Irina Moore v. Kingsway General Insurance Company, 2002 ONFSCDRS 21

Financial Services Commission of Ontario

Neutral Citation: 2002 ONFSCDRS 21 FSCO A01-000580

Between:

Irina Moore Applicant

and

Kingsway General Insurance Company Insurer

Decision on Preliminary Issues

Before: Judith Killoran

Heard: November 27, 2001, at the offices of the Financial Services Commission of Ontario in Toronto.

Appearances:

Phil Bouranov for Ms. Moore Maggy Moore for Kingsway General Insurance Company

Issues:

The Applicant, Irina Moore, was injured in a motor vehicle accident on September 28, 2000. She applied for statutory accident benefits from Kingsway General Insurance Company ("Kingsway"), payable under the Schedule,¹ which were denied. The parties were unable to resolve their disputes through mediation, and Ms. Moore applied for arbitration at the Financial Services Commission of Ontario under the Insurance Act, R.S.O. 1990, c.I.8, as amended (The "Act").

The preliminary issues are:

1. Is Ms. Moore entitled to insurance coverage from Kingsway under section 268 of the Insurance Act for the loss sustained as a result of the accident?

2. Is Kingsway required under the Insurance Act or regulations to pay interim benefits to Ms. Moore pending the outcome of the coverage dispute?

Result:

1. Ms. Moore is entitled to insurance coverage from Kingsway under section 268 of the Insurance Act.

2. Kingsway is not required under the Insurance Act or regulations to pay interim benefits to Ms. Moore. However, Ms. Moore may proceed to an arbitration hearing against Kingsway to determine her entitlement to statutory accident benefits.

EVIDENCE AND ANALYSIS:

Ms. Irina Moore was driving a 1990 Dodge Caravan when she was involved in a motor vehicle collision on September 28, 2000. She applied for statutory accident benefits from Kingsway by application dated October 3, 2000. Kingsway refused payment of benefits to Ms. Moore on two grounds: 1) There was never a contract of automobile insurance between Ms. Moore and Kingsway; and 2) Kingsway had never insured the vehicle that Ms. Moore was driving at the time of the collision.

Ms. Moore testified, and her testimony was corroborated by her employer, Mr. Francesco (Frank) Alfano, that she was driving with a G-1 licence under his supervision.² Ms. Moore worked in Mr. Alfano's office performing administrative tasks and was being trained as a driver. She testified that she drove the 1990 Dodge Caravan for a couple of days before the accident. As she was accustomed to seeing Mr. Alfano drive a Nissan Pathfinder, she asked him before she drove this "new" vehicle if it was insured. Mr. Alfano assured her that the 1990 Dodge Caravan was insured by Kingsway.

In her Application for Accident Benefits to Kingsway,³ Ms. Moore declared in Part 4 that she was not covered under any contract of automobile insurance; not her own, that of a spouse, the policy of anyone on whom she was dependant, or under a policy that listed her as a driver. As Ms. Moore checked "No" to all of the possible coverages, she was directed by her representative to send her application to the insurer of the automobile that she occupied at the time of the accident. The owner of the vehicle is listed as "Ticket Ex Inc." and the policyholder is listed as Frank Alfano, with the policy noted as "PGHOAP17628." The police report⁴ repeats the same information.

Mr. Alfano testified that when his Nissan Pathfinder was being repaired, he attempted unsuccessfully to contact his broker, Mr. Alex Kurgatnikov, who was with D.M.W. Insurance. He telephoned repeatedly and kept getting Mr. Kurgatnikov's voice mail. He left messages for Mr. Kurgatnikov but received no response from him. Therefore, he telephoned Kingsway directly and asked if the uninsured 1990 Dodge Caravan, which his friend, Mario Giangioppo, was prepared to lend to him, could be covered under his insurance policy.

On cross-examination, when Mr. Alfano was asked why he did not know who he spoke with at Kingsway, he testified: "Like I said before, I'm lucky to get a live person. They were transferring me from department to department to department just so I could get some information on my policy. See if I'm covered. Finally I got the advice I was looking for and they ended with, "Why don't you just read your policy?" They weren't very nice." According to Mr. Alfano, a representative at Kingsway told him that the 1990 Dodge Caravan would be covered while the 1997 Nissan Pathfinder was out of service. He testified that he was given this advice a few days before the accident, just before he drove the 1990 Dodge Caravan for the first time.

