Neutral Citation: 2000 ONFSCDRS 192
FSCO A00-000148
FINANCIAL SERVICES COMMISSION OF ONTARIO
BETWEEN:
EDNA SIMCOE
Applicant
and
CGU INSURANCE COMPANY OF CANADA
Insurer
REASONS FOR DECISION
Before:
John Wilson
Heard:
By telephone conference call on September 29, 2000
Appearances:
Stanley B. Pasternak for Ms. Simcoe
Deborah G. Neilson for CGU Insurance Company of Canada
Issues:
The Applicant, Edna Simcoe, was injured in a motor vehicle accident on February 27, 1998. She filed for mediation for payment of non-earner benefit effective August 28, 1998 and ongoing.
At mediation, the mediator reported "... the parties agreed that CGU Insurance would pay a lump sum of $6,602.20 to Ms. Simcoe in exchange for a full and final release for all past and present and future benefits available under the SABS."
Some weeks after the mediation, and prior to the provision of the necessary releases by the Insurer, Ms. Simcoe died.
The issues in this hearing are:
- Have the parties entered into an enforceable settlement of the dispute?
Result:
- The parties entered into an enforceable settlement of their dispute at mediation.
EVIDENCE AND ANALYSIS:
Mr. Pasternak, on behalf of the Estate of Ms. Edna Simcoe, relied upon the report of the mediator, filed with the Application for Arbitration, as support of his contention that a settlement had been reached. According to Mr. Pasternak, only the dilatoriness of CGU in providing the documentation to Ms. Simcoe prevented her from executing the necessary release prior to her death.
Needless to say, the death of Ms. Edna Simcoe, and the subsequent death of her son, Kenneth Simcoe, who had been handling the estate matters complicated the implementation of the settlement for both parties.
At the hearing, CGU did not dispute the validity of the actual settlement, and stated that an order to that effect would resolve all outstanding matters in this dispute.
On the basis of the material before me at the hearing, I find that the parties did settle all claims arising out of the accident at the mediation.
Although the validity of a settlement is a matter for simple contract law, legislation can and does modify the application and enforceability of a contract in specific circumstances.
Regulation 664 of R.R.O. 1990, as amended, known as the settlement regulation, sets out a variety of written notices that the insurer must provide to an insured before a settlement is entered into between an insurer and an insured person. It allows an insured to rescind the settlement within a specified cooling off period. It allows an insured to rescind the settlement outside of the time limit for failure to provide the statements required under the regulation. The regulation assumes that there has been a valid, contractual, settlement, the enforcement of which is made subject to the terms of the regulation.
Essentially, the settlement regulation is a provision for the benefit of the insured, which renders an otherwise valid settlement voidable, at the instance of the insured, for non-compliance with the regulations.
As Arbitrator Baltman noted in Shadd and Prudential (FSCO A97-000364, October 2, 1998): "(T)he Regulation was enacted primarily as a vehicle to protect applicants who, in some cases, may be unrepresented or less sophisticated than insurers."
There is no evidence that CGU complied with the disclosure rules of the settlement regulation. Likewise, there is no evidence that Ms. Simcoe utilized her right to rescind the settlement within the cooling off period or wanted to resile in any way from the agreed settlement.
It would be unconscionable for an insurer to be able to hold up its own default in providing the necessary documentation as a reason for avoiding an otherwise valid settlement. The maxim "Ex dolo malo, non oritur actio" recognizes that "No court will lend its aid to a man who founds his cause of action upon an immoral or illegal act." (Black'sLaw Dictionary) An insurer who relied on his own default to vitiate an otherwise valid settlement could well bring itself within such parameters.
The courts have not been shy in intervening to redress the harm caused by imperfect compliance with statutory or contractual requirements in insurance matters. Usually this takes the form of a request for relief from forfeiture under the Insurance Act. It has long been held, however, that arbitrators have no power to provide such equitable relief.
Arbitrators, however, are mandated to deal with all issues before them, and, although they may not order equitable relief, may apply equitable principles to issues within their statutory mandate.
As Director's Delegate Naylor noted in Branchaud and Co-operators (P96-00048, May 2, 1997) "... the language and the objectives of the Act support the proposition that a Commission arbitrator has implicit power to apply equitable principles in the ordinary exercise of his or her statutory jurisdiction."
