Financial Services Commission des

Commission services financiers

of Ontario de l’Ontario

Neutral Citation: 2007 ONFSCDRS 148

FSCO A05-002466

BETWEEN:

BRANISLAV MARKOSKI

Applicant

and

STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY

Insurer

Before: Arbitrator Suesan Alves

Heard: October 6, November 10 and 16, 2006, and January 22, 2007, at the offices of the Financial Services Commission of Ontario in Toronto.

Appearances: Dimple Verma appeared for Mr. Markoski on all days but January 22, 2007. On that date, Alon Rooz appeared for Mr. Markoski.

Todd J. McCarthy for State Farm Mutual Automobile Insurance Company

Issues:

Mr. Markoski was involved in a motor vehicle accident on August 27, 2004 and claimed statutory accident benefits from State Farm. State Farm submits that Mr. Markoski is excluded from receiving income replacement and housekeeping and home maintenance benefits under section 30(1)(a) of the Schedule,¹ because he knew or ought reasonably to have known that the car he was operating was not insured.

The preliminary issue is:

Is Mr. Markoski excluded from receiving income replacement benefits and housekeeping and home maintenance benefits by section 30(1)(a) of the Schedule, because he knew or ought reasonably to have known that he was operating an automobile while it was not insured under a motor vehicle liability policy?
Which party is liable to pay the other’s expenses in respect of the arbitration under subsection 282(11) of the Insurance Act, R.S.O. 1990, c. I.8?

Result:

Mr. Markoski is excluded from receiving income replacement benefits and housekeeping and home maintenance benefits by section 30(1)(a) of the Schedule. He ought reasonably to have known that at the time of the accident he was operating an automobile while it was not insured under a motor vehicle liability policy.
The issue of expenses may now be addressed.

Background

Mr. Markoski was involved in a motor vehicle accident on August 27, 2004, while driving a car owned by his former wife, Mrs. Markoska.

Mr. Markoski and his former wife divorced in 1997. They live separate and apart on different floors of the same house. Mrs. Markoska permits Mr. Markoski to drive her car. At the time of this hearing the parties agreed that the car was not insured at the time of the accident.

Mr. Markoski submitted a claim for statutory accident benefits to State Farm, the insurer of the other vehicle involved in the motor vehicle 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 relies on section 30(1)(a) of the Schedule and submits that Mr. Markoski is excluded from receiving income replacement benefits as well as housekeeping and home maintenance benefits.

Law

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;

A benefit under section 22 refers to entitlement to housekeeping and home maintenance expenses.

State Farm has the burden of proof. To succeed, State Farm must establish that Mr. Markoski knew or ought reasonably to have known that his former wife’s car, which he was driving on August 27, 2004, was not insured under an insurance policy.

In assessing what Mr. Markoski knew or ought reasonably to have known, I must conduct an individualized inquiry, “but only to the extent of the exercise of reason by an ordinary, rational person in the situation of the Applicant”, as Arbitrator Palmer decided in the case of Jacobs and Economical Mutual Insurance Company (FSCO A-004394, June 16, 1994). In that case, Arbitrator Palmer was construing section 17 of the Bill 68 Schedule. Section 17 sets out the circumstances under which drivers, occupants of vehicles and persons who made or knew of material misrepresentations will be excluded from certain benefits.

In the case of Nwakwesi and Security National Insurance Co. (FSCO A00-000607, January 8, 2001), Arbitrator Wacyk adopted Arbitrator Palmer’s analysis in relation to section 30(1)(a) of the Bill 59 Schedule, the provision at issue in this case. Arbitrator Wacyk held that the test to be applied in the two provisions is the same because the same legislative intent existed and the same language was employed. I agree with and adopt the analysis of Arbitrators Palmer and Wacyk.

To paraphrase the test as expressed by Arbitrator Palmer, in this case, the evidence must convince the arbitrator, at least on a balance of probabilities, that an ordinary person in

Mr. Markoski’s situation on August 27, 2004 should have known that he was driving the car without insurance.

For the following reasons, I conclude that State Farm has discharged its onus and Mr. Markoski is excluded from receiving housekeeping and home maintenance benefits as well as income replacement benefits by section 30(1)(a) of the Schedule.

Mr. Markoski’s knowledge

State Farm called two witnesses and adduced documentary evidence to show the extent of Mr. Markoski’s knowledge of the insurance arrangements in relation to his former wife’s vehicle. Based on that evidence, I find that Mr. Markoski was principally responsible for arranging insurance on Mrs. Markoska’s vehicle and on his own vehicle and that he knew in June 2003 that his wife’s vehicle was uninsured.

Ms. G. Flammia, a senior underwriter with ING Insurance Company, testified at the hearing. She testified that ING insured Mr. Markoski and Mrs. Markoska between 2002 and 2003. There was an automobile policy as well as a home insurance policy. Both were named insureds.

