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

Neutral Citation: 2009 ONFSCDRS 93

FSCO A07-002065

BETWEEN:

ALEX D'ETTORRE

Applicant

and

COACHMAN INSURANCE COMPANY

Insurer

DECISION ON A PRELIMINARY ISSUE

Before: John Wilson

Heard: April 22, 2009, by teleconference

Appearances: Chantal Brochu for Mr. D’Ettorre Stanley C. Tessis for Coachman Insurance Company

Issues:

The Applicant, Alex D’Ettorre, was injured in a motor vehicle accident on November 7, 2001, when his pickup truck collided with a loaded, timber-hauling tractor-trailer on a remote timber road. It appears that the accident was caused when the driver of the tractor-trailer lost control of his vehicle and jackknifed.

Mr. D’Ettorre applied for and received statutory accident benefits from Coachman Insurance Company (“Coachman”), payable under the Schedule.¹ Coachman, however, ceased payment of his income replacement benefits effective October 21, 2005.

The parties were unable to resolve their disputes through mediation, and Mr. D’Ettorre applied for arbitration at the Financial Services Commission of Ontario under the Insurance Act, R.S.O. 1990, c.I.8, as amended. This arbitration has continued, in the name of Mr. D’Ettorre, but in the interest of Nordic, the tort insurer.

Issue:

1. Is Nordic Insurance precluded from proceeding to arbitration with Mr. D’Ettorre’s claim because of the provisions of section 65(1) of the Schedule?

Result:

1. Nordic is not precluded from proceeding with this claim in the name of Mr. D’Ettorre.

EVIDENCE AND ANALYSIS:

Although Mr. D’Ettorre is the nominal applicant in this matter, this is a dispute between two different insurance companies. Unlike the more common priority disputes between two different potential accident benefit insurers, this dispute involves the interaction of tort and accident benefit insurers in the context of a settlement.

To provide some context, it is important to note the circumstances giving rise to this dispute. As noted at the outset of this decision, there is no dispute that Mr. D’Ettorre was involved in a motor vehicle accident, and that he suffered serious injuries as a result.

Mr. D’Ettorre made a claim for accident benefits from his first-party (accident benefits) insurer, the Coachman Insurance Company. Coachman however ceased payment of his income replacement benefits effective October 21, 2005 due to the completion of a re-training programme. It was Coachman’s position at that time that Mr. D’Ettorre did not meet the post 104-week entitlement to ongoing benefits (any occupation) test.

The compensation system in place in Ontario for the victims of motor vehicle accidents is of a hybrid nature. On one hand there are accident benefits which are provided for in every policy of motor vehicle insurance, and which do not depend on a finding of fault. Otherwise, the traditional system of tort compensation in which a wrongdoer (or his or her insurer) compensates the accident victim in the context of a finding of fault.

Of the two systems, the accident benefit scheme embodied in the Schedule is potentially much less comprehensive since it is subject to specific monetary limitations on payments under such headings as in the case of income replacement benefits, and time restrictions as in housekeeping and medical expenses. The accident benefit system as well does not directly address such issues as future payments, and loss of opportunity, not to mention punitive damages. Certain named benefits however, such as direct medical expenses, must be claimed in the context of the accident benefit scheme.

The scheme of the Act is supposed to encourage the prompt resolution of disputes over statutory benefits. Lane J. in Belair Insurance Co. v. McMichael citing Kennelly v. Wawanesa Mutual Insurance Co., noted “the statutory goal of prompt payment for necessary services.”²

As a result, it is quite common for accident victims to make an immediate claim for accident benefits from their own, first party insurer, as well as a claim for damages arising from the accident from an at-fault party. In a mandatory automobile insurance environment, the at-fault party’s interests are usually represented by his or her insurer.

In this matter, Mr. D’Ettorre had received benefits from Coachman, his own insurer, and was claiming damages from Joel Turgeon and Regis Pierre who operated the truck in question under the name of Regis St. Pierre Trucking. The Nordic Insurance Company was the insurer for the truck, and was hence involved in both the defence of the action, and in subsequent attempts to settle the matter in its entirety.

Following discussions between counsel for Mr. D’Ettorre and the defendants in the tort action, the tort claim was settled, and minutes of settlement signed on August 22, 2008. A consent order was obtained on motion before the Superior Court in Thunder Bay on September 5, 2008. The order of the court approved the settlement of the infant plaintiff, Lacy D’Ettorre, and reiterated the terms of the minutes of settlement between Mr. D’Ettorre and Nordic.

