Stegenga v. Economical Mutual Insurance Co.

[Indexed as: Stegenga v. Economical Mutual Insurance Co.]

Ontario Reports

Court of Appeal for Ontario

D.M. Brown, L.B. Roberts and Zarnett JJ.A.

July 19, 2019

147 O.R. (3d) 65 | 2019 ONCA 615

Case Summary

Insurance — Automobile insurance — Statutory accident benefits — Claim of bad faith conduct by insurer in relation to insured's entitlement to statutory accident benefits falling within jurisdiction of Licence Appeal Tribunal under s. 280(2) of Insurance Act — Prohibition in s. 280(3) of Act on court proceeding applying to claim — Insurance Act, R.S.O. 1990, c. I.8, s. 280.

The plaintiff sued the defendant insurer for bad faith in its handling of her claim for statutory accident benefits, seeking punitive and exemplary damages. She claimed that, for about three years after she was seriously injured in a motor vehicle accident, the defendant did not advise her or her parents that her injuries could qualify as a catastrophic impairment or inform them of the benefits that could be available for such an impairment. The defendant moved successfully to strike out the statement of claim. The motion judge held that the claim was "in respect of an insured person's entitlement to statutory accident benefits or in respect of the amount of statutory accident benefits to which an insured person is entitled" and was therefore a claim over which the Licence Appeal Tribunal had exclusive jurisdiction under s. 280(2) of the Insurance Act, and that a court proceeding was prohibited under s. 280(3) of the Act. The plaintiff appealed, arguing that an insurer's duty of good faith is independent of and in addition to its duty to pay the benefits to which an insured person is entitled, and that a breach of the duty of good faith gives rise to a stand-alone action for bad faith which is unrelated to SABS entitlement.

Held: The appeal should be dismissed.

The SABs dispute resolution provisions capture a broad range of disputes, including disputes about how an insurer handled a SABs claim. The purpose of the provisions, the expansive language used and the extent of the powers given to the LAT all support that interpretation. Neither the legal characterization of the cause of action asserted against the insurer nor the relief claimed determines whether a claim falls within the scope of the dispute resolution provisions. If the dispute relates to the insurer's compliance with obligations to the insured concerning SABs, the timeliness of performance of those obligations, and/or the manner in which they were administered, it falls within the broad reach of the dispute resolution provisions, and within the jurisdiction of the LAT. At their core, the facts alleged in the plaintiff's statement of claim were about the defendant's failure to provide the benefits to which she was entitled, its delay in providing benefits, its withholding of benefits, and its conduct in handling the claim for benefits and dealing with the plaintiff and her family. The action, viewed with an eye to its essential character, was a dispute in respect of her entitlement to SABs and their amount. The action was barred by s. 280(3) of the Act.

Authorities

Cases Applied:

Weber v. Ontario Hydro, [1995] 2 S.C.R. 929

Cases Considered:

Other Cases Referred to:

Statutes and Regulations Referred to

Appeal from Motion Judge's Decision

APPEAL from the judgment of Ramsay J., [2018] O.J. No. 1195, 2018 ONSC 1512 striking out a statement of claim.

Counsel:

J. Patrick Brown and Michael Warfe, for appellant
Lisa Armstrong, Julianne Brimfield and Mark A. Gelowitz, for respondent

The judgment of the court was delivered by

ZARNETT J.A.:

The Facts

[1] The Statutory Accident Benefits ("SABs") dispute resolution provisions of s. 280 of the Insurance Act, R.S.O. 1990, c. I.8, which came into force on April 1, 2016, give the Licence Appeal Tribunal ("LAT") jurisdiction to resolve certain disputes and prohibit bringing proceedings in respect of those disputes in court. This appeal raises the question of whether claims for an insurer's bad faith conduct fall outside of those provisions.

[2] The appellant, Morgan Stegenga, was seriously injured in a motor vehicle accident. She claimed SABs from her insurer, the respondent Economical Mutual Insurance Company. In light of the way Economical Mutual handled her claim, she brought an action against it alleging bad faith and claiming punitive and exemplary damages, among other things.

[3] Economical Mutual successfully moved to strike out Ms. Stegenga's statement of claim and obtained a determination, as a matter of law, that the LAT has exclusive jurisdiction to decide Ms. Stegenga's claim at first instance.

[4] The motion judge held that Ms. Stegenga's claim fell within the SABs dispute resolution provisions because it was "in respect of an insured person's entitlement to statutory accident benefits or in respect of the amount of statutory accident benefits to which an insured person is entitled": s. 280(1). It was therefore a claim over which the LAT has exclusive jurisdiction and one which may not be brought in court: s. 280(2), (3). In the motion judge's view, both s. 280 of the Act and this court's decisions under the prior version of the Act's dispute resolution provisions required that conclusion, even though Ms. Stegenga's lawsuit asserted and sought damages for bad faith stemming from Economical Mutual's administration of her SABs claim.

[5] Ms. Stegenga appeals. She argues that this is the first case to consider whether an action for bad faith administration of a SABs claim comes within the current s. 280, amended since the cases the motion judge relied on were decided. She argues that the principles of statutory interpretation, case law that has emphasized the standalone nature of a cause of action for bad faith, the nature of the relief claimed, and sensible policy considerations, all lead to the conclusion that s. 280 does not apply.

