Financial Services Commission of Ontario
Commission des services financiers de l’Ontario
Neutral Citation: 2007 ONFSCDRS 1
FSCO A05-002466
BETWEEN:
BRANISLAV MARKOSKI
Applicant
and
STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY
Insurer
REASONS FOR DECISION
Before: Suesan Alves
Heard: November 16, 2006, at the offices of the Financial Services Commission of Ontario in Toronto.
Appearances:
Dimple Verma for Mr. Markoski
Todd J. McCarthy for State Farm Mutual Automobile Insurance Company
Issues:
A preliminary issues hearing was scheduled to determine whether Mr. Branislav Markoski is excluded from receiving income replacement and housekeeping and home maintenance benefits under section 30(1)(a) of the Schedule, because he knew or ought to have known that the car he was operating was not insured. The hearing was adjourned to January 22, 2007 and the parties requested evidentiary and procedural rulings.
The issues in this hearing are:
At the preliminary issues hearing, does Mr. Markoski have the burden of proving that he was not insured at the time of the accident?
Is Mr. Markoski's driver record search admissible at the hearing?
What is the amount of Mr. Markoski's costs thrown away in relation to the November 16, 2006 hearing date?
Result:
State Farm Mutual Automobile Insurance Company has the burden of proving that Mr. Markoski was not insured at the preliminary issues hearing.
This ruling is premature and is deferred until the relevance of the driver record search is established.
Mr. Markoski's costs thrown away are fixed at $350.
EVIDENCE AND ANALYSIS:
Background
Mr. Markoski was involved in a motor vehicle accident on August 27, 2004, while operating a car owned by his former wife. Mr. Markoski then claimed accident benefits from State Farm, the insurer of the other car involved in the accident, on the basis that his former wife's car was uninsured at the time of the accident.
State Farm alleges that Mr. Markoski knew or ought to have known that the car he was operating on August 27, 2004 was uninsured. State Farm alleges that under section 30(1)(a) of the Schedule Mr. Markoski is excluded from receiving income replacement benefits as well as housekeeping and home maintenance benefits.
Mr. Markoski and his former wife, Mrs. Markoska, are divorced. They continue to live in the same house. Each spouse occupies one floor of the house and they seldom speak to each other. Mrs. Markoska owned a car and gave Mr. Markoski permission to drive it. ING, the insurer of her vehicle, cancelled the policy in June 2004, however, Mrs. Markoska did not inform Mr. Markoski of the cancellation.1
State Farm's theory of the case appears to be that Mr. Markoski knew that the policy had been cancelled. There is some suggestion that Mr. Markoski may have other insurance which could respond to his claims for statutory accident benefits.
Burden of proof and procedure
The positions of the parties
Section 30(1)(a) of the Schedule states:
30 (1) The insurer is not required to pay an income replacement benefit, a non-earner benefit or a benefit under section 20, 21 or 22 in respect of a person who was the driver of an automobile at the time of the accident,
(a) if the driver knew or ought reasonably to have known that he or she was operating the automobile while it was not insured under a motor vehicle liability policy;
Counsel for the Insurer submits that at this hearing, the Insurer has the burden of proving that Mr. Markoski knew or ought to have known that he was uninsured at the time of the accident and Mr. Markoski has the burden of proving that he was uninsured at the time of the accident. He submits that the Applicant should therefore adduce evidence first, that the Insurer may respond to that evidence, and that the Applicant has a right of reply.
Counsel for the Applicant submits that State Farm has the burden of proving all of the elements of section 30(1)(a) of the Schedule. She submits that the Insurer should adduce its evidence first, that the Applicant may respond to that evidence, and that the Insurer has a right of reply.
For the reasons which follow, I conclude that as a matter of law, practice and procedure, State Farm has the burden of proof in this hearing on a preliminary issue.
The Commission's process and procedure
The general rule is that the party who initiates a proceeding seeking relief has the burden of proving entitlement to the relief it claims. For example, insured persons who apply for arbitration have the burden of proving their claims at an arbitration hearing. Insurers who assert claims in a response to an arbitration application have a similar burden to prove their claims, for example, for repayment, at an arbitration hearing.
Within the arbitration proceeding, parties bring motions seeking productions, interim expenses, interim disbursements or other relief. The basic rule on these motions is that the party seeking relief has the burden of proving entitlement to the relief sought.
