Intact Insurance Company v. Allstate Insurance Company of Canada
[Indexed as: Intact Insurance Co. v. Allstate Insurance Co. of Canada]
Ontario Reports
Court of Appeal for Ontario,
Sharpe, LaForme and van Rensburg JJ.A.
August 4, 2016
131 O.R. (3d) 625 | 2016 ONCA 609
Case Summary
Insurance — Arbitration — Appeals — Administrative law framework applying to determination of standard of review on appeal from insurance arbitration — Standard of review of arbitrator's decision as to whether claimant was "principally dependant" on insured for purposes of entitlement to statutory accident benefits being reasonableness.
Insurance — Automobile insurance — Statutory accident benefits — Dependant — Claimants injured in motor vehicle accident seven weeks after moving in with insured — Arbitrator acknowledging that claimants were principally dependent on insured for financial support during that period but choosing to apply 12-month time frame for determining dependency as relationship was unlikely to be permanent — Permanence requirement inconsistent with applicable legal principles — Decision also speculative and unsupported by evidence — Decision that claimants were not principally dependent on insured for purpose of entitlement to statutory accident benefits from his insurer being unreasonable.
P decided to leave her husband, taking her two daughters, and move in with K. Seven weeks later, P and her daughters were injured in a motor vehicle accident while they were passengers in a friend's car. They applied for and received statutory accident benefits from Intact, the insurer of the friend's vehicle. However, Intact argued that Allstate, which insured two vehicles owned by K, should pay those benefits as the claimants were financially dependent on K at the time of the accident and consequently were insureds under Allstate's policies. The insurers submitted the priority dispute to an arbitrator. The arbitrator acknowledged that the claimants were principally dependent on K for financial support during the seven weeks of cohabitation. However, the arbitrator chose to apply a 12-month time frame for determining financial dependency as P's relationship with K was unlikely to be permanent. The arbitrator concluded that the claimants were not principally financially dependent on K and that Intact was responsible for the accident benefits. The arbitrator's decision was set aside on appeal by Intact, and Allstate was found to be responsible for paying the accident benefits. Allstate appealed.
Held, the appeal should be dismissed.
The appeal judge erred by reviewing the arbitrator's decision on a standard of correctness. The administrative law framework must be applied to determine the standard of review on an appeal from an insurance arbitration. The standard of review of the arbitrator's decision was reasonableness.
Despite erring in the standard of review, the appeal judge did not err in setting aside the arbitrator's decision. In carving out a category of "transient" or "recent" relationships and creating a permanence requirement for all of them, the arbitrator applied a categorical approach which was inconsistent with the applicable legal principles and which was too divorced from the actual question to be [page626] decided: what time period accurately reflected the true nature of the particular relationship at issue at the time of the accident? The arbitrator's decision was not supported by the evidence. The uncontroverted evidence was that the move was intended to be a permanent one and that K was contributing the vast majority of the expenses of the new household. The odds of P and K's relationship surviving into the future had very little to do with whether the claimants were principally dependent for financial support on K at the time of the accident. The arbitrator's analysis relied on speculation and unreliable inferences. His decision was unreasonable.
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, 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, 164 A.C.W.S. (3d) 727; Mouvement laïque québécois v. Saguenay (City), [2015] 2 S.C.R. 3, [2015] S.C.J. No. 16, 2015 SCC 16, 332 C.R.R. (2d) 183, 34 M.P.L.R. (5th) 1, 382 D.L.R. (4th) 385, 22 C.C.E.L. (4th) 1, 2015EXP-1106, J.E. 2015-600, EYB 2015-250606, 251 A.C.W.S. (3d) 184, apld
Other cases referred to
