Patricia Abrams v. Aviva Insurance Company of Canada, 2007 ONFSCDRS 140

Financial Services Commission des

Commission services financiers

of Ontario de l’Ontario

Neutral Citation: 2007 ONFSCDRS 140

FSCO A06-000806

BETWEEN:

PATRICIA ABRAMS

Applicant

and

AVIVA INSURANCE COMPANY OF CANADA

(FORMERLY PILOT INSURANCE COMPANY)

Insurer

DECISION ON A PRELIMINARY ISSUE

Before: Denise Ashby

Heard: Written submissions concluded on July 6, 2007

Appearances: Christopher Clifford for Ms. Abrams

Susan Bromley for Pilot Insurance Company

Issues:

Mr. Carl Gibson was fatally injured in a motor vehicle accident on October 15, 2003. At the time of his death, Mr. Gibson was living with the Applicant, Patricia Abrams. She applied for and was denied a spousal death benefit from Aviva Insurance Company of Canada, formerly Pilot Insurance Company (“Aviva”), payable under the Schedule.¹ The parties were unable to resolve their disputes through mediation, and Ms. Abrams 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 issue is:

Is Ms. Abrams precluded from proceeding to arbitration by operation of Aviva’s payment into court of an amount equal to the spousal benefit pursuant to section 271 of the Insurance Act?
In the event, Ms. Abrams is not precluded from proceeding to arbitration, should the arbitration be stayed?

Result:

Ms. Abrams is not precluded from proceeding to arbitration and the arbitration shall proceed on August 15 and 16, 2007, in Kingston, Ontario.

BACKGROUND:

On October 15, 2003, Mr. Carl Gibson was fatally injured when the car he was driving was struck by a VIA train. At the time of his death, Mr. Gibson had been living with the applicant, Ms. Abrams. She made an application for a spousal death benefit pursuant to subsection 25(2)1(i) of the Schedule. Aviva denied payment of the benefit on the basis that Ms. Abrams was not a spouse within the definition set out in Part VI of the Insurance Act as required by the Schedule.

Ms. Abrams has two children by a former relationship, Courtney Abrams and Joshua Abrams. Each of these children made claims as dependants which were denied by Aviva. The arbitration in respect of their claims is scheduled for August 15 and 16, 2007, in Kingston.

Mr. Gibson had two children by a former relationship, Stacy Lynn Kehoe-Gibson and Traci Leigh Kehoe-Gibson. Aviva paid each of these children a dependant death benefit pursuant to subsection 25(2)(i) of the Schedule on the basis that Mr. Gibson had an obligation to provide support under a court order. Neither of these children has made a claim pursuant to subsection 25(2)3 for a share of the spousal benefit on the basis that no spousal payment was required pursuant to paragraph 1.

On March 12, 2007, Aviva obtained an Order of the Superior Court of Justice permitting it to pay the $25,000.00 spousal benefit into Court pursuant to Section 271 of the Insurance Act.

On March 16, 2007, I ordered an adjournment of the hearing then scheduled for March 27 and March 28, 2007, to a date to be set at a resumption of pre-hearing which was to be convened before me.

On May 15, 2007, at the resumption of pre-hearing, I set dates for submissions in respect of this preliminary issue hearing. I further ordered that, in the event, I determined the Commission had the jurisdiction to conduct the hearing and it should not be stayed, then the hearing would be held on August 15 and 16, 2007, in Kingston, at the same time and before the same hearing arbitrator as the matters relating to the claims of Courtney Abrams and Joshua Abrams.

SUBMISSIONS AND ANALYSIS:

Subsection 271(1) of the Insurance Act provides:

Where an insurer admits liability for insurance money payable under section 265 or 268 and it appears that,

(a) there are adverse claimants;…

the insurer may, at any time after thirty days after the date upon which the insurance money becomes payable, apply to the court ex parte for an order for payment of the money into the Ontario Court (General Division)* and the court may upon such notice, if any, as it thinks necessary make an order accordingly.

*Now the Ontario Superior Court of Justice

Subsection 281(1) of Act provides:

(a) the insured person may bring a proceeding in a court of competent jurisdiction;

(b) the insured person may refer the issues in dispute to an arbitrator under section 282; or

(c) the insurer and the insured person may agree to submit any issue in dispute to any person for arbitration in accordance with the Arbitration Act, 1991.

Subsection 282(3) of the Act provides:

The arbitrator shall determine all issues in dispute, whether the issues are raised by the insured person or the insurer.