Mr. Alfano testified that he had worked as a court agent for 11 years and was aware of the consequences of driving without insurance and was also familiar with his responsibilities supervising a G-1 driver. He submitted a claim to Kingsway after the accident and was not denied benefits. Kingsway did not disclaim responsibility for his claim but paid statutory accident benefits under paragraph 268(2)1.(i) of the Act which stipulates that an occupant of an automobile has recourse against the insurer of an automobile in respect of which the occupant is an insured.

Mr. Alfano reviewed correspondence from Kingsway dated March 2, 2000 informing him that his automobile insurance policy KGHOAP17628 had been cancelled for non-payment as of March 18, 2000.⁵ A new application for auto insurance was signed by Mr. Alfano on April 11, 2000 and a new Certificate of Auto Insurance was issued⁶ with the policy number KGHOAP21474. Mr. Alfano agreed that he had given the police the incorrect policy number.

Ms. Dianne Rodrigues testified that she has been an Underwriting Supervisor for the past four years at Kingsway. She verified that there had been a lapse in insurance coverage from March 19, 2000 to April 11, 2000 for the 1997 Nissan Pathfinder and its owner 1398140 Ontario Ltd., with a listed driver of Francesco Alfano. Ms. Rodrigues confirmed that the automobile insurance policy in force for Mr. Alfano at the time of the accident was Kingsway Policy No. KGHOAP21474. Neither of Ms. Rodrigues' underwriting files for either Policy Nos. KGHOAP17628 or KHOAP21474 indicate coverage for a 1990 Dodge Caravan. Rather, the insured vehicle is listed as a 1997 Nissan Pathfinder. Ms. Rodrigues had no record in her files that Ms. Moore had automobile insurance coverage with Kingsway.

In contrast to Mr. Alfano's testimony, Ms. Rodrigues testified that Kingsway is only licensed to transact business through insurance brokers and not through individuals. If an individual were to phone for information, Kingsway's policy would be to refer that person to a broker and the telephone call would be logged on the computer system. There was no record in the company log of an individual calling to enquire about insurance coverage for a 1990 Dodge Caravan and neither policy file had a record of such a phone call.

The affidavit of Mr. Chris Cantrell, an independent insurance adjuster with Metro Claim Services, was filed as he was unable to attend in person due to the imminent death of a family member. Both the Applicant and the Insurer were offered the option of an adjournment in order to have Mr. Cantrell appear in person for cross-examination on his evidence. Both parties waived that opportunity.

Mr. Cantrell was retained by Kingsway to investigate Ms. Moore's claim. He received Ms. Moore's statutory declaration on November 10, 2000. On October 2000, he was advised by Mr. Alfano that he had borrowed the 1990 Dodge Caravan from a friend. Mr. Cantrell states in his affidavit: "I was further advised by Mr. Alfano that this 1990 Dodge Caravan was not insured."⁷

Mr. Cantrell attested that Kingsway's policy number KGHOAP17628 insured a 1997 Nissan Pathfinder but did not insure the 1990 Dodge Caravan that Ms. Moore was driving at the time of the accident. He advised Mr. Bouranov by letter dated November 13, 2000, that the vehicle driven by Ms. Moore on the day of the accident was not insured by Kingsway.⁸ In February 2001, he spoke with Mr. Bouranov and confirmed that Ms. Moore was not entitled to statutory benefits under Kingsway's policy number KGHOAP17628. By letter dated May 31, 2001, Mr. Fonseca, senior counsel for Kingsway, advised Mr. Bouranov that Ms. Moore was not entitled to statutory accident benefits from Kingsway as Kingsway did not insure the vehicle she was driving at the time of the accident.⁹

THE LAW

LEGISLATION

Section 268 of the Insurance Act states:

Liability to pay

(2) The following rules apply for determining who is liable to pay statutory accident benefits:

1. In respect of an occupant of an automobile,

i. The occupant has recourse against the insurer of an automobile in respect of which the occupant is an insured,

ii. If recovery is unavailable under subparagraph i, the occupant has recourse against the insurer of the automobile in which he or she was an occupant,

iii. If recovery is unavailable under subparagraph i or ii, the occupant has recourse against the insurer of any other automobile involved in the incident from which the entitlement to statutory accident benefits arose,

iv. If recovery is unavailable under subparagraph i, ii or iii, the occupant has recourse against the Motor Vehicle Accident Claims Fund.

Ontario Regulation 283/95 - Disputes Between Insurers provides:

1. 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.

2. The first insurer that receives a completed application for benefits is responsible for paying benefits to an insured person pending the resolution of any dispute as to which insurer is required to pay benefits under section 268 of the Act.

