Ontario (Minister of Finance) v. AXA Insurance (Canada)
143 O.R. (3d) 1 | 2018 ONCA 809
Court of Appeal for Ontario
van Rensburg, Pardu and Paciocco JJ.A.
October 9, 2018
Case Summary
Insurance — Insurance policy — Declination rule providing that insurer would refuse to renew policy where insured had not registered to receive data-transmitting device for his vehicle within previous 12 months — Arbitrator reasonably finding that notice of non-renewal sent to insured before end of 12-month period was premature and therefore ineffective — Arbitrator reasonably finding that s. 236(5) of Insurance Act did not operate to extend policy where it was parties' mutual intention to terminate it — Insurance Act, R.S.O. 1990, c. I.8, s. 236(5).
Elite issued an automobile insurance policy for a six-month term to the claimant. The policy was renewed for a second six-month term ending September 20, 2010. Declination Rule 56, filed by Elite with the Superintendent of Financial Services, provided that Elite would refuse to renew the policy if the claimant had not registered via the Internet to receive a data-transmitting device for his vehicle "within 2 previous terms (12 months)". When the claimant did not register online to receive the device, Elite sent him a purported non-renewal notice in August 2010 stating that the policy would terminate on September 20, 2010. The claimant obtained automobile insurance from AXA, but cancelled that policy a short time afterwards. In December 2011, the claimant was struck by an uninsured vehicle that left the scene. He received statutory accident benefits from the Motor Vehicle Accident Claims Fund. The fund gave notice of a priority dispute to Elite and AXA, asserting that Elite was higher in priority. The matter was referred to arbitration. The arbitrator found that the purported notice of non-renewal was premature, and therefore ineffective, because Rule 56 gave the claimant 12 months to comply with the registration requirement. The arbitrator found that, while s. 236(5) of the Insurance Act renewed the policy for one six-month term, it did not extend coverage indefinitely in the face of the parties' clear mutual intention to terminate the insurance contract. The arbitrator concluded that the policy was not in effect at the time of the accident. The fund appealed, and Elite cross-appealed the arbitrator's conclusion that the notice of non-renewal was invalid. The appeal judge allowed the appeal and dismissed the cross-appeal. Elite appealed.
Held: The appeal should be allowed.
Per van Rensburg J.A. (Paciocco J.A. concurring): On a second appeal of an arbitration of a statutory accident benefits priority dispute, the court is required to consider whether the appeal judge chose the correct standard of review of the arbitrator's decision and applied it properly. That requires an examination of the reasonableness of the original decision.
The arbitrator unreasonably concluded that the effect of s. 236(5) of the Act was that the policy was "renewed" for at most one further term. Section 236(5) says nothing about renewal; it simply provides for the continuation of the policy in force until a notice of non-renewal that meets the statutory requirements is given. However, that error was not essential to the result, and did not lead to the conclusion that the arbitrator's decision was unreasonable. At the heart of the dispute was the proper scope for the application of s. 236(5), and whether, despite that provision, the parties could bring to an end the automobile insurance policy through their conduct after an invalid notice of non-renewal was given. In essence, the arbitrator decided that question in the affirmative. It was not unreasonable to give s. 236(5) a contextual reading and to conclude that s. 236(5) is not exhaustive as to what happens to a policy, irrespective of what else might have transpired between the insurer and the insured, in any situation where there has been a defective notice of non-renewal. In the circumstances of this case, the arbitrator's decision that the Elite policy was brought to an end by the mutual agreement of the parties, and was no longer in effect, was reasonable.
Per Pardu J.A. (dissenting): The arbitrator's decision was unreasonable because he failed to give effect to the statutory language, failed to consider legislative purposes, and adopted an interpretation of s. 236(5) of the Insurance Act that had no logical connection to the statutory language.
A. Overview
[1] This appeal, which is before the court with leave, arises from an insurance priority dispute respecting the payment of statutory accident benefits to a claimant who was struck by an uninsured vehicle. The dispute is between the appellant, Elite Insurance Company ("Elite" or the "appellant"), the respondent, Her Majesty the Queen in Right of Ontario as represented by the Minister of Finance, who funds the Motor Vehicle Accident Claims Fund (the "fund" or the "respondent"), and a third insurer, AXA Insurance (Canada) ("AXA").
[2] The priority dispute involving Elite was determined as a preliminary issue in the arbitration. At issue was whether a policy issued by Elite and insuring the claimant remained in force at the time of the accident after Elite purported to give notice of non-renewal. The arbitrator concluded that the notice of non-renewal was premature, but that in the circumstances of the case, s. 236(5) of the Insurance Act, R.S.O. 1990, c. I.8 did not extend coverage under the policy. As such, the Elite policy was not in force at the time of the accident. On appeal to the Superior Court, the appeal judge disagreed, concluding that s. 236(5) extends the existing contract until such time as a compliant notice of non-renewal is given, with the effect that the claimant remained insured under the Elite policy when the accident occurred.
[3] For the reasons that follow, I would allow the appeal. I see no reason to interfere with the reasonable conclusion that the notice of non-renewal was premature. As for the question of whether the policy remained in force after Elite's ineffective notice of non-renewal, while I do not agree with all aspects of the arbitrator's reasoning, his conclusion that the Elite policy was not in force at the time of the accident, supported by his interpretation of s. 236(5) and its application to the facts of this case, was in my view reasonable and ought not to have been overturned by the appeal judge.