Aviva submits that the Commission loses jurisdiction over the benefits paid into court pursuant to subsection 271(1) on the basis that the legislative scheme clearly contemplates that jurisdiction is transferred to the Superior Court of Justice. Aviva submits that the provisions of subsection 282(1) are a rebuttable presumption. Where an insurer makes a payment into court pursuant to 271(1) then jurisdiction for the proceeding is transferred to the court.

Ms. Abrams submits that the provisions permitting the insurer to pay monies into court do not interfere with the right of an insured person to choose the forum for determining the issues in dispute pursuant to subsection 281(1) and should not prevent her from proceeding to arbitration in August.

The legislation confers Commission arbitrators with concurrent jurisdiction with justices of the Superior Court of Justice. Where there is a dispute between an insured person and the insurer and there has been no resolution at mediation, then the applicant may choose between a court of competent jurisdiction or arbitration. The exception is the provision which permits the parties to consent to binding private arbitration. The applicant’s choice of forum is unfettered. In Liberty Mutual Insurance Company v. Fernandes, Madam Justice Katherine Feldman, of the Court of Appeal, made the following finding:

By leaving the choice of forum always with the insured, the legislature has guaranteed that the insured maintains control of the process including its timing and cost. See Baron v. Kingsway General Insurance Co., 2006 CanLII 8463 (ON SC), [2006] O.J. No. 1067, 35 C.C.L.I. (4th) 180 (S.C.J.), at para. 29. Arbitration under the Act is an expeditious and much less costly process than a court action, but the court option is open to an insured. At the same time, s. 281(5) (now s. 281.1), protects the insurer from any undue delay by the insured in initiating dispute resolution, by providing a two-year limitation (subject to the SABS) following an insurer's refusal to pay a claimed benefit, for a step to be taken under s. 281(1)

In the result, I conclude that there is no need or basis for the court to read into the Act a right for insurers to initiate court action or to find that the language of s. 281 is not sufficient to remove any common law right that an insurer may have had to bring such an action. It is clear that the provisions of ss. 279 to 283 of the Act were intended to and do form a complete code for dispute resolution, which can work effectively and fairly for all parties.²

While the legislation provides for payment into court at “any time” it is silent as to the impact the payment has on any proceedings which may have been commenced. This is consistent with Justice Feldman’s analysis. Subsection 271(1) provides an insurer a potential shield from accruing interest, a special award and expenses by having access to the court’s historic role as a repository for funds which are payable but for whom the payee is not yet established or known. It does not provide a means by which the insurer may interfere with an insured’s unfettered right to choose the forum for the determination of the issues in dispute.

Aviva submits that the dependant Kehoe-Gibson children have a right to a share of the spousal benefit. Further, the Abrams children, have a potential right to a share of the spousal benefit. I do not accept this submission. At this juncture, any right Mr. Gibson’s dependants have to share in the spousal benefit only crystallizes when an arbitrator determines that Ms. Abrams is not a spouse within the meaning of the Insurance Act. This is a legal question which Commission arbitrators are empowered by the legislation to determine. The arbitrator’s decision would be binding on all. This would include the Superior Court of Justice as repository of the funds. In the event Ms. Abrams is found to be a spouse then the court would order the release of the funds to her, pursuant to the order of the hearing arbitrator. In the event, she is found not to be a spouse then the funds would be paid out to the dependants upon their application for the release of their share of funds.

I find that there is no basis for staying the proceedings. The Kehoe-Gibson children have not commenced a parallel proceeding by their litigation guardian. Therefore, the determination of Ms. Abrams’status should be dealt with in the forum of her choice, the arbitration hearing presently scheduled for August 15 and 16, 2007 in Kingston, Ontario.

Subsection 271(2) provides for the insurer to be discharged upon receipt of the money by the court and provides that thereafter payment of the funds out of court will be by court order. The ambit of the protection the discharge provides in respect of a special award or interest or expenses and the extent to which the payment restricts the insurer from participating in the arbitration hearing are issues for the hearing arbitrator to determine.

For the foregoing reasons, I find that Ms. Abrams is not precluded from proceeding to arbitration and the arbitration shall proceed on August 15 and 16, 2007, in Kingston, Ontario.

EXPENSES:

I defer the matter of expenses to the hearing arbitrator who will have a greater appreciation of the totality of the expense issues.

July 25, 2007

Denise Ashby

Arbitrator

Date