[6] For the following reasons, I conclude that s. 280 does apply. Interpreted in light of the principles of statutory interpretation, s. 280 grants the LAT jurisdiction over Ms. Stegenga's claim, and prohibits the claim from proceeding as an action in court, notwithstanding that the action alleges bad faith and the remedies the LAT can grant are different from those a court could. This result is a consequence of the policy choice the legislature made in enacting s. 280. I would therefore dismiss the appeal.

The Facts

[7] Economical Mutual brought its motion under rule 21.01(1)(a) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194. On such a motion, the facts alleged in Ms. Stegenga's statement of claim are taken to be true. The facts set out below come from that statement of claim.

[8] In November 2011, when she was 15 years old, Ms. Stegenga was a passenger in a motor vehicle that was involved in a serious collision. She suffered significant injuries, including a head injury with a Glasgow Coma Scale ("GCS") score of 6, necessitating a period of intubation and treatment in a Pediatric Critical Care Unit. She also suffered multiple rib fractures, pulmonary contusions, fractures to her right clavicle, scapula and pelvic rami, as well as other injuries. These injuries were accompanied by, among other things, a loss of cognitive ability; personality, behaviour and psychological changes; and anxiety, depression and chronic pain. As a result, Ms. Stegenga experienced a decline in her academic performance. She has struggled to maintain her grades, focus on school work and complete assignments.

[9] Ms. Stegenga was insured by Economical Mutual under an automobile insurance policy it issued to her father.

[10] In January 2012, Ms. Stegenga's mother applied on her behalf to the respondent for SABs. Pertinent medical information was provided by Ms. Stegenga's pediatrician.

[11] For a period of about three years, Economical Mutual did not advise Ms. Stegenga or her parents that her injuries could qualify as a catastrophic impairment or inform them of the benefits that could be available for such an impairment. Economical Mutual also did not:

provide them with the application form required to make a determination about catastrophic impairment;
take steps to interview Ms. Stegenga or her parents regarding the nature and extent of her injuries or their effect on her daily life;
arrange to have her assessed by a health practitioner;
assign a case manager to assist with her care and rehabilitation, or advise her that she was entitled to a case manager;
obtain her hospital and clinical records for over two years, or respond appropriately to such records when eventually provided to them;
respond to requests to authorize a neurologic psychoeducational assessment; and
provide accurate benefit statements to Ms. Stegenga and her parents (those provided misrepresented both the nature of her injuries as non-catastrophic and the applicable policy limits available to her).

[12] In February 2015, Economical Mutual advised that based on Ms. Stegenga's GCS score, it now accepted that she had suffered a catastrophic impairment as a result of the collision. However, over the next year, Economical Mutual continued to provide benefit statements that described her injuries as non-catastrophic.

[13] Ms. Stegenga alleges that Economical Mutual breached the duties it owed to her because it acted wilfully and negligently in breach of its contract with her and in breach of its duty of good faith. The claim recites 56 particulars of Economical Mutual's alleged breaches, which may be grouped into several categories:

failing to inform Ms. Stegenga and her family of her rights and entitlements to benefits under the Statutory Accident Benefits Schedule — Effective September 1, 2010, O. Reg. 34/10 (the "SABs Schedule");
while it knew or ought to have known that Ms. Stegenga suffered a catastrophic injury, failing to ensure she had the proper information, forms, examinations, assessments, treatment, care and a case manager;
failing to take steps to investigate Ms. Stegenga's medical condition and her entitlement to benefits, and not properly considering information provided to it on those topics;
preventing Ms. Stegenga from accessing benefits and withholding, delaying or denying benefits based on inaccurate and irrelevant considerations;
sending Ms. Stegenga and her family confusing, misleading and contradictory correspondence about her entitlement to benefits, misrepresenting her benefits, withholding information and failing to make disclosure, knowing that Ms. Stegenga would not receive the treatment, care and benefits she required and to which she was entitled; and
failing to follow reasonable standards for the handling of Ms. Stegenga's claim for benefits.

[14] As noted, the statement of claim refers to Ms. Stegenga's entitlement to SABs and to the fact that SABs were not, or were inadequately, provided. It states that, because of Economical Mutual's conduct, and reliance on its misleading representations, she did not "receive the care, treatment, and benefits to which she was entitled and should have received". Ms. Stegenga also pleads that although she provided all forms, information and medical documentation requested by Economical Mutual, Economical Mutual "did not provide the benefits to which [Ms. Stegenga] was legally entitled".

[15] The statement of claim alleges that Economical Mutual's conduct prolonged Ms. Stegenga's suffering, and caused new difficulties and impairments she would not otherwise have experienced, as well as emotional, psychological and financial distress. Damages, including punitive, aggravated and exemplary damages, are claimed.

