ONTARIO SUPERIOR COURT OF JUSTICE

COURT FILE NO.: CV-11-429236
DATE: 20130717

BETWEEN:

The Dominion of canada general insurance company

Applicant/Respondent in Appeal

– and –

Her Majesty the queen in right of ontario as represented by the minister of finance (motor vehicle accident claims fund)

Respondent/Appellant in Appeal

D. Strigberger, for the Applicant/Respondent in Appeal

S. Sokol, for the Respondent/Appellant in Appeal

HEARD: June 5, 2013

Stinson J.

[1] This is an appeal of Arbitrator Bruce Robinson’s May 27, 2011 award in which he found that Robert Niemiec was not, on the date of his motor vehicle accident, financially dependent on his parents for the purposes of ss. 2(1) and (6) of O. Reg. 403/96, Statutory Accidents Benefits Schedule (“SABS”). As a result, the arbitrator found that Robert had no claim under his father’s automobile insurance policy with the Dominion of Canada General Insurance Company (“Dominion”). The arbitrator determined that the Motor Vehicle Claims Fund (“the Fund”) should pay statutory accident benefits to Robert arising out of his January 7, 2007 accident.

[2] The Fund appeals that decision pursuant to s. 45(3) of the Arbitration Act, 1991, S.O. 1991, c. 17. It asserts that the arbitrator made reviewable errors by failing to apply correctly the legal principles and factors set out in Miller v. Safeco (1984), 1984 2019 (ON SC), 48 O.R. (2d) 451 (H.C.J.) to the facts of the case. The Fund requests an order setting aside the arbitrator’s award and declaring that Robert was a dependent of his parents on January 7, 2007 for the purposes of ss. 2(1) and (6) of the SABS.

[3] Dominion responds that the arbitrator correctly followed established jurisprudence by applying the Miller v. Safeco factors and concluding that in the 12 months before his accident, Robert had the financial means to meet more than 51% of his monthly needs. Dominion requests an order dismissing the Fund’s appeal.

background

Facts

[4] On January 7, 2007, at 1:30 p.m. Robert was driving his recently-purchased, uninsured Suzuki Cantana motorcycle. He lost control, struck a median and was thrown 100-150 feet. Robert suffered what have been classified as “catastrophic” injuries, including a fractured right ankle, a collapsed lung, an internal laceration of his spleen, and the amputation of his left upper arm.

[5] On the date of his accident, Robert was working full time as a security guard with D.C. Security. He began this job in December 2004, after spending a semester at Centennial College, from August 2004 to December 2004. At the arbitration hearing, the Fund argued that Robert was planning to return to Centennial College in the fall of 2007, but the arbitrator found it a “matter of speculation” whether Robert would have returned to school. His 2006 tax return showed earnings of $20,040.

[6] At the time of his accident, Robert was living with his parents and his two siblings in their two-bedroom apartment. There is no question that Robert has a tight knit and supportive family. Notably, Robert was not expected to and did not contribute any of his earnings to the family expenses.

[7] Robert claimed accident benefits under his father’s insurance policy with Dominion as a dependent. Dominion declined the claim, taking the position that Robert was not “principally dependent” upon his parents for financial support at the time of the accident and, therefore, the Fund should pay Robert’s accident benefits. The dispute between Dominion and the Fund proceeded to arbitration.

The Decision Below

[8] Over four days, the arbitrator heard evidence from Robert, his parents, Boguslaw and Anna Niemiec, and Jeffrey C. Smith, an evaluator from BDO Canada LLP who conducted a dependency analysis. The arbitrator reviewed the circumstances of the accident as well as Robert’s and his parents’ incomes and financial needs. He examined the factors set out in Miller v. Safeco and concluded that Robert was not a dependent of his parents for the purposes of s. 2(6) of the SABS. In particular, he found that in the year before the accident, Robert’s earnings totalled more than 51% of his financial needs, whether using the numbers provided by Dominion or the numbers provided by the Fund.

Issues and analysis

Positions of the parties

[9] The Fund states that the appropriate standard of review is correctness. The Fund argues that the arbitrator made palpable and overriding errors in failing to apply appropriately the legal principles and criteria set out in Miller v. Safeco. It submits that the arbitrator erred by assessing Robert’s dependency as whether, in the one year period before his accident, Robert’s earnings met 51% of his financial needs. The Fund also claims that the arbitrator made other errors, such as incorrectly calculating Robert’s parents’ incomes.

[10] Dominion submits that the appropriate standard of review is reasonableness. Dominion argues that the arbitrator appropriately acknowledged the leading case of Miller v. Safeco and appropriately applied the factors in line with established jurisprudence. Dominion submits that the arbitrator correctly weighed the evidence and concluded that in the year before the accident, Robert was able to meet 51% of his monthly needs with his earnings, and so was not principally and dependent in the context of the regulation. Dominion states the appropriate standard of review is reasonableness.

[11] In view of the foregoing, the issues to resolve on this appeal are:

a. the appropriate standard of review; and

b. the application of Miller v. Safeco, and in particular:

i. the determination of the duration of dependency, and

ii. the calculation of the amount of dependency, with reference to the 51% test.

Applicable Statute and Regulations

[12] According to s. 268(5) of the Insurance Act, R.S.O. 1990, c. I.8, a dependant, as defined in the SABS, of the named insured “shall claim statutory accident benefits against the insurer under that policy”. In the SABS, a dependant is defined in the following manner:

2(1) In this Regulation, … “insured person”, in respect of a particular motor vehicle liability policy, means

(a) … any dependant of the named insured or spouse, if the … dependant, (i) is involved in an accident in or outside of Ontario that involves the insured automobile or another automobile …

2(6) For the purpose of this Regulation, a person is a dependant of another person if the person is principally dependent for financial support or care on the other person or the other person’s spouse. [Emphasis added.]

