Neutral Citation: 2009 ONFSCDRS 150

FSCO A08-002038

BETWEEN:

RAHEEL AHMED Applicant

and

ROYAL & SUNALLIANCE INSURANCE COMPANY OF CANADA Insurer

DECISION ON PRELIMINARY ISSUES

Before: Anne Sone

Heard: June 2 and 3, 2009, at the offices of the Financial Services Commission of Ontario in Toronto

Appearances: Owen Elliot for Mr. Ahmed Nestor E. Kostyniuk for Royal & SunAlliance Insurance Company of Canada

Issues:

When the Applicant, Mr. Ahmed was in a motor vehicle accident on February 8, 2007, he produced to the police officer who attended at the scene, a pink liability certificate for a 1993 Mazda. It referred to insurance with “Royal & Sun Ins. Co. Facility Mississauga, ON.”¹ Subsequently, Mr. Ahmed claimed statutory accident benefits for medical treatment, attendant care, housekeeping and home maintenance, and assessments from Royal & SunAlliance Insurance Company of Canada (hereinafter referred to as “Royal”), normally payable under the Schedule.² Royal denied coverage on the basis that the liability certificate did not refer to Royal, and that it was a fraudulent liability certificate. At mediation, Mr. Ahmed stated that he had obtained the liability certificate from an independent broker. The parties were unable to resolve their disputes through mediation, and Mr. Ahmed 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 issues are:

Does Royal & SunAlliance Insurance Company of Canada have any duty to adjust a claim based on a liability certificate put forward by a fraudster in this case?
Is Royal & SunAlliance Insurance Company of Canada obliged to respond to Mr. Ahmed’s Application for Accident Benefits?

Result:

Royal & SunAlliance Insurance Company of Canada does not have a duty to adjust a claim based on a Liability Certificate put forward by a fraudster in this case.
Royal & SunAlliance Insurance Company of Canada is not obliged to respond to Mr. Ahmed’s Application for Accident Benefits.

EVIDENCE AND ANALYSIS:

The Alleged Insurance Policy

Mr. Ahmed testified that he works in customer service for a credit card company. During his testimony, he appeared to be reasonably intelligent. Although he was living in Mississauga, he testified that he had gotten insurance from a “Sri Lankan guy”³ in Scarborough. In examination-in-chief, he could not remember exactly where this alleged broker was located; he stated that the broker was somewhere on Markham Road/Kennedy Road⁴ in Toronto. Mr. Ahmed testified that he went there only once in 2005. Upon cross-examination, he added that the broker’s office was south of the 401, that there was a grocery store right on the corner, and right beside it were stairs “you can go up”. He said that the office had two tables, two chairs and a little waiting room. He added that the name on the door was Despres Pacey Insurance Ltd.⁵

Ms. Salimah Haji, Accident Benefits Representative at Royal, testified that she called Despres Pacey Insurance Brokers Ltd.⁶ They advised her that they were located in northern Ontario near Kirkland Lake. They have never had offices in the Greater Toronto Area.

Originally, Mr. Ahmed told Ms. Haji that he paid the broker by VISA at the rate of $189 per month. When asked, he said he would look for the statements. Ultimately, he failed to provide copies of his VISA statements to verify these payments.⁷

During the hearing, Mr. Ahmed testified that in January 2005, he paid the broker for the alleged insurance by various money orders. He said he initially paid $200 for a service fee. At first Mr. Ahmed said that he gave the broker a second money order for the rest of the amount. He believed it was $1,000 something. Then he immediately changed his testimony and said that he gave him a money order for $500 and then a second money order for $500 plus some change. Mr. Ahmed provided no written record of these alleged transactions. On cross-examination, he said that he paid at Western Union (Money Mart) by debit card on his chequing account at TD Canada Trust. He testified that he got the money orders made out to cash, and never asked to whom they should be payable. He never produced any bank records to show the debit card payments. On cross-examination, he said the insurance cost $500 for four months or so.

After payment, he said the broker made up the slip. The second page of the photocopy filed as Exhibit 4 refers to Royal & Sun Ins. Co. Facility Mississauga, ON. It states that Ahmed Raheel was the insured and that he lived at a Mississauga address. It also states that the effective date of the insurance was December 15, 2005, and that the date of expiry was June 15, 2006.

Mr. Ahmed stated that when he renewed his insurance in the summer of 2005,⁸ the broker said it would cost approximately $180 to $190 per month. He said he went to the same location, paid the broker approximately $1,140 in cash, one month before the insurance expired, but did not ask for or receive a receipt.

