Gordyukova v. Certas Direct Insurance Company et al. [Indexed as: Gordyukova v. Certas Direct Insurance Co.]

112 O.R. (3d) 446

2012 ONCA 563

Court of Appeal for Ontario,

Rouleau, Watt and Epstein JJ.A.

August 30, 2012

Insurance -- Automobile insurance -- Limitations -- Director's delegate of Financial Services Commission of Ontario ruling that 281.1(1) of Insurance Act requires claimants to choose forum to dispute benefit claim within two- year time limit and prevents them from initiating proceeding in other forum claiming same benefit after expiry of time limit -- Delegate's interpretation of s. 281.1 reasonable -- Insurance Act, R.S.O. 1990, c. I.8, s. 281.1(1). [page447]

G was involved in a motor vehicle accident in November 2001. In September 2002, she brought an action against her insurer for, among other things, a declaration that she was entitled to continued accident benefits. In November 2008, G commenced an arbitration proceeding at the Financial Services Commission of Ontario ("FSCO") claiming entitlement to continued benefits based on her assertion that she had suffered a catastrophic impairment. The insurer brought a motion to stay the arbitration. A FSCO arbitrator ruled that G could not proceed with both the arbitration and the action, but that the arbitration could proceed on condition that G discontinue the action. She could then add the claims made in the action to the arbitration proceeding. The insurer brought a motion for a ruling that G's claim for income benefits could not now be arbitrated as it was time-barred. The FSCO arbitrator rejected that submission and allowed G to add the claims made in the action to the arbitration proceeding. The director's delegate allowed the insurer's appeal, holding that, although the Insurance Act allows a claimant to choose whether to proceed by arbitration or through the courts, once the two-year limitation period in s. 281.1(1) of the Act has expired, the claimant cannot move a matter from one forum to another. The delegate stayed the arbitration proceeding. The Divisional Court found that the delegate's decision was unreasonable and allowed G's application for judicial review. The insurer appealed.

Held, the appeal should be allowed.

The delegate's conclusion that s. 281.1(1) of the Act requires claimants to choose a forum to dispute a benefit claim within the time limit and prevents them from initiating a proceeding in the other forum claiming the same benefit after expiry of the time limit was entirely reasonable.

APPEAL from the order of the Divisional Court (Jennings, Pardu and Harvison Young JJ.) (2011), 108 O.R. (3d) 315, [2011] O.J. No. 5102, 2011 ONSC 6535 (Div. Ct.) allowing an application for judicial review.

Cases referred to Bolger v. CGU Insurance Co. of Canada, [2003] O.F.S.C.I.D. No. 73; Dunsmuir v. New Brunswick, [2008] 1 S.C.R. 190, [2008] S.C.J. No. 9, 2008 SCC 9, 329 N.B.R. (2d) 1, 64 C.C.E.L. (3d) 1, 164 A.C.W.S. (3d) 727, EYB 2008-130674, J.E. 2008-547, [2008] CLLC Â220-020, 170 L.A.C. (4th) 1, 372 N.R. 1, 69 Imm. L.R. (3d) 1, 291 D.L.R. (4th) 577, 69 Admin. L.R. (4th) 1, 95 L.C.R. 65, D.T.E. 2008T-223; Gordyukova v. Dominion of Canada, General Insurance Co., [2010] O.F.S.C.D. No. 98; Gordyukova v. Dominion of Canada, General Insurance Co., [2011] O.F.S.C.D. No. 25, revg [2010] O.F.S.C.D. No. 124; Mangat v. Non-Marine Underwriters, Lloyd's of London, [2000] O.F.S.C.I.D. No. 144

Statutes referred to Insurance Act, R.S.O. 1990, c. I.8, s. 281.1(1)

Rules and regulations referred to Statutory Accident Benefits Schedule -- Accidents on or after November 1, 1996, O. Reg. 403/96 [as am.]

Todd J. McCarthy, Frank A. Benedetto and Matthew J. Stepura, for appellant Certas Direct Insurance Company. [page448] Stephen Scharbach, for appellant Financial Services Commission of Ontario. J.A. Michael Wolfe, for respondent.

The judgment of the court was delivered by

[1] ROULEAU J.A.: -- This is an appeal by Certas Direct Insurance Company ("Certas") from the decision of the Divisional Court on judicial review. The court set aside a decision made by the director's delegate (the "delegate") of the Financial Services Commission of Ontario ("FSCO"). The issue on appeal is the interpretation of the limitation period provision set out in s. 281.1(1) of the Insurance Act, R.S.O. 1990, c. I.8. Leave to appeal to this court was granted on February 7, 2012.

Facts

[2] On November 9, 2001, the respondent was involved in a motor vehicle accident. She subsequently applied for accident benefits from her insurer, the Dominion of Canada General Insurance Company ("Dominion"). After mediation failed to settle a dispute over entitlement to certain medical benefits, the respondent, on September 16, 2002, issued a statement of claim. She sought damages for accident benefits, aggravated and punitive damages, a declaration that she is entitled to continued accident benefits in accordance with the Statutory Accident Benefits Schedule -- Accidents on or after November 1, 1996, O. Reg. 403/96, as amended ("SABS"), and costs. That claim is currently scheduled to be heard in the Superior Court in November of this year.