Preliminary issue hearings are held in order to determine a cardinal issue in the arbitration in an expeditious and efficient way. Such hearings usually deal with technical defences to claims, such as limitation periods or exclusions; or with the interpretation of a provision of the legislation. If the insurer succeeds at the preliminary issue hearing, the arbitration will be brought to an end, or the disputes to be adjudicated at the hearing on the merits will be significantly limited. This saves time and expense for the parties, saves the time of potential witnesses, and makes efficient use of the Commission's resources where the arbitration is dismissed or the hearing on the merits has a more limited focus. At times, with the benefit of an arbitration decision interpreting a provision of the legislation, the parties are able to resolve the remaining issue in dispute, and avoid a hearing on the merits.
In this case, Mr. Markoski commenced an arbitration proceeding claiming income replacement benefits, attendant care benefits, housekeeping benefits, medical benefits, interest, expenses and a special award. He bears the burden of proof at the hearing on the merits at the substantive hearing scheduled for May 2007.
If there is a dispute at that hearing as to whether he can claim benefits from State Farm, the insurer of another vehicle which was involved in the accident, and the hearing arbitrator concludes that this is not properly a priority dispute, then because of the requirements of section 268(2) of the Insurance Act, Mr. Markoski would have to show that he has no recourse against the insurer of a vehicle in respect of which he is an insured or against the insurer of the vehicle in which he was an occupant, before he can recover benefits from State Farm.2
However, this preliminary issue hearing is a proceeding within the arbitration. It was requested by State Farm to determine whether Mr. Markoski should be excluded from certain benefits. For that reason, at this hearing, the burden of proving that Mr. Markoski was uninsured will rest on State Farm.
Although the same evidence may be relevant at either hearing, at the preliminary issues hearing State Farm has the onus of adducing this evidence, while at the substantive issues hearing Mr. Markoski could have the onus. As a practical matter, it is unlikely that the evidence will be called twice, because the arbitrator at the preliminary issues hearing will make findings of fact which will be binding on the parties.
Law
Section 30 of the Schedule deals with general exclusions from coverage. It is settled law that when an insurer seeks to exclude a person from coverage, the insurer bears the burden of proof.3 The question of whether the vehicle was or was not insured is one of the requisite elements of subsection 30(1)(a) of the Schedule. It follows that this is an element that the insurer must prove.
I do not view this as an impossible burden for State Farm to discharge. As in any other case, State Farm may conduct investigations, perform searches, obtain productions, and adduce documentary evidence, circumstantial evidence as well as viva voce evidence.
A reverse onus?
Counsel for the Insurer submitted that the facts of this case virtually created a reverse onus situation. He submitted that the vehicle which Mr. Markoski was operating at the time of the accident had been owned by the Applicant's ex-wife and plated for several years. Counsel for the Insurer submitted that on each occasion on which the plate had been renewed, the owner would have had to provide a statement to the Ministry of Transportation that the vehicle was insured. Thus, it fell to Mr. Markoski to prove that he was not insured at the time of the accident.
At the time that submission was made, on October 6, 2006, neither party had interviewed Mrs. Markoska, the owner of the vehicle which Mr. Markoski was operating at the time of the accident. Counsel for Mr. Markoski has now filed an Affidavit of Mrs. Markoska. In that Affidavit, she deposes that ING, the insurer of her vehicle, cancelled the insurance in June 2004 and that she did not inform the Applicant of the cancellation.
Counsel for State Farm advised that he does not intend to cross-examine Mrs. Markoska on her Affidavit. In my view, having accepted the contents of the Affidavit, that the vehicle had been insured, the insurance had been cancelled and that Mrs. Markoska had not informed Mr. Markoski of the cancellation, I am not persuaded that State Farm can continue to construe this as a reverse onus situation.
The Commission's practice
Counsel for the Insurer characterized the preliminary issues hearing as the first day of an arbitration hearing which is scheduled to resume in May 2007. If this were correct, then for the reasons given earlier, Mr. Markoski could have the burden of proving, under section 268(2) of the Insurance Act, that he had recourse to the State Farm policy, because he was uninsured. However, I find nothing in the pre-hearing report which supports the submission that the preliminary issue hearing was scheduled in this manner.
