CITATION: Hayward v. Royal & Sun Alliance Insurance Company, 2015 ONSC 433

DIVISIONAL COURT FILE NO.: 149/13

DATE: 20150130

SUPERIOR COURT OF JUSTICE – ONTARIO

DIVISIONAL COURT

RE: Andrew Hayward, Applicant

AND:

Royal & Sun Alliance Insurance Company of Canada and Financial Services Commission of Ontario, Respondents

BEFORE: Wilton-Siegel, D. Brown and Mulligan JJ.

COUNSEL: Kyle T.H. Smith, for the Applicant

Robert S. Franklin, for the Respondent Royal & Sun Alliance Insurance Company of Canada

Elizabeth Nastasi, for the Respondent Financial Services Commission of Ontario

HEARD: October 14, 2014

ENDORSEMENT

Wilton-Siegel J.

[1] This is an application for judicial review brought by Andrew Hayward (the “applicant”) in respect of a decision of the delegate of the Director of Arbitration (the “Delegate”) of the Financial Services Commission of Ontario (“FSCO”) dated March 6, 2013. The Delegate upheld the decision of Arbitrator Richards (the “Arbitrator”) dated October 6, 2011 that the applicant’s entitlement to workers’ compensation benefits precluded him from receiving statutory accident benefits (“SABSs”). The applicant also seeks an order upholding a decision dated February 10, 2011 of Arbitrator Muzzi that the applicant was not precluded from proceeding to arbitration on his claim for SABs on the grounds of the suspension of his driver’s licence at the time of the accident.

Standard of Review

[2] The issues on this application are primarily issues of law and issues of mixed fact and law. The applicant originally submitted that the standard of review should be correctness in respect of such issues but accepted at the hearing that the standard of review should be reasonableness. He argues, however, that the reasonableness standard was not met in respect of the Delegate’s decision on four grounds set out below.

[3] I am satisfied that, in the present circumstances, the principles articulated in Dunsmuir v. New Brunswick, [2008] 1 S.C.R. 190, 2008 SCC 9 provide that the standard of review on the issues in this proceeding is reasonableness.

[4] Among other factors, the following considerations set out at paras. 54-55 of Dunsmuir are determinative in respect of the standard of reasonableness on the issues of law and of mixed fact and law where the issue is primarily one of law: (1) the fact that the Director is interpreting a home statute of FSCO – the Insurance Act, R.S.O. 1990, c. I.8 – and the regulation thereunder pertaining to SABs – the Statutory Accident Benefits Schedule – Accidents on or after November 1, 1996, Ont. Reg. 403/96, as amended, (the “Schedule”), and therefore the issues are within the specialized expertise of the Delegate; (2) the presence of a clear and strong privative clause; (3) the fact that the decision was made in the context of a specialized and independent regime established under the Insurance Act to resolve issues related to SABs; and (4) the absence of a legal issue of “central importance to the legal system”. In particular, the issues on this judicial review involve specialized knowledge of the SABs scheme under the Insurance Act, the claims process for SABs, and the interaction between the SABs regime and the benefit scheme administered by the Workplace Safety and Insurance Board (“WSIB”).

[5] The “reasonableness” standard of review in respect of a judicial review of decisions of the Delegate pertaining to the interpretation of statutes governing disputes regarding no-fault motor vehicle accident benefits under the Insurance Act has been confirmed in a number of decisions post Dunsmuir: see, for example, Aviva Canada Inc. v. Pastore, 2012 ONSC 642, [2012] O.J. No. 4508, at paras. 26, 59 and 60; and Bouchard v. Motors Insurance Corp., 2013 ONSC 2205, [2013] O.J. No. 1960 at paras. 3 and 7. In addition, in State Farm Mutual Automobile Insurance Co. v. Federico, 2014 ONSC 109, [2014] O.J. No. 142 at para. 7, the Divisional Court applied the principle articulated by the Supreme Court in McLean v. British Columbia (Securities Commission), [2013] 3 S.C.R. 895, 2013 SCC 67 at para. 24 of that decision. The Divisional Court held that, under the FSCO arbitration scheme established under the Insurance Act, an arbitrator, if selected, has exclusive jurisdiction and the arbitrator thereby becomes “solely tasked” with considering the matter at first instance. On this basis, the presumption of the reasonableness standard is not rebutted based on the arbitrator having concurrent jurisdiction with the courts at first instance on a question of law, as was held to be the case in Rogers Communications Inc. v. Society of Composers, Authors and Music Publishers of Canada, 2012 SCC 35, [2012] 2 S.C.R. 283.