B. Facts
[4] The material facts are not in dispute and were largely contained in an agreed statement of facts.
[5] Elite issued Arpad Vadasz (the "claimant") an automobile insurance policy for a six-month term, from September 20, 2009 to March 20, 2010. The policy was renewed for a second six-month term ending September 20, 2010.
[6] The Elite policy was an "autograph" policy, which required policyholders to install a device in their car to record driving behaviour. By installing the device, the claimant was entitled to a discount on his policy premium. Depending on the information concerning his driving behaviour recorded by the device, the claimant could be eligible for further discounts. Although he knew he was required to register online to receive the autograph device, the claimant never registered and never received or installed the device.
[7] During the term of the policy, the claimant communicated with Elite on multiple occasions, and asked about the autograph device. He was told that he had not yet registered for the device and that he must do so. He was also told that Elite would cancel his policy in September 2010 if he did not register for the device.
[8] Elite sent the claimant a letter (the purported non-renewal notice) by registered mail, which he received on August 18, 2010. The letter stated that, "effective September 20, 2010 at 12:01 a.m., [Elite would be] unable to provide automobile insurance" on the claimant's vehicle. The letter indicated that the reason was Rule 56 of the Declination Rules that Elite's parent company, Aviva Insurance Company of Canada, had filed with the Superintendent of Financial Services, as required by s. 238 of the Insurance Act. Rule 56 was set out in the letter:
- The named insured/applicant has not registered, via the Internet, to receive the Autograph data-transmitting device, within 2 previous terms (12 months).
[9] On September 21, 2010, the claimant contacted Elite once again to state that he had not received the autograph device. He was told that he had not registered online for the device and that his policy had been cancelled effective September 20, 2010. He was directed to the broker that had placed the Elite policy, to obtain alternative insurance.
[10] The claimant did not pursue any further coverage with Elite after September 20, 2010. On or about September 23, 2010, he obtained an automobile insurance policy from AXA for the same car that had been insured under the Elite policy. He cancelled the AXA policy a short time thereafter.
[11] In July 2011, Elite discontinued the autograph policy program, with the superintendent's approval.
[12] On December 29, 2011, while trying to save a parking spot for a friend, the claimant was struck by an uninsured vehicle that left the scene.
[13] The claimant applied for, and received, statutory accident benefits from the fund. The fund gave notice of a priority dispute to Elite and AXA (as the insurer of his friend's vehicle). The fund asserted that Elite was higher in priority because Elite had issued a motor vehicle insurance policy to the claimant in 2009. AXA agreed. Although Elite had purportedly refused to renew the policy in September 2010, the fund claimed that its notice of non-renewal to the claimant was invalid because it did not comply with ss. 236 and 238 of the Insurance Act and that, pursuant to s. 236(5) of the Insurance Act, the Elite policy had not been terminated and remained in force in December 2011 when the accident occurred.
[14] The matter was referred to arbitration. The parties agreed that the preliminary issue to be resolved was whether the Elite policy was in force at the time of the December 29, 2011 accident. AXA participated in the arbitration but not the subsequent appeals to the Superior Court and to this court.
C. Relevant Statutory Provisions
[15] The relevant provisions of the Insurance Act are as follows:
236(1) If an insurer does not intend to renew a contract or if an insurer proposes to renew a contract on varied terms, the insurer shall,
(a) give the named insured not less than thirty days notice in writing of the insurer's intention or proposal; or
(b) give the broker, if any, through whom the contract was placed forty-five days notice in writing of the insurer's intention or proposal.
(2) Subject to subsection (4), a broker to whom an insurer has given notice under clause (1)(b) shall give the named insured under the contract not less than thirty days notice in writing of the insurer's intention or proposal.
(3) Notices given under subsections (1) and (2) shall set out the reasons for the insurer's intention or proposal.
(4) Where, before a broker is required to have given notice to a named insured under subsection (2), the broker places with another insurer a replacement contract containing substantially similar terms as the expiring contract, the broker is exempted from giving notice under subsection (2).
(5) A contract of insurance is in force until there is compliance with subsections (1), (2) and (3).
(6) This section does not apply to prescribed types of contracts in prescribed circumstances.
238(1) An insurer shall not decline to issue, terminate or refuse to renew a contract or refuse to provide or continue a coverage or endorsement, except on a ground filed with the superintendent under this section.
[16] In accordance with s. 238(1), Elite's parent company filed Declination Rules with the superintendent. The relevant portions are as follows:
If a client does not qualify for the Autograph program, for a reason described below, insurance coverage will be offered through another member of the Aviva group of companies, subject to that member's eligibility requirements, and also provided that the requesting broker carries a valid contract with another member of the Aviva group of companies.
The Insurer will decline to issue, terminate, or refuse to renew a contract where:
The Insurer, for any reason, suspends the Autograph program, following approval from the Financial Services Commission of Ontario.
A policy term is other than 6 months in duration.
The named insured/applicant has not registered, via the Internet, to receive the Autograph data-transmitting device, within 2 previous terms (12 months).
D. Arbitrator's Decision
[17] The priority dispute was referred to a single arbitrator selected by the parties, under the Arbitration Act, 1991, S.O. 1991, c. 17. In considering the preliminary issue, the arbitrator was required to determine, first, whether the notice of non-renewal was valid; and second, if it was invalid, whether the Elite policy remained in force at the time of the accident.