[3] On October 28, 2005, Dominion notified the respondent that she had exhausted her non-catastrophic limits for medical and rehabilitation benefits. After her application for a determination of catastrophic impairment was rejected, the respondent took the matter to mediation. When mediation failed, she commenced an arbitration proceeding at FSCO claiming entitlement to continued benefits based on her assertion that she had suffered a catastrophic impairment. That application was filed on November 28, 2008.

[4] On July 9, 2010, Certas, who by then had been found to be the priority insurer and had been added as a party, brought a motion seeking to have the arbitration stayed. Certas took the position that the catastrophic impairment arbitration should be added to the pending court action for accident benefits. The respondent's position was that the two could proceed concurrently and independently of each other. [page449]

[5] On July 30, 2010, a FSCO arbitrator ruled that the respondent could not proceed with both the arbitration and the Superior Court action [[2010] O.F.S.C.D. No. 98]. There were issues common to both and allowing separate proceedings to go forward created a risk of inconsistent findings.

[6] Certas argued the appropriate remedy was a stay of the arbitration. It explained that that there were limitation problems if the respondent were to seek to add all of the claims now pending in the Superior Court to the recently launched arbitration. There was, however, no problem having the issues raised in the arbitration proceeding decided as part of the pending Superior Court claim.

[7] The FSCO arbitrator nonetheless ruled that the arbitration could proceed on the condition that the respondent discontinue the court action. She could then add the claims made in the court action to the arbitration proceeding. The FSCO arbitrator went on to specify that he had not ruled on the limitation issue raised by Certas. He held that, should Certas wish to raise it, the issue would be decided if and when the respondent chose to proceed by arbitration for all issues.

[8] The respondent gave notice of her intention to discontinue the court action and proceed with arbitration. Certas brought a motion seeking a ruling on the limitation issue. It argued that arbitration of the respondent's claim for income benefits, which was the subject of the court action, could not now be arbitrated as it was time-barred. On October 22, 2010, the same FSCO arbitrator dealt with the limitation issue and rejected Certas' submission. The FSCO arbitrator allowed the respondent to add all of the matters pending before the Superior Court to the arbitration proceeding [[2010] O.F.S.C.D. No. 124].

[9] Certas appealed that decision to the delegate, arguing that the respondent could not, in effect, re-elect the mode of proceeding from the Superior Court to a FSCO arbitration some eight years after having commenced the court action. Section 281.1(1) of the Insurance Act provides that an arbitration or a court action must be commenced within two years. Once the claimant has chosen a forum and the two-year limitation has elapsed, the claimant cannot change the route.

[10] The delegate allowed the appeal. In his reasons dated March 17, 2011 [[2011] O.F.S.C.D. No. 25], he determined that, although the Insurance Act allowed the claimant to choose whether to proceed either by arbitration or through the courts, once the two-year limitation period expired, the claimant could not move a matter from one forum to the other. [page450]

[11] The delegate explained that precluding the addition of the court claim to the arbitration did not place the respondent in an impossible position. He accepted Certas' argument that the respondent's claim of catastrophic impairment fell within her existing Superior Court claim for a declaration of entitlement to "continued Accident Benefits". In any event, even if it did not come within the existing claim, Certas confirmed that it did not object to the issue of catastrophic impairment being specifically added as an issue to be decided as part of the pending Superior Court action.

[12] The delegate therefore stayed the arbitration proceeding.

[13] The respondent brought an application for judicial review. The Divisional Court determined that the standard of review was reasonableness. It found the delegate's decision to be unreasonable and set it aside.

[14] The court began by noting that the respondent had commenced both the arbitration and the court action within the limitation period. The court went on to explain that the delegate's interpretation of s. 281.1(1) of the Insurance Act meant that the respondent, who had done all that was required of her with respect to the presentation of her claims, would be barred from proceeding with one or the other of her claims. She would have to either abandon her claim for catastrophic impairment in the arbitration proceeding or her claim for replacement benefits in the Superior Court. A decision requiring the respondent to abandon one or the other of her claims was unreasonable and placed her in an impossible position.

Analysis

[15] The parties agree that the applicable standard of review before the Divisional Court was reasonableness. This means that the delegate was to be allowed a margin of appreciation in his decision making. As set out by the Supreme Court of Canada in Dunsmuir v. New Brunswick, [2008] 1 S.C.R. 190, [2008] S.C.J. No. 9, 2008 SCC 9, at para. 47:

Tribunals have a margin of appreciation within the range of acceptable and rational solutions. A court conducting a review for reasonableness inquires into the qualities that make a decision reasonable, referring both to the process of articulating the reasons and to outcomes. In judicial review, reasonableness is concerned mostly with the existence of justification, transparency and intelligibility within the decision-making process. But it is also concerned with whether the decision falls within a range of possible, acceptable outcomes which are defensible in respect of the facts and law.

