Financial Services Commission of Ontario

Commission des services financiers de l’Ontario

Neutral Citation: 2015 ONFSCDRS 214

Appeal P15-00027

OFFICE OF THE DIRECTOR OF ARBITRATIONS

MURAT CANKAYA Appellant

and

UNIFUND ASSURANCE COMPANY Respondent

AND

Appeal P15-00028

MURAT CANKAYA Appellant

and

INTACT INSURANCE COMPANY Respondent

BEFORE: Delegate Lawrence Blackman

REPRESENTATIVES: Mr. Stanley B. Pasternak for the Appellant, Mr. Murat Cankaya Mr. Arthur R. Camporese, counsel of record for the Respondent, Unifund Assurance Company. Mr. Steve Coons appearing. Mr. Douglas A. Wallace, counsel of record for the Respondent, Intact Insurance Company. Mr. Sean Miller appearing.

HEARING DATE: September 25, 2015. Further written submissions received by October 19, 2015

APPEAL ORDER

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

Both appeals are allowed. The Arbitrator’s April 9, 10, 13 and 14, 2015 orders are rescinded and replaced with the following orders:

(a) The arbitration files Cankaya and Unifund Assurance Company (FSCO A14-009220) and Cankaya and Intact Insurance Company (FSCO A14-009222), on the consent of all three parties, are combined under the authority of Rule 30 of the Dispute Resolution Practice Code (Fourth Edition – Updated January 2014), the proceedings therein to be heard at the same time.

Financial Services Commission of Ontario Cankaya and Unifund et al. Appeal Orders P15-00027 and P15-00028

(b) On the consent of all three parties, any further arbitration pre-hearings or hearings in these matters shall be heard by an arbitrator other than Arbitrator Davies.

(c) A preliminary arbitration hearing will be held in the two combined arbitration files on whether there is a nexus (that is, some connection that is not totally random or arbitrary) between the Appellant, Mr. Murat Cankaya, and the Respondent, Unifund Assurance Company, the acknowledged first insurer to receive an application for statutory accident benefits under the 2010 Schedule.

The Respondent, Unifund Assurance Company, shall forthwith and in any event of the ultimate cause pay the following legal expenses for these combined appeals:

(a) To the Appellant, Mr. Murat Cankaya, the sum of $8,570.48 inclusive of all appeal fees, disbursements and HST.

(b) To the Respondent, Intact Insurance Company, the sum of $2,041.28 inclusive of all appeal fees, disbursements and HST.

October 23, 2015

Lawrence Blackman Director’s Delegate

Date

REASONS FOR DECISION

I. NATURE OF THE APPEAL AND BACKGROUND

“I have it in writin’.”¹

The Appellant, Mr. Murat Cankaya, was injured in a January 3, 2014 accident while working as an auto mechanic under the hood of an automobile when the engine exploded. As a result, he applied in February 2014 to his insurer, Unifund Assurance Company (“Unifund”), for statutory accident benefits under the 2010 Schedule.² Unifund denied payment.

In June 2014 the Appellant applied for statutory accident benefits to Intact Insurance Company, with whom he also had a policy of insurance. Intact also denied payment.

Both Unifund and Intact, as first-party insurers, have a duty of utmost good faith to their insured. Unifund says it has it in writing it does not have to pay accident benefits because of the section 1.8.4 exclusion of Ontario Automobile Policy (OAP 1) (Garage Workers Not Covered). Intact, as the second insurer to whom the Appellant applied, says it has it in writing it does not have to pay benefits because of O. Reg. 283/95 (entitled “Disputes Between Insurers,” also referred to as the Priorities Regulation). In the interim, the Appellant, with two written policies of automobile insurance, has not received any statutory accident benefits under the 2010 Schedule.

Mediation failed to resolve matters. The Appellant filed separate Applications for Arbitration against Unifund and Intact. A pre-hearing discussion was held before Arbitrator Davies (the “Arbitrator”) of ADR Chambers on April 7, 2015. The Appellant sought orders that: (1) the two arbitrations be combined under Rule 30 of the Dispute Resolution Practice Code (Fourth Edition – Updated January 2014) (the “Code”), and (2) a preliminary issue hearing be held on whether Unifund was obliged to commence payment of statuory accident benefits to him.

A stream of e-mails followed the pre-hearing conferences.

The Arbitrator e-mailed April 9, 2015 that she did not understand how the claims against Unifund and Intact had any relationship. The only preliminary issue she saw related to an insurance contract exclusion clause concerning Unifund. Intact replied that if the matters were not to be combined, there be a separate preliminary issue hearing to determine whether the Intact arbitration could proceed contary to section 2.1(4) of O. Reg. 283/95, when Intact was the second insurer to which the Appellant applied. The Appellant expressed the concern that if both insurers were successful on their respective motions, there would be no responsible insurer.

The Arbitrator e-mailed April 10, 2015 that the Appellant’s dispute that Unifund was obliged to commence payments to him had to be resolved under the Arbitration Act, 1991, S.O. 1991, c. 17.