[6] Dunsmuir makes clear at para. 47 that “reasonableness” is concerned mostly with the existence of justification, transparency and intelligibility within the decision-making process. The applicant does not challenge the Delegate’s decision on any of these grounds. In any event, there is no basis for a challenge on such grounds. The Delegate’s decision amply meets these requirements. It is clearly expressed and includes grounds for each of the principal determinations made therein.

[7] The arguments advanced by the applicant in this case focused more on the further requirement in Dunsmuir that, to be reasonable, a decision must fall with a range of possible, acceptable outcomes which are defensible in respect of the facts and law. Accordingly, on this application the review will focus on whether the interpretations given to the Insurance Act and the Schedule, as well as the factual determinations of the Delegate, fell within a range of reasonable interpretations.

The Issues On This Judicial Review

[8] The applicant challenges two findings in the Arbitrator’s decision upon which the Arbitrator based his conclusion that the applicant’s motor vehicle insurer, Royal & Sun Alliance Insurance Company of Canada (“RSA”), was not estopped from asserting a defence under s. 59(1) of the Schedule. The applicant also raises two issues pertaining to the Arbitrator’s finding that the applicant could not satisfy the requirements of s. 59(2) of the Schedule with the result that s. 59(1) applied to deny the applicant an entitlement to SABs after having been found to be entitled to benefits under the WSIB scheme. I will address each issue in turn.

Issues Pertaining to the Operation of Estoppel

[9] The Arbitrator held that RSA was not estopped from asserting s. 59(1) of the Schedule as a defence to the applicant’s claims for SABs. The applicant says that the Delegate erred in upholding two findings of the Arbitrator discussed below upon which the Arbitrator based this conclusion.

Entitlement to Assertion of the Suspended Licence Defence

[10] The applicant says that the Delegate erred in upholding the Arbitrator’s finding that the insurer was entitled to assert the suspended licence defence as a basis for its denial of the applicant’s claim for SABs. He says this finding was contrary to the finding of Arbitrator Muzzi that the applicant was not precluded from proceeding to arbitration on his claims for SAB’s based on the suspension of his licence at the time of the accident. The applicant also argues that RSA’s denial of benefits based on his suspended licence “misled” him in two respects that should prevent RSA from asserting a defence under s.59(1) of the Schedule. I will address each submission in turn.

The Submission that the Applicant was Misinformed by RSA

[11] The applicant says that he was “misled” by RSA’s statement in its Explanation of Benefits form (OCF-9) dated February 20, 2009 that the applicant was not entitled to SABs because he was driving his vehicle without a valid driver’s licence at the time of the accident. He says that, in view of the subsequent decision of Arbitrator Muzzi, this statement was incorrect and, therefore, constituted the provision of misinformation by RSA upon which he relied to his detriment in applying for workplace benefits under the WSIB scheme.

[12] The applicant relies on statements in Veldhuizen v. Coseco Insurance Co. [1995] O.I.C.D. No. 158 (Ont. Ins. Com.) at p. 5 [“Veldhuizen”] in which the arbitrator listed a number of principles that the arbitrator considered emerged from earlier arbitration decisions that have interpreted the limitation provisions of the Insurance Act and the Schedule. These included, in particular, the principle that an insurer may be estopped from relying on a limitation period if the applicant relied to his or her detriment on the insurer’s conduct. The applicant argues that this principle should be applied to the present circumstances to prevent RSA from relying on the applicant’s decision to elect to apply for benefits under the WSIB scheme. He says that RSA’s conduct “misinformed” him that his suspended licence disentitled him to SABs. He says that RSA should not benefit from its “misleading” conduct, even if it was not made in bad faith or with the intention of impeding the applicant.

