Financial Services Commission of Ontario
Commission des services financiers de l’Ontario
Neutral Citation: 2007 ONFSCDRS 125
FSCO A05-001749
BETWEEN:
KAROLIS VALAUSKAS
Applicant
and
MOTOR VEHICLE ACCIDENT CLAIMS FUND
Insurer
and
WAWANESA MUTUAL INSURANCE COMPANY
Intervenor
DECISION ON A PRELIMINARY ISSUE
Before:
Jeffrey Rogers
Heard:
May 7, 2007, at the offices of the Financial Services Commission of Ontario in Toronto.
Appearances:
Mr. David Levy, solicitor for Mr. Valauskas
Mr. Robert Kerkmann, solicitor for Motor Vehicle Accident Claims Fund
Mr. Daniel Strigberger, solicitor for Wawanesa Mutual Insurance Company
Issue:
- Is the Motor Vehicle Accident Claims Fund ( "the Fund") the first insurer to receive Mr. Valauskas completed Application for Accident Benefits, pursuant to section 2 of O. Reg. 283/95 to the Insurance Act?
Result:
- The Fund is not the first insurer to receive Mr. Valauskas completed application for accident benefits, pursuant to section 2 of O. Reg. 283/95 to the Insurance Act.
FACTS AND BACKGROUND:
The facts are not in dispute. Mr. Valauskas, was injured in a motor vehicle accident on September 14, 2004 when the Jeep in which he was a passenger collided with a Mercedes. The police attended and both vehicles were towed from the scene. The police report, prepared the day of the accident, identifies Wawanesa as the insurer of the Jeep and the Guarantee Company of North America as the insurer of the Mercedes.
On October 4, 2004 Mr. Valauskas' lawyer submitted an OCF-1 (Application for Accident Benefits), signed by Mr. Valauskas. The claim was made against the Motor Vehicle Accident Claims Fund . By letter dated October 12, 2004, the Fund informed Mr. Valuskas' lawyer that the application was incomplete. The Fund requested an application in Form 3, the approved form for applying to the Fund, along with a copy of the police report. On November 8, 2004 the Fund received a Form 3 from Mr. Valauskas' lawyer, along with a statutory declaration. The police report was not provided.
The section of the Form 3 that requests the name of the insurer of the vehicle in which Mr. Valauskas was a passenger is filled in with "I don't know." The Jeep and its driver are identified. The Statutory Declaration indicates that Mr. Valauskas does not have any automobile insurance of his own and is not insured under any policy.
The Fund acknowledged receiving the Application for Accident Benefits by letter dated November 17, 2004. It informed Mr. Valauskas that the claim had been assigned to its adjusters for "adjusting and payment of accident benefits".
Mr. Valauskas provided a second statutory declaration dated February 14, 2005. It indicates that driver of the Jeep was Mr. Valauskas' schoolmate and that he was on the way to watch a hockey game with other schoolmates as passengers, when the accident occurred. This declaration also indicates that the police came to the scene but that Mr. Valauskas was not given the police report. The Fund's adjusters made several further requests of Mr. Valauskas for the police report, advising that the application was incomplete without it. Mr. Valauskas did not provide the police report and, except for the indication on the application for accident benefits that he did not know the name of the insurer of the Jeep, he has maintained complete silence on the subject.
The Fund did not pay the benefits claimed. Mr. Valauskas applied for arbitration on August 9, 2005. The pre-hearing was held on March 30, 2006. At the pre-hearing, the Fund raised the issue of Mr. Valauskas' failure to provide the police report and a preliminary issues hearing was scheduled to address the consequences of that failure. On April 10, 2006 the Fund finally wrote to the police requesting a copy of the accident report. It received a copy on May 17, 2006. The Fund then informed counsel for Mr. Valauskas that Wawanesa was the insurer of the Jeep. In June 2006, the parties informed the Commission that they had agreed to withdraw the preliminary issue. At the time, they were under the impression that Wawanesa would agree to replace the Fund as the insurer in this arbitration.
Mr. Valauskas submitted an Application for Accident Benefits to Wawanesa on July 14, 2006. On December 15, 2006 the Fund requested a resumption of the pre-hearing, with Wawanesa participating informally, to address the issue of whether Wawanesa had agreed to replace the Fund as the respondent in the arbitration. Because, Wawanesa was not a party, I declined the request. I instructed the parties that, if they could not resolve the issue on their own, I would consider it by way of a motion, with notice to Wawanesa.