The Arbitrator’s April 13, 2015 pre-hearing letter in the Unifund arbitration set the following preliminary issue to be heard May 14, 2015:

Is Mr. Cankaya precluded from coverage by operation of section 1.8.4 of the Ontario Automobile Policy (OAP 1) which provides as follows:

Garage Workers Not Covered – No person who sells, repairs, maintains, stores, services or parks automobiles as part of a business is covered by this policy while involved in conducting that business, unless the person, in fact, owns the automobile involved in the accident or is the partner of employee of the owner.

The Arbitrator’s April 14, 2015 pre-hearing letter in the Intact arbitration did not provide for Intact’s involvement in the Unifund preliminary issue hearing. Rather, she scheduled a hearing for February 15 and 16, 2016 to determine the Appellant’s entitlement to certain benefits under the 2010 Schedule. The Arbitrator did not set a hearing date on benefit entitlement in the Unifund arbitration.

The Appelant e-mailed the Arbitrator April 10, 2015 that only insurers can access O. Reg. 283/95. The Arbitrator responded April 13, 2015: “After much consideration, I have decided that these files are not related and the preliminary issue hearing will proceed in person on May 14, 2015 at 1:00 p.m. on the Unifund file.” On April 14, 2015, the Arbitrator e-mailed: “I have given this process considerable thought and I will not relate these files.” She further stated:

As Unifund has taken responsibility as the first insurer, I am of the opinion that this is not a priority dispute. Once the Unifund matter has been decided, if necessary [the] Intact application can proceed to an arbitration hearing if necessary as a pre-hearing has already been held … If the parties are still of the opinion that this is a priority dispute and wish to pursue that avenue under Regulation 283/95, a private arbitration is required under the Arbitration Act, otherwise these matters will be determined under the process as set out above. [Emphasis added]

The Arbitrator e-mailed later that day: “My decision on these two matters is final and I will not discuss this further.” The Appellant delivered his appeals in both proceedings on May 6, 2015.

The Appellant submitted that the Arbitrator had erred in not combining the two arbitrations and in not setting a preliminary issue hearing on whether Unifund, as the first insurer to receive a completed application for statutory accident benefits, was obliged to commence payment of benefits as mandated by O. Reg. 283/95. The Appellant sought leave under Rules 50.2 and 51.2(c) of the Code for his appeals from the Arbitrator’s preliminary orders to proceed.

Under the authority of Rule 57 of the Code, I arranged an in-person preliminary conference on June 17, 2015. Mr. Pasternak attended for the Appellant, Mr. Coons for the Respondent Unifund and Mr. Miller for the Respondent Intact. All three lawyers confirmed they had full binding authority or that their principals were available by telephone to provide any required instructions.

My June 22, 2015 letter confirmed, in part, that at the conference all three parties agreed:

Unifund refused to pay statutory accident benefits to Mr. Cankaya on the basis there was no coverage under its Ontario Automobile Policy (OAP 1), section 1.8.4 (“Garage Workers Not Covered”).
Intact refused to pay statutory accident benefits to Mr. Cankaya on the basis it was not the first insurer to receive an application for benefits under section 2 of O. Reg. 283/95.
No priority dispute had been commenced under O. Reg. 283/95 in this matter.
Arbitrator Davies held in her April 14, 2015, 9:14 a.m. e-mail that “As Unifund has taken responsibility as the first insurer, I am of the opinion that this is not a priority dispute.”
The Arbitrator erred in her April 14, 2015, 1:12 p.m. e-mail decision refusing to combine under the authority of section 30 of the Code the arbitration files of Cankaya and Unifund Assurance Company (FSCO A14-009220) and Cankaya and Intact Insurance Company (FSCO A14-009222). All three parties agreed the Arbitrator’s order should be rescinded and replaced with an order combining the two arbitration files.
All three parties should be in the same room at any arbitration pre-hearing or hearing.
When the parties return to arbitration, they should return to a pre-hearing and hearing arbitrator other than Arbitrator Davies.

My June 22, 2015 letter included the following orders:

Exercising my discretion under Rules 50.2 and 51.2(c) of the Code, I accepted these two appeals from preliminary arbitration orders. Security National Insurance Co./Monnex Insurance Mgmt. Inc. and Hodges, (FSCO P12-00029, August 13, 2012), states that one criterion in determining whether to exercise such discretion is the parties’ preference. All three parties agreed the Arbitrator erred in not combining the two arbitrations under the authority of section 30 of the Code and that her decision in that regard should be rescinded and replaced with a new order combining the two arbitrations.
On the consent of all three parties, I combined these two appeals, applying Rule 30 of the Code, as allowed by Rule 1.2. Rule 1.2 states that where something is not specifically provided for in these Rules the practice may be decided by referring to similar Rules in this Code.

I was satisfied that these two appeals had issues or question of law, fact, or policy in common, including the same insured person involved in the same accident and seeking the same relief with the same supporting arguments. I was further persuaded that the application of Rule 30 would result in the most just, quickest, and least expensive means to deal with the appeals.