From December 2005 to June 2006, Mr. Ahmed testified that he could not reach “the Sri Lankan guy,” so that he did not have any insurance from December 2005 to June 2006.⁹ Mr. Ahmed stated that he had a mechanic, who was a friend, (but he was not sure of his name). He told his friend that he was looking for someone to give him insurance at a good rate. The “friend” said, “Call this guy.” It turned out to be the same “Sri Lankan guy” at the same location, but with a different phone number. Mr. Ahmed testified that he received the same price, and again paid cash. He again did not receive a receipt.

Mr. Ahmed stated that he did not produce the second liability certificate he received because he did not know he had to bring it to the hearing. However, a photocopy of this liability certificate is the first page of Exhibit 4. It also refers to Royal & Sun Ins. Co. Facility Mississauga, ON. It states that Ahmed Raheel was the insured and that he lived at a Mississauga address. It also states that the effective date of the insurance was 23/08/2006, and that the date of expiry was 23/02/2007.

Ms. Carol Rodrigues, a Personal Lines Underwriter with Royal for 9 ½ years was contacted by the Claims Department to review the questionable pink liability slip, put forward by the Applicant. She made the following observations:

The company name was different from her company’s name.
The policy number of R30137925 was incorrect. If it was facility insurance in 2006, it should have started with RPV.
Mr. Raheel Ahmed was not in Royal’s system, either in the past or the present.
The certificate provided merely said “93 MAZDA.” It should show the year in full and also the model. (Not just MAZDA.)
The terms of the policy were on the right side of the slip. Normally Royal’s terms and conditions were on the back of the slip.

Ms. Rodrigues produced a sample Royal’s Liability Certficate.¹⁰

Ms. Rodrigues also provided similar reasons as to why Mr. Ahmed’s prior liability certificate (which stated it expired June 15, 2006) was not valid. She noted that the way the dates were typed did not match each other, and that it was not standard for there to be a gap in coverage.

Further, she indicated that a legitimate insured would get the following:

A copy of the policy.
A copy of the monthly billing statement.
A sheet of liability slips (five on a sheet).¹¹

Accordingly, for the above reasons, Ms. Rodrigues had concluded that Mr. Ahmed’s liability certificate for the time period during the accident was not legitimate and that there was no connection between Mr. Ahmed and Royal.

Mr. Ahmed testified that he thought he had valid insurance because when he was stopped for speeding tickets or renewed his licence plate, the liability slips he had were not questioned.

At first during cross-examination, Mr. Ahmed denied having insurance with Kingsway during 2005. He was forced to admit it when Royal produced a report showing that he had a vehicle insured with Kingsway in Mississauga during this time period. He claimed that he went looking for the “Sri Lankan” in Scarborough again because he only lived in Mississauga for a short period of time. He admitted that he got an envelope with the insurance particulars from Kingsway.

During cross-examination, Mr. Ahmed indicated that he had received a letter from Certas Direct Insurance Company (“Certas”) demanding payment for the property damage to the car which he hit in the accident.¹² Apparently Mr. Ahmed lost control of his vehicle on Highway 403, and collided with a 2002 Ford Windstar. He testified during cross-examination that he wanted somebody to cover damages in case he has to pay Certas.

After Mr. Ahmed made an Application for Accident Benefits to Royal, Ms. Haji determined that he was not insured with Royal. Two letters dated October 24, 2008 and January 20, 2009 from Kostyniuk & Greenside to Mazin Rooz Mazin asked Mr. Ahmed to provide proof of monthly VISA payments allegedly made to a fraudster posing as a broker. Mr. Ahmed never provided proof of these alleged VISA payments.

On April 12, 2007, Royal sent Mr. Ahmed a Notice to Applicant of Dispute Between Insurers.¹³

Mr. Ahmed stated that he was currently insured with State Farm, and that he paid them through a combination of debits and pre-authorized payments.

Legal Framework:

The first issue in this case is whether Royal has any duty to adjust a claim based on a liability certificate put forward by a fraudster. In Monochino v. Liberty Mutual Fire Insurance Company et. al., the Ontario Court of Appeal dealt with a fraud case involving facts somewhat similar to what Mr. Ahmed alleges had taken place here.¹⁴ In Monochino an independent insurance broker had collected premiums for a vehicle. He provided his client with a liability certificate naming AXA Home Insurance Company as the insurer; however, the broker had failed to insure the vehicle. Rather he had pocketed the premiums himself. Subsequently, the vehicle was in an accident. The Court stated that there was no record that AXA had represented to anyone that there was any relationship between the dishonest broker and itself (of even the limited relationship that did exist).¹⁵ As a result, the Court found that based on agency law, AXA was not bound by this contract.

