Financial Services Commission of Ontario

Commission des services financiers de l’Ontario

Neutral Citation: 2006 ONFSCDRS 195 FSCO A05-001559

BETWEEN:

CLIFFORD TAYLOR Applicant

and

STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY Insurer

DECISION ON A PRELIMINARY ISSUE

Before: Jeffrey Rogers

Heard: October 27, 2006, at the offices of the Financial Services Commission of Ontario in Toronto. Written submissions were completed on November 23, 2006.

Appearances: P. Michael Rotondo, solicitor for Mr. Taylor Michael Chadwick, solicitor for State Farm Mutual Automobile Insurance Company

Issues:

The Applicant, Clifford Taylor, alleged that he was injured in a motor vehicle accident on July 3, 2003. He applied for and received statutory accident benefits from State Farm Mutual Automobile Insurance Company ("State Farm"), payable under the Schedule.¹ State Farm disputes his entitlement to further benefits. The parties were unable to resolve their dispute through mediation, and Mr. Taylor 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:

1. Is State Farm precluded from raising the issue of whether Mr. Taylor was injured as a result of an "accident" as defined in section 2(1) of the Schedule, by operation of the doctrine of promissory estoppel?

2. Was Mr. Taylor injured as a result of an "accident" as defined in section 2(1) of the Schedule?

Result:

1. State Farm is not precluded from raising the issue of whether Mr. Taylor was injured as a result of an "accident" as defined in section 2(1) of the Schedule, by operation of the doctrine of promissory estoppel.

2. Mr. Taylor was injured as a result of an "accident" as defined in section 2(1) of the Schedule.

EVIDENCE AND ANALYSIS:

Procedural Ruling

At the opening of the hearing, Mr. Taylor sought an order precluding State Farm from proceeding with its defence on the issue of whether he was injured as a result of an "accident" on two grounds. First, because State Farm had repeatedly breached procedural orders for the delivery of its material. Second, because State Farm was precluded from raising the issue, by operation of the doctrine of promissory estoppel.

State Farm first raised the issue of whether Mr. Taylor was injured as a result of an "accident", at the pre-hearing held on May 29, 2006. Its explanation for not raising the issue earlier was that the law on causation had only recently been placed in doubt by the granting of leave to appeal to the Supreme Court of Canada in Vytlingam v. Cooperators.²

Mr. Taylor immediately took the position that State Farm was estopped from raising the issue at that stage of the proceeding. The pre-hearing Arbitrator directed the parties to provide written submissions on these issues. State Farm was required to deliver its submissions by June 12, 2006. State Farm did not deliver them until July 11, 2006. Counsel explained that the delay was because he had not properly diarised the file.

Although Mr. Taylor objected, the pre-hearing Arbitrator extended the time for delivery of submissions. By letter of August 16, 2006, the pre-hearing Arbitrator ruled that, although he was sceptical about the strength of both parties' positions, it was not the function of the pre-hearing Arbitrator to rule on the issues. The decision would therefore be reserved to the Arbitrator hearing the issues on the merits.

The pre-hearing was resumed on August 18, 2006. At the resumed pre-hearing, the date of October 27, 2006 was set for a hearing on the preliminary issue of whether Mr. Taylor was injured as a result of an "accident". It was anticipated that the preliminary issue hearing would proceed on documentary and affidavit evidence only. State Farm was ordered to deliver its affidavit and documentary evidence on or before October 6, 2006. Mr. Taylor was to respond by October 20, 2006. The parties were ordered to exchange case books on or before October 20, 2007.

State Farm did not deliver any material until October 25, 2006, when it served a Document Brief and Brief of Authorities. It did not serve any affidavit material. Instead, by letter of October 26, 2006, it explained that it had been unable to comply with the deadline for filing material because of counsel's trial commitments, and proposed to call the driver of the insured vehicle to give viva voce evidence. Attached to the letter was a statement setting out the driver's anticipated evidence. The statement included an allegation that the driver believed that Mr. Taylor fell into his car on purpose. Before me, counsel for State Farm indicated that the statement contained all of the proposed evidence of the driver.

Mr. Taylor argued that he had already been prejudiced by State Farm's delay in proceeding with its proposed defence and that he would be further prejudiced if the hearing on the issue now proceeded on viva voce evidence. The only aspect of the proposed evidence that Mr. Taylor identified as prejudicial was the driver's statement to the effect that he believed that Mr. Taylor intentionally fell into his car.

State Farm argued that it had reasonably explained its delay and proposed that any resulting prejudice to Mr. Taylor be remedied by a short adjournment of the hearing that would allow him to consider the proposed evidence and respond. Counsel for Mr. Taylor indicated that the option of a short adjournment was not available because he could not attend again until June, 2007.

