ONTARIO
SUPERIOR COURT OF JUSTICE
COURT FILE NO: CV-12-443986
DATE: 20121105
B E T W E E N:
Republic Western Insurance Company Applicant (Appellant in Appeal)
- and -
Economical Mutual Insurance Company Respondent (Respondent in Appeal)
C. Michael J. Kealy, for the Applicant/Appellant
Ian D. Kirby , for the Respondent
HEARD : October 17, 2012
GOLDSTEIN J.:
[ 1 ] Under s. 9(1) of Ontario Regulation 664 (“ the Regulation ”) made under the Insurance Act , R.S.O. 1990, c. I.8 (“ the Act ”) a “heavy commercial vehicle” is defined as a “commercial vehicle with a gross weight greater than 4500 kilograms”. Whether a vehicle is a heavy commercial vehicle matters if that vehicle gets into an accident since it may determine which insurance company has to pay benefits. But: does 4500 kilograms refer to the weight of the vehicle plus its overall cargo capacity when full (“ the capacity weight ”)? Or does 4500 kilograms refer to the actual weight of the vehicle at the time of the accident? In this case, an insurance arbitrator, the Honourable Douglas Coo, thought that the 4500 kilograms referred to the capacity weight of the vehicle, and not its actual weight. In my view, he erred in law and the appeal must be allowed.
BACKGROUND
[ 2 ] On January 24 2007 Yvonne Bacchus was driving a 4-door Toyota when she was struck from behind by a Ford El-G truck driven by Anane Abebrese (“ the truck ”). Abebrese was moving and had rented the truck from U-Haul. Ms. Bacchus applied for and received accident benefits from her insurer, the Respondent Economic Mutual Insurance Company (“ Economic Mutual ”). Economic Mutual sought indemnification from the Applicant/Appellant Republic Western Insurance Company (“ Republic Western ”) pursuant to s. 275 of the Act ”) and s. 9 the Regulation. Republic Western insured the truck. Economic Mutual and Republic Western arbitrated the dispute over who was responsible for the statutory accident benefits.
[ 3 ] The Honourable Douglas Coo, a former justice of this Court, served as Arbitrator. The main issue on the arbitration was the meaning of “gross weight” of a heavy commercial vehicle. Under the loss transfer scheme set up by the Act and the Regulation, where a heavy commercial vehicle has an accident with another vehicle, the insurer of the heavy commercial vehicle must indemnify the insurer of the other vehicle. In this case, since Economic Mutual paid accident benefits to Ms. Bacchus, it sought indemnity from Republic Western.
[ 4 ] Section 9(1) of the Regulation defines “heavy commercial vehicle” as “a commercial vehicle with a gross vehicle weight greater than 4,500 kilograms.”
[ 5 ] According to the investigative report, the truck, which was empty at the time of the accident, would have weighed approximately 3730 kilograms. The Arbitrator determined that the truck would not have come close to weighing 4500 kilograms at the time of the accident. The capacity of the truck, according to the manufacturer, was 4989.5 kilograms.
[ 6 ] The question before the Arbitrator was, therefore, whether “gross vehicle weight” was the vehicle’s actual weight at the time of the accident or its capacity weight. The Arbitrator determined that “gross vehicle weight” meant capacity weight, not actual weight. This meant that Republic Western, the insurer of the truck, had to indemnify Economic Mutual for the accident benefits it paid to Ms. Bacchus. Republic Western now appeals to this Court. Republic Western’s position is that the Arbitrator erred and that “heavy commercial vehicle” refers to actual weight.
ANALYSIS
[ 7 ] The only issue before the Court is whether the learned Arbitrator erred in his interpretation of the term “heavy commercial vehicle”.
[ 8 ] The standard of appellate review of an arbitrator’s award is correctness on questions of law, and reasonableness in relation to questions of mixed fact and law: Lombard Canada Limited v. Royal and Sun Alliance Insurance (2008), 2007 82792 (ON SC) , 94 O.R. (3d) 62 (Sup.Ct.); Zurich Insurance Co. v. Personal Insurance Co. , 2009 26362 (ON SC) , [2009] O.J. No. 2157 (Sup.Ct.). Where the appeal concerns a review of an arbitrator’s award in a loss transfer scheme, the standard of review is correctness: Wawanesa Mutual Insurance Co. v. Axa Insurance (Canada) (2011), 2011 ONSC 4181 () , 107 O.R. (3d) 395 (Sup.Ct.).
[ 9 ] As the Arbitrator’s award in this case turned on a question of law, the standard of review is correctness.
