Her Majesty the Queen in Right of Ontario as represented by the Minister of Finance v. Pilot Insurance Company

[Indexed as: Ontario (Minister of Finance) v. Pilot Insurance Co.]

109 O.R. (3d) 168

2012 ONCA 33

Court of Appeal for Ontario,

MacPherson, LaForme and Epstein JJ.A.

January 19, 2012

Insurance -- Automobile insurance -- Disputes between insurers -- Cyclist applying to Motor Vehicle Accident Claims Fund ("Fund") for statutory accident benefits after struck by unidentified motorist -- Cyclist not attaching police report as he was unable to obtain one but advising Fund that motorist had made 911 call to report accident -- [page169] Fund aware that it could only obtain information about 911 call through freedom of information request or court order -- Fund delaying seeking court order for seven months after its freedom of information request was denied -- Fund discovering motorist's identity after obtaining court order and serving notice of dispute on motorist's insurer under s. 3 of O. Reg. 283/95 -- Fund not meeting notice requirements of s. 3 as it was not reasonably diligent in investigating motorist's identity -- Fund responsible for paying statutory accident benefits to cyclist -- Disputes Between Insurers, O. Reg. 283/95.

A cyclist was injured by an unidentified motorist and submitted an application for statutory accident benefits to the Motor Vehicle Accident Claims Fund (the "Fund"). He did not attach a police report, as he was unable to obtain one, but advised the Fund that the motorist had made a 911 call on her cellphone to inform the police of the accident. The Fund discovered that information about a 911 call could only be obtained through a freedom of information request or a court order. Its freedom of information request was denied in January 2008. The Fund applied successfully for a court order for access to the 911 call in September 2008 and identified the driver. In October 2008, the Fund put the driver's insurer, Pilot, on notice that it was disputing its obligation to pay benefits. The Fund initiated arbitration proceedings. The arbitrator held that the Fund had not met the notice requirements of s. 3 of O. Reg. 283/95. The arbitrator found that the Fund was not diligent in investigating the driver's identity as it delayed seeking a court order between January 2008, when its freedom of information request was denied, and August 2008. The Fund's appeal was allowed. Pilot appealed.

Held, the appeal should be allowed.

A functionally adequate application constitutes a "completed application" for the purposes of s. 3 of the Regulation. As soon as the insurer has sufficient information to notify another insurer that it is disputing liability to pay benefits, the 90-day notice period in s. 3 starts to run. The Fund had sufficient information to give written notice to Pilot for the purpose of s. 3 when the 911 call information was obtained in September 2008. However, the Fund's delay in pursuing the 911 call information meant that the Fund should be treated as if it had received a completed application in February 2008. When the freedom of information request was denied in January 2008, the Fund was obligated to continue to pursue the information using other means, yet it did not seek a court order for more than seven months. It would be contrary to the legislative intent to allow the Fund to sit on the application without adequate investigation for months at a time. The arbitrator was correct in finding that it was the Fund's responsibility to pay accident benefits to the cyclist.

APPEAL from the judgment of Cumming J., [2010] O.J. No. 4205, 2010 ONSC 5361, 2 M.V.R. (6th) 112 allowing an appeal from a decision of the arbitrator.

Cases referred to ING Insurance Co. of Canada v. TD Insurance Meloche Monnex (2010), 103 O.R. (3d) 270, [2010] O.J. No. 3549, 2010 ONCA 559, [2010] I.L.R. I-5044, 266 O.A.C. 377, 88 C.C.L.I. (4th) 163, 323 D.L.R. (4th) 241; Ontario (Minister of Finance) v. Lombard Insurance Co. of Canada (2010), 100 O.R. (3d) 51, [2010] O.J. No. 1210, 2010 ONSC 1770, 93 M.V.R. (5th) 59, [2010] I.L.R. I-4966, apld

Other cases referred to ING Insurance Co. of Canada v. State Farm Insurance Companies (2009), 2009 45850 (ON SC), 97 O.R. (3d) 291, [2009] O.J. No. 3643, [2009] I.L.R. I-4887, 77 C.C.L.I. (4th) 198, 180 A.C.W.S. (3d) 151 (S.C.J.); Liberty Mutual Insurance Co. v. Commerce Insurance Co., 2001 62750 (ON SC), [2001] O.J. No. 5479, [2001] O.T.C. 978, 36 C.C.L.I. (3d) 269, [2002] I.L.R. I-4049, 111 A.C.W.S. (3d) 812 (S.C.J.) [page170]

Statutes referred to Insurance Act, R.S.O. 1990, c. I.8, s. 268 Motor Vehicle Accident Claims Act, R.S.O. 1990, c. M.41 [as am.]

