Aviva Insurance Company of Canada v. Abrams, 2009 ONFSCDRS 86

Financial Services Commission of Ontario

Commission des services financiers de l’Ontario

Neutral Citation: 2009 ONFSCDRS 86

Appeal P08-00027 and P08-00028

AVIVA INSURANCE COMPANY OF CANADA (FORMERLY PILOT INSURANCE COMPANY)

Appellant

and

Respondents

BEFORE:

Delegate Lawrence Blackman

REPRESENTATIVES:

Mr. James M. Brown and Ms. Susan Bromley for the Appellant Mr. Chris Clifford for the Respondents

HEARING DATE:

March 31, 2009 Subsequent written submissions were received by May 29, 2009

Under section 283 of the Insurance Act, R.S.O. 1990, c.I.8, as amended, it is ordered that:

Paragraphs 1 and 2 of the Arbitrator’s June 23, 2008 Order and Results #2, #3 and #4 on page 3 of the Arbitrator’s June 23, 2008 decision are rescinded.
The issue of the Respondents’ entitlement to interest pursuant to section 46 of the Schedule is remitted to arbitration for a new hearing.
If the parties are unable to agree on the legal expenses of these two appeals, an expense hearing may be arranged in accordance with Rule 79 of the Dispute Resolution Practice Code (Fourth Edition, Updated – October 2003).

June 26, 2009

Lawrence Blackman Director’s Delegate

Date

I. BACKGROUND

Mr. Carl Gibson was killed in a motor vehicle accident on October 15, 2003.

As a result, Ms. Patricia Abrams (with whom the deceased was residing at the time of his death) applied in April 2004 to her first party automobile insurer, Aviva Insurance Company of Canada, formerly Pilot Insurance Company (the “Appellant”), for a spousal death benefit under paragraph 25(2)(1) of the Schedule.¹ In February 2005, Ms. Abrams’ then minor children, Courtney and Joshua Abrams (the “Respondents”), applied to the Appellant for dependant death benefits pursuant to paragraph 25(2)(2) of the Schedule.

The Appellant denied these claims on the basis that Patricia Abrams did not meet the definition of “spouse” under subsection 224(1) of the Insurance Act, R.S.O. 1990, c. I.8, Ms. Abrams having advised the Appellant that she had resided with the deceased only since May 2001, which was less than the statutory three year requirement. The Appellant also took the position that there was no evidence that the Respondents were primarily dependent upon the deceased for financial support or care.

On August 9, 2007, the Honourable Justice Power of the Superior Court of Justice determined that Patricia Abrams was the spouse of the deceased and ordered the spousal death benefit (paid into court by the Appellant) be paid to Ms. Abrams. The motion record before the court included, amongst other supporting evidence, Patricia Abrams’ affidavit that, confused with grief, she had given the Appellant incorrect information and had actually been living with the deceased since May 2000.

The Appellant states that:

Following the determination that [Patricia] Abrams was in fact the spouse of [Carl] Gibson, Aviva paid dependant death benefits to both Courtney and Joshua. Although the benefits themselves had been paid, the three arbitrations continued on the issues of interest and costs.

This matter thus came before Arbitrator Ashby (the “Arbitrator”) by way of written submissions to determine whether Patricia Abrams and the Respondents were entitled to (1) interest for overdue payments of death benefits and (2) their legal expenses of the arbitration.

The Arbitrator’s June 23, 2008 decision held that Patricia Abrams was not entitled to an award of interest on the basis the Appellant could not establish Ms. Abrams’ entitlement to the death benefit until she amended her initial, incorrect statement. The Arbitrator relied on Bajic and Pafco Insurance Company Limited and Zurich Insurance Company, (FSCO P00-00050, June 5, 2001) that, in the Arbitrator’s words, “interest does not accrue where the actions of the insured person prevents the insurer from determining entitlement.”

The Arbitrator found that the Respondents were entitled to interest under subsection 46(2) of the Schedule on the overdue payment of dependant death benefits starting thirty days after the Appellant’s receipt of their application for benefits. The Arbitrator, stating that the term “dependant” was not defined in the Schedule, found that the Appellant had clear and convincing evidence by December 1, 2006 that the Respondents were dependants of the deceased.

The Arbitrator further ordered that the Appellant pay Patricia Abrams and the Respondents their legal costs, fixed at $8,915.

