Financial Services Commission of Ontario

Neutral Citation: 2002 ONFSCDRS 15 FSCO A00-000717

Between: Farida Govani and Sadruddin Govani (Applicants) and Motor Vehicle Accident Claims Fund (Insurer)

Decision on a Preliminary Issue

Before: Suesan Alves Heard: By written submissions received by October 29, 2001.

Appearances: Henry Goldentuler for Mr. and Mrs. Govani Giovanna Roccamo for Motor Vehicle Accident Claims Fund

Issues:

Mr. and Mrs. Govani were injured in a motor vehicle accident on July 27, 1999, in California, U.S.A. They allege that the Motor Vehicle Accident Claims Fund, ("The Fund") has an obligation to pay their statutory accident benefits, pursuant to the Statutory Accident Benefits Schedule — Accidents on or after November 1, 1996 (the "Schedule"). The Fund disputes any such obligation. The Fund also disputes that an arbitrator at the Financial Services Commission of Ontario can deal with the issues raised in this arbitration. Mr. and Mrs. Govani disagree.

The preliminary issues are:

1. Does an arbitrator have jurisdiction to address the questions raised in this arbitration or to grant the relief sought by the Applicants?
2. Does this proceeding duplicate an action brought by the Applicants before the Ontario Superior Court of Justice?

Result:

1. An arbitrator has jurisdiction to decide the questions necessary to determine this dispute and to grant the relief claimed.
2. This proceeding does not duplicate the Applicants' court action.
3. If the parties are unable to agree on the question of expenses, that issue may now be addressed.

EVIDENCE AND ANALYSIS:

Mr. and Mrs. Govani were injured in a motor vehicle accident on July 27, 1999, in California, U.S.A. They allege that as they are uninsured residents of Ontario, the Motor Vehicle Accident Claims Fund is obliged to pay their statutory accident benefits, pursuant to the Statutory Accident Benefits Schedule — Accidents on or after November 1, 1996 (the "Schedule”). The Fund disputes any such obligation, and submits that it is only obliged to pay such benefits to uninsured residents of Ontario injured in motor vehicle accidents which take place within Ontario.

The Fund brought this motion for a ruling as to whether a FSCO arbitrator is prevented from dealing with the issues raised in this arbitration. Firstly, the Fund submits that the inquiry required is beyond the scope of an arbitrator's jurisdiction; secondly, the remedy sought is one which is in the exclusive jurisdiction of a superior court; and thirdly, this proceeding duplicates an action commenced by Mr. and Mrs. Govani in the Ontario Superior Court of Justice.

At this hearing, it is not my role to decide the merits of the case. The Applicants allege that they are entitled to benefits under section 57 of the Schedule. That section deals with accidents outside Ontario, and provides:

57. (1) If, as a result of an accident in another province or territory of Canada or a jurisdiction in the United States of America, a person insured in that jurisdiction dies or sustains an impairment or incurs an expense described in section 14, 15 or 16, the insurer shall pay, as the person may elect,

(a) benefits provided by this Regulation, other than the benefits referred to in clause (b); or

(b) benefits in the same amounts and subject to the same conditions as if the person was a resident of the jurisdiction in which the accident occurred and was entitled to payments under the law of that jurisdiction.

(1.1) Subsection (1) does not apply if the person receives benefits under the law of the jurisdiction in which the accident occurred. O.Reg. 462/96, s.8(1)

(2) A person who elects to claim a benefit as provided in clause (1) (a) is thereafter eligible only for benefits referred to in that clause.

(3) A person who elects to claim a benefit as provided in clause (1) (b) is thereafter ineligible for benefits referred to in clause (1) (a).

(4) For the purpose of this Part, a person is insured in the jurisdiction in which the accident occurred if the person, at the time of the accident,

(a) was authorized by law to be or to remain in Canada and was living and ordinarily present in Ontario;

(b) met the criteria prescribed for recovery under the law of the jurisdiction in which the accident occurred;

(c) was not the owner or driver of, or an occupant of an automobile registered in the jurisdiction in which the accident occurred; and

(d) was,

(i) an occupant of the insured automobile,

(ii) the named insured, a person specified in the policy as a driver of the insured automobile, the spouse of the named insured or a dependant of the named insured or spouse, while the occupant of any automobile,

(iii) a person who was not the occupant of an automobile and was struck by the insured automobile,

(iv) the named insured, his or her spouse or a dependant of either of them and was struck by any automobile,

(v) if the named insured is a corporation, unincorporated association, partnership or sole proprietorship, a person for whose regular use the insured automobile was supplied, his or her spouse or a dependant of either of them who suffered an impairment,

(A) while the occupant of any automobile,

(B) by any automobile while not the occupant of the automobile, or

(vi) a person struck by an automobile that was driven by a person described in subclause (i), (ii) or (v).[O. Reg. 462/06; O.Reg. 114/00, s.6]

The Fund alleges that the Govanis had insurance coverage, while the Govanis allege they did not. Failing agreement by the parties, it will be up to an arbitrator to decide the questions of coverage and entitlement to benefits.

