Evan Griffiths v. State Farm Mutual Automobile Insurance Company, 2003 ONFSCDRS 122

Financial Services Commission of Ontario

Neutral Citation: 2003 ONFSCDRS 122 FSCO A97-000035

BETWEEN:

EVAN GRIFFITHS Applicant

and

STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY Insurer

REASONS FOR DECISION

Before: Judith Killoran Heard: June 3, 2003, in Stoney Creek, Ontario.

Appearances: Paul Barrafato for Mr. Griffiths Joseph J. Sullivan for State Farm Mutual Automobile Insurance Company

Issues:

The Applicant, Evan Griffiths, was injured in a motor vehicle accident on November 11, 1990. He applied for and received from State Farm Mutual Automobile Insurance Company ("State Farm") $50,000 US in New York State no-fault benefits. The parties were unable to resolve their disputes through mediation, and Mr. Griffiths applied for arbitration at the Financial Services Commission of Ontario under the Insurance Act, R.S.O. 1990, c.I.8, as amended. A preliminary issue hearing was conducted before me on December 18, 2000 in Niagara Falls, Ontario.

The preliminary issues at that time were:

1. Is Evan Griffiths an insured person under the OPF 1 standard policy issued by State Farm to its insured, Ralph Packer?

2. Is State Farm required to pay statutory accident benefits to Mr. Griffiths on the basis of the Insurance Act, the applicable Schedule,¹ the OPF 1 standard policy or some combination thereof?

In my decision dated March 28, 2001, I ruled the following:

1. Evan Griffiths is an insured person under the OPF 1 standard policy issued by State Farm to its insured, Ralph Packer.

2. State Farm must pay statutory accident benefits to Mr. Griffiths on the basis of the Insurance Act, the applicable Schedule, and the OPF 1 standard policy.

At the preliminary issue hearing on December 18, 2000, Mr. Griffiths raised an alternative argument. He claimed that State Farm was obligated to pay statutory accident benefits pursuant to the Power of Attorney and Undertaking ("PAU") which it filed with the Superintendent of Insurance for British Columbia. The parties agreed to defer this issue pending my decision on the scope of the policy.

My decision was overturned on appeal by the Director's Delegate in his decision on March 25, 2002. The Director's Delegate ruled that Mr. Griffiths was not entitled to Ontario statutory accident benefits from State Farm.

The remaining issue was whether Mr. Griffiths was entitled to Ontario accident benefits as a result of the Power of Attorney and Undertaking filed by State Farm. I conducted a hearing in Stoney Creek on June 3, 2003 to hear submissions from both parties on this issue.

The issue at the hearing on June 3, 2003 was:

1. Is Evan Griffiths entitled to Ontario statutory accident benefits as a result of the Power of Attorney and Undertaking filed by State Farm Mutual Automobile Insurance Company?

Result:

1. Mr. Griffiths is not entitled to Ontario statutory accident benefits as a result of the Power of Attorney and Undertaking filed by State Farm Mutual Automobile Insurance Company.

Preliminary Objection

A preliminary objection was raised at the hearing. State Farm objected to having me sit as the hearing arbitrator on the basis that I had rendered a preliminary issue decision in this case on March 28, 2001, which was appealed and overturned on March 25, 2002. State Farm submitted that the issue before me was a related and similar issue and should be heard by another arbitrator. State Farm submitted that it was not questioning my fairness or impartiality but was concerned more with the appearance of bias or conflict. State Farm stated that in releasing my first decision, I expressed certain opinions which meant that it was more appropriate to have a new arbitrator hear this issue.

I disagreed. There was a procedural agreement on the record that the parties would return to have me rule on this issue after the release of my decision on the preliminary issues. This issue is a discrete issue which will not require me to interpret New York insurance law or rule on the conflict of laws question, as was required in my first decision. I ruled that it was appropriate for me to sit as the arbitrator with respect to this issue.

EVIDENCE:

Agreed Statement of Facts

The parties agreed to the following facts:

1. Evan Griffiths was a passenger in a vehicle driven by Ralph Packer when it was involved in an automobile accident in 1990 in New York State.

