Ontario (Minister of Finance) v. Echelon General Insurance Co.
[Indexed as: Ontario (Minister of Finance) v. Echelon General Insurance Co.]
Ontario Reports
Court of Appeal for Ontario
Lauwers, Fairburn and Nordheimer JJ.A.
July 25, 2019
147 O.R. (3d) 1 | 2019 ONCA 629
Case Summary
Insurance — Automobile insurance — Statutory accident benefits — Priorities
Echelon priority insurer for payment of statutory accident benefits to B at time of B's accident. Echelon mistakenly believing that B's vehicle was not covered under its policy. Echelon persuading Motor Vehicle Accident Claims Fund to pay Statutory Accident Benefits to B. Fund not ordinary insurer in priority dispute under Regulation. Fund permitted to resile from acceptance of priority. Arbitrator having jurisdiction to make special award under s. 7(6) of Regulation requiring Echelon to reimburse fund.
Disputes Between Insurers, O. Reg. 283/95, s. 7(6).
Facts
B was injured when she was thrown off a snowmobile operated by her boyfriend, F. F was a named insured under an automobile insurance policy issued by Echelon. Under the mistaken belief that the snowmobile was not insured under the policy, Echelon denied that it was liable to pay statutory accident benefits ("SABs") to B and persuaded the Motor Vehicle Accident Claims Fund to accept the payment obligation. When Echelon's coverage mistake came to light, the fund asked Echelon to start paying SABs to B and to reimburse it for payments made to her. Echelon refused, arguing that the fund lost its ability to contest priority once it accepted responsibility for paying benefits to B. The dispute went to arbitration.
Echelon asserted that the fund was an ordinary insurer and was bound by arbitral jurisprudence holding that an insurer that accepts priority cannot later resile except in unusual circumstances that did not exist here. The arbitrator found that Echelon was obliged to pay the SABs to B. He found that his authority under s. 7(6) of the Disputes Between Insurers, O. Reg. 283/95 (the "Regulation") did not permit him to order Echelon to reimburse the fund. However, he found he had authority to make such an order under s. 31 of the Arbitration Act, 1991, S.O. 1991, c. 17. He found that principles of both unjust enrichment and contract law permitted him to order Echelon to reimburse the fund. The appeal judge dismissed Echelon's appeal.
Echelon appealed.
Held
The appeal should be dismissed.
The fund is not an ordinary insurer in a priority dispute under the Regulation. That fact was made abundantly clear by amendments to the Regulation in 2010, which provided additional protections to the fund by requiring an insurer claiming that the fund was required to pay benefits to complete a reasonable investigation to determine if any other insurer or insurers were liable to pay benefits in priority to the fund. The arbitrator did not err in refusing to apply the arbitral jurisprudence referred to by Echelon to the fund.
The arbitrator's interpretation of s. 7(6) of the Regulation as it related to his jurisdiction to order Echelon to reimburse the fund was unreasonable. Section 7(6) permits an arbitrator to resolve a priority dispute by requiring an insurer to fully reimburse the fund for benefits paid for which the insurer was properly responsible, in addition to the costs of the investigation and legal fees, and ordering any sanctions the arbitrator might find to be warranted. However, since the arbitrator imposed a reasonable award, albeit by resorting unnecessarily to s. 31 of the Arbitration Act, the appeal should be dismissed.