At paragraph 6 of the judgement D.C. Shaw J. ordered:

THIS COURT ORDERS AND ADJUDGES that all of the Plaintiff’s rights in respect of any and all past, present and future payments the releasors were, may have been or may become entitled to as of and/or after September 1, 2008 for claims under the Statutory Accident Benefits Schedule − Accidents On or After November 1, 1996 including but not limited to claims for income replacement benefits, non-earner benefits, caregiver benefits, medical benefits, rehabilitation benefits, attendant care benefits, case manager services, payment of other expenses, death benefits, funeral benefits, interest, special award, punitive or aggravated damages or any other benefit or claim whatsoever under or in connection with Coachman Insurance Company policy no. 87420 arising out of the motor vehicle accident of November 7, 2001 are assigned to The Nordic Insurance Company of Canada.

Such a provision is not at all unusual. As Master Sandler observed:

…counsel agree that the tortfeasor (and his insurer) cannot sue the plaintiff 's no-fault insurer to recover the no-fault benefits that are available to, but have not been paid to, the plaintiff, unless the injured plaintiff assigns his contractual rights to so sue his own insurer, to the tortfeasor or his insurer. In other words, there is no cause of action, whether in tort or contract or under a statute, by the tortfeasor's insurer directly against the plaintiff 's no-fault insurer. I am informed that frequently the plaintiff, as a term of settling his or her claim with the tortfeasor's insurer, will execute such an assignment.³

Mr. D’Ettorre has by all appearances carried out his side of the bargain with Nordic. He has brought forward his claims against Coachman for ongoing accident benefits and, the claims not having been satisfied, he has proceeded to arbitration on those issues. Although, until the beginning of 2009, Mr. D’Ettorre was represented by his own lawyer, Mark Voell, Nordic later appointed its own counsel, Ms. Chantal Brochu, to represent him. Mr. D’Ettorre, however, has remained directly involved in the arbitration, and has been available for case conferences and pre-hearings.

From early on in the arbitration process, Coachman objected to this arbitration, principally on the basis of section 65 of the Schedule, which provides as follows:

65. (1) The assignment of a benefit under this Regulation, or the assignment of the right to pursue a mediation, arbitration, appeal or variation proceeding under sections 280 to 284 of the Act, is void. O. Reg. 281/03, s. 32 (1).

(2) Subsection (1) does not apply to,

(a) an assignment under section 267.8 of the Insurance Act;

(b) an assignment of a benefit to,

(i) the Ministry of Community, Family and Children’s Services,

(ii) a delivery agent under the Ontario Disability Support Program Act, 1997 or the Ontario Works Act, 1997, or

(iii) The Minister of Finance under subsection 6.1 (4) of the Motor Vehicle Accident Claims Act; or

(c) the assignment of a benefit to the Ministry of Health in respect of a service, benefit or entitlement provided under an Act the administration of which was transferred by order in council from the Ministry of Community and Social Services to the Ministry of Health. O. Reg. 403/96, s. 65 (2); O. Reg. 281/03, s. 32.

Section 267.8 referenced above provides for the assignment of future collateral benefits

Future collateral benefits

267.8 (9) A plaintiff who recovers damages for income loss, loss of earning capacity, expenses that have been or will be incurred for health care, or other pecuniary loss in an action for loss or damage from bodily injury or death arising directly or indirectly from the use or operation of an automobile shall hold the following amounts in trust:

1. All payments in respect of the incident that the plaintiff receives after the trial of the action for statutory accident benefits in respect of income loss or loss of earning capacity.

2. All payments in respect of the incident that the plaintiff receives after the trial of the action for income loss or loss of earning capacity under the laws of any jurisdiction or under an income continuation benefit plan.

3. All payments in respect of the incident that the plaintiff receives after the trial of the action under a sick leave plan arising by reason of the plaintiff’s occupation or employment.

4. All payments in respect of the incident that the plaintiff receives after the trial of the action for statutory accident benefits in respect of expenses for health care.

Assignment of future collateral benefits

(12) The court that heard and determined the action for loss or damage from bodily injury or death arising directly or indirectly from the use or operation of the automobile, on motion, may order that, subject to any conditions the court considers just,

(a) the plaintiff who recovered damages in the action assign to the defendants or the defendants’ insurers all rights in respect of all payments to which the plaintiff who recovered damages is entitled in respect of the incident after the trial of the action,

(i) for statutory accident benefits in respect of income loss or loss of earning capacity,

(ii) for income loss or loss of earning capacity under the laws of any jurisdiction or under an income continuation benefit plan,

(iii) under a sick leave plan arising by reason of the plaintiff’s occupation or employment,

(iv) for statutory accident benefits in respect of expenses for health care,

(v) under any medical, surgical, dental, hospitalization, rehabilitation or long-term care plan or law, and

(vi) for statutory accident benefits in respect of pecuniary loss, other than income loss, loss of earning capacity and expenses for health care; and

(b) the plaintiff who recovered damages in the action co-operate with the defendants or the defendants’ insurers in any claim or proceeding brought by the defendants or the defendants’ insurers in respect of a payment assigned pursuant to clause (a). 1996, c. 21, s. 29.

