Financial Services Commission des
Commission services financiers
of Ontario de l’Ontario
Neutral Citation: 2016 ONFSCDRS 178
FSCO A15-002228
BETWEEN:
VINCENT SINCLAIR
Applicant
and
UNIFUND ASSURANCE COMPANY
Insurer
DECISION ON A PRELIMINARY ISSUE
Before: Arbitrator John Wilson
Heard: February 5, 2016 in London, Ontario
Appearances: Mr. Sinclair on his own behalf
Laura B. Zeleznik for Unifund Assurance Company
Issues:
The Applicant, Vincent Sinclair, was injured in a motor vehicle accident on April 27, 2013. He applied for statutory accident benefits from Unifund Assurance Company (“Unifund”), payable under the Schedule.1 The parties were unable to resolve their disputes through mediation, and Mr. Sinclair applied for arbitration at the Financial Services Commission of Ontario under the Insurance Act.2
SINCLAIR and UNIFUND
FSCO A15-002228
The preliminary issue is:
- Is Mr. Sinclair precluded from proceeding to arbitration because the sole issue in his application for arbitration, entitlement to non-earner benefits, was not the subject of a mediation, nor was it the subject of an application for benefits made to Unifund?
Result:
- Mr. Sinclair is precluded from proceeding to arbitration because the sole issue in his application for arbitration, entitlement to non-earner benefits, was not the subject of a failed mediation.
EVIDENCE AND ANALYSIS:
There is no doubt raised that Mr. Sinclair was involved in a motor vehicle accident, which resulted in serious damage to his car.
Nor is there any doubt that Mr. Sinclair was insured by Unifund, who would be responsible for any claims that he made under the Statutory Accident Benefits Schedule. It is just such a claim for accident benefits that has caused Mr. Sinclair to apply for arbitration of a dispute between himself and Unifund.
According to his Application for Arbitration, which forms part of the record of this proceeding, Mr. Sinclair is claiming a non-earner benefit from Unifund on the basis that he is not employed but has sustained a complete inability to carry on a normal life because of the accident.
Putting aside the Insurer’s concerns that Mr. Sinclair may have represented at the outset of the claim that he was both self-employed, and not suffering any consequences from the accident that prevented him from working, the principal problem raised by the Insurer, and the most relevant to this hearing is the allegation that the issue of non-earner benefits was not mediated and therefore cannot be referred to arbitration.
Mr. Sinclair in his submissions also suggests that Unifund failed in its obligation to advise him as to the potential election between income benefits and non-earner benefits, and that as a result that election should somehow defer by default to a non-earner benefit.
While it is axiomatic that an accident benefit insurer should treat its clients with utmost good faith, I am unable to find any support in the current legislation or the jurisprudence for the default to non-earner benefits as put forward by Mr. Sinclair.
Nor is there any evidence that Unifund failed to provide any of the required forms or basic information that it was obliged to under the Schedule.
In any event, while Unifund’s initial handling of the file may have had some shortcomings, these would be of little assistance to Mr. Sinclair in this hearing since the sole issue is whether or not he met the legislative pre-condition of mediating an issue before referring it to arbitration.
Mr. Sinclair acknowledges that the mediator’s report refers to an issue of entitlement to income replacement benefits and not non-earner benefits but submits that there was a mediation, albeit on another issue, but in any event, since Unifund has failed to pay him the benefits he claims, it is in breach of the insurance contract and cannot therefore rely on “exclusion clauses” contained in the contract. Mr. Sinclair construes the mediation prerequisite to access to arbitration as one of the exclusionary clauses that would be invalidated by what he appears to believe is a “fundamental breach” of the insurance contract.
In the event that I do not accept the theory of fundamental breach with regard to Mr. Sinclair’s claim, Mr. Sinclair further requests what is in essence a relief from forfeiture; that I somehow waive the requirement that he mediate the issue of non-earner benefits, prior to commencing an arbitration.
For the reasons that follow, I am unable to make the orders requested by Mr. Sinclair. Rather, I accept that Unifund is correct in law, and that for this arbitration to proceed, Mr. Sinclair would have been required to mediate the issue of non-earner benefits.
While Mr. Sinclair is correct in his analysis that in accordance with section 266(1) of the Insurance Act, statutory accidents benefits form part of his insurance contract. They are a hybrid provision that is also grounded in legislation and have an existence that can be independent of the insurance contract itself. This hybrid nature allows persons, such as pedestrians who are not parties to any insurance contract to access the insurance policy covering a motor vehicle which is involved in a collision with them.