The Motion Judge's Decision

[16] Economical Mutual moved under Rule 21 to strike the statement of claim, seeking the determination of a question of law: whether the appellant's claim is barred by s. 280(1) and (3) of the Insurance Act. The motion judge defined the question as whether a claim for negligent, fraudulent or bad faith administration of accident benefits is a claim falling within s. 280(1), that is, whether it is a dispute "in respect of an insured person's entitlement to statutory accident benefits or in respect of the amount of statutory accident benefits to which an insured person is entitled".

[17] The motion judge reasoned that the words "in respect of" in s. 280(1) import a connection in a very broad sense. He considered the dispute resolution provisions to be designed to provide a cost-efficient and fair mechanism for resolving disputes between insurers and insureds in respect of SABs, by mandating that disputes be heard at first instance by the LAT. To determine whether the dispute fell within the LAT's jurisdiction and therefore outside that of the courts, the motion judge instructed himself to look to the facts giving rise to the dispute rather than the legal characterization of the wrong, citing Weber v. Ontario Hydro, [1995] 2 S.C.R. 929, at para. 49. He cited this court's decision in Arsenault v. Dumfries Mutual Insurance Co., 57 O.R. (3d) 625, which was decided under the dispute resolution provisions of the Act before the 2016 amendments, as standing for the proposition that those provisions apply if a refusal of accident benefits is an essential part of a claim, regardless of whether bad faith in administering a claim may be an independent tort in the context of accident benefits. He concluded that s. 280 is "intended to deprive a claimant of resort to the court at first instance whenever the claim is based on denial of accident benefits, no matter how the denial is characterized in legal terms".

The Appellant's Position

[18] Although the statement of claim seeks damages for breach of contract, negligence, misrepresentation and infliction of mental distress, Ms. Stegenga's argument on appeal focuses on her action as one for bad faith relating to the administration of her SABs claim. She argues that an insurer's duty of good faith is independent of and in addition to its duty to pay the benefits to which an insured person is entitled, a point she argues follows from the Supreme Court's decision in Whiten v. Pilot Insurance Co., 2002 SCC 18, [2002] 1 S.C.R. 595, at para. 79. A breach of the duty of good faith gives rise to a standalone action for bad faith in which aggravated, exemplary and punitive damages are available.

[19] Ms. Stegenga submits that nothing in the Insurance Act deprives the Superior Court of jurisdiction to deal with such a claim or confers jurisdiction on the LAT to do so, for interrelated reasons. Her standalone bad faith claim is not for benefits entitlement, and the LAT cannot award aggravated, exemplary or punitive damages. The cases by which the motion judge considered himself bound, including Arsenault, are distinguishable because they did not involve true bad faith claims: they were claims for indemnity under the insurance contract and dealt with entitlement issues. The motion judge's conclusion that the LAT has exclusive jurisdiction over Ms. Stegenga's claim effectively insulates insurers from claims involving a breach of their duty of good faith in relation to claims for SABs, a result she contends should be avoided.

Analysis

[20] This appeal requires me to consider three issues:

(1) What is the breadth of the SABs dispute resolution provisions in the Insurance Act that prohibit recourse to the court and empower the LAT to resolve disputes?

(2) Does a bad faith claim against an insurer, seeking relief such as punitive damages, fall outside the scope of the dispute resolution provisions?

(3) What effect do the conclusions under issues 1 and 2 have on Ms. Stegenga's claim?

[21] As I explain, the SABs dispute resolution provisions capture a broad range of disputes, including disputes about how an insurer handled a SABs claim. The purpose of the provisions, the expansive language used and the extent of the powers given to the LAT all support this interpretation.

[22] Neither the legal characterization of the cause of action asserted against the insurer nor the relief claimed determines whether a claim falls within the scope of the dispute resolution provisions. If the dispute relates to the insurer's compliance with obligations to the insured concerning SABs, the timeliness of performance of those obligations and/or the manner in which they were administered, it falls within the broad reach of the dispute resolution provisions, and within the jurisdiction of the LAT. The prohibition on court proceedings will apply.

[23] In this case, these conclusions apply to bar Ms. Stegenga's action.

The Statutory Scheme

[24] Subsection 280(1) of the Insurance Act describes the disputes to which the dispute resolution process it mandates applies. It provides:

280(1) This section applies with respect to the resolution of disputes in respect of an insured person's entitlement to statutory accident benefits or in respect of the amount of statutory accident benefits to which an insured person is entitled.

[25] Subsection 280(2) goes on to confer jurisdiction on the LAT to resolve the disputes described in s. 280(1):

(2) The insured person or the insurer may apply to the Licence Appeal Tribunal to resolve a dispute described in subsection (1).

[26] Subsection 280(3) then places a limit on what proceedings may be brought in court, prohibiting proceedings at first instance if they are with respect to a dispute described in s. 280(1), that is, a dispute that falls within the jurisdiction of the LAT:

(3) No person may bring a proceeding in any court with respect to a dispute described in subsection (1), other than an appeal from a decision of the Licence Appeal Tribunal or an application for judicial review.

[27] Further guidance on what falls within the jurisdiction of the LAT and therefore outside that of the court at first instance is contained in the balance of s. 280 and the relevant regulations.