Even in the absence of an order as to assignment of a claim, the legislation anticipates that the accident victim will hold any payments in respect of certain accident benefits in trust for the party or the insurer who has paid out future claims. The trust provisions contemplate that “a plaintiff who holds money in trust under subsection (9) shall pay the money to the persons from whom damages were recovered in the action, in the proportions that those persons paid the damages.” (s.267.8(10))

Although D.C. Shaw J.’s order dismissing the tort claim states that the accident benefit claims “are assigned to The Nordic Insurance Company of Canada”, Coachman does not accept the validity of that order in the context of overcoming the ban on assignment contained in section 65 of the Schedule.

The law relating to the assignment of insurance benefits, including statutory accident benefits, is a complex mix of statute, regulation and common law.

Not only is the wording of section 65 of the Schedule which offers a blanket ban on assignment of accident benefits problematic for Mr. D’Ettorre and Nordic, but there are overlapping provisions in the Insurance Act itself which interact with the common law, and the provisions of the Schedule.

Notwithstanding the order of D.C. Shaw J., the transfer of benefits from Mr. D’Ettorre to Nordic has to traverse a minefield of obstacles before it can be accepted at face value.

The interest of Nordic in advancing Mr. D’Ettorre’s claim could well be interpreted as an assignment of a bare cause of action against Coachman. Such assignments have been deemed by the courts over the years to be undesirable.⁴

This rule, based on the public policy against maintenance, champerty, or otherwise trafficking in litigation for the purpose of profit⁵, may be summarized as providing that, as a general rule, an assignment of a chose in action in tort is invalid.⁶

However, as McLachlin J.A. summarized in Frederickson (2):

However, the Courts of Equity generally speaking did recognize and enforce such assignments. This recognition was adopted in 1873 in the Judicature Act and today our courts uphold assignments which the Court of Equity would have previously enforced. Today there are six categories of contracts which are considered to be unassignable. They⁷ are:

1. Contracts which expressly by their terms exclude assignment;

2. Mere rights of action (assignments savouring of maintenance and champerty);

3 Contracts which by their assignment throw uncontemplated burdens on the debtor;

4. Personal contracts;

5. Assignments void by public policy (public officers' wages or salary and alimony or maintenance agreements); and

6. Assignments prohibited by statutory provisions.

A distinction may be drawn, however, between the assignment of a contract and the assignment of a cause of action for damages arising out of an executed contract. Some cases suggest that if a contract is not assignable, a cause of action arising out of it is similarly not assignable: Cohen v. Webber (1911), 24 O.L.R. 171 at p. 173 (Ont. C.A.); Brown and Owen v. Hall (1956), 1956 CanLII 402 (ON CA), 6 D.L.R. 460 at p. 464 (Ont. C.A.). However, the rationale which supports the non-assignability of personal contracts does not apply to causes of action for damages, when all that remains is the payment of money, since the assignment of a cause of action does not confer on the assignee the right to have services performed by the party who contracted with the assignor. This suggests that the fact that a personal contract cannot be assigned should not preclude assignment of a cause of action for damages based on a breach of that contract.

Although based on a legislative scheme embodied in a regulation, entitlement to accident benefits is deemed to form part of every automobile insurance contract in Ontario. Consequently, although Nordic is the insurer of the tortfeasor in this matter, the rights being “assigned” to it by Mr. D’Ettorre are contractual and, subject to the legislation, may be assignable provided Nordic had an interest in the proceedings beyond the mere assignment.

SUBROGATION

Another aspect of this transaction is that, notwithstanding the use of the words “assign” in both the settlement agreement and the confirming order, it could also be characterized as subrogation.

Although there are conceptual similarities between assignment and subrogation, there are also important differences. While Black’s⁸ defines “assignment” as “the transfer of rights or property,” the definition of “subrogation” is more subtle:

The substitution of one party for another whose debt the party pays, entitling the paying party to rights, remedies, or securities that would otherwise belong to the debtor.

