Financial Services Commission of Ontario

Commission des services financiers de l’Ontario

Neutral Citation: 2002 ONFSCDRS 181

Appeal P01-00028

OFFICE OF THE DIRECTOR OF ARBITRATIONS

ZURICH INSURANCE COMPANY

Appellant

and

RICK HISSON

Respondent

Before:

Stewart M. McMahon

Representatives:

Jonathan A. Schwartzman for Zurich

Helen Fortinos for Mr. Hisson

Hearing Date:

March 26, 2002

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 order dated May 15, 2001, is confirmed.

2. Zurich Insurance Company shall pay Mr. Hisson's appeal expenses.

November 15, 2002

Stewart M. McMahon Director's Delegate

Date

REASONS FOR DECISION

I. NATURE OF THE APPEAL

Becky-Jo Hisson was killed in a tragic automobile accident on June 11, 1999. Zurich Insurance Company ("Zurich") paid a death benefit of $10,000 to Becky-Jo's mother, Shirley Hisson, pursuant to s. 25(2)5.i of the SABS-1996.¹ Zurich refused to make an additional payment to her father, Rick Hisson. The Arbitrator rejected Zurich's position in a decision dated May 15, 2001, ordering Zurich to make an additional payment of $10,000 to Mr. Hisson. Zurich appeals from this order.

The obligation to pay a benefit pursuant to s. 25(2)5.i is premised on the insured person being a dependant of the claimant at the time of the accident. The section reads as follows:

5. A payment of $10,000 to,

i. a person in respect of whom the insured person was a dependant at the time of the accident.

Dependant is a defined term for the purposes of the SABS-1996. Section 2(6) states:

a person is a dependant of another person if the person is principally dependent for financial support or care on the other person or the other person's spouse or same sex partner.

The agreed statement of facts filed at the arbitration indicates that Becky-Jo was 17 at the time of the accident. She lived with her parents, Mr. and Mrs. Hisson. She was principally dependent on her mother for financial support, but was not principally dependent on either of her parents for care. However, Zurich concedes that Becky-Jo must still be considered a dependant of her father by virtue of the fact that he is Mrs. Hisson's spouse.

Mr. Hisson claims that because Becky-Jo was his dependant, he is entitled to a payment of $10,000, notwithstanding the payment to his wife. Zurich contends that s. 25(2)5.i provides for a single payment of $10,000, even though the insured might be a dependant of more than one person. Beyond this statement, Zurich also maintains that its obligations were exhausted when it made the payment to Mrs. Hisson, and that consequently it does not have to respond to Mr. Hisson's claim.

Section 25 provides for the payment of a death benefit to three classes of beneficiaries: spouses of the insured person, dependants of the insured person, and the group we are concerned with — persons in respect of whom the insured was a dependant. I shall refer to this latter group as the "providers." By virtue of the definitions in the SABS-1996, each class can include more than one beneficiary. The insured person can have more than one spouse or dependant, or alternatively, can be a dependant of more than one person. The wording of the death benefit for spouses and dependants clearly indicates when the insurer is responsible for making a separate payment to each beneficiary, or alternatively, a single payment to be shared amongst the beneficiaries. For example, the provision for dependants requires the insurer to make a payment to "each" of the insured person's dependents [s. 25(2)2]. Conversely, the provision for spouses stipulates that the payment is to "be divided equally among them" [ss. 25(2)(1) and 25(4)]. No such direction is provided with respect to the benefit for the providers, leaving the parties to argue over whether the section contemplates a single payment; to be shared amongst the beneficiaries, or a payment of $10,000 to each beneficiary. Each party makes a compelling argument in the face of an ambiguous provision. For the reasons that follow, I prefer Mr. Hisson's position.

II. THE EVOLUTION OF THE LEGISLATION AND THE JURISPRUDENCE

The wording of the subsection governing the payment of benefits to providers has evolved with successive versions of the SABS. Likewise, the definition of dependant has changed. These changes have been central to the reasoning of many of the decisions that have considered this issue. Attached as Appendix "A" is a table containing the three versions of the legislation. Below is a brief discussion of the most significant changes and a review of the jurisprudence. The first no-fault regime — SABS-1990² contained the most restrictive definition of dependant. It stipulated that an insured is a dependant of another if he is principally dependent on that person for financial support. However, it also stated that the insured is a dependant of that person's spouse. The SABS-1990 version of the death benefit provided for a payment "to the person upon whom the deceased was dependent."