[ 10 ] The theory behind the loss transfer scheme is simple: where a heavier vehicle has an accident with a lighter vehicle, the lighter vehicle (and the passengers) will usually suffer more damage and injury. This makes sense: in a contest between Harley Davidson and Mack Truck, for example, Harley Davidson will inevitably come out worst. The theory is reflected in s. 9(3) of the Regulation:
9(3) A second party insurer under a policy insuring a heavy commercial vehicle is obligated under section 275 of the Act to indemnify a first party insurer unless the person receiving statutory accident benefits from the first party insurer is claiming them under a policy insuring a heavy commercial vehicle.
[ 11 ] I start with the oft-cited rule for statutory interpretation is that found in Driedger’s The Construction of Statutes :
Today there is only one principle or approach, namely, the words of an Act are to be read in their entire context in their grammatical and ordinary sense harmoniously with the scheme of the Act, the object of the Act and the intention of Parliament.
[ 12 ] As is apparent from the definition, the object of the Regulation and the intention of the Legislature is not readily apparent from the words of the Regulation itself. “Gross vehicle weight” is not defined in the Act or the Regulation. It is, however, defined in at least three other statutes. Part VIII of the Highway Traffic Act , R.S.O. 1990, c. H.8 (“ the HTA ”), regulates the operation of vehicles on different types of Ontario roads by weight. Section 114(1) of the HTA defines “gross vehicle weight” as follows:
"gross vehicle weight" means the total weight in kilograms transmitted to the highway by a vehicle, or combination of vehicles, and load.
[ 13 ] The Fuel Tax Act, R.S.O. 1990, c. F.35 and the Gasoline Tax Act , R.S.O. 1990. c. G.5, both adopt the following definition:
"gross vehicle weight" means,
(a) the combined weight of the motor vehicle and load, or
(b) where the motor vehicle is drawing a trailer or trailers, the combined weight of the motor vehicle, trailer or trailers and load.
[ 14 ] The definition of “gross vehicle weight” was considered by Stach J. in Royal Insurance Co. v. Wawanesa Mutual Insurance Co., 2004 1833 (ON SC) , [2004] O.J. No. 2924, 14 C.C.L.I. (4 th ) 314 (Sup.Ct.). A 1984 GMC “Blue Bird” vehicle was involved in an accident with a school bus where a plate flew off the Blue Bird and crashed through the window of an oncoming school bus. Tragically, a child was killed and three injured. The Blue Bird had been modified to add a trailer hitch and at the time of the accident was hauling a compressor. The unmodified manufacturers gross vehicle weight rating was 4536 kilograms. At the time of the accident the truck likely weighed 4170 kilograms. The compressor and the vehicle together weighted 5430 kilograms. The arbitrator found that “gross vehicle weight” meant the vehicle’s actual weight rather than the manufacturer’s original weight ratings. Stach J., in upholding the arbitrator’s finding, stated as follows:
18 In considering the ordinary sense of the words "gross vehicle weight" the arbitrator found it neither necessary nor desirable to import the manufacturers' original weight ratings for this vehicle into the mix. He did accept evidence led at the arbitration hearing that it was "not uncommon" for owners to make modifications to these types of vehicles.
19 The arbitrator was mindful of the significant modification that Roy's Electric made to this particular vehicle, its actual weight (when put to its intended use after the modification) and its actual use. It was also practical for the arbitrator to consider a more temporal and use-oriented approach in ascribing meaning to the term "gross vehicle weight." As the arbitrator noted, Roy's Electric is required by law to obtain a vehicle permit for this vehicle. In order to obtain the permit, Roy's Electric had to produce a weigh slip showing its actual weight and, at the same time, to provide a declaration as to the maximum loaded weight intended.
20 When Roy's Electric acquired the vehicle permit, the modified parts truck weighed 3,400 kg. The maximum loaded weight intended was declared to be 4,500 kg. Both weights, actual and intended, are recorded on the vehicle permit. There are weigh stations and enforcement officers in all areas of the province of Ontario.
21 After considering the various approaches contended for by counsel, the arbitrator found the ordinary sense of the words "gross vehicle weight" to mean the combined loaded weight of the vehicle. This definition, incidentally, mirrors that found in section 1 of the Highway Traffic Act . I am persuaded that the arbitrator was correct both in his approach to analysis and in his definition of the term.
[ 15 ] The Court of Appeal dismissed a subsequent appeal and commented:
We think that both the arbitrator and Stach J. were correct in their interpretation of "gross vehicle weight" and "trailer". We see no basis to interfere.
