Evan Griffiths v. State Farm Mutual Automobile Insurance Company, 2004 ONFSCDRS 18

Financial Services Commission of Ontario

Commission des services financiers de l’Ontario

Neutral Citation: 2004 ONFSCDRS 18

Appeal P03-00032

OFFICE OF THE DIRECTOR OF ARBITRATIONS

EVAN GRIFFITHS

Appellant

and

STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY

Respondent

Before:

David R. Draper

Representatives:

Paul Barrafato for Mr. Griffiths

Joseph J. Sullivan and Bruce Cook for State Farm

Hearing Date:

January 27, 2004

APPEAL ORDER

Under section 283 of the Insurance Act, R.S.O. 1990, c.I.8, as amended, it is ordered that:

1. The appeal is dismissed and the arbitration order, dated August 8, 2003, is confirmed.

2. Evan Griffiths shall pay the appeal expenses of State Farm Mutual Automobile Insurance Company, fixed at $750, all inclusive.

February 11, 2004

David R. Draper Director of Arbitrations

Date

REASONS FOR DECISION

I. NATURE OF THE APPEAL

This appeal involves the Power of Attorney and Undertaking ("PAU") filed by State Farm Mutual Automobile Insurance Company ("State Farm") with the Superintendent of Insurance for British Columbia. Mr. Griffiths claims the Arbitrator erred in concluding that the PAU does not require State Farm to pay him statutory accident benefits at Ontario levels.

II. BACKGROUND

The parties agree on the essential facts. In 1990, Mr. Griffiths, a resident of Colorado, was visiting his friend, Ralph Packer, in Ontario. They decided to go to New York State in Mr. Packer's car, which was insured by State Farm under an Ontario policy. Mr. Griffiths did not own a vehicle or have coverage under any other automobile policy. While in New York, Mr. Packer and Mr. Griffiths were involved in an accident. Mr. Griffiths, who was a passenger at the time, was injured.

Shortly after the accident, Mr. Griffiths applied to State Farm for no-fault benefits under the New York State Insurance Code. State Farm accepted his claim and paid benefits totalling $50,000. Later, Mr. Griffiths claimed that State Farm was obligated to pay the more generous Ontario accident benefits.¹ State Farm denied this claim.

At the arbitration hearing in December 2000, the question was whether Mr. Griffiths was an "insured person" under Mr. Packer's policy. The PAU issue was raised, but it was deferred pending the outcome on the "insured person" issue. The Arbitrator issued her decision in March 2001, concluding that Mr. Griffiths was an insured person under s. 2.2.3(g) of Mr. Packer's policy and, therefore, entitled to Ontario accident benefits. State Farm appealed. For reasons set out in my decision dated March 25, 2002, I allowed the appeal and ordered that Mr. Griffiths was not entitled to Ontario benefits as an insured person under Mr. Packer's policy.

Mr. Griffiths then returned to the Arbitrator on the PAU issue. He argued that as a result of filing the PAU, State Farm was required to pay him Ontario benefits. The Arbitrator disagreed. She held that the PAU did not apply to Mr. Griffiths because the accident was not in Ontario. Mr. Griffiths appeals, claiming the Arbitrator erred in law in reaching this conclusion.

III. ANALYSIS

A. Summary

I find little strength in Mr. Griffiths' argument. The PAU has an important, but limited function. It is part of a reciprocal scheme that requires foreign insurers who participate in the scheme to respect the obligations established in Canadian provinces and territories for accidents that occur in those provinces and territories. Recent court decisions make it clear that the PAU extends to various types of coverages, including those not in place when the PAU was filed.² However, that is not the issue here. Mr. Griffiths claims that the PAU gives him rights in an Ontario proceeding under an Ontario policy for an accident that occurred outside of Ontario. Like the Arbitrator, I find that none of the decisions support this proposition. The PAU becomes relevant in an Ontario proceeding where someone is relying on a non-Ontario policy issued by a company that has filed a PAU, and the policy does not provide the same level of coverage that would be available under an Ontario policy. In an action in Ontario under an Ontario policy, the scope of coverage is set out in the policy — it is not extended by the PAU.

B. Discussion

Automobile insurance in Ontario is highly regulated. Policies must include certain types of coverage, including first-party statutory accident benefits. For accidents in Ontario, this protection is extended to foreign policies in two ways. First, s. 45(1) of the Insurance Act provides that any company licenced to carry on automobile insurance in Ontario, that also issues policies elsewhere, cannot rely on the limits of its foreign policy in an action brought in Ontario that arises out of an accident in Ontario — it must provide the coverage, including statutory accident benefits, available under an Ontario policy.

The second mechanism is the PAU, which is not limited to Ontario-licenced companies.³ Like s. 45, the PAU requires participating insurers to provide Ontario-level protections for accidents in Ontario. The incentive for the insurance companies is that by filing the PAU, their policies are recognized as valid insurance in the various provinces and territories, allowing their insureds to operate their vehicles in Canada.

