Neutral Citation: 2011 ONFSCDRS 20 FSCO A09-001079

BETWEEN:

MARCIA WALKER Applicant

and

AVIVA CANADA INC. (Scottish and York Insurance Company Limited) Insurer

DECISION ON A PRELIMINARY ISSUE

Before: Lloyd (J.R.) Richards Heard: July 14, 15, 2010, at the offices of the Financial Services Commission of Ontario in Toronto.

Appearances: Allan Chapnik for Ms. Walker Karla Gnanasegaram for Aviva Canada Inc.

Issues:

The Applicant, Marcia Walker, was injured in a motor vehicle accident on August 11, 2008. She applied for statutory accident benefits from Aviva Canada Inc. (“Aviva”), payable under the Schedule.¹ Aviva denied weekly income replacement and housekeeping and home maintenance benefits. The parties were unable to resolve their disputes through mediation, and Ms. Walker 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 issue is:

Is Ms. Walker precluded from receiving income replacement and housekeeping and home maintenance benefits, pursuant to section 30 of the Schedule?

Result:

Ms. Walker is not precluded from receiving income replacement and housekeeping and home maintenance benefits, pursuant to section 30 of the Schedule.

EVIDENCE AND ANALYSIS:

Background

Ms. Marcia Walker purchased automobile insurance from President’s Choice Insurance on May 22, 2008 for a one year term. President’s Choice provides insurance through Scottish and York Insurance, which is owned by Aviva Canada. Ms. Walker arranged with President’s Choice to have pre-authorized insurance premium payments deducted from her bank account once per month. She was involved in a motor vehicle accident on August 11, 2008. She telephoned President’s Choice on August 12, 2008 to report the collision and was advised that her policy had been cancelled for non-payment of her premiums. Scottish and York’s position is that Ms. Walker is not entitled to income replacement or housekeeping and home maintenance benefits because she knew or ought to have known that she was driving without insurance.

The Law

Section 30 of the Schedule states that an insurer is not required to pay an income replacement benefit, a non-earner benefit or housekeeping and home maintenance benefit to the driver of an automobile who, at the time of a motor vehicle accident, 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.

Section 3 of Ontario Regulation 777/93 permits insured people to pay their insurance premiums through monthly payments. When an insured person does not pay his or her premium, section 11 of the regulation allows an insurer to give notice of termination to the insured person by registered mail or personal delivery. According to the regulation, when the insurer gives notice by registered mail, the notice shall specify that the insurance is terminated no earlier than 30 days after the insurer gives the notice. Section 11(1.3) of the Regulation further requires the notice to state the amount due as at the date of the notice. The notice must also state that the insurance contract will terminate on a specified day, unless the insured person pays an administration fee and the full premium instalments owing to the insurer by cash, money order or certified cheque, no later than 12:00 noon on the business day before the day specified for termination.

Ms. Walker’s Position

Ms. Walker’s evidence is that in the summers of 2006, 2007, and 2008, she toured the U.S. with her children in Drum Corps games. The games consist of children between the ages of eight to twelve competing in marching drills on a football field. She claims she left for tour in early June 2008 and returned home in late July. She states that her younger brother cares for her mother who has Alzheimer’s disease. When she returned home in July 2008 she went to live with her mother and relieved her brother of his duties. She claims that while she was away she made arrangements for her twenty year old son to stay in her home and take care of her affairs.

She states that she receives Ontario Disability Support Payments every month and that before she left for the U.S. in June 2008 she ensured that there was enough money in her account to pay all her bills. However, while she was away from home she did not check in with her son. She admitted under cross-examination that it is her responsibility to check her accounts to ensure that her affairs are in order. In this case, she claims that she checks her accounts at a banking kiosk in Brantford, Ontario because her bank does not send out statements, nor is there a passbook attached to her account. She states that since she was caring for her mother and she assumed everything was in order, she did not check the accounts from June to August, 2008.

Ms. Walker admits to having received registered mail in the past, however in this case she claims to have never received the registered mail notice from Canada Post. She also admits that it is possible that her son could have received the notice and neglected to advise her. She claims that at the time of the motor vehicle accident she had never been informed that her policy had been cancelled.

Ms. Walker raises the following defenses:

If the policy was cancelled, Scottish and York provided no evidence that she had actual knowledge of the cancellation and a reasonable person would not have known that the policy was cancelled.