3(1) No insurer may dispute its obligation to pay benefits under section 268 of the Act unless it gives written notice within 90 days of receipt of a completed application for benefits to every insurer who it claims is required to pay under that section.

7(1) If the insurers cannot agree as to who is required to pay benefits or if the insured person disagrees with an agreement among insurers that an insurer other than the insurer selected by the insured person should pay the benefits, the dispute shall be resolved through an arbitration under the Arbitrations Act, 1991.

Case Law

In Mariona and Canadian General Insurance Company,¹⁰ the applicant submitted that questions of coverage had been removed from the jurisdiction of FSCO by Ontario Regulation 283/95 (the "Priorities Regulation"), which came into force on May 27, 1995. The arbitrator was not persuaded that the issue before her was a priority dispute within the scope of section 1 of the Priorities Regulation. The insurer had raised a defence to Mr. Mariona's claim to statutory accident benefits, alleging that there was no coverage available to him at the time of the accident. The arbitrator reasoned that if there were no coverage, there was no entitlement from Canadian General. If there were coverage, then an arbitrator could determine the issue of entitlement. Therefore, the arbitrator ruled that the question of whether there was coverage was a preliminary question which must be determined before the issues of Mr. Mariona's entitlement and the quantum could be determined. In that way, coverage became an issue within her jurisdiction. Mariona established that the onus is on the applicant to prove that the insurer had a statutory duty to respond to the application.

In Brown and Allstate Insurance Company of Canada,¹¹ the applicant was seriously injured, a quadriplegic who had been hospitalized for at least eight months and was still in the hospital at the time of the hearing. Mr. Brown had received no statutory accident benefits since the accident because Allstate had disputed coverage but did not deny that it was the first company to which he had applied for benefits.

Mr. Brown had at one time insured his vehicle by Allstate, in fact, until four months before the accident. However, Allstate submitted that at the time of the accident, there was no existing agreement, undertaking or offer to undertake a contract and so it could not be considered an insurer under the Act.

Accordingly, Allstate claimed that it was not bound by the procedures set out in the Priorities Regulation. Allstate claimed that the priority rules only apply to "insurers," within the meaning of the Act, in situations where it is acknowledged that there is a valid and subsisting policy of insurance in force.

According to Allstate, the applicant first had the onus of establishing that Allstate was an "insurer" within the meaning of the Act, before any statutory duty or obligation to respond to the application could be invoked. The arbitrator was of the view that Allstate's arguments might have some merit in a situation where an applicant candidly admits that he or she has applied for accident benefits from a randomly selected insurance company, without asserting any contractual relationship or nexus.

The arbitrator in Brown ruled that the question of whether Allstate had a valid policy in effect on the vehicle involved in the accident must be decided by a private arbitrator under the Arbitrations Act, 1991. Accordingly, the arbitrator ruled that she need not decide as a preliminary matter, whether Allstate was an "insurer" for the purposes of the Regulation, since that is integral to the question which an arbitrator appointed under the Arbitrations Act, 1991 must determine. In the interim, the arbitrator ruled that pending a finding on liability as among several insurers, the regulation provides, at section 2, that the first insurer that receives a completed application for benefits is responsible for paying benefits to an insured person. Therefore, she found that until an arbitrator appointed under the Arbitrations Act, 1991 determined that Allstate was not required to pay benefits under section 268 of the Act, she could not find that Allstate was not an insurer. She concluded under section 2 of the Regulation that Allstate was responsible for paying benefits to Mr. Brown on an interim basis.

Allstate appealed Brown to the Ontario Court (General Division). The appeal was dismissed. The majority ruled that when the arbitrator stated that she need not decide whether Allstate was an insurer "for the purposes of the Regulation if this was taken to mean that the arbitrator need not decide as a preliminary matter whether Allstate was an "insurer" for the purposes of the Insurance Act, the arbitrator erred in law." However, the statement of the arbitrator could also be interpreted to mean that she need not determine the issue in the context of the Priorities Regulation as opposed to the Act. There was sufficient evidence before the arbitrator for a preliminary finding that Allstate was an "insurer" although Allstate might ultimately be found not to be an "insurer" under the Act. Therefore, the court found that it was not unreasonable to require Allstate to pay interim benefits as the arbitrator had jurisdiction to determine the preliminary issue of whether Allstate was an "insurer" under the Act and there was a sufficient nexus between the claimant and Allstate.

