Neutral Citation: 2017 ONFSCDRS 54

FSCO A15-008874

BETWEEN:

(WAYNE) REGINALD SMITH Applicant

and

AVIVA CANADA INC. Insurer

DECISION ON A PRELIMINARY ISSUE

Before: Arbitrator Janette Mills

Heard: In person at ADR Chambers on April 29, 2016 and December 8, 2016

Appearances: Mr. (Wayne) Reginald Smith participated Mr. Stanley Razenberg participated for Mr. (Wayne) Reginald Smith Ms. Catherine Zingg participated for Aviva Canada Inc.

Issues:

The Applicant, Mr. (Wayne) Reginald Smith, was injured in a motor vehicle accident on July 26, 2014 and sought accident benefits from Aviva Canada Inc. ("Aviva"), payable under the Schedule.¹ The parties were unable to resolve their disputes through mediation, and the Applicant, through his representative, applied for arbitration at the Financial Services Commission of Ontario under the Insurance Act, R.S.O. 1990, c. I.8, as amended.

The issues in this Preliminary Issue Hearing are:

Was the Applicant insured at the time of the accident?
If not, did the Applicant know or ought he reasonably to have known that the motorcycle he was operating was not covered by an insurance policy, which would trigger the exclusion in section 31(1)(a)(i) of the Schedule to invalidate the Applicant's right to benefits?

Result:

The Applicant was not insured at the time of the accident.
The Applicant did not know nor ought he reasonably to have known that the motorcycle he was operating was not covered by an insurance policy, so the exclusion in section 31(1)(a)(i) of the Schedule does not apply.

EVIDENCE AND ANALYSIS:

Background

The Applicant is 44 years old. He resides on the Six Nations of the Grand River Territories Reserve in Brantford. He and his family are full-status native Indians. The Applicant was raised on the Reserve and has spent most of his life living there, as has his family.

On July 26, 2014, the Applicant was operating a Harley Davidson motorcycle when he was struck by a motor vehicle. The accident left him with serious head injuries and multiple broken bones. He was also bleeding internally, which resulted in the removal of his spleen. The Applicant was in a coma for six days, and remained in hospital for a couple of weeks. There was no dispute regarding the extent and seriousness of the Applicant's injuries. At the time of the accident, the Applicant was in possession of an Allstate Motor Vehicle Liability Insurance Card (the "pink slip").

Sometime after the accident, the Applicant's then-lawyer informed Allstate Insurance Company of the accident and the Applicant's intention to claim accident benefits. Allstate subsequently informed the Applicant that there was no such insurance policy in effect. As a result, the Applicant filed an OCF-1 with Aviva, the Insurer of the car that collided with him.

Positions of the Parties

The Insurer submits that a reasonable person in the Applicant's situation would not have thought that he or she was operating an insured vehicle at the time of the accident. The Insurer relies on the following: the Applicant had a bad driving record that he knew would result in higher premiums and as a result, he registered the motorcycle in his wife's name as he anticipated difficulties in obtaining insurance; the Applicant was knowledgeable about insurance because he had a history of purchasing policies, including for motorcycles; the Applicant purchased insurance by cash and barter, through an individual who was also a customer of his (but he did not know the man's name and had no contact information for him); there was no firm arrangement in place between the Applicant and the customer, and all of the arrangements happened by chance; and the Applicant never received a copy of the insurance policy. The Insurer asserts that all of this leads to the conclusion that the Applicant knew or ought to have known that he was operating the motorcycle while it was not insured. For these reasons, the exclusion in section 31(1)(a)(i) of the Schedule applies and the Applicant is prevented from receiving benefits.

The Applicant submits that the evidence points to a subjective belief on the Applicant's part that he did in fact have insurance for the motorcycle. Further, when considering an objective assessment, I must take into consideration the distinct culture and way of life of aboriginal people. The Applicant submits that the Insurer has: failed to provide any evidence that the payment of goods and services in cash is unusual for aboriginal peoples living on a reserve; failed to account for the cultural and historical differences in record-keeping or to account for the bartering culture of aboriginal life; and the Insurer called no evidence in support of its position that the Applicant's genuine and honest belief was not objectively reasonable.