[13] The Arbitrator concluded that RSA merely advanced, and properly advised, the applicant of its position that he was not entitled to benefits based on the undisputed fact that he was driving with a suspended licence at the time of the accident. The Arbitrator concluded that this statement did not constitute a misrepresentation. On this basis, the Arbitrator concluded that RSA did not “mislead” the applicant in a manner that engages the doctrine of estoppel under the Insurance Act.

[14] The Delegate upheld the Arbitrator’s decision that RSA did not mislead the applicant and was therefore entitled to assert the defence of s. 59(1) of the Schedule. In reaching that conclusion, the Delegate stated that RSA did not act improperly in raising the issue of the suspended licence and that, given the suspension, the applicant had the onus of demonstrating a basis for being relieved from the provisions of s. 30(1)(b) of the Schedule. The Delegate further held that Arbitrator Muzzi’s decision was heavily fact-based, particularly regarding facts which went to the applicant’s credibility and were known only to him, and that Arbitrator Muzzi’s conclusions were not so self-evident that RSA could have foreseen them when it denied the applicant’s application for SABs. On this basis, the Delegate held that RSA’s lack of success on the suspended licence defence at the hearing before Arbitrator Muzzi did not mean that it made a misrepresentation or misinformed the applicant.

[15] I am of the view that there was a reasonable basis for the Delegate’s conclusion for the following reasons.

[16] There is no basis on which the applicant can reasonably suggest that he was misled by RSA’s letter to him dated January 16, 2009. The applicant subsequently delivered an application for accident benefits on form OCF-1 within thirty days of the RSA letter. In that application, the applicant indicated that, contrary to RSA’s understanding in its earlier letter, the accident in which he was involved did not occur while he was at work.

[17] There is also no basis on which the applicant can reasonably suggest that he was “misinformed” by RSA’s notice of denial of benefits in its Explanation of Benefits form dated February 20, 2009. For its part, RSA communicated the reason for the denial of the applicant’s benefits based upon the information it possessed i.e. that the applicant’s licence was suspended at the time of the accident. RSA’s statement of its denial of benefits met the standard set out in Turner v. State Farm Mutual Automobile Insurance Co. (2005), 2005 2551 (ON CA), 195 O.A.C. 61, [2005] O.J. No. 351 (C.A.) [“Turner”] which addressed a provision of an earlier version of the Schedule dealing with the denial of benefits. Turner required that an insurer’s reasons permit the insured to decide whether or not to challenge the denial. Turner expressly provided, however, that the reasons need not be legally correct. The applicant has not identified any provision in the applicable version of the Schedule that would impose such a requirement.

[18] In addition, I agree with the Delegate’s observation that, essentially, the applicant is seeking to impose 20/20 hindsight on RSA and that the applicant’s position would mean that every insurer who loses on a similar defence after a hearing would have “mislead” its insured. This is particularly problematic where the information pertaining to an insured’s defence is solely within the knowledge of the insured at the time of the insurer’s denial of benefits.

[19] Most importantly, RSA’s communication of its position did not compel the appellant to apply for WSIB benefits. As the Arbitrator noted, unlike the circumstances in Veldhuizen, Royal did not engage in any actions that prevented the applicant’s claims from crystallizing. In this case, the applicant remained free at all times to elect to commence a tort action and to pursue his claim for SABs by appealing RSA’s eligibility decision.

The Submission Based on an Alleged Omission of Advice of his Due Diligence Defence

[20] As an alternative argument, the applicant argued before the Arbitrator that RSA breached its duty of good faith as an insurer toward its insured in failing to provide him at the outset of his claim with an election form for the purposes of electing to pursue a tort claim and SABs as contemplated by s. 59(2) of the Schedule. The Arbitrator held that, as of the date of the applicant’s application for benefits, RSA had no reason to believe that the applicant required an election form because he had, in effect, advised RSA that he did not require the form.

[21] Given that the applicant advised RSA prior to the denial of his benefits that the accident had not occurred in the course of his employment, the Arbitrator’s determination on this issue was clearly reasonable.