Ms. Flammia testified based on the file documents that on April 14, 2003, ING asked Mr. Markoski and Mrs. Markoska to complete renewal questionnaires for their home and automobile policies. Mr. Markoski signed and returned the questionnaires on his behalf and on behalf of Mrs. Markoska.

Mr. Markoski failed to disclose two convictions which he had accumulated on his driving record. On June 16, 2003, ING sent a letter to both named insureds, canceling the policies for misrepresentation, based on Mr. Markoski’s failure to disclose his convictions. The cancellation was sent by registered mail. The effective date of the cancellation was July 18, 2003.

On June 18, 2003, Mr. Markoski attended at ING’s offices, questioned the cancellation, and expressed the view that there must have been some error on the part of the Ministry of Transportation. He denied having received any tickets.

ING gave Mr. Markoski the opportunity to provide a copy of his driver record search and documentation from the Ministry of Transportation regarding the error he alleged. ING also agreed to rescind the cancellation if documentation from the Ministry of Transportation established there had been an error as Mr. Markoski alleged.

Mr. Markoski attended at the broker with his wife’s driver record search which would be sent to ING. Her record was a clear one. However, Mr. Markoski did not provide ING with a copy of his own driver record search with the Ministry of Transportation. His record was the one which was problematic. As Mr. Markoski did not provide documentation which conflicted with ING’s searches, it maintained the cancellation.

Mr. J. Hubbard, an independent insurance broker who had placed insurance on Mrs. Markoska’s vehicle between 2001 and 2003, testified at the hearing. He also produced a copy of the brokerage file in relation to Mr. and Mrs. Markoski which was some 52 pages in length.²

Mr. Hubbard testified that he dealt with Mr. Markoski in relation to insurance matters; he seldom dealt with Mrs. Markoska. The brokerage records reflect the name of the customer as Bruno Markoski, the same person as the Applicant, Branislav Markoski. Of the more than two hundred and fifty entries set out in the brokerage records, a mere handful involve Mrs. Markoska.

In this proceeding, Mr. Markoski filed an Affidavit of his former wife, Mrs. Markoska, in which she deposed that she bought the car in 1997 and that: “I have at all times been responsible for insuring this vehicle.” I accept that this is correct in terms of her legal obligation as the owner of the vehicle to ensure that there is insurance on the vehicle. However, I find that the evidence of Mr. Hubbard, the broker and of Ms. Flammia, the underwriter establishes that in practice, this was a task that Mr. Markoski had undertaken for years.

Mr. Markoski was principally responsible for arranging insurance on Mrs. Markoska’s vehicle. He completed application forms, negotiated claims for property damage, dealt with settlement proceeds, requested refunds, and communicated with the broker and the insurer.

I find Mr. Markoski received notice of the cancellation of the policy on Mrs. Markoska’s vehicle in June 2003 and acted upon it. On June 18, 2003, he attended at ING’s offices and questioned the basis for the cancellation of the home and automobile policies. On June 19, 2003, Mr. Markoski also asked the broker to arrange other insurance.

Mr. Hubbard testified that at Mr. Markoski’s request, he attempted to place insurance with other insurers; however, he was unsuccessful in doing so. Mr. Hubbard testified that the cancellation and misrepresentation would follow both named insureds as part of their insurance history, and they would therefore experience difficulty obtaining insurance from another carrier. I accept his evidence.

When ING sent out its cancellation notice on June 16, 2003, ING also requested payment of $114.78 as earned premium for the period between the date of the notice of cancellation and the effective date of cancellation.

On July 18, 2003, the effective date of the cancellation, Mr. Markoski telephoned the brokerage in response to a letter from the broker which confirmed that his home and automobile policies had been cancelled. During that conversation, Mr. Markoski alleged that he had himself arranged home and auto insurance through another broker, at lower rates, since June and wanted his money back from ING. He stated he had been insured with the wrong company. According to Ms. Flammia, no premium had been paid during this period; this was simply written off by ING.

Counsel for Mr. Markoski submitted that this statement by Mr. Markoski was evidence that he had other insurance in place on his wife’s vehicle since June 2003. In light of the difficulties the broker anticipated and encountered in placing insurance for Mr. Markoski, I do not accept this as evidence that Mr. Markoski had arranged other insurance coverage without more, such as a pink slip, a policy number, and a name of the insurer. If anything, the cost of his insurance would likely be more. Mr. Hubbard testified that he anticipated that the premium ING might have charged to continue to write the insurance would be 35% more. However, ING was not prepared to rescind the cancellation.

Did the cancellation take place in 2003 or 2004?

The evidence of the broker and the underwriter is that the policy was cancelled in 2003. Mrs. Markoska deposes in her Affidavit that the cancellation took place in June 2004 while she was out of the country on vacation, and that she did not inform Mr. Markoski of the cancellation. Section 30(1)(a) of the Schedule contemplates the state of the driver’s knowledge at the time of the accident, so the fourteen month gap in time could be significant.