Over the Appellant’s objection, I exercised my discretion under Rule 81 of the Code to extend the time for delivery of the Responses to Appeal. The delay of 12 days was outweighed by the unfairness of not allowing the Respondents to participate in these appeals. Any prejudice to the Appellant could be addressed in terms of legal expenses at the conclusion of these appeals.

II. ANALYSIS

Disputes Between Insurers, O. Reg. 283/95, provides, in part:

2.1 (1) This section applies in respect of benefits that may be payable as a result of an accident that occurs on or after September 1, 2010.

(6) The first insurer that receives a completed application for benefits from the applicant shall commence paying the benefits in accordance with the provisions of the Schedule pending the resolution of any dispute as to which insurer is required to pay the benefits. [Emphasis added]

(7) An insurer that fails to comply with this section shall reimburse the Fund or another insurer for any legal fees, adjuster’s fees, administrative costs and disbursements that are reasonably incurred by the Fund or other insurer as a result of the non-compliance.

(1) No insurer may dispute its obligation to pay benefits under section 268 of the Act unless it gives written notice within 90 days of receipt of a completed application for benefits to every insurer who it claims is required to pay under that section ...

The Arbitrator’s April 10, 2015 e-mail relied on the following excerpt from Practice Note 10 of the Code (archived September 10, 2010):

This Note is to advise claimants and insurers of the provisions of Regulation 283/95 Disputes Between Insurers (“the Regulation”). The Regulation ensures that claimants will have access to statutory accident benefits where two or more insurers are disputing which one has the responsibility to pay accident benefits. The Regulation also requires that disputes between insurers about which insurer is required to pay accident benefits be referred to private arbitration under the Arbitration Act, 1991. Such disputes between insurers are no longer dealt with through the dispute resolution process at the Commission. A copy of this Regulation is included with this Practice Note. [My emphasis]

First party automobile insurance is intended to expeditiously provide statutory accident benefits to victims of motor vehicle accidents. Early intervention is beneficial to the injured person, their family and society at large. As section 16 of the 2010 Schedule states, the legislative intent is to reduce or eliminate the effects of any disability from the accident impairment and facilitate the person’s reintegration into his or her family, the rest of society and the labour market.

Delay means a greater likelihood of entrenching disability and preventing reintegration of the injured person. Higher rates of pre-judgment interest and the special award provision in first party automobile accident claims are intended to discourage insurer delay.

Consistent with the purpose of first-party statutory benefits and an insurer’s duty of utmost good faith to its own paying clients, Practice Note 10 further states:

This Regulation ensures that accident victims will not be denied statutory accident benefits simply because the first insurer applied to for benefits thinks another insurer should pay.

That purpose has been defeated in this case. It is now 20 months since the Appellant initially applied and he has yet to receive any statutory accident benefits.

This travesty may perhaps have possibly been ameliorated had the Arbitrator the benefit of Zurich Insurance Co. v. Chubb Insurance Co. of Canada, 2015 SCC 19. In that decision, the Supreme Court of Canada unanimously allowed the appeal from the Ontario Court of Appeal’s decision in Zurich Insurance Company v. Chubb Insurance Company of Canada, 2014 ONCA 400, for the dissenting reasons given by Juriansz J.A.

In Zurich, the injured person rented a vehicle insured by Zurich. Chubb provided optional death and dismemberment insurance to the car rental company’s customers during the car rental period, but limited to non-motor vehicle accidents. The injured person had not purchased Chubb’s optional coverage. However, the injured person did have a pamphlet regarding Chubb’s coverage and submitted a claim to Chubb for statutory automobile accident benefits.

Chubb refused to pay. Zurich ultimately began payment of accident benefits. The insurers submitted their dispute to private arbitration.

Juriansz J. held:

… I would simply apply the established “nexus” test to determine whether Chubb, as the first insurance company to receive a completed application for benefits, was obliged by O. Reg. 283/95 (“the Regulation”) to pay those benefits while disputing coverage.

There is a mature and stable jurisprudence relating to the “nexus” test and the application of the Regulation. Both the courts and arbitrators of the Financial Services Commission of Ontario have applied the nexus test on numerous occasions to determine whether an insurance company must pay benefits under s. 2 ³… It is, in my view, both unnecessary and unwise to adopt a new and different interpretation of the Regulation ...