Authorities Considered
Allstate Insurance Co. of Canada v. Motor Vehicle Accident Claims Fund, 2007 ONCA 61
Kingsway General Insurance Co. v. Ontario (Minister of Finance), 2007 ONCA 62
Royal & SunAlliance Insurance Co. and State Farm Mutual Automobile Insurance Co. (Re), 2016 CarswellOnt 13322 (Arbitration)
Other Cases Referred To
Aviva Insurance Co. of Canada and State Farm Insurance Co. (Re), 2012 CarswellOnt 17684 (Arbitrator: Shari L. Novick)
AXA Insurance Co. of Canada and Ontario (Minister of Finance) (Re), 2008 CarswellOnt 11418 (Arbitrator: M. Guy Jones)
Bell ExpressVu Limited Partnership v. Rex, 2002 SCC 42
Dominion of Canada General Insurance Co. v. State Farm Mutual Automobile Insurance Co., 2018 ONCA 101
Dominion of Canada General Insurance Co v. Unifund Assurance Co., 2018 ONCA 303
Enterprise Rent A Car and ING Insurance Co. of Canada (Re), 2006 CarswellOnt 11716 (Arbitrator: M. Guy Jones)
Intact Insurance Co. v. Allstate Insurance Co. of Canada, 2016 ONCA 609
Kalinkine v. Ontario (Superintendent of Financial Services)
Kingsway General Insurance Co. v. West Wawanosh Insurance Co.
McLean v. British Columbia (Securities Commission), 2013 SCC 67
Motors Insurance Co. v. Co-operators Insurance Co., 2004 CarswellOnt 10976 (Arbitration)
Statutes Referred To
Arbitration Act, 1991, S.O. 1991, c. 17, s. 31
Insurance Act, R.S.O. 1990, c. I.8, ss. 268, 282(10)
Rules and Regulations Referred To
Disputes Between Insurers, O. Reg. 283/95, ss. 2, 2.1, 3, 3.1, 4, 7
Authorities Referred To
Driedger, Elmer A., Construction of Statutes, 2nd ed. (Toronto: Butterworths, 1983)
Stratas, David, "The Canadian Law of Judicial Review: A Plea for Doctrinal Coherence and Consistency" (2016), 42 Queen's Law Journal 27
Appeal
APPEAL from the order of Lederer J., 2018 ONSC 4550 (S.C.J.) dismissing an appeal from an award of arbitrator.
Counsel:
Jamie R. Pollack and Erica Lewin, for appellant.
Marie Sydney, for respondent.
Judgment
The judgment of the court was delivered by
LAUWERS J.A.:
A. The Issue
[1] Anne Louise Barnes was a passenger on a snowmobile operated by her boyfriend Frazer Bird when she was thrown off and suffered injuries. Mr. Bird was a named insured under an automobile insurance policy issued by Echelon General Insurance Company. Ms. Barnes applied to Echelon for statutory accident benefits. Echelon began paying her benefits as required by s. 2 of Disputes Between Insurers, O. Reg. 283/95 (the "Regulation"), enacted under the Insurance Act, R.S.O. 1990, c. I.8. However, Echelon soon decided that it was not liable because the snowmobile was not a described vehicle under Mr. Bird's policy. In reality, the snowmobile was insured under the "other automobiles" section of the policy.
[2] In the mistaken belief that Ms. Barnes was not covered by its insurance policy, but was uninsured, Echelon persuaded the Motor Vehicle Accident Claims Fund to accept the payment obligation. Echelon's coverage mistake eventually came to light and the Fund requested Echelon to resume paying Ms. Barnes, and to reimburse it for payments made to her. Echelon refused.
[3] The Fund and Echelon arbitrated their dispute under the provisions of the Regulation. The arbitrator found that Echelon, not the Fund, was obliged to pay the benefits to Ms. Barnes. The appeal judge agreed that Echelon was obliged to pay the benefits.
[4] Echelon appeals to this court with leave. I would dismiss the appeal, for the following reasons.
B. The Issue
[5] The overarching issue is whether responsibility for paying statutory accident benefits to Ms. Barnes lies with Echelon or the Fund.
[6] It is common ground that Echelon was mistaken in transferring its responsibility for paying Ms. Barnes' benefits to the Fund because under the "other automobiles" section of Mr. Bird's insurance policy with Echelon, the snowmobile was expressly insured: "motorized snow vehicle" is included in the definition of "automobile"; and "[a]utomobiles, other than a described automobile, are also covered when driven by [the insured]". Ms. Barnes was therefore an occupant of an insured vehicle at the material time, and Echelon was the priority insurer for the payment of statutory accident benefits.