On March 9, 2007 I heard a motion that Mr. Valauskas brought, for an order adding Wawanesa as a party to this arbitration. Wawanesa opposed the motion. By a decision dated April 3, 2007, I ruled that an arbitrator does not have the jurisdiction to grant the order sought. At the hearing of the motion the parties agreed that, because the issue of whether the Fund was the first insurer to receive a completed application has the potential to determine the entire dispute, that issue would be resolved by way of this preliminary issue hearing, in the event that the motion was not successful. The parties also agreed that Wawanesa would be granted intervenor status at the preliminary issue hearing because of its potential to affect Wawanesa's interests..
ANALYSIS:
This decision turns on an analysis of the parameters of Section 2 of O.Reg. 283/95 ("Disputes Between Insurers") and section 268 of the Insurance Act. Section 2 provides that the first insurer that receives a completed application for accident 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 Insurance Act. The Commission does not have jurisdiction to resolve the priority dispute. It is resolved by arbitration under the Arbitration Act, 1991.
The Fund does not issue insurance policies. It is a statutory body that provides recovery where an injured person has no recourse to a policy. There is no dispute that the Fund is, as a general proposition, an insurer for the purpose of sections 2 and 268. Neither the Fund nor Wawanesa has sought arbitration of the priority issue.
It is not disputed that Wawanesa is the priority insurer, by the rules established in section 268. Mr. Valauskas position is that, because the priority issue has not been resolved, the Fund is responsible for paying him accident benefits, as the first insurer to have receive a completed application. Wawanesa supports that position. The Fund's position is it is not required to respond to Mr. Valauskas' application because there was not sufficient nexus between the Fund and Mr. Valauskas for the Fund to be considered an insurer within the meaning of sections 2 and 268, under the circumstances in which Mr. Valauskas made his application. In addition, the Fund maintains that it did not receive a completed application, because of the absence of the police report.
It is not disputed that, although the Commission lacks jurisdiction to resolve the priority issue, an arbitrator does have jurisdiction to resolve the issue of whether the Fund was an insurer under section 268 of the Act, in the context of this arbitration. Authority for that jurisdiction is found in the decision of the Divisional Court in Allstate Insurance Co. of Canada v. Brown1. The Court found jurisdiction in the provision in section 282(3) of the Act, that "[T]he arbitrator shall determine all issues in dispute...". The Court noted that section 282(3) includes the authority for an arbitrator to determine his or her own jurisdiction. If the Fund is not an insurer under section 268 for the purpose of this arbitration, an arbitrator has no jurisdiction to order it to pay benefits to Mr. Valauskas.
In Vieira and Royal & SunAlliance Insurance Co. of Canada2, the Director of Arbitrations provided the following concise analysis of the interaction between the priorities Regulation and an arbitrator's jurisdiction :
The correct approach, in my opinion, is to treat the Priorities Regulation as part of the claims process. It establishes procedures, not substantive entitlements. Insurers are required to participate in a scheme designed to ensure that injured persons will get a prompt determination of their entitlement to the accident benefits, even if they have chosen the wrong insurer. It is inherent in this scheme that an insurer may have to pay benefits that another insurer should be paying, but only on an interim basis. If the first insurer to receive a completed application wants to shift responsibility to another insurer, it must follow the procedures in the Priorities Regulation . Although a FSCO arbitrator may need to determine whether the insurer before them was the first insurer to receive a completed application, if it was, that insurer can only resist the claim on the basis that the person is not entitled to the benefits provided under the SABS, not that he or she should be looking to another insurer to pay them.
Completed Application
Section 69 of the Schedule requires that an Application for Accident Benefits must be made in a form approved by the Superintendent of Insurance. The Superintendent approved Form 3 as the Application for Accident Benefits for use when applying to the Fund. Form 3 requires the applicant to attach a copy of the police report. Mr. Valauskas and Wawanesa submitted that the application is complete without the police report because the requirement of a police report expands an applicant's obligations under the Schedule and is therefore beyond the jurisdiction of the Superintendent. Mr. Valauskas and Wawanesa also submitted that the Fund was estopped from arguing that it had not received a completed application because it acknowledged that it had received the application and assigned it to its adjusters. I find it unnecessary to address those submissions. I find that, in any event, the application was complete when the Fund received a copy of the police report on May 17, 2006, before Mr. Valauskas had made an application to Wawanesa.