2. The Packer vehicle was insured by State Farm under an Ontario policy issued by State Farm Mutual Automobile Insurance Company in Markham, Ontario.

3. Evan Griffiths was a resident of Colorado who was visiting his friend Ralph Packer, in Ontario when they decided to go to New York State. Evan Griffiths was not living nor ordinarily a resident in Ontario.

4. Evan Griffiths did not own a vehicle nor was he a named insured on another automobile insurance policy, nor was he a spouse or dependant of any other named insured under any other automobile insurance policy.

5. State Farm paid Evan Griffiths the total of $50,000.00 US in New York State no-fault benefits as an insured person under the New York State Insurance Code.

6. State Farm Mutual Automobile Insurance Company is not a wholly owned subsidiary of State Farm Mutual Automobile Insurance Company but a branch of State Farm Mutual Auto, Fire and Theft, a foreign corporation.

7. State Farm filed a Power of Attorney and Undertaking dated June 4, 1964, and is the operative PAU in this matter.

The Power of Attorney and Undertaking

The PAU states:

CANADA NON-RESIDENT INTER-PROVINCIAL

MOTOR-VEHICLE LIABILITIES INSURANCE CARD

State Farm Mutual Automobile Insurance Company, the head office of which is in the City of Bloomington in the State of Illinois in the United States, hereby, with respect to an action or proceeding against it or its insured, or its insured and another or others, arising out of a motor-vehicle accident in any of the respective Provinces or Territories, appoints severally the Superintendents of Insurance of British Columbia, Alberta, Saskatchewan, and Manitoba, the Registrars of Motor Vehicles of Ontario, New Brunswick, Nova Scotia, Prince Edward Island, and Newfoundland, the Director of the Motor Vehicle Bureau of Quebec, the Commissioners of Yukon Territory and the Northwest Territories, or such official as may from time to time be designated by the Provinces or Territories concerned, to do and execute all or any of the following acts, deeds, and things, that is to say: To accept service of notice or process on its behalf.

State Farm Mutual Automobile Insurance Company aforesaid hereby undertakes:

A To appear in any action or proceeding against it or its insured in any Province or Territory in which such action has been instituted and of which it has knowledge;

B. That upon receipt from any of the officials aforesaid of such notice or process in respect of its insured, or in respect of its insured and another or others, it will forthwith cause the notice or process to be personally served upon the insured;

C. Not to set up any defence to any claim, action or proceeding, under a motor-vehicle liability insurance contract entered into by it, which might not be set up if the contract had been entered into in, and in accordance with the law relating to motor-vehicle liability insurance contracts of the Province or Territory of Canada in which such action or proceeding may be instituted, and to satisfy any final judgment rendered against it or its insured by a Court in such Province or Territory, in the claim, action, or proceeding, up to

(1) the limit or limits of liability provided in the contract; but

(2) in any event an amount not less than the limit or limits fixed as the minimum for which a contract of motor-vehicle liability insurance may be entered into in such Province or Territory of Canada, exclusive of interest and costs and subject to any priorities as to bodily injury or property damage with respect to such minimum limit or limits as may be fixed by the Province or Territory.

D. That it will not issue motor-vehicle liability insurance cards supplied to it by the Superintendent of Insurance of British Columbia, except to persons who are non-residents of Canada and who are insured with it under a contract of motor-vehicle liability insurance.

Mr. Griffiths' Submissions

Mr. Griffiths relies on the PAU which was filed in 1964 by State Farm with the office of the Superintendent of Financial Institutions for the Province of British Columbia. The PAU, he submits, requires that State Farm treat its policy as an Ontario policy with all consequent coverage and benefits. The reciprocal scheme is based upon a Power of Attorney and Undertaking filed by each participating motor vehicle insurer with the Superintendent of Insurance of British Columbia. The Superintendent accepts the filing on behalf of the Superintendents of Insurance in the other provinces and territories, and sends copies to them. They are authorized to accept service on behalf of the insurer with respect to an action against it or its insured arising out of a motor vehicle accident in their respective jurisdictions.