[7] Despite its own error, Echelon argues that the Fund lost its ability to contest priority once the Fund accepted responsibility for paying benefits to Ms. Barnes. Arbitral jurisprudence holds that an insurer that accepts priority cannot later resile except in unusual circumstances that do not exist here. Echelon asserts that the Fund is an ordinary insurer and is bound by this jurisprudence.
C. The Decisions of the Arbitrator and the Appeal Judge
[8] In an unreported decision dated August 29, 2017, the Arbitrator Scott Densem determined that Echelon was the priority insurer responsible for paying benefits to Ms. Barnes. The arbitrator found in the Fund's favour in comprehensive reasons. He determined that the Regulation did not on its own provide a remedy by which the Fund could be reimbursed. In his view, his authority under s. 7(6) of the Regulation to make a "special award" did not permit him to order Echelon to reimburse the Fund. However, he found he had authority to make such an order under s. 31 of the Arbitration Act, 1991, S.O. 1991, c. 17, which provides: "An arbitral tribunal shall decide a dispute in accordance with law, including equity, and may order specific performance, injunctions and other equitable remedies." The arbitrator found that principles of both unjust enrichment and contract law permitted him to order Echelon to reimburse the Fund.
[9] The appeal judge dismissed Echelon's appeal of the arbitrator's award but did not accept the arbitrator's analysis. Instead, the appeal judge found that Echelon's failure to conduct a reasonable investigation was fatal to its notice to require the Fund to pay benefits to Ms. Barnes. The appeal judge noted that s. 3.1 of the Regulation requires an insurer to conduct a "reasonable investigation" before submitting notice of a priority dispute to the Fund. He accepted the arbitrator's finding that Echelon did not conduct a reasonable investigation because it had failed to read its own policy. In the absence of proper notice, the appeal judge found there was no dispute that could be subject to arbitration, rendering the arbitration void from the outset.
D. The Standard of Review
[10] Several decisions of this court have concluded that the standard of review for a question of law determined by an arbitrator in the statutory accident benefits regime is presumptively reasonableness: Dominion of Canada General Insurance Co v. Unifund Assurance Co., 2018 ONCA 303, at para. 35, per van Rensburg J.A., leave to appeal to S.C.C. refused; Intact Insurance Co. v. Allstate Insurance Co. of Canada, 2016 ONCA 609, at para. 53, per LaForme J.A.; and Dominion of Canada General Insurance Co. v. State Farm Mutual Automobile Insurance Co., 2018 ONCA 101, at para. 44, per Roberts J.A. That said, there are occasions on which there is only one reasonable answer to a question of law: McLean v. British Columbia (Securities Commission), 2013 SCC 67, at para. 38.
E. Analysis
[11] I begin by setting out how the Regulation is to be interpreted and implemented in light of the legislation and the jurisprudence.
(1) Purposes of the Regulation
[12] The first purpose of the Regulation, which came into effect in May 1995, is "to ensure that injured persons receive accident benefits promptly, despite any disputes between insurers over who should pay these benefits": Allstate Insurance Co of Canada v. Motor Vehicle Accident Claims Fund, 2007 ONCA 61, at para. 24, per Laskin J.A. ("Allstate"). This flows from the obligation imposed by s. 2 of the Regulation: "the first insurer that receives a completed application for benefits is responsible for paying benefits to an insured person pending the resolution of any dispute as to which insurer is required to pay benefits".
[13] The second purpose of the Regulation identified by Laskin J.A. is "to provide for the resolution of insurer disputes by arbitration under the Arbitration Act, 1991": at para. 25.