In the earlier cases, the rationale for applying the Regulation in cases of “purported” or “represented” coverage was that the applicant chose the insurance company based on a non-arbitrary belief that the insurance company provided coverage on the relevant vehicle. This is the crux of the nexus test. If the claimant’s non-arbitrary but mistaken belief is a basis for requiring the insurance company to pay benefits in cases of “purported” or “represented” coverage, I see no reason to treat claimants differently if their non-arbitrary beliefs are based on information other than a false representation. In my view, it would be best to allow adjudicators to continue to consider whether there is some connection between the parties as set out in the familiar and established nexus test …

The overriding public policy of the Regulation is to provide timely delivery of benefits to all persons injured in car accidents in Ontario, despite the inconvenience to insurance companies who must provide benefits immediately and seek reimbursement from the correct insurance company later. As Laskin J.A. said at para. 21 of Kingsway General Insurance Co. v. Ontario (Minister of Finance), “I am inclined to agree… [o]nly in the most extreme cases, where the connection with the insurers is totally arbitrary should the insurer refuse to pay”. In my view, that public policy would be seriously eroded by allowing an insurance company that writes motor vehicle liability policies in Ontario to argue, in a case in which the nexus test is satisfied, that it is a “non-motor vehicle liability insurer”. [Emphasis added]

The Supreme Court specifically endorsed (see Footnote 3 below) the FSCO appeal decision in Vieira and Royal & SunAlliance Insurance Company of Canada, (FSCO P04-00016, February 15, 2005) (Application for Judicial Review abandoned). Mrs. Vieira, a pedestrian, witnessed a multi-vehicle accident. While running from oncoming vehicles she struck a lamp standard and was injured. Royal & SunAlliance accepted it was the first insurer Mrs. Vieira approached. While responding to Mrs. Vieira’s application for accident benefits under her son’s policy, it maintained Mrs. Vieira was not an insured person.

The arbitrator in Vieira and Royal & SunAlliance Insurance Company of Canada, (FSCO A02-000954, March 25, 2004), agreed that Mrs. Vieira was not covered under her son’s policy and, therefore, was not entitled to seek any further benefits from Royal & SunAlliance. On appeal, Director Draper allowed Chubb Insurance Company of Canada (a second insurer to whom Mrs. Vieira had applied for benefits) intervenor status. Director Draper held:

As the first insurer to receive a completed application for accident benefits from Josefina Vieira, Royal is obliged to respond to her claims for accident benefits, subject to an order under O.Reg. 283/95, Disputes Between Insurers, that another insurer has priority.

In the body of his decision, Director Draper stated:

The Priorities Regulation was introduced to ensure that the payment of accident benefits is not delayed due to a dispute over which insurer should pay …

Mrs. Vieira finds herself caught between two insurers, each claiming the other is responsible for paying her accident benefits - precisely the situation the Priorities Regulation was meant to eliminate

Distinguishing between coverage disputes and disputes over insurer priority is artificial and leads to the dead end at which Mrs. Vieira now finds herself - Royal is relieved from paying benefits because she is not an “insured person” under its policy and Chubb refuses to pay benefits on the basis that Royal was the first insurer to receive a completed application for benefits and did not challenge its obligation to pay under the Priorities Regulation.

The correct approach, in my opinion, is to treat the Priorities Regulation as part of the claims process. It establishes procedures, not substantive entitlements. Insurers are required to participate in a scheme designed to ensure that injured persons will get a prompt determination of their entitlement to the accident benefits, even if they have chosen the wrong insurer. It is inherent in this scheme that an insurer may have to pay benefits that another insurer should be paying, but only on an interim basis. If the first insurer to receive a completed application wants to shift responsibility to another insurer, it must follow the procedures in the Priorities Regulation. Although a FSCO arbitrator may need to determine whether the insurer before them was the first insurer to receive a completed application, if it was, that insurer can only resist the claim on the basis that the person is not entitled to the benefits provided under the SABS, not that he or she should be looking to another insurer to pay them

All disputes about which insurer must pay the benefits - the who pays question - are decided under the Priorities Regulation. This leaves FSCO arbitrators and judges to determine entitlement - the what, if any, benefits question. In other words, if the insurer before a FSCO arbitrator was the first insurer to receive a completed application, the arbitrator’s role is to determine what benefits that person is entitled to receive under the SABS, without regard to whether he or she is covered by that particular policy

In this case, Mrs. Vieira filed a completed application for accident benefits with Royal. She referred to a policy issued to her son and explained her understanding that this policy covered a vehicle that the two of them co-owned. This was far from a random choice of insurer … In the circumstances, Royal was obligated to respond under s. 2 of the Priorities Regulation as the first insurer to receive a completed application. As Chubb correctly stated in its October 2001 letter, Royal’s recourse was to follow the procedures in the Priorities Regulation if it wanted to claim that some other insurer was responsible for paying the benefits. It was not entitled to make that same argument through the backdoor of an arbitration hearing. [Emphasis added]

The Supreme Court also endorsed Bianca and Wawanesa Mutual Insurance Company, (FSCO A03-001571, December 20, 2004). Mrs. Bianca was an uninsured pedestrian struck by an uninsured vehicle. Wawanesa provided insurance for the driver, but on another vehicle. It was undisputed Wawanesa was the first insurer to receive an accident benefits application. Arbitrator Slotnick, finding a “sufficient connection” between Mrs. Bianca and Wawanesa, ordered Wawanesa to respond forthwith to her claim for statutory accident benefits.