[18] On the first issue, the arbitrator concluded that the August 12, 2010 notice of non-renewal was invalid because it was premature. He accepted the Fund's argument that Rule 56, read in its grammatical and ordinary sense, required the non-renewal notice to be sent after 12 months -- that is, after the second term of the policy had ended without the insured having registered to receive the autograph device. The second term was not complete until September 20, 2010. The grounds for non-renewal did not exist at the time the notice was sent, and the notice of non-renewal was therefore not compliant with ss. 236 and 238 of the Insurance Act.
[19] On the second issue, the arbitrator considered s. 236(5) in the light of the parties' conduct and common law principles.
[20] He accepted the fund's argument that, in the absence of an effective non-renewal notice, s. 236(5) applied to automatically renew the policy. However, he did not accept that, unless a proper s. 236 non-renewal notice was given, the policy would renew indefinitely on each anniversary date of the policy term no matter what occurred after the initial automatic renewal. Rather, referring to the Supreme Court's decision in Patterson v. Gallant, he concluded that each renewal represents a new contract with its own offer and acceptance and that, in the absence of agreement between the parties, the policy would renew for at most one more term.
[21] The arbitrator stated that the common law principles of contract law apply to insurance contracts unless specifically excluded by legislation. He therefore considered whether, notwithstanding the ineffective notice of non-renewal, there was a mutual intention to continue the policy. The arbitrator said that "events which occurred after the September 20, 2010 disputed renewal date are relevant to the issue of whether the Elite policy was still in force as of the December 29, 2011 accident date". The arbitrator found that, although the notice was invalid for s. 236 purposes, there was no doubt the claimant received the notice and understood Elite did not intend to insure him under its policy beyond September 20, 2010. The claimant decided to end his insurance relationship with Elite and to pursue insurance coverage with a different insurer. The arbitrator concluded that there was a mutual intention to terminate the relationship.
[22] The arbitrator stated that, alternatively, the claimant effectively repudiated his contract with Elite when he failed to make any effort to comply with the essential conditions of the contract and when he secured replacement coverage. According to the arbitrator, the policy ended no later than March 20, 2011. At p. 36, he said:
In any event, in my opinion, putting the automatic renewal argument at its strongest, the s. 236(5) consequence of Elite's invalid non-renewal notice is that the claimant's policy automatically renewed on September 20, 2010 because at that point it was only the insurer Elite who had expressed the intention to end the contractual relationship. It was not until a few days after September 20, 2010 that there was a mutual intention to end the contractual relationship.
[23] The arbitrator concluded that s. 236(5) "does not have the effect of making the automobile insurance contract continue indefinitely where the parties are not ad idem, or where they have mutually indicated an intention to end any contractual relationship which existed".
[24] At p. 40 of his decision, the arbitrator held that, in the alternative, the Elite policy was not in force on December 29, 2011 because Elite had terminated the entire autograph policy program months before:
In light of this, it seems to me that it would stretch the application of subsection 236(5) beyond the breaking point to accede to HMQ's argument that the claimant's Autograph Policy is in effect indefinitely, until Elite properly terminates it, or delivers a valid notice of non-renewal. This would create the legal fiction of an ongoing Autograph Policy contract in circumstances where, by the middle of 2011 with the approval of the Superintendent of Insurance, the insurer could not offer, and the insured could not obtain, automobile insurance coverage under the Autograph Policy program.
E. Appeal Decision
[25] The fund appealed the arbitrator's decision that, notwithstanding an invalid notice of non-renewal, the Elite policy was not in force at the date of the accident. Elite cross-appealed the arbitrator's conclusion that the notice of non-renewal was invalid.
[26] On appeal it was agreed that the standard of review of the arbitrator's decision was reasonableness.
[27] The appeal judge dismissed Elite's cross-appeal. Essentially, he upheld as reasonable the arbitrator's conclusion, based on an interpretation of s. 236 and Rule 56, that the non-renewal notice was invalid. He agreed with the arbitrator that a valid notice could not be given before the expiry of two six-month terms of the contract, given the wording of Rule 56.
[28] The appeal judge allowed the fund's appeal, overturning the decision of the arbitrator. He concluded that the Elite policy remained in force at the date of the accident.
[29] The appeal judge referred to the decision of Matheson J. in Echelon General Insurance Co. v. Ontario (Minister of Finance) (2016), 133 O.R. (3d) 233, 2016 ONSC 5019 (an appeal from an arbitrator's decision that a policy was no longer in effect notwithstanding an ineffective notice of cancellation because it had lapsed at the end of its six-month term). In that case, Matheson J. concluded that the policy had not lapsed because s. 236(5), which provided that a contract of insurance was in force until there was compliance with subsections (1), (2) and (3), "oust[ed] the common law of contract under which an insurance policy may otherwise expire on its own terms".
[30] The appeal judge applied this reasoning to the case before him. While he agreed with Elite that, under the common law, the failure to give a valid notice of non-renewal would require offer and acceptance and a mutual intention by the parties for a renewal of the contract, the effect of s. 236(5) was to displace the common law principles that would otherwise apply.