The Arbitrator, while acknowledging that neither Respondent had sought a special award under subsection 282(10) of the Insurance Act, held that her findings respecting the Respondents’ dependency on the deceased raised a prima facie case that the Appellant “may have unreasonably delayed payment of the dependant death benefits.” The Arbitrator stated that a hearing would be convened, in a manner and at a date to be determined, to address the Respondents’ entitlement to a special award.

The July 21, 2008 Notices of Appeals herein sought: (1) leave to appeal; (2) leave to introduce fresh evidence; (3) a stay of certain arbitration orders; (4) an order that the Arbitrator’s June 23, 2008 interest orders respecting the Respondents be set aside and replaced with an order that the dependant death benefits were only payable as of 30 days of the August 9, 2007 order of the Superior Court of Justice (rather than 30 days following February 4, 2005); (5) revocation of the June 23, 2008 order for a special award hearing; and (6) its legal expenses of these appeals.

The Appellant did not appeal the Arbitrator’s award of legal expenses.

My September 18, 2008 preliminary issue decision ordered, in part, that:

These two appeals were combined.
The appeals of the Arbitrator’s June 23, 2008 decision could proceed.
The Arbitrator’s interest awards to the Respondents and her order regarding a special award hearing were stayed pursuant to subsection 283(6) of the Insurance Act.
The requests for fresh evidence in these appeals were denied.
The issue of the legal expenses of the preliminary issue decision was deferred to the main appeal hearing.

II. ANALYSIS

When these Applications for Arbitration were filed, the Respondents were minors. Accordingly, Patricia Abrams signed, for each child, the Commission’s Form P, noting that she was filing the applications on their behalf. The Respondents are now of age, Courtney Abrams having been born on March 7, 1989 and Joshua Abrams on August 7, 1990. On the consent of all parties, the title of proceeding is amended accordingly.

Subsection 41(1) of the Schedule provides, in part, that if a person is entitled to a death benefit, the insurer shall pay the benefit within 30 days after it receives the application for the benefit.

Section 46 of the Schedule provides that:

(1) An amount payable in respect of a benefit is overdue if the insurer fails to pay the benefit within the time required under this Part.

(2) If payment of a benefit under this Regulation is overdue, the insurer shall pay interest on the overdue amount for each day the amount is overdue from the date the amount became overdue at the rate of 2 per cent per month compounded monthly.

The Ontario Court of Appeal has confirmed, in Sorokin v. Wawanesa Mutual Insurance Company, 2009 ONCA 152, that the clear policy intent of section 46 is compensatory.

The Respondents submit that there is a narrow line of cases, embodied in the reasoning in Bajic, that allows an insurer relief from the mandatory interest entitlement provision under the Schedule if the insured person acted in a manner that effectively prevented the insurer from assessing their entitlement. This is not disputed for the purposes of these appeals.

The parties agree that the Arbitrator erred in law in finding that the Respondents were directly dependent on the late Carl Gibson. The parties do not fully agree as to what follows from that error of law.

I agree, for the following reasons, that the Arbitrator erred in law in finding the Respondents directly dependent on the late Carl Gibson:

(a) The Arbitrator found that the term “dependant” was not defined, when it is defined in subsection 2(6) of the Schedule, as follows:

For the purpose of this Regulation, a person is a dependant of another person if the person is principally dependent for financial support or care on the other person or the other person’s spouse.

(b) The Arbitrator failed to apply the correct definition of “dependant.” The Arbitrator’s decision refers to documentation the Appellant received in December 2006 establishing a relationship between the deceased and the Respondents and the deceased having an active part in the Respondents’ upbringing. As well, the Arbitrator accepted the statement of a friend of Patricia Abrams that the deceased had provided for Patricia Abrams and the Respondents, the extent or measure of which are unstated. Such evidence is insufficient to establish the requisite principal dependency for financial support or care.

(c) In any event, the parties had agreed, prior to the arbitration hearing, that neither Respondent was directly dependent on the deceased, the Respondents having conceded that there was insufficient evidence for such a finding. The parties further agree that the issue of direct dependency on the deceased was not advanced by either party and was not before the Arbitrator.

(d) Rather, the parties agree that the Respondents:

were primarily dependent for financial support or care on Patricia Abrams;
at the time of the accident, Patricia Abrams was the spouse, as defined in Part VI of the Insurance Act, of the late Carl Gibson;
the Respondents were dependants of the deceased pursuant to subsection 2(6) of the Schedule in that they were primarily dependent on the deceased’s spouse, Patricia Abrams;
the Respondents were each entitled to a dependency death benefit of $10,000 only as a result of their being dependants of the deceased’s spouse, Patricia Abrams, in accordance with paragraph 25(2)(2) of the Schedule; and,
the Appellant paid $10,000 to each Respondent pursuant to paragraph 25(2)(2) of the Schedule.

