Dharam Sidhu v. Aviva Canada Inc., 2017 ONFSCDRS 203

Financial Services Commission of Ontario

Commission des services financiers de l’Ontario

Neutral Citation: 2017 ONFSCDRS 203

Appeal P17-00014

OFFICE OF THE DIRECTOR OF ARBITRATIONS

DHARAM SIDHU Appellant

and

AVIVA CANADA INC. Respondent

BEFORE: Delegate Jeffrey Rogers

REPRESENTATIVES: Mr. Kevin Doan, solicitor for Mr. Sidhu Mr. Robert H. Rogers, solicitor for Aviva

HEARING DATE: On the record, by written submissions completed on June 26, 2017

APPEAL ORDER

Under section 283 of the 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, it is ordered that:

1. This appeal is dismissed.

2. If the parties are unable to agree about expenses of this appeal, an expense hearing may be arranged in accordance with Rule 79 of the Dispute Resolution Practice Code.

July 21, 2017

Jeffrey Rogers Director’s Delegate

Date

REASONS FOR DECISION

I. NATURE OF THE APPEAL

Mr. Sidhu appeals the Arbitrator’s order of February 3, 2017. He submits that the Arbitrator erred in finding that the Full and Final Release (FFR) he signed on December 2, 2003, precludes him from proceeding to arbitration. He submits that the Arbitrator incorrectly ruled that she was bound by the Ontario Court of Appeal to conclude that the Settlement Regulation¹ does not apply to a settlement of accident benefits reached during a court proceeding.

For the reasons that follow, I agree with the Arbitrator’s conclusion. This appeal is therefore dismissed.

II. BACKGROUND

Mr. Sidhu is currently the applicant in three arbitration proceedings before the Commission. They arise from three automobile accidents which occurred August 4, 1990, January 19, 1994 and March 10, 1997. This appeal relates to the first accident.

At the time of the accident, Mr. Sidhu was insured by General Accident Assurance Company, since subsumed by Aviva. Mr. Sidhu applied for and was paid accident benefits. Income Replacement Benefits (IRBs) were terminated in 1993 and Mr. Sidhu applied for mediation. After mediation failed, he brought an action in the Ontario Court (General Division). The parties negotiated a settlement of the action. The action was dismissed, on consent, on December 1, 2003 and Mr. Sidhu signed the FFR on December 2, 2003.

In the FFR, Mr. Sidhu released Aviva from “all actions, causes of actions, damages, claims and demands whatsoever which I ever had, now have or which I… may have with respect to any past or future claims under Parts I through VIII of The Statutory Accident Benefits Schedule – Accidents before January 1, 1994 against Aviva”.

In February 2014, Mr. Sidhu purported to rescind the 2003 settlement and indicated that he intended to claim further IRBs. Aviva refused to pay. He applied for arbitration after mediation did not resolve the dispute. The pre-hearing Arbitrator referred two preliminary issues for hearing:

1. Should Arbitration proceed, as the Applicant signed a Full and Final Release (“FFR”) on December 2, 2003?

2. Should the Applicant’s claim for entitlement to income replacement benefits be time-barred, as this benefit was stopped by Aviva on July 30, 1993?

The Arbitrator decided the arbitration could not proceed. As a result, she found it unnecessary to decide the second issue.

The Arbitrator reasoned that Mr. Sidhu could only rescind the settlement if the Settlement Regulation applied and it was breached. She ruled that the Settlement Regulation does not apply and therefore any breach of it by Aviva was irrelevant. She found that the decisions by the Court of Appeal in Walker v. Allstate Insurance Company² and in Igbokwe v. HB Group Insurance Management³ dictate that conclusion. She found that amendments to the Settlement Regulation after those cases were decided do not change the result and she rejected Mr. Sidhu’s submission that Igbokwe and Walker were not decided in the context of interpretive principles applicable to consumer protection legislation.

