Travelers Insurance Company of Canada v. CAA Insurance Company

[Indexed as: Travelers Insurance Co. of Canada v. CAA Insurance Co.]

Ontario Reports

Court of Appeal for Ontario

Lauwers, Paciocco and Fairburn JJ.A.

June 15, 2020

151 O.R. (3d) 78 | 2020 ONCA 382

Case Summary

Insurance law — Automobile insurance — Compulsory government schemes — Recovery by insurer — Appeal by Travelers Insurance from decision dismissing its appeal from arbitrator's decision requiring appellant to reimburse respondent CAA for benefits CAA had paid to CAA's insured allowed — Claimant, an Ontario resident, was in accident in Nunavut driving Nunavut-plated vehicle owned by Nunavut and covered by Nunavut insurance policy issued by appellant — Claimant's Ontario vehicle insured by respondent — Appellant not an Ontario insurer — Arbitrator failed to give effect to Nunavut law regarding claimant's status and limits on her entitlement to Nunavut benefits under Nunavut legislation — Ontario Insurance Act had no application to Nunavut policy in this case.

Appeal by Travelers Insurance from a decision dismissing its appeal from an arbitrator's decision requiring the appellant to reimburse the respondent CAA for the benefits CAA had paid to CAA's insured and to assume responsibility for paying the benefits to her in the future. The claimant was catastrophically injured in an accident in Nunavut where she was temporarily employed. She was driving a Nunavut-plated vehicle owned by the Government of Nunavut and covered by a Nunavut motor vehicle insurance policy issued by the appellant to the Government of Nunavut. Under that policy the claimant was entitled to Nunavut statutory accident benefits. The claimant, ordinarily resident in Ontario, owned a car plated in Ontario and insured by CAA. Under the terms of her Ontario insurance policy, the claimant was contractually entitled to claim Ontario statutory accident benefits from CAA. The arbitrator found that the appellant was an Ontario insurer because it was licensed to undertake automobile insurance in Ontario. He also found the appellant was bound by the power of attorney and undertaking, which it signed in 1964 and thus became an insurer in the province or territory where the claim was brought.

Held, the appeal should be allowed.

The arbitrator erred in law in finding that the appellant was an Ontario insurer required to arbitrate priorities with CAA under s. 268 of the Ontario Insurance Act, R.S.O. 1990, c. I.8. In respect of the Nunavut policy and the accident in Nunavut the appellant was not considered an Ontario insurer for the purpose of the priority provisions of the Ontario Insurance Act. It was thus not obliged to indemnify CAA or to assume CAA's obligations to the claimant. Ontario's insurance laws did not have extraterritorial effect. The arbitrator erred in finding that a signatory to the power of attorney and undertaking essentially became an insurer in the province or territory where the claim was brought. Even if the appellant was an Ontario insurer, the arbitrator misapplied s. 268 by failing to give effect to Nunavut law regarding the claimant's status and the limits on her entitlement to Nunavut benefits under Nunavut legislation. The Ontario Insurance Act had no application to the Nunavut policy on the facts of this case. An insurance policy could not both be governed by Ontario and Nunavut law at the same time. The Nunavut legislation clearly stated that Nunavut law governed the contract. Under the Nunavut policy, the claimant was not a named insured and the Nunavut legislation did not include [page79] the concept of a deemed named insured. Both the arbitrator and the appeal judge erroneously treated the appellant as an Ontario insurer in this case and the Nunavut policy as an Ontario policy.