The only case to consider this regime was my arbitration decision in Jarvis and Allstate Insurance Company of Canada, (OIC A-000399, September 10, 1996). Allstate paid Mrs. Jarvis a benefit on the basis that her son was dependent on her for financial support at the time of his death. Mr. Jarvis, who was separated, but not divorced, from Mrs. Jarvis, made a claim on the basis that his son was a dependant of his because he remained married to Mrs. Jarvis.

Mr. Jarvis's position was understandable. By definition, Malcolm Jarvis was a dependant of his father. The difficulty raised by Mr. Jarvis's application was how to resolve the conflict caused by the fact that Malcolm was a dependant of two people, but the language of the death benefit suggested the insurer was responsible for a single payment, to be made to "the" person on whom the deceased was dependent. In resolving this conflict, I concluded that the benefit was payable to the person on whom the deceased was actually dependent, rather than to a person in respect of whom the insured was deemed to be a dependant, by virtue of marital status.

The passage of the SABS-1994³ brought about an important expansion in the definition of dependant. It stipulated that a person is a dependant of another, if they are principally dependent on the other for financial support or care. Notwithstanding the change in the definition of dependant, the death benefit provision continued to refer to "the person upon whom the insured was dependent."

In Harris and Liberty Mutual Insurance Company, (OIC A95-000037, March 3, 1998) rev'd, (FSCO P98-00015, November 19, 1998), the Director's Delegate considered whether the death of a dependant could trigger more than one payment. He concluded that it could not, stating the death benefit provided for a single payment. He stated that the conflict between the definition of dependant, and the benefit provision, does not expand the insurer's obligations. However, he acknowledged that it creates confusion over how the benefit should be paid out. He concluded that in some cases the payment would have to be split, notwithstanding the absence of any explicit direction to this effect.

The passage of the SABS-1996 did not change the definition of dependant. However, the wording of the death benefit was amended. The most obvious change was to the opening words of s. 51(2)5.i which now reads a payment to "a" person, rather than "the" person. Less obvious, but just as important, was the change to the second part of the sentence, which directs to whom the payment is made. Before the 1996 amendments, the beneficiary was identified as the person upon whom the insured was dependent." In the SABS-1996 version, the beneficiary is a person "in respect of whom the insured person was a dependant." I note that throughout the history of this provision, the drafters have used dependant as a noun, identifying a person, whereas they have used dependent as an adjective to signify a state of dependency on another.

The first case to consider the new legislation was John v. C.I.B.C. Insurance, an unreported decision of the Ontario Court (General Division), dated July 28, 1998. Mrs. John applied to her husband's insurer for payment of a benefit on the death of her son. The insurer had honoured the father's claim, but denied the mother's, taking the position that the section provided for a payment to only one person. The Judge agreed stating: "If the Legislature had intended to provide payment to more than one person, the wording would reflect that intention. In that case, the legislation would provide for payments to 'a person or persons.' It does not do so."

The second case to consider the matter was the arbitration decision in Kristensen and State Farm Mutual Automobile Insurance Company, (FSCO A98-001416, September 30, 1999) cont'd, (FSCO P99-00051, July 6, 2000). The Arbitrator noted that the wording of the pre-1996 provisions suggested the benefit was intended for one person. However, he concluded that the new provision could be interpreted as either a payment to each provider, or alternatively, a single payment to be divided amongst the providers. In light of this ambiguity, the Arbitrator examined the purpose of the provision. He concluded that the benefit was intended to "...provide some reasonable short-term financial assistance to survivors, responsive to the simple recognition of the value of life." The Arbitrator concluded that each person who loses a dependant child suffers a separate loss, and requiring those individuals to split the benefit would diminish the value of the child's life, contrary to the intent of the legislature. Based on this logic, he held that the insurer was obliged to make a payment of $10,000 to each parent.