Mediation is part of the statutory dispute resolution scheme set up by the Insurance Act to deal with disputes over statutory accident benefits. Section 281 (2) of the Insurance Act is quite clear. It states:
No person may bring a proceeding in any court, refer the issues in dispute to an arbitrator under section 282 or agree to submit an issue for arbitration in accordance with the Arbitration Act, 1991 unless mediation was sought, mediation failed and, if the issues in dispute were referred for an evaluation under section 280.1 the report of the person who performed the evaluation has been given to the parties.
Although given the infinite creativity of litigants, work-arounds have been attempted, the jurisprudence is also clear that: “Mediation is central to the statutory scheme for resolving disputes between insured persons and their insurers and is a statutory precondition to an insured bringing court proceedings.” ( Hourigan J.A. Madder v. South Easthope Mutual Insurance Co. , 2014 ONCA 714).
There was a mediation in this dispute, and a report of a mediator was issued.
The mediation report in this matter states on its face that income replacement benefits were mediated. There is no mention of non-earner benefits. Patently, they were not mediated.
Notwithstanding the possibility of meeting the mediation requirement based on a generic mediation as suggested by Charbonneau J. in Woodman (Woodman v. State Farm Mutual Automobile Insurance Co. [1999] O.J. No. 521) more recent jurisprudence has been more closely aligned with the position taken in Madder - requiring some evidence of a failed mediation relating to the issue to be referred to arbitration or the courts.
According such importance to mediation means that section 281(2) ought to be read carefully to bring out the obvious implication that the mediation that must take place, is the mediation of the issue in question, not some generic mediation on an un-related subject. Given the significant differences between an income replacement benefit and a non-earner benefit, the mediation in question in this matter cannot but be seen as unrelated. Accordingly, there was no mediation of non-earner benefits.
Charbonneau J. in Woodman (supra) issued an order dispensing with the requirement of mediation. Unfortunately, as a statutory arbitrator, I do not have either the jurisdiction or the inherent authority of a superior court judge to grant such an order.
Mr. Sinclair’s request for relief from forfeiture must also be declined for the same reason.
Section 129 of the Insurance Act provides for such relief to be granted only by superior court judges, not arbitrators.
However, even if I had the jurisdiction to make such an order, I would not be inclined to do so since relief from forfeiture deals with curing incomplete compliance; “Where there has been a failure to comply with a condition for receipt of insurance proceeds and where leniency in respect of strict compliance with the condition will not result in prejudice to the insurer” in the words of McLachlin,J in Falk Brothers. (Falk Bros. Industries Ltd. v. Elance Steel Fabricating Co., 1989 CanLII 38 (SCC), [1989] 2 S.C.R. 778).
It is difficult to accept that applying for and mediating a different accident benefit is incomplete compliance with a condition for the receipt of insurance proceeds. Rather it is complete compliance with the mediation pre-condition to apply for arbitration on the issue of income replacement benefits.
Nor is it possible to amend the application for benefits and applications for mediation and arbitration at this time. The un-contradicted evidence before me is that there was never an application to the insurer for a non-earner benefit, nor a completed disability certificate related to the non-earner benefits, notwithstanding that section 32 of the Schedule requires notice of a claim for benefits within seven days of the circumstances giving rise to entitlement. Likewise, section 36(2) requires a disability certificate to be provided in the same time frame. The evidence before me is that neither has been provided to the Insurer. Therefore, even if the application were amended to add a claim for non-earner, such a claim would have no hope for success.
If we look at potential prejudice to the Insurer from adding an issue at this late date, the situation becomes even more untenable, since we are now some three years post-accident and the Insurer has been denied the opportunity to investigate and adjust this new claim over that period of time. I also note that Mr. Sinclair has provided no credible explanation for his failure to bring forward the non-earner claim in a timely manner. Consequently, any amendment request will be declined.
The issue of “fundamental breach” raised by Mr. Sinclair also goes nowhere. Although there is an attractive aspect to Mr. Sinclair’s forceful arguments, his position relies on several points that are somewhat problematic;
Mr. Sinclair assumes that the mediation pre-condition is a contractual term that constitutes a limitation clause to his insurance contract.
Mr. Sinclair assumes, without proving, that the terms of the insurance policy were fundamentally breached by the Insurer.
Mr. Sinclair believes that the doctrine of fundamental breach forms part of the current law of Ontario.