Cases referred to

Allstate Insurance Co. of Canada v. Motor Vehicle Accident Claims Fund (2007), 84 O.R. (3d) 401, [2007] O.J. No. 292, 2007 ONCA 61, 277 D.L.R. (4th) 720, 45 C.C.L.I. (4th) 1, [2007] I.L.R. I-4577, 42 M.V.R. (5th) 165, 154 A.C.W.S. (3d) 1191 (C.A.); Benson v. Belair Insurance Co. (2019), 148 O.R. (3d) 589, [2019] O.J. No. 5437, 2019 ONCA 840, 439 D.L.R. (4th) 142, 94 C.C.L.I. (5th) 8, 55 M.V.R. (7th) 220 (C.A.); CAA Insurance Co. and Travelers Insurance Co. (Re) (2017), 66 C.C.L.I. (5th) 149 (Bialkowski); Canada (Minister of Citizenship and Immigration) v. Vavilov, [2019] S.C.J. No. 65, 2019 SCC 65, 2020EXP-27, 441 D.L.R. (4th) 1, 59 Admin. L.R. (6th) 1, 69 Imm. L.R. (4th) 1, EYB 2019-335761; Corbett v. Co-Operative Fire and Casualty Co., [1984] A.J. No. 1016, 14 D.L.R. (4th) 531, [1985] 1 W.W.R. 462, 34 Alta. L.R. (2d) 158, 56 A.R. 60, 9 C.C.L.I. 300, [1985] I.L.R. para. 1-1879 at 7217 (Q.B.); Healy v. Interboro Mutual Indemnity Insurance Co. (1999), 44 O.R. (3d) 404, [1999] O.J. No. 1667, [1999] I.L.R. I-3704, 44 M.V.R. (3d) 167, 88 A.C.W.S. (3d) 463 (C.A.); Intact Insurance Co. v. Allstate Insurance Co. of Canada (2016), 131 O.R. (3d) 625, [2016] O.J. No. 4113, 2016 ONCA 609, 403 D.L.R. (4th) 438, 351 O.A.C. 1, 60 C.C.L.I. (5th) 1, 268 A.C.W.S. (3d) 425, 2016 OABC para. A-1226 (C.A.) [Leave to appeal to S.C.C. refused [2016] S.C.C.A. No. 392]; Ledcor Construction Ltd. v. Northbridge Indemnity Insurance Co., [2016] 2 S.C.R. 23, [2016] S.C.J. No. 37, 2016 SCC 37, 404 D.L.R. (4th) 258, 487 N.R. 1, [2016] 10 W.W.R. 419, J.E. 2016-1579, 54 B.L.R. (5th) 1, 59 C.C.L.I. (5th) 173, 56 C.L.R. (4th) 1, [2016] I.L.R. para. I-5917, 269 A.C.W.S. (3d) 753, EYB 2016-270368, 2016EXP-2930, 19 Admin. L.R. (6th) 1; MacDonald v. Chicago Title Insurance Co. of Canada (2015), 127 O.R. (3d) 663, [2015] O.J. No. 6350, 2015 ONCA 842, 392 D.L.R. (4th) 463, 341 O.A.C. 299, 52 B.L.R. (5th) 26, 56 C.C.L.I. (5th) 267, [2016] I.L.R. I-5826, 61 R.P.R. (5th) 1, 260 A.C.W.S. (3d) 402, 2015 OREG para. 59,135 (C.A.) [Leave to appeal to S.C.C. refused [2016] S.C.C.A. No. 39]; MacDonald v. Proctor, [1979] 2 S.C.R. 153, [1979] S.C.J. No. 37, 105 D.L.R. (3d) 169, [1980] I.L.R. para. 1-1164 at 530 , 1 A.C.W.S. (2d) 115, affg (1977), 19 O.R. (2d) 745, [1977] O.J. No. 2531, 86 D.L.R. (3d) 455, [1979] I.L.R. para. 1-1135, [1978] 1 A.C.W.S. 32 (C.A.); Ontario (Minister of Finance) v. Echelon General Insurance Co. (2019), 147 O.R. (3d) 1, [2019] O.J. No. 3942, 2019 ONCA 629, 95 C.C.L.I. (5th) 116 (C.A.); Potts v. Gluckstein (1992), 8 O.R. (3d) 556, [1992] O.J. No. 1173, 56 O.A.C. 290, 14 C.C.L.I. (2d) 175, [1992] I.L.R. para. 1-2849, 33 A.C.W.S. (3d) 1279 (C.A.) [Leave to appeal to S.C.C. refused [1992] S.C.C.A. No. 402, 149 N.R. 399n, 62 O.A.C. 320n, 14 C.C.L.I. (2d) 175n]; Primmum Insurance Co. v. Allstate Insurance Co. (2010), 107 O.R. (3d) 159, [2010] O.J. No. 4748, 2010 ONCA 756, [2011] I.L.R. I-5068, 92 C.C.L.I. (4th) 30, 194 A.C.W.S. (3d) 710 (C.A.), affg (2010), 100 O.R. (3d) 788, [2010] O.J. No. 600, 2010 ONSC 986, 81 C.C.L.I. (4th) 199, [2010] I.L.R. I-4954, 186 A.C.W.S. (3d) 16 (S.C.J.) [Leave to appeal to S.C.C. refused [2011] S.C.C.A. No. 13]; Progressive Homes Ltd. v. Lombard General Insurance Co. of Canada, [2010] 2 S.C.R. 245, [2010] S.C.J. No. 33, 2010 SCC 33, 293 B.C.A.C. 1, [2010] I.L.R. I-5051, 406 N.R. 182, 323 D.L.R. (4th) 513, 9 B.C.L.R. (5th) 1, EYB 2010-179515, 93 C.L.R. (3d) 1, 2010EXP-3049, J.E. 2010-1683, [2010] 10 W.W.R. 573, 73 B.L.R. (4th) 163, 89 C.C.L.I. (4th) 161, 193 A.C.W.S. (3d) 1292; Unifund Assurance Co. v. Insurance Corp. of British Columbia, [2003] 2 S.C.R. 63, [2003] S.C.J. No 39, 2003 SCC 40, 227 D.L.R. (4th) 402, 306 N.R. 201, [2003] 9 W.W.R. 1, J.E. 2003-1355, 16 B.C.L.R. (4th) 1, 176 O.A.C. 1, [2003] I.L.R. I-4209, 124 A.C.W.S. (3d) 61; Young v. Ontario (Minister of Finance) (2003), 68 O.R. (3d) 321, [2003] O.J. No. 4832, 233 D.L.R. (4th) 619, 179 O.A.C. 383, 7 C.C.L.I. (4th) 38, [2004] I.L.R. para. M-1803, 47 M.V.R. (4th) 200, 127 A.C.W.S. (3d) 550 (C.A.)

Statutes referred to

Insurance Act, R.S.N.W.T. (NU) 1988, c. I-4, ss. 1(1) [as am.], 2(2), (3), 39 [as am.], 40 [as am.], 124(1), (3)

Insurance Act, R.S.O. 1990, c. I.8, Part VI [as am.], ss. 224(1) [as am.], (a), (b), 226, (2), [page80] 226.1 [as am.], 268 [as am.], (5.1), (5.2) [as am.], 275 [as am.]

Rules and regulations referred to

Disputes Between Insurers, O. Reg. 283/95, s. 7 [as am.]

Statutory Accidents Benefits Schedule, O. Reg. 34/10, s. 3(7)(f)

Authorities referred to

Black, V., "Interprovincial Inter-Insurer Interactions: Unifund v. ICBC" (2002), 36 Can. Bus. L.J. 436

Brown, Craig and Mercer, Andrew, Introduction to Canadian Insurance Law, 4th ed. (Toronto: LexisNexis Canada, 2018)

MacNeil, John S., "The Enigmatic Exception to the Bar Against Subrogation: S. 275 of the Insurance Act" (2008), 34 Adv. Q. 172

APPEAL from the judgment of Pollak J., [2018] O.J. No. 4681, 2018 ONSC 3911 (S.C.J.).