The reciprocal scheme ensures that a person who is a party to a motor vehicle insurance contract in one province is recognized as an insured in other provinces. If there is an accident, the insurer agrees to be bound by the law of the province or territory where the action is brought and not the province or state where the policy is issued. The insurer accepts liability to the limits prescribed in its policy, or at least to the minimum established in the province or territory where the action is brought. American insurers are allowed to participate in this scheme.

Mr. Griffiths argues that the PAU should be read as two distinct documents: a Power of Attorney and as an Undertaking. State Farm, as a foreign insurer that filed a PAU, is bound by the undertaking not to set up a defence to any claim or action, or proceeding under a motor vehicle liability insurance contract entered into by it, "which might not be set up if the contract had been entered into in, and in accordance with the law relating to motor-vehicle liability insurance contracts of the Province or Territory of Canada in which such action or proceeding may be instituted... "

Mr. Griffiths submits that the terms of the PAU do not limit its operation to circumstances where the vehicle insured was in Ontario, nor did those terms confine the PAU to the kinds of claims permitted under Ontario law in 1964. Rather, those terms suggest that the PAU was intended to have a prospective reach to Ontario law as it might develop.

Although the insurance industry has argued that the PAU has very limited application, Mr. Griffiths asserts that the Ontario courts have stated that the PAU documentation should stand on its own. Consequently, the PAU imposes obligations on foreign insurers that they claim not to have anticipated, such as providing unidentified vehicle coverage, paying statutory accident benefits where foreign insured vehicles have accidents in Ontario, and paying statutory accident benefits to their own insured even though the vehicle insured was not involved in the accident in Ontario, but the insured was.

Mr. Griffiths argues that he had the legal right to bring his proceedings in Ontario because no-fault payments were to be paid under an Ontario policy issued by a foreign insurer in Ontario. He relies on the PAU filed by State Farm Mutual Automobile Insurance Company to claim no-fault payments at Ontario levels and not those of New York State. Application of the terms of the PAU precludes State Farm from raising the defence that only New York State benefits are payable. Mr. Griffiths argued that nothing limits the operation of the PAU to the circumstances where a motor vehicle accident took place in Ontario.

State Farm's Submissions

State Farm submitted that Mr. Griffiths made an application for benefits under New York insurance law on November 30, 1990, shortly after the motor vehicle accident which occurred on November 11, 1990. In fact, State Farm paid Mr. Griffiths benefits under this law. State Farm relies on Director's Delegate Draper's application of the Insurance Act, the Schedule, and the individual policy to conclude that Mr. Griffiths does not meet the definition of an "insured" in the Ontario insurance policy and the Schedule.

State Farm submits that the Applicant cannot use the PAU to expand the definition of "insured." Rather, FSCO's jurisdiction is defined by the Insurance Act, the Schedule, and the policy. State Farm is not a separate subsidiary - it is a foreign corporation with a branch in Canada. If I should rule in the Applicant's favour, it would result in treating companies like State Farm, which have filed PAUs, differently than other insurers who have not. State Farm is licensed to transact business in Ontario and has a foreign parent. Many other insurance companies operating in Ontario have not filed PAUs.

State Farm's position on the PAU in this case is that it only applies to accidents in Ontario. The PAU requires non-resident insurers who have insured drivers from outside Ontario who come to Ontario and are involved in an accident to meet the minimum limits for third party liability and unidentified liability.

In this case, State Farm is licensed to conduct business in Ontario and the insurance policy was issued in Unionville, Ontario. Therefore, the PAU does not apply. The way in which the PAU would apply would be if an insured from New York were involved in an accident in Ontario, then State Farm would have to pay the minimum Ontario limits under statutory accident benefits.