Indeed, there are indicia of subrogation⁹ in the manner in which this arbitration is proceeding. The claim remains in the name of Mr. D’Ettorre¹⁰, and not Nordic. In spite of the broadly defined words of the settlement agreement, the claim in the accident benefit arbitration appears to be restricted to those issues initially raised by Mr. D’Ettorre, issues that were apparently addressed through compensation in his global settlement with Nordic.

Unlike the more generalized assignment, subrogation entitles the paying party to pursue a claim, only to the extent that the paying party has compensated the claimant.

Professor Barbara Billingsley, in an article in the Alberta Law Review,¹¹ defined the operation of subrogation as follows:

In exchange for providing this upfront compensation, the insurer gains the equitable right to subrogate against the wrongdoer -- that is, to step into the shoes of the insured and to sue the wrongdoer in order to recover some or all of the money paid out by the insurer to the insured. As part of the overall system of indemnity insurance, subrogation is therefore relied upon as the key to ensuring justice for all: the insured receives prompt compensation under the policy without the expense of suing the wrongdoer; the insured is prevented from simultaneously recovering from the insurance company and the wrongdoer and thereby double-recovering for the loss.¹²

The general rule in the Insurance Act is that subrogation is available to insurers¹³ who make a payment or accept liability. Section 278(1) of the Act reads as follows:

278(1) Subrogation -- An insurer who makes any payment or assumes liability therefor under a contract is subrogated to all rights of recovery of the insured against any person and may bring action in the name of the insured to enforce those rights.

In Markham,¹⁴ Farley J. relied on the equitable principle of subrogation, which is reflected in section 278(1) to find that other insurance companies who had paid accident benefits that should have been paid by Markham Insurance, were entitled by way of subrogation to claim those benefits against the estate of the bankrupt insurer.

Although Markham arose out of the insurer’s bankruptcy, the issue in question was the right of a party, a stranger to the insurance contract, to claim back against Markham for accident benefits paid to policyholders. According to Farley J., subrogation applied.

Ferguson J. however is of the opinion that the rule for accident benefits is different:

She claims this unrestricted right applies to claims by automobile insurers to recover statutory accident benefits. This argument has no merit. What she overlooks is that under s. 274(2) the payment of the statutory accident benefits effects a release by the insured of any claim to the extent of the claim. An insurer can only sue for rights enforceable by the insured and the insured has no right to sue for these claims. A section similar to the current s. 274(2) has been part of the Insurance Act for many years, e.g. see s. 274 of the Insurance Act, R.S.O. 1990, c. I.8. This elimination of the right to subrogate for recovery of payments of statutory accident benefits is now stated a second time in other terms in the new s. 267.8(17) which specifically says there is no right of subrogation for such claims. That provision was also in the Act previously in s. 267(4). The stated intention of the legislature as set out in its Explanatory Note, the simultaneous amendments to the Health Insurance Act, the historical sequence of rules concerning the lack of subrogation rights of automobile insurers for recovery of statutory accident benefits, and the literal meaning of the provisions in both official languages, all indicate that s. 267.8(18) is a provision applicable only to subrogated claims by the Ministry.¹⁵

The current version of the legislation referred to by Ferguson J, is contained at section 267.8 (17) of the Act.

Limitation on subrogation

(17) A person who has made a payment described in subsection (1), (4) or (6) is not subrogated to a right of recovery of the insured against another person in respect of that payment.

Section 268.8 (1) (4) and (6) refer respectively to:

All payments in respect of the incident that the plaintiff receives after the trial of the action for statutory accident benefits in respect of income loss or loss of earning capacity.

All payments in respect of the incident that the plaintiff receives after the trial of the action for statutory accident benefits in respect of expenses for health care.

All payments in respect of the incident that the plaintiff receives after the trial of the action for statutory accident benefits in respect of pecuniary loss, other than income loss, loss of earning capacity and expenses for health care.

The Supreme Court has made it clear that in interpreting legislation one should read legislative provisions, in the words of Driedger, “in their entire context and in their grammatical and ordinary sense harmoniously with the scheme of the Act, the object of the Act, and the intention of Parliament.”¹⁶

A plain reading of the section would be that subrogation, which is possible under section 278(1) and the common law, is not allowed in the context of the statutory accident benefits referred to in section 267.8(1), (4) and (6).

As the authors of Halsbury’s have summarized:

Except in so far as they are clearly and unambiguously intended to do so, statutes should not be construed so as to make any alteration in the common law or to change any established principle of law.¹⁷

While there is a clear conflict with section 278(1) which upholds the principle of subrogation in general, it is clear that the ban in matters involving accident benefits contained in section 267.8 is an exception carved out of that general rule. Section 267.8 is also consistent with a reading of section 65 of the Schedule which bans all assignment of benefits except in the context of a judge’s order. Consequently, I accept that the legislators have provided just that sort of clear indication mentioned by the authors of Halsbury’s to remove the principle of subrogation from insurance law as it relates to accident benefits.