III. ANALYSIS

Igbokwe and Walker are binding

I agree with the Arbitrator that the decisions in Igbokwe and Walker dictate the result in this case and I endorse her reasons. Igbokwe and Walker are binding decisions which cannot be distinguished on the facts or avoided by any subsequent changes in the law.

In Igbokwe the issue was whether the parties agreed to settle the plaintiff’s action for accident benefits upon payment of $45,000, plus costs. The insurer claimed that there was a settlement and moved for judgment under Rule 49 of the Rules of Civil Procedure. The motions judge dismissed the motion on the grounds that the settlement did not comply with the Settlement Regulation. The Court of Appeal reversed the decision. The Court held that the insurer made an offer that complied with the requirements of Rule 49, that the plaintiff accepted the offer and compliance with the Settlement Regulation is not required once an action is commenced. The Court stated:

Rule 49 is intended to encourage settlements of litigation and it carries costs consequences. Section 9.1 (of the Settlement Regulation) is not concerned with offer, acceptance and cost consequences, but rather with the right of rescission within a cooling-off period once an agreement between the insurer and a claimant has been reached for benefits (SABs). Its purpose is to provide a claimant with adequate information prior to the commencement of an action in order to avoid a quick and uninformed decision as to the benefits the claimant is entitled to receive from the insurer. Once an action is commenced, any such relevant information would be available in the course of litigation, something an insured would not otherwise be entitled to receive but for the requirements of s. 9.1.⁴

The Court of Appeal considered the issue again in Walker. In this case, the parties participated in a private mediation and settled the plaintiff’s two actions for accident benefits. The plaintiff later moved for an order that the settlement could be rescinded for failure to comply with the Settlement Regulation. The motion was granted. The Court of Appeal again reversed the decision. The Court again held that the Settlement Regulation does not apply once an action has been commenced.

There is one difference between Igbokwe and Walker, relevant to the outcome in this case. In Igbokwe, the Court specifically found that the insurer’s offer complied with the requirements of Rule 49. In Walker, the settlement was negotiated in mediation and there was no Rule 49 offer. The plaintiff submitted that Igbokwe only applied where there was a Rule 49 offer. The Court rejected this submission:

The respondent submits that Igbokwe is limited to Rule 49 [of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194] offers. I would reject that submission. In my view, it is clear from the passages quoted above that if litigation has been commenced, s. 9.1 of the regulation has no further effect.⁵

Mr. Sidhu conceded on appeal that Igbokwe and Walker hold that the Settlement Regulation does not apply, once an action has been commenced. However, he now submits that these cases can be distinguished because of a new interpretive argument the Court did not consider. Namely that Rule 49 is subordinate to s. 279 of the Insurance Act, and therefore to the Settlement Regulation. Assuming that one can “distinguish” binding precedent on the basis of an argument the appellate body did not consider, this submission is rejected for two reasons.

First, the Court considered and rejected the relevance of s. 279 in Igbokwe. The Court stated:

The respondent also submits that the insurer was required to comply with s. 9.1 because of s. 279 of the Insurance Act.

In my view, s. 279 and hence s. 9.1 of the regulations have no application once the parties are in litigation.⁶

Second, Walker removes Rule 49 from the analysis. In that case there was no Rule 49 offer. The only requirement for exclusion of the Settlement Regulation is that the settlement occurred after an action was commenced.

Smith[^7] does not change result

I reject Mr. Sidhu’s submission that the decision of the Supreme Court of Canada in Smith v. Co-operators General Insurance Company established new interpretive principles that were not considered in Igbokwe and Walker and which dictate a different result. The Arbitrator rejected this submission, stating:

I am also not persuaded by the Applicant’s argument that the Igbokwe and Walker cases were not decided in the context of interpretive principles applicable to consumer protection legislation. The Court of Appeal in Igbokwe and Walker is clearly concerned with the policy underpinning of the accident benefits system. The Court of Appeal in Igbokwe, for instance, affirms at paragraphs 20 and 23 the intent to protect the right of an insured person to obtain information. Further, in the same decision in paragraph 15, the Court of Appeal referred to the decision of Jennings J. in Kibalian and the references there to legislative purpose and the distinction between litigation and accident benefits dispute resolution.

