Neutral Citation: 2004 ONFSCDRS 167

FSCO A03-000833

FINANCIAL SERVICES COMMISSION OF ONTARIO

BETWEEN:

SHANNON STEWART

Applicant

and

LIBERTY MUTUAL INSURANCE COMPANY (Now: Liberty Insurance Company of Canada)

Insurer

REASONS FOR DECISION

Before:

Susan Sapin

Heard:

December 16 and 17, 2003, in Barrie, Ontario. Oral submissions by telephone conference on December 19, 2003.

Appearances:

D. Kevin Carroll for Mr. Stewart Suzanne Courtlander for Liberty Mutual Insurance Company

Issues:

The Applicant, Shannon Stewart, is the natural father of Ashley Pyles, whose mother, Anna Pyles, was killed in a motor vehicle accident on June 8, 1997, at the age of 24. Ashley was one month old at the time of the accident; Mr. Stewart was 26. The deceased Anna Pyles was a named insured under her father Franklin Pyles' automobile insurance policy with Liberty Mutual Insurance Company ("Liberty"). Mr. Pyles applied to Liberty for dependant death benefits of $20,000 on behalf of Ashley, payable under the Statutory Accident Benefits Schedule.¹ Liberty paid this benefit to Mr. Pyles and made a further payment of $25,000 to Ashley in lieu of a spousal death benefit, on the basis that Anna Pyles did not have a spouse at the time of the accident.

In January 2003, Mr. Stewart applied to Liberty for statutory death benefits, on the basis that he was Anna Pyles' common law spouse at the time of the accident. Liberty refused to pay the benefit to Mr. Stewart. The parties were unable to resolve their disputes through mediation, and Mr. Stewart applied for arbitration at the Financial Services Commission of Ontario under the Insurance Act, R.S.O. 1990, c.I.8, as amended.

The issues in this hearing are:

Is Mr. Stewart entitled to a death benefit of $50,000 under subparagraph 25(2)1.ii on the basis that he was Anna Pyles' common law spouse at the time of the accident?²
Is Liberty liable to pay a special award under subsection 282(10) of the Insurance Act because its failure to pay Mr. Stewart a spousal death benefit was unreasonable?
Is Mr. Stewart entitled to interest on any amounts found to be owing under section 46 of the Schedule?
Is either party liable to pay the arbitration expenses of the other under subsection 282(11) of the Insurance Act?

Result:

Mr. Stewart is entitled to a death benefit of $50,000 under subparagraph 25(2)1.ii because he was Anna Pyles' spouse at the time of the accident.
Mr. Stewart is entitled to a special award of $25,000, inclusive of interest, under subsection 282(10) of the Insurance Act.
Mr. Stewart is entitled to interest on the spousal death benefit from January 2, 1998 to April 22, 1999 and from January 18, 2002 until the overdue amounts are paid, in accordance with section 46 of the Schedule.
Mr. Stewart is entitled to his expenses of the arbitration proceeding.

The law:

Subsection 25(1) of the Schedule requires insurers to pay a death benefit to the spouse of an insured person who dies as a result of an accident. Subsection 25(6) further specifies that, "In this section, 'spouse' means a person who was a spouse at the time of the accident."

The term "spouse" is not defined in the Schedule. However, subparagraph 224(1)(c) of the Insurance Act defines "spouse," for purposes of automobile insurance, as "either of a man and a woman who are married to each other" or: . . .

are not married to each other and have cohabited continuously for a period of not less than three years, or have cohabited in a relationship of some permanence if they are the natural or adoptive parents of a child; (Emphasis added)

Reading subsection 25(6) and 224(1)(c) together, Mr. Stewart, as Ashley's natural father, would be entitled to a death benefit if he establishes on a balance of probabilities that he cohabited in a relationship of some permanence with Anna Pyles at the time of the accident.

It is not disputed that Mr. Stewart and Ms. Pyles cohabited in a common-law relationship starting as college students in Orillia from September 1993 until the summer of 1996, when they lived in Fredericton, New Brunswick, Mr. Stewart's home town. That summer, the couple mutually agreed to separate, and Ms. Pyles decided to return to Ontario. She subsequently discovered she was pregnant with Mr. Stewart's child, but went ahead with her plans regardless, returning to Owen Sound and moving in with her parents in October 1996. Mr. Stewart returned to Ontario about five months later in March 1997 and moved to Barrie, about 100 kilometres from Owen Sound, where he found work as a car salesman. Ashley Pyles was born on May 12, 1997, just under a month before her mother's death.

The issue in this case is whether, at the time of the accident, while living in separate towns, Mr. Stewart and Ms. Pyles could be said to "have cohabited in a relationship of some permanence."

As "cohabitation" is not defined in the Insurance Act, one must look elsewhere for assistance in determining what it means to "cohabit" in the context of statutory no-fault automobile accident benefits. Black's Law Dictionary, Seventh Edition defines cohabitation as "the fact or state of living together, esp. as partners in life, usu. with the suggestion of sexual relations . . ." As one would expect, the reality of cohabitation, from a legal perspective, is quite a bit more complicated than simply "the fact of living together."

The meaning of "cohabitation" has been considered in a number of court and arbitration decisions.³ In Rodrigue, Arbitrator Naylor applied general principles of family law and jurisprudence to accident benefit cases, on the basis that they shared a common purpose of protecting stable family units from economic hardship in the event of the death of one of the family members. In the family law context, cohabitation is defined as living in a conjugal relationship, living together in a marriage-like relationship outside marriage, or living together as husband and wife.⁴ It includes many of the rights and obligations, legal and otherwise, that characterize a marriage, such as mutual interdependence and support.

In the case of statutory accident benefits, there is a further temporal requirement. Reading subsection 25(6) of the Schedule and subparagraph 224(1)(c) of the Insurance Act together, first with a view to plain language if not good grammar, I find that the phrase "at the time of the accident" is intended to modify the phrase "have cohabited in a relationship of some permanence," to the effect that cohabitation must exist at the time of the accident, and not have ended at some undefined time prior to it. Without the phrase "at the time of the accident," the meaning of "have cohabited" would be different because, grammatically, the phrase "a man and a woman have cohabited in a relationship of some permanence," without more, implies the notion that they cohabited "at some time in the past," and not necessarily at any fixed point in time. The inclusion of the phrase "at the time of the accident," however, precludes that implication. It fixes the cohabitation to the time of the accident. Although grammatically suspect, I find the legal intention is clear.