Agraira v. Canada (Public Safety and Emergency Preparedness), [2013] 2 S.C.R. 559, [2013] S.C.J. No. 36, 2013 SCC 36, 2013EXP-2099, J.E. 2013-1121, EYB 2013-223432, 52 Admin. L.R. (5th) 183, 360 D.L.R. (4th) 411, 16 Imm. L.R. (4th) 173, 446 N.R. 65, 228 A.C.W.S. (3d) 1098; Aviva Insurance Co. of Canada v. Royal & SunAlliance Insurance Co., 2008 41817 (ON SC), [2008] O.J. No. 3240, [2008] I.L.R. I-4726, 66 C.C.L.I. (4th) 262, 169 A.C.W.S. (3d) 640 (S.C.J.); Ayr Farmers Mutual Insurance Co. v. Wright, [2015] O.J. No. 5280, 2015 ONSC 6219 (S.C.J.); Canada (Canadian Human Rights Commission) v. Canada (Attorney General), [2011] 3 S.C.R. 471, [2011] S.C.J. No. 53, 2011 SCC 53, 2011EXP-3257, 2011EXPT-1939, J.E. 2011-1815, D.T.E. 2011T-708, EYB 2011-197380, 93 C.C.E.L. (3d) 1, 337 D.L.R. (4th) 385, 26 Admin. L.R. (5th) 1, 93 C.C.E.L. (3d) 1, 422 N.R. 248, [2011] CLLC Â230-043, 73 C.H.R.R. D/30; Carrick (Re) (2015), 128 O.R. (3d) 209, [2015] O.J. No. 6524, 2015 ONCA 866, 344 O.A.C. 66, 126 W.C.B. (2d) 353; Chisholm v. Liberty Mutual Group (2002), 2002 45020 (ON CA), 60 O.R. (3d) 776, [2002] O.J. No. 3135, 217 D.L.R. (4th) 145, 163 O.A.C. 129, 43 C.C.L.I. (3d) 58, 33 M.V.R. (4th) 165, 116 A.C.W.S. (3d) 264 (C.A.); Dominion of Canada General Insurance Co. v. Ontario (Minister of Finance), [2013] O.J. No. 3345, 2013 ONSC 4717, 25 C.C.L.I. (5th) 125, 230 A.C.W.S. (3d) 580 (S.C.J.); Dr. Q v. College of Physicians and Surgeons of British Columbia, [2003] 1 S.C.R. 226, [2003] S.C.J. No. 18, 2003 SCC 19, 223 D.L.R. (4th) 599, 302 N.R. 34, [2003] 5 W.W.R. 1, J.E. 2003-714, 179 B.C.A.C. 170, 11 B.C.L.R. (4th) 1, 48 Admin. L.R. (3d) 1, 121 A.C.W.S. (3d) 178; Halifax (Regional Municipality) v. Canada (Public Works and Government Services), [2012] 2 S.C.R. 108, [2012] S.C.J. No. 29, 2012 SCC 29, 2012EXP-2260, J.E. 2012-1182, EYB 2012-207733, 431 N.R. 10, 17 R.P.R. (5th) 1, 36 Admin. L.R. (5th) 1, 345 D.L.R. (4th) 577, 97 M.P.L.R. (4th) 1, 215 A.C.W.S. (3d) 20; Gore Mutual Insurance Co. v. Co-Operators General Insurance Co. (2008), 2008 46914 (ON SC), 93 O.R. (3d) 234, [2008] O.J. No. 3603, 68 C.C.L.I. (4th) 258, 171 A.C.W.S. (3d) 179 (S.C.J.); Housen v. Nikolaisen, [2002] 2 S.C.R. 235, [2002] S.C.J. No. 31, 2002 SCC 33, 211 D.L.R. (4th) 577, 286 N.R. 1, [2002] 7 W.W.R. 1, J.E. 2002-617, 219 Sask. R. 1, 10 C.C.L.T. (3d) 157, 30 M.P.L.R. (3d) 1, 112 A.C.W.S. (3d) 991; Intact Insurance Co. v. Old Republic Insurance Co. (2016), 131 O.R. (3d) 485, [2016] O.J. No. 2491, 2016 ONSC 3110 (S.C.J.); [page627] Loewen v. Manitoba Teachers' Society, [2015] M.J. No. 21, 2015 MBCA 13, [2015] 3 W.W.R. 70, 85 Admin. L.R. (5th) 120, 315 Man. R. (2d) 123, 380 D.L.R. (4th) 654, 249 A.C.W.S. (3d) 19; Lombard Canada Ltd. v. Royal & SunAlliance Insurance Co. (2008), 2007 82792 (ON SC), 94 O.R. (3d) 62, [2008] O.J. No. 5239, 70 C.C.L.I. (4th) 190, [2009] I.L.R. I-4779 (S.C.J.); McLean v. British Columbia (Securities Commission), [2013] 3 S.C.R. 895, [2013] S.C.J. No. 67, 2013 SCC 67, 347 B.C.A.C. 1, 452 N.R. 340, 2013EXP-3911, J.E. 2013-2131, EYB 2013-230152, 366 D.L.R. (4th) 30, [2014] 2 W.W.R. 415, 53 B.C.L.R. (5th) 1, 64 Admin. L.R. (5th) 237, 235 A.C.W.S. (3d) 290; Miller v. Safeco Insurance Co. of America (1985), 1985 2022 (ON CA), 50 O.R. (2d) 797, [1985] O.J. No. 2742, 13 C.C.L.I. 31, [1985] I.L.R. Â1-1949 at 7486, 32 A.C.W.S. (2d) 70 (C.A.), affg (1984), 1984 2019 (ON SC), 48 O.R. (2d) 451, [1984] O.J. No. 3383, 9 C.C.L.I. 1, [1984] I.L.R. Â1-1848 at 7091, 28 A.C.W.S. (2d) 290 (H.C.J.); Monsanto Canada Inc. v. Ontario (Superintendent of Financial Services), [2004] 3 S.C.R. 152, [2004] S.C.J. No. 51, 2004 SCC 54, 242 D.L.R. (4th) 193, 324 N.R. 259, J.E. 2004-1546, 189 O.A.C. 201, 17 Admin. L.R. (4th) 1, 45 B.L.R. (3d) 161, 41 C.C.P.B. 106, 132 A.C.W.S. (3d) 579; Nor-Man Regional Health Authority Inc. v. Manitoba Association of Health Care Professionals, [2011] 3 S.C.R. 616, [2011] S.C.J. No. 59, 2011 SCC 59, 275 Man. R. (2d) 16, 423 N.R. 95, 2011EXP-3790, 2011EXPT-2180, J.E. 2011-2079, D.T.E. 2011T-803, [2012] CLLC Â220-004, 340 D.L.R. (4th) 1, 29 Admin. L.R. (5th) 1, 212 L.A.C. (4th) 93, [2012] 2 W.W.R. 619, 96 C.C.E.L. (3d) 1, 208 A.C.W.S. (3d) 583; Ottawa (City) v. Coliseum Inc., [2016] O.J. No. 2506, 2016 ONCA 363, 398 D.L.R. (4th) 34, 85 C.P.C. (7th) 213, 265 A.C.W.S. (3d) 606; Oxford Mutual Insurance Co. v. Co-operators General Insurance Co. (2006), 2006 37956 (ON CA), 83 O.R. (3d) 591, [2006] O.J. No. 4518, 43 C.C.L.I. (4th) 199, [2007] I.L.R. I-4564, 40 M.V.R. (5th) 1, 152 A.C.W.S. (3d) 912 (C.A.); Rogers Communications Inc. v. Society of Composers, Authors and Music Publishers of Canada, [2012] 2 S.C.R. 283, [2012] S.C.J. No. 35, 2012 SCC 35, 2012EXP-2624, J.E. 2012-1380, EYB 2012-208930, 432 N.R. 1, 100 C.P.R. (4th) 204, 347 D.L.R. (4th) 235, 38 Admin. L.R. (5th) 1, 216 A.C.W.S. (3d) 219; St. Paul Travellers v. York Fire & Casualty Insurance Co., August 11, 2011 (Arb. Samis); Tervita Corp. v. Canada (Commissioner of Competition), [2015] 1 S.C.R. 161, [2015] S.C.J. No. 3, 2015 SCC 3, 380 D.L.R. (4th) 381, 79 Admin. L.R. (5th) 1, 2015EXP-279, J.E. 2015-140, EYB 2015-247038, 248 A.C.W.S. (3d) 811; Zurich Insurance Co. v. Personal Insurance Co., 2009 26362 (ON SC), [2009] O.J. No. 2157, 73 C.C.L.I. (4th) 301, 85 M.V.R. (5th) 22, [2009] I.L.R. I-4836 (S.C.J.)