I do not accept the Fund's submission that the purpose of including the requirement to attach a police report is to avoid unnecessary and improper applications to the Fund and that, without its strict enforcement, the Fund would be required to respond to applications before it can know whether it is properly named as the insurer. The fact that Fund was not prepared to respond in this case refutes that submission.
The Director of Arbitrations noted in Vieira that the accident benefits scheme is designed to ensure prompt determination of entitlement to benefits and it is inherent in the scheme that an insurer may have to pay benefits that another insurer should be paying. Also inherent in the scheme is the risk of incurring other types of expenses that another insurer should be incurring. I see no reason to accord the Fund the special status it seeks in order to avoid the expense that it might incur in investigating whether it is properly named as the insurer and resolving disputes when it takes the position that it is not, based on its own investigation.
The scheme also includes speedy resolution of priority disputes under O.Reg. 283/95. Section 3 provides as follows:
3.(1) No insurer may dispute its obligation to pay benefits under section 268 of the Act unless it gives written notice within 90 days of receipt of a completed application for benefits to every insurer who it claims is required to pay under that section. O. Reg. 283/95, s. 3 (1).
(2) An insurer may give notice after the 90-day period if,
(a) 90 days was not a sufficient period of time to make a determination that another insurer or insurers is liable under section 268 of the Act; and
(b) the insurer made the reasonable investigations necessary to determine if another insurer was liable within the 90-day period. O. Reg. 283/95, s. 3 (2).
As indicated in section 3(2)(b) above, the scheme contemplates that insurers, faced with a possible priority issue, will "make reasonable investigations necessary to determine if another insurer was liable". The scheme does not contemplate, as the Fund submitted, that information relevant to liability of another insurer, will be provided exclusively by the applicant. The Fund could have obtained the police report immediately after it received Mr. Valauskas' application. Had it done so, the issue of its obligation to respond to his application would likely have been long ago resolved.
Nexus
The principle that there must be a sufficient nexus between the applicant and the insurer to trigger the obligation to pay was first expressed by Senior Arbitrator Rotter in Brown and Allstate Insurance Co. of Canada3. Her approach was upheld and endorsed by the Divisional Court. It has been applied in several FSCO decisions, including Vieira.
In Brown the applicant applied to three insurers and the Fund for accident benefits. Allstate was the first to receive an application but it denied the claimed benefits on the basis that its policy had expired several months before the accident. The applicant asserted that a valid contract existed at the time of the accident. Senior Arbitrator Rotter held that, although Allstate may not have had a policy in force at the time, there was nevertheless a sufficient nexus or connection to generate an obligation to respond. She recognised that there are circumstances in which nexus cannot be established, noting that "[A]llstate's argument may have some merit in a situation where an applicant candidly admits that he or she has simply applied for accident benefits from a randomly selected insurance company, without asserting any contractual relationship or nexus4."
In Vieira, the Director of Arbitrations noted that the threshold for establishing nexus is not a high one.
He summarized the correct approach as follows:
In my opinion, "insurer" in these provisions must be interpreted broadly based on the claim being asserted, not the ultimate determination. Where, as in this case, an insurance company licenced to write automobile insurance in the Province of Ontario receives a completed application for accident benefits under a specific policy that the applicant claims was in force at the time of the accident, that company must respond under s. 2 of the Priorities Regulation. Using the words in Allstate v. Brown, there is a sufficient nexus. Indeed, none of the arbitration decisions, including the one under review, suggests otherwise.