Consequently, if an assignment of the accident benefits to Nordic fails or is otherwise not possible, Nordic may not proceed by the back door and protect their interests by way of a subrogated claim against Coachman.

An assignee, as pointed out by counsel for Coachman, could end up with a windfall, having access potentially to an insured’s potential benefits over a lifetime, benefits that could exceed the amounts paid to the insured by way of settlement. While under subrogation an “assigned” claim would be limited to the amount paid out under the settlement, a bare assignment would not necessarily be subject to the same equitable rules. There could well be a “windfall.”

From a policy point of view, there would seem to be drawbacks inherent in any interpretation finding that the ban on assignment of benefits contained in section 65 would also reach subrogated claims. Subrogation, to repeat the words of Professor Billingsley, is “the key to ensuring justice for all: the insured receives prompt compensation under the policy without the expense of suing the wrongdoer; the insured is prevented from simultaneously recovering from the insurance company and the wrongdoer and thereby double-recovering for the loss.”

Certainly in Mr. D’Ettorre’s case the settlement with Nordic allowed him to access accident benefits that had been refused by Coachman. While some significant time may have elapsed between the refusal of benefits and the Nordic settlement, it should be noted that Coachman still denies liability for payment of those benefits, both on procedural and substantive grounds. At least from Mr. D’Ettorre’s point of view, the settlement with Nordic squarely addressed the overall intent of the Schedule − the prompt provision of benefits.

However, in the light of the clear direction given by section 267.8(17) of the Act, section 65 of the Schedule, which also deals with the limitations on dealing with accident benefits, should be read broadly to coincide with the governing legislation.¹⁸

Restricting section 65 to judicially authorized assignments has the advantage of addressing an important consumer protection function.

Accident benefits are a personal benefit, aimed at addressing the immediate needs of an insured following a motor vehicle accident. The purpose of the scheme is multi fold. As has often been stated, the statutory accident benefits system or no-fault benefits system itself serves a variety of public interests.

It would run counter to the provision of fair compensation to an injured insured if a third party were to be allowed to “buy” the right to claim benefits by way of assignment, at a discount, while profiting on ongoing benefits that do not go to assist the injured party. By restricting assignment to a judicial act, the Schedule rules out abusive assignments by speculators or unscrupulous treatment providers¹⁹ of the nature that have attracted the attention of both courts and arbitrators.

It also reduces the temptation of desperate, or uninformed insureds to merchandize their right to claim benefits at an early stage.

The requirement of a judge’s order also addresses the public policy against maintenance and champerty embodied in the An Act respecting Champerty.²⁰

Presumably a judge having carriage of the matter would ensure that the assignee has a legitimate and genuine interest in the subject matter and “the circumstances are such as reasonably warrant the assignment of it to him.”²¹

I see no evidence of an abuse of process by Nordic in proceeding with this arbitration, in Mr. D’Ettorre’s name, and with his participation.

Nordic’s assumption of responsibility for these claims advances the public policy behind accident benefits since Coachman has, to date, refused to continue paying Mr. D’Ettorre’s benefits.

Nordic has assumed the risk that the monies it has paid out on account of accident benefits are indeed recoverable. Mr. D’Ettorre now has some money in his pocket to achieve whatever rehabilitation goals he may wish to pursue. I find that this settlement goes a long way towards satisfying the “statutory goal of prompt payment for necessary services.”

The validity of the assignment, however, is dependent on bringing the order of the Superior Court, relied upon by Nordic, within the ambit of the exception outlines in section 65 of the Schedule.

EFFECT OF THE COURT ORDER:

In the resolution of the dispute between Nordic, its insureds and Mr. D’Ettorre, there was more than just a settlement agreement executed between the parties. As noted earlier, the settlement agreement between Nordic and Mr. D’Ettorre was embodied in an order issued by D.C. Shaw J., a judge of the Superior Court. The order confirms that there is an “assignment” of accident benefits to Nordic.

Coachman disputes that this order has any force. It characterizes the order as a consent order to which Coachman is not a party, and which is consequently not binding on them.

Nordic takes the position that, not only is the order of D.C. Shaw J. enforceable, but it also constitutes “an assignment under section 267.8 of the Insurance Act” as defined by section 65(2)(a) of the Schedule.

I will deal briefly with the status of D.C. Shaw J.’s order, which, alone, provides support for the assignment of benefits.