See: Royal Insurance Co. v. Wawanesa Mutual Insurance Co ., 2005 22197 (ON CA) , [2005] O.J. No. 2639, 25 C.C.L.I. (4th) 120, 19 M.V.R. (5th) 161 (C.A.).
[ 16 ] In this case, the Arbitrator made the factual findings that I have already referred to, namely that the vehicle at the time of the accident had a capacity rating of 4989.5 kilograms and an actual weight of 3730 kilograms. The Arbitrator then analyzed the positions of the parties in terms of business logic in the insurance field. He found that using capacity weight would make business dealings simple, direct, and comprehensive. He found that weighing a vehicle after an accident to determine actual weight might be problematic or impossible, such as after a vehicle fire. The Arbitrator distinguished Royal Insurance on a factual basis.
[ 17 ] Mr. Kirby, for the Respondent Economic Mutual argues that the Arbitrator’s ruling must be seen in light of the fact that the Blue Bird in the Royal Insurance case was modified and carried a trailer. He argues that using actual weight here makes no sense. A commercial vehicle could start out loaded in the morning, make several runs picking up and unloading cargo, and therefore be either a heavy commercial vehicle or not a heavy commercial vehicle depending on the time of day. By using capacity weight, rather than actual weight, much of the guesswork is removed from the arbitration process. He argues that Royal Insurance can be confined to the situation of modified vehicles. Since manufacturer’s weight ratings are useless in the case of modified vehicles, and there are many modified vehicles on the roads of Ontario, it is appropriate to adopt a different definition for unmodified vehicles.
[ 18 ] There is much in Mr. Kirby’s argument that makes sense. If I adopt his characterization of “gross vehicle weight” as capacity weight, there will never be uncertainty about whether a vehicle in an accident is a “heavy commercial vehicle”. He argues that using capacity weight as the measurement it will add certainty and predictability to the process, a critical feature of Ontario’s loss transfer scheme.
[ 19 ] Respectfully, however, I do not accept this argument. As Mr. Kealy, for the Applicant/Appellant Republic Western argues, there is a certain amount of arbitrariness no matter which definition is chosen. He argues that it would be equally arbitrary to have one definition for modified vehicles, and another definition for unmodified vehicles. I agree. I would go further, and point out that in the Royal Insurance case the owner of the Blue Bird had to produce a weigh slip showing the modified vehicle’s actual weight and a declaration as to the maximum weight in order to obtain a vehicle permit. It is true that arbitrators will have to engage in an ex post facto fact-finding process in order to determine actual weight, but that is no different from what triers of fact do every day in courts and private arbitrations. Indeed, as Stach J. observed in Royal Insurance , arbitrators are chosen on the basis of their expertise and knowledge of the industry. I am very confident that arbitrators are more than capable of carrying out this fact-finding function.
[ 20 ] If the objective of the loss transfer scheme is to allocate statutory accident benefit payouts in a more equitable way, then surely using actual weight will account for damage actually, rather than theoretically caused by heavy commercial vehicles. Furthermore , it would make no sense to adopt a definition of “gross vehicle weight” for the purposes of one specific portion of the Regulation that is at odds from the definition used in a case that has been specifically approved by the Court of Appeal and in three statutes concerned with closely related regulatory matters.
[ 21 ] Finally, I see no basis to confine the authority of Royal Insurance to the situation of modified vehicles. Even if one could make the factual distinction between modified and unmodified vehicles, and accept that Royal Insurance is, therefore, not binding (which I do not accept) that case would surely still be very persuasive authority for the proposition that “gross vehicle weight” means actual weight.
[ 22 ] Accordingly, the Arbitrator should have followed the binding authority of Royal Insurance . In failing to do so, he erred.
DISPOSITION
[ 23 ] The application/appeal is allowed. Pursuant to an agreement between counsel, costs in the amount of $10,000.00 plus HST are payable to the Applicant/Appellant Republic Western. I am grateful to counsel for their helpful and cogent submissions.
GOLDSTEIN, J.
DATE: November 5, 2012
v. Economical Mutual Insurance, 2012 ONSC 5952
COURT FILE NO: CV-12-443986
DATE: 20121105
ONTARIO SUPERIOR COURT OF JUSTICE B E T W E E N:
Republic Western Insurance Company Applicant (Appellant in Appeal)
- and -
Economical Mutual Insurance Company Respondent (Respondent in Appeal)
JUDGMENT GOLDSTEIN J.
Released: November 5, 2012