Rules and regulations referred to Disputes Between Insurers, O. Reg. 283/95, ss. 2 [as am.], 3 [as am.], (1), (2) O. Reg. 38/10 (Insurance Act), s. 4

Todd J. McCarthy and Stephanie Zwicker Slavens, for appellant. John Friendly, for respondent.

The judgment of the court was delivered by

LAFORME J.A.: -- Introduction

[1] In Ontario, insurance law designates which insurance companies are liable to pay statutory accident benefits in the case of a motor vehicle accident. The priority rules are set out in the Insurance Act, R.S.O. 1990, c. I.8, s. 268.

[2] Non-occupants who are involved in a motor vehicle accident must first submit their claim for statutory accident benefits to their own insurance company. If they do not have insurance, then they must submit their claim to the insurer of the vehicle that struck them.

[3] However, in circumstances where the striking vehicle is not insured or where the insurer of the striking vehicle is unknown, and no other vehicle was involved, non-occupants have recourse against the Motor Vehicle Accident Claims Fund (the "Fund"), established under the Motor Vehicle Accident Claims Act, R.S.O. 1990, c. M.41.

[4] Her Majesty the Queen in Right of Ontario as represented by the Minister of Finance administers the Fund. The Fund is considered to be the "payer of last resort" because it provides compensation to people injured in motor vehicle accidents when no insurance exists to respond to their claim.

[5] If, after receiving a claim, the Fund discovers that another insurer may be liable, the Fund can dispute its obligation to pay statutory accident benefits. [page171]

[6] This appeal examines whether the Fund can dispute its obligation to pay benefits to an injured cyclist with Pilot Insurance Company ("Pilot"). This examination turns on whether the Fund complied with the requirements of s. 3 of Disputes Between Insurers, O. Reg. 283/95, when it notified Pilot that it was seeking to dispute liability.

Background

Relevant provisions

[7] Sections 2 and 3 of O. Reg. 283/95 are relevant to this appeal. [See Note 1 below] O. Reg. 283/95 creates a scheme that applies to insurers disputing who is obligated to pay statutory accident benefits.

[8] Section 2 directs the first insurer that receives a completed application for statutory accident benefits to pay those benefits to the injured applicant:

2(1) The first insurer that receives a completed application for benefits is responsible for paying benefits to an insured person pending the resolution of any dispute as to which insurer is required to pay benefits under section 268 of the [Insurance Act]. (Emphasis added)

[9] Section 3(1) gives an insurer 90 days from receipt of a completed application to dispute its obligation to pay statutory accident benefits: [See Note 2 below]

3(1) No insurer may dispute its obligation to pay benefits under section 268 of the Act unless it gives written notice within 90 days of receipt of a completed application for benefits to every insurer who it claims is required to pay under that section. (Emphasis added)

[10] The 90-day notice period in s. 3(1) is subject to extension by s. 3(2). Section 3(2) provides an exception for cases in which, despite the reasonable efforts of the insurer seeking indemnity, 90 days is not enough to determine whether another insurer is liable:

(2) An insurer may give notice after the 90-day period if, [page172] (a) 90 days was not a sufficient period of time to make a determination that another insurer or insurers is liable under section 268 of the Act; and (b) the insurer made the reasonable investigations necessary to determine if another insurer was liable within the 90-day period.

[11] As emphasized above, receipt of a "completed application" triggers obligations under both ss. 2 and 3.