1. Was the Applicant insured at the time of the accident?

At the commencement of the Hearing, the parties jointly submitted that the Allstate insurance policy in question was not in fact a valid insurance policy, and that the Applicant was not insured at the time of the accident. I accept this submission.

2. Did the Applicant know or ought he reasonably to have known that he was operating the automobile while it was not insured under a motor vehicle liability policy?

The Law

The Schedule states the following:

s.31. (1) The insurer is not required to pay an income replacement benefit, a non-earner benefit or a benefit under section 21, 22 or 23,

(a) in respect of a person who was the driver of an automobile at the time of the accident,

(i) if the driver 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

The Burden of Proof

The parties jointly submitted that the onus is on the Insurer to establish that the exclusionary clause articulated in s. 31(1)(a)(i) of the Schedule applies, on a balance of probabilities. Further, the parties agree that the standard to be applied is an objective one considered from the point of view of an ordinary, rational person in the situation of the Applicant. I accept this submission.²

The Evidence

The Applicant testified that in 2013, he and his wife were running a smoke shop on the Reserve. In June 2013, he purchased a Harley Davidson motorcycle from a motorcycle shop in Brantford. He had made installment payments on the motorcycle, and ultimately paid $8,800.00 in cash for the bike and a trailer. At that time, he owned three other motor vehicles. All of the vehicles were in his wife's name, and two of them were insured by her; the third was in the process of being rebuilt but never went on the road.

The Applicant testified that usually he and his wife used a local insurance broker ("Grand River") to insure their vehicles. However, Grand River informed the Applicant that it did not insure motorcycles. Shortly thereafter, the Applicant and his wife were in their smoke shop discussing the insurance of the bike when a customer, having overheard their conversation, told the Applicant that he was an insurance broker and could help them with insurance.

The customer, who had frequented their shop approximately twice each month for the previous two to two-and-a-half years, took the bike information from the Applicant (make, model and year) and said he would provide the Applicant with a quote. In payment for the insurance, they discussed doing a "deal" whereby the customer would be paid with a combination of cigarettes and cash. This occurred in the last week of May 2013, just prior to the Applicant completing the purchase of the motorcycle.

The Applicant testified that he could no longer remember the customer's name and that he used a nickname. He had given the Applicant his phone number, but the number was lost when the Applicant closed down his smoke shop. He described the customer as East Indian, with greying hair, well-kept and in good shape. He was in his mid-twenties to mid-thirties, dressed well and drove a nice vehicle, which he described as being a SUV, perhaps a Lexus or BMW.

The customer returned a week later and gave the Applicant a quote of $800.00 to $900.00 to insure the motorcycle. They agreed that the Applicant would pay for the insurance with a box of cigarettes, which had a retail value of approximately $500.00, and the rest in cash. The Applicant testified that he thought he gave the customer $400.00. The customer took down the vehicle VIN number, and the Applicant received the pink slip three to four days later. After providing the Applicant with the insurance, the customer frequented the smoke shop once or twice more, until it closed. The Applicant testified that he thinks the store closed in the autumn of 2013.

The Applicant testified that he also asked the customer to speak with his mother, as he thought that he might be able to get a good deal on insurance for her. However, this did not happen as the customer left the store before his mother arrived. The Applicant testified that on the Reserve, paying in cash and bartering for services is a way of life. He testified that his house had been built using cash or barter, and that all of the vehicles he owned had also been paid for in cash.

On cross-examination, the Applicant testified that the customer had neither given him a business card nor a receipt. He described their transaction as a person-to-person deal. He did not make any arrangements to meet the customer again, believing that he would see him within the week, nor did he receive anything from Allstate to confirm the transaction. He agreed that he put the insurance in his wife's name due to his unenviable driving record, in the hope that it would be a cheaper way of insuring the bike.