Ms. Walker is of the opinion that the evidence shows that the cancellation was effected by registered mail that was never picked up and Scottish and York produced nothing that demonstrates some other method by which she ought to have known that the policy was cancelled. She posits that there are two standards applicable in this case. The subjective standard requires her to have actual knowledge of the cancellation. The objective standard asks whether a reasonable person, under these circumstances, would have known of the cancellation. In her view there is no evidence that she or a reasonable person would have been alerted to the alleged non-payment. Scottish and York presented no evidence of her actual knowledge and no evidence that, under the circumstances, she ought to have known that the policy had been cancelled. She argues that the grave consequences that an insured person faces when her insurance is cancelled entail a greater level of protection from the Insurance Act and Regulations.

Scottish and York provided no evidence of its attempt to withdraw the premium and no proof of her non-payment, therefore an arbitrator cannot conclude that the cancellation was properly founded.

Ms. Walker claims to have had money in her account and does not know why her bank denied Scottish and York’s request for payment. In her view, the alleged insufficient funds notice from the bank could have been because of an accounting or banking process error and Scottish and York presented no evidence that its system is without flaws.

Scottish and York provided no evidence of when the notice of cancellation went into the possession of Canada Post and when it was subsequently mailed to her. In the absence of this evidence, an arbitrator cannot conclude that Scottish and York gave her the statutorily required 30 days notice.

She notes Scottish and York’s only witness, Ms. Wendy Knibbs, is in the underwriting department and not accounting. Ms. Knibbs’ evidence is that the accounting department first receives an insufficient funds notice from the bank. The accounting department then initiates an automated process that generates a cancellation form that is sent out to an insured person by registered mail through Scottish and York’s mailroom. Scottish and York presented no evidence about when the accounting department delivered the notice to the mailroom, when the mailroom took the notice to Canada Post, or about when the notice was actually mailed.

The notice that Scottish and York alleges it sent to Ms. Walker is defective.

Section 11(1.3) of Ontario Regulation 777/93 requires that the notice must advise an insured person that the insurance contract will terminate on a specified day, unless the insured person pays an administration fee and the full premium instalments owing to the insurer by cash, money order or certified cheque. The notice Scottish and York alleges it sent to Ms. Walker lists certified cheque, online or telephone banking and credit card as the 3 methods by which Ms. Walker could remit her premium payment to Scottish and York to continue her insurance coverage. Ms. Walker contends that online or telephone banking payments are electronic transfers and not cash and therefore the notice does not comply with the legislation.

Scottish and York’s Position

Scottish and York states that Ms. Walker purchased insurance on May 22, 2008 for a 1 year term, with an agreement that she would pay her insurance premium in monthly instalments. They mailed the policy particulars and pre-approved payment plan information to her. Scottish and York alleges that when it attempted to make the first withdrawal from Ms. Walker’s account to satisfy her premium payment, the withdrawal attempt was returned by the bank because of insufficient funds.

Scottish and York then prepared a notice² and sent it to Ms. Walker’s address. The notice informed Ms. Walker that as of July 15, 2008 her policy would be cancelled. It advised her that if she wished to continue her insurance coverage without interruption, then she would have to submit the missed payment, including an insufficient funds charge, to Scottish and York by 12 noon on the day prior to the cancellation. The notice listed three payment options: certified cheque or money order; an online or telephone banking payment; or a credit card payment.

The registered mail notice was returned to Scottish and York, marked by Canada Post as unclaimed, on July 10, 2008.³ Once in receipt of the uncollected registered mail notice, Scottish and York noted the file, microfilmed the notice and cancelled the policy. On August 12, 2008, Ms. Walker reported a claim to Scottish and York and she was advised that the policy had been cancelled.

Scottish and York’s position is that since they complied with the Regulation and sent a notice to Ms. Walker by registered mail, she knew or ought to have known that she was driving without insurance. Scottish and York asserts that Ms. Walker has the onus to prove that Scottish and York cancelled her policy regardless of the fact that she had the funds in her account. In its view Ms. Walker has provided no proof that the funds were in her account or that she was away from home when the policy was cancelled. Scottish and York claims that it has no way to prove that Ms. Walker had knowledge of the cancellation. Further, that since the registered mail notice was returned as unclaimed, rather than undelivered, it is clear that Ms. Walker chose not to claim the notice from Canada Post. Scottish and York’s position is that it is impossible to prove that someone has knowledge of a notice if that person refuses knowledge. Ms. Walker’s evidence was that she checks her bank account once per month, but that she did not check her accounts from June to August 2008, and therefore was not aware of Scottish and York’s attempt to withdraw the premium payment. Scottish and York claims that Ms. Walker should have exercised due diligence in checking her accounts and that she knew or ought to have known that the funds were not in her account. In effect, she refused to be notified of the cancellation by not claiming her registered mail.