When a child is born to a couple, a different standard applies. Cohabitation is no longer modified by the term "continuous," but instead by the phrase "in a relationship of some permanence." Cohabitation in "a relationship of some permanence" is intended to be a less stringent, more flexible alternative to the requirement of "continuous" cohabitation that recognises and provides statutory benefits to relationships outside of marriage that fit within that definition.⁵

This language reflects the functional goal of statutory death benefits in the no-fault auto insurance scheme described by Justice L'Heureux-Dube of the Supreme Court of Canada in Miron et. al. v. Trudel et. al.,⁶ - "to protect stable family units by insuring against the economic consequences that may follow from the injury of one of the members of the family."⁷ The alternative, broader definition of cohabitation in subparagraph (c) is just one example of the acknowledgement and recognition in recent years by the courts and legislatures of non-traditional forms of relationships outside marriage, reflecting society's beliefs that relationships of mutual interdependence and support, particularly where children are concerned, are deserving of protection.

Not all family units outside marriage are of sufficient stability and interdependence to warrant statutory protection, though. The key element that qualifying family units have in common is the obligation of mutual support such as imposed upon common-law spouses under the Family Law Act., R.S.O. 1990, c. F.3. Commenting on this obligation, Justice L'Heureux-Dube noted that in the no-fault accident insurance context, the basic purpose of the Ontario Standard Automobile Policy

[is] almost inextricably related to that mutual obligation [of support] and to the relationship of interdependency upon which that obligation is premised.⁸

To assist in determining whether a couple cohabited in a spousal relationship as defined by statute, the courts have developed several criteria to evaluate the nature of the relationship. These have been summarised by Arbitrator Alves in B. W. and Motor Vehicle Accident Claims Fund (FSCO A99-000725, November 7, 2000).⁹ They are: the living arrangements of the parties; the sexual and personal behaviour of the parties; the services they provided to each other; their social participation; societal attitudes towards them; their economic relationships; and their attitude and conduct concerning children. The need to develop such criteria reflects the complexity of modern relationships, and the application of these criteria in the case law makes it plain that "cohabitation" is not determined solely on whether or not a couple actually live together under the same roof.

Although these criteria are helpful in evaluating whether the degree of a couple’s inter-dependency is such as to fall within the statutory protection of the SABS, the criteria are not a hard and fast measuring stick, and may be applied differently depending on whether the test to be met is "continuous" cohabitation, or cohabitation "in a relationship of some permanence."

In addition, whether a couple have cohabited either continuously or in a relationship "of some permanence," is both a subjective and an objective test - one must look at what the intentions of the parties towards each other were, and how the couple was viewed by the outside world.¹⁰The subjective part of the test is no easy thing to determine in the case before me, where one half of the couple has been silenced by an untimely death.

With respect to the subjective element, the parties' intentions, the courts have looked for commitment and support, and the parties' expectations.¹¹ As stated in Rodrigue, with respect to the requirement of "continuous" cohabitation,

the cases have made it clear that temporary interruptions in physical living arrangements do not terminate cohabitation, unless either party has demonstrated in a convincing manner a settled state of mind that the relationship is at an end:

the test should be realistic and flexible enough to recognize that a brief cooling-off period does not bring the relationship to an end.¹²

I would go further. In my view, given the omission of the word "continuous" from the definition of cohabitation "in a relationship of some permanence," and the special recognition and protection given by statute to relationships that produce children, in the form of this less stringent requirement for cohabitation, and given natural parents' Family Law Act obligations to support their children and each other, it should be presumed, once a child is born, that cohabitation in a relationship of some permanence continues despite changes in living arrangements, until either natural parent takes concrete or legal steps to terminate the relationship.

Finally, no one factor discussed above is determinative, and each case must be decided upon its own particular facts, taking into account the wide variations in expectations and behaviour that exist in relationships outside marriage today.

Having reviewed the jurisprudence and considered the evidence as a whole in light of the factors noted above, I find that at the time of the accident, Mr. Stewart and Ms. Pyles were involved in a relationship of sufficient mutual interdependence and support that they cohabited in a relationship of some permanence, for the following reasons.

EVIDENCE AND FINDINGS:

Evidence about the relationship of Mr. Stewart and Ms. Pyles was provided by Mr. Stewart, his friends Stacey Parker and Paul Van Niekerk, and Ms. Pyles parents, Franklin and Gay Pyles, all of whom testified at the hearing. In addition, letters written by the deceased and other documentary evidence was submitted. All of the testimony was given in a straightforward and guileless manner and was, for the most part, credible.

In addition to the facts noted above, I find the following facts to be relevant. Mr. Stewart and Ms. Pyles began living together in Orillia, Ontario in September of 1993 while students at Georgian College. In the spring of 1994, after Ms. Pyles completed her courses, they moved to Fredericton and lived together in a number of different accommodations dictated by economics, including a stay with Mr. Stewart’s parents. Each went through several jobs, none of which paid well. Ms. Pyles was unhappy and homesick in New Brunswick. The couple decided to separate in the summer of 1996, despite learning subsequently that Ms. Pyles was pregnant. Mr. Stewart drove Ms. Pyles and her personal belongings home to her parents in Owen Sound at Thanksgiving. He stayed the weekend with the family, returned to Fredericton, and moved in with his parents.

Ms. Pyles stayed at her parents' home and found work in Owen Sound. She expected Mr. Stewart to return to Owen Sound for Christmas, but he did not do so. I accept his evidence that he wanted to remain at his retail sales position over the busy Christmas season to earn increased income from commissions. In late March 1997 he moved from Fredericton to Barrie, 100 kilometres from Owen Sound, and stayed with parents of his friend Paul Van Niekerk while he sought employment and a place to live. Within a week he found work as a car salesman, then moved into shared accommodation with four college students until he could find something suitable and affordable on a more permanent basis. Ashley was born about six weeks later, on May 12th.

Mr. Stewart candidly admitted he made no plans to live with Ms. Pyles before the accident. I accept his, Mr. Pyles' and Mr. Van Niekerk's evidence that the economy, and hence job prospects, were poor in Owen Sound, a much smaller community than Barrie. There was no evidence that Ms. Pyles had plans to move to Barrie. However, Mr. Stewart visited her almost every weekend in Owen Sound, staying overnight at her parents' home on the family room sofa. She visited him a few times in Barrie, staying overnight. On one occasion the couple spent a night together at a hotel in Barrie. Mr. Stewart pointed out this was a rare occurrence only because of the expense. Ms. Pyles and Ashley spent the Thursday and Friday night before the Saturday she was killed with Mr. Stewart in Barrie. The last time Mr. Stewart saw Ms. Pyles was as she and Ashley lay sleeping in his bed the Saturday morning he left for work.¹³

While Ms. Pyles lived at her parents' house, she used one of the two family cars to drive to and from work, and Mr. Pyles insured her under his policy with Liberty. Once she began working, Ms. Pyles contributed to the family's food budget. Mr. Stewart did not contribute to any of her living expenses during this period, nor she to his.