The Applicant testified that this wife had taken care of any paperwork for insurance purposes in the past. He further testified that in 2012, he was incarcerated and that his wife and mother ran the smoke shop for him during that time. Having said at the Examination Under Oath ("EUO") that he had closed the smoke shop two to three years earlier (which would make it 2012), he was sure that in fact it was closed in the autumn of 2013. He further testified that the quote for the insurance was in keeping with the amount that he had paid for another bike that he had owned some years earlier.

The Applicant's wife testified that she had been married to the Applicant since 2008. She is the mother of five children, two of whom are her and the Applicant's children. She worked together with her husband in the smoke shop. It was her job to take care of the bookkeeping and to account for the money. Her driver's licence is in good standing. However, she does not have a motorcycle licence. She testified that previously they had purchased motor vehicle insurance from Jevco and Intact insurance companies.

The Applicant's wife testified that she was in the smoke shop with her husband discussing insurance for the motorcycle when a customer told them that he deals with insurance and could help them. She believes this was sometime at the beginning of 2013, possibly between February and June. She testified that the man was a regular customer and that she had seen him numerous times previously. He always spent between $1,000.00 to $2,000.00 on cigarettes and cigars. She described him as Arabian or Pakistani, she could not understand his name. He was in his mid-thirties to early forties, approximately six feet tall, well-dressed, greying at the temples. He drove an expensive "sporty" car.

The Applicant's wife testified that she did not take part in the conversation between her husband and the customer, as she was occupied with her daughter and customers. At any given time, there would be four to five people in the smoke shop. She noted that her husband was excited about the prospect of getting insurance. He told her that he gave the customer $400.00 and that the customer would be back within a few days with the pink slip and then they would give him a case of cigarettes to complete payment. Four to six days later, the customer returned and her husband showed her the pink slip. When she went to obtain licence plates for the motorcycle, she provided the Ministry of Transportation with the ownership and the same pink slip.

The Applicant's wife testified that at some point between 2013 and January 2014, their long-time insurance company cancelled the vehicle insurance for their two cars for non-payment. Cigarette sales had significantly decreased, and they could no longer afford the payments. She believed they closed their smoke shop in late 2013.

She further testified that their insurance broker, Grand River, had always been paid by cash and that they would go to the Grand River office to arrange payment. However, a Grand River representative would have come to them had they wished it. It was usual practise for them to barter for goods and services. They did not barter cigarettes with Grand River Brokers because the Brokers also owned the cigarette factory where they bought their cigarettes to sell in their smoke shop.

She did not think anything untoward of her husband's arrangement with the customer, and when the motor vehicle accident happened, it was the family's expectation that they would be able to claim for accident benefits through Allstate. However, on being informed of the accident, her primary concern was her husband and her children. The Applicant was in the hospital for two weeks and his wife was at the hospital every day. She did not contact the insurance company and left it for their then lawyer to do.

On cross-examination, the Applicant's wife agreed that the smoke shop could have closed in the spring of 2014, and that her husband went to work in his brother's smoke shop after its closure. She further testified that the sporty car driven by the customer could have been a Jaguar or a BMW.

The Applicant's mother testified that in addition to the Applicant, she and other family members also owned smoke shops on the Reserve. The Applicant's smoke shop and another son's smoke shop were separated by a 30-foot driveway. The Applicant's mother testified that she is close to the Applicant, and that he discussed purchasing the motorcycle with her and the need for insurance. She called at least five insurance companies for the Applicant, including her own insurance company, but none sold insurance for motorcycles.

She testified that she saw the customer who sold the Applicant insurance from a distance, but she never spoke to him. She was at the Applicant's shop when the Applicant asked her if she wished to speak with the customer regarding a quote for motor vehicle insurance. She explained that she was at the shop because it was late in the day and she was collecting the money from the day's sales, which she did every day before putting the money in her home safe. She described the customer as dressed in nice clothes, late thirties, black hair and brown skin. She described him as likely East Indian.