It is my understanding that this order was issued on consent, on motion before Shaw J. and has never been appealed. Nor does it appear that Coachman was represented at the hearing, or even given notice of the proposed hearing and order. Coachman was not a party and was not directly bound by the resolution of the dispute between Mr. D’Ettorre and Nordic.

There is, however, a valid order of the court that purports to assign Mr. D’Ettorre’s accident benefit claim to Nordic, an order that is directly challenged by Coachman in this matter.

Traditionally, the law has frowned on collateral attacks on judgements and orders. Collateral attack has been described as:

an attack on a judgment in a proceeding other than a direct appeal; esp., an attempt to undermine a judgment through a judicial proceeding in which the ground of the proceeding (or a defence in the proceeding) is that the judgment is ineffective.

The Supreme Court has considered the question of collateral attack in a pair of decisions heard in 1998. These are R. v. Al Klippert Ltd²² and Consolidated Maybrun.²³

The Klippert case involved a question of municipal approval for a gravel extraction operation, in which the company pleaded as a defence the invalidity of an earlier order under the Alberta Planning Act, ordering the company to stop the gravel extraction process. L’Heureux-Dubé J. summarized the considerations involved in determining whether a collateral attack was permissible:

In Consolidated Maybrun, supra, this Court reviewed the applicable principles for determining whether a person charged with failing to comply with an administrative order can collaterally attack the order by way of defence. I do not intend here to repeat all the matters discussed in that decision. In summary, whether a collateral attack is possible must be determined by reviewing the legislature's intention as to the appropriate forum. For that purpose, I stated that it might be helpful to consider, in particular, the following factors: (1) the wording of the statute under the authority of which the order was issued; (2) the purpose of the legislation; (3) the existence of a right of appeal; (4) the kind of collateral attack in light of the expertise or raison d'être of the administrative appeal tribunal; and (5) the penalty on a conviction for failing to comply with the order.

There is no doubt that Coachman’s position in this arbitration constitutes a collateral attack on the order of Shaw J. The order is clear. The question rather is whether Coachman should be allowed to collaterally attack this order.

Court orders inherently have different effects on the actions of non-parties, depending on their nature. This court order was “in personam”, rather than “in rem”, meaning that while it bound the parties to the proceeding, it was not necessarily binding on all the world.²⁴ As such, to insist that Coachman, a stranger to the litigation, should be bound by it would be unfair.²⁵

It is clear, however, that Coachman is aware of the order, and is not being taken by surprise by Nordic’s presence at this arbitration.

Although Coachman also explained away the order as only a means of approving an infant settlement, it is clear from the order itself that such was incidental to the disposition of the entire claim against Nordic and its insureds.

In Coachman’s favour, it was not a party to the proceeding before Shaw J. Without standing at the hearing where the order was made, it has no practical right of appeal. Likewise, the apparently conflicting purposes of the legislation and the common law, the tension between the section 65 ban on assignment, and the traditional practices within the insurance industry suggest that Shaw J.’s order should not be determinative of the issue of assignment as it effects Coachman. Those considerations certainly favour permitting a challenge to the order in this forum.

The order, however, on its face is valid. As Monnin J.A stated in R. v. Wilson, “The record of a superior court is to be treated as absolute verity so long as it stands unreversed.”

McIntyre J., in citing the above statement, added:

It has long been a fundamental rule that a court order made by a court having jurisdiction to make it stand and is binding and conclusive unless it is set aside on appeal or lawfully quashed. It is also well-settled in the authorities that such an order may not be attacked collaterally -- and a collateral attack may be described as an attack made in proceedings other than those whose specific object is the reversal, variation, or nullification of the order or judgment.²⁶

It cannot be said that the order of Shaw J. was of no effect. Section 267.8 of the Insurance Act provides that a “court that heard and determined the action for loss or damage from bodily injury or death arising directly or indirectly from the use or operation of the automobile, on motion, may order, that subject to any conditions the court considers just”, that an assignment may take place. Section 65 of the Schedule mirrors this provision as a specific exception to the ban on assignment.

Although Coachman characterizes Shaw J.’s order as merely a consent order, it would appear from the recitals in the order that Shaw J. was seised of the issue, and made a determination of the outcome of the matter, albeit on joint submissions of all the parties present. A consent order is still an order of the court. A hearing, however brief, disposed of the matter. As noted by Ewaschuk J., in Woodside, a trial does not necessarily entail a contested trial²⁷:

The policy specifically provides that the insured cannot sue the insurer for a claim arising from liability coverage “until the amount of the insured's obligation to pay shall have been finally determined ... by judgment against the Insured after actual trial ...”. Here, the insurer contends that the Woodsides were obliged by the policy to defend the action. In other words, “actual trial” means a contested trial. I reject that submission. As far as I am concerned, a court assessment of damages, even ex parte, constitutes an actual trial.