Through her parents' church, Ms. Pyles found a one-bedroom apartment about six kilometres from her parents' home. She planned to officially move in on June 1, 1997. I accept her parents' evidence that she applied for and received social assistance because she had not worked long enough to qualify for Employment Insurance maternity benefits, and she wanted to be able to afford to live in her own apartment and remain off work with her baby after the birth. There is no evidence that Mr. Stewart contributed to the cost of renting the apartment.

Ms. Pyles furnished the apartment with garage sale finds and baby furniture her parents gave her as a gift, as well as some belongings Mr. Stewart brought back with him from New Brunswick in March 1997. She purchased a toothbrush, shaving kit and bathrobe for Mr. Stewart to use when he came to the apartment. She and Mr. Stewart spent one night there together with Ashley in the week before the accident; Ms. Pyles was still in the process of moving in when she was killed on June 8, 1997.

Mr. Stewart attended the last of four prenatal classes in Owen Sound with Ms. Pyles and assisted at Ashley’s birth. After Ashley was born he visited and was involved with her care. He bought diapers, baby clothes and a washtub and gave Ms. Pyles $200 in cash. There is no question that, in the words of Gay Pyles, Mr. Stewart "had fallen in love with the baby." After the accident, the Pyles took on the care of Ashley, on what Mr. Stewart assumed would be a temporary basis. When the Pyles sought permanent custody, however, Mr. Stewart left his job, moved to Owen Sound and sought and eventually obtained sole custody of Ashley, on terms at first. She has lived with him in Barrie ever since. He remains on cordial terms with the Pyles, who now live in Brampton, and they visit with Ashley regularly.

Mr. Stewart attended Ms. Pyles' funeral, but it was Mr. Pyles who bought the burial plot, sent out the death notices, and handled the legal matters. Mr. Pyles obtained a birth certificate and American citizenship for Ashley (the Pyles are American citizens), closed Anna’s bank accounts, and dealt with her creditors and income tax affairs. He applied for and obtained statutory death benefits on behalf of Ashley under his insurance policy with Liberty, and applied for dependant Canada Pension Plan benefits on behalf of Ashley and Mr. Stewart.

Both Mr. Pyles and Mr. Stewart testified that they did not discuss who would undertake these tasks. Mr. Stewart explained that Mr. Pyles, as a church pastor, was used to being in charge and dealing with such matters, and did not consult him. He testified that he felt "swept aside" after the accident. I accept his evidence that he was in considerable shock and at a loss after Ms. Pyles unexpected and untimely death. For his part, Mr. Pyles testified that he simply assumed the responsibilities because his daughter was living under his roof when she died, and he "just went into gear."

These are the objective facts. Liberty maintains that these bald facts about the couple's living arrangements, economic relationship, funeral arrangements for Ms. Pyles and conduct concerning Ashley mitigate against a finding that the couple cohabited in a relationship of some permanence at the time of the accident, because, it submits, they intended to separate and did so as of October 1996; they lived apart from that time; they were not financially interdependent; there was no evidence of definite plans to marry or live together in future; there were no indications that they planned to raise their child together; and they were not viewed as a couple by "society," as evidenced by the funeral arrangements, death notices, and local newspaper accounts of the accident. Liberty's theory is that Mr. Stewart's behaviour towards Ms. Pyles and Ashley was more characteristic of a divorced or separated father than of a cohabiting spouse.

However, objective facts alone do not always tell the whole story. If one looks further at the intentions of the parties as gleaned from their own words, as seen through the eyes of witnesses and as revealed in what little documentary evidence there is, a different, more complex picture emerges, one that I find refutes Liberty's theory.

In his testimony, Mr. Stewart described his relationship with Ms. Pyles as "wonderful, very loving and very physical and exciting." He felt she went through a "quarter-life crisis" in the summer of 1996 because she was unhappy with her life in New Brunswick. She became "possessive and controlling" and wanted to spend more time with her parents in Ontario, believing her mother had heart disease. She stopped taking birth control pills "to level off her hormones so she could act a bit more normal," a step Mr. Stewart believed might solve some of their issues. He stated that when she moved back to Ontario, they did not "discuss where the relationship was going," but that they were "very much in love and very supportive of each other, and had no thought of terminating the relationship."

After Mr. Stewart returned to Barrie, he spent weekends with Ms. Pyles, but he stated they did not have time to discuss, in the few short weeks after Ashley was born, whether he would live together with or marry Ms. Pyles; he admitted that he had no specific plans to do so at the time of the accident. He explained that Ms. Pyles rented the apartment so the couple could have their own space, "away from the watchful eyes of the Pyles," who did not approve of conjugal relationships outside of marriage. Mr. Stewart stated that he helped Ms. Pyles move into the apartment, kept some furniture and belongings he'd brought back with him from New Brunswick there, and spent one night there with her and Ashley after Ashley was born. Mr. Van Niekerk confirmed this evidence.

Mr. Stewart testified that he always considered Ms. Pyles to be his "girlfriend" and introduced her to others as such. Although he stated he considered her "his spouse in a legal context," he himself did not use that term because he believed that term applied only to married couples.

Mr. Stewart’s testimony at the hearing was consistent with a statement Liberty obtained from him on September 24, 1997:

Our relationship magically came back together once I moved to Barrie. I considered Anna my girlfriend at that stage of our relationship. We had no commitments to get married but there was a good chance that was going to happen, we were committed to each other and committed to raising our child.. . . We were involved in a loving physical relationship. We were not committed to marriage however had never made any legal attempts to break our common law relationship. . . In my opinion at the time of Anna's death on June 8, 1997, she was my girlfriend. We were seeing each other every week and I was confident there was a strong chance that we would re co-habitate [sic] in the future. We did not have plans to move in together at the time but I was confident we would reunite.¹⁴

Even accounting for the fact that the statement, taken down in longhand by the Insurer’s representative, is most likely a summary of answers to questions asked of Mr. Stewart by the Insurer, rather than a narrative in Mr. Stewart’s own words, I find it to be an accurate depiction of Mr. Stewart’s state of mind at the time, because it is consistent with his testimony at the hearing as well as with his close and regular contact with Ms. Pyles after he returned from New Brunswick. It is also consistent with the evidence of Ms. Parker and Mr. Van Niekerk, and Mr. and Mrs. Pyles, that the couple were often together.

I also find that Mr. Stewart's use of the terms "common-law relationship," "girlfriend," and "cohabitate" cannot be taken literally or at face value; it was evident even at the hearing that, like most non-lawyers, Mr. Stewart had his own understanding of these terms, which does not necessarily correspond with the correct or legal definitions. I note that Mr. Stewart was not represented by counsel and did not have independent legal advice when he provided his statement, nor was he provided with much in the way of information or assistance by Liberty. What he clearly understood though, as revealed by his conduct before and after the accident, was that in his own mind and in his own way, he was committed to both Ms. Pyles and their daughter.