ANALYSIS

I will address each of Ms. Walker’s defenses in turn.

If the policy was cancelled Scottish and York provided no evidence that she had actual knowledge of the cancellation and a reasonable person would not have known that the policy was cancelled.

Ms. Walker’s recounting of her participation in Drum Corps marching with her children in the U.S. in the summer of 2008 was plain, direct and presented a plausible explanation for her being away from her home over that summer. Ms. Walker purchased her insurance from President’s Choice and also arranged her pre-authorized premium payments through that institution. President’s Choice does not send out statements, but requires its customers to either use a banking machine or its online services. Ms. Walker’s evidence was consistent and not rebutted by Scottish and York’s evidence or undermined by cross-examination. I find that, given her schedule with her younger children and her attention to her mother over the summer of 2008, she neglected to follow up on her banking responsibilities.

The case law in this area requires an individualized inquiry of the entire circumstances in each case, rather than just an inquiry into whether an insurer has satisfied its regulatory obligations.⁴ Scottish and York presented no evidence that Ms. Walker received the registered mail notification from Canada Post at her door. Nor did Scottish and York present any evidence that Ms. Walker signed for the cancellation notice at the post office. The only evidence Scottish and York provided was that the registered letter was stamped “unclaimed” by Canada Post. I find that there is no evidence that a reasonable person in Ms. Walker’s circumstances ought to have known that her insurance had been cancelled. Scottish and York stated that Ms. Walker chose not to claim the notice from Canada Post and therefore refused knowledge of the cancellation. I disagree. Under the circumstances, it is clear that Ms. Walker was not at home to receive the notice from Canada Post and did not know that the notice was available to be collected from the post office. She had left her 20 year old son to take care of her affairs, and while he might bear some responsibility to advise her of any notice that was left at her door, it was Scottish and York’s responsibility to ensure the notice got to Ms. Walker instead of her son.

In light of the fact that Scottish and York provided no proof that Ms. Walker knew or ought to have known that her insurance had been cancelled, I find that Ms. Walker had no reason to believe that she was driving without insurance.

Scottish and York provided no evidence of its attempt to withdraw the premium and no proof of her non-payment, therefore an arbitrator cannot conclude that the cancellation was properly founded.
Scottish and York provided no evidence of when the notice of cancellation went into the possession of Canada Post and was subsequently mailed to her. In the absence of this evidence, I cannot conclude that Scottish and York gave her the statutorily required 30 days notice.

Having found that Ms. Walker did not know that she was driving without insurance, I do not have to address these defenses. However, when Ms. Walker raised the issue that Scottish and York had not provided proof of her non-payment, Scottish and York requested permission to call, as a witness, Ms. Asha Brahim from its accounting department. Ms. Walker objected to Scottish and York’s calling of the witness on the grounds that it was late in the proceeding, and further, that she was not alleging fraud by claiming that money was in her account and Scottish and York had refused to debit the funds. I declined to allow the witness to give evidence as all the evidence in the case had been entered and the parties were at the closing argument stage. Furthermore, as Scottish and York had presented no other evidence of its attempting to give notice of the cancellation to Ms. Walker other than the unclaimed registered mail, it was unnecessary for me to hear from its accounting department.

The notice that Scottish and York alleges it sent to Ms. Walker is defective.

Ms. Walker contends that the notice sent to her is defective because it did not advise her that she could pay Scottish and York in cash in order to continue her insurance coverage. In her view, online and telephone banking are not cash transactions and so the notice is not in compliance with the regulation. While I do not have to address this argument, I disagree with Ms. Walker. She presented no compelling argument that an electronic or telephone transfer of funds is not the same as a cash transfer from one party to another. In fact, electronic or telephone transfers of funds are often easier methods of transferring cash than withdrawing money from an account and physically delivering the money to its intended recipient.

EXPENSES:

The parties made no submissions on expenses. They are encouraged to resolve the issue. If they are unable to do so, they may schedule an expense hearing before me according to the provisions of Rule 79 of the Dispute Resolution Practice Code.

February 28, 2011

Lloyd (J.R.) Richards Arbitrator

Date

Financial Services Commission of Ontario