In Danilov and Unifund Assurance Company et al., (FSCO A07-001441, June 15, 2009), Arbitrator Bujold held that Unifund Assurance Company was the first insurer under section 2 of O. Reg. 283/95 to receive Mr. Danilov’s completed Application for Accident Benefits.

Mr. Danilov was involved in a two-vehicle accident. The driver of the other vehicle showed a pink Motor Vehicle Liability Insurance Card indicating the vehicle was insured with Unifund. Unifund, however, had never written or issued such a policy.

Arbitrator Bujold held that in the absence of evidence that Mr. Danilov was complicit in any fraud and finding that Mr. Danilov had “turned his mind” to the choice of insurer no “matter how incorrect or false that information turned out to be, Mr. Danilov’s choice of insurer was clearly not arbitrary or random [and] was sufficient to establish the nexus necessary to trigger Unifund’s obligation to respond to Mr. Danilov’s application for accident benefits.”

Under O. Reg. 283/95 an insurer was required to pay benefits only until another insurer accepted responsibility or the matter was resolved through private arbitration. If successful under O. Reg. 283/95, the first insurer was prima facie entitled to its costs from the unsuccessful parties.

On appeal, in Unifund Assurance Company and Danilov et al., (FSCO P09-00023, December 30, 2009), in refusing to stay Arbitrator Bujold’s June 15, 2009 Order, I noted the March 31, 2009 Five-Year Review by the Superintendent of Financial Services, released pursuant to section 289.1 of the Insurance Act, recommending improvements in the effectiveness and administration of the regulations. Under the heading “Disputes Between Insurers,” the Report stated:

One key objective of Ontario’s no-fault accident benefit system is to meet claimants’ immediate needs following an automobile accident and provide prompt payment of benefits without regard to fault. Without a system of prompt payments, claimants could be left without the ability to pay for ongoing household and living expenses and medical and rehabilitation costs resulting from an accident.

The Report continued:

… Ontario Regulation 283/95 was introduced in 1995 to ensure claimants receive accident benefits in a timely fashion, while these disputes are being resolved. The Regulation sets out a mandatory process for private arbitration of all disputes between insurers regarding which insurer is liable to pay accident benefits.

Over the years, a number of disputes, court cases, and differences in interpretation have emerged that have led to delays in the payment of claimants’ benefits. These delays often have detrimental effects on injured accident victims. Some insurance companies have refused to respond to applications on the basis that the person making the application is not an “insured person.” They maintain that there was no existing policy in place at the time of the accident (e.g., policy had expired, been cancelled or never existed) or that the claimant was not covered by a policy (e.g., the claimant was not a dependant of one of their policyholders) … Some court decisions have criticized insurance companies for the way they handle these claims. [Emphasis added]

The Superintendent recommended in his 2009 Report:

Regulation 283/95 should be amended to make it more difficult for insurers to deflect claims and to ensure that claimants receive accident benefits while the issue of liability for a claim is resolved.

Page six of the Danilov decision noted that Unifund (the Appellant in that case, a Respondent herein) referred to the nexus test as “infamous.” That “infamous test” was at that time endorsed by the Ontario Court of Appeal in Kingsway General Insurance Co. v. Ontario (Minister of Finance), [2007] I.L. R. I-4580. That same “infamous test” has now been endorsed by the Supreme Court of Canada.

Unifund’s September 14, 2015 written submissions cited my decision in State Farm Mutual Automobile Insurance Company and Pedisic, (FSCO P08-00002, March 20, 2008):

… The traditional formula for the exercise of discretion, as stated by the British Columbia Court of Appeal in Pugh v. Pugh, 1979 CanLII 766 (BC CA), 17 B.C.L.R. 14 (C.A.), is that:

. . . this Court does not have an independent discretion and should only interfere with the exercise of discretion by the trial judge when clearly of the opinion that he acted on a wrong principle, or wrongly exercised his discretion in not giving sufficient weight to relevant considerations, or that, on other grounds, the decision might result in injustice.

As stated by the Ontario Divisional Court in Kalin v. Ontario College of Teachers, 2005 CanLII 18286 (ON SCDC), 75 O.R. (3d) 523:

Generally speaking, decisions made in the exercise of discretion are entitled to considerable deference, provided the discretion is exercised judicially and in accordance with principles of fairness and natural justice …

Rule 30 of the Code specifically sets out the considerations on whether to combine applications:

30.1 Where two or more Applications for Arbitration have been filed and it appears that:

(a) they have an issue or question of law, fact, or policy in common; or

(b) the application of this Rule will result in the most just, quickest, and least expensive means to deal with the Applications;

The Dispute Resolution Group will notify the parties in writing of the intention to:

(d) schedule the proceedings to be heard at the same time;

(e) schedule one or more proceedings to be heard one immediately after the other by the same arbitrator; or

(f) suspend the scheduling of a proceeding or proceedings until the determination of any one of them.

Rule 30.2 provides that where a party objects to the Rule 30.1 notice it must promptly notify the Dispute Resolution Group and the other parties involved, in writing, of the objection. Rule 30.3 states that an arbitrator will consider an objection made under Rule 30.2 and make an order on such terms as he or she considers just.