[12] This court recently dealt with the meaning of "completed application" for the purpose of triggering the first insurer's obligation to pay benefits to the injured person under s. 2 in ING Insurance Co. of Canada v. TD Insurance Meloche Monnex (2010), 103 O.R. (3d) 270, [2010] O.J. No. 3549, 2010 ONCA 559. [See Note 3 below]

[13] The case we [are] deciding deals with the meaning of "completed application" for the purpose of triggering the 90-day notice period in s. 3.

The facts

[14] A cyclist was injured by an unidentified motorist on November 30, 2006. He had no insurance of his own, and thus, on December 19, 2006, submitted a signed application for statutory accident benefits to the Fund. He did not attach a police report as he was unable to obtain one.

[15] The Fund received the cyclist's application on March 7, 2007. Seeking to dispute its obligation to pay benefits to the cyclist, the Fund took steps to determine the insurer of the striking vehicle.

[16] On May 8, 2007, the Fund obtained a statement from the cyclist. This statement informed the Fund that the driver of the vehicle that struck the cyclist made a 911 call on her cellphone to inform police of the accident.

[17] In September 2007, an investigator for the Fund identified and spoke to the police officer who had responded to the accident. The police officer told the investigator that his notes had gone missing and that it was possible he had not written an official accident report. [page173]

[18] The police advised the investigator that there were only two ways to obtain information about the 911 call: through a freedom of information request or by way of a court order.

[19] The Fund's investigator made two unsuccessful freedom of information requests to obtain the 911 call records. The last of these requests was denied on January 17, 2008.

[20] On May 22, 2008, the Fund wrote to Kingsway General Insurance Company to inquire about Kingsway's position on priority with regard to the accident. The Fund had received information suggesting that Kingsway might be liable, but this later turned out to be incorrect.

[21] Kingsway did not respond to the Fund's letter. The Fund turned the matter over to its legal counsel. Counsel served Kingsway with a notice of commencement of arbitration on July 9, 2008. Then, on August 21, 2008, counsel filed a motion to obtain the particulars of the 911 call.

[22] On September 4, 2008, the Fund obtained an unopposed court order to provide the particulars of the 911 call. On September 8, 2008, the Fund received the 911 call records from Toronto Police Services. The records identified the driver of the vehicle that struck the cyclist.

[23] On September 12, 2008, a driver record and insurance search provided contact information for the driver. On October 8, 2008, the driver confirmed her involvement in the accident and that Pilot was her insurer.

[24] On October 10, 2008, Pilot was put on notice that the Fund was disputing its obligation to pay benefits. Pilot, therefore, was put on notice some one and a half years after the Fund had received the cyclist's application without the police report, but within 30 days after the Fund had identified the driver.

[25] The Fund then initiated arbitration against Pilot, seeking to have Pilot held responsible for paying the cyclist's statutory accident benefits.

The issue arbitrated

[26] The issue that proceeded to arbitration was straightforward: did the Fund provide written notice of its intent to dispute priority within 90 days of receiving a completed application for statutory accident benefits, as required by s. 3(1) of O. Reg. 283/95, and if not, do the saving provisions of s. 3(2) apply?

The arbitrator's decision

[27] The arbitrator held that the Fund had not met the notice requirements of s. 3, so Pilot could not be held responsible for covering the costs of the cyclist's statutory accident benefits. [page174]

[28] The arbitrator relied on Ontario (Minister of Finance) v. Lombard Insurance Co. of Canada, supra, in which Perell J. held that the term "completed application" could have a different meaning for establishing whether an insured has made out a claim for benefits (pursuant to s. 2) than it does for calculating the deadline for contesting priority between insurers (pursuant to s. 3). When a police report is unavailable, an insured need not submit such a report for her application to be treated as complete for the purpose of obtaining benefits under s. 2. However, the application is not treated as complete for the purpose of starting the insurer's 90-day clock for disputing its liability to pay those benefits with other insurers under s. 3 as long as the insurer is diligent in investigating the missing information.

[29] The arbitrator held that the Fund had not been diligent in investigating the missing information and so failed to meet the 90-day deadline when it put Pilot on notice on October 10, 2008. Following Lombard, the arbitrator held that the Fund had access to the information that would have been in the police report once it obtained the 911 call records in September 2008. However, the Fund was estopped from claiming that it had not received a completed application until September 2008 because the Fund delayed in seeking a court order to obtain those call records between January 2008 (when its last freedom of information request was denied) and August 2008 (when it brought the motion to obtain the court order).