I ruled that State Farm had not provided a reasonable explanation for its delay. It was not reasonable that counsel had failed to diarise, was too busy to file material, failed to inform Mr. Taylor that he would be unable to deliver material on time and failed to request some of the relevant material until August 29, 2006. However, any prejudice to Mr. Taylor could be remedied by a short adjournment, with an order for expenses in his favour. In those circumstances, State Farm should not be deprived of its right to advance the defence raised, because of the unavailability of counsel for Mr. Taylor. I ruled that the hearing would therefore proceed, but that the prejudice to Mr. Taylor would be minimized because I would not admit the driver's evidence on what he thought Mr. Taylor intended, when he came into contact with the insured automobile.

With regard to Mr. Taylor's second objection, I ruled that the issue of estoppel would be decided as part of the hearing, not as a preliminary objection.

Upon the above rulings, the parties agreed that there were no facts remaining in dispute and prepared an Agreed Statement of Facts, setting out the circumstances that led to Mr. Taylor's injury. They also agreed to separate the issues. The issue of whether Mr. Taylor was injured in an "accident" would be addressed in oral submissions and the issue of estoppel addressed in subsequent written submissions.

Promissory Estoppel

The parties' agreed statement of facts sets out the following:

1. An incident involving Mr. Taylor and Mr. Mirkhani occurred on July 3, 2003.

2. The incident happened when Mr. Taylor, standing waiting for a bus on the sidewalk, became dizzy, passed out and fell, causing him to strike the side of the passing Mirkhani vehicle.

It is not disputed that Mr. Taylor reported that he had a blackout before he came into contact with the insured vehicle, in August 2003 and that State Farm did not raise the issue of whether he was injured in an "accident" until May 2006.

The doctrine of promissory estoppel is neatly summarized in Canadian Newspapers Company Limited v. Kansa General³, as follows:

A party alleging promissory estoppel must establish that the other party has, by words or conduct, made a clear promise which was intended to affect their legal relationship and to be acted on. Furthermore, the person to whom the promise is made must establish that he acted upon the promise or in some way changed his or her position in reliance upon it....[A] party's silence may amount to acquiescence and thus constitute conduct giving rise to promissory estoppel...

Mr. Taylor submits that State Farm's silence on the issue of whether he was injured in an "accident", knowing the circumstances in which his injuries occurred, amounts to a clear promise that it would not raise the issue. Mr. Taylor further submits that he acted upon the promise to his detriment, by incurring the expenses for treatment and examinations at issue in this arbitration, along with the expense of pursuing the arbitration. He submits that he incurred these expenses "solely by reason of his conviction that he was entitled to statutory accident benefit coverage." Mr. Taylor suggests that, had State Farm raised the issue promptly, he would have deferred incurring expenses and would have pursued adjudication of this issue alone, either by Arbitration or a motion for Summary Judgment.

Assuming for the purpose of argument that State Farm's silence amounts to a clear promise, intended to affect its legal relationship with Mr. Taylor, I find it inconceivable that he acted upon it to his detriment. Mr. Taylor incurred any expenses for the benefits at issue, with no assurance that State Farm would not refuse to pay for them and, when State Farm did refuse to pay, he proceeded to Arbitration. There is no evidence at all that he would have done otherwise, had State Farm raised this issue earlier. Mr. Taylor's submission that he would not have incurred the expenses claimed in this Arbitration, had State Farm put entitlement at issue, flies in the face of the position he must take in pursuing the Arbitration, that the expenses are reasonable and necessary.

The option of perusing this issue alone through Arbitration would not have been available. Section 280 of the Insurance Act does not contemplate an application for mediation, and consequently arbitration, in the absence of a substantive dispute about entitlement to statutory accident benefits. Had State Farm raised the issue earlier, the process of arbitrating the issue would have proceeded exactly as it has. A pre-hearing would have been scheduled and the pre-hearing Arbitrator would have decided whether to schedule a hearing on the preliminary issue of whether Mr. Taylor was injured as a result of an "accident", leaving the substantive dispute to be determined later, if necessary.

If Mr. Taylor is correct in his view that he could have applied to the Court to have this issue decided by way of summary judgment, there is no evidence that such an application would have been less expensive than the Arbitration in which he is now engaged.

Because he did not rely on State Farm's conduct to his detriment, I find that State Farm is not precluded from raising the issue of whether Mr. Taylor was injured as a result of an "accident" as defined in section 2(1) of the Schedule, by operation of the doctrine of promissory estoppel.