The Arbitrator, in refusing to combine the two arbitrations, never referenced Rule 30. The two proceedings certainly had facts in common: the same applicant, the same accident and the same benefit claims. The arbitrations certainly had a policy in common, as upheld by the Supreme Court of Canada, “to provide timely delivery of benefits to all persons injured in car accidents in Ontario.” The Arbitrator’s refusal to combine the arbitrations meant Intact was unfairly precluded from the preliminary issue, the resolution of which directly affected it.

In exercising her discretion not to combine the two arbitrations, the Arbitrator acted on wrong principles. She failed to give sufficient weight to relevant considerations. Her discretion was not exercised judicially and was contrary to the principles of fairness and natural justice.

On the consent of all parties, I find that the Arbitrator erred in law in not combining the two arbitrations. I thus combine the arbitration files Cankaya and Unifund Assurance Company (FSCO A14-009220) and Cankaya and Intact Insurance Company (FSCO A14-009222, under the authority of Rule 30 of the Code, the proceedings therein to be heard at the same time.

The Appellant submits that Unifund has admitted all of the essential facts necessary to create its obligation to commence payment of statutory accident benefits. Accordingly, he argues there is no need to remit this preliminary issue to arbitration. The Appellant cites Rule 1.1 of the Code and section 2 of the Statutory Powers Procedure Act, R.S.O. 1990, c. S.22, as amended, for the propostion that rules of practice should be liberally construed to secure the just and most expeditious and cost-effective determination of every proceeding on its merits.

Accordingly, the Appellant asks that I order Unifund, as the first insurer to have received his application, to start payment of whatever statutory accident benefits to which he is entitled.

The Appellant also requests an order that the issue of whether section 1.8.4 of the OAP 1 precludes the Appellant from coverage under the Unifund policy can only be decided under O. Reg. 283/95 and not as part of these arbitration proceedings.

Intact argues that the Arbitrator, in setting a coverage issue, was allowing Unifund (to cite Director Draper in Vieira) by the backdoor to have its priority issue determined in the arbitration proceeding. Under O. Reg. 283/95 she had no authority to do so. Intact’s September 16, 2015 written submissions argued that the following preliminary issues should be determined:

Is Unifund, as the first insurer to receive a completed Application for Benefits, responsible for paying benefits to the Applicant?

Subsumed in that question are the following questions:

(a) What, if any, effect does section 1.8.4 of the O.A.P. 1 have on this answer?

(b) What effect, if any, does Unifund’s decision not to commence a priority dispute under O. Reg. 283/95 have on the answer to the question?

(i) If so, does FSCO have jurisdiction to determine which insurer stands in priority to pay accident benefits to the Applicant pursuant to O. Reg. 283/95?

(ii) If not, should Cankaya and Intact (FSCO A14-009222) be dismissed for lack of jurisdiction?

Intact submits that any preliminary issue should go back to arbitration for determination. It asks that the Arbitrator’s order scheduling a hearing between it and the Appellant on February 15 and 16, 2016 be rescinded.

Unifund, at paragraphs 7, 29 and 55 of its written submissions, states it does not dispute that it held a valid contract of insurance with the Appellant under policy #PR91ABD551 on the date of the incident, subject to the terms and exclusions contained therein. It argues that the Arbitrator was correct in ordering a preliminary issue hearing “on whether the Appellant is precluded from coverage by operation of section 1.8.4 of the OAP 1.” It submits that the Commission does not have jurisdiction to determine whether Unifund, as the first insurer to receive a completed application for accident benefits, was obliged to commence payments under O. Reg. 283/95.

At oral submissions on September 25, 2015, however, all three parties eventually agreed that the correct test and a correct preliminary issue was, as held by the Supreme Court in Canada in Zurich, the “nexus” test. I agree.

In oral appeal submissions Unifund concedes there is a policy of Unifund Insurance (unlike in Danilov where there was a fraudulent pink slip). Unifund concedes there is a policy of Unifund automobile insurance (unlike in Zurich, where Chubb covered only non-motor vehicle accidents). Unifund concedes there was a valid policy of Unifund automobile insurance when the January 3, 2014 incident took place. Unifund concedes Mr. Cankaya held this valid policy of Unifund automobile insurance at the time of that incident under Policy #PR91ABD551. Unifund concedes it was the first insurer to receive Mr. Cankaya’s application for statutory accident benefits, Mr. Cankaya applying to Intact several months later in June 2014. Unifund concedes it did not access O. Reg. 283/95 to dispute its obligation to pay statutory accident benefits.

Unifund does not concede there is a nexus between it and the Appellant. Unifund does not concede that the Appellant’s choice to apply for statutory accident benefits to Unifund was anything other than entirely random and arbitrary.