[28] Subsection 280(4) provides that a dispute shall be resolved in accordance with the SABs Schedule. Subsections (5) and (6) provide that the powers of the LAT and the orders it may make may be provided for by regulation, and may include the power to make orders "to pay amounts even if those amounts are not costs or amounts to which a party is entitled under the [SABs Schedule]": s. 280(6)2.

[29] Both the SABs Schedule and the regulations envisaged by the Act contemplate the LAT making determinations about how an insurer has handled a claim and granting relief beyond the payment of SABs when payments have been "unreasonably withheld or delayed". Section 3(8) of the SABs Schedule provides:

(8) If in a dispute described in subsection 280(1) of the Act, the Licence Appeal Tribunal finds that an expense was not incurred because the insurer unreasonably withheld or delayed payment of a benefit in respect of the expense, the Licence Appeal Tribunal may, for the purpose of determining an insured person's entitlement to the benefit, deem the expense to have been incurred.

[30] And s. 10 of Automobile Insurance, R.R.O. 1990, Reg. 664 provides:

If the Licence Appeal Tribunal finds that an insurer has unreasonably withheld or delayed payments, the Licence Appeal Tribunal, in addition to awarding the benefits and interest to which an insured person is entitled under the Statutory Accident Benefits Schedule, may award a lump sum of up to 50 per cent of the amount to which the person was entitled at the time of the award together with interest on all amounts then owing to the insured (including unpaid interest) at the rate of 2 per cent per month, compounded monthly, from the time the benefits first became payable under the Schedule.

Issue 1: The Broad Scope of the SABs Dispute Resolution Provisions

[31] The breadth of s. 280 of the Insurance Act is a question of statutory interpretation. The modern approach to statutory interpretation requires the court to consider the words of a statute "in their entire context and in their grammatical and ordinary sense harmoniously with the scheme of the Act, the object of the Act, and the intention of Parliament": Belwood Lake Cottagers Ass'n Inc. v. Ontario (Environment and Climate Change), 2019 ONCA 70, [2019] O.J. No. 485, at para. 39, citing Montréal (City) v. 2952-1366 Québec Inc., 2005 SCC 62, [2005] 3 S.C.R. 141, at paras. 9-12; and Rizzo & Rizzo Shoes Ltd. (Re), [1998] 1 S.C.R. 27, at para. 21. Reading a statutory provision in its entire context requires the court to consider the history of the provision and its place in the overall scheme of the act, among other things: Belwood, at para. 41.

[32] More specific principles of interpretation apply in some cases. Ms. Stegenga argues that as the Superior Court is a court of general jurisdiction, it has jurisdiction over all matters of substantive law in civil claims unless that jurisdiction is taken away by clear and unequivocal legislative language: TeleZone Inc. v. Canada (Attorney General), 2008 ONCA 892, 94 O.R. (3d) 19, affd Canada (Attorney General) v. TeleZone Inc., 2010 SCC 62, [2010] 3 S.C.R. 585, at paras. 3, 6.

[33] It is conceded that the Act does, by clear and unequivocal language, take away some jurisdiction from the court and confer it on the LAT. The Act's express directions that "[n]o person may bring a proceeding in any court with respect to a dispute . . ." (s. 280(3)) and that "[t]he insured person or the insurer may apply to the [LAT] to resolve a dispute . . ." (s. 280(2)) leave no doubt about that. The issue is the breadth of the subject matter carved out of the court's jurisdiction and given to the LAT to resolve.

[34] Ms. Stegenga essentially argues that the words "disputes in respect of an insured person's entitlement to statutory accident benefits or in respect of the amount of statutory accident benefits to which an insured person is entitled" only capture disputes about whether or not a benefit should be paid, that is, claims for a benefit itself, or disputes about whether a benefit was paid in an incorrect amount, that is, claims for the further amount that should be paid or for the excess amount that should not have been paid. She argues that the legislature used the terms "entitlement" and "amount" to limit the scope of s. 280(1). Had the legislature drafted the provision to cover "any dispute in respect of statutory accident benefits", for example, its reach would be broader.

[35] In my view, this argument reads the section too narrowly. Several indicators of legislative meaning, which I outline below, lead to the conclusion that a dispute in respect of an insured person's entitlement to SABs or the amount of an insured person's SABs entitlement embraces more than a claim for the payment of a benefit not paid or paid in an incorrect amount, and extends to the way the claim was handled.

(i) Legislative Purpose

[36] The current version of s. 280 of the Act came into force on April 1, 2016. The previous version provided for mandatory mediation of disputes in respect of any entitlement to or the amount of an entitlement to SABs, and gave an insured person an option of then proceeding to court or arbitration for the resolution of such a dispute if mediation failed, but within a two-year limitation period: Insurance Act, ss. 279-283, as they appeared on March 31, 2016.

[37] The pre-April 2016 provisions were described as a "mandatory scheme" and "complete code for dealing with disputes between an insured person and an insurer concerning SABs issues": Ayr Farmers Mutual Insurance Co. v. Wright, 2016 ONCA 789, 134 O.R. (3d) 427, at paras. 4, 16, 34. The amendments enacted in April 2016 -- giving the LAT jurisdiction (subject to appeal or judicial review) over the same disputes that were previously subject to mandatory mediation, and prohibiting proceedings in court -- do not detract from the legislature's intention that the provisions continue to constitute a complete code for the resolution of disputes in respect of an insured person's entitlement to SABs or in respect of the amount of SABs to which an insured person is entitled.

