Neutral Citation: 2004 ONFSCDRS 42

FSCO A02-000954

BETWEEN:

JOSEFINA VIEIRA

Applicant

and

ROYAL & SUNALLIANCE INSURANCE COMPANY OF CANADA

Insurer

SECOND DECISION ON PRELIMINARY ISSUES

Before:

Judith Killoran

Heard:

October 20 and 21, 2003, January 6, 7 and 8, 2004 at the offices of the Financial Services Commission of Ontario in Toronto.

Documents were filed on January 30, 2004.

Appearances:

Mary Meropoulos for Mrs. Vieira

Joan Takahashi for Royal & SunAlliance Insurance Company

Mrs. Josefina Vieira claimed to have been injured in a motor vehicle accident on July 31, 2001. She applied for and received statutory accident benefits from Royal & SunAlliance Insurance Company of Canada ("Royal"), payable under the Schedule.¹ The parties were unable to resolve their disputes through mediation, and Mrs. Vieira applied for arbitration at the Financial Services Commission of Ontario under the Insurance Act, R.S.O. 1990, c.I.8, as amended.

The preliminary issues are:

Is Royal obliged to respond to Mrs. Vieira's claim under Regulation 283/95 as the first insurer to which Mrs. Vieira submitted an application for accident benefits?
Is Mrs. Vieira an "insured person" under the Royal automobile insurance policy?
Did Mrs. Vieira suffer an impairment as a result of an "accident" within the meaning of subsection 2(1) of the Schedule?

Royal accepts that it is the first insurer to which Mrs. Vieira submitted an application for accident benefits. Royal has responded to Mrs. Vieira's application for accident benefits.
Mrs. Vieira is not an "insured person" under the Royal automobile insurance policy.
Royal conceded that Mrs. Vieira suffered an impairment as a result of an "accident" within the meaning of subsection 2(1) of the Schedule.

Mrs. Josefina Vieira testified that, on July 31, 2001, she was waiting to walk across the street at the intersection of Dufferin Street and Glencairn Avenue in Toronto. While standing on the north-east corner of the intersection, Mrs. Vieira observed a multi motor vehicle collision in the intersection. She was frightened and attempted to flee the oncoming vehicles by running towards a garage. While running, Mrs. Vieira struck a lamp standard and fell to the sidewalk, sustaining injuries which gave rise to a claim for accident benefits.²

Is Royal obliged to respond to Mrs. Vieira's claim as the first insurer to which Mrs. Vieira submitted an application for accident benefits?

Regulation 283/95 which governs Disputes Between Insurers (the "Priority Regulation") stipulates in section 1 that: "All disputes as to which an insurer is required to pay benefits under section 268 of the Act shall be settled in accordance with this Regulation." The Priority Regulation ensures that accident victims will not be denied statutory accident benefits simply because the first insurer applied to for benefits thinks another insurer should pay.

Under paragraph 268(2) 2 of the Insurance Act, the following rules apply for determining who is liable to pay statutory accident benefits:

In respect of non-occupants,

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

ii. If recovery is unavailable under subparagraph i, the non-occupant has recourse against the insurer of the automobile that struck the non-occupant,

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

Section 2 of the Priority Regulation reads:

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

Practice Note 10 of the Dispute Resolution Practice Code advises:

If the first insurer has a number of reasons for denying the claim, some of which are based on lack of entitlement, and others based on a liability question, it should dispute the claim in the normal manner before the Commission on the entitlement dispute. It should also issue a notice under the Regulation to the insurer that it believes would be required to pay, in the event it is unsuccessful on the entitlement issues.

On November 21, 2001, Royal issued a Notice of Dispute Between Insurers and sent it to Chubb Insurance, Personal Insurance and Zurich Insurance.³ As there was some uncertainty about the law, Royal sent the notice to comply with the 90-day notice period. However, based on its review of the Priority Regulation, Royal concluded that it was first in line to deal with Mrs. Vieira's accident benefits claim.

In State Farm Mutual Automobile Insurance Company v. Mohamed⁴, the Director's Delegate held that when an insurer receives an application for accident benefits and there is an issue of priority, the first insurer must pay accident benefits under the Schedule even if it believes that it is not the priority insurer. The first insurer is only obligated to pay benefits if the insured person has established entitlement, however.