This first-party dispute resolution system is intended to be expeditious, cost-efficient and just. Keeping this principle in mind, and that I am not a first-party adjudicator, I rescind the Arbitrator’s April 9, 10, 13 and 14, 2015 orders and hold as follows:

(a) The Arbitrator erred in law in not combining the arbitration files. For the reasons set out on pages 11 to 12 above, the arbitration files Cankaya and Unifund Assurance Company (FSCO A14-009220) and Cankaya and Intact Insurance Company (FSCO A14-009222), on the consent of all three parties, are combined under the authority of Rule 30 of the Dispute Resolution Practice Code (Fourth Edition – Updated January 2014), the proceedings therein to be heard at the same time.

(b) On the consent of all three parties, any further arbitration pre-hearings or hearings in these matters shall be heard by an arbitrator other than Arbitrator Davies.

(c) The Arbitrator erred in law in setting a coverage issue between Unifund and the Appellant. In accordance with the Supreme Court decision in Zurich and for the reasons set out at pages 4 to 11 above, a preliminary arbitration hearing will be held in the two combined arbitration files on whether there is a nexus (that is, some connection that is not totally random or arbitrary) between the Appellant, Mr. Murat Cankaya, and the Respondent, Unifund Assurance Company, the acknowledged first insurer to receive an application for statutory accident benefits under the 2010 Schedule.

At the same time, any other preliminary arbitration issues can be addressed, such as the causation issue Unifund raises in this appeal and the Appellant’s request for an interim benefit payment order against Unifund.

(d) The Arbitrator’s order that the present main arbitration hearing scheduled for February 15 and 16, 2016 is not rescinded. Rather, those dates should be kept as a target for determination of the Appellant’s entitlement to statutory accident benefits with the appropriate insurer.

IV. LEGAL EXPENSES

My September 21, 2015 e-mail to the parties stated that in the absence of any offer to settle to be considered, the parties should be prepared at the September 25, 2015 oral hearing to speak to both entitlement to and the quantum of appeal legal expenses.

Oral submissions included discussion of whether a Bullock or Sanderson order⁴ was appropriate. Further written expense submissions were received by October 19, 2015. All three parties seek their appeal expenses.

Rule 75.2 of the Code sets out the criteria to be considered in awarding legal expenses. I find the following criteria relevant to these combined appeals:

Each party’s degree of success in the outcome of these appeals.
The conduct of a party or a party’s representative that tended to prolong, obstruct or hinder the proceeding, including a failure to comply with undertakings and orders.
Whether any aspect of the appeal proceedings was improper, vexatious or unnecessary.

Mr. Miller, representing Intact, has persuaded me that Unifund should be responsible for the legal expenses of these appeals.

Whatever the ultimate result in arbitration, the Appellant has been successful in rescinding the Arbitrator’s April 9, 10, 13 and 14, 2015 Orders. Intact supported these appeals. Unifund raised arguments on appeal that were irrelevant, unnecessary and that tended to prolong, obstruct or hinder the proceeding. After a recitation of the facts, Unifund set out its legal argument at paragraphs 20 to 57 of its September 15, 2015 written submissions:

Paragraphs 20 to 28 sets out cases where coverage was the central issue. After an hour and a half of oral argument, Unifund conceded the nexus test endorsed by the Supreme Court of Canada five months prior, on April 21, 2015, was binding. The Court supported, among other cases, that of Director Draper in Vieira that “[d]istinguishing between coverage disputes and disputes over insurer priority is artificial.” Accordingly, just as this Commission has no jurisdiction to determine priority, in priority cases it has no jurisdiction to determine coverage.
Paragraph 30 submits that cases such as Bianca and Danilov are not of assistance as the insurer in those cases did not rely on a specific policy exclusion. The implication of this submission is that a forged pink slip (as in Danilov) or that the injured person was not an insured person under the policy (as in Vieira) form a stronger nexus than an injured person claiming under his own her own policy of automobile insurance.
Paragraphs 31 to 38 and 57 address a causation issue, whether a car engine exploding while being worked on is an incident in which the use or operation of an automobile directly caused an impairment. That issue was not before me. The Arbitrator did not determine such an issue. The Arbitrator did not set a hearing to determine any such issue.
Paragraphs 39 to 45 argue that these appeals from preliminary decisions should not be accepted. However, Unifund had already conceded the Arbitrator erred in law in not combining the two arbitrations. My June 22, 2015 letter, three months before these September 15, 2015 written submissions, had accepted these appeals.

At paragraph 45 of its written submissions Unifund submits “this is not an appropriate case for the Director to exercise his discretion to accept this appeal as it fails to raise a novel issue.” However, at paragraph 30 Unifund argues that this case is novel as it involves a specific policy exclusion.

Paragraph 46 addresses the severing of issues under Rule 31 of the Code. This provision was neither mentioned by the Arbitrator nor is it relevant.
Paragraphs 47 to 51 argue that deference should be given to an adjudicator’s exercise of discretion. However, an adjudicator does not have independent discretion to act on a wrong principle, give insufficient weight to relevant considerations or make a decision that might result in injustice or act non-judicially contrary to the principles of fairness and natural justice.
Paragraphs 52 to 54 argue, contrary to the case law accepted by the Supreme Court in Zurich, that the Commission does not have jurisdiction to determine whether the first insurer to receive a completed application for accident benefits was obliged to commence payments of benefits under O. Reg. 283/95.