State Farm also argued that the PAU is one document. It should be read by taking out the respective provinces and inserting Ontario. It appoints the Superintendent of Insurance to accept service on behalf of State Farm. State Farm reviewed provisions A, B, and C, with particular attention to C. Provision C, which is relied on by Mr. Griffiths, involves the undertaking by State Farm not to set up any defence arising out of a motor-vehicle accident in any of the respective Provinces or Territories. However, this is only the case if the insurance policy had been issued outside Ontario by a non-Ontario licensed insurer. It is not applicable in this case where the accident did not occur in Ontario but in New York. The PAU is designed to apply to non-Ontario insurance contracts, while the policy in this case was issued in Ontario. Without considering the cases, the plain wording of the PAU dictates that the policy does not apply in this case.

According to State Farm, all of the cases relied on by Mr. Griffiths are distinguishable. Each insurer referred to in the cases is not licensed in Ontario. In all of the cases where the PAU has been applied, the accidents were in Ontario. In the one case where the PAU was not applied by the B.C. court, the accident was in Hawaii. There is no case decided in Canada that applies the PAU when the accident occurs outside the province where the action was commenced.

ANALYSIS:

I reviewed the many cases dealing with the effect of filing a Power of Attorney and Undertaking with the Superintendent of Insurance for British Columbia.

In Van der Est v. State Farm Fire and Casualty Co.² the plaintiff, a resident of British Columbia, was injured in a motor vehicle accident in the State of Hawaii. The defendant was insured with State Farm in Hawaii. Although the Superintendent of Insurance was served in B.C., the court ruled that it was not valid service because the PAU did not apply to accidents outside of the province of B.C. The judge ruled that the foundation of the undertaking lies in the appointment of the attorney. According to the judge, this clearly concerns accidents within the province. The PAU was to provide insurance to foreign vehicles while within British Columbia. Mr. Griffiths' situation is similar as it involves an accident outside the province.

In Potts v. Gluckstein et. al.,³ a B.C. vehicle was involved in an accident in Ontario. The B.C. plaintiff was hit by an uninsured Ontario vehicle. The issue was whether the B.C. plaintiff could sue the Insurance Corporation of British Columbia (the "ICBC") in Ontario or whether the plaintiff was subject to uninsured motorist's coverage. The court ruled that as the ICBC had filed a PAU, it was required to provide minimum coverage under Ontario's accident benefits scheme. This case can be distinguished in that the accident occurred in Ontario.

In Schrader v. United States Fidelity & Guaranty Co. et al.,⁴ a New York insured vehicle was involved in an accident in Ontario caused by an unidentified motorist. The American insurer did not have unidentified vehicle coverage. The issue was whether the PAU required the New York insurer to provide unidentified vehicle coverage. The decision was that the PAU requires the insurer to meet Ontario's minimum standards. Again, this is distinguishable in that the accident occurred in Ontario.

In Healey v. Interboro Mutual Indemnity Insurance et al.,⁵ a New York resident was a passenger in an Ontario vehicle insured by Guardian, an Ontario insurance company which issued the policy. The passenger owned a vehicle in New York insured by Interboro, which was not licensed in Ontario, but had filed a PAU. Again, this can be distinguished from this case in that State Farm was licensed in Ontario and the accident occurred in Ontario. The court ruled that Interboro, the New York company, must pay the accident benefits because of the PAU.

In Berg v. Farm Bureau Mutual Insurance Co.,⁶ which also involved an accident in Ontario, the plaintiff was a Minnesota resident in a Minnesota vehicle which was involved in an accident. The plaintiff's insurer, Farm Mutual, had filed a PAU. The motions judge stayed the action. The stay was overturned on appeal. It was found that the plaintiff was entitled to Ontario accident benefits by virtue of the PAU. It appeared that the Court of Appeal was concerned that if the plaintiff sued in Minnesota, the Ontario accident benefits would be compromised. The Minnesota insurer was required to pay Ontario accident benefits.