[22] Before the Delegate, the applicant revised his argument based on RSA’s duty of good faith. He submitted that he was misled by RSA’s failure to advise him of the possibility of a “due diligence” defence to RSA’s denial of his benefits. He argued that RSA’s duty of good faith required it to make such disclosure to him. He says that, as a result of RSA’s failure to make such disclosure, he was “induced” to take an action that constituted a renunciation of his right to pursue a civil tort action and SABs.

[23] The Delegate did not specifically address this revised argument in finding that RSA was not estopped from asserting a defence under s. 59(1) of the Schedule. However, the Delegate’s finding necessarily subsumes a determination that RSA was not required to make such disclosure. I am satisfied that this was also a reasonable determination.

[24] The Explanation of Benefits form sent by RSA described the steps that the applicant could take if he wished to dispute RSA’s determination. The statutory form (OCF-9) does not contain any section that requires the insurer to identify defences that might be available to an insured to challenge a denial of benefits. Turner also did not require that an insurer’s notice of denial of benefits describe any possible grounds for challenging the denial of benefits. Nor has the applicant pointed to any provision in the Schedule that imposes such a requirement.

[25] I also do not think that the insurer’s duty of good faith imposes such a requirement, at least in the circumstances where the facts supporting any grounds for challenging a denial of benefits are entirely within the knowledge of the insured. Any duty of good faith on the part of RSA would only arise, if at all, in the event that RSA became aware of the existence of such a defence. I note that, from the discussion in paragraph 38 of the Arbitrator’s decision, it is clear that the Arbitrator was alert to this issue. While the applicant did provide a statement on February 19, 2009 that addressed the suspension of his licence, it stopped short of providing facts upon which RSA ought reasonably to have concluded that he had a valid due diligence defence. It does not state that he paid the fine but, is instead, limited to a statement that he had never received notification that his licence had been suspended and, among other things, raises a legitimate issue of credibility. Given the lack of information establishing the applicants due diligence defence, the principle in Miachalski (Litigation Guardian of) v. Wawanesa Mutual Insurance Co., [2005] O.F.S.C.D. No. 150 (FSCO) at paras. 121-122, even if applicable to disclosure of a potential defence, which is by no means clear, does not apply in the present circumstances.

[26] Moreover, the absence of any statement of RSA that the applicant was entitled to assert a “due diligence” defence to its denial of benefits did not prevent the applicant from asserting such a defence to the extent he had knowledge of facts supporting such a defence.

[27] On the basis of the foregoing, I conclude that RSA’s notice of denial of benefits also did not mislead the applicant by omitting any reference to his right to challenge the decision based on a due diligence defence in the particular circumstances of his case.

Detrimental Reliance

[28] The applicant says that the Delegate also erred in upholding the Arbitrator’s finding that the applicant did not rely on RSA’s position to his detriment, specifically that he did not suffer a detriment.

[29] The Arbitrator based this conclusion on a finding that, because the SABs and the WSIB scheme operate as mutually exclusive benefit schemes, the applicant’s application for benefits under the latter scheme cannot be deemed to be detrimental to him in the present proceeding.

[30] The applicant does not directly challenge the Arbitrator’s analysis of the relationship between the accident benefits under the Schedule and under the WSIB scheme. Instead, he says that the Arbitrator missed the fact that he suffered a detriment in the form of a loss of the ability to choose between the SABs and benefits under the WSIB scheme when he claimed an entitlement under the WSIB scheme in reliance on RSA’s denial notice.

[31] The Delegate agreed with the Arbitrator’s conclusion that the applicant could not assert that he relied to his detriment on the statement in the Explanation of Benefits form. The Delegate concluded that the system worked as it was intended to, with the applicant applying for benefits under the WSIB scheme as the default scheme in the situation where his accident occurred in the course of employment. The Delegate stated that he failed to see how this can be logically turned around to mean that RSA made the applicant act to his detriment.

[32] This was also a reasonable determination of the Delegate that should be given deference.