She further testified that the bike was insured for the 2013 riding season, and then again in April or May 2014. She knew this because in 2014, she had to give the Applicant an advance on his salary to pay for the insurance. The Applicant's mother testified that paying in cash was usual and that she thought he had gotten a good deal. She did not think it suspect.

Analysis

The Insurer urges me to find that the Applicant knew or ought to have known that he was operating the motorcycle without insurance. The Insurer relies on the evidence before me that the Applicant had a bad driving record that he knew would result in higher premiums. As a result, he registered the motorcycle in his wife's name in order to obtain insurance at a better rate. I accept that this was the motivation for his registering the vehicle in his wife's name, despite her not having a motorcycle licence. Indeed, the Applicant testified that this was his reason for doing so.

The Insurer further submits that because the Applicant was acutely aware of his unenviable driving record and the potential cost of insurance, he was motivated to seek insurance from any source, the implication being that he either knew that he had not purchased legitimate insurance, or chose not to enquire into whether or not he had done so, preferring to accept a "deal" without further inquiry. The Insurer relies on the evidence before me that the Applicant did not know the customer's real name (only a nickname which he could no longer remember); that he had no contact information for him; that there were no firm arrangements in place and all of the subsequent contact happened by chance; and the Applicant never received a copy of the insurance policy. The Insurer also points to inconsistencies in the Applicant's evidence at the EUO and at the Hearing before me.

I cannot accept this submission. In my view, this submission does not accurately reflect the evidence. The Applicant testified that he had a contact phone number for the customer, but it was mislaid when his smoke shop was shut down. Further, he knew him by a nickname, which seems to be an acceptable way of addressing others within the Applicant's community; the Applicant is known by a nickname, as is his brother. Indeed, his mother referred to the Applicant's brother only by his nickname during her testimony. I accept that nothing about the use of the customer's nickname would give the Applicant pause. Further, the Applicant's wife's testimony was that the customer had provided them with his name, but that it was difficult to pronounce, which would lend itself to the use of a nickname.

I am also not concerned by the lack of firm arrangements for further meetings. As stated above, the Applicant had a contact phone number initially. In addition, the customer was known to frequent the store bi-monthly. I also note that there were two pink slips issued to the Applicant; one in 2013 and the other in 2014. The 2013 pink slip was issued after an appropriate process whereby the Applicant provided the relevant information to the customer, who returned a few days later with a quote; on receiving the $400.00 deposit, he returned again a few days later with the pink slip. This suggests a process that it is reasonable to assume was legitimate.

If there was a happenstance quality to the interaction, it was in regard to the 2014 pink slip. At that time the Applicant had closed his smoke shop and lost his records in the process. He had no obvious means of contacting the customer. Notwithstanding, in my view, this does not impact on the reasonableness of the Applicant's belief that the policy was legitimate. I am aided in this view by the evidence before me that the Applicant was stopped on a number of occasions by police whilst riding his motorcycle, and on at least two occasions, he received tickets for Highway Traffic Act violations. At no time was the validity of his insurance questioned. Furthermore, the Applicant's then-counsel submitted an accident benefit claim to Allstate on the Applicant's behalf, suggesting that the Applicant expected accident benefits to be paid under the policy.

The Insurer submits that it is unreasonable for the Applicant to believe that an insurance broker would use barter to conduct legitimate business. I do not accept this submission. The transaction must be viewed through the lens of an ordinary rational person in the Applicant's situation. There was much evidence before me, which I accept, that barter is a way of life on the Reserve. The Applicant and his mother built their homes in this fashion. Furthermore, cash payment is the norm even for large ticket items, such as cars. There would be no reason for the Applicant to question such an arrangement.

In addition, the terms of the barter did not seem unreasonable to the Applicant, nor is there evidence before me to suggest that the terms of the barter were unreasonable. I cannot accept the Insurer's submission that the $800.00-$900.00 cost of the policy was below fair market value. There is no evidence before me of this. I also note that the Applicant paid for the policy twice—once for the 2013 pink slip, and then again in April 2014 for the second pink slip (for a six-month period) when he had to get an advance on his salary from his mother to complete the transaction. The Insurer describes this as an unusual practise. There is no evidence before me to support this submission. The evidence is to the contrary—barter and cash transactions are usual practises on the Reserve. In addition, it is reasonable to assume that the nature of barter is one devoid of receipt.