In Leachoy Chen and Kingsway General Insurance Company,¹² Arbitrator Blackman ruled:

I do not find that all 'coverage' questions have been removed from the jurisdiction of this Commission by O.Reg. 283/95. The determining factor as to whether this Commission has jurisdiction to determine such a question is the context in which the issue is raised.

In State Farm Mutual Automobile Insurance Company and Mohamed and American Home Assurance Company,¹³ Director's Delegate Draper made the following observations:

• The Priorities Regulation creates a distinction between "the first insurer to receive a completed application for benefits" ("the first insurer") and the insurer with priority under s. 268 of the Act ("the priority insurer").

• The first insurer must pay accident benefits under the SABS-1994 even if it believes it is not the priority insurer.

• To contest its obligation to continue paying benefits, the first insurer must give written notice, according to the procedures established in the Priorities Regulation, that it is not the priority insurer. If it does not give notice, it cannot argue that another insurer is the priority insurer, subject to getting an extension under s. 4 of the Priorities Regulation.

• The first insurer is only obliged to pay benefits if the insured person has established his or her entitlement. If it refuses any part of the claim, however, the insured person has a right under the Act to contest that decision through the dispute resolution system. It would defeat the purpose of the Priorities Regulation if that process had to wait for the outcome of the priorities dispute.

• The first insurer, or any other insurer, cannot defend a claim in the dispute resolution system by arguing that it is not the priority insurer. The Priorities Regulation has moved that jurisdiction to arbitrators acting under the Arbitrations Act, 1991.

Although arbitrators can no longer decide the priority issue, the question remains whether the company being pursued is the first insurer to receive a completed application. As Director's Delegate Draper expressed it:

Anything that diverts attention from the insured person's claim for benefits has the potential of delaying access to those benefits .... In my view, the purpose of the Priorities Regulation is better achieved by requiring the first insurer to receive a completed application .... to pay interim benefits and let it contest its obligation through private arbitration under the Priorities Regulation.

CONCLUSION

I have not been asked to determine a priorities dispute among insurers, but rather, a dispute about coverage between an insurer and an applicant claiming to be an insured, which is within my jurisdiction. Under subsection 282(3) of the Act, "it is within my jurisdiction to determine all issues in dispute, including my own jurisdiction."¹⁴

Kingsway submitted that as Ms. Moore applied for accident benefits without asserting any contractual nexus or relationship, the insurance company need not respond. The evidence in the case before me is different from Mariona in that neither Ms. Moore nor Mr. Alfano had a certificate of insurance for the vehicle which was involved in the accident. Ms. Moore relied on information from Mr. Alfano to substantiate the number of the insurance policy and did so when completing her application for accident benefits.

I was persuaded by the testimony of Ms. Moore and Mr. Alfano. I find it plausible that Mr. Alfano was told by Kingsway that the 1990 Dodge Caravan was covered under his policy, provided that the 1997 Nissan Pathfinder was out of service. Although Mr. Cantrell's affidavit states that Mr. Alfano advised him that the 1990 Dodge Caravan was not insured, I interpret that to mean that the 1990 Dodge Caravan which was lent to him by his friend was uninsured. It is because the vehicle was uninsured that Mr. Alfano telephoned Kingsway in order to obtain coverage. I believe Mr. Alfano's testimony that he was told by a Kingsway representative that the 1990 Dodge Caravan was covered under his automobile liability policy.

I accept the evidence of Ms. Rodrigues about Kingsway's policies; for example, the policy of dealing directly with brokers only and noting all phone calls in the company log. At the same time, I acknowledge that there is often a dissonance between a company's stated policies and the implementation of those policies. In other words, I believe that Mr. Alfano was given advice about his policy, albeit in an abrupt fashion, upon which he relied, although it was contrary to Kingsway's policy for the advice to be given and for the telephone call not to be logged or noted in the files.

I am not persuaded that someone, such as Mr. Alfano, who acts as a court agent and was very aware of the negative consequences of driving without insurance, would drive or allow an employee to drive a friend's van without insurance. Although Kingsway argued that Ms. Moore had randomly selected it as the insurer, I do not accept this argument. Ms. Moore asserted a contractual relationship or nexus to Kingsway.

It is necessary to establish that an applicant is an insured person before an insurer is required to pay benefits. Section 1 of the Act provides in part:

"insurer" means the person who undertakes or agrees or offers to undertake a contract;

"contract" means a contract of insurance and includes a policy, certificate, interim receipt, renewal receipt, or writing evidencing the contract, whether sealed or not, and a binding oral agreement;

Subsection 224(1) of the Act defines "insured" to mean "a person insured by a contract whether named or not and includes every person who is entitled to statutory benefits under the contract whether or not described therein as an insured person."