The PAU in this case was filed by State Farm in 1964. It provides as follows (italics added):

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 defense 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 relies on paragraph C. He claims it deals with the location of the litigation, not the accident. It follows, he argues, that because State Farm did not contest his right to pursue his claim in Ontario, paragraph C means that it must pay him Ontario-level accident benefits. He deals with the italicized portion, limiting the scope to accidents in the province or territory, by arguing that the PAU should be read as having two distinct parts — the power of attorney in the first paragraph and the undertaking that follows — and that these two parts should be read separately.

In my opinion, the Arbitrator was correct in rejecting this interpretation. It is not supported by a plain reading of the PAU or the case law. As the Arbitrator held, the PAU is a single document that must be read and interpreted as a whole. It applies to actions or proceedings "arising out of a motor-vehicle accident in any of the respective Provinces or Territories." For Ontario, this means the PAU applies to an action or proceeding brought in Ontario in respect of an accident in Ontario.

I also agree with the Arbitrator's review of the court decisions, including her conclusion, as follows:

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. (p. 12)

After the Arbitrator released her decision, the Supreme Court of Canada issued its decision in Unifund Assurance Co. v. Insurance Corp. Of British Columbia, 2003 SCC 40, [2003] S.C.J. No. 39, 227 D.L.R. (4^th) 402. Mr. Griffiths relies on this decision. However, I am not persuaded that it assists him.

The basic facts in Unifund are straightforward. Mr. and Mrs. Brennan, who lived in Ontario, flew to British Columbia for their son's wedding. They rented a car and while driving in British Columbia, they were struck from behind by a tractor-trailer truck and pushed into oncoming traffic. They were seriously injured, particularly Mrs. Brennan.

After their return to Ontario, the Brennans received statutory accident benefits under their Ontario automobile policy issued by Unifund. Later, they were awarded damages in an action in British Columbia against the truck owner, truck driver and repair shop, all of whom were insured by the Insurance Corporation of British Columbia ("ICBC"). The ICBC deducted the amount of the statutory accident benefits from the damages award, as allowed by British Columbia law.

Under the Ontario Insurance Act, an insurer that pays statutory accident benefits is entitled to seek indemnification from the insurer of any heavy commercial vehicle involved in the accident. Unifund brought a motion in Ontario Superior Court of Justice for the appointment of an arbitrator to determine the issue of indemnification. ICBC brought a cross-motion to stay the proceedings on the basis that the Ontario indemnification provisions were not constitutionally applicable to it, or, alternatively, that British Columbia was the more appropriate forum.

The application judge granted the stay. The Court of Appeal allowed Unifund's appeal, concluding that the judge erred in ordering the stay. It held that he should have declined the motion and proceeded with the appointment of an arbitrator, who could then have dealt with any issues of jurisdiction and law. ICBC appealed to the Supreme Court of Canada. The Court (4:3) allowed the appeal.

The Supreme Court's primary ruling was that it is was up to the Ontario Superior Court to determine the constitutional issue before appointing an arbitrator. Binnie J., writing for the majority, went on to consider the constitutional issue. He concluded that the indemnification scheme in the Ontario Insurance Act was not constitutionally applicable to ICBC because applying it would not respect the territorial limits on provincial jurisdiction. In reaching this conclusion, he rejected Unifund's argument that the Ontario law should be applied because there was a "real and substantial connection" between ICBC and Ontario, or based on the PAU.

Mr. Griffiths relies on Justice Binnie's explanation of the role of the PAU, set out below, as obiter support for his position. In particular, he cites the following paragraphs:

99. The Court [Ontario Court of Appeal] recognized the limited effect of the PAU, and did not accept as correct the theory of interprovincial integration urged in this case by the respondent. The importance of the PAU in this respect is as stated in Healy v. Interboro Mutual Indemnity Insurance Co. (1999), 1999 CanLII 1485 (ON CA), 44 O.R. (3d) 404 (C.A.), per Goudge J.A., at p. 409:

[The PAU] assures the same statutory guarantees to someone injured in an automobile accident in Ontario whether the relevant automobile insurance contract was made in Ontario or another participating jurisdiction.

100. The PAU is about enforcement of insurance policies, not about helping insurance companies, which have been paid a premium for the no-fault coverage, to seek to recover in their home jurisdictions their losses from other insurance companies located in a different jurisdiction when the accident took place in that other jurisdiction, and where the claims arising out of the accident were litigated there. The appellant referred us to the observations of Professor Black:

The reciprocal system, of which the PAU is a key part, thus has what might loosely be described as a pro-compensation, consumer protection function.