In regard to the keeping of records, the Applicant testified that he had records and that these were lost when his shop was closed. Furthermore, his wife testified that she was the person responsible for record-keeping and maintaining their books.

The Insurer points to discrepancies in the testimony of the Applicant and his wife regarding the description of the customer and his vehicle; the implication being that their respective evidence is not credible. I found the witnesses to be credible. They gave their testimony in a forthright manner and there was no indication before me that there had been any attempt to collude. In fact, the differences in their respective recollections suggest the opposite.

Whilst I agree there were differences in the description of the customer, I do not find them to be problematic. I am in agreement with the Applicant that the descriptions provided by the three witnesses are not incompatible with one another, nor with the evidence of the Applicant at the EUO. Each described the customer as being "perhaps" East Indian, Egyptian, Pakistani or Arabian. It was clear that each witness meant to describe him as dark-skinned. In addition, each described him as well-dressed, with greying hair and each recounted a similar height and weight. Whilst there was a difference in age range, it was not so different as to be of concern or to outweigh the other evidence.

I agree there were inconsistencies in regard to the make of the customer's vehicle. However, each described it as a high-end vehicle. If the witnesses were attempting to mislead, it is reasonable to assume that their evidence would be more consistent than not. I accept the Applicant's submission that any inconsistencies, when looked at from the evidence as a whole, suggest the passage of time and difficulties of recollection rather than collusion. It must also be remembered that the Applicant has suffered a serious head injury. Both his testimony at the EUO and at the Preliminary Issue Hearing must be seen in this context, particularly his ability to recall details.

The Insurer submits that because the Applicant did not receive an insurance policy, this should have given rise to a concern on his behalf. I am in agreement with the Insurer that had the insurance been valid, a policy would have been sent to the Applicant and his wife, and that it is reasonable to assume that the lack of a policy should have raised concerns. Notwithstanding, I am mindful that the evidence must be viewed from the perspective of an ordinary rational person in the situation of the Applicant; in this regard, the evidence must be seen in the context of life on the Reserve. The evidence before me establishes that life and business are conducted in a more relaxed and informal fashion than may be acceptable in other settings. Indeed, the Applicant points to jurisprudence regarding the historical differences between aboriginal culture and western culture, which cannot be overlooked.³ Furthermore, the Applicant was not asked whether he was concerned by, or what he thought about, not having received an insurance policy, and I am mindful that the burden of proof is on the Insurer.

In conclusion, I find that the weight of the evidence establishes that the Applicant had a subjective belief that he had purchased a legitimate insurance policy. Further, I find that cash payment for goods and services and barter are accepted ways of life on the Applicant's Reserve, and the weight of the evidence establishes that there was nothing unusual in the transaction between the Applicant and the customer. For these reasons, I find the Applicant's subjective belief to be objectively reasonable.

For the foregoing reasons, I find that the evidence does not convince me on a balance of probabilities that an ordinary person in the Applicant's situation knew or ought reasonably to have known that he was operating the motorcycle while it was not insured under a motor vehicle liability policy, and the Insurer has failed to demonstrate that section 31(1)(a)(i) of the Schedule applies.

EXPENSES:

Neither party requested its expenses in this matter, and it is more appropriate to leave the issue of expenses to the Hearing Arbitrator, who will have the benefit of full submissions prior to arriving at a decision.

February 13, 2017

Janette Mills Arbitrator

ARBITRATION ORDER

Under section 282 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 Ontario Regulation 664, as amended, it is ordered that:

The Applicant was not insured at the time of the accident.
The Applicant did not know nor ought he reasonably to have known that the motorcycle he was operating was not covered by an insurance policy, so the exclusion in section 31(1)(a) of the Schedule does not apply.