It was suggested to Mr. Stewart on cross-examination that the couple separated because of "commitment" issues, i.e. Ms. Pyles wanted to be married, or at least live together, and Mr. Stewart did not, and Ms. Pyles wanted Mr. Stewart to change certain aspects of his behaviour,¹⁵ which he did not see as a problem and was unwilling to do. Mr. Stewart denied these allegations.

Mr. Stewart's denials were not particularly convincing, and his attempts to attribute responsibility for the relationship difficulties to hormone-related behaviour on the part of Ms. Pyles or to the influence of a disapproving family spoke for themselves about the reasons for the couple's difficulties. However, I find that Liberty's allegations, even if true, at best serve to explain the reasons the couple decided to spend time apart. They are not particularly relevant to, and certainly not determinative of, the question of cohabitation. Nor are they helpful in determining whether the couple at any time decided to permanently sever their relationship. In light of the evidence as a whole, I find the relationship difficulties in this case fall far short of the requirement of "convincing" evidence of "a settled state of mind that the relationship is at an end" as set out in Rodrigue.

The testimony of Mr. Stewart's friends, Stacey Parker and Paul Van Niekerk, as well as the evidence of Mr. and Mrs. Pyles, supports the view that Mr. Stewart and Ms. Pyles were involved in an ongoing relationship of some permanence, albeit of unknown future, at the time of the accident.

Stacey Parker, one of the students with whom Mr. Stewart shared a house when he first returned to Barrie, and now a police officer with the Barrie police department, and Paul Van Niekerk, Mr. Stewart's best friend, testified that they considered Mr. Stewart and Ms. Pyles to be a couple. Ms. Parker testified that Ms. Pyles would spend the night in Mr. Stewart's room when she visited, and presumed they slept in the same bed. Mr. Stewart referred to Ms. Pyles as his girlfriend, and he had no other girlfriends.

Mr. Van Niekerk understood that his friend returned to Barrie to be near Ms. Pyles. The couple stayed overnight at the apartment of Mr. Van Niekerk’s wife Kelly before the Van Niekerks were married, and afterward Mr. Van Niekerk and his wife visited the couple once at Ms. Pyles apartment, where he observed Mr. Stewart's belongings. With respect to the criteria of social participation and societal attitudes as indicators of cohabitation, I find that in the eyes of their peers, at least, Mr. Stewart and Ms. Pyles socialised as, and were considered to be, a couple.

Mr. and Mrs. Pyles also testified. Despite their strong religious beliefs and obvious reluctance to be witnesses,¹⁶ I found their testimony even-handed, perceptive and reliable. Mr. Pyles candidly admitted that he and his wife were not supportive of the relationship as it was. Mr. Pyles never discussed Ms. Pyles' relationship with Mr. Stewart with his daughter. Both parents were nevertheless supportive of their daughter. Mr. Pyles described having his adult daughter back at home as "wonderful." Although he helped her find her own apartment, he doubted it was "economically sustainable," because the type of work his daughter was able to obtain did not pay well. It was his impression that his daughter hoped, "as do many women," that Mr. Stewart would marry her. He himself saw that as unlikely, and believed his daughter would likely become a single mother. It was his understanding that Ms. Pyles expected Mr. Stewart to help out with Ashley, but that no formal support or other arrangements were yet in place when she died, and that she was "still figuring out what she needed to do to get steady support."

Mrs. Pyles impressed me as a non-judgmental, compassionate and perceptive mother who loved and was close to her daughter, respected her, was prepared to support her choices, and who was scrupulous about being truthful, and fair, in her testimony. Her admission that "what a daughter feels and what she tells her mother may not be the same thing" indicated she was aware her own perspective would necessarily be to some extent subjective.

It was Mrs. Pyles' understanding that when Mr. Stewart and her daughter left for New Brunswick in the spring of 1994, they planned to marry as soon as they had saved enough money. In the summer of 1996 the couple were going through a difficult time, and Ms. Pyles confided to her mother that she felt Mr. Stewart did not keep promises he made, and that she felt insecure, upset, angry and homesick; Mrs. Pyles understood that her daughter and Mr. Stewart both felt they "needed a break." When Ms. Pyles returned to Owen Sound in October 1996 with her personal belongings and Christmas decorations, Mrs. Pyles understood that her daughter expected Mr. Stewart to return by Christmas. She testified that her daughter would have married Mr. Stewart "in a moment" and that her daughter never stopped loving Mr. Stewart or hoping that they would be together again. It was Mrs. Pyles' impression that the couple had definitely separated in the summer of 1996, and when Mr. Stewart did not return to Ontario by Christmas, her daughter felt the relationship was over.

When Mr. Stewart returned in the spring of 1997, however, the couple saw each other almost every weekend, and Mrs. Pyles stated things appeared to have improved. This is consistent with Mr. Stewart's statement that the relationship "magically came together" after he returned to Ontario. Mrs. Pyles was unsure if her daughter's feelings towards Mr. Stewart, and her desire to be together again, were reciprocated, but stated that she never discussed this with either her daughter or Mr. Stewart. It was also Mrs. Pyles impression that there would be a legal arrangement with respect to support after Ashley was born, but that nothing had been formalized at the time her daughter died.

Mrs. Pyles testified that her daughter told her she felt Mr. Stewart was being a good father to Ashley. She testified that in her view, the couple were sharing "parenting feelings" but that, as far as her daughter's personal relationship with Mr. Stewart was concerned, she didn't know "where it was." I find her statement that the time was too short, and that perhaps given more time, the couple’s future would have become clearer, is reasonable, and significant. I place a great deal of weight on it. I find it supports a reasonable conclusion consistent with the preponderance of evidence - that the couple went through a definite, but brief (i.e. five months) "cooling off" period after Ms. Pyles returned to Ontario in the fall of 1996, that Mr. Stewart returned to Ontario to be closer to Ms. Pyles, that the relationship was on the mend after his return, and the couple drew closer as Ashley’s birth approached, and remained close after she was born.

Contrary to Liberty’s contention, I find the death notices and newspaper articles are not a reliable depiction of "societal" attitudes towards the couple, and are belied by the actual behaviour of those closest to the couple. Mr. and Mrs. Pyles welcomed Mr. Stewart into their home almost every weekend after he returned to Ontario, presumably so that he could spend time with their daughter. They supported her wish for a separate apartment. It is fair to assume they knew Mr. Stewart would continue to spend time there with her. Mr. Stewart's own parents stayed with the Pyles when they came from New Brunswick for the funeral.

