Financial Services Commission of Ontario
Commission des services financiers de l’Ontario
Neutral Citation: 2009 ONFSCDRS 133
Appeal P07-00036
OFFICE OF THE DIRECTOR OF ARBITRATIONS
AVIVA CANADA INC.
Appellant
and
DOROTHY SHAUGHNESSY
Respondent
BEFORE:
David Evans
REPRESENTATIVES:
Susan Bromley and James Brown for Aviva Canada Inc.
John McCarthy and Joyce Chun for Ms. Shaughnessy
HEARING DATE:
August 28, 2008
APPEAL ORDER
Under section 283 of the Insurance Act, R.S.O. 1990, c.I.8, as amended, it is ordered that:
The arbitrator’s order dated November 6, 2007, is rescinded and replaced with:
Aviva Canada Inc. is not precluded from challenging the catastrophic determination made by the North Toronto Assessment Centre DAC of May 24, 2004.
If the parties are unable to agree about expenses of this appeal, an expense hearing may be arranged in accordance with Rule 79 of the Dispute Resolution Practice Code.
October 2, 2009
David Evans Director’s Delegate
Date
REASONS FOR DECISION
I. NATURE OF THE APPEAL
As a result of an impairment sustained in a motor vehicle accident on June 25, 1998, Ms. Shaughnessy claimed from Aviva Canada Inc. certain benefits under the SABS–19961 that are only available to those suffering from a catastrophic impairment. Aviva denied those benefits, and after a failed mediation, Ms. Shaughnessy then applied for arbitration.
Ms. Shaughnessy relied on an assessment for catastrophic impairment at a Designated Assessment Centre (CAT DAC) that determined her impairment was catastrophic. Pursuant to the Court of Appeal decision in Liberty Mutual Insurance Co. v. Fernandes (2006), 2006 CanLII 30212 (ON CA), 82 O.R. (3d) 524, Aviva sought to challenge that CAT DAC finding as part of the dispute resolution process commenced by Ms. Shaughnessy. Aviva appeals the arbitrator’s preliminary issue decision that, notwithstanding Fernandes, it is precluded from doing so.
II. BACKGROUND
The issue is how an insurer can challenge a CAT DAC’s finding of catastrophic impairment.
In Fernandes, the Court of Appeal found that insurers can challenge disputed CAT DACs in the dispute resolution system but not in the courts. It found that the relevant dispute resolution provisions, discussed below, form a complete code that removes any common law right that an insurer may have had to bring such an action.
However, the arbitrator concluded that the only remedy for an insurer would be to seek judicial review of the CAT DAC’s finding, on the basis that the court’s comments regarding remedies at the Commission were obiter.
III. ANALYSIS
The provisions at issue include ss. 279 to 283 of the Insurance Act, which govern dispute resolution of accident benefits. In addition, s. 40 of the SABS–1996 (as it read prior to O. Reg. 546/05) provided the procedure when claiming catastrophic impairment. By s. 40(4), a CAT DAC’s finding was binding on the insured and the insurer, subject to the determination of a dispute in accordance with ss. 279 to 283 whether the impairment was catastrophic.
When the matter came before him as a preliminary issue regarding Aviva’s right to dispute the CAT DAC in the dispute resolution process, the arbitrator stated:
What I take to be the nub of the Fernandes decision is the finding that the dispute resolution system created by sections 279 to 283 is a complete procedural code and that, consequently, an insurer may not launch an action in a court or commence an arbitration for the purposes of challenging a catastrophic DAC assessment.
The further comments concerning the alternatives available to an insurer who challenges a DAC, while illuminating, are not necessary to the court’s central findings. Consequently, they are obiter dicta and while they should be given consideration and respect, they remain non-binding on courts and arbitrators.
However, the arbitrator’s comments notwithstanding, the court’s first consideration was an insurer’s remedy for a positive CAT DAC. Having determined that the remedy lies in the dispute resolution process, the court then set out how. Only then did the court state that insurers cannot turn to the courts. Thus, the court’s discussion of a remedy for insurers in these circumstances was central to its decision.
The court started by discussing whether the dispute resolution procedures outlined in sections 279 to 283 provide a meaningful remedy for the insurer. The court noted that the key section of the Act regarding the procedural and substantive requirements for dispute resolution is s. 281, and in particular s. 281(1), which provides that after a failed mediation only the insured person may refer the issues in dispute to the courts or an arbitrator under s. 282. The insurer had submitted that it should nevertheless have the right to bring a proceeding in court because otherwise its rights under ss. 37 and 40 of the SABS were unenforceable.
The court agreed with the insurer that both ss. 40(4) and 37(5) of the SABS – the former dealing with the binding nature of a CAT DAC and the latter with