Accordingly, I order that Unifund pay both the Appellant and the Respondent Intact their reasonable expenses of these appeals.

Intact sought $2,041.28 in legal fees for 20 hours spent on these appeals. Unifund did not object to this amount, having claimed 29 hours for an account of $3,129.43. I allow Intact’s claim.

The Appellant sought a corrected 43.6 hours for these appeals, plus 1.5 hours to review and respond to the Respondents’ written expense submissions subsequent to the oral submissions.

The quantum of the Appellant’s account is objected to for the following reasons:

The costs claimed (in Intact’s submission) on this “straightforward, technical appeal on a clear error of law” are unreasonable and excessive given the circumstances and (in Unifund’s submission) the hours claimed are inordinate, excessive, unreasonable and disproportionate to the narrow appeal issues or were spent on extraneous matters or wasted on the combining matter to which the Respondents agreed.
A line-by-line review of the Bill of Cost show excessive hours being claimed.

These appeals should have been simple and expeditious with a minimum of cost. They were not.

Under the authority of Rule 57 of the Code, I set a telephone preliminary conference for May 20, 2015 to address the appropriate procedure to attain the most just, quickest and least expensive resolution of these appeals. At the telephone conference (as my June 11, 2015 letter confirmed), Mr. Camporese indicated he needed to receive instructions from his principal, Unifund.

My June 11, 2015 letter confirmed this office had heard nothing from Mr. Camporese. His office dockets, submitted at the September 25, 2015 oral hearing in support of Unifund’s claim for its appeal expenses, show six e-mail or telephone exchanges billed with a Ms. Melinda McLean between May 6 and 13, 2015 (all before the May 20, 2015 telephone conference and all billed at $335 an hour, rather than $110 noted in some other entries). The next communication with Ms. McLean is June 15, 2015 (after my June 11, 2015 fax). All other entries during this period note communication with the other counsel or with this office, excepting a confirmation of the client paying a $4,236.25 bill on June 5, 2015.

My June 11, 2015 letter noted that neither Respondent had met the June 5, 2015 deadline for delivering their Responses to Appeal. In setting an in-person preliminary conference under the authority of Rule 57, I noted my power to award interim legal expenses directly against counsel. My June 16, 2015 letter confirmed that counsel attend with full binding authority. At the June 17, 2015 discussion, in part, I extended the time for delivery of the Responses to Appeal, leaving the legal expenses of that decision to the conclusion of these appeals.

Arbitrator Makepeace confirmed in Henri and Allstate Insurance Company of Canada, (OIC A‑007954, August 8, 1997) that a line-by-line assessment of the expenses claimed was not appropriate. Rather, a global assessment of reasonable expenses should be made.

Neither Respondent objected to the Appellant’s hourly rate of $150 for his counsel. In my view, that amount is more than warranted.

Consistent with Henri, I am not engaging in a line-by-line assessment. Unifund does not take exception to Intact claiming 20 hours for essentially saying “me too” to the Appellant’s arguments. I find 45 hours for the Appellant in the circumstances to be reasonable especially in light of Unifund’s arguments on appeal that were irrelevant, unnecessary and tended to prolong, obstruct or hinder the proceeding or, as Intact succinctly put it, were “a waste of time.”

45 hours at $150 an hour, plus HST, equals $7,627.50. I find the claimed disbursements of $942.98 (including $500 for filing the two Notices of Appeal) reasonable. Accordingly, I award the Appellant his legal expenses in the amount of $8,570.48.

IV. Finding of Possible Unfair or Deceptive Business Practice

In oral submissions, the Appellant noted that Unifund was involved in a prior O. Reg. 283/95 case in Danilov. In that case Unifund referred to the nexus test, now supported by the Supreme Court of Canada as well as the Ontario Court of Appeal, as “infamous.”

The Superintendent’s 2009 recommendation, six years ago, was that it be made more difficult for insurers to deflect claims to ensure that claimants receive accident benefits while the issue of liability for a claim is resolved. The Superintendent noted that “[s]ome court decisions have criticized insurance companies for the way they handle these claims.”

Section 288 of the Insurance Act provides:

Finding of possible unfair or deceptive business practice

The Director shall review arbitration orders and may recommend to the Superintendent that the Superintendent investigate the business practices of an insurer if the Director is of the opinion that any one or more arbitrations or appeals from arbitrations reveal unfair or deceptive business practices. R.S.O. 1990, c. I.8, s. 288; 1996, c. 21, s. 43.

Under subsection 6(4) of the Insurance Act, R.S.O. 1990, c. I. 8, the Director of Arbitrations’ powers were delegated to me to hold hearings on the Director’s behalf and exercise his powers and perform his duties relating to such hearings.

The Director’s duties under section 288 of the Insurance Act were not delegated to me.