Despite all this, Mr. Pyles chose to identify Mr. Stewart as a "good friend" of his daughter in the published death notices, with no mention that he was Ashley’s father. Liberty relied on this portrayal of Mr. Stewart as evidence that the Pyles, and, by inference, their church community, did not regard Mr. Stewart and Ms. Pyles as a couple. I find the Pyles' religious beliefs and leadership role in their religious community clearly influenced their views about the relationship, and they were reluctant to publicly acknowledge Mr. Stewart and Ms. Pyles as a couple so long as they remained unmarried. Similarly, I do not consider references to Ms. Pyles as a "single mother" in local newspaper articles to reflect societal or community attitudes, when information for the articles was supplied by the Pyles.

Based on the testimony of Mr. Pyles and Mr. Stewart, and Mr. Pyles' letters to Liberty after the accident, I find that the Pyles intended to retain custody of Ashley and obtain statutory death benefits on her behalf from Liberty.¹⁷ I find it was not in their interest at that time to acknowledge Mr. Stewart as their daughter's spouse, and this influenced their conduct and how they chose to portray the relationship to others. I find their actions also influenced Liberty's decision that Mr. Stewart was not a spouse.

Further documentary evidence in the form of letters from Ms. Pyles to Mr. Stewart between November 1996 and February 1997, photographs of the couple with Ashley at the hospital after Ashley was born, an RRSP application form of Mr. Stewart's dated February 29, 1996, and tax returns do not support a conclusion that the couple had ceased to cohabit in a relationship of some permanence at the time of the accident.

There is no indication whatsoever from her letters that Ms. Pyles considered the relationship to be over after she returned to Ontario; quite the contrary, in fact. Liberty suggested that because Mr. Stewart did not write back to Ms. Pyles, he did not reciprocate her feelings, and it should be inferred that he treated the relationship as over. This is a huge inferential leap, and I do not find it to be reasonable. According to her mother, Ms. Pyles was an enthusiastic and prolific correspondent. Her letters are lengthy, emotional, girlish and mostly about her feelings and affection for Mr. Stewart; Mr. Stewart, on the other hand, presented at the hearing as a young man not particularly adept at analyzing feelings and relationships and not too keen on talking (or writing) about them at length; his explanation that he was "not much of a letter-writer" seems perfectly reasonable to me. It reflects his personality and the couple's own mutual decision to "take a break." His reticence strikes me as a normal reaction, and is hardly convincing evidence of a settled state of mind that the relationship was over.

In any event, actions speak louder than words. Mr. Stewart visited with Ms. Pyles when he came to Ontario on a business trip in February 1997; she came to see him as soon as he returned to Ontario at the end of March and they spent almost every weekend together; he drove 100 kilometres to attend prenatal classes when his schedule permitted; he was present when Ashley was born and helped care for her afterward; he purchased things for the baby and provided some financial support; and, according to his uncontradicted testimony and that of his friends, resumed a close, affectionate and physical relationship with Ms. Pyles, plainly evident from the hospital photographs. As noted above, Mr. Stewart last saw Ms. Pyles the morning on the day she died, asleep with their daughter in his bed. Contrary to Liberty's theory, these are not the actions of a separated couple. I find the couple exhibited more commitment to each other and interdependence than one would expect had either one of them demonstrated a clear intention to terminate the relationship, and in my view spent enough conjugal time together to meet the test of cohabitation in a relationship of some permanence.

I place less weight on the Pyles' view of the relationship. That they would not have been privy to certain aspects of their daughter's relationship with Mr. Stewart is explained by the fact that the couple knew her parents did not really approve; this is consistent with Mr. Stewart's testimony that Ms. Pyles found the apartment in part so that the couple could spend time together privately. Unfortunately, they were only able to do so once in the week before the fatal accident on June 8, 1997.

The remaining documents are not helpful. Mr. Stewart’s 1997 T1 General tax return is full of errors. He appears to have claimed a spousal deduction, but identifies his status at December 31, 1997 as "single." Given that the only other choices are "married, divorced, separated, living common-law or widowed," of which, arguably, none applied to him after Ms. Pyles died, I fail to see how anything on this form is relevant to the issues in dispute in this arbitration. The Notices of Assessment for the years 1995 and 1996, when it is not disputed the couple cohabited, indicate Mr. Stewart did not claim spousal credits in those years. These documents prove nothing one way or the other.

Mr. Stewart's RRSP application dated February 29, 1996 identifying Anna Pyles as his beneficiary and the relationship between the contributor and the beneficiary as "common-law" is also not helpful because there is no dispute that the couple were cohabiting at that time.

Ms. Pyles' letter to Social Services applying for a "start-up" allowance to help furnish her apartment is not a reliable indicator of whether her relationship with Mr. Stewart was terminated. In the letter, Ms. Pyles states she needs household items such as dressers, a bed and linens, diapers and a washer/dryer, etc. because her own belongings, accumulated in a five-year common-law relationship, were left behind when the relationship ended, and she was unable to obtain those belongings. She also states she could no longer live at her parents' home. As the first statement is partly untrue and the second is certainly untrue, given the Pyles' evidence, I place no weight on Ms. Pyles' statement that her common-law relationship had ended. I find it evident she made that statement in support of a request for financial assistance she would not have been entitled to otherwise, because she wanted some financial independence and wanted to be able to stay home after her baby was born.

All of the evidence indicates Mr. Stewart and Ms. Pyles were not big wage-earners, and made life choices accordingly, such as putting up with unsatisfying jobs and choosing accommodations based on economic considerations. Mr. Stewart's decision to stay on in New Brunswick until after Christmas, living with his parents; his move to Barrie, where he found work shortly after his arrival, stayed with friends and then shared a house with college students; his visits to Ms. Pyles at her family's home every weekend; and Ms. Pyles' garage-sale acquisitions for the apartment, are all consistent with the couple's pattern of modest income and careful spending with respect to living arrangements. There is no evidence the couple's separate living arrangements at the time of the accident were permanent, and, under the circumstances of this case, I do not consider the fact that they lived in separate residences during the week to be determinative of whether they "cohabited in a relationship of some permanence" within the meaning of subparagraph 224(1)(c) of the Insurance Act and subsection 25(6) of the Schedule, at the time of the accident.

The case law is clear that relationships may go through "cooling off" periods and couples may spend extended periods of time apart as a result, and still be found to have met the test of cohabitation. In the case before me, the test to be met is an even less stringent one; all that is required is cohabitation "in a relationship of some permanence." In Labbe v. McCullough,¹⁸a decision of the (then) Family Division of the Ontario Provincial Court, Judge Weisman found this test was met by a couple who lived together at the applicant’s apartment for only six weeks in a 19-month period, because a child was conceived, and there had been "some talk of marriage some day:"

In my view, this gives the relationship a touch of permanence. The Legislature has used the words "some permanence" and I cannot find that there was no permanence to the relationship.