[31] He rejected Elite's argument that giving the words of s. 236(5) a "literal interpretation" would alter the common law with respect to insurance policies by turning insurance contracts into continuous contracts. Rather, the appeal judge concluded that s. 236(5) addresses the consequence of an insurer failing to comply with the statutory requirement to give a valid notice of non-renewal but does not preclude an insurer or insured from taking permissible steps to terminate an insurance contract in accordance with other statutory provisions. And he agreed with the appeal judge in Echelon that to give the words in s. 236(5) their grammatical and ordinary meaning would not necessarily cause a contract of insurance to continue in perpetuity because the policy continues only until the insurance company discharges the statutory notice obligations and the insurance company bears the risk if it makes a mistake in the notice process.
[32] The appeal judge ended his analysis on this issue by concluding that the arbitrator's determination that there was an automatic renewal of the policy under s. 236(5) that was valid at most for a further six months, was not only in error, but outside a range of possible, acceptable outcomes because it "fail[ed] to give effect to the clear words of s. 236(5) when read in their entire context and in their grammatical and ordinary sense harmoniously with the scheme of the Insurance Act and its objects".
[33] The appeal judge therefore declared that Elite's policy was in force at the time of the December 29, 2011 accident and that, as between Elite and the fund, Elite is the priority insurer responsible for payment of the claimant's statutory accident benefits.
F. Standard of Review
[34] The parties agree that the applicable standard of review in the appeal from the arbitrator's decision was reasonableness. This was the determination of a priority dispute between insurers under the statutory accident benefits regime, by an arbitrator with special expertise who was selected by the parties: see Intact Insurance Co. v. Allstate Insurance Co. of Canada (2016), 131 O.R. (3d) 625, 2016 ONCA 609, at para. 53, leave to appeal to S.C.C. refused [2016] S.C.C.A. No. 392.
[35] The fund argued that on this appeal, the court's task is to determine whether the appeal judge applied the right standard, and that, once it is satisfied that he applied a "reasonableness" standard, and not a disguised "correctness" standard, this court ought not to interfere with his decision. This is not the appropriate standard of review. In a second appeal of the appeal of an arbitration of a statutory accident benefits priority dispute, this court is required to consider whether the appeal judge chose the correct standard of review of the arbitrator's decision, and applied it properly. This requires an examination of the reasonableness of the original decision. The issue is therefore whether the arbitrator's conclusions that (a) Elite's notice of non-renewal was ineffective and (b) that the policy had nevertheless terminated were reasonable.
G. Arguments on Appeal
[36] The appellant asserts that
(1) it was unreasonable for the arbitrator (and the appeal judge) to conclude that the notice of non-renewal was premature. Essentially, Elite argues that Rule 56 does not explicitly state that the notice must be sent after the end of two policy terms. Elite also submits that the purpose of Rule 56 is to give the insured two terms of grace, rather than two terms and 30 days;
(2) the arbitrator's decision that the policy had been terminated, and his interpretation of s. 236(5) in the context of the common law and the factual circumstances of the case, were reasonable. Elite contends that the appeal judge substituted his own decision for that of the arbitrator rather than conducting a reasonableness assessment and that he failed to consider the factual circumstances that brought the policy to an end; and
(3) the arbitrator's alternative reason for concluding that coverage had ended (because the autograph policy ceased to exist) was reasonable and was not addressed by the appeal judge.
[37] The respondent contends that the arbitrator's conclusion that the notice of non-renewal was premature was a reasonable interpretation of the requirements of s. 236 in the context of Ontario's mandatory automotive insurance scheme.
[38] The respondent also argues that the arbitrator's conclusions that the common law applied to bring the contract to an end or that s. 236(5) operated to renew the contract for only one further six-month term were unreasonable because (i) he failed to apply the clear wording of s. 236(5); (ii) he failed to consider the statutory context; (iii) he applied irrelevant case law and failed to follow relevant authorities; and (iv) he applied the common law which was displaced by the statutory regime. Applying s. 236(5), the only reasonable conclusion was that the operation of the common law was ousted and the Elite policy remained in force at the date of the accident.
H. Analysis
[39] The Supreme Court directs that, in reviewing a decision for reasonableness, the court must recognize that certain questions may give rise to a number of possible, reasonable conclusions. A court conducting a review for reasonableness must inquire into the qualities that make a decision reasonable, including both the process of articulating the reasons and the outcomes. In Dunsmuir v. New Brunswick, 2008 SCC 9, at para. 47, the Supreme Court of Canada stated:
[R]easonableness is concerned mostly with the existence of justification, transparency and intelligibility within the decision-making process [and] also with whether the decision falls within a range of possible, acceptable outcomes which are defensible in respect of the facts and law.
[40] An error in the arbitrator's analysis would not necessarily lead to an unreasonable decision. A reasonableness review is not an examination of the weakest link of a chain of analysis in isolation from the reasons as a whole: Petro-Canada v. British Columbia (Workers' Compensation Board), 2009 BCCA 396, at para. 56. Nor is it a "line-by-line treasure hunt for error": Communications, Energy and Paperworkers Union of Canada, Local 30 v. Irving Pulp & Paper, Ltd., 2013 SCC 34, at para. 54. Indeed, a global analysis of the arbitrator's decision can lead to the conclusion that the result falls within acceptable, defensible outcomes, and that the reasons -- despite their flaws -- fulfill the criteria for justification, transparency and intelligibility: see Syndicat des métallos section locale 7065 c. Entreprises de construction de Québec ltée, 2015 QCCA 1690, at para. 69.
[41] In my view, both aspects of the arbitrator's decision -- that the notice of non-renewal was premature, and that the policy, notwithstanding s. 236(5) of the Insurance Act, had come to an end -- were reasonable and justifiable interpretations of the relevant statutory provisions and their application to the particular facts of this case.