Daniel Strigberger and Julianne Brimfield, for appellant.

Jamie R. Pollack and Stacey A. Morrow, for respondent.

The judgment of the court was delivered by

LAUWERS J.A.: —

I. Overview

[1] The claimant, Patricia Soloway, was catastrophically injured in an accident in Nunavut, where she was temporarily employed as a nurse supervisor. She was driving a Nunavut-plated vehicle owned by the Government of Nunavut and covered by a Nunavut motor vehicle insurance policy issued by Travelers Insurance Company of Canada ("Travelers") to the Government of Nunavut. Under that policy, the claimant was entitled to Nunavut statutory accident benefits.

[2] The claimant was ordinarily resident in Ontario. She owned a car plated in Ontario and insured by CAA Insurance Company under the terms of the Ontario Standard Automobile Policy ("OAP"), which included coverage for prescribed statutory accident benefits. Ontario statutory accident benefits are more generous than those of Nunavut.

[3] Under the terms of her Ontario insurance policy, the claimant was contractually entitled to claim Ontario statutory accident benefits from CAA. The OAP covers an insured wherever he or she drives in North America. Section 1.2 of the prescribed policy form provides:

This policy covers you and other insured persons for incidents occurring in Canada, the United States of America and any other jurisdiction designated in the Statutory Accident Benefits Schedule, and on a vessel travelling between ports of those countries. All of the dollar limits described in this policy are in Canadian funds.

The CAA coverage followed the claimant to Nunavut. This was the basis on which the claimant was entitled to seek statutory accident [page81] benefits under the CAA policy, even though the accident that led to her injuries occurred in Nunavut and did not involve her Ontario-insured car. CAA has been paying those benefits.

[4] CAA pursued Travelers for reimbursement for some or all of the benefits CAA paid to the claimant under Ontario's legislated motor vehicle insurance regime as a form of a "statutory cause of action": Unifund Assurance Co. of Canada v. Insurance Corp. of British Columbia, 2003 SCC 40, [2003] 2 S.C.R. 63, [2003] S.C.J. No. 39, 2003 SCC 40, at para. 10, per Binnie J.

[5] CAA succeeded in its claim against Travelers in an arbitration under s. 268 of the Ontario Insurance Act.[^1] The arbitrator required Travelers to reimburse CAA for the benefits CAA had paid to the claimant and to assume responsibility for paying the benefits to her in the future. The appeal judge upheld the arbitrator's decision, accepting the arbitrator's analysis. Travelers appeals to this court.

[6] Nothing in this decision affects the claimant's entitlement to Ontario statutory accident benefits. The only question is which insurer must pay them.

II. The Issue

[7] The issue in this appeal is whether CAA is entitled under the Ontario Insurance Act to recover from Travelers some or all of the statutory accident benefits that CAA has paid to the claimant and to compel Travelers to pay these benefits to her in the future.

[8] As I will explain, this issue turns on whether, in respect of the Nunavut policy and the accident in Nunavut, Travelers is to be considered an "Ontario insurer" for the purpose of the priority provisions of the Ontario Insurance Act. I conclude that Travelers is not an Ontario insurer for that purpose and is not obliged to indemnify CAA or to assume CAA's obligations to the claimant.

III. The Positions of the Parties

[9] Travelers is prepared to pay what it is obliged to pay as statutory accident benefits under the Nunavut policy (for which it received premiums at the Nunavut level), but not the higher Ontario statutory accident benefits. Travelers argues that the statutory scheme does not oblige it to pay the Ontario benefits and that the arbitrator erred in so finding. [page82]

[10] CAA argues that, having elected to take the benefits of its presence in the lucrative Ontario insurance market, Travelers must also take the burdens, one of which is the possibility that it would have to assume financial responsibility under the priority provisions of the Ontario Insurance Act, as CAA submits the arbitrator correctly found.

IV. The Arbitrator's Decision

[11] The operative decision in this dispute is that of the arbitrator, who concluded that s. 268 of the Ontario Insurance Act supplied CAA with a statutory basis for its claim against Travelers. The arbitrator relied on two connections between Travelers and Ontario to do so. First, he found that Travelers is an "Ontario insurer" because it "is licensed to undertake automobile insurance in Ontario as outlined in s. 224(1) of the Insurance Act": at p. 8. Second, he found that Travelers is bound by the power of attorney and undertaking ("PAU"), which Travelers signed in 1964. He said: "I am satisfied that as a signatory to the PAU, Travelers is considered to be an Ontario insurer for the purposes of this dispute between insurers and is therefore subject to the provisions of the Insurance Act, the Statutory Accident Benefits Schedule and its Regulations": at p. 14.

[12] The arbitrator then added a determination of considerably broader application: "I find that a signatory to the PAU essentially becomes an insurer in the province or Territory where the claim is brought and with that exposure to the liability limits, accident benefit limits, as well as the loss transfer and priority obligations, if any, of that jurisdiction": at p. 16. The result is that "the priority provisions of the Ontario Insurance Act apply to Travelers": at p. 16.

[13] The arbitrator then applied s. 268(5.2) of the Ontario Insurance Act and stipulated that Travelers was the priority insurer with responsibility for paying and adjusting statutory accident benefits to and on behalf of the claimant, on the basis that she was the occupant of the vehicle Travelers insured at the time of the accident. The arbitrator required Travelers to indemnify CAA for the benefits it has paid to or on behalf of the claimant together with interest, and to assume the financial burden of future payments.