The second issue in this case is whether Royal is obliged to respond to Mr. Ahmed’s Application for Accident Benefits. Subsection 268(1) of the Insurance Act sets out that every motor vehicle liability policy shall be deemed to provide for certain statutory accident benefits, as set out in the Schedule. Subsection 268(2) of the Insurance Act combined with subsections 268(4) and (5) establish priority rules for the payment of accident benefits.

Ontario Regulation 283/95 is entitled Disputes Between Insurers. At sections 1 and 2, it provides:

All disputes as to which insurer is required to pay benefits under section 268 of the Act shall be settled in accordance with this Regulation.

The first insurer that receives a completed application for 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 Act.

Section 2 of Regulation 283 is extremely important. It ensures that a person who is injured in a motor vehicle accident receives benefits as soon as possible. As a result, insurers cannot ordinarily avoid responding to a claim on the basis that another insurer is responsible.

There are numerous cases dealing with the obligation of the first insurer to receive an application for accident benefits to respond. Two of the leading cases are Allstate Insurance Company of Canada v. Brown¹⁶ and Ontario (Minister of Finance) v. Royal & SunAlliance Insurance Company of Canada.¹⁷ In these cases, along with many others, arbitrators and courts have developed and applied a “nexus” test for determining whether the first insurer to receive the application is obligated to respond. Essentially, if there is some nexus in the form of a connection¹⁸ between the person applying for the benefit and the insurer who receives the application, that insurer is obliged to adjust the file, pending the resolution of any priority dispute with another insurer. For example, in Brown, the Divisional Court interpreted this nexus to include cases where the insurance policy has expired.¹⁹

A five-person panel at the Ontario Court of Appeal looked at this issue in Kingsway General Insurance Co. v. Ontario (Minister of Finance).²⁰ Laskin, J.A. stated on behalf of the court that, “The nature of the nexus or connection required to trigger the insurer’s obligation under section 2 will vary from case to case.” He also goes on to say that he was inclined to agree with Arbitrator Jones in Royal & SunAlliance, that “[o]nly in the most extreme cases, where the connection with the insurer is totally arbitrary should the insurer refuse to pay”.

First Issue – Does Royal & SunAlliance Insurance Company of Canada have any duty to adjust a claim based on a liability certificate put forward by a fraudster in this case?

Discussion and Conclusion:

Based on Ms. Rodrigues’ experience and her overwhelming evidence, there is no question that the liability certificate put forward by Mr. Ahmed is a fraud. It does not even contain Royal’s name.

Further, Royal never held itself out as giving Mr. Ahmed’s “phantom agent” authority. In fact, it was never aware of his claim until after the accident. Based on Monochino, above, Royal never represented itself as having an agency relationship with Mr. Ahmed’s alleged broker.

Accordingly, I find that under these circumstances that Royal does not have duty to adjust a claim put forward by a fraudster who may have been posing as a broker.

Second Issue - Is Royal & SunAlliance Insurance Company of Canada obliged to respond to Mr. Ahmed’s Application for Accident Benefits?

Discussion and Conclusion:

There are valid policy reasons for regulations which force insurers to respond quickly, and in appropriate cases pay statutory accident benefits, even if ultimately they are not found to be the priority insurer.²¹ Based on the case law, only in the most extreme cases, where the connection with the insurer is totally arbitrary, should an insurer refuse to pay. In my view, this is one of those extreme cases. As Royal stated in its submissions, the situation here is akin to pulling a name of an insurer out of a hat.

Firstly, the photocopies of liability certificates are the only documentary evidence that Mr. Ahmed has provided of his alleged connection with Royal. However, the name on the liability certificates is not Royal & SunAlliance Insurance Company of Canada. Rather it is Royal & Sun Ins. Co. Facility, Mississauga ON. Certainly the words “Royal” and an “&” are in both, but otherwise the name is not the same. In addition, the best evidence that Mr. Ahmed was able to come up with were photocopies. Further, these photocopies were not of authentic Royal forms and the policy number R30137925 does not exist with Royal. In view of my overall opinion of Mr. Ahmed’s credibility, I do not place much, if any, weight on them. Based on the sloppiness of the certificate, especially for something as important as the insurer’s name, I find that the choice of name was entirely random or totally arbitrary. Accordingly, on their own, I do not find these certificates establish a nexus or connection between Royal and Mr. Ahmed.