I agree with the Arbitrator that the Court addressed the issue of consumer protection in Igbokwe and Walker. The Court concluded that the consumer protection issues that the Settlement Regulation is intended to address are not engaged in the context of settlement of a court action.

I would add this: Smith did not create a new environment. When Smith was decided, the consumer protection principles were already so well established that there was no dispute. The Court stated:

There is no dispute that one of the main objectives of insurance law is consumer protection, particularly in the field of automobile and home insurance. The Court of Appeal was unanimous on this point and the respondent does not contest it.⁸

The same Court that decided Igbokwe and Walker had already determined that consumer protection principles applied to the interpretation of insurance law. Further, Smith does not provide a cure for all unfavourable results for insured persons. What Mr. Sidhu suggests is not interpretation. He points to nothing in the language of the Settlement Regulation that can be interpreted to mean something different from what was found in Igbokwe and Walker. He simply states that a different result protects the consumer. That requires legislation, not interpretation.

No contractual right to compliance with Settlement Regulation

Mr. Sidhu submits that the agreement to settle required compliance with the Settlement Regulation. At the time of the settlement, Mr. Sidhu executed both an FFR and a Settlement Disclosure Notice (SDN) that Aviva sent him. Aviva disputes that execution of the SDN was a term of the settlement. The Arbitrator rejected this argument because the facts are the same as in Walker, where the plaintiff also executed an SDN. She stated:

Aviva submits that the facts of Walker are similar to the facts of this case, the essential elements being a negotiated settlement, a Release and SDN provided by the Insurer and signed by the Insured, and consent to the action being dismissed. The allegation in Walker, as here, was that the SDN was non-compliant and an application was brought for a declaration that the settlement agreement had been rescinded. The Court of Appeal held that the right to rescind contained in the Settlement Regulation did not apply in these circumstances.⁹

I agree with the Arbitrator. I do not accept Mr. Sidhu’s submission that Walker can be distinguished on the grounds that the Court did not consider the argument that the right to compliance with the Settlement Regulation arose from a contract between the parties. Rejection of that argument is implicit in the Court’s decision. Further, even if execution of the SDN were a term of the contract, that does not mean that any deficiencies in the SDN would give Mr. Sidhu a right to rescind the settlement. There is no suggestion that there was any agreement to incorporate the entire Settlement Regulation.

Where the Settlement Regulation applies, the right to rescind after the cooling off period is not derived from execution of the SDN. It is derived from other provisions in the Settlement Regulation that allow rescission where the insurer has breached the disclosure requirements. Here, the right would have to arise from the terms of the contract or from a rule of law of general application that gives a right to rescind a contract. There is no suggestion that the parties agreed to include a right to rescind, or that any general rule of law applies.

Amendments to Settlement Regulation do not change result

Mr. Sidhu submits that amendments to the Settlement Regulation after the decisions in Igbokwe and Walker mean that its provisions now apply to settlements made in the context of court actions. The Arbitrator rejected this submission. She stated:

The Applicant submits that these amendments indicated that the Settlement Regulation applies to all Arbitration and litigation proceedings. I disagree. It was open to the legislature to make that specific change to explicitly overrule the line of cases in the Court of Appeal. It did not do so.¹⁰

I agree with Mr. Sidhu that the Legislature was not required to explicitly “overrule” Igbokwe and Walker in order to change the principle they established, but I agree with the Arbitrator that the amendments do not mean that the Settlement Regulation now applies to all settlements in the context of court actions.

Before looking at the relevant amendments, I note that the Legislature did not change the definition of a “settlement” in s. 9.1 (1) of the Settlement Regulation. This is the section that the Court considered in Igbokwe and Walker. It remains “an agreement between an insurer and an insured person that finally disposes of a claim or dispute in respect of the insured person’s entitlement to one or more benefits under the Statutory Accident Benefits Schedule.” On its face, the definition applies to all settlements, but the Court in Igbokwe and Walker, taking a purposive approach, found that it does not apply to settlements in the context of a court action.