(1) The conclusion that Elite's notice of non-renewal was premature was reasonable
[42] The arbitrator concluded that Elite did not comply with the requirements of ss. 236 and 238 of the Insurance Act in notifying the claimant that it did not intend to renew the autograph policy. He accepted the argument of the fund that the reason given in its notice did not constitute a valid ground for non-renewal filed with the superintendent at the time the notice was given because the facts required to validate the ground were not yet in existence.
[43] In arriving at his decision, the arbitrator interpreted the wording of Rule 56 in its grammatical and ordinary sense. He concluded that the rule requires specific timing for such notice, which cannot be validly given before the expiry of two six-month terms of the policy. He rejected Elite's argument that the purpose of the non-renewal notice provision in s. 236 was satisfied in this case because the claimant was aware he was no longer insured and took steps to replace his insurance coverage. The arbitrator concluded that lack of prejudice did not validate the premature non-renewal notice. He also concluded that to the extent that the wording of Rule 56 was open to competing interpretations, any ambiguity must be resolved in favour of expanding rather than restricting coverage.
[44] While there is merit to the argument that Rule 56 admits of an alternative interpretation, the question is not whether one interpretation is better or more persuasive than the other. The scheme of the statutory accident benefits priority dispute mechanism, under O. Reg. 283/95, anticipates that an arbitrator selected by the parties will determine any dispute between insurers. In this case, the arbitrator considered what transpired in the context of the mandatory requirements in s. 236 for how an insurer is to give notice of non-renewal. Although the claimant had actual notice of the intention not to renew, s. 236(5) provides that coverage continues until subsections (1), (2) and (3) are complied with. The arbitrator's interpretation of the requirements of s. 236 is consistent with the plain wording of the rule, and to the extent there is any ambiguity, favours coverage to the claimant.
[45] Elite did not persuade the appeal judge or this court that the arbitrator's decision on this issue was unreasonable. Accordingly, there is no basis to interfere with the arbitrator's conclusion that the non-renewal notice given by Elite was premature. The decision on this issue was based on a reasonable interpretation of the relevant statutory provisions and the declination rule as applied to the facts of the case.
(2) The conclusion that the Elite policy was not in force notwithstanding the invalid notice of non-renewal was reasonable
[46] The appeal judge, at para. 41, asserted that "the Arbitrator failed to properly engage in an interpretive process in respect of s. 236(5) of the Insurance Act" and that he made findings that were "not only in error, but outside of a range of possible, acceptable, outcomes" because his "conclusion fails to give effect to the clear words of section 236(5)".
[47] I disagree. Although I do not agree with all aspects of the arbitrator's analysis, the decision does not ignore the relevant statutory provisions. Rather, it takes them into account together with the factual circumstances of the case, and arrives at what I consider to be a reasonable result.
[48] The issue here turns on the scope and meaning to be given to s. 236(5) of the Insurance Act, which provides that "[a] contract of insurance is in force until there is compliance with subsections (1), (2) and (3)", and its application to the facts of this case.
[49] The arbitrator concluded that s. 236(5) was not exhaustive and determinative of the issue before him. He expressed this in terms of the common law continuing to apply, unless specifically excluded, and that s. 236(5) did not prevent the termination of the Elite policy because of the parties' mutual intention to bring the contract to an end. The appeal judge, by contrast, considered the issue as one of statutory interpretation: s. 236(5) prescribed consequences for a defective non-renewal notice. Following the literal wording of the section, until there is compliance with the non-renewal notice requirements, the policy remains in force.
[50] Before turning to why I say the arbitrator's approach and conclusion were reasonable, I will identify two points on which I agree with the appeal judge that the arbitrator's analysis departed from the clear wording of s. 236(5) and was therefore unreasonable.
[51] First, the arbitrator concluded that the effect of s. 236(5) was that the policy "renewed" at most for one further term (rejecting the fund's argument at that stage that the policy would renew indefinitely in the event of non-compliance with s. 236(1), (2) or (3)). It appears that both parties at the arbitration stage characterized the effect of s. 236(5) as renewing the policy (an argument Elite continued to make to this court). Section 236(5), however, says nothing about renewal; it simply provides for the continuation of the policy in force until a notice of non-renewal that meets the statutory requirements is given. I agree with the fund's current position that s. 236(5) does not create any new contract through some form of renewal. The arbitrator's conclusion that s. 236(5) would extend coverage under the policy for no longer than an additional one six-month term contradicts the plain wording of the section, which contemplates that coverage continues until proper notice is given.
[52] Second, it was unreasonable for the arbitrator, in arriving at his conclusion that the policy renewed for only one term, to rely on Patterson v. Gallant as authority that each renewal of an insurance policy creates a new contract, and that any further renewal would therefore require a meeting of the minds on terms and offer and acceptance. As the appeal judge pointed out, there was no equivalent to s. 236 in the applicable insurance legislation in Patterson and the court expressly recognized, at para. 28, that "the provisions of the Insurance Act can override the common law of contract". I agree with the appeal judge that the only reasonable interpretation of s. 236(5) is that it overrides the common law with respect to lapsed policies.
