Gordyukova v. Certas Direct Insurance Company et al. [Indexed as: Gordyukova v. Certas Direct Insurance Co.]
108 O.R. (3d) 315
2011 ONSC 6535
Ontario Superior Court of Justice,
Divisional Court,
Jennings, Pardu and Harvison-Young JJ.
November 8, 2011
Insurance -- Automobile insurance -- Arbitration -- Insured commencing action within limitation period for accident benefits and income replacement benefits and subsequently applying within limitation period for arbitration of issue of whether she was catastrophically impaired -- Arbitrator ruling on motion by insurer that issues of entitlement to accident benefits and catastrophic impairment should be heard together in arbitration proceedings -- Insurer moving for finding that insured's claim for income replacement benefits could not be added to arbitration as it was time barred -- Arbitrator correctly ruling that claim for income replacement benefits was not time barred for purposes of arbitration as it was advanced in court action which was commenced within limitation period -- Insurance Act, R.S.O. 1990, c. I.8, s. 281.1.
The applicant commenced an action against Dominion for accident benefits and income replacement benefits within the limitation period. Dominion subsequently rejected the applicant's application for determination of catastrophic impairment. The applicant filed an application for arbitration with respect to whether she had suffered a catastrophic impairment. In the meantime, Certas was determined to be the priority insurer. Certas moved to have the catastrophic impairment arbitration stayed, arguing that the issue of catastrophic impairment should be added to the court action. The arbitrator ruled that the causation issues raised by Certas required that the issues of entitlement to specific accident benefits and catastrophic impairment should be heard together in the arbitration proceedings. Certas then moved for a finding that the applicant's claim for income replacement benefits was time barred from being arbitrated and could not be added to the arbitration proceedings. The arbitrator dismissed the motion. The director's delegate reversed that decision. The applicant applied for judicial review of the director's delegate's decision.
Held, the application should be granted.
The arbitrator interpreted s. 281.1 of the Insurance Act as meaning that commencing an arbitration or court action within two years of the insurer's refusal to pay the benefit or amount claimed fully satisfies the limitation requirement of that claim, even if it is subsequently added to a later proceeding. That interpretation was not only reasonable, it was correct. The director's delegate's decision was unreasonable.
APPLICATION for judicial review of a decision of the director's delegate reversing a decision of the arbitrator.
The judgment of the court was delivered by
Cases referred to Gordyukova v. Certas Direct Insurance Co., [2011] O.F.S.C.D. No. 25 (F.S.C.), revg [2010] O.F.S.C.D. No. 124 (F.S.C.); Gordyukova v. Dominion of Canada General Insurance Co., [2010] O.F.S.C.D. No. 98 (F.S.C.); Kohl v. ING Insurance Co. of Canada, [2011] O.J. No. 1556, 2011 ONSC 2138; Woodman v. State Farm Mutual Automobile Insurance Co., [1999] O.J. No. 521, 92 O.T.C. 144, 86 A.C.W.S. (3d) 412 (Gen. Div.) [page316]
Statutes referred to Arbitration Act, 1991, S.O. 1991, c. 17 [as am.] Insurance Act, R.S.O. 1990, c. I.8, ss. 281 [as am.], 281.1, (1)
J.A. Michael Wolfe and Melissa MacLeod, for applicant. Frank Benedetto, for respondent Certas Direct Insurance Company. Steven Scharbach, for respondent Financial Services Commission of Ontario.
[1] JENNINGS J.: -- The applicant seeks judicial review of a decision dated March 17, 2011 by Director's Delegate Evans [[2011] O.F.S.C.D. No. 25 (F.S.C.)] reversing a decision dated October 22, 2010 [[2010] O.F.S.C.D. No. 124 (F.S.C.)] by Arbitrator Bujold which held that the applicant's claim for income replacement benefits was not time barred for the purposes of an arbitration proceeding at the Financial Services Commission of Ontario (the "Commission").
Facts
[2] The applicant was injured in a motor vehicle accident on November 9, 2001. She applied for accident benefits from her insurer, the Dominion of Canada General Insurance Company ("Dominion"). A dispute arose over entitlement to certain medical benefits. Mediation failed, although the parties did reach an agreement with respect to income replacement benefits. The applicant issued a statement of claim in the Superior Court of Justice on September 16, 2002, seeking damages for accident benefits, aggravated damages of $1 million, punitive damages of $1 million and a "declaration that the Plaintiff is and will remain entitled to continued Accident Benefits pursuant to the terms of her automobile insurance policy".