Statutes referred to
Arbitration Act, 1991, S.O. 1991, c. 17 [as am.], s. 45
Courts of Justice Act, C.Q.L.R., c. T-16 [as am.]
Insurance Act, R.S.O. 1990, c. I.8, s. 268 [as am.], (1) [as am.], (2) [as am.]
Rules and regulations referred to
Disputes Between Insurers, O. Reg. 283/95 [as am.]
Statutory Accident Benefits Schedule — Accidents on or after November 1, 1996, O. Reg. 403/96, s. 2(1), [as am.], (6) [as am.]
APPEAL from the order of Raikes J., [2015] O.J. No. 3471, 2015 ONSC 4264, 51 C.C.L.I. (5th) 231 (S.C.J.) allowing an appeal from the award of Arbitrator Bialkowski (2014), 40 C.C.L.I. (5th) 323.
Todd J. McCarthy and Frank A. Bennedetto, for appellant.
Douglas A. Wallace and Tori Chapman, for respondent. [page628]
The judgment of the court was delivered by
[1] LAFORME J.A.: — Either the appellant, Allstate Insurance Company of Canada ("Allstate"), or the respondent, Intact Insurance Company ("Intact"), is responsible for statutory accident benefits owed to Paula Chartrand and her two daughters (the "claimants") after they were injured in an accident on August 21, 2010. Who bears that responsibility depends on the answer to the central question in these proceedings: were the claimants principally dependent for financial support on Kyle Houghton at the time of the accident?
[2] The parties submitted their "priority dispute" to an arbitrator, who decided that the claimants were not principally dependent for financial support on Kyle at the time of the accident. Therefore, Intact was responsible for the accident benefits. The arbitrator summarized his rationale as follows:
In the final analysis I find that it would be inappropriate to use the seven week period pre-accident, when the claimants were principally dependent on Kyle Houghton for financial support, as in my view the relationship was not one of permanence. Using the traditional 12 month period pre-accident the claimants clearly were not principally financially dependent on Kyle Houghton for financial support.
(Emphasis added)
[3] Intact appealed. The appeal judge concluded that the arbitrator had committed an error of law by importing a permanency requirement into the analysis and an error in principle by speculating about future events. Because of these errors, the appeal judge reviewed the arbitrator's decision on a correctness standard of review, set aside his decision and concluded that Allstate was responsible for paying the accident benefits owed to the claimants.
[4] Allstate sought and obtained leave to appeal to this court. It argues that the appeal judge erred by reviewing the arbitrator's decision on a correctness standard and that the arbitrator's decision should be restored because it was reasonable. Intact resists both arguments and submits that the appeal judge did not err by setting aside the arbitrator's decision.
[5] For the reasons that follow, I would dismiss the appeal. Although the appeal judge erred by reviewing the arbitrator's decision on a correctness standard, the arbitrator's decision was an unreasonable one and, therefore, should not be restored.
I. Background
[6] The relationship between Paula and Kyle forms the factual background for this priority dispute. [page629]
[7] Until January 2010, Paula was living in Sudbury, Ontario, with her husband, Yvan Restoule, and her two daughters, Destiny Chartrand and Athena Restoule.
[8] In January or February 2010, Paula began working at the Triple Play Sports Bar in Sarnia, Ontario. She met and began dating Kyle at the same time.
[9] Between February and June 2010, Paula would spend three weeks of each month in Sarnia. She would spend the remaining week in Sudbury with Yvan and her daughters at their apartment.
[10] Paula decided to leave Yvan and move to Sarnia with her daughters in June 2010. In early July, Paula asked her mother to drive her and her daughters from Sudbury to Parry Sound, where they met Kyle at a gas station. They transferred their belongings to Kyle's vehicle, including their clothes, toys, blankets and sheets. Kyle brought the claimants back to his house in Sarnia.
[11] The evidence indicated that the move was intended to be a permanent one. Yvan testified that his relationship with Paula had been deteriorating for a while, and that she told him that she would be leaving him and permanently moving to Sarnia with her daughters. Paula's mother said that she thought the move was a permanent one.
[12] Kyle acknowledged, as noted by the arbitrator, that he did not know if his relationship with Paula would survive and said that "you hope for the best and expect the worst". Essentially, Kyle was acknowledging that he could not predict what would happen in the future, especially given that his relationship with Paula had started only recently. However, on the whole, his evidence also confirmed that the claimants' move was intended to be a permanent one. According to Kyle, the plan was that Athena and Destiny would be enrolled in school in Sarnia in September and that Paula would look for a job at that time. There was some discussion of Paula and Kyle getting married as well.
[13] After their move to Sarnia, Kyle was responsible for most of the claimants' expenses as Paula was not contributing to household expenses or paying any of the bills. She would occasionally buy some groceries or alcohol, or would pay for a dinner. During the seven weeks after the move and before the accident, Kyle paid for at least 64 per cent of the claimants' financial needs.