[30] The arbitrator held that the Fund should have moved for the court order far earlier than it did -- by February 2008 at the very latest -- and 90 days from that date would have been sufficient time to obtain the information. So the Fund did not come within the saving provisions of s. 3(2).

The application judge's decision

[31] The application judge allowed the Fund's appeal, holding that the Fund had met the notice requirements of s. 3. The application judge agreed with the arbitrator that the principles set out in Lombard apply to this case; however, he held that the arbitrator's ruling did not accord with those principles.

[32] At para. 29 of his reasons, the application judge expressed the law as follows:

The case law recognizes that receipt of an application may be "functionally adequate" so as to be treated as a "completed application" for the purpose of paying benefits under s. 2 while not being "functionally adequate" so as to be treated as a "completed application" under s. 3 for the purpose of triggering the 90 day limitation period to exercise its legislated rights to determine the priority obligation as between competing insurers. [page175]

[33] The application judge concluded that the Fund did not have a functionally adequate application -- so as to be treated as a completed application under s. 3 -- until the Fund obtained the 911 call records in September 2008, and thus met the 90-day deadline when it put Pilot on notice on October 10, 2008. This was because, until the 911 call records were obtained, the Fund did not have sufficient information to identify the insurer of the unidentified motorist.

[34] The arbitrator's conclusion that the Fund did too little between January and August 2008 to locate the motorist did not, in the application judge's view, result in the Fund's receiving a completed application prior to September 2008. The application judge found the arbitrator's conclusion to be inconsistent with the evidence that, during that time, the Fund was pursuing the possibility that another insurer might be responsible.

[35] The application judge also held that the evidentiary record did not support the arbitrator's finding that the Fund was estopped from asserting that it did not have a completed application until September 2008. In his view, the elements of estoppel by representation had been made out.

Nature of the Appeal

[36] The issue on appeal is whether the application judge erred in reversing the arbitrator's decision that the Fund did not comply with the notice requirements under s. 3.

[37] Pilot argues that the application judge erred because the Fund had a "functionally adequate" application on March 7, 2007, when the Fund received the cyclist's application. On that date, the Fund had sufficient information to conduct investigations within 90 days with the assistance of an investigator or counsel. At that time, the Fund could have, and should have, applied for a freedom of information request or applied to the court for an unopposed order to produce the 911 call records from the police. In other words, it should have conducted the same process in March 2007 that it successfully conducted early in the second half of 2008.

[38] The Fund makes two arguments. First, it argues that the application judge was correct to hold that the Fund did not receive a "functionally adequate" application until it received the 911 call records in September 2008.

[39] Second, the Fund argues that, even if the 90-day notice period began on March 7, 2007, it would have been impossible, on the facts as found, for the Fund to have put Pilot on notice within 90 days of that date. The Fund relies on s. 3(2) to say that the notice period could not have expired at that point as the [page176] Fund exercised due diligence to determine if another insurer was liable and 90 days was not a sufficient period of time in which to do so.

[40] For the following reasons, I would allow Pilot's appeal.

[41] I agree with the decision of the arbitrator. As I will explain, the arbitrator's evidentiary findings support the conclusion that the Fund had a functionally adequate application, and therefore a completed application, in September 2008. However, because the Fund was not diligent in investigating the missing information, it cannot claim that it did not receive a completed application until September 2008. Rather, the Fund ought to have pursued the information by at least February 2008 and was required to put Pilot on notice under s. 3 by May 2008.

Analysis

[42] I would adopt the approach that has developed through the jurisprudence -- particularly as set out by Perell J. in Lombard -- to determine when an insurer has received a "completed application" for the purposes of s. 3 of O. Reg. 283/95. That is to say, and as I will discuss below, a completed application is one that is (1) genuinely complete; (2) functionally adequate for its legislated purpose; or (3) treated as complete based on the conduct of the first insurer.