[14] Another purpose of the scheme is to ensure that the Fund is the funder of last resort, liable to pay statutory accident benefits with public money only if there is no private insurance available for that purpose. The expenditure of public funds should be guarded carefully and the entitlement clearly established. As Laidlaw J.A. observed in respect of the predecessor fund, in Sinclair v. Woodward, at para. 5:
Therefore, much care and vigilance is required before the Court can be satisfied that the conditions of the statute have been fulfilled, or before dispensing with the necessity for complying with any of the statutory requirements in a particular case. Every provision of the Act designed for protection of the fund should be given full consideration and effect.
[15] To that end, while the Fund is intended to be treated as an insurer for many purposes, the Regulation, as amended by O. Reg. 38/10, contains substantial protections for the Fund.
[16] I agree with the observations of Arbitrator Bialkowski in Royal & SunAlliance Insurance Co. and State Farm Mutual Automobile Insurance Co. (Re), 2016 CarswellOnt 13322 (Arbitration), that the purpose of the 2010 amendments was to provide additional protections to the Fund. The investigation obligation in s. 3.1 was added to protect the Fund from what is commonly known as "dumping". "Dumping" occurs when the insurer receives a claim for benefits and, rather than incurring the time and expense of its own priority investigation, immediately places the Fund on notice thereby forcing the Fund to complete a reasonable investigation to determine if another insurer stands in priority: at para. 25. Arbitrator Bialkowski identified another protective purpose in s. 2.1(7), which "provides the Fund with protection against 'deflection'". He also noted that "the purpose of [subsection] 3(1.1) was to prevent what counsel for the Fund describe[d] as 'blindsiding', that is involving the Fund at a late stage": at para. 37.
[17] The legislation must be read with these principles and purposes in mind.
(2) Reading the Legislative Language
[18] Under s. 2.1 of the Regulation, the individual claiming statutory accident benefits must notify the insurer "that he or she wishes to apply for benefits": at s. 2.1(2). The insurer is obliged to "promptly provide an application and any other appropriate forms" to the applicant. The Fund can be an insurer under s. 2.1. This possibility is reinforced by the language of s. 4(2). If the Fund is "[t]he first insurer that receives a completed application for benefits from the applicant", then it "shall commence paying the benefits": at s. 2.1(6).
[19] However, if the first insurer to receive a completed application disputes priority under s. 268 of the Insurance Act, then the procedure set out in s. 3(1) of the Regulation applies. The insurer must give "written notice within 90 days of receipt of a completed application for benefits to every insurer who it claims is required to pay under that section": at s. 3(1). The notice "must also be given to the Fund if the insurer claims the Fund is required to pay benefits": at s. 3(1.1). It is notable that the requirement to give notice within 90 days does not apply to the Fund if it is disputing priority, nor does an insurer's obligation to make "reasonable investigations necessary to determine if another insurer was liable within the 90-day period", which is imposed under s. 3(2)(b), apply to the Fund. This is the result of s. 3(2.1), which provides:
3(2.1) If the dispute relates to an accident that occurred on or after September 1, 2010, the Fund may give a notice under subsection (1) after the 90-day period and is not required to comply with subsection (2).
[20] Section 3.1 of the Regulation imposes a burden on an insurer claiming that the Fund is required to pay benefits. Subsection 3.1(2) provides:
3.1(2) Before giving a notice to the Fund under section 3, an insurer must,
(a) complete a reasonable investigation to determine if any other insurer or insurers are liable to pay benefits in priority to the Fund; and
(b) provide particulars to the Fund of the investigation and the results of the investigation.
[21] If the dispute between the insurers, or between an insurer and the Fund, cannot be resolved, s. 7 specifies that the dispute proceeds to arbitration under the Arbitration Act, 1991. Under s. 7(1), the arbitration is "initiated by the insurer paying benefits", "or any other insurer against whom the obligation to pay benefits is claimed". Subsection 7(3) provides that the arbitration may be initiated "no later than one year after the day the insurer paying benefits first gives notice under section 3", but this time limit does not apply to the Fund. Subsection 7(4) states that "the arbitration may be initiated by the Fund at any time before or after the expiry of the time limit set out in subsection (3) if the Fund is paying benefits".