[14] On August 18, 2010, Paula's friend drove the claimants to Canada's Wonderland and then to Sudbury, to visit Paula's mother and to retrieve the rest of their belongings. On their way back to Sarnia, on August 21, 2010, they were involved in an [page630] accident. Paula suffered relatively minor injuries, but Destiny and Athena sustained catastrophic injuries.
[15] The claimants applied for and received accident benefits from Intact, the insurer of the vehicle they were riding in at the time of the accident. However, Intact argued that Allstate, who insured two vehicles owned by Kyle, should pay those benefits. Intact took the position that Allstate was obligated to pay because the claimants were dependent on Kyle at the time of the accident and, consequently, they were insureds under Allstate's policies with Kyle.
II. Legal Framework
[16] Section 268 of the Insurance Act, R.S.O. 1990, c. I.8 deals with statutory accident benefits in motor vehicle liability policies. Section 268(1) provides that every such policy "shall be deemed to provide for . . . statutory accident benefits". For cases where an individual might seek benefits under more than one policy, s. 268(2) sets out priority rules. As the claimants were occupants of a vehicle at the time of the accident, the following rules apply:
(i) the occupant has recourse against the insurer of an automobile in respect of which the occupant is an insured;
(ii) if recovery is unavailable under (i), the occupant has recourse against the insurer of the automobile in which he or she was an occupant;
(iii) if recovery is unavailable under (i) or (ii), the occupant has recourse against the insurer of any other automobile involved in the accident from which the entitlement to statutory accident benefits arose; and
(iv) if recovery is unavailable under (i), (ii) or (iii), the occupant has recourse against the Motor Vehicle Accident Claims Fund.
[17] Section 2(1) of the Statutory Accident Benefits Schedule -- Accidents on or after November 1, 1996, O. Reg. 403/96 ("SABS") provides that "any dependant of the named insured" is an "insured person" for any motor vehicle policy. Section 2(6) of the same regulation provides that a person is dependent on another "if the person is principally dependent for financial support . . . on the other person".
[18] Also relevant for this appeal is Disputes Between Insurers, O. Reg. 283/95 (the "Regulation"). It provides that all disputes [page631] under s. 268 shall be settled through arbitration conducted in accordance with the Arbitration Act, 1991, S.O. 1991, c. 17.
[19] Section 45 of the Arbitration Act, 1991 provides that, presumptively, parties can appeal only on points of law with leave. However, the parties can provide for broader rights of appeal in their arbitration agreement. In this case, Allstate and Intact agreed that either could "appeal the Arbitrator's decision on a point or points of law or mixed fact and law" to a judge of the Superior Court of Justice.
III. Issues on Appeal
[20] Intact argues that the appeal judge erred by (i) reviewing the arbitrator's decision for correctness; and (ii) setting aside the arbitrator's decision even though it was reasonable. As noted, I accept the first argument but not the second. I will first address the standard of review. Then I will explain why the arbitrator's decision was unreasonable.
IV. The Standard of Review
[21] The parties' disagreement is founded upon their conflicting characterization of the question before the appeal judge. Allstate argues that determining dependency for purposes of SABS is a mixed fact and law exercise and, therefore, the appeal judge should have applied a deferential standard of review. Intact, on the other hand, insists that the arbitrator committed an extricable legal error and so his decision was properly reviewed on a correctness standard.
[22] I approach this question in a different way than the parties. As the choice of standard of review is a question of law, this court is not bound by the parties' positions and must determine the correct standard of review: Monsanto Canada Inc. v. Ontario (Superintendent of Financial Services), [2004] 3 S.C.R. 152, [2004] S.C.J. No. 51, 2004 SCC 54, at para. 6.
[23] I begin by considering the framework for choosing the appropriate standard of review. Then I will apply that framework to determine the standard of review that should be applied by this court and the one that should have been applied by the appeal judge.
(1) The framework for determining the standard of review
[24] There are two different frameworks for determining the standard of review on an appeal: (i) the "appellate" framework articulated in Housen v. Nikolaisen, [2002] 2 S.C.R. 235, [2002] S.C.J. No. 31, 2002 SCC 33; and (ii) the "administrative law" [page632] framework associated with Dunsmuir v. New Brunswick, [2008] 1 S.C.R. 190, [2008] S.C.J. No. 9, 2008 SCC 9.
[25] In my view, the administrative law framework must be applied to determine the standard of review on an appeal from an insurance arbitration. In general, decisions rendered by non-judicial decision makers should be reviewed under that framework, even when that review is styled as an appeal.
[26] The Supreme Court recently discussed the selection of the appropriate framework in Mouvement laïque québécois v. Saguenay (City), [2015] 2 S.C.R. 3, [2015] S.C.J. No. 16, 2015 SCC 16. Justice Gascon highlighted the distinction between the two frameworks and concluded that the Quebec Court of Appeal had erred by applying the appellate framework to appeals from the Quebec Human Rights Tribunal. At para. 38, he held that whenever a court reviews a decision of a specialized administrative tribunal, whether on a judicial review or a statutory appeal, the standard of review must be determined on the basis of administrative law principles.[^1]
[27] At paras. 39-42 of Saguenay, Gascon J. provided the following reasons for why the administrative law framework should have been applied: the tribunal was not a court subject to the Courts of Justice Act, C.Q.L.R., c. T-16, but rather a specialized decision maker; the tribunal had its own, different procedure that reflected its function; and the tribunal's enabling legislation contained a privative clause and a supporting clause that protected the tribunal's jurisdiction.
[28] The analysis from Saguenay leads to the same result in this case, namely, that the administrative law framework must be applied to determine the standard of review.