The scope of the arbitrator's jurisdiction

The Fund submits that an arbitrator at the Financial Services Commission of Ontario has no jurisdiction to interpret the provisions of section 268 of the Insurance Act and section 6 of the Motor Vehicle Accident Claims Act.

(a) Section 268 of the Insurance Act

Section 268 of the Insurance Act sets out the rules to be applied when determining which insurer is liable to pay statutory accident benefits to occupants and non-occupants of automobiles involved in an accident. Under those rules, a person has recourse against the Fund only if recovery is unavailable from other insurers.

The Fund asserts that there is another insurer involved from whom recovery of accident benefits should be pursued. The exchange of documents between the parties has not yet revealed the identity of this other insurer or insurers.

However, in the event of a dispute between the Fund and an insurer, I find the Priorities Dispute Regulation, O.Reg. 283/95 would apply. Section 1 of that Regulation provides that "All disputes as to which insurer is required to pay benefits under section 268 of the Act shall be settled in accordance with this Regulation."

In this arbitration, the Fund asserts that it is not an insurer. Section 11 of the Regulation provides that "If the Motor Vehicle Accident Claims Fund receives an application for benefits, section 4 and 5 do not apply and the insured person is not entitled to initiate or participate as a party in an arbitration under section 7." This section contemplates the situation in which the Fund receives an application for accident benefits and wishes to dispute that it is required to pay benefits under section 268 of the Act. Section 4 of the Regulation requires an insurer which disputes its obligation to pay benefits under section 268 of the Act to give notice to the insured person. Section 5 permits the insured person to object to the proposed transfer of the claim to another insurer or insurers.

I find that the combination of sections 4, 5, and 11 of the Regulation appears to recognize the Fund as an insurer. An insurer would normally be subject to the requirements of sections 4 and 5, but section 11 relieves the Fund from complying with these requirements. Thus, in the absence of section 11, the Fund would be treated like any other insurer. The necessary implication is that the Fund is an insurer for the purposes of the Regulation.

The Priorities Dispute Regulation requires that such disputes be decided by an arbitrator appointed under the provisions of the Arbitrations Act, 1991, not by an arbitrator at FSCO, or by a court. Since section 2 of the Regulation expressly obliges the first insurer which receives a completed application for benefits to pay benefits pending the resolution of any priority disputes in a different forum, the existence of a priority dispute is not a basis for delaying or preventing an arbitration dealing with the question of entitlement to statutory accident benefits.

I find, in this case, the Fund is the first insurer which received a completed application for benefits arising out of the accident of July 27, 1999.

(b) Section 6 of the Motor Vehicle Accident Claims Act

The Fund submits that an arbitrator at FSCO does not have jurisdiction to determine whether section 6 of the Motor Vehicle Accident Claims Act should be applied to accidents which occur outside of Ontario. The Fund submits that a person is only entitled to be paid statutory accident benefits by the Fund under section 6 of the Motor Vehicle Accident Claims Act, R.S.O. 1990, c. M.41, as amended, once a person has recourse to the Fund.

Section 6 provides:

6.--(1) Any person who has recourse against the Fund for no-fault benefits under section 268 of the Insurance Act may make application, in a form prescribed by the Minister, for payment out of the Fund of the benefits. R.S.O. 1990, c. M.41, s. 6 (1).

(2) If a person has recourse against the Fund under section 268 of the Insurance Act,

(a) a reference to an insurer in the Statutory Accident Benefits Schedule shall be deemed to be a reference to the Fund and a reference to an insured person shall be deemed to be a reference to the person who has recourse against the Fund; and

(b) sections 272, 274 and 279 to 287 of the Insurance Act apply with necessary modifications. R.S.O. 1990, c. M.41, s. 6 (2); S.O. 1993, c. 10, s. 54 (2).

(3) The Minister shall make payment out of the Fund of the amounts owing to a person described in subsection (2). R.S.O. 1990, c. M.41, s. 6 (3).