The Arbitrator's decision was upheld on appeal. The appeal decision focused on the changes to the structure of the benefit provision. The Director's Delegate noted, with approval, the distinction the Arbitrator drew between the previous versions which referred to a payment to "the" person, and the present version which employs the indefinite article "a." She also noted that the present section provides a payment to "a person in respect of whom the insured was a dependant" whereas in the previous version the payment was to the person upon whom the insured was dependent. She concluded that because, by definition, the insured is a dependant of both spouses, the suggestion in Jarvis that the payment was intended for the person on whom the insured was actually dependent, but not their spouse, was no longer applicable.

The third decision to consider the question was Fraczek v. State Farm, an unreported decision of the SCJ, rev'd (2001), 2001 CanLII 38749 (ON SCDC), 57 O.R. (3d) 716 (Div Ct.). In this case, the insurer honoured the father's claim, but denied the mother's. The insurer conceded that the insured person was a dependant of both his parents, but took the position that its obligations were exhausted on payment of the benefit to the father. The motions court Judge considered John, and the arbitral decision in Kristensen, preferring the analysis in John. He concluded that the legislation contemplated only a single payment. He indicated that where "there is more than one person in respect of whom the deceased was a dependant, the insurer should endeavor to determine the identity of those persons and make the payment to them jointly, as arguably they are entitled to share the $10,000 sum." The Divisional Court overturned the decision, ordering the insurer to make an additional payment to the mother. The Court cited Jarvis for the proposition that the SABS-1990 provided for a single payment to the person who provided the deceased with financial support. However, it noted the change in the SABS-1996, from a benefit payable to "the" person to "a" person, stating that there must have been a reason for this amendment. The Court also noted that because the definition of dependant was expanded to include care, two individuals could qualify for a benefit on the death of a dependant child. It went on to state that if the legislature had intended these two persons to share the benefit, it could easily have stated that the benefit was to be split, as it did in other instances. In addition to a grammatical or structural analysis, the Court also commented on the purpose of the legislation, suggesting that an interpretation that forced a child's parents to split a single payment was inconsistent with the goal of providing modest financial recognition of their loss. The Court was also influenced by the implications of requiring estranged parents to share a single benefit in the absence of any statutory direction.

The arbitration decision in Hisson and Zurich Insurance Company, that is the subject of this appeal, was released before the Divisional Court heard Fraczek. However, in many respects, it is very similar to the Court's decision. The Arbitrator reviewed, but rejected, the approaches taken in John and the decision at first instance in Fraczek. He noted that neither decision adequately explored the implications of the absence of any direction to whom the single payment should be made. The Arbitrator preferred the reasoning of the Director's Delegate in Kristensen, relying on her grammatical analysis. Finally, the Arbitrator was influenced by the structure of s. 25(2)5, as a whole. In particular, he commented on the fact that, in light of the addition of care to the definition of dependant, subsection (ii), which provides for a benefit to a spouse who is a caregiver, but only in the event of the principle beneficiaries death, is contradictory, or at least redundant, if there is only one payment.

III. ARGUMENT AND ANALYSIS

The judges and adjudicators who have concluded that insurers are only obliged to make a single payment of $10,000 have tended to concentrate on the absence of any direction to make a payment to "each" beneficiary, and the fact that the section refers to "a person" as opposed to "a person or persons." Conversely, the judges and adjudicators who have concluded that insurers are obliged to make multiple payments of $10,000 have focused on the absence of any wording that states the benefit should be divided amongst the beneficiaries. Given that the provisions dealing with claims by spouses and dependants clearly state when multiple payments are contemplated, or alternatively, when a single payment must be split by the beneficiaries, a reader of either s. 51(5) of the SABS-1994 or s. 25(2)5.i of the SABS-1996 could be forgiven for asking why there is no such direction in relation to the benefit for providers.

It is possible that when the drafters expanded the definition of "dependant" in the SABS-1994, they did not intend to increase the number of people on whom the insured was dependent, but rather, intended merely to provide an alternate way in which a member of the family could qualify as a dependant. In this case, s. 51(5) of the SABS-1994 would work quite well. It would still be possible to identify "the" person who could qualify for the benefit, namely the person on whom the insured was primarily dependent be it for financial support or, alternatively, for care. If this was the drafters' intention, they did not succeed. Virtually all of the decisions discussed above note that the expanded definition of dependant means that the insured person can be principally dependent on two separate individuals, one of whom provides financial support, and the other care. This, in turn, means that two separate people can qualify for a benefit on the death of the insured person.