[29] Insurance arbitrations are not court proceedings. Rather, as a result of the Regulation, priority disputes like this one are adjudicated by arbitrators with relevant expertise: Oxford Mutual Insurance Co. v. Co-operators General Insurance Co. (2006), 2006 37956 (ON CA), 83 O.R. (3d) 591, [2006] O.J. No. 4518 (C.A.), at para. 23; Chisholm v. Liberty Mutual Group (2002), 2002 45020 (ON CA), 60 O.R. (3d) 776, [2002] O.J. No. 3135 (C.A.), at para. 21.
[30] In addition, the Regulation has put in place a distinct regime that efficiently resolves priority disputes between insurers while ensuring that beneficiaries receive their benefits promptly: [page633] Lombard Canada Ltd. v. Royal & SunAlliance Insurance Co. (2008), 2007 82792 (ON SC), 94 O.R. (3d) 62, [2008] O.J. No. 5239 (S.C.J.), at para. 39.
[31] The limited rights of appeal that presumptively apply in arbitrations are similar to a privative clause. More broadly, arbitrations governed by the Arbitration Act, 1991 occur against the background of a tightly defined regime under which judicial intervention is generally unwarranted: Ottawa (City) v. Coliseum Inc., [2016] O.J. No. 2506, 2016 ONCA 363, 85 C.P.C. (7th) 213, at paras. 32-34.
[32] Therefore, I conclude that the standard of review applicable in this case must be determined by applying administrative law principles.
(2) The role of this court
[33] This court must apply the appellate standard of review to the appeal judge's decision and review his choice of standard of review for correctness: Dr. Q v. College of Physicians and Surgeons of British Columbia, [2003] 1 S.C.R. 226, [2003] S.C.J. No. 18, 2003 SCC 19, at para. 43. In other words, this court should determine if the appeal judge identified the correct standard of review and whether he applied it properly: Agraira v. Canada (Public Safety and Emergency Preparedness), [2013] 2 S.C.R. 559, [2013] S.C.J. No. 36, 2013 SCC 36, at paras. 45-47.
(3) Standard of review on appeal from insurance arbitration to Superior Court
[34] Recently, in Intact Insurance Co. v. Old Republic Insurance Co. (2016), 131 O.R. (3d) 485, [2016] O.J. No. 2491, 2016 ONSC 3110 (S.C.J.), at para. 15, Goldstein J. observed that the standard of review on appeals from insurance arbitrations has been "the subject of a spirited debate and extensive analysis" in the Superior Court. In Zurich Insurance Co. v. Personal Insurance Co., 2009 26362 (ON SC), [2009] O.J. No. 2157, 73 C.C.L.I. (4th) 301 (S.C.J.), Brown J. (as he then was) reviewed the jurisprudence on this issue, demonstrating the different, and arguably inconsistent, results reached by different judges.
[35] Generally, determining whether a person is "principally dependent" on another is a question of mixed fact and law: Oxford Mutual, at para. 23. Such questions are presumptively reviewed for reasonableness: Tervita Corp. v. Canada (Commissioner of Competition), [2015] 1 S.C.R. 161, [2015] S.C.J. No. 3, 2015 SCC 3, at para. 40. And this court has already confirmed that, on appeals from insurance arbitrations involving an interpretation of dependency under SABS, mixed fact and law questions are reviewed for reasonableness: Oxford Mutual, at para. 23. [page634]
[36] Intact, however, argues that the arbitrator committed an extricable legal error by importing a permanence requirement. I note that it is possible to extricate a legal question from a question of mixed fact and law under the administrative law framework: Rogers Communications Inc. v. Society of Composers, Authors and Music Publishers of Canada, [2012] 2 S.C.R. 283, [2012] S.C.J. No. 35, 2012 SCC 35, at para. 20. However, this court has not addressed the standard of review for a question of law on appeals from an insurance arbitration. Therefore, assuming that an extricable legal question can be identified in this case, we must determine the standard of review that should be applied to that extricated legal question.
[37] Dunsmuir, at para. 62, provides a two-step process for determining the standard of review under administrative law principles:
First, courts ascertain whether the jurisprudence has already determined in a satisfactory manner the degree of deference to be accorded with regard to a particular category of question. Second, where the first inquiry proves unfruitful, courts must proceed to an analysis of the factors making it possible to identify the proper standard of review.
[38] Before turning to the two steps, I note that the "category of question" should not be construed broadly as just a question of law. Rather, the category must be determined more precisely in light of the issues raised on appeal or application for judicial review. For instance, in Dunsmuir, the court considered the standard of review for an "adjudicator's interpretation of the [Public Service Labour Relations Act], in particular ss. 97(2.1) and 100.1, and s. 20 of the Civil Service Act": para. 65.
[39] In this case, we must determine the standard of review for an insurance arbitrator's interpretation of SABS and, in particular, the meaning of dependency for purposes of that regulation.
(a) Prior jurisprudence
[40] In my view, the existing jurisprudence has settled the standard of review in such cases and the reasonableness standard applies.
[41] Justice Rothstein in Sattva Capital Corp. v. Creston Moly Corp., [2014] 2 S.C.R. 633, [2014] S.C.J. No. 53, 2014 SCC 53, at para. 106, stated that
[i]n the context of commercial arbitration, where appeals are restricted to questions of law, the standard of review will be reasonableness unless the question is one that would attract the correctness standard, such as constitutional questions or questions of law of central importance to the legal system as a whole and outside the adjudicator's expertise.
(Citation omitted) [page635]
[42] In Coliseum, this court followed Sattva and applied the reasonableness standard to an appeal from an arbitration governed by the Arbitration Act, 1991. As noted, under the Regulation, the Arbitration Act, 1991 governs insurance arbitrations and appeals from those arbitrations.
[43] I note that the parties' arbitration agreement provides that they can appeal on both points of law and mixed fact and law. Unlike in Sattva, the parties are not restricted to appealing on questions of law only. However, in my view, that does not make the decision in Sattva inapplicable.