In addition, there is jurisprudence suggesting that the courts have jurisdiction to deal with the failure to comply with statutory conditions contained in an insurance policy without resorting to the relief from forfeiture provisions of the Insurance Act.
In Morrow v. The Lancashire Insurance Company, (26 O.A.R. 173), Burton C.J. upheld the decision of Chancellor Boyd holding that an insurer could be estopped, by its conduct, from relying on a failure of strict compliance of a statutory condition. In such a case there would be no need for an insured to rely on the relief from forfeiture provisions of the Insurance Act, but could merely plead estoppel.
I accept that an arbitrator, as well, may deal with a failure of compliance with a statutory condition in a like manner, without resort to relief from forfeiture.
Lord Cairns in Hughes v. Metropolitan Railway Co., (1877) 2 App. Cas. 439 stated at p.448:
It is the first principle upon which all Courts of Equity proceed, that if parties who have entered into definite and distinct terms involving certain legal results- certain penalties or legal forfeiture- afterwards by their own act or with their own consent enter upon a course of negotiation which has the effect of leading one of the parties to suppose that the strict rights arising under the contract will not be enforced or will be kept in suspense, or held in abeyance, the person who otherwise might have enforced those rights will not be allowed to enforce them where it would be inequitable having regard to the dealings which have thus taken place between the parties.
Estoppel, if pleaded by an insured, would preclude an insurer from relying upon non-compliance with a statutory condition, such as the settlement regulation, if an insurer made a promise or assurance which was intended to affect their legal relationship, and the insured relied upon the representation, and acted or changed his or her position in some way.
In Ms. Simcoe's case, CGU offered to settle at mediation. Ms. Simcoe accepted the offer and relied upon CGU to provide the required documentation to formalize the settlement. Through delays, for reasons only known to CGU, the documents were not provided, and Ms. Simcoe died without receiving either the documents or the settlement monies.
I find that Ms. Simcoe and CGU entered into a valid and enforceable settlement at mediation, and adopt the reasons given by Arbitrator Baltman in Shadd and Prudential (supra):
... I conclude that an insurer may not rely upon its failure to comply with the Regulation in order to evade a contract it negotiated with an applicant. Otherwise, insurers could deliberately frustrate settlements where they had second thoughts afterwards, simply by refusing to forward the documents required under the Regulation. This seriously undermines the legislative goal of dispute resolution.
I find that the only reason the settlement provisions were not complied with was the default of CGU in failing to provide the necessary documents within a reasonable time. Consequently, CGU is estopped from raising non-compliance with the settlement regulations as a bar to the enforcement of the agreement reached at mediation.
At the time of the hearing, the evidence before me was that there has been no executor or other representative of the estate of Ms. Simcoe, since the untimely death of her son Kenneth, some months ago. I am advised by Mr. Pasternak, however, that solicitors for the estate of Kenneth Simcoe have begun the process of dealing with the Estate of Ms. Edna Simcoe.
Given the concerns expressed by CGU with regard to the ongoing uncertainty over the status of Ms. Simcoe's estate, I requested submissions from both parties concerning the manner in which any payment of the settlement monies should be made.
The parties made joint submissions as to the manner in which an order should go, and I have incorporated them into my decision and the subsequent order.
EXPENSES:
The parties shall have 30 days from the date of the order in this matter to agree on expenses, failing which they may apply to the Commission for an assessment.
October 20, 2000
John Wilson
Arbitrator
Date
Neutral Citation: 2000 ONFSCDRS 192
FSCO A00-000148
FINANCIAL SERVICES COMMISSION OF ONTARIO
BETWEEN:
EDNA SIMCOE
Applicant
and
CGU 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:
The settlement reached between the parties at mediation is valid and enforceable.
CGU is hereby ordered to pay to Mr. Pasternak, in trust, as solicitor representing the interests of the estate of Ms. Simcoe, $6,602.20, being the amount agreed to as a full and final settlement at mediation.
Mr. Pasternak shall retain the said funds in his trust account until such time as he is able to obtain a release from the authorized representative of the estate of Edna Simcoe for her claim against CGU, and has forwarded the release to CGU.
The parties shall have 30 days to agree on expenses, failing which they may apply to the Commission for an assessment.
September 29, 2000
John Wilson
Arbitrator
Date