At the hearing, Royal submitted that this is not a priority dispute, but rather, a coverage dispute. Royal presented evidence through Ms. Debra Ann Donald, a senior claims adjuster, that it responded to all treatment plans and offered Mrs. Vieira a medical/rehabilitation DAC assessment. I find that Royal accepted that it was the first insurer to be approached by Mrs. Vieira and responded appropriately to her application for accident benefits.

Is Mrs. Vieira an "insured person" under the Royal automobile insurance policy?

Ms. Donald was assigned to handling Mrs. Vieira's file on July 31, 2001. As she had limited information, she requested that Claims View investigate the circumstances of the claim. On September 5, 2001, Claims View wrote to Rizzotto Ipacs, the firm representing Mrs. Vieira, informing it that the 1986 Pontiac Trans Am that Mr. Tony Vieira reported that his mother co-owned was not insured until August 20, 2001, one month following the motor vehicle accident. In addition, Mrs. Vieira was not listed as an additional insured nor was she listed as an additional driver on the policy. The letter states that Mrs. Vieira works full time and her son is unemployed. Therefore, she does not qualify as a dependant of her son. The letter goes on to say that it is their understanding that a claim will be made to the striking vehicle.⁵

As a result of that opinion, Ms. Donald sent a letter dated September 12, 2001 to Mrs. Vieira finding no entitlement to accident benefits.⁶ On October 23, 2001, Royal denied Mrs. Vieira's eligibility in a letter to Chubb Insurance. On November 28, 2001, there was further correspondence finding Mrs. Vieira not eligible. On November 30, 2001, another Explanation of Benefits was sent to Mrs. Vieira. On December 12, 2001, another Explanation of Benefits was sent to Rizzotto Ipacs. On December 19, 2001, a treatment plan from Dr. Rodriguez was rejected on the grounds that Mrs. Vieira was not an "insured person" pursuant to section 2 of the Schedule. On January 22, 2002, a letter was sent clarifying previous correspondence.⁷ Royal insisted that this was a coverage issue and the Applicant was not an insured person under the regulations.

According to Royal, the Priority Regulation is not designed to deal with every situation. When Royal says that Mrs. Vieira is not an insured under its policy, this is from an entitlement to benefits perspective which is that Mrs. Vieira is not an "insured person" under section 2 of the Schedule. Under subsection 224(1) of the Insurance Act, "insured" means a person insured by a contract whether named or not and includes every person who is entitled to statutory accident benefits under the contract whether or not described therein as an insured person. Mrs. Vieira does not meet the definition of "insured person" under the Insurance Act or the Schedule. A regulation cannot conflict or give a right to someone that they would not have under a parent statute. Royal submits that the Applicant cannot be given a substantive right under the Priority Regulation that she does not have under the Insurance Act.⁸

Mrs. Vieira testified that at the time of the accident, she believed that she was insured with Royal. She thought that she was covered under her son Tony's insurance policy for a 1973 Chevrolet Corvette. As a rule, whenever her son took out a policy, she was listed as an insured. She conceded that the 1973 Chevrolet Corvette was registered only in Tony's name. However, she recalled attending the office of the insurance broker, Mr. Simon Da Rosa, and having both her and her son covered by the insurance policy.

Mrs. Vieira recalled signing a statement⁹ in her lawyer's office. A Portugese interpreter was present and read the statement back to her before she signed. The statement said (among other things) that Mrs. Vieira had not driven in six years. Mrs. Vieira claimed that she meant she did not drive as much as she did six years ago.

Mrs. Vieira's son, Tony, testified that he thought his mother was covered under his policy of insurance because he had asked Mr. Simon Da Rosa to put her on the policy. The effective date for the policy for the 1973 Chevrolet Corvette was June 15, 2001. However, in the application for insurance, Mr. Vieira was listed as the driver for 100% of the time. Mr. Vieira claimed that Mr. Da Rosa ignored his instructions.

Mr. Vieira denied that Mr. Da Rosa took him through the application and claimed that he never reviewed it. He also denied reviewing the certificate of insurance when it was mailed to him. However, Mr. Vieira initialled those items where he declined coverage. Mr. Vieira confirmed that he never at any time went back to Mr. Da Rosa to ask him why his mother was not covered under his insurance.