[44] In Sattva, at para. 105, Rothstein J. identified a number of reasons why a reasonableness standard should apply: a presumption that the arbitrator will have relevant expertise, jurisprudence regarding non-judicial decision makers, and the limited scope of appellate review of arbitral decisions. The broader right of appeal available to the parties in this case displaces none of those reasons. Significantly, the parties' right to appeal is still comparatively restricted as they cannot appeal on points of fact.
[45] The question at issue here -- determining dependency for purposes of SABS and insurance priority disputes -- does not rebut the presumption of reasonableness review established in Sattva. It is not a question of jurisdiction, a constitutional question, or a general question of law that is of central importance to the legal system as a whole and outside the adjudicator's expertise.
(b) Contextual analysis
[46] In any event, the conclusion that a reasonableness standard of review applies is confirmed by the second step, which has been called a "contextual analysis" in the post- Dunsmuir jurisprudence: Nor-Man Regional Health Authority Inc. v. Manitoba Association of Health Care Professionals, [2011] 3 S.C.R. 616, [2011] S.C.J. No. 59, 2011 SCC 59, at para. 39. The analysis at this second stage is driven by the nature of the issue before the decision maker under review. Factors considered include the presence or absence of a privative clause, the specialization of the decision maker and the nature of the question under review: Canada (Canadian Human Rights Commission) v. Canada (Attorney General), [2011] 3 S.C.R. 471, [2011] S.C.J. No. 53, 2011 SCC 53 ("Mowat"), at para. 16.
[47] As a starting point, there is a presumption that a reasonableness standard of review will apply where a decision maker is interpreting its "home" statute or statutes closely connected to its function: McLean v. British Columbia (Securities Commission), [2013] 3 S.C.R. 895, [2013] S.C.J. No. 67, 2013 SCC 67, at para. 21. [page636] As noted, insurance arbitrators are recognized as having expertise and experience in interpreting insurance laws; as such, the presumption applies here.
[48] Limitations on parties' appeal rights -- which have the same effect as privative clauses -- will differ from case to case since appeal rights may be determined by the parties' arbitration agreement. However, the jurisprudence has reduced the importance of privative clauses and, therefore, the absence of limits on appeal rights in a particular case will not be important: Mowat, at para. 17.
[49] The expertise of insurance arbitrators favours a reasonableness review. Courts have recognized the expertise of insurance arbitrators in a number of different contexts: Chisholm, at para. 21; Ayr Farmers Mutual Insurance Co. v. Wright, [2013] O.J. No. 5280, 2015 ONSC 6219 (S.C.J.), at paras. 10-11; Aviva Insurance Co. of Canada v. Royal & SunAlliance Insurance Co., 2008 41817 (ON SC), [2008] O.J. No. 3240, 66 C.C.L.I. (4th) 262 (S.C.J.); and Oxford Mutual, at para. 23.
[50] Moreover, as with other private arbitrations, the fact that parties are able to select their decision maker creates a presumption that they will choose someone with relevant expertise: Sattva, at para. 105. As noted by Strathy J. (as he then was) in Lombard Canada Ltd., at para. 41:
Although the selection of the tribunal is left entirely to the private choice of the parties, and is not a creation of the Regulation, the reality is that the parties -- automobile insurers -- are highly sophisticated litigants, represented by specialist counsel, and they invariably select arbitrators who are themselves accomplished, experienced and respected.
[51] Finally, the nature of the question under review also suggests that a reasonableness standard of review applies. The nature of the question has rebutted the presumption of reasonableness review in two kinds of cases. The first is where the decision maker at issue and the courts share jurisdiction over the same legal question at the first instance: McLean, at para. 24. The second is where the question is one of those "exceptional" kinds of questions -- questions of jurisdiction, constitutional questions, or general questions of law that are both of central importance to the legal system as a whole and outside the adjudicator's specialized area of expertise -- where courts will apply a correctness standard of review: McLean, at paras. 25-26.
[52] Courts and arbitrators do not share jurisdiction over priority disputes at the first instance; under the Regulation, an arbitrator must hear those disputes before they are potentially appealed to a court. And, as noted, the interpretation of SABS is [page637] not the kind of "exceptional" question that can rebut the presumption of reasonableness review.
(c) Conclusion on standard of review on appeal to Superior Court
[53] In general, an appeal to the Superior Court from an insurance arbitration regarding a priority dispute will engage questions of mixed fact and law that must be reviewed for reasonableness. Even if the appeal involves an extricable question of law regarding SABS, a reasonableness standard of review will still generally apply. In the unlikely scenario that the issue before the insurance arbitrator is an "exceptional" question (one of jurisdiction, a constitutional question, or a general question of law that is both of central importance to the legal system as a whole and outside the adjudicator's specialized area or expertise), a correctness standard of review may be applicable.
[54] In this case, there was no basis for applying a correctness standard of review. Therefore, this court must correct the appeal judge's error by reviewing the arbitrator's decision under a reasonableness standard: Dr. Q, at para. 44. I now turn to the arbitrator's decision.
V. The Arbitrator's Decision was Unreasonable
[55] As noted, in my view, the arbitrator's decision was unreasonable. To explain my conclusion, I will first summarize the arbitrator's reasoning process and decision. Then I will outline principles relevant to conducting a reasonableness review. Finally, I will explain why the arbitrator's decision was unreasonable.