[3] Dominion paid the applicant income replacement benefits for about 3[cents] years and then determined that on the basis of updated medical reports the applicant no longer was entitled to those benefits. Mediation failed. Dominion and the applicant agreed that the previously issued statement of claim encompassed a claim by the plaintiff for the continuation of income replacement benefits. [page317]
[4] On October 28, 2005, Dominion notified the applicant that her non-catastrophic limits of $100,000 for medical and rehabilitation benefits had been exhausted. The applicant thereupon submitted to Dominion an application for determination of catastrophic impairment, and on July 3, 2008, Dominion rejected the claim. The applicant filed an application for mediation on that issue, which was completed on November 26, 2008 as failed. On November 28, 2008, the applicant filed an application for arbitration with the Commission with respect to whether she had suffered a catastrophic impairment.
[5] In the meantime, Dominion had initiated an inter-company priority dispute against Certas Direct Insurance Company ("Certas"). That issue continued in arbitration and litigation from May 13, 2008 until December 24, 2009, when Certas' application for leave to appeal an order of the Superior Court of Justice finding that it was the priority insurer was denied by the Court of Appeal.
[6] The catastrophic impairment arbitration was to be heard on March 29, 2010, but Certas took the position that the issue of catastrophic impairment should be added to the court action. On consent, the arbitration was adjourned to the week of September 27, 2010.
[7] On July 9, 2010, Certas brought a motion to have the arbitration stayed. The applicant's position was that the catastrophic impairment arbitration should be allowed to proceed concurrently and independently of the court action. By decision dated July 30, 2010 [[2010] O.F.S.C.D. No. 98 (F.S.C.)], Arbitrator Bujold held that causation issues raised by Certas required that the issues of entitlement to specific accident benefits and catastrophic impairment should be heard together in the arbitration proceedings on the condition that the applicant gave notice of her intention to discontinue her court action. The applicant gave that notice.
[8] On September 28, 2010, on the eve of the arbitration, Certas brought a motion for a preliminary issue claiming that the applicant's claim for income replacement benefits was time barred from being arbitrated and could not be added to the arbitration proceeding. Arbitrator Bujold ruled on October 22, 2010 that the applicant was not precluded from proceeding to arbitration with respect to her claim for income replacement benefits.
[9] Certas appealed the October 22, 2010 decision of Arbitrator Bujold. On March 17, 2011, Director's Delegate Evans reversed Arbitrator Bujold's decision finding that the claim for [page318] income replacement benefits was time barred for the purpose of arbitration.
[10] The issue on this application is whether a limitation period prevented the claim for income replacement benefits from being heard in the arbitration proceeding.
Standard of Review
[11] I accept the submissions of the applicant, Certas and of the Commission that the standard of review is reasonableness.
Applicable Legislation
[12] Sections 281 and 281.1 of the Insurance Act, R.S.O. 1990, c. I.8 provide as follows:
Litigation or arbitration
281(1) Subject to subsection (2), (a) the insured person may bring a proceeding in a court of competent jurisdiction; (b) the insured person may refer the issues in dispute to an arbitrator under section 282; or (c) the insurer and the insured person may agree to submit any issue in dispute to any person for arbitration in accordance with the Arbitration Act, 1991.
Limitation
(2) No person may bring a proceeding in any court, refer the issues in dispute to an arbitrator under section 282 or agree to submit an issue for arbitration in accordance with the Arbitration Act, 1991, unless mediation was sought, mediation failed and, if the issues in dispute were referred for an evaluation under section 280.1, the report of the person who performed the evaluation has been given to the parties. . . . . .
Limitation period
281.1(1) A mediation proceeding or evaluation under section 280 or 280.1 or a court proceeding or arbitration under section 281 shall be commenced within two years after the insurer's refusal to pay the benefit claimed.
Analysis
[13] Once a mediation has failed, s. 281 of the Act gives to the insured person only the right to pursue remedies by either court action or arbitration with the Commission. Additionally, with the consent of the insurer, the matter may be arbitrated privately under the Arbitration Act, 1991, S.O. 1991, c. 17.