(e) The Respondents acknowledge the decision in Lombardi and State Farm Mutual Automobile Insurance Company, (FSCO P01-00022, February 26, 2003) that states that errors of law can include findings of fact made in the complete absence of supporting evidence, made on the basis of conjecture or made on the basis of a misapprehension of the evidence caused by misdirection on a legal principle.

(f) In this case, based on a misdirection on a legal principle, there was a misapprehension of the evidence and an implicit inconsistent finding that while the Appellant had insufficient information that Patricia Abrams was the deceased’s spouse until served in August 2007 with Patricia Abrams’ affidavit, the Appellant had sufficient information in February 2005 to establish the Respondents’ dependency on the deceased based on Patricia Abrams’ status as spouse.

The question then becomes, what follows this error of law?

The Arbitrator based her finding of a prima facie basis for a special award on her finding of direct dependency. The parties agree that the latter was an error of law. On the consent of both parties, and in accordance with subsection 283(5) of the Insurance Act, I rescind the Arbitrator’s order that a hearing should proceed on the issue as to the Respondents’ entitlement to a special award.

If interest flows automatically unless the Bajic exception is established, and the exception in Bajic was not established regarding the Respondents, then the result regarding the Respondents’ entitlement to interest would be the same.

The Appellant submits that the Arbitrator found that the Appellant could rely on the Bajic exception regarding Patricia Abrams, her actions preventing the Appellant from determining entitlement. The Appellant submits that as Ms. Abrams applied for dependant death benefits on behalf of both Respondents:

… As with any other agency relationship, [the Respondents] are bound by the actions of their agent. Since Abrams’ failure to correct her earlier error brought her own claim within the confines of the Bajic decision … this failure similarly brings the claims of [the Respondents] within the confines of that decision.

Therefore:

The dependant death benefits did not become payable until 30 days after the Superior Court of Justice determined that Abrams was a spouse, thereby making [the Respondents] dependent upon a spouse.

The Respondents argue that regarding the Bajic exception they, themselves, are the insured persons whose conduct is to be considered. The issue regarding their interest claim is whether they, not their mother, acted in a manner that prevented the Appellant from assessing their entitlement, thus triggering the Bajic exception to the Schedule’s mandatory interest provision.

The Respondents submit that they did not act in any way to prevent the Appellant from assessing their entitlement, that it was not their conduct that effectively prevented the Appellant from determining whether Patricia Abrams was the spouse of the late Carl Gibson and, hence, prevented the Appellant from determining their own entitlement to dependency death benefits. The Respondents state that their own Application for Benefits was completed and submitted not by Patricia Abrams, but rather by counsel on February 4, 2005. Although Patricia Abrams was their mother, they submit she did not represent them or act as their agent at any relevant time.

The Respondents concede that no specific submissions were made at arbitration distinguishing Patricia Abrams’ conduct from their own. The Respondents, however, argue that the Arbitrator did take their conduct into consideration, noting the Arbitrator’s conclusions that the Appellant received sufficient information regarding the Respondents’ application for death benefits in February 2005, and that additional statements received by the Appellant in December 2006 were even more sufficient.

The Respondents argue that these findings of fact are not appealable and confirm that the Respondents’ conduct respecting the application process was more than sufficient to avoid the narrow exception in Bajic regarding mandatory interest.

To thus attribute Patricia Abrams’ one instance of mistaken evidence, under sad and difficult circumstances in an earlier, separate proceeding to the then minor Respondents and to ignore the evidence of numerous witness statements to the contrary is, it is argued, to expand the Bajic exception beyond recognition. Accordingly, the Arbitrator’s decision respecting payment of interest should stand.

The Appellant, however, submits that throughout arbitration the parties understood that the Respondents’ claims were contingent on Patricia Abrams’ claim. At no time was it suggested that the Respondents’ claims were distinct, as the Respondents’ written arbitration submissions either did not differentiate between themselves and Patricia Abrams or implied that their claims for interest were as contingent on their mother as were their claims for dependency.