If Coachman takes issue with the order of D.C. Shaw J. it must do so in a forum²⁸ other than arbitration. Just as an inferior court cannot look behind an order of a superior court²⁹, so an arbitrator is also bound to give effect to such an order.

While there can be some unfairness to Coachman being caught by an order made in a matter to which it was not a party, I see no real prejudice to it arising from the acceptance of the order.

Had Mr. D’Ettorre not settled with Nordic, he would have pursued his accident benefits claim against Coachman. At worst, Coachman could have been obliged to pay Mr. D’Ettorre for those benefits that would be found payable. With Nordic as assignee, the risk to Coachman is exactly the same. Coachman can be obliged to pay no more than what an arbitrator determines it owes to Mr. D’Ettorre. There is no injustice in such an arrangement.

Consequently, I find that Shaw J.’s order qualifies as an order made under section 267.8 of the Insurance Act, and constitutes an exception to the general ban on assignment pursuant to section 65 of the Schedule. As such it gives Nordic standing to pursue this arbitration in the manner in which it has proceeded.

DISPOSITION:

Having found that the assignment of the accident benefit claims to Nordic contained in the order of D.C. Shaw J. is valid, Nordic may continue to proceed with the claim brought on behalf of Mr. D’Ettorre as assignee.

Given the requirement in section 281(1)(b) of the Insurance Act which provides that only the Insured person may refer a dispute to arbitration, the matter must continue in the name of Mr. D’Ettorre, notwithstanding the assignment.

EXPENSES:

Given the outcome of this matter, subject to any further submissions of the parties, I would be inclined to exercise my discretion to award Mr. D’Ettorre his expenses incurred in this preliminary issue hearing.

Counsel for Mr. D’Ettorre should submit a brief cost outline to Coachman.

The parties then have 30 days to resolve the quantum of expenses, failing which I may be spoken to on this issue.

July 7, 2009

John Wilson Arbitrator

Date

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

Neutral Citation: 2009 ONFSCDRS 93

FSCO A07-002065

BETWEEN:

ALEX D'ETTORRE

Applicant

and

COACHMAN INSURANCE COMPANY

Insurer

ARBITRATION ORDER

Under section 282 of the Insurance Act, R.S.O. 1990, c.I.8, as amended, it is ordered that:

1. Having found that the assignment of the accident benefit claims to Nordic contained in the order of D.C. Shaw J. is valid, Nordic may continue to proceed with the claim brought on behalf of Mr. D’Ettorre as assignee

2. Given the requirement in section 281 (1) (b) of the Insurance Act which provides that only the Insured person may refer a dispute to arbitration, the matter must continue in the name of Mr. D’Ettorre, notwithstanding the assignment.

3. Counsel for Mr. D’Ettorre should submit a brief cost outline to Coachman. The parties then have 30 days to resolve the quantum of expenses, failing which I may be spoken to on this issue.