[38] The purpose of the amendments that led to the current s. 280 has been described as reducing both insurance rates and insurance fraud, and speeding up dispute resolution, in large part by providing an efficient, fair and accessible mechanism for resolving disputes: "Fighting Fraud and Reducing Automobile Insurance Rates Act, 2014", 1st reading, Ontario, Legislative Assembly, Official Report of Debates (Hansard), 41st Parl., 1st Sess., No. 8 (July 15, 2014) at 1510 (Hon. Charles Sousa); see, also, 2014 Ontario Automobile Insurance Dispute Resolution System Review, Final Report, by The Hon. J. Douglas Cunningham (Toronto: February 25, 2014), at pp. 2-3, 13, 31-33, the report that formed the basis for the amendments to the dispute resolution provisions. The amendments removing disputes from the courts and empowering the LAT to deal with them are among the "cornerstones" of the legislation passed to effect the above purpose: Hon. Charles Sousa, at 1510.

[39] The purpose of the current s. 280 has two important implications. First, the purpose of reducing insurance rates by providing for efficient dispute resolution through the LAT would not be served by an overly restrictive reading of the LAT's jurisdiction and the corresponding limit on the court's jurisdiction. The legislature must be taken to have considered the importance of its objectives of efficiency and cost reduction to outweigh the loss of insured individuals' access to the courts and to the full range of remedies available there.

[40] Second, while the legislature's intention that the dispute resolution provisions continue to be a complete code does not, on its own, determine which disputes fall within it, it does suggest that the legislature did not intend the same, similar, or overlapping issues to be adjudicated in more than one forum.

(ii) The Use of Expansive Language in s. 280(1)

[41] The entry point to the SABs dispute resolution provisions is s. 280(1), which contains expansive language.

[42] As the motion judge correctly noted, the phrase "in respect of" connotes the broadest possible connection between two subject matters: Arsenault, at para. 16, citing R. v. Nowegijick, [1983] 1 S.C.R. 29, at p. 39 S.C.R. In s. 280(1), that phrase connects "dispute" to "entitlement" to statutory accident benefits or their amount.

[43] The ordinary meaning of the noun "dispute" is broad. It has been described as a "conflict or controversy", a "disagreement or argument" and a "controversy; a debate": Black's Law Dictionary, 11th ed.; Concise Oxford English Dictionary, 12th ed.; Canadian Oxford Dictionary, 2nd ed.

[44] "Entitlement" is a term of wide meaning, referring to "a right to do or receive something": Concise Oxford English Dictionary, 12th ed. It embraces the content of the insured's right to receive SABs (i.e., what SABs an insured person has a right to receive), when they have a right to receive those SABs, and the manner of performance by the insurer they have a right to receive.

[45] Taken together, the words of s. 280(1) cover a wide array of disagreements connected in some way to the SABs to which an insured person was or is entitled. Viewed in the context of the purpose and history of the dispute resolution provisions, those words include disagreements about when the insurer's obligation to provide SABs should be or should have been performed, and how the obligation to provide them should be or should have been performed.

(iii) The LAT's Jurisdiction

[46] The balance of s. 280 informs the proper interpretation of the s. 280(1) reference to disputes in respect of entitlement to SABs or their amount. These provisions elaborate on the jurisdiction given to the LAT, and therefore on what falls within s. 280(1). The jurisdiction given to the LAT over those disputes is co-extensive with that removed from the court: s. 280(2), (3).

[47] The jurisdiction given to the LAT includes making determinations about the manner in which an insurer has administered a claim for SABs. Subsection 280(4) states that the LAT shall resolve disputes in accordance with the SABs Schedule. The SABs Schedule gives the LAT the power, for the purpose of making an award of benefits, to deem an expense to have been incurred if that expense was not incurred because an insurer unreasonably withheld or delayed payment of benefits in respect of the expense: s. 3(8). Determining whether a benefit was unreasonably withheld or delayed necessarily involves determining both what benefits were due and when, and whether the insurer's conduct that led to it not providing the benefit or providing it later than it should have was unreasonable.

[48] Similarly, s. 280(5) and (6) of the Act contemplate the LAT exercising power under other regulations. Subsection 280(6)2 allows the regulations to authorize the LAT to award amounts beyond those for which the SABs Schedule provides. The regulations in turn allow the LAT to make, in addition to an award of the benefits and interest to which the insured is entitled under the SABs Schedule, an award (known as a "special award") of up to 50 per cent of the benefits to which the insured is otherwise entitled, and interest at a higher rate, if it finds the insurer unreasonably withheld or delayed the payment of benefits: Automobile Insurance, s. 10. The LAT's powers contemplate an enquiry into and determination of what and when benefits should have been paid, and into whether any delay or failure to pay was reasonable, that is, into the manner in which the insurer has dealt with the claim and performed its SABs-related obligations.