(1) The arbitrator's decision
[56] After reviewing the evidence, the arbitrator correctly identified the applicable legal principles, articulated in this court's decisions in Miller v. Safeco Insurance Co. of America (1985), 1985 2022 (ON CA), 50 O.R. (2d) 797, [1985] O.J. No. 2742 (C.A.), affg (1984), 1984 2019 (ON SC), 48 O.R. (2d) 451, [1984] O.J. No. 3383 (H.C.J.), and Oxford Mutual. He summarized these principles as follows:
(a) The 51% principle from Liberty Mutual Insurance v. Federation Insurance should be applied. It is not sufficient that the claimant simply be dependent, but rather must be principally dependent. If the claimant had sufficient resources to fund 51% of their financial needs then the person could not be dependent upon others.
(b) The time frame to be looked at may encompass days, weeks or even years. One does not simply look at a "snap shot" of the actual day of the Accident to determine the issue of dependency. [page638]
(c) The factors from Miller v. Safeco should be considered:
(i) the duration of the dependency
(ii) the amount of dependency
(iii) the financial or other needs of the alleged dependent
(iv) the ability of the alleged dependent to be self-supporting.
(d) Each case must be factually driven.
(e) The ability to be self-supporting must be taken into account when measuring dependency.
[57] The arbitrator had evidence relating to two different time frames before him. He was satisfied that if he were to look at the seven-week period before the accident then the claimants were financially dependent on Kyle; on the other hand, if he looked at a year-long period before the accident, they were not. As the arbitrator observed, "the result in this case is totally dependent on the appropriate time frame to use for the calculation of financial dependency".
[58] Then, turning to the jurisprudence he considered relevant, the arbitrator observed that courts and arbitrators have struggled when asked to determine financial dependency in cases involving new relationships or relationships that have experienced a significant change in the recent past. The arbitrator acknowledged that other arbitrators and courts had considered a short time frame in some cases. The arbitrator thought that there was a rule or principle that he could draw from these cases:
The common theme through these cases where a short time frame was considered appears to be that each arbitrator wrestled with the question as to whether the relationship existing during that period was of permanence and likely to continue into the future or was it transitional. The same analysis must be done here.
[59] Then the arbitrator made the following conclusion as to the time frame in which to consider whether the claimants were financially dependent on Kyle:
On the evidence before me Intact has failed to satisfy the onus upon it to establish the relationship between [Kyle] and [Paula] was on the balance of probability likely to be permanent. As a result I find that a seven week time frame for the analysis of financial dependency is inappropriate. Accordingly, one must look at the "big picture".
[60] After looking at the "big picture", the arbitrator concluded as follows:
What we have here is a case complicated by relationships involving people on the fringe of society, stripping, prostitution, addiction, depression, [page639] criminality and CAS involvement. There is no hallmark of stability. The closest thing to stability is Paula's on and off relationship (mainly on) with [Yvan]. This would encompass a period of several years and certainly the better part of the 12-month period pre-accident. In my view this better represents the "big picture" and true nature of the relationship. Paula and Yvan had separated before but Paula returned. During the 12 month period pre-accident that I have chosen as the appropriate timeframe for analysis the three claimants were not principally dependent for financial support on Kyle.
(Emphasis in original)
[61] I note that the parties disagree on exactly what the arbitrator did in this case. Allstate argues that he looked at all of the evidence and came to a decision about the appropriate time frame based on the facts as a whole. Intact, on the other hands, submits that he created a permanency requirement and that this was the only basis for his decision.
[62] I agree with Intact's characterization of the decision. As noted, the arbitrator chose the year-long period solely because, in his view, "it would be inappropriate to use the seven week period pre-accident . . . as . . . the relationship was not one of permanence". Therefore, it is that rationale and the resulting outcome that must be reviewed for reasonableness.
(2) Reasonableness review
[63] In Dunsmuir, at para. 47, Bastarache and LeBel JJ. explained that
[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.
[64] When reviewing a decision for reasonableness, a court must consider the reasons proffered and the substantive outcome in light of the legal and factual context in which the decision was rendered: Carrick (Re) (2015), 128 O.R. (3d) 209, [2015] O.J. No. 6524, 2015 ONCA 866, at paras. 25-26; Loewen v. Manitoba Teachers' Society, [2015] M.J. No. 21, 2015 MBCA 13, 315 Man. R. (2d) 123, at paras. 74-75.
[65] A decision may be unreasonable where a decision maker fails to carry out the proper analysis or where the decision is inconsistent with underlying legal principles: Halifax (Regional Municipality) v. Canada (Public Works and Government Services), [2012] 2 S.C.R. 108, [2012] S.C.J. No. 29, 2012 SCC 29, at paras. 43 and 47. A decision may also be unreasonable where [page640] the outcome ignores or cannot be supported by the evidence: Halifax, at paras. 47-49.
(3) The arbitrator's decision was unreasonable
[66] With the principles just noted in mind, I turn to the ultimate issue in this appeal: the reasonableness of the arbitrator's decision. That decision was unreasonable for two reasons. First, the arbitrator failed to conduct the requisite analysis and his "permanence" requirement is simply incompatible with the applicable legal principles. Second, the arbitrator's decision is inconsistent with the evidence and the result of indefensible speculation.
(a) Permanence requirement inconsistent with applicable legal principles
[67] As noted, arbitrators and courts asked to determine dependency must sometimes fit fluid and transient human relations into rigid legal categories. It is not always a comfortable fit. The nature of the challenge was aptly described by Arbitrator Samis in St. Paul Travellers v. York Fire & Casualty Insurance Co. (August 11, 2011 award)[^2] as follows:
The law with respect to dependency cases has evolved over the past two decades to recognize the challenges associated with applying the dependency principle to real life fact situations. Amongst the most challenging situations are those where the recent pre-accident history shows a changing environment. The case law calls for us to identify a time period for the purpose of evaluating dependency. It is often not useful, or even sometimes misleading, to look at circumstances in too narrow a time frame (often referred to as a "snapshot"). To arrive at an appropriate determination of dependency status, we have to look at the status of a person's needs and resources over a time period. Then, within a selected timeframe, we can approach the issue of financial needs and resources in order to determine the person's dependency status.