I had a great deal of difficulty with the credibility of much of Mr. Ahmed’s evidence. He insisted that he was the innocent victim of a fraud. This was simply not believable. There was approximately two and one-half years between the date of the accident and the hearing, so he had ample time to verify facts and obtain documents. For the most part, he did not do so. Key elements of his testimony were vague, evasive, inconsistent and contradictory. For example:

Aside from two photocopies of bogus liability certificates in the name of a non-existent company, he had nothing to support his contention that he thought he was insured.
He testified that he did not have insurance with any other companies, but on cross-examination admitted that he did have insurance with Kingsway in Mississauga and State Farm for other vehicles. Not only is the contradictory evidence relevant, it also proves that he was aware of insurance company procedures, such as sending out policies and monthly statements. (He never received a policy with respect to his so-called insurance with Royal.)
He went to see his alleged broker a number of times, but testified that he did not know the broker’s name²², address or even general location. (Markham Road/Kennedy Road in Scarborough, south of the 401, near a grocery store.) The generic description he gave of the so-called broker’s office was not helpful or persuasive.
He did not explain why he would go to Scarborough for car insurance, when he was living in Mississauga and had already obtained car insurance for another vehicle with Kingsway in Mississauga.
Especially troubling were Mr. Ahmed’s changing stories of how and how much he paid the so-called broker. Mr. Ahmed initially told Royal that he paid for the insurance with monthly payments of $189 on his VISA account. When Royal asked for copies of his VISA statements, he stated that he only made payments with money orders and cash. He suddenly had no record (or proof) of these payments.
Although he said various friends, acquaintances and his mechanic told him about the “Sri Lankan guy,” none of these people testified to corroborate his story. In fact, he was extremely reluctant to provide even their names, and it appeared that they had all left Canada.
He stated that he had the business card of the “Sri Lankan,” the originals of the first and second liability certificates he received from the “Sri Lankan” and other documents from the “Sri Lankan.” Mr. Ahmed testified that he had lost each and every one of these documents.

As a result of all these suspicious circumstances, I cannot give any weight to Mr. Ahmed’s testimony.

I have already found that Mr. Ahmed did not have a legitimate insurance policy with Royal.

I next must determine whether there was a sufficient nexus between Mr. Ahmed and Royal, to give rise to an obligation on the part of Royal to respond. In other words, did Mr. Ahmed have reasonable grounds to believe that he was insured with Royal?

Mr. Ahmed’s failure to prove the existence of his “phantom broker” and his inability to prove that he had actually paid anything for insurance coupled with his complete lack of credibility lead me to conclude that no reasonable person objectively would believe Mr. Ahmed had a policy with Royal.

Did Mr. Ahmed subjectively believe that he had insurance with Royal? During the hearing, Mr. Ahmed insisted that he thought he was insured with Royal.²³ He stated that since he was able to use the pink liability certificate to renew his driver’s licence or when stopped by the police, he assumed that he had valid insurance. However, the vagueness and inconsistencies of his testimony, as set out in more detail above, especially regarding the “phantom broker” and how he paid him were simply not credible. His complete failure to corroborate any of his assertions was also very telling. During cross-examination, he admitted that he had had insurance with other insurers. As a result, he would know that he should have received a policy, a monthly statement as well as a sheet of pink liability certificates. Accordingly, I find that Mr. Ahmed did not persuade me that he actually believed that he was insured with Royal.

In my view this finding distinguishes this case from situations where applicants do genuinely believe (and have grounds to believe) that they are insured with a particular insurer. For example, where they are victims of a fraud perpetrated by an otherwise genuine and verifiable broker.

The onus is on Mr. Ahmed to establish a credible nexus or connection with Royal. As the above-noted cases have indicated, the standard is not an onerous one. Even an expired policy might have sufficed. Based on the lack of credibility of his testimony, the absence of corroborating witnesses and the dearth of documentary evidence²⁴, there is overwhelming evidence that the Applicant knew or ought to have known that he did not have coverage with his purported insurer. I find that Mr. Ahmed has failed to establish objectively or subjectively, a nexus or connection with Royal. Accordingly, Royal is not obliged to respond to Mr. Ahmed’s Application for Accident Benefits.

EXPENSES:

I exercise my discretion to award Royal its expenses incurred in this preliminary issue hearing. Should the parties not agree on the amount, either party may request that the question of expenses be dealt with in accordance with Rule 79 of the Dispute Resolution Practice Code.

November 4, 2009

Anne Sone Arbitrator

Date

Financial Services Commission of Ontario / Commission des services financiers de l’Ontario