[49] The LAT's jurisprudence shows that it enters into such enquiries and makes such determinations. In 17-006757 v. Aviva Insurance Canada, the LAT found the insurer to have unreasonably delayed payment of benefits: 17-006757, at para. 32. In making a special award, the LAT considered the insured's entitlement to the benefits claimed, the insurer's delay in approving payments without apparent explanation, its near total disregard of the correspondence from the insured's legal representatives and medical practitioners, its failure to reassess the claim when new information became available, its ignoring the claim for a period of time and its imprudent, stubborn, inflexible and unyielding stance with respect to the benefits claimed: 17-006757, at paras. 36-37.

[50] This is consistent with the approach taken to special awards under the prior version of the Act. Jurisdiction to make a special award was vested in an arbitrator of the Financial Services Commission of Ontario: Insurance Act, s. 282(10) as it appeared on March 31, 2016. The operative language permitting such an award was nearly identical to the regulation now empowering the LAT to do so; that is, it required the insurer to have unreasonably withheld or delayed the payment of benefits. The approach to making special awards under the prior version of the Act required the arbitrator to determine the benefits owing to the insured person, and whether the insurer unreasonably withheld or delayed payments. Factors relevant to fixing the amount of a special award included the amount of benefits unreasonably withheld or delayed, the length of the delay and any failure to respect procedural and other protections for the insured. Bad faith was not required but was relevant if shown, as was the vulnerability of the insured if known to the insurer: Personal Insurance Co. v. Hoang, 2014 ONSC 81, [2014] O.J. No. 1383, at paras. 64-65.

(iv) Differences in Remedial Powers Do Not Affect the Result

[51] The appellant points out that the remedies the LAT can grant, such as a special award, are different from what a court may award. For example, even if the LAT finds a delay or withholding of benefits that was unreasonable, and in making that determination finds conduct that would at common law amount to bad faith, it could not grant consequential or punitive damages as a court might. The appellant submits that finding that s. 280 bars Ms. Stegenga's claim effectively insulates insurers from claims involving the breach of the duty of good faith in the SABs context, and from the punitive and deterrent effect of the court's remedial powers.

[52] In my view, this remedial difference does not bear on the issue of what types of disputes are captured by the grant of authority to the LAT and the parallel prohibition on court proceedings. The legislature made a choice as to what disputes would be within the exclusive jurisdiction of the LAT, and what remedial powers the LAT would have. That was a policy choice it was entitled to make. The Insurance Act and its regulations form a comprehensive scheme for the regulation of insurers and insurance. The legislature must be taken to have armed the LAT with the remedial powers it considered appropriate to deal with improper insurer behaviour, knowing those remedial powers were different from the court's.

(v) Conclusion on the Meaning of the Dispute Resolution Provisions

[53] Disagreements between an insurer and insured about the SABs the insured should receive, their amount, the timeliness of their provision, and the conduct and process of the insurer in providing them (that is, the handling or administration of the claim) constitute disputes in respect of the insured person's entitlement to SABs or their amount. Put in terms applicable here, an insured person could properly be said to have a dispute falling within s. 280(1) if a benefit the insured considers ought to have been paid or provided was not, or if it was paid or provided but only well after the insured considers it should have been because of what the insured considers to have been the insurer's inappropriate handling of the claim. These are matters the legislature has empowered the LAT to decide, and has taken away from the court.

Issue 2: A Bad Faith Claim Does Not Automatically Fall Outside the Reach of s. 280

[54] The appellant argues that since bad faith is a standalone cause of action, her claim falls beyond the reach of s. 280. I agree that bad faith can be characterized as a cause of action which is available to a person insured by an insurance contract but is independent of and distinct from a claim for payment or indemnity under the insurance contract. However, it does not follow that this automatically takes the subject matter of a claim, even when characterized as one for bad faith, outside of s. 280.

[55] The following descriptions of the nature of an action for bad faith (all from cases that do not deal with SABs) are useful to analyze the appellant's submission:

(a) An insurer is under a duty of good faith and fair dealing. A breach of the duty of good faith is independent of and in addition to the breach of a contractual duty to pay the insured's loss. It is an actionable wrong, which can support a claim for punitive damages: Whiten, at para. 79.

(b) "A breach of the duty to act fairly and in good faith gives rise to a separate cause of action that is distinct from the cause of action founded on the express terms of the policy and that is not restricted by the limits in the policy. Hence it may result in an award of consequential damages distinct from the proceeds payable under the policy": Ferme Gérald Laplante & Fils Ltée v. Grenville Patron Mutual Fire Insurance Co., 61 O.R. (3d) 481, at para. 78.

(c) Statutory conditions in an insurance contract imposing limitation periods for "a claim under [this] contract" or an action "under this contract . . . in respect of the loss or damage to person or property" do not apply to a bad faith claim. A bad faith claim is not a claim for indemnity under the contract: Dundas v. Zurich Canada, 2012 ONCA 181, 109 O.R. (3d) 521, at paras. 46-49.