[16] The issue on appeal is whether the Divisional Court erred in concluding that the decision of the delegate was unreasonable. [page451] Put another way, did the delegate's decision fall within the range of acceptable and rational dispositions.

[17] In my view, the Divisional Court erred in its understanding of the effect of the delegate's decision and consequently erred in its conclusion that the delegate's interpretation of s. 281.1(1) of the Insurance Act was unreasonable.

[18] The delegate's interpretation of s. 281.1(1) is owed deference. The Insurance Act does not provide for an appeal from the delegate's decision. Further, interpreting the SABS provisions and s. 281.1(1) of the Insurance Act is at the core of the delegate's expertise. As long as the interpretation given to these is within the range of reasonable interpretations and rational outcomes, it ought not to be disturbed.

[19] Section 281.1(1) of the Insurance Act reads as follows:

281.1(1) A mediation proceeding or evaluation under section 280 or 280.1 or a court proceeding or arbitration under section 281 shall be commenced within two years after the insurer's refusal to pay the benefit claimed. (Emphasis added)

[20] As explained by the delegate, the use of the word "or" to separate each option and the use of the phrase "shall be commenced" means that if any one of the available options is going to be exercised, it must be pursued within the two-year limit. [See Note 1 below]

[21] The conclusion that s. 281.1(1) requires applicants to choose a forum to dispute a benefit claim within the time limit and prevents them from initiating a proceeding in the other forum claiming the same benefit after expiry of the time limit is entirely reasonable. It is also consistent with the general thrust of earlier decisions by FSCO, including Mangat v. Non- Marine Underwriters, Lloyd's London, [2000] O.F.S.C.I.D. No. 144 and Bolger v. CGU Insurance Co. of Canada, [2003] O.F.S.C.I.D. No. 73.

[22] If the Divisional Court's interpretation of s. 281.1(1) were adopted, nothing would prevent a claimant from deciding on the eve of trial to change fora and seek to have the matter heard by an arbitrator. The court dates would likely be wasted, the matter would be delayed and the only potential sanction would be an order for costs of the discontinued proceeding. There would also be a good deal of effort wasted by the parties in preparing for trial. Similarly, the Divisional Court's decision suggests that a [page452] claimant could later discontinue an arbitration proceeding and issue a fresh statement of claim.

[23] Certas acknowledged that the choice of forum -- court or arbitration -- always rests with the insured. An insured is also at liberty to seek to have some issues determined by the court and other issues determined by arbitration. What an insured cannot do is change forums after the expiry of the limitation period. Problems such as those encountered in this case are exceptional and will only arise when a stay of the arbitration proceeding is sought in order to avoid the risk of inconsistent findings or to avoid duplication.

[24] I agree with the delegate that the difficulty in the present case only arose because the FSCO arbitrator who dealt with the July 30, 2010 motion, seeking to prevent the matter from proceeding in two different fora, had not considered the limitation period issue before deciding the consolidation issue.

[25] As set out in Mangat, where a motion to stay an arbitration is brought because of a concern that there may be conflicting findings or duplication, the arbitrator should consider several factors in deciding whether to grant an order staying the arbitration. Among the factors to be considered are whether the claim in the court action is [at para. 42] "broad enough to include the benefits claimed in the arbitration proceeding" and whether there "is no obvious impediment to [the insured] adding the issues to the court action". As explained by the delegate, dealing with the limitation issues as part of the stay motion is required precisely to avoid placing the insured into an impossible situation.

[26] In any event, the delegate's decision did not, as the Divisional Court held [at para. 16], put the respondent in an "impossible position". The delegate's decision made it clear that the respondent's catastrophic impairment claim did not have to be abandoned: it would be decided as part of the pending Superior Court action.

[27] As the delegate explained, the respondent's Superior Court action sought a declaration of entitlement to "continued accident benefits". In the circumstances, this necessarily raised the issue of catastrophic impairment. Even if he were wrong, Certas made it clear throughout the proceedings that it did not object to the catastrophic impairment issue being specifically added as an issue in the Superior Court action should the respondent wish to explicitly make the claim.

[28] The respondent was and remains at liberty to have her claim for catastrophic impairment determined as part of the pending Superior Court action. The Divisional Court misapprehended [page453] the effect of the delegate's decision when it held otherwise. In all of the circumstances, the delegate's decision was reasonable and deserving of deference.

Conclusion

[29] For these reasons, I would allow the appeal, set aside the order of the Divisional Court and restore the order of the delegate. As agreed by the parties, I would award Certas costs of this appeal and of the leave motion in the global amount of $6,500 plus HST, but inclusive of disbursements. I would also award Certas costs of the Divisional Court proceeding fixed in the amount of $3,500, inclusive of disbursements and applicable taxes.

Appeal allowed.

@7 Notes

Note 1: Other provisions in the Insurance Act extend the limitation period in specific circumstances. None of these apply to this case.