The pre-hearing was conducted by another arbitrator. Counsel for the Insurer is the only counsel who was present at the pre-hearing. According to the pre-hearing report, a preliminary issues hearing was scheduled in October 2006, to be followed by a hearing on the merits in May 2007. The usual practice at the Commission is to treat the preliminary issues hearing and the hearing on the merits as distinct proceedings and to assign a different arbitrator to each proceeding.
For these reasons, I conclude that as a matter of law, and as a matter of practice and procedure, State Farm has the burden of proving each of the elements required by section 30(1)(a) of the Schedule, including the element that Mr. Markoski was not insured at the time of the accident.
Procedure
Since State Farm bears the burden of proof at the preliminary issues hearing, it will adduce its evidence first. Mr. Markoski is entitled to call no evidence if he is of the view that State Farm has failed to discharge its burden of proof. If State Farm adduces sufficient evidence and Mr. Markoski is of the view that he needs to respond, he will then adduce his evidence, and State Farm will have a right to call reply evidence.
Driver record search
State Farm filed a book of documents which was made Exhibit 2 on November 10, 2006. That brief contains a copy of a driver record search performed in relation to Mr. Markoski. According to that document, approximately six weeks after the accident which gives rise to this arbitration, Mr. Markoski was convicted of failing to have an insurance card. Counsel for State Farm submits that this evidence is relevant as to what Mr. Markoski knew or ought to have known, and he intends to rely on it in his cross-examination of the Applicant.
Counsel for Mr. Markoski objects to this document being filed. She submits that the document concerns an event which took place following the accident, which if admitted would be prejudicial to the Applicant in determining the issues in dispute.
At this point, I have limited material before me—one Affidavit and a series of documents which were filed as an exhibit. In my view the request for this ruling is premature. I will determine the relevance and admissibility of this document, its probative value, and whether it is so prejudicial that it ought to be excluded, after the relevance of this document has been established.
Expenses
This hearing was initially scheduled for October 6, 2006, then adjourned on November 10, 2006, to November 16, 2006, and is now further adjourned to January 22, 2007. On November 16, 2006, counsel for the Applicant sought costs thrown away. Given the circumstances of the adjournment, counsel for the Insurer conceded that this would be appropriate, and suggested that they be fixed in the amount of perhaps $150. I accept that approximately five hours of preparation time would be lost as a result of the adjournment. Counsel for the Applicant advised that she was called to the bar in 2005. I fix the Applicant's costs thrown away at $350. State Farm should pay those costs before the adjourned date of January 22, 2007.
January 2, 2007
Suesan Alves
Arbitrator
Date
Financial Services Commission of Ontario
Commission des services financiers de l’Ontario
Neutral Citation: 2007 ONFSCDRS 1
FSCO A05-002466
BETWEEN:
BRANISLAV MARKOSKI
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:
State Farm Mutual Automobile Insurance Company bears the burden of proving all the requisite elements of section 30(1)(a) of the Schedule. State Farm Mutual Automobile Insurance Company will call its evidence first and has a right of reply.
The ruling with respect to the admissibility of Mr. Markoski's driver search is deferred until the document is put to Mr. Markoski in cross-examination.
State Farm Mutual Automobile Insurance Company shall pay Mr. Markoski's costs thrown away, fixed in the amount of $350 before the adjourned date of January 22, 2007.
January 2, 2007
Suesan Alves
Arbitrator
Date
- In respect of an occupant of an automobile, i. the occupant has recourse against the insurer of an automobile in respect of which the occupant is an insured, ii. if recovery is unavailable under subparagraph i, the occupant has recourse against the insurer of the automobile in which he or she was an occupant, iii. if recovery is unavailable under subparagraph i or ii, the occupant has recourse against the insurer of any other automobile involved in the incident from which the entitlement to statutory accident benefits arose, iv. if recovery is unavailable under subparagraph i, ii or iii, the occupant has recourse against the Motor Vehicle Accident Claims Fund.
Footnotes
- Affidavit of Mrs. Markoska
- (2) The following rules apply for determining who is liable to pay statutory accident benefits:
- See for example the cases of Graham and State Farm (OIC A96-000871, June 30, 1997); Sofantzidelis and AXA Insurance (Canada) (OIC A95-000384, May 7, 1997); Giordano and Royal & SunAlliance Insurance Company of Canada (FSCO A05-001174, April 12, 2006) and Michalowski and St. Paul Fire & Marine Insurance Company (FSCO A98-001492, July 9, 1999)