The question remains, can Mr. Hisson, on whom Becky-Jo was not principally dependent for either financial support or care, qualify for a benefit? I agree with the comment by the Director's Delegate in Kristensen, that the shift from a payment to the "person upon whom the deceased was dependent," to a payment to a person "in respect of whom the insured person was a dependant," makes the old distinction between the provider and their spouse irrelevant. Because spouses are, by definition, a person "in respect of whom the insured person was a dependant," the class of persons entitled to a benefit on the death of a dependant now includes both the providers and their spouses. As a spouse, Mr. Hisson is entitled to a death benefit.

What remains to be decided is whether this class of claimants are each entitled to a payment of $10,000 or, alternatively, are limited to a share of $10,000. Put another way, in the absence of any clear direction, should the provision be read expansively or restrictively?

Zurich relies on a restrictive reading of s. 25(2)5.i to argue that the death of an insured person triggers the obligation to make "a" payment [read single] to "a" person [read any one of the persons] in respect of whom the insured was a dependant. Based on this reading, it argues that a payment to Mrs. Hisson is a complete answer to a claim by Mr. Hisson, or presumably anyone else who could qualify for a benefit.

This reasoning, which was accepted in John v. C.I.B.C. and the lower court ruling in Fraczek, presumes that the death of the insured person triggers a single claim. I do not agree with this premise. To the contrary, in my opinion, the death of the insured person entitles each person who can define himself as a person "in respect of whom the insured was a dependant," to demand payment of a death benefit. Each of these individuals has an independent right to assert a claim, and no one person has any greater right to the benefit than any other. In light of this, it is no answer to a claim by one person to say that the claim has already been disposed of by virtue of a payment to someone else. The insurer must honour each claim that is proven.

The question then becomes; what are each of these claimants entitled to? The answer is found by returning to the words of the section. If the claimant can establish they were "a person in respect of whom the insured person was a dependant," they are entitled to "a payment of $10,000." Read in this context, the absence of any stipulation that this person must split the payment with someone else suggests that every person who qualifies for the benefit is entitled to a payment of $10,000. In this case, Mr. Hisson is "a person in respect of whom the insured person [Becky-Jo] was a dependant. Accordingly, he is entitled to "a payment of $10,000."

In addition to a structural analysis, I think that it is useful to scrutinize the legislative intent of the provision. The Court of Appeal recently applied Professor Sullivan's description of the modern approach to statutory interpretation to an analysis of the SABS. See Bapoo v. Co-Operators General Insurance Comapny (1997), 1997 CanLII 6320 (ON CA), 36 O.R. (3d) 616. Professor Sullivan's approach reads in part:

...the court must then adopt an interpretation that is appropriate. An appropriate interpretation is one that can be justified in terms of (a) its plausibility, that is, its compliance with legislative text; (b) its efficacy, that is, its promotion of the legislative purpose; and (c) its acceptability, that is, the outcome is reasonable and just.

Zurich argues, quite persuasively, that the death benefit provisions must be read in the context of the overall purpose of Bill 59, which was to stabilize insurance premiums. This was done, in large measure, by curtailing the benefits available in the previous version of the SABS. Zurich notes that an expansive reading of s. 25(2)5.i will double, or even quadruple, insurers' exposure for death benefits as compared to the SABS-1994 version. In light of the general retrenching of benefits brought about by Bill 59, an interpretation that increases the insurer's exposure, must be carefully scrutinized. However, I think that Zurich takes the argument too far when it submits that there is a presumption that the Legislature intended to reduce every benefit, and therefore, every ambiguity must be interpreted in a way that decreases the level of benefits in relation to the SABS-1994. In addition, I note that while an expansive reading of this provision will significantly increase the insurer's exposure in those relatively few cases where it is called on to pay benefits because of the death of a child, or other dependant, the impact on the industry's overall exposure for accident benefits will be negligible, and should not affect rates in any material way.

I am more persuaded by the reasoning in the arbitration decision in Kristensen, and the Divisional Court decision in Fraczek, that focused on the purpose of the benefit, namely, to provide modest financial recognition of the loss suffered by a parent on the death of their child. Arbitrator Renahan supported his reasoning by quoting from Justice Osborne's Report of Inquiry into Motor Vehicle Accident Compensation in Ontario, which stated: "The death benefit should be modest but not insignificant. An inordinately low death benefit will trivialize the value of life..." Arbitrator Renahan felt that forcing the parents to split a $10,000 benefit would trivialize the loss sustained by each parent.