The Fund submits that section 6 of the Motor Vehicle Accident Claims Act comes into play once a person has recourse against the Fund, not before. Consequently, only after that determination has been made do sections 279 to 287 of the Insurance Act apply. "Therefore, any jurisdiction granted to an arbitrator pursuant to s. 282 of the Insurance Act is valid only once it has been determined that a person has recourse against the Fund in the first place and the matter is properly before the Arbitrator."

The Fund also submits that because such a finding "requires a finding on the legislative interpretation of section 6 of the Motor Vehicle Accident Claims Act," including the question of whether it should be applied to accidents which occur outside of Ontario, "the issue in dispute, although framed as a question of entitlement to accident benefits, is, in pith and substance a dispute over the interpretation of section 6 of the Motor Vehicle Accident Claims Act within the context of that legislation as a whole." The Fund submits that this is beyond the jurisdiction of an arbitrator at the Financial Services Commission of Ontario appointed by the Director under section 282 of the Insurance Act.

I disagree with the Fund's submissions. In my view, the Fund's submission concerning an arbitrator's jurisdiction does not take into account additional provisions of the Insurance Act which address an arbitrator's jurisdiction, and arbitral case law.

Sections 279 to 288 of the Insurance Act are in the section headed Dispute Resolution — Statutory Accident Benefits. However, additional provisions of the Act address the jurisdiction of an arbitrator at FSCO. In particular, section 20(2) of the Insurance Act, R.S.O. 1990, c.I.8, (the "Act") provides that an arbitrator at the Financial Services Commission of Ontario has:

exclusive jurisdiction to exercise the powers conferred upon him or her under this Act and to determine all questions of fact or law that arise in any proceeding before him or her and, unless an appeal is provided under this Act, his or her decision thereon is final and conclusive for all purposes. [emphasis added]

FSCO arbitrators are explicitly empowered to determine all questions of fact or law which bear on issues before them. I find that the statutory language in this section of the Act confers express authority on FSCO arbitrators to determine all questions of law in any proceeding before them by virtue of section 20 of the Insurance Act. I find that whether the interpretation of section 6 of the Motor Vehicle Accident Claims Act arises in this proceeding, and this involves a question of law, fact, or mixed fact and law, section 20 of the Insurance Act provides an arbitrator with the requisite jurisdiction to determine such questions.

In the case of Abdulbaki and Royal Insurance Company of Canada (OIC A-010205, December 12, 1995), Mr. Abdulbaki claimed entitlement to statutory accident benefits. He sought a ruling as to whether he reached a binding agreement with Royal. Royal submitted that such a question was beyond the scope of an arbitrator's jurisdiction, and should be decided by a court. Royal characterized Mr. Abdulbaki's motion as one in which he sought specific performance of the alleged agreement, together with damages. Arbitrator Palmer concluded that the question which Mr. Abdulbaki raised was a preliminary question which she must decide before determining the ultimate question of entitlement to statutory accident benefits. Arbitrator Palmer held:

In my view, the first issue in this case can be seen as a preliminary question, the determination of which is a precondition to the determination of entitlement to statutory accident benefits. The ultimate question before me at the arbitration hearing is whether Mr. Abdulbaki is entitled to further statutory accident benefits. In some cases, this question may be answered directly by the presentation of evidence about an applicant’s medical condition. However, in other cases, arbitrators are first called upon to determine such questions as "was there an accident, as defined in the Schedule," "was the applicant an insured person, as defined in the Schedule," "did the applicant sustain an injury in the accident." In this case, in the first instance, the question is whether a settlement of the issue of entitlement has already taken place.

I agree with Arbitrator Palmer's reasons. In Branchaud and Co-operators Insurance Company (OIC P96-00048, May 2, 1997), Director's Delegate Naylor expressly agreed with those reasons. Similarly, in this case, in the course of determining whether the Applicants are entitled to statutory accident benefits, an arbitrator may be required to interpret the provisions of section 6 of the Motor Vehicle Accident Claims Act to determine whether the Fund is the insurer in this case.

Further, if the Fund's argument were correct, then anyone who alleged that the Fund was obliged to pay statutory accident benefits would be prevented from exercising the choice of bringing their dispute to arbitration or court. However, one of the key aspects of the Dispute Resolution provisions of the Insurance Act is that insured persons are provided with a choice of the forum in which their disputes are to be decided. Barring any express indication in the Motor Vehicle Accident Claims Act or the Insurance Act that the Fund is excluded from the dispute resolution process, my interpretation means the scheme set out under the Motor Vehicle Accident Claims Act can operate harmoniously with the dispute resolution process under the Insurance Act and the Schedule.