It is only in the context of this appeal that, for the first time, the Respondents suggest that their interest claims are distinct from that of Patricia Abrams. The Respondents, having chosen not to raise this issue at first instance, should be held to that choice. In this regard, the Appellant cites R. v. Vidulich, 1989 CanLII 231 (BC CA), [1989] B.C.J. No. 1124 (B.C.C.A.) that:

… it is only in those exceptional cases where balancing the interests of justice to all parties leads to the conclusion that an injustice has been done, that a new ground is likely to be permitted to be raised on appeal. Such a new ground is more likely to be permitted where it raises an issue of law alone than where it requires the leading of evidence either in the appeal court or at a new trial …

The Appellant further cites the Saskatchewan Court of Appeal in Farr-Mor Fertilizer Services Ltd. v. Hawkeye Tanks & Equipment Inc., [2002] S.J. No. 204, that:

The general rule against raising an entirely new argument for the first time on appeal applies as much to an appellant as to a respondent. Although the rule is not absolute, it is essential that all interested parties have an adequate opportunity to prepare submissions, and consider what evidence should be placed before the trial court. In this case, the respondent had no such opportunity and correctly points out that this Court is being asked to pass upon an issue without the necessary evidentiary underpinning.

The Appellant, citing 767269 Ontario Ltd. v. Ontario Energy Savings L.P., [2008] O.J. No. 1711, submits that the onus is on the party seeking to raise an issue on appeal.

The Appellant submits that no further findings of fact are necessary in this case and that everything is before me to resolve this matter, that is to say, that “this appeal should be decided upon the same basis that this case has always been advanced – namely that the Respondents’ claims are contingent upon the claim of Ms. Abrams, even for the purposes of interest.”

The Respondents argue, in an alternative submission, that the least prejudicial and most efficient remedy is to submit the Arbitrator’s decision to her for expansion and clarification, in accordance with Rule 65.6 of the Dispute Resolution Practice Code (Fourth Edition, Updated – October 2003) (the “Code”), that an adjudicator may at any time clarify a decision or an order that contains a misstatement, ambiguity or other similar error. This is especially so under the principle of parens patriae that minors, as the Respondents were in arbitration, be protected.

I do not agree with the Respondents’ submission that the Arbitrator considered the issue of their separate conduct. The Arbitrator’s comments noted above went to establishing direct dependency on the deceased, not to addressing the Bajic exception. Nor am I persuaded that the issues, as now argued, come under Rule 65.6 of the Code.

In this case, whatever the intent of the parties may have been at arbitration as to whether Patricia Abrams’ actions applied equally to the Respondents, the Arbitrator is silent in this regard as to any findings of fact or determinations of law.

Specifically, the Arbitrator is silent regarding: (1) any discussion of agency and whether, as a fact, Patricia Abrams was the Respondents’ agent such that the Respondents were bound by her actions; (2) whether, as fact and law, the Respondents were otherwise bound by Patricia Abrams’ actions; or (3) whether the Respondents’ own actions prevented the Appellant from determining entitlement such that the Bajic exception applied directly to them.

Even if there was explicit agreement between the parties in their written submissions as to the law (and the Appellant argues that such agreement is implied while the Arbitrator is silent in this regard), Vidulich states that “[o]f course, no court can be required to apply a legislative provision on the basis of an interpretation that it believes to be incorrect …”

Efficiency and cost effectiveness favour an immediate determination of this question. However, outweighing these considerations in this case are the need for specific findings of fact, the jurisdictional limitation of appeals to errors of law (and not making, in this case, certain fundamental findings of fact), fairness in allowing the parties an adequate opportunity to prepare submissions and the need to preserve the parties’ right of internal appeal within the Commission’s dispute resolution system.

I am, thus, persuaded that the appropriate consequence of finding that the Arbitrator erred in law is to also rescind her orders regarding the Respondents’ entitlement to interest and to return these issues to arbitration. A resumed arbitration pre-hearing should, amongst other things, narrow and confirm the precise outstanding issues as well as the quickest, most efficient and cost-effective means of determining same. No adjudicator is seized with this new hearing.

III. EXPENSES

I sincerely thank counsel for their assistance, forthrightness and efforts to narrow the issues in dispute wherever possible.

The parties agreed to defer the issue of the legal expenses of these appeals to the release of this decision. If the parties are unable to agree on these expenses, a resolution of this issue may be arranged in accordance with Rule 79 of the Code.

June 26, 2009

Lawrence Blackman Director’s Delegate

Date

Footnotes

The Statutory Accident Benefits Schedule — Accidents on or after November 1, 1996, Ontario Regulation 403/96, as amended.