[14] The jurisprudence provides that insureds are permitted to pursue both arbitration and court action independently. That [page319] said, if there is a danger of inconsistent findings on issues of causation, for example, it is generally preferable that all claims be heard in one proceeding. That principle was applied by Arbitrator Bujold in arriving at the decision that he made on July 30, 2010.
[15] It is clear and not disputed by Certas that each of the court action and the arbitration was commenced within the limitation period required. If the court action and the arbitration proceeded independently, no issue of limitation would arise. By seeking to consolidate all of the claims in one proceeding, Certas has itself created the limitation issue. Its position is that the claim for income replacement benefits cannot be included in the arbitration which was commenced more than two years after the claim for those benefits arose. Similarly, the claim for catastrophic impairment was presented for arbitration seven years after the court action seeking damages was commenced in November 2002.
[16] If Certas' position is correct, the applicant, who has done all that was required of her pursuant to the provisions of the Act with respect to the presentation of her claims, would find herself, because of the position now adopted by Certas, having to abandon either the catastrophic impairment claim or the claim for replacement benefits. That result was undoubtedly what compelled Arbitrator Bujold to hold as he did, at p. 15 of his decision [[2010] O.F.S.C.D. No. 124 (F.S.C.)] (application record, p. 47) [at paras. 54-55]:
Notwithstanding Certas's assertion to the contrary, I find that it has been more than two years since Dominion advised Ms. Gordyukova of its refusal to accept that she had sustained a catastrophic impairment as a result of the accident. Dominion gave clear and unequivocal notice of its position to Ms. Gordyukova on July 3, 2008. As a result, if Certas's interpretation is accepted, Ms. Gordyukova would be prevented from adding claims from either forum to the other. In short, after successfully arguing that Ms. Gordyukova should not be permitted to pursue her claims in separate proceedings, Certas would now have me interpret the limitation provisions in such a manner as to preclude Ms. Gordyukova from pursuing her claims in one proceeding.
Even if Certas consents to the catastrophic issue being added to the court action in this case, its interpretation of the law, if accepted, would place insured persons in an impossible position in other cases. As well, Certas's consent does not sidestep the fact that its interpretation creates a limitation issue, that did not otherwise exist, simply because it was determined on a procedural motion that claims commenced in different forums should not proceed separately to avoid the spectre of inconsistent results.
In my view, Certas's interpretation must be rejected. It is an interpretation that does not further the purposes of the limitation provisions and produces a result that is unreasonable and unjust. (Emphasis added) [page320]
[17] Arbitrator Bujold then concluded, on p. 16 of his reasons (application record, p. 48) [at para. 58]:
I find that interpreting section 281.1 of the Insurance Act and section 51 of the Schedule so that commencing an arbitration or court action within two years of an insurer's refusal to pay the benefit or amount claimed fully satisfies the limitation requirement for that claim, even if it is subsequently added to a later proceeding, is not only compatible with the legislative text and the purpose of the limitation period, it also produces the most reasonable and just result. [Emphasis in original]
[18] In my opinion, that conclusion and the reasons for it are both reasonable and correct.
[19] In reversing Arbitrator Bujold, Director's Delegate Evans appears to me to be holding that notwithstanding that each process was commenced within the two-year limitation period applying to the claims presented, the claims in one process could not be added to the claims in the other unless the other process was commenced within two years after the claims seeking to be added arose. That interpretation does not, in my opinion, comply with the letter and spirit of the Act. Firstly, where the limitation period has been complied with in the institution of each of the proceedings, there is nothing in the statute which prevents the issues from being presented in one or other of those proceedings. Secondly, it would appear to me to fly in the face of the jurisprudence which requires that s. 281 be liberally interpreted. See Kohl v. ING Insurance Co. of Canada, [2011] O.J. No. 1556, 2011 ONSC 2138; Woodman v. State Farm Mutual Automobile Insurance Co., [1999] O.J. No. 521, 92 O.T.C. 144 (Gen. Div.).
[20] Given the results that would pertain if the director's delegate's decision were to be maintained, I find it to be unreasonable. I also find it to be incorrect in its interpretation of s. 281.1(1). As I have said, each of the court proceeding and arbitration was commenced as required, within two years of the applicable refusal to pay.
[21] The application for judicial review must succeed. The order of the director's delegate reversing the order of Arbitrator Bujold is set aside.
[22] The applicant is entitled to her costs in the agreed upon amount of $3,500, payable forthwith by Certas.
Application granted.