V. Analysis

[14] Because this is a statutory appeal that raises questions of law, including questions of statutory interpretation, the standard of correctness applies: Canada (Minister of Citizenship and Immigration) v. Vavilov, [2019] S.C.J. No. 65, 2019 SCC 65, at paras. 37, 53. In any event, the arbitrator made several serious legal errors that I would consider constitutional, jurisdictional and exceptional, in respect of which deference is not due: Intact Insurance Co. v. [page83] Allstate Insurance Co. of Canada (2016), 131 O.R. (3d) 625, [2016] O.J. No. 4113, 2016 ONCA 609 (C.A.), at para. 53, leave to appeal to S.C.C. refused [2016] S.C.C.A. No. 392. The standard of correctness has always applied to questions of law: Progressive Homes Ltd. v. Lombard General Insurance Co. of Canada, [2010] 2 S.C.R. 245, [2010] S.C.J. No. 33, 2010 SCC 33, at para. 23; Ledcor Construction Ltd. v. Northbridge Indemnity Insurance Co., [2016] 2 S.C.R. 23, [2016] S.C.J. No. 37, 2016 SCC 37, at para. 46; MacDonald v. Chicago Title Insurance Co. of Canada (2015), 127 O.R. (3d) 663, [2015] O.J. No. 6350, 2015 ONCA 842 (C.A.), leave to appeal to S.C.C. refused [2016] S.C.C.A. No. 39.

[15] I now consider whether the arbitrator correctly applied Unifund to determine that Travelers was an Ontario insurer for the purposes of s. 268 and the role of the PAU in reaching that conclusion. In my view, the arbitrator erred in his application of the Unifund decision. His approach to the significance of the PAU would effectively turn Unifund on its head.

[16] The governing principle in Unifund is that Ontario's insurance laws do not have extraterritorial effect, as Binnie J. explained, at paras. 50-51:

It is well established that a province has no legislative competence to legislate extraterritorially. If the Ontario Act purported to regulate civil rights in British Columbia arising out of an accident in that province, this would be an impermissible extraterritorial application of provincial legislation.

This territorial restriction is fundamental to our system of federalism in which each province is obliged to respect the sovereignty of the other provinces within their respective legislative spheres, and expects the same respect in return. It flows from the opening words of s. 92 of the Constitution Act, 1867, which limit the territorial reach of provincial legislation: "In each Province the Legislature may exclusively make Laws in relation to" the enumerated heads of power.

(Emphasis in original; internal citations omitted)

[17] In Unifund, the Brennans were insured under an Ontario policy issued by Unifund. While driving a rental car in British Columbia, they were struck by a tractor-trailer insured by the Insurance Corporation of British Columbia ("ICBC") under a British Columbia insurance policy. The Brennans sued in British Columbia and were awarded damages of about $2.5 million. Unifund had paid the Brennans statutory accident benefits under the Ontario policy from the time the Brennans claimed benefits from Unifund until the trial judge's decision, several years later. In the British Columbia action, ICBC, under British Columbia legislation, had deducted the amount of the statutory accident benefits from the trial award payable to the Brennans. Unifund sought reimbursement from ICBC of the benefits it had paid to the Brennans. [page84]

[18] The Supreme Court found that Unifund could not use the provisions of the Ontario Insurance Act to recover the statutory accident benefits it had paid. In my view, the result in this case is the same.

[19] As noted, the arbitrator in this case relied on two factors to tie Travelers into the Ontario statutory regime for determining priorities. The first was that Travelers had signed the PAU; the second is Travelers' status as an "Ontario insurer". I address each factor in turn.

[20] The arbitrator's reliance on the fact that Travelers had signed the PAU is contrary to Binnie J.'s reasoning about the role of the PAU. He stated in Unifund, at para. 100:

The PAU is about enforcement of insurance policies, not about helping insurance companies, which have been paid a premium for the no-fault coverage, to seek to recover in their home jurisdictions their losses from other insurance companies located in a different jurisdiction when the accident took place in that other jurisdiction, and where the claims arising out of the accident were litigated there.

(Emphasis in original)

[21] The PAU is a complex document containing many provisions designed to protect insureds, which Binnie J. discussed at length. He quoted and agreed with Professor Vaughan Black's observation: "The reciprocal system, of which the PAU is a key part, thus has what might loosely be described as a pro-compensation, consumer-protection function": Unifund, at para. 100, citing V. Black, "Interprovincial Inter-Insurer Interactions: Unifund v. ICBC" (2002), 36 Can. Bus. L.J. 436, at p. 444. The PAU's purpose is to protect insureds, not insurers. It therefore offers no assistance to CAA in this dispute.

[22] Accordingly, the arbitrator was not correct in his bald assertion that "a signatory to the PAU essentially becomes an insurer in the province or Territory where the claim is brought and with that exposure to the liability limits, accident benefit limits, as well as the loss transfer and priority obligations, if any, of that jurisdiction": at p. 16. The use and application of the PAU in favour of insureds is context specific. If, for example, the claimant had driven the Nunavut vehicle into Ontario and had the accident here, Travelers would have had to provide her with statutory accident benefits at the Ontario level under the Nunavut policy. That is how the PAU is designed to work. But there is no basis for the arbitrator's assertion that the PAU operates to extend "loss transfer and priority obligations" between or among insurers otherwise liable to compensate an insured under the Ontario Insurance Act's provisions.

[23] The second factor the arbitrator relied on to tie Travelers into the Ontario priorities regime was Travelers' status as an "Ontario insurer": at p. 16. He rooted his decision in a single statement Binnie J. made in the last sentence of para. 12 of Unifund: [page85]

Section 275(4) of the Ontario Act provides that disputes about indemnification are to be resolved by arbitration, pursuant to the Ontario Arbitration Act, 1991, S.O. 1991, c. 17. There is no doubt that if the appellant were an Ontario insurer, it would be required to arbitrate Unifund's claim.