[56] In my view, the nature of a bad faith cause of action does not automatically take a claim so denominated outside the reach of s. 280. Section 280 is not limited to claims for breach of a contractual duty to pay SABs, nor to claims under an insurance contract. As explained above, s. 280 also embraces disputes about the manner in which a claim was handled or administered.

[57] Alleging bad faith did not automatically take a claim out of the ambit of the pre-April 2016 SABs dispute resolution provisions. In Arsenault, Abella J.A. (as she then was) held that a claim alleging bad faith in the termination of benefits was still subject to the limitation period in former s. 281(5), for two reasons. First, assuming that bad faith could form an independent basis for a claim (as was subsequently confirmed in Whiten), Abella J.A. reasoned that the claim fell within the subject matter of the SABs dispute resolution code in the Act, including its limitation period, because the claim required a determination as to whether the insurer's termination of benefits was improper: Arsenault, at para. 18. Second, looking at the substance of the claim, rather than its pleaded legal characterization, Abella J.A. also reasoned that the claim was for a determination that the insurer ought not to have terminated benefits when it did. On that basis, it also fell with the dispute resolution code: Arsenault, at para. 19.

[58] This court reached a similar result in Mader v. South Easthope Mutual Insurance Co., 2014 ONCA 714, 123 O.R. (3d) 120. The insured in that case framed her claims for income replacement benefits and damages as flowing not only from a breach of contract, but also from a breach of the duty of good faith and a conspiracy, and argued that the latter claims were not subject to the mandatory mediation requirement in the previous s. 281(2) of the Act. However, Hourigan J.A. concluded that the claim still fell within the Act's previous dispute resolution code, because "[t]he claims asserted by the appellant all flow from the denial of benefits" and essentially "amount to nothing more than a claim that the appellant was wrongly denied benefits to which she believes that she is entitled to receive": Mader, at para. 49. This was precisely the type of claim contemplated for resolution by the Act's former SABs dispute resolution procedure.

[59] I do not accept Ms. Stegenga's submission that the reasoning in these cases is inconsistent with or displaced by the decision in Dundas. The bad faith claim in Dundas was not covered by the statutory condition imposing a time limit on claims because the condition applied only to claims under the policy. As noted, s. 280 is not similarly limited.

[60] In my view, the amendments to the Act following Arsenault and Mader do not affect their continued applicability. The language considered in those cases, "[d]isputes in respect of any insured person's entitlement to statutory accident benefits or in respect of the amount of statutory accident benefits to which an insured person is entitled", remains virtually the same. The legislature preserved that language in the face of the broad interpretation the courts had given to it, of which the legislature is presumed to have been aware: ATCO Gas & Pipelines Ltd. v. Alberta (Energy & Utilities Board), 2006 SCC 4, [2006] 1 S.C.R. 140, at para. 59; Ruth Sullivan, Sullivan on the Construction of Statutes, 6th ed. (Toronto: LexisNexis, 2014), at p. 205. Only the consequences of a dispute coming within that definition have changed. Court proceedings were previously available following mandatory mediation, and within a certain limitation period; now they are not. That consideration does not prevail over the fact that the operative language remains the same. Arsenault and Mader continue to be applicable to the current s. 280(1).

[61] It is not the type of legal claim, whether bad faith or otherwise, which determines whether s. 280 applies. As I explain below, it is the nature and subject matter of the dispute, assessed on the basis of the facts that give rise to it, that are determinative.

Issue 3: Application to the Appellant's Claim

[62] The approach taken by the Supreme Court in Weber v. Ontario Hydro, supra, applies to determine whether the Act has removed a dispute from the court's jurisdiction in favour of the LAT's jurisdiction. In Weber, McLachlin J. (as she then was) held that the facts giving rise to a dispute, rather than the legal characterization of a dispute, determined whether that dispute had been removed from the court's jurisdiction by the mandatory arbitration clause in s. 45(1) of the former Labour Relations Act, R.S.O. 1990, c. L.2: Weber, at para. 49. If the legal characterization of the claim were determinative, clever pleading could defeat the object of the legislature's prohibition on parallel court proceedings: Weber, at para. 49.

[63] As in Weber, the wording of the Insurance Act removing jurisdiction from the court and conferring it on the LAT indicates that the facts giving rise to the dispute determine which forum has jurisdiction over the dispute. In Weber, McLachlin J. noted that the mandatory arbitration provision in the Labour Relations Act "refers to 'all differences between the parties arising from the interpretation, application, administration or alleged violation of the agreement'": Weber, at para. 45 [emphasis in original]. She reasoned that the word "differences" denoted the dispute between the parties, rather than the type of legal claim one party might be able to bring against another. The legislature intended to exclude all proceedings arising from disputes of a certain character between the parties, "however those proceedings may be framed": Weber, at para. 45. The same reasoning applies here: s. 280 of the Insurance Act is not framed in terms of legal characterizations, but refers directly to disputes.