[53] The appeal judge focused on these parts of the analysis when he stated, at para. 41, that the arbitrator's "conclusion that there was an automatic renewal of the contract of insurance under s. 236(5) that was valid at most for a further six months" was not only in error but also unreasonable. As I will explain, the fact that these aspects of the arbitrator's reasoning are unreasonable, as they directly contradict s. 236(5), does not inevitably lead to the conclusion that his decision was unreasonable, as the errors were not essential to the result: see, e.g., Syndicat des métallos, at para. 69.
[54] The question at the heart of the dispute was the proper scope for the application of s. 236(5), and whether, despite this provision, the parties could bring to an end the automobile insurance policy through their conduct after an invalid notice of non-renewal was given. In essence, the arbitrator decided this question in the affirmative, while the appeal judge treated s. 236(5) as determinative for all purposes of what would occur with respect to the policy, once a defective notice of non-renewal had been given.
[55] While the only reasonable interpretation of s. 236(5) may well be that the Elite policy did not lapse at the conclusion of its six-month term, it is not unreasonable to give s. 236(5) a contextual reading, and to conclude that s. 236(5) is not exhaustive as to what happens to a policy, irrespective of what else might have transpired between the insurer and insured, in any situation where there has been a defective notice of non-renewal.
[56] There is no question that an insurance policy may come to an end, other than by an insurer's notice of non-renewal. While insurers are subject to detailed statutory requirements for the unilateral termination of a policy, the termination may occur at the initiative of the insured, without formality. Statutory Conditions -- Automobile Insurance, O. Reg. 777/93, Schedule, s. 11(2) provides that a policy may be terminated by the insured "at any time on request", and there are no specific requirements for the content or form of the request. As the appeal judge noted, s. 236(5) "does not operate to preclude an insurer or an insured from taking permissible steps to terminate an insurance contract in accordance with other statutory provisions".
[57] Section 236 only deals with non-renewal or policy variations by an insurer. It prescribes the timing and content of notice required to be given. Until these requirements are met the contract of insurance remains in force, in accordance with s. 236(5).
[58] As I have already observed, s. 236(5) does not "renew" a policy: it simply extends its coverage -- potentially indefinitely -- until the insurer complies with the notice provisions for non-renewal. As Matheson J. noted in Echelon and the appeal judge observed here, the plain language of s. 236(5) ousts the operation of the common law with respect to the lapsing of policies.
[59] Section 236(5) may well oust the common law that a policy will lapse when it is not renewed, but it does not preclude the consideration of other circumstances that may have arisen and brought the policy to an end. In my view, this is a reasonable interpretation that does not undermine the policy behind s. 236(5) to ensure continuous coverage.
[60] The circumstances that were relevant in this case are the following. The evidence is clear that the claimant knew what the insurer was requiring him to do in order to continue coverage under the autograph policy. After he received notice (albeit prematurely), he acted to protect his interests. By September 23, 2010, he had obtained a replacement policy from AXA. As the arbitrator noted, the parties shared a mutual intention that the Elite policy would not continue to cover the claimant. Even if this intention was precipitated by the assumption that Elite's notice of non-renewal was valid and that the autograph policy had therefore ended, the parties acted so as to terminate their relationship and conducted themselves in reliance on the termination. The claimant obtained replacement coverage and was no longer charged a premium for the Elite policy.
[61] The appeal judge did not consider whether the parties' conduct after the ineffective notice of non-renewal may have terminated the Elite policy. He treated s. 236(5) as determinative for all purposes of what would occur with respect to the policy, once a defective notice of non-renewal had been given. In so doing, he relied heavily on Echelon. Yet, there is nothing in Matheson J.'s reasoning or conclusion in that case that is inconsistent with finding here that the Elite policy was effectively terminated by what followed the invalid notice of non-renewal. In Echelon, the insurer had attempted unsuccessfully to terminate the policy but argued that the policy had nevertheless lapsed at the end of its term. This argument (based on Patterson) was precluded by s. 236(5), which operates to oust the common law to prevent a non-renewed policy from lapsing. Echelon did not, however, deal with other circumstances that might have brought the policy to an end, and as such was not a complete answer to the question faced by the appeal judge in this case.
[62] Here, accepting that the effect of s. 236(5) is that coverage would continue under a policy after an ineffective notice of non-renewal was given, the arbitrator's conclusion that the policy was brought to an end by the mutual agreement of the parties, and was therefore no longer in effect, is not unreasonable.
[63] First, as I have explained, this conclusion is legally defensible and not inconsistent with the statutory regime. While it is correct to say that the statutory provisions reflect the legislative intent in favour of coverage, that policy is not undermined by this analysis on the facts of this case. The fact that the claimant obtained a new policy from AXA confirmed his intention to terminate the Elite policy, and ensured (at least until the AXA policy was terminated) that he had replacement coverage.
[64] Second, this conclusion is consistent with the modern approach to statutory interpretation, including the presumption against absurd results. A literal interpretation of s. 236(5), applying it to all cases where s. 236(1), (2) or (3) are not complied with, without consideration of the factual context, would lead to absurd results. It would keep a policy alive indefinitely even where an insured subsequently receives a valid notice of cancellation (authorized by other provisions within the insurance legislative scheme) or the insured has chosen to terminate and replace the policy.
[65] The appeal judge was willing to accept the potentially indefinite continuation of insurance coverage when a defective notice is given on the basis that the risk of non-compliance with notice provisions should rest with the insurer who has the means to avoid the risk. The underlying concern here is that the insurer will accept the consequences of its own mistake by providing ongoing coverage, where the result would otherwise be an interruption in coverage.