[22] The remedial section of the Regulation is s. 7(6), which provides:
7(6) If the dispute relates to an accident that occurred on or after September 1, 2010, the failure of an insurer other than the Fund to comply with section 2.1 or 3.1 may be the subject of a special award made by the arbitrator.
[23] Taking ss. 3.1, 3(2.1) and 7 together, in my view it is clear that the Fund may dispute its obligation to pay benefits at any time and need not initiate an arbitration within one year of the time that it first began paying benefits. The arbitrator has authority to grant a remedy where one is warranted.
[24] Since 2007, there has been no doubt that the Fund is an insurer under the Regulation. This court decided two companion decisions sitting in a panel of five in Kingsway General Insurance Co. v. Ontario (Minister of Finance), 2007 ONCA 62 ("Kingsway") and Allstate. The panel was convened because of an earlier decision of the court, Kalinkine v. Ontario (Superintendent of Financial Services), in which the court found that the Fund is not an "insurer" for the purpose of the Insurance Act or the Regulation.
[25] In Kingsway and Allstate this court concluded, as expressed at para. 52 of Allstate, that Kalinkine was wrongly decided and that the Fund is an insurer under regulation 283. Justice Laskin stated in Allstate, at para. 37:
Literally, of course, the Fund is not an insurer. "Insurer" is defined in the Insurance Act to mean a "person who undertakes or agrees or offers to undertake a contract." The Fund does not meet this definition. However, in the interpretation of statutes or regulations, the literal or ordinary meaning of a word is not always determinative. That is because its meaning flows, at least partly, from the statute's, or in this case the regulation's, context and purpose. Interpreted in this light, I conclude that the Fund is an insurer for the purpose of resolving disputes over the payment of accident benefits. Both the overall context and purpose of the legislative and regulatory scheme, and the immediate context, the wording of regulation 283, support this conclusion.
[26] As Laskin J.A. pointed out, the treatment of the Fund is entirely contextual. Context applies to any consideration of whether precedents relating to disputes between insurers apply in whole or in part to the Fund, particularly in light of the 2010 amendments to the Regulation. I observe that these amendments followed the 2007 decisions in Kingsway and Allstate. O. Reg. 38/10 amended the Regulation to separate out more distinctly the Fund from other insurers and to add protections for the Fund, as the detailed analysis of the new provisions set out earlier amply shows.
(3) The Emergent Issues
[27] The reasons of the arbitrator and the appeal judge, and the arguments put forward by the parties, raise the following issues, to which I now turn:
- Was the appeal judge correct in holding that the arbitration was void from the outset?
- Does the arbitral jurisprudence bind the Fund in a priority dispute?
- Was the arbitrator's interpretation of s. 7(6) of the Regulation reasonable?
(a) Was the Appeal Judge Correct in Holding that the Arbitration was Void from the Outset?
[28] In my view, the appeal judge was not correct in concluding that the arbitration was void from the outset.
[29] I begin the analysis with the arbitrator's award. When he refers to "HMQ" he is referring to the Fund. He made the following findings and orders:
HMQ is permitted to withdraw from its agreement to accept priority for the claimant SABS [statutory accident benefits] claim.
Echelon is the priority insurer pursuant to section 268 (2) of the Insurance Act, and, if the claim remains open, has the responsibility to continue handling the claimant's SABS claim.
HMQ is entitled to restitution from Echelon of any monies HMQ has paid to Echelon, and monies paid to or on behalf of the SABS claimant, Anne Louise Barnes.
HMQ, as the successful party in this arbitration, is entitled to recover its costs from Echelon, including its share of the Arbitrator's fees and disbursements already paid or payable.
These terms would entirely resolve the issues between Echelon and the Fund. An order of this type is contemplated by the Regulation.
[30] The appeal judge was not correct in concluding that the arbitration was void from the outset, for two reasons.