July 7, 2009

John Wilson Arbitrator

Date

Footnotes

1. 1The Statutory Accident Benefits Schedule - Accidents on or after November 1, 1996, Ontario Regulation 403/96, as amended.
2. 22007 CanLII 17630 (ON SCDC), [2007] O.J. No. 1972
3. 3Maggio v. Lopes et al.; Economical Mutual Insurance Co., 1985 CanLII 1986 (ON HCJ), 51 O.R. (2d) 441
4. 4In Torkington v. Magee, [1902] 2 K.B. 427, Channell J. defined “chose in action” as : 'Chose in action' is a known legal expression used to describe all personal rights of property which can only be claimed or enforced by action, and not in taking physical possession.
5. 5528650 Ontario Ltd. (c.o.b. Ontario Heater & Supply Co.) v. Hepburn, 2003 O.J. No. 2779 Cameron J.
6. 6Fredrickson v. Insurance Corporation of British Columbia (1986), 1986 CanLII 1066 (BC CA), 28 D.L.R. (4th) 414 (C.A.) affirmed in 1988 at 1988 CanLII 38 (SCC), 49 D.L.R. (4th) 160 (S.C.C.). The case upheld an assignment by an insured tortfeasor to the plaintiff.
7. 7Fredrickson v. Insurance Corp. of British Columbia (B.C.C.A.) 1986 CanLII 1066 (BC CA), 28 D.L.R. (4th) 414
8. 8Black’s Law Dictionary (8th ed.)
9. 9See Gough v. Toronto and York Radial R.W. Co. [1918] O.J. No. 205 Middleton J.
10. 10In London Assurance Company v. Sainsbury¹⁰, Lord Mansfield observed: “There is no instance of an action in the name of an insurer, while numberless actions have been brought by owners of ships for damage done by other ships where many of them must have been insured.”
11. 11Somersall, Subrogation and the Supreme Court: How the Top Court's Ruling in Somersall v. Friedman Undermines Insurance Law Theory and Practice: Barbara Billingsley, Alberta Law Review (2003) 40 Alta. L. Rev. 917 - 928
12. 12Somersall, Subrogation and the Supreme Court: How the Top Court's Ruling in Somersall v. Friedman Undermines Insurance Law Theory and Practice: Barbara Billingsley, Alberta Law Review (2003) 40 Alta. L. Rev. 917 - 928
13. 13National Fire Insurance Co. v. McLaren (1886), 12 O.R. 682 (H.C.J.)
14. 14The Superintendent of Financial Services v. Markham General Insurance Company 2002 CanLII 16519 (ON SC), 62 O.R. (3d) 637
15. 15Wawanesa Mutual Insurance Co. v. Ontario Provincial Police (Commissioner) 2001 CanLII 38746 (ON SCDC), 54 O.R. (3d) 112
16. 16Rizzo & Rizzo Shoes Ltd. (Re) 1998 CanLII 837 (SCC), 154 D.L.R. (4th) 193
17. 1736 Hals. 3rd ed. P. 412
18. 18Nor would Nordic’s claim meet three of the four criteria for a restitutionary remedy against Coachman as outlined by Fridman in that it was not compelled by law to make payment, it may have officiously exposed itself to the payment obligation, and that that as between the plaintiff, the payor, and the defendant, the defendant was ultimately or primarily liable. Restitution by Professor Fridman (2d ed.) at p. 244:
19. 19Piotto and Kingsway General Insurance Company (FSCO A00-001061, March 22, 2002), Rod Hare, in the name of AshleyPiotto (minor) and Kingsway General Insurance Company (FSCO A00-001061, September 30, 2002 and November 29, 2002 interim expenses and expenses); Royal and SunAlliance of Canada v. Volfson 2005 CanLII 38902 (ON SCDC), [2005] O.J. No. 4523 - Div.Ct.) J.R.R. Jennings J.
20. 20chapter 327 of the Revised Statutes of Ontario 1897, Vol. 3. in An Act respecting Champerty
21. 21Trendtex Trading Corporation v. Credit Suisse, [1980] 1 Q.B. 629 (C.A.).
22. 22R. v. Al Klippert Ltd. 1998 CanLII 821 (SCC), [1998] 1 S.C.R. 737
23. 231998 CanLII 820 (SCC), [1998] 1 S.C.R. 706
24. 24Common examples of in rem orders include judgements arresting vessels under admiralty law, determinations of insanity or inacapacity, and divorce judgements to the extent that they alter the status and attach to the thing or person that is the subject of the litigation. See Love v. Love et al. 1968 CanLII 414 (ON HCJ), [1969] 1 O.R.291Ferguson J.
25. 25See Lietz v. Canada [1985] F.C.J. No. 88 Cullen J., and Ontario v. Mar-Dive Corp. [1996] O.J. No. 4471 Lissaman J.
26. 26R. v. Wilson, 1983 CanLII 35 (SCC), [1983] 2 S.C.R. 594 at 603 [1984] 1 W.W.R. 481]
27. 27Woodside et al. v. Gibraltar General Insurance Co. et al. 1988 CanLII 4650 (ON HCJ), 66 O.R. (2d) 630
28. 28As Doherty J.A. observed in R. v. Domm 1996 CanLII 1331 (ON CA), 31 O.R. (3d) 540, “In this case, the appellant could have challenged the non-publication order through existing court procedures. The arguments against the validity of the order advanced by the appellant at trial were being made on the appeal challenging the order of Kovacs J. That appeal was outstanding at the time the appellant chose to defy the order. The appellant could have awaited the results of the appeal, or even applied for standing on the appeal if he thought it advisable. Had there been no appeal extant, he could have moved before Kovacs J. for a variation of that order, and if unsuccessful, pursued his appellate remedies
29. 29In R. v. Wilson 1982 CanLII 3728 (MB CA), [1982] 2 W.W.R. 91 O'Sullivan J.A stated: “In my opinion, where there is an authorization granted by a superior court of record, it cannot be collaterally attacked in any court and it cannot be attacked at all in an inferior court."