[66] In the present circumstances, the defective notice was followed by conduct that led the claimant to obtain a new policy. Because of the operation of s. 236(5), there was no interruption in coverage until the claimant cancelled that policy. The parties would never have intended that, once the Elite policy was replaced, Elite would continue to cover the claimant -- with the corresponding obligation to pay premiums: see Insurance Act, s. 134. This interpretation would not interfere with the detailed regime respecting insurers' rights to terminate or to refuse to renew auto insurance policies, designed to avoid any gap in coverage in a compulsory insurance scheme.
[67] For these reasons, I would uphold as reasonable the arbitrator's decision that the Elite policy was no longer in force on December 29, 2011, when the accident occurred, and that as such, Elite was not required to provide the claimant with statutory accident benefits.
(3) Elite's alternative argument
[68] Finally, Elite argued that the arbitrator reasonably concluded that its policy was no longer in force because the entire autograph policy program had been terminated months before the collision. The fund responds that this argument fails to recognize that a deeming provision, such as s. 236(5), creates a legal effect (here, of continuing coverage) irrespective of future factual developments.
[69] The appeal judge did not address this argument. In view of my conclusions respecting the reasonableness of the arbitrator's decision that the Elite policy had been effectively terminated for other reasons, it is unnecessary to address this issue in the disposition of this appeal.
I. Disposition
[70] For these reasons, I would allow the appeal and restore the decision of the arbitrator on the preliminary issue in the arbitration of the statutory accident benefits priority dispute. I would award costs to the appellant of this appeal in the sum of $15,000, inclusive of disbursements and HST.
Dissenting Opinion
[71] PARDU J.A. (dissenting): -- Neither the insurer nor the insured complied with the statutory requirements for non-renewal or termination of an insurance policy. Nonetheless, the arbitrator concluded that because of the conduct and subjective assumptions of the parties, the insurance contract was at an end. I agree with the decision of the reviewing judge that this decision was unreasonable. The decision of the arbitrator was unreasonable because he failed to give effect to the statutory language, failed to consider legislative purposes and adopted an interpretation that has no logical connection to the statutory language.
[72] Section 236(1) of the Insurance Act, R.S.O. 1990, c. I.8 provides that if an insurer does not intend to renew a contract the insurer shall give the named insured not less than 30 days' notice of its intention. The insurer must set out the reason for the non-renewal in the notice (s. 236(3)).
[73] Section 236(5) provides that "[a] contract of insurance is in force until there is compliance" (emphasis added) with the notice requirements.
[74] O. Reg. 777/93 mandates statutory conditions that apply to all contracts of automobile insurance. It specifies in great detail the steps an insurer must take to terminate a contract, and in s. 11(2) also provides that an insured may terminate a contract at any time on request.
[75] I agree with the observations of the reviewing judge that s. 236(5) of the Insurance Act [at para. 32],
. . . when read in the context of provisions addressing termination or non-renewal of contracts of insurance, and when given [its] grammatical and ordinary sense harmoniously with the scheme of the Insurance Act, mean[s] what [it] say[s]: that a contract of insurance is in force until there is compliance with ss. 236(1), (2) and (3). Subsection 236(5), in my view, clearly displaces the common law principles applicable to renewals of lapsed contracts. I agree with the statements made by the appeal judge in Echelon that this interpretation is consistent with the scheme and purpose of the Insurance Act and related legislation, and is also consistent with the objectives of a compulsory insurance regime: Echelon, at paras. 17-27.
[76] One of the purposes of the compulsory automobile insurance regime established by the Insurance Act and related legislation is to protect third parties. The existence of a policy of insurance has consequences that extend far beyond the interests of the contracting parties. A pedestrian who, for example, is hit by an insured driver may have recourse to that driver's policy of insurance. Certainty as to whether that policy is in existence is an important step in resolving claims for injuries resulting from accidents and may have significant consequences where, for example, the limits under the insurance policy are higher than the statutory minimum.
[77] As pointed out by Matheson J. in Echelon General Insurance Co. v. Ontario (Minister of Finance) (2016), 133 O.R. (3d) 233, 2016 ONSC 5019, at paras. 25 and 26:
This interpretation is consistent with scheme and purpose of the Insurance Act and related legislation. Section 236 was introduced in 1990 as part of a group of reforms to Ontario's compulsory automobile insurance regime: Insurance Statute Law Amendment Act, S.O. 1990, c. 2, s. 47. As put in Matheson v. Lewis, 2014 ONCA 542, 121 O.R. (3d) 641, at para. 36, the compulsory automobile insurance regime "is clearly intended to protect innocent victims of automobile accidents from having no means of seeking damages from persons who might have caused those damages without having the protection of automobile insurance." The Compulsory Automobile Insurance Act, R.S.O. 1990, c. C.25, s. 2(1) prohibits an owner of a motor vehicle from operating it on a highway "unless the motor vehicle is insured under a contract of automobile insurance."
The additional notice obligations introduced as part of the 1990 reforms are consistent with the objectives of a compulsory insurance regime. The s. 236 notice provisions facilitate continuity of insurance by requiring that insurance companies take additional steps to draw to a policyholder's attention that their policy is about to lapse, and by providing that the insurance remain in force until the notice obligation has been fulfilled.