Having considered the evidence as a whole, the comparatively low threshold for establishing a relationship of some permanence and the criteria set out in the jurisprudence, I find that Mr. Stewart and Ms. Pyles regularly spent time together in an affectionate, physical, and exclusive relationship, were both involved in the birth and care of their child, were mutually supportive of and emotionally dependent upon each other, and socialised as a couple. After Ashley was born, Mr. Stewart gave Ms. Pyles things for the baby and $200 in cash, with more likely to follow, presumably for Ms. Pyles to use as needed, either for herself or for the child. Although no one could predict with certainty where the relationship was headed at the time of the accident, there was no clear and convincing evidence that either party intended to permanently sever the relationship, and neither had taken concrete steps to do so.

I find that there was far more than a mere "touch of permanence" to the relationship, and it could definitely be said of Anna Pyles and Shannon Stewart that they cohabited in a relationship of some permanence at the time of the accident.

Time limits

Liberty submits that Mr. Stewart is disentitled to a spousal death benefit on two grounds: first, he failed without reasonable excuse to notify Liberty of his intention to apply for the benefit within 30 days after the accident, contrary to subsections 31(1), 32(1) and (1.1)(a) of the Schedule; and, second, he is barred from arbitrating his claim because he failed to apply for mediation "within two years after the insurer's refusal to pay the amount claimed," as required by subsection 51(1) of the Schedule.

Neither argument was raised either at the pre-hearing of this matter or in the Insurer's response to Mr. Stewart's application for arbitration. Neither argument has any merit.

Although neither party was particularly forthcoming on these points, I accept Mr. Stewart's testimony and find, on the evidence put before me, that he did not apply to Liberty for the spousal benefit within 30 days because he had no idea he might be entitled to it. It was Mr. Stewart's uncontradicted evidence, and I find, that Liberty did not inform him that he might possibly be entitled to a spousal benefit, even as it took a statement from him in September 1997, more than three months after the accident, as part of its own investigation to rule out that very possibility.

Liberty submitted that it had no obligation to inform Mr. Stewart of his potential entitlement, because it was satisfied after interviewing Mr. Stewart, receiving assurances and documents from Mr. Pyles in the form of extracts from a letter written by Anna Pyles, and obtaining legal advice, that Mr. Stewart was not a spouse of Anna Pyles. Liberty further submitted that, under the priority rules, it had no obligation to provide Mr. Stewart with application forms or even to inform him that he might be entitled to a benefit, because he was not "their insured," and he ought to have applied to his own automobile insurance company for a spousal death benefit.

I find that Liberty, at the very least, ought to have informed Mr. Stewart at the time it interviewed him that he might be entitled to claim a spousal death benefit, particularly as that was in fact the very reason it interviewed him, and it ought to have advised him about how to apply for the benefit, or to obtain independent advice.

In light of the Supreme Court of Canada’s decision in Smith v. Co-operators General Insurance Co.¹⁹ emphasising the important consumer protection role of the statutory no-fault accident benefit scheme, it should be clear by now that insurers cannot expect to rely on time limits to restrict consumer access to benefits, where an insurer’s own conduct has contributed to the delay. Liberty’s refusal to acknowledge any responsibility to Mr. Stewart is contrary to the priority rules in the Insurance Act, which are designed to provide prompt delivery of benefits and prevent consumers from being "bounced around" between insurance companies in instances where coverage issues are not immediately straightforward.

I further find Liberty took more than six months to complete its investigation (which included a legal opinion) to decide Mr. Stewart’s status,²⁰ did not inform him it was investigating his entitlement, and did not communicate its decision to him.

I find that Liberty’s silence under the circumstances to be a reasonable explanation for why Mr. Stewart did not apply for a spousal death benefit within the time limits specified in section 32, and he is not disentitled on that ground.

With respect to the two-year time limit for commencing an arbitration proceeding, it is clear from Smith v. Co-operators that this time limit is only triggered by a valid refusal which includes a description of the dispute resolution process. I was not presented with any evidence that Liberty provided a clear and unequivocal refusal of the spousal death benefit to Mr. Stewart, or information about the dispute resolution process, from which point the two-year time limit would begin to run and which would bar his application for arbitration. Liberty’s excuse, that it was not required to provide a refusal of benefits because Mr. Stewart had not actually applied for the benefit, is no defence in light of its failure to fulfill its obligation, as the first insurer contacted, to advise him of his potential claim for spousal death benefits, to refer him to his own insurance company, or to provide him with an application form in the first place. The fact that Mr. Stewart was represented by counsel as of January 1999 does not relieve Liberty of its obligations under the Schedule or the Insurance Act in this case.

Special Award

The facts related above are also relevant to the issue of a special award. Mr. Stewart claims a special award under subsection 282(10) of the Insurance Act, which authorises an arbitrator to award an amount of up to 50 per cent of the value of benefits and interest found to be owing if he or she finds that an insurer has unreasonably withheld or delayed payment of those benefits.

Under subparagraph 25(1)(a) of the Schedule, death benefits must be paid within 180 days of the accident. This is in fact how long it took Liberty to investigate Mr. Stewart’s entitlement and decide whether the benefit would be paid on Ashley's behalf or to Mr. Stewart as the spouse of Anna Pyles.

Based on documents filed and on the testimony of Mr. Stewart, Mr. Pyles and Ms. Shanna Harvey, a senior accident benefits claims specialist with Liberty, I find that Mr. Stewart is entitled to a special award calculated from December 19, 1997, 180 days after the accident, for the following reasons.

I do not take issue with Liberty's conclusion in December 1997 that Mr. Stewart was not a spouse - this is a difficult case and that conclusion was not unreasonable under the circumstances at the time. What was unreasonable, however, was that Liberty believed Mr. Stewart might qualify as a spouse and investigated that possibility, going so far as to interview him and obtain a written statement from him, and never advised him he might be entitled to a spousal death benefit, or how to apply; never explained any of the procedures, including dispute resolution procedures, or important time limits involved; and never referred him to his own insurance company, which it claimed at the hearing would have been the priority insurer.

It is simply not reasonable for an insurance company to investigate an insured's entitlement to a benefit and then act so as to deprive that person of any opportunity to pursue that benefit or dispute a decision made against his interest in a timely fashion. Under those circumstances, the excuse provided by Liberty, that Mr. Stewart was not "their insured," is simply not acceptable. These reasons are based on the following findings of fact.