[31] First, the appeal judge clearly thought the appeal should be dismissed. But by basing his reasoning on a finding that the arbitration was void from the outset, the appeal judge nullified the arbitration award. If the arbitration was void, it is unclear on what basis the Fund could obtain the remedy it seeks and to which it is entitled.
[32] Second, there is no doubt that the arbitration was properly initiated by the Fund and duly constituted. The arbitrator had the authority given to him by the Regulation and the Arbitration Act, 1991 to resolve the issues confided to him. There is nothing in the text of the amended Regulation or in the Insurance Act that compels or could even justify the result of voiding the arbitration award. Quite to the contrary, s. 7(6) of the Regulation addresses precisely the situation in which an insurer fails to comply with s. 3.1, including the insurer's failure under s. 3.1(2)(a) to "complete a reasonable investigation to determine if any other insurer or insurers are liable to pay benefits in priority to the Fund".
[33] This conclusion leads me back to the arbitration decision. Was it reasonable?
(b) Does the Arbitral Jurisprudence Bind the Fund in a Priority Dispute?
[34] Echelon submits that the basic policy thrust of the Regulation is to permit summary and relatively quick arbitrations aimed at supporting certainty, simplicity and efficiency, as this court noted in Kingsway General Insurance Co. v. West Wawanosh Insurance Co. ("West Wawanosh"). The Fund is an insurer for the purposes of the Regulation, as this court found in Kingsway and Allstate. Accordingly, the ordinary rules of arbitration apply to the Fund. In particular, Echelon asserts that the invariable rule is that once an insurer accepts priority, the insurer is not permitted to resile from that acceptance unless the arbitrator can be persuaded that the acceptance of priority was a result of misrepresentation or bad faith on the part of the other insurer. Since there is no evidence in this case of bad faith or misrepresentation on the part of Echelon, once the Fund accepted priority, arbitral jurisprudence dictates that it is bound by the decision and cannot resile. Echelon asserts that nothing in the 2010 amendments to the Regulation undermine this approach.
[35] Echelon relies heavily on this court's 2002 decision in West Wawanosh, which involved whether the limitation period in s. 3(1) of the Regulation could be avoided in light of a subsequent change in jurisprudence interpreting the relevant statutory provisions. Sharpe J.A. stated, at para. 10:
The Regulation sets out in precise and specific terms a scheme for resolving disputes between insurers. Insurers are entitled to assume and rely upon the requirement for compliance with those provisions. Insurers subject to this Regulation are sophisticated litigants who deal with these disputes on a daily basis. The scheme applies to a specific type of dispute involving a limited number of parties who find themselves regularly involved in disputes with each other. In this context, it seems to me that clarity and certainty of application are of primary concern. Insurers need to make appropriate decisions with respect to conducting investigations, establishing reserves and maintaining records. Given this regulatory setting, there is little room for creative interpretations or for carving out judicial exceptions designed to deal with the equities of particular cases.
[36] Echelon argues that the arbitral jurisprudence has built on this reasoning to sharply limit the discretion of arbitrators to permit insurers to resile from an acceptance of priority. A representative holding is that of Arbitrator Guy Jones in Motors Insurance Co. v. Co-operators Insurance Co., 2004 CarswellOnt 10976 (Arbitration), at para. 19:
While this decision [West Wawanosh] involved an Interpretation of the section 3 notice provisions of Regulation 283/95, I am of the opinion that the same principles apply to the matter that we are dealing with at this time. The parties have entered into an agreement as to who is to pay the accident benefits. While I accept that in the proper circumstances, an arbitrator can exercise his equitable powers to intervene and allow a party to withdraw from an agreement, this should only occur in the most extreme cases. In a scheme where certainty, simplicity and efficiency are important, allowing one party to revoke a previous agreement simply because they may later become aware of new facts is not desirable. To allow such an approach would be to encourage parties to change their positions each time they obtained new facts, something which is clearly contrary to the Intent of the Regulation.