Mr. Valauskas and Wawanesa argued that, because the Fund is required to pay benefits in any case where coverage is not available under an insurance policy, it is potentially an insurer whenever there has been an accident. An applicant therefore establishes the required nexus simply by asserting, as Mr. Valauskas did, that he does not know any particulars of insurance. Wawanesa submitted that although an applicant would be required to provide a link to a specific policy to establish a nexus with Wawanesa, the Fund should be viewed differently, because it does not issue policies. In other words, an applicant cannot go wrong by naming the Fund. I disagree. The approach Wawanesa suggests sets the standard at the possibility of a general connection between the applicant and the insurer, rather than a connection in the particular circumstances of the claim. That would mean that an applicant should be able to establish a nexus to Wawanesa simply by asserting the possibility that a policy could have been placed through Wawanesa.
Although the threshold for establishing nexus is not a high one, the choice of insurer cannot be arbitrary. A link must be established between the applicant and the named insurer, in the particular circumstances of the claim. There must be some basis for the applicant believing that the insurer to which the application is submitted is required to pay benefits. Where the application is submitted to the Fund, there must be some basis for the applicant's belief that coverage is not available under an insurance policy.
Because of his silence on the subject, I raised the issue of whether the onus was on Mr. Valauskas to prove that there was sufficient nexus between himself and the Fund. Mr. Valauskas and Wawanesa submitted that the issue is strictly procedural and, because the Fund raised it, the onus was on the Fund to prove a lack of nexus. Because there is no evidence to support a finding of nexus, I have concluded that it is not necessary to decide the issue of onus. However, I would think the issue is one of coverage which would place the onus on the applicant, as found in the Appeal decision in TTC and Deborah Wootton.5
As noted above, except for the information provided in his application for benefits, Mr. Valauskas has been completely silent on the issue of insurance coverage. He has provided no information at all on how he concluded that recovery was not available to him against the insurer of the vehicle in which he was a passenger. He has provided no information at all, on how he concluded that recovery was not available to him against the insurer of the other vehicle involved in the accident. He was required to consider those sources of recovery before he could turn to the Fund. Although the information on insurance coverage was readily available by obtaining the police report, he has provided no explanation for his failure to obtain the report. We do not even know whether he took the simple step of asking the driver or any of his fellow passengers whether there was insurance coverage. There is no evidence that he turned his mind to the question of whether the insurer to which he submitted his application might be required to pay him accident benefits. I find that the inescapable inference is that Mr. Valauskas' choice to submit his application to the Fund was arbitrary. In these circumstances, the Fund is not an "insurer" within the meaning of section 268 and it is not required to respond to his application.
HEARING
This preliminary issues hearing was held on a date that was originally scheduled for hearing the merits of the application. The parties agreed to new hearing dates of November 19 to 22, 2007. Counsel for Wawanesa indicated that he was available on those dates but, depending on the outcome, he would need to seek instructions on whether Wawanesa will agree to replace the Fund in this arbitration. Unless otherwise ordered, the hearing dates will be vacated if the Commission is not advised within 60 days that the arbitration will be proceeding with Wawanesa as the insurer.
EXPENSES:
The parties made no submissions on expenses. Should the parties be unable to resolve the issue of expenses, any party may make an appointment for me to determine the matter in accordance with Rules 75 to 79 of the Dispute Resolution Practice Code.
June 20, 2007
Jeffrey Rogers
Arbitrator
Date
Financial Services Commission of Ontario
Commission des services financiers de l’Ontario
Neutral Citation: 2007 ONFSCDRS 125
FSCO A05-001749
BETWEEN:
KAROLIS VALAUSKAS
Applicant
and
MOTOR VEHICLE ACCIDENT CLAIMS FUND
Insurer
and
WAWANESA MUTUAL INSURANCE COMPANY
Intervenor
ARBITRATION ORDER
Under section 282 of the Insurance Act, R.S.O. 1990, c.I.8, as amended, it is ordered that:
- The Motor Vehicle Accident Claims Fund is not required to respond to his application because it was not the first insurer to receive Mr. Valauskas completed application for accident benefits, pursuant to section 2 of O. Reg. 283/95 to the Insurance Act.
June 20, 2007
Jeffrey Rogers
Arbitrator
Date
Footnotes
- (1998), 1998 CanLII 18877 (ON CTGD), 40 O.R. (3rd) 610, (Ont. Div. Ct.)
- FSCO P04-00016, February 15, 2005, at paragraph 19
- OIC A97-000579, May 29, 1997
- OIC A97-000579, May 29, 1997, at paragraph 13
- FSCO PO4-00004, November 2, 2004