I accept Mr. Stewart's uncontradicted testimony that the independent adjuster/investigator who took a statement from him on September 24, 1997, over three months after the accident, did not inform him that he might be entitled to a spousal death benefit and did not provide him with information about how or to whom to apply, application forms, or information about time limits; that the adjuster promised to "get back to him" if there was "any reason to" but no further information was forthcoming; that no one else from Liberty ever contacted Mr. Stewart or advised him of any potential entitlement; that he was never told and was not aware he should apply to his own insurer for a death benefit; that he found out about his possible entitlement only after a conversation with a co-worker prompted him to seek legal advice at some point after Liberty took the statement from him; and that he became aware only several years later that Liberty paid Ashley Pyles $25,000 in trust in lieu of the spousal death benefit. I find Liberty did not provide Mr. Stewart with a copy of his statement.

Ms. Harvey testified that she has been responsible for the Pyles claims file for the past three years. I did not find her to be a forthright or convincing witness. She contradicted herself by stating initially that Liberty first became aware of a possible spousal claim when it obtained a statement from Franklin Pyles on June 16, 1997, prompting it to obtain a statement three months later from Mr. Stewart; Ms. Harvey then stated the company was first notified of Mr. Stewart’s potential claim when it received Mr. Carroll’s April 22, 1999 letter.

Ms. Harvey admitted she did not know if Liberty's adjuster notified Mr. Stewart that he was potentially entitled to a spousal death benefit, or provided him with application forms, and was clearly unwilling to agree that Liberty had any responsibility to do so; when pressed on cross-examination, she conceded only that a responsible adjuster would do both, but only if the adjuster felt Mr. Stewart was entitled to the spousal benefit. She maintained that, as Liberty had investigated the matter and had satisfied itself that Mr. Stewart was not Anna Pyles spouse, the adjuster in this case was not required to provide him with notice or forms.

The first difficulty with this position is that, as noted above, Liberty’s investigation took more than six months, during which time it said nothing to Mr. Stewart at all, despite the several statutory time limits at stake in this case and the consequences, to both parties, of missing those time limits. I find Liberty was fully aware, or should have been, of the relevant legislative requirements, and Mr. Stewart was not, and he was clearly disadvantaged as a result. Liberty’s knowledge permitted it to take a calculated risk that Mr. Stewart would not apply for a spousal benefit, and its conduct prevented him from doing so. This amounted to taking advantage of him. I find this conduct was unreasonable and delayed Mr. Stewart's eventual application for benefits, as well as an impartial determination of his entitlement.

The second difficulty with Ms. Harvey’s contention that Liberty was not responsible to Mr. Stewart was her response to Mr. Carroll’s suggestion that Liberty purposely ignored Mr. Stewart's spousal claim to avoid paying him the $50,000 spousal death benefit. Ms. Harvey's response, that it actually would have been in Liberty’s interest to pay the spousal death benefit, because it could then have recovered the money from Mr. Stewart's own insurer under the priority regulation,²¹ was not convincing, and was belied by Liberty's own conduct.

The priority regulation protects insurers by stipulating that the first insurer to receive a completed application for accident benefits must pay the benefit claimed, and then has 90 days to inform another insurer that it believes the other insurer is liable to pay. I find that, by not providing Mr. Stewart with information about the benefits and entitlement or application forms in the first place, Liberty by its own conduct effectively ensured it would not receive a completed application from Mr. Stewart, and thus avoided the application of the priority regulation in the first place. Liberty has only itself to blame for any prejudice it may have suffered by missing the deadline for informing another insurer under the priority rules.

I also note that Liberty's adjuster investigated the priority of payments and reported on November 4, 1997 that Mr. Stewart was insured in New Brunswick until March 23, 1997, when his policy was cancelled because of his return to Ontario, and that a new policy was issued for him in Ontario by the Wawanesa Insurance Company on June 27, 1997.²² As the accident occurred on June 8, 1997, the question is raised, whether Mr. Stewart even had an automobile insurance policy of his own at the time of the accident, under which he could claim a spousal death benefit, as Liberty maintained he should have done. As I heard no evidence or argument on this point, however, I make no finding for the purpose of the special award claim.²³

I further note that in October 1997 Franklin Pyles sent Liberty's adjuster an excerpt from a letter written by his daughter purportedly describing a "break-up" of her relationship with Mr. Stewart,²⁴ as well as a letter stating that if Liberty were to pay Mr. Stewart a spousal benefit, Mr. Pyles would sue to recover the payment for Ashley, because "it is obvious that the relationship had indeed ended."²⁵ Liberty did not obtain the full text of Ms. Pyles' letter until the first day of the hearing.²⁶

I find it more likely than not, in the absence of any evidence to the contrary and despite Ms. Harvey’s blanket assurances, that this correspondence received after Liberty obtained Mr. Stewart’s statement influenced its decision to say nothing to Mr. Stewart pending a legal opinion on his spousal status, and to remain silent once it had made its decision.

Log notes provided by Liberty indicate that someone at the company requested a summary of the claim in May 1998. The brief summary provided reads in part:

. . .THE MAIN ISSUE WAS THE ENTITLEMENT OF DEATH BENEFITS. INSD MAINTAINED THAT THE COMMON-LAW RELATIONSHIP WAS OVER AND THE BOYFRIEND HAD NO RIGHT TO ANY BENEFITS. IT WAS ULTIMATELY CONFIRMED THAT THERE WAS NO SPOUSE AND THAT BENEFIT SHOULD BE AND WAS PAID TO THE INFANT. . .²⁷

The log notes indicate Liberty closed its file in August 1998, and that nothing further happened until it received a phone call on January 6, 1999 from Ms. Pyles "common-law spouse . . . wanting copy of statement he gave to our adjuster 1.5 years ago. . . He wants us to send the statement to his lawyer, Kevin Carroll in Barrie."

Apparently it took Liberty another two months to find and photocopy the statement, but the adjuster could not find Mr. Carroll's address;²⁸ a subsequent log note indicates a different adjuster eventually found a telephone number for Mr. Carroll and left a message for him to call her back on May 27, 1999. In the meantime, though, Mr. Carroll sent his April 22, 1999 letter to Liberty advising that Mr. Stewart was a spouse and was entitled to a death benefit, and requesting payment of same:²⁹

Would you kindly confirm that you are prepared to make payment of this amount by return fax.

There is a limitation period fast approaching and if I do not hear from you by April 27, 1999, then I shall assume that the claim is being denied and will arrange for mediation.

Although it is not disputed that Liberty received this letter, there is no mention of it in the log notes, and Mr. Carroll did not receive a reply. Ms. Harvey conceded Liberty ought to have replied to the letter, but she was unable to explain why it did not, or why the file was again returned to storage.