Genuinely complete

[43] A genuinely complete application is one that is filled out on the Application for Accident Benefits (OCF-1) form and contains any required attachments. Part 11 of the OCF-1 form requires three documents to be attached to the applicant's form -- one of which is a Motor Vehicle Accident (Police) Report -- in cases where the applicant, as a last resort, applies to the Fund for the payment of accident benefits.

[44] The cyclist in this case clearly did not submit a genuinely complete application, as the police report was missing.

[45] However, the jurisprudence dealing with the interpretation of "completed application" in s. 3 as well as in s. 2 of O. Reg. 283/95 has looked beyond the plain meaning of this phrase and interpreted it purposively.

Functionally adequate

[46] An application for benefits that is not genuinely complete can nevertheless constitute a "completed application" if it is [page177] functionally adequate for its legislated purpose. This interpretation applies to both ss. 2 and 3.

Section 2

[47] In ING, this court held that a functionally adequate application constitutes a "completed application" under s. 2. In doing so, at para. 51, this court endorsed the following proposition set out in Liberty Mutual Insurance Co. v. Commerce Insurance Co., 2001 62750 (ON SC), [2001] O.J. No. 5479, 36 C.C.L.I. (3d) 269 (S.C.J.):

[A]n application for accident benefits need not be on a certain form in order to be valid -- it need only provide sufficient particulars to reasonably assist the insurer with processing the application, identifying the benefits to which the applicant may be entitled, and assessing the claim . . . the insurer only needs sufficient information to meaningfully move forward or commence the process of adjusting the claim[.]

[48] This court went on to hold, at para. 60 of ING, that "[o]nce an insurer has received sufficient information that it can obtain any further necessary information, it must obtain that additional information and begin to pay benefits". The insurer is not permitted to rely on shortcomings in written documentation as grounds for refusing to pay benefits.

[49] This court held that this flexible approach to determining whether certain documents amount to a completed application -- as opposed to a formalistic one -- furthers the legislative goal of "pay now, dispute later", as it encourages the prompt payment of benefits to injured applicants.

Section 3

[50] Consistently, a functionally adequate application constitutes a "completed application" under s. 3. An insurer is not permitted to rely on shortcomings in written documentation as grounds for claiming that the 90-day notice period has not commenced. As soon as the insurer has sufficient information to notify another insurer that it is disputing liability to pay the benefits, the 90-day notice period starts running.

[51] This interpretation advances the goal of resolving disputes between insurers in a timely and efficient manner.

[52] In this case, Pilot and the Fund agree that a functionally adequate application is sufficient to constitute a "completed application" under s. 3. They agree that a "completed application" may be different for purposes of s. 2 and s. 3. They agree that the application judge applied the correct test. Where they part company is on when a functionally adequate application existed. [page178]

Determining when an application is functionally adequate

[53] The purpose of the section of O. Reg. 283/95 that is being considered (i.e., s. 2 or s. 3) will determine whether an application is functionally adequate.

[54] As set out in ING, to be functionally adequate for the purpose of s. 2 -- and thus trigger the first insurer's obligation to pay benefits to the injured person -- an application must contain sufficient information to allow the insurer to assess and process the injured person's claim for benefits.

[55] To be functionally adequate for the purposes of s. 3 -- and thus trigger the 90-day period an insurer has to notify another insurer that it is disputing its obligation to pay benefits -- an application must contain sufficient information to allow the first insurer to give notice of dispute to another insurer. This interpretation applies in this case.

Application to this case

[56] The Fund had sufficient information to give written notice to Pilot for the purpose of s. 3 when the 911 call information was obtained in September 2008. Before this, the Fund did not know the identity of the motorist who struck the cyclist and so could not determine the insurer of the motorist's vehicle. Once it obtained the missing information of the motorist's identity, the Fund had sufficient external information to supplement the standard OCF-1 form and make it complete. At this point, the Fund had an application that was functionally adequate for the purpose of notifying Pilot.

[57] The analysis, however, does not end there.