The relevant amendments are found in sections 9.6 (10) and 9.6 (11) of the new Settlement Regulation:

(10) A restriction on an insured person’s right to mediate, litigate, arbitrate, appeal or apply to vary an order under sections 280 to 284 of the Act is not void under subsection 279 (2) of the Act if,

(a) the restriction is contained in a settlement;

(b) the settlement is entered into on or after the first anniversary of the day of the accident that gave rise to the claim; and

(c) the insurer complied with subsections (2) and (3).

(11) Despite clause (10) (b), a restriction contained in a settlement entered into before the first anniversary of the day of the accident that gave rise to the claim is not void under subsection 279 (2) of the Act if, in respect of the claim,

(a) the insured person brought a proceeding in a court of competent jurisdiction under clause 281 (1) (a) of the Act and examinations for discovery have commenced;

(b) the insured person referred the issues in dispute to an arbitrator under clause 281 (1) (b) of the Act and a pre-hearing conference has been completed; or

(c) the insurer and the insured agreed under clause 281 (1) (c) of the Act to submit the issues in dispute for arbitration in accordance with the Arbitration Act, 1991 and an arbitration agreement under that Act has been entered into.

Section 9.6 (10) clearly prohibits all settlements before the first anniversary of the accident that gave rise to the claim. The parties agree that this section applies to settlements made in the context of a court action. That could be its only meaning in view of the exception that s. 9.6 (11) creates. Section 9.6 (11)(a) exempts settlements made before the first anniversary of the accident, in the context of a court action, where examinations for discovery have commenced. I agree with Mr. Sidhu that the exemption only makes sense if s. 9.6 (10) applies to all settlement. However, I do not accept his logic that the amendments overrule Igbokwe and Walker.

Mr. Sidhu’s approach would mean that a settlement in the context of a court action, made before the first anniversary of the accident, avoids compliance with the Settlement Regulation upon commencing discoveries. Whereas, a settlement made in identical circumstances after the first anniversary must provide the additional disclosure that the Settlement Regulation requires. Those are the facts in this case. If possible, the amendments must be interpreted to avoid that absurd result.

I agree with Aviva that the amendments must be interpreted in the context of the exception that Igbokwe and Walker established. In that context, sections 9.6 (10) and 9.6 (11) are seen to recognize the mischief of premature settlements, but also acknowledge that the mischief is diminished in the context of a court action, as the Court did in Igbokwe and Walker. I agree with Aviva that, having recognized that settlements in the context of court actions require less protection, the Legislature would have employed specific, clear and unambiguous language, if it also intended to erode the exception that Igbokwe and Walker created.

To summarize, I reject Mr. Sidhu’s submissions that Igbokwe and Walker can be distinguished, that he has a contractual right to rescind the settlement, and that Smith and the amendments to the Settlement Regulation change the result. I agree with the Arbitrator that he is precluded from proceeding to arbitration and I therefore dismiss this appeal.

IV. EXPENSES

If the parties are unable to agree about expenses of this appeal, an expense hearing may be arranged in accordance with Rule 79 of the Dispute Resolution Practice Code.

July 21, 2017

Jeffrey Rogers Director’s Delegate

Date

Footnotes

1. 1R.R.O. 1990, Reg. 664
2. 22002 CanLII 44970 (ON CA), [2002] O. J. No. 2140
3. 3(2001), 2001 CanLII 3804 (ON CA), 55 O.R. (3rd) 313 (Ont. C.A.)
4. 4At paragraph 19
5. 5At paragraph 8
6. 6At paragraphs 21 and 22
7. 8At paragraph 11
8. 9At page 10
9. 10At page 12
10. 7Smith v. Co-operators General Insurance Company 2002 SCC 30, [2002] 2 S.C.R. 129