[33] While it may be technically correct to say that the applicant lost his right to claim SABs when he applied and was granted benefits under the WSIB scheme, this is a theoretical argument only on the record before the Court. As the Delegate stated, the WSIB scheme is an alternative benefit scheme that provided benefits to him to the extent of his entitlement given his employment situation. There is no evidence of any material detriment resulting from his accessing benefits under the WSIB scheme rather than SABs.

[34] More significantly, the detriment to which the applicant points is the loss of a right to pursue a tort claim and SABs as an alternative to seeking benefits under the WSIB scheme. RSA’s denial of benefits did not prevent the applicant from electing to pursue a tort claim and SABs, subject to addressing the issue of the suspension of his licence. The applicant only “lost” his right of election as a result of his own conscious decision not to pursue his right to elect. As mentioned, he remained free at all times to maintain his appeal of RSA’s eligibility decision and to pursue his claim for SABs together with a civil tort action.

[35] Lastly, actual reliance is also problematic in the present circumstances. As mentioned, at the time of RSA’s denial of benefits, the applicant had advised RSA that the accident had not occurred in the course of his employment. In other words, if the applicant’s position on February 20, 2009 was as stated in his OCF-1, that the accident had not occurred in the course of his employment, he could not have relied on the denial notice to his detriment. If his position was, instead, that the accident occurred in the course of his employment notwithstanding his advice to RSA to the contrary, his reliance on the denial notice was not reasonable, given that he would have understood that RSA was proceeding on a different understanding.

Issues Pertaining to the Application of s. 59(2) of the Schedule

[36] The applicant also argues that the Delegate erred in upholding the Arbitrator’s finding that the applicant could not satisfy the requirements of s. 59(2) of the Schedule with the result that s. 59(1) applied to deny the applicant an entitlement to SABs after having been found to be entitled to benefits under the WSIB scheme. He alleges two errors.

Interpretation of s. 59(2) of the Act

[37] First, the Arbitrator held, without further reasons, that the applicant had the onus under s. 59(2) of the Schedule to prove that his action was not commenced primarily for the purpose of claiming SABs under the Schedule. The Delegate upheld the Arbitrator’s finding on the interpretation of s. 59(2) of the Schedule, which he also stated was consistent with long-standing case law at FSCO.

[38] The applicant argues that the Arbitrator applied the wrong onus of proof with respect to the exception in s. 59(2) of the Schedule. The applicant argues that a shifting onus should be applied under this provision such that if the applicant discharges his onus of proving that he has complied with s. 30 of the Workplace Safety and Insurance Act, 1997, S.O. 1997, C. 16, Sched. A (the “WSIA”), then the onus should shift to the insurer to establish that the applicant commenced his claim for the purpose of claiming benefits under the SABs.

[39] The applicant argues that the Arbitrator’s decision is inconsistent with the wording of s. 30 of the WSIA, and with the principles established by the Supreme Court in Reid Crowther & Partners Ltd. v. Simcoe & Erie General Insurance Co., 1993 150 (SCC), [1993] 1 S.C.R. 252, 99 DLR (4th) 741. The applicant also suggests that the act of commencing a civil action should give rise to a prima facie presumption that the claim is legitimate and brought for its stated purposes.

[40] In the interpretation of s. 59(2) of the Act, it is necessary to have regard to s. 59 in its entirety. Section 59(1) is an exclusionary provision that denies SABs to any person who is entitled to receive benefits under the WSIB scheme or any other workers’ compensation scheme. As such, in accordance with the principles in Reid Crowther, s. 59(1) should be interpreted narrowly. Conversely, s. 59(2) is effectively a coverage provision that creates an exception to the rule in s. 59(1). As such, Reid Crowther mandates that s. 59(2) should be interpreted broadly. Reid Crowther does not, however, support the applicant’s suggestion that s. 59(2) should be bifurcated for this purpose with the first half being interpreted broadly and the second half narrowly. The onus remains on a party seeking to take advantage of s. 59(2) to demonstrate satisfaction of the conditions of that provision.