(Emphasis added)

[24] Binnie J. did not explain what he meant by the term "Ontario insurer". This is not a term of art or a technical legal term. The arbitrator assumed that Travelers was an Ontario insurer on the evidence presented by CAA -- that it was licensed to undertake automobile insurance in Ontario, as required by s. 224(1) of the Ontario Insurance Act and had offices in Ontario.

[25] In my view, the correct approach is not quite so simple. Like Travelers, many of Canada's car insurers are licensed to write car insurance here and elsewhere in Canada. Mere licensing, or the presence of an office, does not convert these insurers into Ontario insurers for all purposes, nor does it make the Ontario Insurance Act the governing legislation for all of the automobile insurance policies they underwrite. Treating mere Ontario licensing as the sole reason to constitute an insurer as an "Ontario insurer" would give Ontario insurance legislation extraterritorial effect, which would be contrary to the essential holding in Unifund.

[26] In this case, Travelers issued a Nunavut motor vehicle policy insuring a Nunavut-plated vehicle owned by the Government of Nunavut. The accident occurred in Nunavut. Under that policy, which is governed by Nunavut insurance law, the claimant was entitled to Nunavut statutory accident benefits.

[27] There are several reasons to conclude that the Ontario Insurance Act has no application to the Nunavut policy on the facts of this case.

[28] The first is in the interpretation of the legislation. Ontario requires automobiles driven in the province to have valid insurance. Ontario-registered cars are usually covered by the prescribed OAP. Those who drive a vehicle into Ontario from elsewhere must also have adequate insurance. These concepts are captured by the language of the Ontario Insurance Act, in particular Part VI, which deals with automobile insurance. Section 224(1) provides:

224(1) In this Part,

"automobile" includes,

(a) a motor vehicle required under any Act to be insured under a motor vehicle liability policy[.]

"contract" means a contract of automobile insurance that, [page86]

(a) is undertaken by an insurer that is licensed to undertake automobile insurance in Ontario, or

(b) is evidenced by a policy issued in another province or territory of Canada, the United States of America or a jurisdiction designated in the Statutory Accident Benefits Schedule by an insurer that has filed an undertaking under section 226.1.

[29] In Benson v. Belair Insurance Co. (2019), 148 O.R. (3d) 589, [2019] O.J. No. 5437, 2019 ONCA 840 (C.A.), Feldman J.A. said, at para. 41, that the phrase "required under any Act" in s. 224(1) refers only to an Ontario statute:

I say Ontario statutes because s. 224 (1) refers to "any Act", and s. 87 of the Legislation Act, 2006, S.O. 2006, c. 21, Sched. F. states that the words "Act" and "statute", when used in an Act or regulation means an Act of the Legislature of Ontario.

[30] Section 224(1) must be read together with ss. 226 and 226.1 of the Ontario Insurance Act. Section 226 addresses the application of Part VI and provides:

226(2) This Part does not apply to a contract providing insurance in respect of an automobile not required to be registered under the Highway Traffic Act unless it is insured under a contract evidenced by a form of policy approved under this Part.

(Emphasis added)

[31] Section 226.1 supplies additional context for out-of-province insurers. It provides:

226.1 An insurer that issues motor vehicle liability policies in another province or territory of Canada, the United States of America or a jurisdiction designated in the Statutory Accident Benefits Schedule may file an undertaking with the Chief Executive Officer, in the form provided by the Chief Executive Officer, providing that the insurer's motor vehicle liability policies will provide at least the coverage described in sections 251, 265 and 268 when the insured automobiles are operated in Ontario.

(Emphasis added)

[32] These provisions, properly interpreted, include policies that are issued in Ontario and policies that are issued in another province when vehicles from those jurisdictions are operated in Ontario. They make it plain that Part VI of the Ontario Insurance Act did not apply to the Nunavut vehicle operated by the claimant in Nunavut at the time of the accident because the vehicle was not then required to be insured in Ontario.

[33] How did Ontario statutory accident benefits for the Nunavut accident come to be arbitrated under s. 268 of the Ontario Insurance Act? The purpose of s. 268 is to permit two or more insurers who might have responsibility for paying Ontario statutory accident benefits to determine responsibility on a set of prescribed priority rules. If the insurers cannot agree, then the issue is arbitrated under the Disputes Between Insurers Regulation. [page87]

[34] Although s. 268 appears to require the insured to select a certain insurer from which to claim benefits, that is not how the scheme works in practice. The historic refusal of insurers to pay benefits before their liability had been established through litigation led to the enactment in 1995 of the Dispute Between Insurers regulation: Ontario (Minister of Finance) v. Echelon General Insurance Co. (2019), 147 O.R. (3d) 1, [2019] O.J. No. 3942, 2019 ONCA 629 (C.A.), at para. 12; Allstate Insurance Co. of Canada v. Motor Vehicle Accident Claims Fund (2007), 84 O.R. (3d) 401, [2007] O.J. No. 292, 2007 ONCA 61 (C.A.), at para. 24. The regulation allows the claimant to select the insurer that will pay statutory accident benefits and the selected insurer must pay. The paying insurer may then initiate an arbitration under the regulation to sort out priorities where another insurer is involved. At that point the claimant is no longer involved or affected by the outcome; the claimant will receive the benefits regardless of how responsibility is allocated between the insurers. That is how this case got before the arbitrator.