If the benefit were only payable to an intact family, there might be some sense in treating the parents as a single entity, who are paid a benefit jointly. However, this is not possible when the spouses are separated or divorced. In these circumstances, the benefit is not being paid jointly, it is truly being split. I agree with Arbitrator Renahan that $10,000 is a modest amount. Given the number of parents who divorce and remarry, or separate and cohabit with someone else, it would not be uncommon for three or four people to qualify for the benefit. Splitting it, particularly if it is four ways, reduces this amount to the point where it trivializes the value of the child's life, contrary to the legislative intent. It is not possible to read the section in one way for intact families and another way for separated families. A reading that provides for a meaningful benefit for all parents, regardless of their family status, should be preferred.

For both of these reasons, I conclude that an expansive reading of the section is preferable. Accordingly, I dismiss the appeal and confirm the arbitration order requiring Zurich to pay Mr. Hisson a death benefit of $10,000 plus interest.

Zurich shall pay Mr. Hisson's appeal expenses.

November 15, 2002

Stewart M. McMahon Director's Delegate

Date

APPENDIX A

SABS 1990

SABS 1994

SABS 1996

Death Benefit

11.-(1) If, as a result of an accident, an insured person dies within the benefit period set out in subsection (3), the insurer will pay with respect to the insured person....

(d) if, at the time of the accident, the deceased was a dependant, $10,000,

(i) to the person upon whom the deceased was dependent or, if that person is dead, to the surviving spouse of that person if the surviving spouse was the deceased's primary caregiver, or

(ii) to the other surviving dependants of the person upon whom the deceased was dependent if that person and his or her spouse are dead.

11.-(5) Payments under clauses (1)(b) and (d) and clauses (2)(b) and (d) will be paid in equal shares to the surviving dependants.

51.-(5) If an insured person dies as a result of an accident and, at the time of the accident, the insured person was a dependant, the insurer shall pay $10,000,

(a) to the person upon whom the insured person was dependent or, if that person is dead or dies within thirty days of the insured person’s death, to the surviving spouse of that person if the surviving spouse was the insured person’s primary caregiver; or

(b) to the surviving dependants of the person upon whom the insured person was dependent, if that person is dead and no payment is required by clause (a).

(9) Payments under sub-section (2) or clause (5)(b) shall be paid in equal shares to the surviving dependants.

25. (2) The death benefit shall provide for the following payments:

26. A payment of $10,000 to,

i. a person in respect of whom the insured person was a dependant at the time of the accident,

ii. the spouse of a person in respect of whom the insured person was a dependant at the time of the accident, if the spouse was the insured person’s primary caregiver at the time of the accident and the person in respect of whom the insured person was a dependant at the time of the accident dies before the insured person or within 30 days after the insured person, or

iii. the dependants of a person in respect of whom the insured person was a dependant at the time of the accident, if no payment is required by subparagraph i or ii, to be divided equally among the persons entitled.

Dependant

3.-(2) For the purposes of this Regulation, a person is a dependant of another person if the person is principally dependent for financial support on the other person or the other person's spouse.

4. For the purpose of this Regulation, a person is a dependant of another person if the person is principally dependent for financial support or care on the other person or the other person’s spouse.

2.-(6) For the purpose of this Regulation, a person is a dependant of another person if the person is principally dependent for financial support or care on the other person or the other person’s spouse.

This table was prepared by Director's Delegate Naylor. It is a copy of the table found at page 8 of her decision in State Farm and Kristensen, Supra.

Footnotes

1. 1The Statutory Accident Benefits Schedule —Accidents on or after November 1, 1996, Ontario Regulation 403/96, as amended.
2. 2The Statutory Accident Benefits Schedule — Accidents between June 22, 1990 and December 31, 1993, Regulation 672, R.R.O. 1990, as amended by Ontario Regulations 660/93 and 779/93.
3. 3The Statutory Accident Benefits Schedule—Accidents after December 31, 1993 and before November 1, 1996, Ontario Regulation 776/93, as amended by Ontario Regulations 781/94 and 304/98.