[41] As mentioned, the applicant’s interpretation of s. 59(2) goes hand in hand with his submission that the commencement of a civil action creates a prima facie presumption that the claim is legitimate and brought for its stated purposes. Indeed, as RSA argues, if the onus were placed on the insurer, that would be the effective result. Under such a presumption, in order to exclude an entitlement to SABs by an insured, an insurer would have to prove that the insured’s claim was brought primarily for the purpose of claiming SABs even if the insured had done no more than issue a statement of claim. Short of trying the merits of a claim to the point of assessing whether there is a reasonable likelihood of success, it is not clear that an insurer could demonstrate facts that would justify such a conclusion. This would result, as RSA argues, in a threshold that is so low that it cannot have been intended by the Legislature.

[42] The applicant also submits that it is incorrect in law to impose an onus on the applicant to prove a negative, that is, that he did not commence his action for an improper purpose. Although he does not specifically say so, the applicant appears to be saying that the Legislature could never intended to have acted contrary to this alleged principle of law and therefore must have intended a reverse onus on the insurer. I am not aware of any blanket principle of law of the nature of the principle urged on the Court. More importantly, I am not persuaded that, in fact, the Arbitrator’s interpretation of s. 59(2) required the applicant to prove a negative. Rather, I think the practical effect of the specific wording of the provision is to require the applicant to demonstrate that he brought the action in good faith for a primary purpose other than the purpose of claiming benefits under the SABS regulation, that is, that he had a bona fide claim, a practical effect which is reasonable given that the applicant would be the party in possession of information regarding whether his claim meets this standard.

[43] Based on the foregoing, I conclude that the decision of the Delegate falls within the range of possible, acceptable interpretations of s. 59(2) and is, therefore, reasonable.

Factual Finding Regarding the Primary Purpose of the Applicant’s Civil Action

[44] In the alternative, the applicant also submits that there is no evidence that he commenced his claim for the purpose of claiming accident benefits. On this basis, he says that he has successfully established that his legal action was not commenced primarily for the purpose of claiming SABs under the Schedule.

[45] The Arbitrator found that the applicant had not discharged the onus on him to prove an entitlement to the provisions of s. 59(2) – that his action was not commenced primarily for the purpose of claiming SABs. In reaching this conclusion, the Arbitrator held that the objective evidence did not assist in weighing the merits of the civil action and that the subjective evidence surrounding his claim argued in favour of an adverse finding on the applicant’s primary purpose in commencing the action. These are factual findings of the Arbitrator based on the evidence before him.

[46] Under s. 283(1) of the Insurance Act, a party to an arbitration may appeal the order of the arbitrator to the Director “on a question of law”. In this case, having found that the Arbitrator had applied the correct test for s. 59(2), the Director’s Delegate properly observed that it was not for him to weigh the evidence which had been before the Arbitrator.

[47] The Delegate did refer to the submission of Mr. Hayward that he only withdrew the WSIB claim at the last minute because he was not aware it was still outstanding. With respect to this submission, the Delegate concluded that this evidence was before the Arbitrator, and it was up to him to weigh it. Implicit in the Delegate’s conclusion is that he found no error of law in the Arbitrator’s assessment of the evidence.

[48] On this application for judicial review, the issue for the Court is whether the decision of the Delegate was reasonable. I am satisfied that the Delegate’s decision that the Arbitrator made no error of law in weighing the evidence was reasonable. For its part, the Court also has no authority to re-weigh the evidence that was before the Arbitrator. Accordingly, there is no basis for this Court to interfere with the factual findings made by the Arbitrator on this issue.

The Suspended Licence Issue

[49] The applicant also sought an order upholding the decision of Arbitrator Muzzi with respect to the RSA defence pertaining to the applicant’s suspended licence at the time of the accident. However, at the hearing of this application, the applicant agreed with FSCO that, as the Delegate made no order regarding RSA’s appeal of the decision of Arbitrator Muzzi, the applicant’s application in respect of this issue is unnecessary and premature. Therefore, no relief is granted in respect of this issue.

Costs

[50] Costs in the amount sought by RSA, being $2,946.36, are payable by the applicant forthwith to RSA. Such costs are eminently reasonable given the number of issues raised by the applicant. As FSCO does not seek any costs, no costs are awarded in its favour.

Wilton-Siegel J.

D. Brown J.

Mulligan J.

Date: January 30, 2015