[35] But the priority rules stipulated by s. 268 only apply if both insurers are subject to those rules. Section 268(1) provides that it applies to: "Every contract evidenced by a motor vehicle liability policy." To understand what this means, one must turn to the definition of "contract" in s. 224(1). That section refers to Ontario policies (s. 224(1)(a)), and to policies issued extra-provincially by insurers who file an undertaking in Ontario (s. 224(1)(b)). The extent to which extra-provincial policies are caught by s. 224(1) (b) is generally limited by s. 226.1 to situations where the vehicle that is registered and insured extra-provincially is actually operated in Ontario.[^2]

[36] Section 226(2) limits the application of the Ontario Insurance Act in providing that Part VI "does not apply to a contract providing insurance in respect of an automobile not required to be registered under the Highway Traffic Act" (emphasis added). The Nunavut Insurance Act, R.S.N.W.T. (NU) 1988, c. I-4 contains similar provisions: ss. 1(1), 2(2), (3), 39, 40, 124(1), (3). An insurance policy cannot both be governed by Ontario and Nunavut law at the same time. As this court clarified in Benson, it is a "legal misapprehension that the lex loci delicti [principle] should be applied to a contract and statutory interpretation issue involving an Ontario contract and Ontario legislation where [page88] that legislation specifically directs that Ontario law is to apply": at para. 52. By parity of reasoning the same is true with respect to a Nunavut insurance policy where the Nunavut legislation clearly states that Nunavut law governs the contract.

[37] I note that this conclusion accords with this court's analysis in Young v. Ontario (Minister of Finance) (2003), 68 O.R. (3d) 321, [2003] O.J. No. 4832 (C.A.). In Young, this court concluded that a policy of insurance issued in New Mexico was not a policy of insurance within the meaning of s. 268. The plaintiff was catastrophically injured when her pick-up truck flipped over in New Mexico, where she resided. She returned home to Ontario and sought statutory accident benefits from the Motor Vehicle Accident Claims Fund, which is "the payor of last resort of no-fault accident benefits to persons injured in Ontario where there is otherwise no access to coverage under a motor vehicle liability policy": at para. 2. This court refused relief. As MacPherson J.A. explained, at paras. 31-32:

The respondent's vehicle did not need to be registered in Ontario. Nor did the respondent's insurance policy need to comply with the mandatory coverage provisions of the Compulsory Automobile Insurance Act. The respondent's insurance policy could not be deemed by s. 268(1) of the Insurance Act to provide for the statutory accident benefits set out in the Schedule. This is because the respondent's vehicle was not being operated in Ontario. Moreover, the respondent did not sustain injuries in a motor vehicle accident in Ontario. It follows that Part VI of the Insurance Act, including s. 268, has no application to the respondent or her vehicle.

The only way in which the respondent could qualify for Ontario statutory accident benefits for an accident in New Mexico would have been if she were an insured person in respect of a particular motor vehicle liability policy issued in Ontario. In other words, her recourse for the payment of Ontario statutory benefits would have been contractual in nature. The respondent did not have such a policy, nor was she an insured person on any other Ontario policy.

[38] Accordingly, the arbitrator erred in applying s. 268 of the Ontario Insurance Act to Travelers and to the Nunavut policy on the facts of this case.

[39] The second reason for questioning the application of s. 268 of the Ontario Insurance Act is that the Ontario legislation provides no basis on these facts for managing the inconsistencies in the intersection of the statutory insurance schemes of different political entities in Canada, nor could it do so constitutionally under Unifund. The anomalies emerge quickly. In their text, Introcution to Canadian Insurance Law, 4th ed. (Toronto: LexisNexis Canada, 2018), Craig Brown and Andrew Mercer make the following observations in s. 14.5(c)(i) on medical and rehabilitation benefits:

In most jurisdictions (all except Ontario), where the alternative source of compensation is another automobile no-fault policy, the automobile insurer of the owner of the vehicle involved in the accident pays the no-fault benefits. If there are two or more vehicles involved, the insurance on each car covers the occupants [page89] of that car. If there are two cars involved in a collision with a pedestrian, the claim is paid by the insurer of the car that created the force which caused the impact.

(Emphasis added)

[40] The authors explain their statement that: "the automobile insurer of the owner of the vehicle involved in the accident pays the no-fault benefits" in an instructive footnote:

This is made clear in most of the Insurance Acts; see Alberta, s. 591(1); New Brunswick, s. 260(1); Nova Scotia, s. 143(1); Northwest Territories, s. 161(1). The matter appears to be dealt with in Newfoundland (s. 34(3)) and the Yukon (s. 159(3)) by a provision (which also appears in addition to those cited above in other Insurance Acts except P.E.I. and Nova Scotia) which provides:

(3) The insurance mentioned in paragraph (a) of subsection (1) is first loss insurance, and any other automobile insurance of the same type available to the injured person or in respect of a deceased person is excess insurance only. Although the meaning of this provision is not entirely clear, the confusion has been resolved in practice by a rule in the Insurance Bureau of Canada Inter-Company Claims Agreement. The insurer of the vehicle involved in the accident pays.

In contrast, in Ontario, a claimant's first recourse is to his/her own insurer. See Ontario Insurance Act, s. 268(2).

(Internal citations omitted)

[41] The Nunavut Insurance Act has a similar provision to the usual provisions outside Ontario and stipulates what happens when more than one policy applies:

157(1) Every contract evidenced by a motor vehicle liability policy shall provide the benefits set out in subsection 1 of the Schedule subject to the limits, terms and conditions set out in the Schedule.

(4) The insurance mentioned in subsection (1) is a first loss insurance, and any other automobile insurance of the same type available to the injured person or in respect of a deceased person is excess insurance only.

161(1) Where a person entitled to benefits provided by insurance under sections 157 and 158, or either of them,

(a) is an occupant of a motor vehicle involved in an accident, the insurer of the owner of the motor vehicle is, in the first instance, liable for payment of the benefits provided by the insurance.