[37] The arbitrator considered a number of other arbitral cases put forward by Echelon, including AXA Insurance Co. of Canada and Ontario (Minister of Finance) (Re), 2008 CarswellOnt 11418 (Arbitrator: M. Guy Jones); Enterprise Rent A Car and ING Insurance Co. of Canada (Re), 2006 CarswellOnt 11716 (Arbitrator: M. Guy Jones); and Aviva Insurance Co. of Canada and State Farm Insurance Co. (Re), 2012 CarswellOnt 17684 (Arbitrator: Shari L. Novick).
[38] The arbitrator noted, at p. 54, that none of these cases involved the Fund or s. 3.1 of the Regulation. He added, at p. 55: "I am of the view that there is insufficient legal foundation for such a severe narrowing of the circumstances in which an insurer may withdraw an agreement to accept priority -- especially considering the section 3.1 amendment to the priority dispute regulation for cases involving HMQ."
[39] The arbitrator considered, at p. 61, whether it would be unjust to allow the Fund to withdraw its agreement to accept priority and to require Echelon to make restitution of moneys paid by the Fund, "because Echelon detrimentally changed its position or its circumstances in reliance upon HMQ's decision". He concluded, at p. 63, that there was no real prejudice to Echelon apart from having to pay, which was "simply the consequence of righting the wrong which ha[d] occurred, and essentially putting Echelon back in the position [of] priority insurer -- a position in which it should have remained according to the facts and law of this case". The appeal judge addressed the arbitral jurisprudence. He noted, at para. 21:
The Fund stands apart. I point out that for all the cases referred to on behalf of Echelon as demonstrating that an insurer, having accepted liability (priority), cannot step away from that acceptance, none concern the involvement of the Fund. They are all disputes between "insurers" save one which has no application to the issues raised by this case.
[40] The appeal judge, at paras. 39 and 40, endorsed as reasonable the arbitrator's view expressed at p. 44 of his reasons:
[I]n cases involving HMQ, the "bad faith" and "deliberate misrepresentation" analysis as it may relate to what documentation/information has or has not been provided to HMQ has no application after the September, 2010 priority dispute regulation amendments, if indeed it ever had appropriate application for this kind of an issue in a priority dispute.
[41] The appeal judge considered the amendments to be "determinative": at para. 39. He did not consider it necessary for the arbitrator to consider and reject the arbitral jurisprudence on a broader basis.
[42] The Fund is not an ordinary insurer, as Laskin J.A. noted in Allstate. And the Fund is not an ordinary insurer in a priority dispute under the Regulation, as the 2010 amendments make abundantly clear. I agree with the arbitrator and the appeal judge that even though the Fund is an insurer for some purposes, it stands apart from ordinary insurers in priority disputes under the Regulation. The arbitrator did not err in refusing to apply the arbitral jurisprudence to the Fund in this instance.
(c) Was the Arbitrator's Interpretation of s. 7(6) of the Regulation Reasonable?
[43] Subsection 7(6) of the Regulation provides that in a dispute that is being arbitrated, "the failure of an insurer other than the Fund to comply with section 2.1 or 3.1 may be the subject of a special award made by the arbitrator". The arbitrator found that s. 7(6) of the Regulation did not give him remedial authority to order Echelon to resume payments of statutory accident benefits to Ms. Barnes and to reimburse the Fund for payments it had made to her: "[T]he 'special award' remedy referred to in section 7(6) ought not to be used by itself to essentially determine the merits of the priority dispute before me" (at p. 30). He added, at p. 31:
Instead, in my view a special award under s. 7(6) is to be considered in the form of a costs type of sanction if I deem it appropriate for Echelon's failure to comply with the terms of section 3.1, and provided I find HMQ otherwise successful on the merits of its claim.
