under the Charter by virtue of the fact that one's partner had a choice.

In my view, this analysis supports the appellant's contention that the focus should be on her. It suggests that the intention of one party to avoid spousal status may not be sufficient to overcome evidence that the nature of the relationship left the other person in the role of a spouse. I am aware of two recent Ontario decisions that have taken this approach.³ While there are other decisions that turn on the subjective intention of the parties, they typically are cases where a shared intention is used to overcome gaps in the objective indicators, such as a period of separation.⁴

For these reasons, I am not prepared to dismiss the appellant's contention that simultaneous cohabitation is possible, although this proposition is far from settled.⁵ However, even if this is the law, it remains legitimate in a case like this to evaluate the nature of the new relationship by looking at the state of the pre-existing one. The more time and attention the person puts into one spousal relationship, the less able he will be to sustain another.

Finally, the case law establishes the importance of economic aspects of the relationship, particularly where spousal status is being determined for an economic purpose.⁶ In Miron v. Trudel, Justices McLachlin and Justice L'Heureux-Dube both emphasize the discrimination involved in extending the economic protections offered by automobile insurance to married couples and their families without extending it to those in analogous, but non-marital, economic arrangements. At page 3430, Justice McLachlin criticizes the legislators' focus on "marriage-like" conjugal relationships, rather than looking at the underlying functional values relevant to the purpose of the Insurance Act - financial interdependence.

Recently, the Ontario Court of Appeal considered the spousal death benefits provisions of the SABS-1994 in AXA Insurance Co. of Canada v. Prince (1998), 1998 CanLII 7123 (ON CA), 40 O.R. (3d) 66. The issue was whether a separation agreement can eliminate a separated-but-not-divorced spouse's right to death benefits under the SABS-1994. The majority (2-1) held that it can. In reaching this decision, Justice Osbourne considered the purpose of the death benefit provisions, stating that it is "to provide some economic assistance to the persons (spouses and dependants) who are assumed, in a statutory no-fault scheme, to be economically disadvantaged as a result of an insured person's death."

In my opinion, therefore, economic arrangements take on particular importance in evaluating spousal status under the SABS-1994.

2. The Facts

In this case, the appellant did not meet the financial aspects of cohabitation. She conceded that she was not financially dependant on the deceased. As the arbitrator points out, the deceased did not have a financial interest in the appellant's house, pay rent or contribute on any formal basis toward utilities or general household expenses. Nor did he and the appellant share any bank accounts, assets or debts, and were not listed as beneficiaries on each other's health or insurance plans.

Further, this was not a lengthy relationship. At best, the appellant barely qualifies with a period of cohabitation of just over one year. However, there was a serious dispute about the amount of time the deceased spent with the appellant. As noted above, the appellant claimed he had separated from his wife and was living with her. She testified that he was at her house six nights a week unless he was out-of-town, which happened about once a month. This conflicted with the wife's evidence. She claimed that he continued to live with her, although he worked erratic hours and was away two to three nights per week.

Although the arbitrator's finding could have been stated more clearly, I find it implicit in her decision that she preferred the wife's evidence. At page 17, she states that she has no hesitation in finding that the deceased was still living with his wife and son at the time of the accident. In evaluating the appellant's evidence, she makes the following finding:

What, in my view, the Applicant has established is that the deceased physically stayed at her house on and off for about 13 months, from May 1995 to June 1996. (p.17)

In my view, this is a substantial rejection of the appellant's position. The arbitrator's finding that the deceased stayed at the appellant's house "on and off" is inconsistent with the appellant's assertion that he generally was there six nights a week. After reviewing the evidence, including the transcript, I find nothing surprising in the arbitrator's assessment. For example, when the appellant's counsel asked her the critical question of when the deceased moved in, she testified as follows:

He actually never seemed - - - to me I believed that he was there from that time [May 18 or 19, 1995], ever since that time that he stayed over with me he seemed to be there.

His clothes slowly came in and he had his own drawer and he had a lot of clothes in his car, a lot of possession [sic] in his car, and he just was there from that time on. He resided there, he came there from work and left from there to work, and that was it.

Much of the other testimony of the appellant and her witnesses is similarly vague. As I read the decision, the arbitrator concluded that the appellant's intention to continue the relationship toward marriage was insufficient to overcome the gaps in the objective factors in the absence of credible evidence of a mutual intention on the part of the deceased. This conclusion was available to the arbitrator on the evidence before her and should not be second-guessed on appeal.

IV. EXPENSES

Because the arbitration in this matter was commenced after November 1, 1996, expenses are governed by the 1996 amendments to the Insurance Act and the expense regulation (R.R.O. 1990, Reg. 664). These amendments opened the possibility of expenses being ordered in favour of insurers and set out the criteria to be considered in awarding expenses to either party.

The appellant submits that her appeal raised important and novel issues and, therefore, Western Assurance should be ordered to pay her reasonable appeal expenses regardless of the outcome. These expenses include the cost of the transcript of the arbitration hearing that she says was ordered because Western Assurance took the position it was required.

Western Assurance opposes the appellant's request, arguing that she should be ordered to pay its expenses. It contends that the appeal was without merit, essentially objecting to the arbitrator's assessment of the evidence. Further, it contends that the appeal was pursued due to the implications of the arbitration decision on other pending litigation. Finally, Western Assurance argues that the appellant shifted her position on the importance of hearsay evidence about the deceased's intention. At the arbitration, she argued for the admission of this evidence, but objected on appeal to the arbitrator's reliance on it.

I accept that this was a legitimate appeal, raising genuine legal issues. As a result, I am not persuaded that the appellant should be ordered to pay Western Assurance's expenses. However, I am not convinced that the issues raised were of sufficient general importance that Western Assurance should be expected to bear the cost. Nor am I persuaded that the appellant had to order the arbitration transcript. Her position was that this was an appeal on the law, not the facts. In response to Western Assurance's argument that it was an appeal on the facts requiring a transcript, she should have either maintained her position or asked for a ruling. In the circumstances, the parties will bear their own expenses.

February 8, 1999

David R. Draper Director's Delegate

Date

Footnotes

1. 1The appellant's former partner said he moved out later, but the arbitrator did not accept his evidence.
2. 2The successor to the SABS-1994, O.Reg. 403/96, as amended, the Statutory Accident Benefits Schedule - Accidents on or after November 1, 1996, went back to using the definition of "spouse" in the Insurance Act, as amended. While this definition requires a three-year cohabitation (as applied under the predecessor to the SABS-1994), paragraph (b) was amended to include the SABS-1994 wording for void or voidable marriages.
3. 3Mahoney v. King (1998), 1998 CanLII 29658 (ON CTGD), 39 R.F.L. (4th) 361 (Ont. Gen. Div.); Thauvette v. Malyon (1996), 1996 CanLII 8090 (ON CTGD), 23 R.F.L. (4th) 217 (Ont. Gen. Div.).
4. 4For example, Sanderson v. Russell (1979), 1979 CanLII 2048 (ON CA), 9 R.F.L.(2d) 81 (Ont. C.A.); Dicks v. Zavitz (1979), 1979 CanLII 3583 (ON PROVCT), 13 R.F.L. (2d) 179 (Ont. Prov. Ct.).
5. 5In an annotation to the Mahoney decision, cited above, Professor James G. McLeod expresses serious concerns about the direction family law seems to be headed in this area.
6. 6For example, see Stoikiewicz v. Filas (1978), 1978 CanLII 1328 (ON HCJ), 7 R.F.L (2d) 366 (Ont. U.F.C.).