(Emphasis added)

[42] If the claimant had made a claim in Nunavut against her employer's policy with Travelers, the Nunavut legislation would have designated the Nunavut policy as the primary policy. It is not clear how or whether the claimant's entitlement to coverage under CAA's Ontario insurance policy would have figured in, since Nunavut legislation can have no extraterritorial application under [page90] Unifund. There is no evidence before the court on the impact of the Insurance Bureau of Canada Inter-Company Claims Agreement, which Brown and Mercer mention, on the way that insurers privately address the primary and excess coverage issues that this legislation and the legislation of other provinces might create.

[43] Next, assuming that s. 268 of the Ontario Insurance Act governs in these circumstances, did the arbitrator apply the section properly? That question turns on which of two subsections is applicable, ss. 268(5.1) or (5.2). They provide:

268(5.1) Subject to subsection (5.2), if there is more than one insurer against which a person may claim benefits under subsection (5), the person, in his or her discretion, may decide the insurer from which he or she will claim the benefits.

(5.2) If there is more than one insurer against which a person may claim benefits under subsection (5) and the person was, at the time of the incident, an occupant of an automobile in respect of which the person is the named insured or the spouse or a dependant of the named insured, the person shall claim statutory accident benefits against the insurer of the automobile in which the person was an occupant.

[44] The arbitrator quoted these subsections and referred to s. 3(7)(f) of the Statutory Accidents Benefits Schedule, O. Reg. 34/10, which provides:

3(7)(f) An individual who is living and ordinarily present in Ontario is deemed to be the named insured under the policy insuring an automobile at the time of an accident if, at the time of the accident,

(i) the insured automobile is being made available for the individual's regular use by a corporation, unincorporated association, partnership, sole proprietorship or other entity[.]

[45] The arbitrator took this view, at p. 17:

If it were demonstrated that the claimant had "regular use" of the vehicle she was operating at the time of the accident, she would be considered a deemed named insured. Being a named insured on a policy with CAA and a deemed named insurer under the Travelers' policy, the tie breaking mechanism of s. 268(5.2) would apply and the insurer of the vehicle in which she was an occupant, Travelers, would stand in priority if "regular use" cannot be demonstrated then CAA would stand in priority by reason of s. 268(2)(i).

[46] The arbitrator found that "the claimant had 'regular use' at the time of the accident and was a deemed 'named insured' under the Travelers policy and also a 'named insured' under her policy with CAA": at p. 19. He applied s. 268(5.2) and found Travelers to be the priority insurer. I note that Travelers did not appeal the arbitrator's determination that the claimant is "deemed" to be a "named insured" under the Nunavut policy analyzed under Ontario law. However, I see this as a legal question that must be resolved in order to correctly determine the appeal. [page91]

[47] The difficulty with this analysis is that the arbitrator assumed that Ontario law was applicable in determining both the claimant's status under the Nunavut policy and her entitlement to statutory accident benefits, without regard to the Nunavut legislation or to the Nunavut policy limits. Under the Nunavut policy, the claimant was not a "named insured" and the Nunavut legislation does not include the concept of a "deemed named insured". If Nunavut legislation had been considered and applied in determining the claimant's status under the Nunavut policy, the claimant would not be a "named insured" within the meaning of s. 268(5.2). Instead, s. 268(5.1) of the Ontario Insurance Act would apply. The claimant, in her discretion, claimed benefits from CAA, and that choice would govern.

[48] Further, under Nunavut law, the claimant was only entitled to Nunavut statutory accident benefits. As noted, if the claimant had been driving the Nunavut vehicle in Ontario at the time of the accident, the PAU would have obliged Travelers to pay statutory accident benefits at the Ontario rate and not the Nunavut rate, but that is not what happened here. There is no legal basis on which the arbitrator could force Travelers to pay more than the Nunavut limits under its Nunavut policy. Ontario's Insurance Act cannot have extraterritorial application to compel Travelers to accept the burden of Ontario statutory benefits in this case, and the terms of the PAU do not alter that.

[49] Both the arbitrator and the appeal judge erroneously treated Travelers as an Ontario insurer in this case and the Nunavut policy as an Ontario policy. The arbitrator and the appeal judge mistakenly looked to the PAU as preventing Travelers from taking the position that it was not required to pay Ontario statutory accident benefits under the Nunavut policy. As noted, this is contrary to Unifund because it would constitute an extraterritorial application of Ontario law. Nor is it justified under the PAU, which does not have the effect of converting a Nunavut insurance contract into an Ontario insurance contract and does not, by its terms, require Travelers to pay Ontario statutory accident benefits in this case: Potts v. Gluckstein (1992), 8 O.R. (3d) 556, [1992] O.J. No. 1173 (C.A.), at para. 12, leave to appeal to S.C.C. refused [1992] S.C.C.A. No. 42, 142 N.R. 399n, citing Corbett v. Co-operative Fire and Casualty Co., [1984] A.J. No. 1016, 34 Alta. L.R. (2d) 158 (Q.B.), at para. 31, per Shannon J., citing MacDonald v. Proctor (1977), 19 O.R. (2d) 745, [1977] O.J. No. 2531 (C.A.), affd [1979] 2 S.C.R. 153, [1979] S.C.J. No. 37.

[50] CAA submits that this court should apply the reasoning in Primmum Insurance Co. v. Allstate Insurance Co. (2010), 100 O.R. (3d) 788, [2010] O.J. No. 600, 2010 ONSC 986 (S.C.J.), affd (2010), 107 O.R. (3d) 159, [2010] O.J. No. 4748, 2010 ONCA 756 (C.A.), leave to [page92] appeal to S.C.C. refused [2011] S.C.C.A. No. 13, a case that specifically addresses the application of s. 275 of the Ontario Insurance Act.