I find it more likely that ING cancelled the policy in June 2003 because of the dates in ING’s business records and those of the brokerage. Mr. Hubbard testified that the dates of the entries in the brokerage records were computer generated, and no-one had the ability to alter these entries once they were made. ING’s request for the completion of renewal applications; the completed renewal applications which Mr. Markoski submitted; the letter from ING and the letter from the brokerage advising of the cancellation are all dated in 2003. The post office registration receipts in relation to the letter cancelling the policy are dated in 2003.

Those documents were prepared closer in time to the events they describe than Mrs. Markoska’s Affidavit, which was sworn years after the event in question. Mrs. Markoska had limited dealings with insurance matters and she deposed that there was minimal communication between herself and her husband. For these reasons, I conclude that the policy was cancelled in June 2003.

Conclusion

I am persuaded that State Farm has conclusively established that in June 2003, Mr. Markoski knew that his wife’s vehicle was not insured. The motor vehicle accident in question occurred in August 2004, approximately fourteen months later. The question then becomes what Mr. Markoski knew or ought reasonably to have known at the time of the accident.

To restate the test: the evidence must convince the arbitrator, at least on a balance of probabilities, that an ordinary person in Mr. Markoski’s situation on August 27, 2004 should have known that he was driving the car without insurance.

State Farm adduced strong evidence that fourteen months earlier, the broker could not find an insurer willing to take the risk, not even at a higher premium. In my view, Mr. Markoski has the evidential burden, given the strength of State Farm’s evidence, of responding to that evidence by showing that something changed which could form the basis of a reasonably held belief that Mrs. Markoska’s car was insured some 14 months later. For example, that Mrs. Markoska obtained a policy of insurance on her vehicle.

Mr. Markoski did not testify at the hearing, nor did his former wife. His counsel cross-examined the witnesses State Farm summonsed. The only evidence Mr. Markoski adduced was an Affidavit from his former wife, Mrs. Markoska. That evidence did not respond to the key points in State Farm’s evidence.

I infer that there is no such evidence. Absent such evidence, in light of the difficulty Mr. Markosi and Mrs. Markoska would have in obtaining insurance coverage after the cancellation, I do not accept that an ordinary, rational person standing in the shoes of Mr. Markoski could believe that Mrs. Markoska’s vehicle was insured.

I then examine Mr. Markoski’s conduct on August 27, 2004, the day of the accident. According to the statement provided by the other driver, at the scene of the accident, Mr. Markoski took her insurance particulars, but refused to provide his and went back to his car.

The other driver reported the accident to the collision reporting centre. Mr. Markoski did not. Given the injuries Mr. Markoski alleged he sustained in his application for accident benefits, this was a reportable collision. In that document, Mr. Markoski’s injuries were stated as: “Injured lower back, both legs, neck, head. As well broke three teeth on the left side and the right arm.”

According to the collision report from the other driver, the property damage to her vehicle was reported as a punctured front bumper guard and paint damage.

In the absence of any evidence from Mr. Markoski as to the reasons for his actions on August 27, 2004, and in the context of the other evidence, I find the most plausible explanation for Mr. Markoski’s refusal to provide particulars of his insurance to the other driver and for his failure to report at the collision reporting centre was that at the time of the accident, Mr. Markoski knew that the car he was driving was not insured and he knew that he did not have an insurance certificate for the vehicle.

Counsel for the Insurer tendered a copy of Mr. Markoski’s driver record search which showed that on October 4, 2004, about six weeks after the accident in this case, he was charged with failing to have an insurance card contrary to the Compulsory Automobile Insurance Act, R.S.O. 1990, c. C.25. The conviction was registered on October 6, 2005. The offence took place following the accident in issue in this case. I was not persuaded that this was relevant to show whether Mr. Markoski knew his former wife’s vehicle was insured at an earlier date, at the time of the accident. There is no indication in that record as to which car he was driving. In September 2004, prior to the offence date, Mr. Markoski had already acknowledged that he was an uninsured driver when he submitted his application for accident benefits to State Farm.

For these reasons, I conclude, on a balance of probabilities that an ordinary person in

Mr. Markoski’s situation on August 27, 2004 ought to have reasonably known that he was driving Mrs. Markoska’s vehicle without insurance. For these reasons I dismiss Mr. Markoski’s claims for income replacement benefits and housekeeping and home maintenance benefits and remain seized of the issue of expenses.

Mr. Markoski may proceed with his claims for medical benefits, attendant care, a special award and arbitration expenses.

Expenses

If the parties are unable to agree on expenses, they should follow the procedure set out in section 79 of the Dispute Resolution Practice Code—Fourth Edition, Updated October 2003.

August 2, 2007

Suesan Alves Arbitrator

Date