Lord Denning, drawing on the decision of the House of Lords in Suisse Atlantique Societe d'Armament SA v. NV Rotterdamsche Kolen Centrale [1967] 1 AC 361, commented that it:
...affirms the long line of cases in this court that when one party has been guilty of a fundamental breach of the contract ... and the other side accepts it, so that the contract comes to an end ... then the guilty party cannot rely on an exception or limitation clause to escape from his liability for the breach. (Harbutt's "Plasticine" Ltd v Wayne Tank & Pump Co Ltd [1970] 1 Q.B. 447.)
Dickson J, speaking for the Supreme Court, summarised the meaning of the doctrine as follows:
A fundamental breach occurs where the event resulting from the failure of one party to perform a primary obligation has the effect of depriving the other party of substantially the whole benefit that the parties intended should obtain from the contract. Fundamental breach represents an exception to the rule that the contract continues to subsist and that damages be paid for the unperformed obligation for it gives the innocent party an election to put an end to all unperformed primary obligations of both parties. This exceptional remedy is available only where the very thing bargained for has not been provided.
Unfortunately for Mr. Sinclair, the doctrine has suffered some rude reverses, both in England (Photo Production Ltd v Securicor Transport Ltd [1980] UKHL 2) and Canada. The doctrine of fundamental breach has been put out to pasture, once and for all, by the Supreme Court in Tercon (Tercon Contractors Ltd. v. British Columbia Transportation and Highways, 2010 SCC 4).
Instead, the Supreme Court has specifically accepted that exclusion clauses can remain valid even in the face of breach of the underlying contract and has created a three-step test to evaluate the application of exclusion clauses. The first step is to evaluate the exclusion clause in the factual context of each case to determine if it applies to the material circumstances. The second step is to evaluate if the exclusion clause was unconscionable at the time of incorporation. The final step is to evaluate whether the exclusion clause should not be enforced on public policy grounds.
Given that the “exclusion” in question has an independent statutory existence outside of the insurance contract, it is hard to suggest that it is even a true exclusion clause, and even harder to argue that an element of the Insurance Act should be found to be either unconscionable or unenforceable on public policy grounds . I find, therefore, that the mediation pre-condition is not an exclusion clause, and even if it was, it would be enforceable as a matter of public policy.
The mediation pre-condition to arbitration and litigation is not meant to be a burden or an obstacle to accident benefit claimants. Rather, it ought to give both parties an opportunity to air their differences and hopefully narrow or resolve their disputes in a collaborative manner with the assistance of an experienced mediator. There should have been no prejudice to Mr. Sinclair by insisting that he mediate his dispute.
It is hard to know whether mediation would have helped Mr. Sinclair in resolving his non-earner claim. What matters now, however, is that the absence of that mediation means that he is barred from bringing forward that claim to arbitration, and I so find. Consequently Mr. Sinclair’s arbitration application is dismissed for failure to mediate the claim of entitlement to non-earner benefits being brought forward.
EXPENSES:
The parties did not address the issue of expenses during the hearing. While Unifund might expect to recover some of its costs since it was successful in this preliminary issue hearing, I note that Mr. Sinclair was co-operative and assisted in keeping the hearing process timely and efficient.
If the parties are unsuccessful in working out any dispute as to expenses, a request may be made to the Commission to determine that issue. To that end, brief written submissions together with a summary of the expenses being claimed must be served and filed within 14 days of the issuance of this decision. Otherwise, both parties will absorb their own costs.
June 23, 2016
Arbitrator
Date
Financial Services Commission des
Commission services financiers
of Ontario de l’Ontario
Neutral Citation: 2016 ONFSCDRS 178
FSCO A15-002228
BETWEEN:
VINCENT SINCLAIR
Applicant
and
UNIFUND ASSURANCE COMPANY
Insurer
ARBITRATION ORDER
Under section 282 of the Insurance Act, R.S.O. 1990, c.I.8, as amended, it is ordered that:
Mr. Sinclair is precluded from proceeding to arbitration because the sole issue in his application for arbitration, entitlement to non-earner benefits, was not the subject of a mediation.
If the parties are unable to resolve the issue of expenses, a request may be made to the Commission to determine that issue. To that end, brief written submissions together with a summary of the expenses being claimed must be served and filed within 14 days of the issuance of this decision. Otherwise, both parties will absorb their own costs.
June 23, 2016
Arbitrator
Date
Footnotes
- The Statutory Accident Benefits Schedule - Effective September 1, 2010, Ontario Regulation 34/10, as amended.
- Insurance Act, R.S.O. 1990 c.I.8, as it read immediately before being amended by Schedule 3 to the Fighting Fraud and Reducing Automobile Insurance Rates Act, 2014, and Regulation 664, R.R.O. 1990, as amended.