[51] In Primmum, an Ontario resident was insured under an Ontario policy issued by Primmum. He was riding his motorcycle in North Carolina when he was struck and injured by a pick-up truck insured by Allstate under a policy issued in North Carolina. As of 2010, Allstate was licensed to provide insurance in Ontario and had an office in Markham, Ontario. Allstate argued that s. 275 of the Ontario Insurance Act -- the loss transfer provision -- only applied where "the accident occur[ed] in Ontario or both policies were issued in Ontario" and that the section "d[id] not apply where one of the policies was issued outside of Ontario to cover a vehicle licensed and registered outside Ontario, even though it has signed a PAU": at para. 22.

[52] The Primmum application judge stated, at paras. 20, 28:

If both of the insurers are registered in and carry on business in Ontario, they may claim loss transfer, even if the accident occurred in a non-loss-transfer jurisdiction such as Vermont: Royal & Sun Alliance Insurance Co. v. Wawanesa Mutual Insurance Co. [(2006), 84 O.R. (3d) 449], [2006] O.J. No. 5131, per Newbould J., who followed Binnie J. in Unifund.

In the Insurance Act, Allstate is an "insurer" under s. 1 and it issues "contracts" because it is licensed to sell insurance in Ontario under s. 224(1)(a). The premiums it charges for the insurance or the limits of coverage in North Carolina are of no concern to Ontario.

[53] He therefore determined Allstate was a licensed Ontario insurer under the Ontario Insurance Act because Allstate met the definition of "insurer" and was licensed to undertake and sell automobile insurance in Ontario: at paras. 17, 20. He concluded that Allstate could have avoided liability by either "deregister[ing] as an Ontario insurance company or incorporat[ing] a subsidiary to sell insurance in North Carolina": at para. 29.

[54] This court upheld the Primmum decision. In a brief endorsement, this court simply quoted Binnie J.'s sentence in Unifund and held that "Allstate is an Ontario insurer. Accordingly, it must arbitrate Primmum's claim": at para. 7. In doing so, it appears that the court rejected Allstate's argument in its written submissions that Binnie J.'s statement was obiter.

[55] I conclude that Primmum is of no assistance in this case. It does not touch the earlier determination that the arbitrator in this case erred in his interpretation of s. 268 of the Ontario Insurance Act, which was not at issue in that case. Primmum dealt only with the application of s. 275 of the Ontario Insurance Act, the [page93] underlying purpose of which is distinct from the purpose underlying the priority rules in s. 268.[^3]

[56] Moreover, neither the Primmum application judge nor this court explored what Binnie J. meant by "Ontario insurer", which, as noted earlier, is not a defined term. That exploration remains open to the court and has been undertaken in this case.

[57] For these reasons, I conclude that Primmum is not applicable to the factual scenario presented in this appeal.[^4]

Conclusions

[58] In my view, the arbitrator erred in law in finding that Travelers was an Ontario insurer required to arbitrate priorities with CAA under s. 268 of the Ontario Insurance Act, for the reasons set out above. Further, if the arbitrator had been correct in that finding, he misapplied the section by failing to give effect to Nunavut law regarding the claimant's status and the limits on her entitlement to Nunavut benefits under Nunavut legislation. The arbitrator should have found that s. 268(5.1) applied so that the claimant's decision to seek statutory accident benefits from CAA was final and binding on CAA.

VI. Disposition

[59] I would allow the appeal, set aside both the order of the appeal judge and the award of the arbitrator, and issue a declaration that Travelers is not liable under s. 268 of the Ontario Insurance Act to reimburse CAA for the benefits CAA has paid to the claimant or to assume responsibility for paying the benefits to her in the future.

[60] I would award the costs of the appeal to Travelers in the agreed amount of $10,000, all inclusive, reverse the costs awards [page94] made by the arbitrator and the appeal judge against Travelers, and require CAA to pay the same amounts to Travelers.

Appeal allowed.

[^1]: Insurance Act, R.S.O. 1990, c. I.8. The arbitration took place under s. 7 of the Disputes Between Insurers, O. Reg. 283/95 before Arbitrator Kenneth J. Bialkowski: CAA Insurance Co. and Travelers Insurance Co. (Re) (2017), 66 C.C.L.I. (5th) 149.

[^2]: I note that Part VI of the Ontario Insurance Act also applies to a foreign insured when they are injured in any vehicle driven in Ontario through the operation of the PAU: Healy v. Interboro Mutual Indemnity Insurance Co. (1999), 1999 CanLII 1485 (ON CA), 44 O.R. (3d) 404, [1999] O.J. No. 1667 (C.A.).

[^3]: See the discussion by John S. MacNeil in "The Enigmatic Exception to the Bar Against Subrogation: S. 275 of the Insurance Act" (2008), 34 Adv. Q. 172, at pp. 175-178. Section 275 was introduced as a limited exception to the prohibition against recovering no-fault benefits through subrogation. As Mr. MacNeil points out, s. 275 was not intended to re-order the priority rules for payment of benefits. Instead, it introduced a statutory indemnity to give effect to a fault-based balancing of any inequity introduced by the expanded no-fault regime. It does not transfer responsibility for payment of accident benefits but permits a partial statutory indemnity in certain cases.

[^4]: Travelers did not argue that Primmum was wrongly decided or that the per incuriam exception should be applied. The Primmum application judge did not address Young v. Ontario (Minister of Finance) in concluding that Allstate was an Ontario insurer within Binnie J.'s meaning in Unifund. I leave the question of whether Primmum was correctly decided for another day.