An "insured" is a person insured by a contract. Hence, that contract must be in force and provide coverage to the "insured" at the time of the injury before anyone is an "insured. "According to the Act, only an insured person is entitled to statutory accident benefits. I have enquired into and determined that there is sufficient evidence presented to me that Ms. Moore was the occupant of a motor vehicle covered by Kingsway at the time of the accident, although Kingsway may ultimately be found not to be the insurer.

It is the automobile liability policy which defines the automobiles to which the contract of insurance relates. In the Schedule, "insured automobile" is defined as "any automobile covered by the policy."

Neither the Applicant nor the Insurer presented me with any evidence about whether the policy in question was a standard policy or whether the 1990 Dodge Caravan met the definition of "temporary substitute automobile" under the particular policy. However, I find that there was a binding oral agreement between Kingsway and Mr. Alfano, as a result of Mr. Alfano's telephone inquiries. Therefore, Ms. Moore has recourse against Kingsway under paragraph 268(2)(ii) of the Act as an occupant having recourse against the insurer of the automobile in which he or she was an occupant.

As in Brown, I find that there is a "sufficient nexus" between Ms. Moore and Kingsway and "sufficient evidence" before me for a preliminary finding that Kingsway was an "insurer."

For these purposes, I find that Kingsway meets the definition of "insurer" and Ms. Moore meets the definition of "insured" under the Act. In the event that an issue arises as to a finding of priority as between Kingsway and another insurer, the regulation provides at section 2, that, in the interim, the first insurer that receives a completed application for benefits is responsible for paying benefits to an insured person.

Kingsway did not file a Notice of Dispute between Insurers to every insurer which it claims was required to pay, within 90 days of receiving Ms. Moore's claim, as it was required to do under the Regulation. As in Brown, until an arbitrator appointed under the Arbitrations Act determines that Kingsway is not required to pay benefits under section 268 of the Act, I find that Kingsway is an insurer. Therefore, pursuant to section 2 of the Regulation, Kingsway is responsible for paying benefits to Ms. Moore, provided that she is able to establish entitlement.

In Brown, there was an interim order for payment of benefits but the arbitrator stated:

The overriding principle in most cases is that an order will be made only after a hearing which fully canvasses the evidence and positions of both sides. Interim orders are generally granted where an applicant has (1) established to a convincing degree, that he or she is entitled to the benefits claimed and (2) demonstrated a need, necessity or urgency for the interim order.

Ms. Moore did not present me with any evidence to establish entitlement or need, necessity or urgency to the statutory accident benefits claimed. Therefore, she is not entitled to an interim order for benefits. However, she may proceed to an arbitration hearing against Kingsway in order to establish her entitlement to statutory accident benefits.

EXPENSES:

I leave the issue of expenses to the discretion of the hearing arbitrator.

January 28, 2002

Judith Killoran Arbitrator

Date

Neutral Citation: 2002 ONFSCDRS 21 FSCO A01-000580

FINANCIAL SERVICES COMMISSION OF ONTARIO

BETWEEN:

IRINA MOORE Applicant

and

KINGSWAY GENERAL INSURANCE COMPANY 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. Moore is entitled to insurance coverage from Kingsway under section 268 of the Insurance Act.

2. Kingsway is not required under the Insurance Act or regulations to pay interim benefits to Ms. Moore. However, Ms. Moore may proceed to an arbitration hearing against Kingsway to determine her entitlement to statutory accident benefits.

January 28, 2002

Judith Killoran 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, 551/96 and 303/98.
2. 2A driver with a G-1 licence is not authorized to drive a vehicle alone but must be supervised by a licenced driver.
3. 3Exhibit 3, Tab 7
4. 4ibid., Tab 6
5. 5ibid., Tab 3
6. 6ibid, Tab 5
7. 7Exhibit 1, p. 3
8. 8ibid., Tab H
9. 9Supra, note 3, Tab 18
10. 10(FSCO A96-000717, September 25, 1998)
11. 11(OIC A97-000579, May 29, 1997), affirmed, Allstate Insurance Company of Canada v. Brown et al. (1998) 1998 CanLII 18877 (ON CTGD), 40 O.R. (3d) 610 (Ont. Div. Ct.)
12. 12(FSCO A97-000931, November 10, 1998)
13. 13(FSCO Appeal P99-00022, December 1, 1999)
14. 14Jevco Insurance Company v. Ontario Insurance Commission (1996) O.J. No. 2216 (Div. Ct.)