[64] At their core, the facts alleged in Ms. Stegenga's statement of claim are about the insurer's failure to provide the benefits to which Ms. Stegenga was entitled; the insurer's delay in providing benefits, its withholding of benefits, and the circumstances in which that occurred; and the insurer's conduct and process in handling the claim for benefits and dealing with Ms. Stegenga and her family, all of which caused or contributed to Ms. Stegenga not receiving "the care, treatment, and benefits to which she was entitled and should have received". These facts demonstrate that Ms. Stegenga's action, "viewed with an eye to its essential character", is a dispute "in respect of" her entitlement to SABs and their amount: Weber, at para. 67. It falls within s. 280.

[65] Ms. Stegenga's entitlement to benefits and the insurer's non-provision of benefits recurs as a theme in her pleading. If the court action were allowed to proceed, the benefits to which Ms. Stegenga was entitled, their amount and when they ought to have been provided would have to be determined as a predicate to determining whether the insurer's withholding or delay in providing benefits -- its handling of the claim -- gave rise to an actionable wrong such as bad faith. Those same determinations would have to be made in order to decide whether the insurer made actionable misleading statements. But those predicate determinations are within the LAT's jurisdiction. In intending to enact a cost-effective and efficient dispute resolution scheme, the legislature did not intend both the LAT and the court to determine the same questions on the path to granting different relief.

[66] It does not matter that the LAT would look at the facts through the lens of unreasonableness, while a court would do so through the lens of bad faith. It is not the legal characterization of the claim but the facts giving rise to the dispute that are determinative.

[67] The facts giving rise to Ms. Stegenga's dispute with the insurer relate to her entitlement to benefits or to the amount of her entitlement, as those terms are used in s. 280(1): they are connected to the category of SABs to which she was entitled, and to the proper amount of her entitlement, and they relate to the insurer's handling of the claim. Because these matters are covered by the broad language in s. 280(1), they are within the LAT's jurisdiction under s. 280(2), and are thus within the ambit of the s. 280(3) prohibition on court proceedings. The LAT is specifically empowered to grant relief for claims like Ms. Stegenga's; the court is barred from doing so.

Conclusion

[68] In my view, the motion judge reached the correct conclusion. Ms. Stegenga's action is barred by the dispute resolution provisions of the Insurance Act. I would dismiss the appeal.

[69] The respondent is entitled to the costs of the appeal in the sum of $7,500, inclusive of disbursements and applicable taxes.

Appeal dismissed.

Notes

1 Appeals from or applications for judicial review of LAT decisions can be brought in court: s. 280(3).

2 Whether claims for extracontractual damages such as punitive damages fall outside of those provisions was the subject of some commentary shortly after they came into force: see Philippa G. Samworth, "AABS and SABS: The Evolving World of Ontario Statutory Accident Benefits in 2016" (2017), 46 Advoc. Q 1.

3 The prior version of s. 280(1), defining the scope of the dispute resolution provisions' application, read as follows: "Disputes in respect of any insured person's entitlement to statutory accident benefits or in respect of the amount of statutory accident benefits to which an insured person is entitled shall be resolved in accordance with sections 280 to 283 and the Statutory Accident Benefits Schedule": Insurance Act, R.S.O. 1990, c. I.8, s. 279(1) as it appeared on March 31, 2016.

4 Prior to the 2016 amendments, a court hearing a SABs entitlement dispute could also grant damages for mental distress to the SABs claimant: McQueen v. Echelon General Insurance Co., 2011 ONCA 649, 107 O.R. (3d) 780, at paras. 19, 65, 75.

5 Ms. Stegenga relies on three other cases that are similarly distinguishable: L'Espérance v. Economical Mutual Insurance Group, 2014 ONSC 6293, 122 O.R. (3d) 773; Johnston v. Wawanesa Mutual Insurance Co., 2006 CarswellOnt 4528, [2006] O.J. No. 3037; and St. Denis v. TD Insurance Home and Auto Liberty Insurance Co. of Canada, 80 O.R. (3d) 706. They are not SABs claims. Further, like Dundas, they involve limitation periods that are only applicable to claims "under" or "under or by virtue of" the relevant insurance policy: L'Espérance, at paras. 14, 25; Johnston, at paras. 2, 32; St. Denis, at para. 17.

6 The word "any" has been changed to "an": see Insurance Act, R.S.O. 1990, c. I.8, s. 279(1), as it appeared on March 31, 2016.

Stegenga v. Economical Mutual Insurance Co., 2019 ONCA 615

Case Summary

Stegenga v. Economical Mutual Insurance Co.

Case Summary

Authorities

Statutes and Regulations Referred to

Appeal from Motion Judge's Decision

The Facts

The Facts

The Motion Judge's Decision

The Appellant's Position

Analysis

The Statutory Scheme

Issue 1: The Broad Scope of the SABs Dispute Resolution Provisions

(i) Legislative Purpose

(ii) The Use of Expansive Language in s. 280(1)

(iii) The LAT's Jurisdiction

(iv) Differences in Remedial Powers Do Not Affect the Result

(v) Conclusion on the Meaning of the Dispute Resolution Provisions

Issue 2: A Bad Faith Claim Does Not Automatically Fall Outside the Reach of s. 280

Issue 3: Application to the Appellant's Claim

Conclusion

Notes

Judges

Counsel

Parties

Areas of Law