(V. Black, "Interprovincial Inter-Insurer Interactions: Unifund v. I.C.B.C." (2002), 36 Can. Bus. L. J. 436, at p. 444)

While I accept Mr. Griffiths' submission that the PAU has a pro-consumer purpose and should be interpreted in a prospective manner, I do not read the Unifund decision as supporting his claim. Binnie J. describes the purpose of the PAU in a number of places. Each time, he refers to an action in a province or territory in respect of an accident in that province or territory, where the insurance policy was issued in another jurisdiction by an insurer that had filed a PAU.⁴ This is reinforced in the paragraphs excerpted above, which specifically endorse the view, expressed in Healy, that the PAU protects people injured in accidents in Ontario.

I also note that in the next paragraph of the decision, Binnie J. states that "the opening language of the PAU, which sets the framework for the rest of the document, talks about a proceeding 'arising out of a motor-vehicle accident in any of the respective Provinces.'" This interpretation stands in direct opposition to Mr. Griffiths' position. The PAU is not to be read as having two distinct parts. On the contrary, the opening paragraph "sets the framework for the rest of the document." Therefore, the undertakings only become relevant in an Ontario proceeding in respect of an accident in Ontario.

Mr. Justice Bastarache, who wrote the dissenting judgment in Unifund, agreed that the Ontario Supreme Court of Justice, not an arbitrator, should determine the constitutional issue. However, he reached a different conclusion on the applicability of the Ontario indemnification scheme. He held that the ICBC accepted the jurisdiction of Ontario by signing the PAU, and that the subject matter of the action was sufficiently connected to Ontario to make the Ontario legislation applicable to the ICBC. The key paragraph for purposes of this appeal follows:

129. In the present case, the underlying tort claim is not a relevant factor in determining whether Ontario has jurisdiction simpliciter. What is relevant is the fact that the insurers, by signing the PAU, have recognized the interrelationship of insurance regimes across Canada and accepted that insurers in one province will sometimes be sued in other provinces. In my opinion it is therefore reasonably foreseeable that the appellant will sometimes have to appear in Ontario to defend an action brought in that jurisdiction as a result of an accident having occurred in British Columbia. The appellant is, at least notionally, an insurer in Ontario, or one carrying on business in that province. In fact, the appellant has facilitated service and agreed, in limited circumstances, not to raise certain defences in Ontario courts. I do not find it unfair that insurers involved in the interprovincial scheme underlying this appeal, and having accepted the risk of harm to extraprovincial parties to the agreement, be considered to have attorned to the jurisdiction of Ontario's courts. I think that all of the reasons justifying a widened jurisdiction in Morguard [Morguard Investments Ltd. v. De Savoye, [1990] 2 S.C.R. 1077] apply in this case. Most importantly, the demands of Canadian federalism strongly favour this result. I wish to clarify at this juncture that my conclusion does not interfere with the right of the appellant in this case to argue that Ontario is forum non conveniens, or that the law of Ontario should not apply.

While this paragraph arguably provides some support for Mr. Griffiths' position, it comes from the dissent. In any event, even if the PAU is relevant in an Ontario proceeding in respect of a non-Ontario accident, Mr. Griffiths still faces a major obstacle. The PAU does not say that the insurer must respond to the claim as if the accident occurred in Ontario. It says that the insurer cannot raise any defences that could not have been raised if the automobile insurance policy had been issued in Ontario. In this case, State Farm's defence is that Mr. Griffiths is not an "insured person" under Mr. Packer's Ontario policy. In other words, its defence is based on the Ontario wording. The PAU, which only ensures that Ontario-level coverage is provided, does nothing to change the conclusion that, as a non-resident, Mr. Griffiths is not covered for an accident in New York.

For these reasons, the appeal is dismissed.

IV. APPEAL EXPENSES

Both parties claim their appeal expenses. Although the appeal was not successful, Mr. Griffiths argues that the issue was novel and of general importance. This is a factor, but not every appellant who brings a new issue will recover expenses paid by the successful party. Where, as here, the appeal has little chance of success, the losing party must bear some responsibility for expenses. In this case, I conclude that Mr. Griffiths should pay State Farm's appeal expenses, fixed at a modest amount — $750, all inclusive.

February 11, 2004

David R. Draper Director of Arbitrations

Date

Footnotes

1. 1The date of the accident means that the relevant Ontario scheme is the SABS-1990 — The Statutory Accident Benefits Schedule — Accidents Before January 1, 1994, Regulation 672 of R.R.O. 1990, as amended.
2. 2Berg (Litigation guardian of) v. Farm Bureau Mutual Insurance Co. (2000), 2000 CanLII 2301 (ON CA), 50 O.R. (3d) 109 (C.A.); Healy v. Interboro Mutual Indemnity Insurance (1999), 1999 CanLII 1485 (ON CA), 44 O.R. (3d) 404 (C.A.); Schrader v. United States Fidelity Co. et al. (1987), 1987 CanLII 4150 (ON HCJ), 59 O.R. (2d) 178 (Div. Ct.).
3. 3State Farm explains that it filed the PAU because its Canadian operation is not an independent entity, although the reason for filing is not particularly relevant to this appeal.
4. 4See paragraphs 18, 24, 25 and 92.