[44] In his discussion of the jurisdiction to make a special award, the arbitrator referred to s. 282(10), found in a previous version of the Insurance Act: at p. 26. Subsection 282(10) followed a heading entitled, "Special award". As he noted, that section authorized an arbitrator who found that the insurer had unreasonably withheld or delayed statutory accident benefits payments to a claimant, to award the claimant up to an additional 50 per cent of the amount to which the claimant was otherwise entitled. The arbitrator observed:
In effect this was a punishment for insurer bad behaviour and a deterrent against future bad behaviour. Obviously though, to be entitled to a special award the claimant had to be successful on the underlying merits of the dispute and found entitled to recover benefits. The section has now gone by the wayside[.]
[45] Echelon submits that the arbitrator's ultimate conclusion, at p. 77 of his reasons, that a special award was not appropriate is correct, based on the arbitral jurisprudence, "as there was no evidence of any type of bad faith, or egregious conduct on the part of the appellant". The arbitrator found that the misrepresentations "were innocent, and the result of the same mistake HMQ itself made with respect to conclusions about coverage". On this basis, he did not make a special award.
[46] The arbitrator noted that a number of cases used the concept of "special award" in the jurisprudence. He then made two findings concerning s. 7(6). First, he found that the function of the "special award" is to "allow an arbitrator to impose an added penalty type of sanction upon an insurer where the facts warranted it, and after a claimant has been found successful on the merits of the claim": at p. 27. He explained, at p. 28:
My overall reading of the provisions in their legislative context, and their historical application, leads me to conclude that in the absence of explicit statutory direction, a section 7(6) "special award" is not intended to provide a remedy which essentially determines the merits of the priority dispute.
[47] Second, he added, at p. 31:
Instead, in my view a special award under section 7(6) is to be considered in the form of a costs type of sanction if I deem it appropriate for Echelon's failure to comply with the terms of section 3.1, and provided I find HMQ otherwise successful on the merits of its claim.
[48] In my view, the arbitrator erred in this determination, for two reasons. First, the narrow reading of his authority under s. 7(6) compelled the arbitrator to pursue the convoluted common law route to an effective remedy that occupied many pages of his lengthy decision. This extended the arbitration well beyond its normal summary dimensions and was, in my view, an unnecessary side trip. While the arbitrator has jurisdiction under the Arbitration Act, 1991 to take that road, there was no need to do so in this case. This is the summary perspective within which an arbitration under the Regulation is intended to operate, as Sharpe J.A. noted in West Wawanosh.
[49] Second, s. 282(10) was repealed in 2016. There is no reason to implicitly import the express limitations on a "special award" found in an earlier repealed provision. It is trite law that the words of an Act are to be read in their entire context and in their grammatical and ordinary sense harmoniously with the scheme of the Act, the object of the Act and the intention of the legislature. See Bell ExpressVu Limited Partnership v. Rex, 2002 SCC 42, at para. 26; and Rizzo & Rizzo Shoes Ltd. (Re), at para. 21, quoting Elmer A. Driedger, Construction of Statutes, 2nd ed. (Toronto: Butterworths, 1983), at p. 87. Implicitly importing repealed limitations would not be consistent with the accepted approach to statutory interpretation, which is to give effect to the text of the provision resorting only to the implication of additional terms where that is necessary and consistent with the statutory scheme.
[50] In my view, the arbitrator's interpretation of s. 7(6) of the Regulation as it related to the jurisdiction to make a special award was unreasonable. Contrary to his view, it permits an arbitrator to resolve the priority dispute by requiring an insurer to fully reimburse the Fund for benefits paid for which the insurer was properly responsible, in addition to the costs of the investigation and legal fees, and ordering any sanctions the arbitrator might find to be warranted. This reading rounds out the regulatory scheme. However, since the arbitrator imposed a reasonable award, the appeal should be dismissed.
F. Disposition
[51] I would dismiss Echelon's appeal for the reasons given, with costs payable to the Fund in the agreed amount of $10,000, all inclusive.
Appeal dismissed.
End of Document