Mr. Da Rosa testified that he routinely asked detailed questions of Tony when he insured his vehicles. He would always check the ownership, take the serial number, list all the drivers in the household, and list the percentage use of each driver in order to decide the amount of the premium. In this particular case, he was told by Tony that the car would be driven by him alone.

Therefore, Mr. Da Rosa did not include Mrs. Vieira as an insured person under Tony's automobile insurance policy. He also testified that no one from the Vieira family telephoned at any time to ask about the insurance coverage.

CONCLUSION

Mrs. Vieira relies on a line of cases following Brown and Allstate Insurance Company of Canada¹⁰ to submit that there was a sufficient nexus between Royal and Mrs. Vieira obligating Royal to respond to Mrs. Vieira's application for benefits. Brown deals with an interim decision which is not the case before me. I have found that Royal responded appropriately to Mrs. Vieira's initial application for benefits. We must now move to the next issue of whether Mrs. Vieira is an "insured person" under her son Tony's policy.

Royal submits that Mrs. Vieira is not an "insured person" within the meaning of section 2 of the Schedule. In the Schedule, the definition of "insured person" in respect of a particular motor vehicle policy means,

(a) the named insured, any person specified in the policy as a driver of the insured automobile, the spouse or same-sex partner of the named insured, and any dependant of the named insured, spouse or same-sex partner, if the named insured, specified driver, spouse, same-sex partner or dependant,

(i) is involved in an accident in or outside of Ontario that involves the insured automobile or another automobile

Mrs. Vieira does not fit within any of the above categories. However, she relies on Moore and Kingsway General Insurance Company¹¹ and Rozmerets and Goncerneco and Wawanesa Mutual Insurance Company¹² to argue that there was a binding oral contract when Mr. Da Rosa advised that Mrs. Vieira would be placed on the insurance policy. As a result of this binding oral contract, she submits that she is an "insured person" under the Royal policy.

In Mariona and Canadian General Insurance Company¹³, Arbitrator Alves rejected the oral evidence on the basis of the parol evidence rule. The rule is designed to preserve the integrity of the written contract and states that if the language of the written contract is clear and unambiguous, no evidence may be admitted to alter, vary or interpret in any way the words used in the writing.¹⁴ In the case before me, there is no ambiguity on the face of the documents. The certificate of insurance is consistent with the application for insurance.

According to Royal, the effect of what Mrs. Vieira is asking me to do is to rectify the contract.

Even if I thought rectification were in order, Royal argued that I do not have the power to grant equitable relief. Under section 20 of the Insurance Act, arbitrators are given the authority to determine all questions of fact and law. This contrasts with section 11 of the Courts of Justice Act, R.S.O. 1990, c. C.43, from which courts derive their inherent jurisdiction to make equitable decisions. Mrs. Vieira relied on Branchaud and Co-operators General Insurance Company¹⁵ to submit that I have the requisite equitable jurisdiction to rectify the insurance policy. In any case, rectification is an equitable remedy granted in instances of mutual mistake, rarely on the basis of unilateral mistake. I do not find that the circumstances of this case are appropriate for a consideration of the equitable remedy of rectification.

In any event, where the evidence of Mrs. Vieira and her son differs from that of Mr. Da Rosa, I accept the evidence of Mr. Da Rosa. I do not accept that Mr. Da Rosa was asked to include Mrs. Vieira on her son's insurance policy. When I review the documentary evidence, there is no application to add Mrs. Vieira and Mrs. Vieira is not a named insured. Section 1 of the Insurance Act defines a contract as a "contract of insurance", either written or a binding oral agreement. I find that there was no contract of insurance, either written or a binding oral agreement, between Mrs. Vieira and Royal.

I find that Mrs. Vieira is not an "insured person" under her son's automobile insurance policy with Royal. Therefore, Mrs. Vieira is not covered under her son's policy of insurance and is not entitled to seek further accident benefits from Royal.

EXPENSES:

I heard no submissions on the issue of expenses. I encourage the parties to resolve this issue. If they are unable to do so, they may apply for an expense hearing before me in accordance with the requirements of the Dispute Resolution Practice Code.

March 25, 2004

Judith Killoran Arbitrator

Date