Was Mr. Taylor injured as a result of an "accident"?

"Accident" is defined as follows in section 2(1) of the Schedule:

an incident in which the use or operation of an automobile directly causes an impairment...

State Farm submits that the automobile that Mr. Taylor fell into, did not directly cause his impairment. Rather, it was his passing out that was the direct cause of his impairment. State Farm relies on the decision in Chisolm v. Liberty Mutual Group⁴ to support its position.

The issue in that case was whether a driver, injured in a drive-by shooting, was entitled to statutory accident benefits. The Court ruled that the causation element of the two-part, purpose and causation test, established in Amos v. Insurance Corp. of British Columbia⁵, must be modified to reflect the requirement of direct causation, not present in Amos. The modified test may be summarized as follows:

1. Did the accident result from the ordinary and well known activities to which automobiles are put? and

2. Was there an unbroken chain of events between the use or operation of the automobile and the victim's injuries, or was there an intervening act, independent of the vehicle's use or operation, which clearly broke the chain of causation?

To illustrate its approach, the Court stated the following:

When one thinks of direct causation one thinks of something knocking over the first in a row of blocks after which the rest falls down without the assistance of any other act.⁶

State Farm argued that it was Mr. Taylor's passing out that set in motion an unbroken chain of events, leading to his injury. That submission misses the focus of the analysis. It focusses on the cause of the incident, rather than the cause of the injury. Section 2(1) requires a determination of whether the use or operation of an automobile directly causes injury. Although it is arguable that the cause of the incident was Mr. Taylor's passing out, his passing out caused no injury. What caused his injury was the fact that he came into contact with the insured's moving automobile.

Unlike Chisolm, where the gunshots were the only instrument of injury, the only instrument of Mr. Taylor's injuries was the automobile that struck him as he fell. State Farm's position amounts to arguing that the automobile did not cause Mr. Taylor's injuries. What caused his injuries was that fact that he happened to be where he was, when he came into contact with the automobile.

I do not accept State Farm's submissions. I find that the use or operation of an automobile directly caused Mr. Taylor's impairments. He was therefore injured as a result of an "accident", as defined in section 2(1) of the Schedule.

Hearing

In the interest of expediting the process, the parties provided dates for the hearing, to be set in the event that State Farm was not successful on the preliminary issue. Accordingly, the date for the hearing has now been fixed for November 5, 6, 7 and 8, 2007. This office will send a Notice of Hearing shortly.

EXPENSES:

Based on his success, I find that Mr. Taylor is entitled to his expenses incurred in this preliminary issue hearing, in any event of the cause. I reserve the assessment of those expenses to the hearing Arbitrator. However, should the parties resolve the matter without a hearing but are unable to resolve the issue of expenses, either party may make an appointment for me to determine the matter in accordance with Rules 75 to 79 of the Dispute Resolution Practice Code.

December 14, 2006

Jeffrey Rogers Arbitrator

Date

Financial Services Commission of Ontario

Commission des services financiers de l’Ontario

Neutral Citation: 2006 ONFSCDRS 195 FSCO A05-001559

BETWEEN:

CLIFFORD TAYLOR Applicant

and

STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY Insurer

ARBITRATION ORDER

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

1. State Farm is not precluded from raising the issue of whether Mr. Taylor was injured as a result of an "accident" as defined in section 2(1) of the Schedule, by operation of the doctrine of promissory estoppel.

2. Mr. Taylor was injured as a result of an "accident" as defined in section 2(1) of the Schedule.

3. Mr. Taylor is entitled to his expenses incurred in this preliminary issue hearing, in any event of the cause.

4. The assessment of those expenses is reserved to the hearing Arbitrator.

5. If the parties resolve the matter without a hearing but are unable to resolve the issue of expenses, either party may make an appointment for me to determine the matter in accordance with Rules 75 to 79 of the Dispute Resolution Practice Code.

December 14, 2006

Jeffrey Rogers Arbitrator

Date

Footnotes

1. 1The Statutory Accident Benefits Schedule —Accidents on or after November 1, 1996, Ontario Regulation 403/96, as amended.
2. 22005 CanLII 19659 (ON CA), [2005] O.J. No. 2266 (C.A., leave to appeal granted [2005] S.C.C.A. No. 376
3. 3[1996] I.L.R. 1-3369, (Ont. C.A.) at Page 15
4. 4(2002), 2002 CanLII 45020 (ON CA), 217 D.L.R. (4th) 145 (Ont. C.A.)
5. 51995 CanLII 66 (SCC), [1995] 3 S.C.R. 405 (S.C.C.)
6. 6At Page 8, paragraph 27