[78] Interpreting s. 236(5) as requiring that a contract of insurance remain in force until there is compliance with the notice requirements is consistent with the objective of providing some certainty as to when a policy is in force. It is also consistent with that objective to make the insurer responsible for compliance with the statutory conditions for non-renewal or its termination of a policy, as an insurer has control over the steps required to initiate and complete that process.
[79] However, this important legislative purpose was not considered by the arbitrator. An adjudicator must assess the extent to which an interpretation supports legislative objectives. Failure to do so may be a factor leading to a conclusion that the decision was unreasonable.
[80] The ordinary meaning of a statutory provision is also important. As noted in Teal Cedar Products Ltd. v. British Columbia, 2017 SCC 32, the modern principle of statutory interpretation requires that due importance be given to the ordinary meaning of a statute [at paras. 111 and 112]:
The modern principle of statutory interpretation is well-established:
Today there is only one principle or approach, namely, the words of an Act are to be read in their entire context and in their grammatical and ordinary sense harmoniously with the scheme of the Act, the object of the Act, and the intention of Parliament.
(E. A. Driedger, Construction of Statutes (2nd ed. 1983), at p. 87)
This principle requires that statutes "be read to give the words their most obvious ordinary meaning which accords with the context and purpose of the enactment in which they occur": CanadianOxy Chemicals Ltd. v. Canada (Attorney General), [1999] 1 S.C.R. 743, at para. 14; Rizzo & Rizzo Shoes Ltd. (Re), [1998] 1 S.C.R. 27, at paras. 21-22. The plain and ordinary meaning of a statutory provision is the "natural meaning which appears when the provision is simply read through"[.]
[81] Use of different words implies a legislative intention to express different meanings: Ruth Sullivan, Sullivan on the Construction of Statutes, 6th ed. (Markham: LexisNexis, 2014), at p. 218. The arbitrator's conclusion that s. 236(5) provides for automatic renewal is inconsistent with this principle. While s. 236(1) speaks of an intention not to renew a policy, s. 236(5) says the contract is in force until there is compliance with the notice provisions. Section 236(5) does not say that the contract is renewed until there is compliance.
[82] Additionally, the arbitrator's conclusion that "upon renewal, an automobile insurance contract is like any other contract in that each renewal represents a new contract and requires its own 'offer and acceptance'" flies in the face of the plain language of s. 236(5), which provides that the contract continues to be in force absent compliance with the statutory requirements for non-renewal. There is no basis in the relevant statutory provisions to conclude, as the arbitrator did, that failure to give proper notice of non-renewal meant that the policy was renewed for one further six-month term.
[83] Disagreement with the arbitrator and agreement with the reviewing judge is not the end of the inquiry. The reviewing judge could only set aside the arbitrator's decision if the latter's decision was unreasonable. The appellant argues that the reviewing judge in fact applied a correctness standard of review, although he articulated his conclusion by applying a reasonableness norm.
[84] What is it that makes a decision interpreting a statute unreasonable? Some provisions admit of more than one reasonable interpretation. Choosing one reasonable interpretation over another does not make the decision unreasonable, even where the reviewing tribunal disagrees with that choice: Teal Cedar Products Ltd. and McLean v. British Columbia (Securities Commission), 2013 SCC 67. In some circumstances, the autonomy of arbitrators may result in divergent lines of interpretation, both of which are reasonable.
[85] However, as pointed out in McLean [at para. 38]:
It will not always be the case that a particular provision permits multiple reasonable interpretations. Where the ordinary tools of statutory interpretation lead to a single reasonable interpretation and the administrative decision maker adopts a different interpretation, its interpretation will necessarily be unreasonable -- no degree of deference can justify its acceptance; see, e.g., Dunsmuir, at para. 75; Mowat, at para. 34. In those cases, the "range of reasonable outcomes" (Canada (Citizenship and Immigration) v. Khosa, 2009 SCC 12, [2009] 1 S.C.R. 339, at para. 4) will necessarily be limited to a single reasonable interpretation -- and the administrative decision maker must adopt it.
[86] Given the statutory language and context, there was only one reasonable interpretation here. The interpretative question in this case does not require a heavily context dependent application of a normative question such as reasonableness. This is not an area where arbitral pluralism is desirable.
[87] I agree with the conclusions of the reviewing judge, at para. 41 of his reasons:
I conclude that the Arbitrator failed to properly engage in an interpretative process in respect of s. 236(5) of the Insurance Act by taking into account the text, context and purpose of this provision. The Arbitrator's conclusion that there was an automatic renewal of the contract of insurance under section 236(5) that was valid at most for only a further six months was, in my view, not only in error, but outside of a range of possible, acceptable, outcomes which are defensible in respect of the facts and law, because this conclusion fails to give effect to the clear words of section 236(5) when read in their entire context and in their grammatical and ordinary sense harmoniously with the scheme of the Insurance Act and its objects.
[88] The arbitrator failed to give effect to the plain language of the section. He did not consider the purposes of the legislation and did not consider the effects on persons who were not parties to the contract. His application of the notion of repudiation was flawed, as there was no communication of acceptance of repudiation by another contracting party. The insurer did not purport to rescind the policy by attempting to rely on common law authority to do so. There was no communication between the insured and the insurer that could be construed as a mutual agreement to terminate the policy. Moreover, to allow subjective assumptions by either party to lead to a conclusion that there was no contract of insurance, in the face of statutory requirements for non-renewal or termination of such contracts, was unreasonable.
[89] I would dismiss the appeal.
Appeal allowed.