In Insurance Corp. of British Columbia v. Royal Insurance Co. of Canada,⁷ a B.C. resident was in an accident in Ontario while insured with the ICBC. The truck involved was insured with Royal. The ICBC paid accident benefits to the policyholder because of the PAU. The only issue was whether the ICBC could access section 215 of the Ontario Insurance Act and its loss transfer provisions to make Royal liable. The court ruled that the PAU was triggered and hence, section 215 was applicable, so the loss transfer occurred on that basis.

In Lincoln General Insurance Co. v. Insurance Corp. of British Columbia,⁸ a young girl was involved in an accident and was allegedly a dependant of a B.C. resident. The B.C. resident was insured by the ICBC and Lincoln Insurance insured the Ontario at-fault vehicle. The issue was which insurer was responsible for paying accident benefits. The ICBC stated that the girl was not a dependant of its insured while Lincoln argued that the ICBC must submit to the Ontario process for disputes among insurance companies, as set out in Regulation 283. The court found that the application of B.C. law to the exclusion of Ontario law was inappropriate. It issued an injunction prohibiting the ICBC from continuing its declaratory action in B.C. that would determine matters currently at issue in an Ontario arbitration.

The jurisprudence has broadened the application of the PAU and the implications of filing it with the Superintendent of Insurance in British Columbia. The PAU has been extended to include unidentified vehicle coverage and the payment of statutory accident benefits to an insured in an American insured vehicle. However, a common characteristic in all the cases is that for the PAU to apply in Ontario, the accident must occur in Ontario. That is consistent with a plain reading of the PAU which specifies that it applies to a motor vehicle accident in any of the respective Provinces or Territories.

CONCLUSION

The PAU ensures that any insurer who files with the Superintendent in British Columbia is liable to pay accident benefits that meet the minimum standards of the Provinces or Territories in which a motor vehicle accident occurs. The PAU cannot be extended to apply to accidents which occur outside of a Province or Territory. In this case, the effect of the PAU operates on any State Farm policy issued outside of Canada when an insured under that policy travels to a province or territory. If that insured is involved in a motor vehicle accident, the policy provides coverage in accordance with the PAU.

I find that the Power of Attorney and Undertaking is one document which must be read and interpreted as a whole. Consequently, it only applies to circumstances where a vehicle, insured elsewhere, is involved in an accident in any of the provinces, including Ontario. Consequently, I find that Mr. Griffiths, as someone involved in an accident outside of Ontario, is not entitled to Ontario statutory accident benefits as a result of the Power of Attorney and Undertaking filed by State Farm Mutual Automobile Insurance Company.

EXPENSES:

The parties are encouraged to resolve the issue of expenses. If unable to do so, they may make submissions to me on the issues of entitlement and quantum.

August 8, 2003

Judith Killoran Arbitrator

Date

Neutral Citation: 2003 ONFSCDRS 122 FSCO A97-000035

FINANCIAL SERVICES COMMISSION OF ONTARIO

BETWEEN:

EVAN GRIFFITHS Applicant

and

STATE FARM MUTUAL AUTOMOBILE 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. Mr. Griffiths is not entitled to Ontario statutory accident benefits as a result of the Power of Attorney and Undertaking filed by State Farm Mutual Automobile Insurance Company.

August 8, 2003

Judith Killoran Arbitrator

Date

Footnotes

1. 1The Statutory Accident Benefits Schedule — Accidents On or Between June 22, 1990 and December 31, 1993, Regulation 672 of R.R.O. 1990, as amended by Ontario Regulations 660/93 and 779/93.
2. 2[1983] B.C.J. No. 1796 (B.C. Supreme Court) May 2, 1983
3. 31992 CanLII 7623 (ON CA), 8 O.R. (3d) 556 (Court of Appeal)
4. 4(1987) 1987 CanLII 4150 (ON HCJ), 37 D.L.R. (4th) 120
5. 5(1999) 1999 CanLII 1485 (ON CA), 44 O.R. (3d) 404
6. 6(2000) 2000 CanLII 2301 (ON CA), 50 O.R. (3d) 109
7. 71999 CanLII 818 (ON CA), [1999] O.J. No. 1668
8. 8[2001] O.J. No. 1903