[68] How did the arbitrator respond to this challenge in this case? He responded, based on his review of the jurisprudence, by creating and applying a "permanence" test. Specifically, the arbitrator concluded that he should accept a "short" time frame only in cases where the relationship at issue is likely permanent.
[69] That approach conflicts with the legal principles laid down in the jurisprudence. It is well established that, when conducting a dependency analysis, the arbitrator was required to [page641] look at the relationship between the claimants and Kyle during a "period of time which fairly reflects the status of the parties at the time of the accident" (emphasis added): Oxford Mutual, at paras. 26-27; see, also, Dominion of Canada, at paras. 29-31; Gore Mutual Insurance Co. v. Co-Operators General Insurance Co. (2008), 2008 46914 (ON SC), 93 O.R. (3d) 234, [2008] O.J. No. 3603 (S.C.J.), at para. 8. The time period chosen for a dependency analysis must reflect the facts of the case: Oxford Mutual, at para. 26. Simply put, the jurisprudence has rejected a categorical or one-size-fits-all approach.
[70] In contrast, the arbitrator carved out the category of "transient" or "recent" relationships and created a permanence requirement for all of them. Then the arbitrator relied on his conclusion that the relationship between Paula and Kyle was unlikely to succeed when choosing a one-year time period over a seven-week time period. Reading the arbitrator's decision, it is clear that this is the only reason why he chose a year-long period where the claimants were not dependent on Kyle over a seven-week period where they were. In my view, the arbitrator applied a categorical approach. This approach is unreasonable because it is inconsistent with the applicable legal principles and is simply too divorced from the actual question: what time period accurately reflects the true nature of the particular relationship at issue at the time of the accident?
(b) Arbitrator's decision is not supported by the evidence
[71] In large part because of the approach he adopted, the arbitrator's decision is inconsistent with the evidence in this case. When considered in light of the facts of this case, it is clear that the seven-week period accurately reflects the nature of the relationship between Kyle and the claimants at the time of the accident.
[72] According to Yvan, his marriage with Paula had been deteriorating for some time and Paula said she was leaving him in June 2010. At this time, Paula had been dating Kyle for a few months and spent most of her time in Sarnia, with him. In July 2010, she moved her two daughters to Sarnia to live with Kyle. All of the witnesses who provided evidence (Kyle, Yvan and Paula's mother) indicated that this move was intended to be a permanent one.
[73] Significantly, the evidence indicates that Kyle and Paula believed that they were building a real relationship. They had a plan to enroll Athena and Destiny in a school in Sarnia. Paula was supposed to find a new job to help support this new household. There was even some talk of Paula and Kyle getting married. [page642]
[74] During the seven weeks after the move, while they were trying to implement this plan, Kyle was paying for almost all of the household expenses and was responsible for the majority of the claimants' needs.
[75] As I read his decision, the arbitrator did not question and largely accepted all of that evidence. However, he chose to focus on something else. He chose to focus on the permanence of the Paula-Kyle relationship. And he concluded that this relationship was unlikely to survive based on his conclusion about the kind of person Paula was. He focused on Paula's psyche and the fact that she was a troubled woman, the fact that she was not completely honest with Kyle, and his conclusion that the Paula-Yvan relationship was a more stable feature of her life.
[76] There are at least two problems with such an approach.
[77] First, it is difficult to see how any of these facts shed any light on the nature of the claimants' relationship with Kyle at the time of the accident. The uncontroverted evidence was that the move was intended to be a permanent one and that Kyle was contributing the vast majority of the expenses of this new household. The odds of Paula and Kyle's relationship surviving into the future has very little to do with whether the claimants were principally dependent for financial support on Kyle at the time of the accident.
[78] Second, the arbitrator did not have any evidence suggesting that anyone saw Paula and Kyle's relationship as temporary. The arbitrator's conclusion to the contrary was based on his assessment of Paula's psyche and his conclusion based on what the arbitrator knew about Paula's past life.
[79] This analysis is simply too speculative and unreliable. I agree with the appeal judge [at para. 40] that "[s]peculation of this sort is a mug's game". There are simply too many variables at play and it is extremely doubtful that any decision maker can predict the future course of a relationship in the way the arbitrator purported to. Because that analysis was the sole basis for the arbitrator's decision, in my view, it renders his overall decision unreasonable as well.
(c) Conclusion on arbitrator's decision
[80] The arbitrator adopted an unreasonable approach by asking, as the central and determinative question, whether the relationship between Paula and Kyle was permanent. Because of this approach, the arbitrator's analysis relied on speculation and unreliable inferences. His substantive outcome cannot be supported by the evidence before him. [page643]
[81] When considered under the proper approach, the seven-week period preceding the accident does not merely present a "snapshot" of the relationship between Kyle and the claimants. Rather, the seven-week period is the one that appropriately represents the true nature of the relationship at the time of the accident: a nascent but real relationship wherein the claimants were principally dependent on Kyle for financial support.
[82] As such, even though the appeal judge erred in the standard of review, he did not err by setting aside the arbitrator's decision.
VI. Disposition
[83] I would dismiss the appeal. In line with the parties' agreement, I would award costs of the appeal and the motion seeking leave to this court to Intact, fixed at $15,000, all inclusive.
Appeal dismissed.
Notes
[^1]: Although Gascon J. referred to "specialized administrative tribunals", the administrative law framework applies when a court reviews a decision rendered by a single decision maker as well: see, for example, Dunsmuir.
[^2]: Cited in Dominion of Canada General Insurance Co. v. Ontario (Minister of Finance), [2013] O.J. No. 3345, 2013 ONSC 4717, 25 C.C.L.I. (5th) 125 (S.C.J.), at para. 31.
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