Completed application based on the first insurer's conduct

[58] Another principle that has developed in the jurisprudence involves circumstances where the first insurer receives an inadequate application but is treated as if it had received a completed application because of its conduct. Waiver, estoppel, delay and deflection have all been seized on as examples of such conduct.

[59] This case is concerned with whether an insurer has failed to act diligently to obtain information that is missing from an application form when a police report is not available. The 90-day clock will start to run when an insurer fails to fulfill its obligation to "take steps to ascertain the missing information": Lombard, at para. 63.

[60] In this case, the evidentiary record supports the arbitrator's conclusion that the Fund's delay in pursuing the 911 call [page179] information forms the basis for treating the Fund as if it had received a completed application in February 2008.

[61] The arbitrator's finding that the Fund failed to diligently investigate the claim is owed deference, as is his finding that the Fund should have moved for the court order to obtain the 911 call records in February 2008 at the very latest.

[62] The arbitrator found that the Fund was aware of the two possible ways to acquire the 911 call information in this case: (1) through a freedom of information request or (2) through a court order. When the last freedom of information request was denied in January 2008, the Fund was obligated to continue to pursue the information using other means. The arbitrator found that the Fund delayed unnecessarily in seeking a court order to obtain the 911 call records that revealed the information necessary to proceed against Pilot. In my view, these findings were entirely reasonable given the evidence before the arbitrator.

[63] The application judge's observation, at para. 18 of his reasons, that the Fund did take some steps to investigate between May and August 2008, is not sufficient to disturb the arbitrator's findings.

[64] The Fund was required to exercise reasonable diligence in pursuing the missing information. The Fund was one step away from turning an incomplete application into a functionally adequate application, but did not act to obtain the court order for more than seven months after the freedom of information route proved unsuccessful. Given the short notice period established by s. 3, it would be contrary to the legislative intent to allow the Fund to sit on the application without adequate investigation for months at a time.

[65] I agree with the application judge that the elements of estoppel by representation were not made out. There is no suggestion that Pilot detrimentally relied on the Fund's conduct -- I imagine that Pilot had no idea that the accident had occurred. However, in my view, the application judge misinterpreted the arbitrator's reference to estoppel as referring narrowly to estoppel by representation. The arbitrator indicated that he was relying on Lombard for the principle that the first insurer should be treated as receiving a completed application when it does not act diligently in attempting to obtain missing information. The arbitrator's findings relate to the Fund's failure to exercise diligence in obtaining the missing information. The arbitrator made no reference to the elements of estoppel by representation. In my view, the arbitrator relied on the Fund's delay in [page180] investigating the missing information, not on estoppel by representation, as the basis for his conclusion.

Saving provisions

[66] Given this result and the reasons for it, the Fund cannot rely on the saving provisions in s. 3(2).

Disposition

[67] For these reasons, I would allow the appeal. The order of the arbitrator -- that it is the responsibility of the Fund to pay accident benefits to or on behalf the cyclist -- should be restored.

[68] I would award the appellant its costs of the appeal in the agreed upon amount of $7,500, inclusive of disbursements and HST. Given the result, I would also award the appellant its costs before the application judge, fixed in the agreed upon amount of $5,000, inclusive of disbursements and HST.

Appeal allowed.

@7 Notes

Note 1: This regulation was amended in 2010 by O. Reg. 38/10. Sections 2 and 3 were amended with respect to accidents that occur on or after September 1, 2010.

Note 2: The 2010 amendments to the regulation now provide that "[i]f the dispute relates to an accident that occurred on or after September 1, 2010, the Fund may give a notice under subsection (1) after the 90-day period and is not required to comply with subsection (2)": O. Reg. 38/10, s. 4.

Note 3: ING Insurance Co. of Canada v. TD Insurance Meloche Monnex was released after the two main cases that the arbitrator and application judge relied upon, namely, Ontario (Minister of Finance) v. Lombard Insurance Co. of Canada (2010), 100 O.R. (3d) 51, [2010] O.J. No. 1210, 2010 ONSC 1770 and ING Insurance Co. of Canada v. State Farm Insurance Companies (2009), 2009 45850 (ON SC), 97 O.R. (3d) 291, [2009] O.J. No. 3643 (S.C.J.).