The remedy argument

In this arbitration, the Applicants claim statutory accident benefits under the Schedule, interest on overdue benefits, expenses and a special award. They seek a decision as to whether they are entitled to those benefits and the amount of those benefits. Section 279(1) of the Insurance Act confers jurisdiction to deal with questions of entitlement to and the amount of statutory accident benefits. An arbitrator has the jurisdiction to grant a special award under section 282(10) of the Insurance Act. I find that an arbitrator has the authority to determine the questions the Applicants seek to have resolved.

I am not persuaded by the Fund's submission that the relief sought by the Applicants is properly characterized as a declaration of rights based on the interpretation of legislation under the Motor Vehicle Accident Claims Act, or that the relief sought involves the granting of extraordinary remedies and equitable relief.

I accept that at one point in time, counsel for the Govanis, in the course of a pre-hearing discussion, did seek a determination on the legal issue in the absence of the factual underpinnings. However, the Fund alleges that the arbitrator before whom that request was made was not prepared to entertain the hearing of an academic dispute. At that point the Fund was submitting that there was a real likelihood that other insurers were responsible for the claims being advanced against the Fund. In subsequent discussions before me, I have made production orders to facilitate this process.

The duplicate proceedings argument

The Fund further submitted that the Applicants had commenced a court action which dealt with the same questions they raised in this arbitration. The relief sought in the applications for arbitration filed with the Registrar on June 11, 2000 in relation to Mrs. Govani is for treatment in the amount of $8,750 and $903.57US under section 4 of the Schedule, housekeeping and home maintenance in the amount of $1,800 and ongoing under section 22 of the Schedule, the cost of examinations in the amount of $1,200 for an assessment by an occupational therapist under section 24 of the Schedule, interest and expenses.

The relief sought on behalf of Mr. Govani is the cost of treatment in the amount of $6,430 which is ongoing under section 14 of the Schedule, the cost of examinations for the cost of a disability certificate in the amount of $75 under section 24 of the Schedule, interest and expenses.

Counsel for the Applicants filed a copy of the Statement of Claim commenced by Farida Govani and Sadruddin Govani as Plaintiffs against John P. Joyce, George Robinson Leasing Company and the Motor Vehicle Accident Claims Fund in the Ontario Superior Court of Justice as No. 56391/00 on August 25, 2000.

According to paragraphs 1 and 2 of the Claim each Plaintiff claims from the Defendants, jointly and severally, pecuniary and non-pecuniary damages, damages pursuant to section 61 of the Family Law Act, pre-judgment interest, post-judgment interest, costs and such further and other relief as the Court may deem just. On the face of it, those claims do not duplicate the claim as framed in the arbitration application for various statutory accident benefits under section 57 of the Schedule.

The Fund relies on paragraphs 7 and 8 of the pleadings, which state:

7. The Defendant, The Motor Vehicle Accident Compensation Fund is a government body, enacted by Ontario statute, with the mandate of compensating victims of motor vehicle accidents, who are unable to obtain adequate compensation from private insurers.

8. The Plaintiffs plead and rely upon the provisions of the said statute and state that they are entitled to Judgement against the defendant, Motor Vehicle Accident Compensation Fund, for all sums that they may be entitled to recover from an uninsured and/or under insured automobile owner or driver.

The Fund submits that there are only two sections of the Motor Vehicle Accident Claims Act under which it can be obliged to pay persons who have been injured in an accident, namely, sections 4 and 6. The Fund submits that since neither claim as framed in the action can succeed, then the claim before the Court can only be a claim for accident benefits, and the Applicants must choose to proceed in one forum, namely, the Ontario Superior Court of Justice.

Even if the Fund's submissions — that the action as framed cannot succeed against the Fund — are accepted by the Court, it does not necessarily follow that the Claim against the Fund in that forum is one for statutory accident benefits. For example, the Court could dismiss the action as against the Fund on the basis that it discloses no cause of action, if it accepted the Fund's submission.

For these reasons, I reject the Fund’s submission that the arbitration application duplicates the Claim in the Superior Court of Justice. I also conclude that an arbitrator has the jurisdiction to deal with all the questions which the Fund submits require a determination in this arbitration.

EXPENSES:

If the parties are unable to agree on expenses of this hearing, the parties should contact the case administrator to arrange further submissions in this regard.

January 18, 2002

Suesan Alves Arbitrator

Arbitration Order

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

1. An arbitrator has jurisdiction to decide the questions necessary to determine this dispute and to grant the relief claimed.
2. This proceeding does not duplicate the Applicants' court action.
3. If the parties are unable to agree, the question of expenses may now be addressed.

January 18, 2002

Suesan Alves Arbitrator