Mr. Carroll sent a second letter on January 16, 2002, stating that Mr. Stewart was a spouse and was entitled to a death benefit of $25,000;³⁰ Liberty’s log notes on January 24, 2002 indicate that its response in a telephone conversation with Mr. Carroll was that an "APPLICATION HAD NOT BEEN FILED BY OR ON BEHALF OF SHANNON STEWART." Ms. Harvey testified that at that point, she reviewed the documents in the file (statements from Mr. Pyles and Mr. Stewart, Ms. Pyles' letter to social services, and Mr. Pyles' letters) and was satisfied that Mr. Stewart had no spousal claim because he did not cohabit with Ms. Pyles at the time of the accident. She further concluded that the two-year time limit had passed and so Mr. Stewart was precluded from pursuing a claim under section 51 of the Schedule. She conceded she ignored this letter, and did not explain why she did not send Mr. Stewart an application form for the death benefit.

I find that Ms. Harvey was well aware, as she should have been, that under section 51 the two-year time limit only begins to run after the insurer's refusal to pay the amount claimed, and a refusal to pay a benefit must be clear, unequivocal and in writing - basic requirements well-established in the jurisprudence. Ms. Harvey’s testimony, first that Liberty ought to have responded to Mr. Carroll’s April 22, 1999 letter, then that it was not required to respond because Mr. Carroll stated he would treat a non-response to his request for payment as a denial, together with her admission that she ignored a second letter sent by Mr. Carroll on January 16, 2002, suggests to me that Liberty more likely than not chose to ignore Mr. Stewart's claim in the hopes he would not follow it up, and, if he did so, his claim would be excluded by the time limits.

Mr. Stewart eventually filed an application for mediation in October 2002. No explanation was provided as to why he did not do so in the three years between then and April 1999, when Mr. Carroll first wrote to Liberty. After mediation took place, Mr. Stewart submitted a Death and Funeral Benefits Application to Liberty dated January 16, 2003,³¹ and Ms. Harvey responded with a formal written refusal.

I find Liberty's conduct set out above was unreasonable and was directly responsible for delaying the determination of Mr. Stewart's claim, and hence payment of the spousal death benefit to him up to April 1999, when he made it clear through his lawyer that he expected Liberty to pay the benefit. After that point, I find the responsibility for delay shifted to Mr. Stewart because he provided no reasonable explanation for why he failed to pursue his claim for over three years after he was represented by counsel.

Under the circumstances, I find Mr. Stewart is entitled to a special award.

Director Draper explained how to calculate a special award in Liberty Mutual Insurance Company and Persofsky.³² As I understand it, one cannot arrive at a realistic or appropriate figure for a special award without first determining what the maximum interest payable under subsection 282(10) would be. The maximum special award payable, reserved for the most egregious conduct on the part of an insurer, would be 50 per cent of that amount.

Director Draper further emphasized that "while arbitrators must consider the gravity of the insurer's conduct, and may want to locate it along a continuum, it is not sufficient to assign a percentage without determining whether the amount that flows from the resulting calculations is appropriate."

In his Application for Arbitration, Mr. Stewart has asked for a special award of $25,000.

Were I to follow the method as set out in Persofsky and applied in Smith, I expect the maximum interest payable under 282(10) in the case before me would amount to several hundred thousand dollars. Mr. Stewart's suggested special award of $25,000, hardly a nominal amount, would translate to a fairly modest percentage of the total payable under subsection 282(10). I find the "percentage" method is not helpful in this case.

In my view, however, a special award of $25,000, inclusive of interest, is appropriate. It represents a sufficiently serious penalty to impose upon Liberty for its conduct under the circumstances, and for its part in the delayed payment of the spousal death benefit.

INTEREST:

Section 46 of the Schedule provides for interest on benefits found to be overdue at a rate of 2 per cent per month compounded monthly, a generous rate of interest that exceeds the bank rate. The Court of Appeal has confirmed the view of arbitrators that this provision, unlike that governing special awards, is not punitive, but ". . . is designed to compensate insureds for the time value of money and to encourage insurers to pay accident benefits promptly. Without [such a provision], insurers would have an incentive to delay paying benefits properly owing, thus forcing insureds to litigate their claims."³³

The decisions in Trottier and Royal & SunAlliance Insurance Company of Canada (FSCO P03-00019, December 15, 2003) and Lacroix and Jevco Insurance Company (FSCO A00-000163, June 16, 2004 (under appeal) make it clear, however, that erroneous assumptions on the part of insurers about whether a benefit is payable, or the actual amount payable, do not excuse them from paying interest once an arbitrator has determined a benefit is owing, from the date the benefit is owed.

On that basis, I find that in concluding Mr. Stewart was not entitled to a spousal death benefit, Liberty took a calculated risk that its decision might be reversed by an arbitrator should Mr. Stewart pursue his claim, and Mr. Stewart is therefore entitled to interest under section 46 of the Schedule beginning from 194 days (180 + 14) after the accident, i.e. January 2, 1998.

I find, however, that once Mr. Stewart retained counsel, he was responsible for pursuing his claim in a timely fashion. As he did not do so between April 22, 1999, when counsel first contacted Liberty, and January 18, 2002, when active pursuit of the claim was resumed, I find Mr. Stewart, and not Liberty, is responsible for the lost time value of the $50,000 benefit during that time, and Mr. Stewart is not entitled to interest for that period.

I find Mr. Stewart's entitlement to interest begins again as of January 18, 2002, when he was required to resume his efforts to persuade Liberty Mutual to reverse its decision and recognize his status as Ms. Pyles spouse.

EXPENSES:

In my view, as Mr. Stewart has been entirely successful in this arbitration proceeding, he is entitled to his expenses. If the parties are unable to agree on the amount of Mr. Stewart’s arbitration expenses, they may request a hearing of the matter before me in accordance with the provisions of the Dispute Resolution Practice Code.

November 16, 2004

Susan Sapin Arbitrator

Date

Neutral Citation: 2004 ONFSCDRS 167

FSCO A03–000833

FINANCIAL SERVICES COMMISSION OF ONTARIO

BETWEEN:

SHANNON STEWART

Applicant

and

LIBERTY MUTUAL INSURANCE COMPANY (Now: Liberty Insurance Company of Canada)

Insurer

ARBITRATION ORDER

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

Liberty Mutual Insurance Company shall pay to Shannon Stewart the following:

a) A spousal death benefit of $50,000 pursuant to section 25 of the Schedule

b) A special award in the amount of $25,000, inclusive of interest, pursuant to subsection 282(10) of the Insurance Act

c) Interest on the spousal death benefit from January 2, 1998 to April 22, 1999 and from January 18, 2002 until the overdue amounts are paid, in accordance with section 46 of the Schedule.

d) Mr. Stewart's expenses of this arbitration.