Analysis

Standard of Review

[13] The Fund argues that the appropriate standard of review is correctness because the arbitration involved a legal analysis of s. 2(6) of the SABS and the application of the legal principles in Miller v. Safeco. Even if the issues in the case are classified as mixed fact and law, the Fund submits that the arbitrator’s decision should be reviewed against the standard of correctness because the determinations in the arbitration were more of a legal than factual nature.

[14] Dominion submits that the applicable standard of review of a decision by an arbitrator under the Insurance Act is correctness on questions of law and reasonableness on questions of mixed fact and law, citing Oxford Mutual Insurance Co. v. Co-Operators General Insurance Co., (2006), 2006 37956 (ON CA), 83 O.R. (3d) 591, [2006] O.J. No. 4518 (C.A.), at para. 5. Because the arbitration involved the application of legal principles to Robert’s factual circumstances, Dominion argues that the issue was one of mixed fact and law, but was closer to a factual determination.

[15] In Oxford v. Co-Operators, the Court of Appeal reviewed an arbitrator’s decision as to whether an individual could be considered “principally dependent” under the SABS regulation, applying the Miller v. Safeco principles. In that case, Lang J.A. held, at para. 23, that the applicable standard of review was reasonableness, but in any event, the arbitrator’s decision was also correct:

In those circumstances, the question became one of applying the correct legal principles to his factual findings about the particular circumstances of Mr. Williams's relationship with his mother. Accordingly, the question before the arbitrator was one of mixed fact and law and was closer to a factual determination. See Liberty Mutual Insurance Co. v. Federation Insurance Co. of Canada, [2000] O.J. No. 1234 (C.A.). Given the special expertise of arbitrators in evaluating facts for a determination of dependency for statutory accident benefits entitlement, unless the arbitrator's decision was unreasonable, it was entitled to deference. In any event, in my view, the arbitrator's decision was also correct.

[16] In Gore Mutual Insurance Co. v. Co-Operators Insurance Co. (2008), 2008 46914 (ON SC), 93 O.R. (3d) 234, [2008] O.J. No. 360 (S.C.J.), at para. 5, Perrell J. also classified an arbitrator’s task of determining whether a person is principally dependent as one of mixed fact and law. In that case, Perrell J. held, at para. 4, that the arbitrator’s decision was both reasonable and correct.

[17] In the present case, I find that the arbitrator’s task of applying the appropriate legal principles to determine whether Robert was principally dependent within the meaning of s. 2(6) of the SABS involved questions of mixed fact and law. The arbitrator’s decision is therefore entitled to deference unless it was unreasonable. For the reasons that follow, I find that his application of the law followed established jurisprudence and was not unreasonable. I also find that his decision was correct.

Remedial Argument

[18] In its oral submissions, the Fund suggested that the regulation should be read in a remedial fashion, and especially so when the dispute is between a private insurer and the Fund.

[19] I accept, as did O’Brien J. in Miller v. Safeco, that this legislation was remedial, and intended to broaden insurance coverage. That said, I am unable to give it the broad reading proposed by the Fund, to the point of interpreting it to have the same meaning as the Family Coverage Protection Endorsement found in OPCF 44R (a standard form endorsement that is added to many automobile insurance policies to provide uninsured and underinsured coverage). OPCF 44R extends coverage to “a relative of the named insured or of his or her spouse, who resides in the same dwelling as the named insured.” By contrast, s. 2(6) of the SABS extends coverage only to those who are “principally dependent” on the insured or the insured’s spouse for financial support or care. Had the drafters intended to expand the SABS coverage to that extent, similar language would have been used.

[20] I also reject the Fund’s suggestion that the law should apply in a different manner when a dispute is between a private insurer and the government fund than when the dispute is between two private insurers. I see no valid reason to adjust the goal posts when the government happens to be playing. Should the government wish to alter the rules, it has the power to do so by means of a revised regulation or a legislative amendment.

Application of Miller v. Safeco

[21] The main source of dispute in this appeal is the appropriate application of the legal principles and criteria set out by O’Brien J. in Miller v. Safeco, as follows:

In my view, it would be preferable to approach the question of this interpretation on the basis the legislation was of a remedial nature, intended to broaden insurance coverage to include members of family units as persons insured under the policy.

Obviously, cases of this kind will be approached on their own particular facts. In my view, however, in considering who is an "insured person", the legislative intent should be kept in mind and, in addition, matters such as the amount and duration of the financial or other dependency, the financial or other needs of the claimant, the ability of the claimant to be self-supporting, and the general standard of living within the family unit should be considered.

[22] With the exception of “general standard of living within the family unit”, the Court of Appeal upheld this decision: (1985), 1985 2022 (ON CA), 50 O.R. (2d) 797, [1985] O.J. No. 2742.

[23] The Fund argues that the arbitrator failed to heed to the guiding principle in Miller v. Safeco that the legislation is to be remedial and broaden insurance coverage. For the reasons stated above, I decline to read this provision in the SABS in the remedial fashion suggested by the Fund. I also note, as pointed out by Dominion, while Miller v. Safeco remains the leading case on dependency, it dealt with a previous insurance scheme and did not deal with accident benefits.

[24] The Fund primarily argues that the arbitrator erred by not correctly applying the four legal principles set out in Miller v. Safeco: duration of dependency; amount of dependency; financial and other needs of alleged dependant; and, ability of the alleged dependant to be self-supporting. As discussed below, the Fund submits that the arbitrator incorrectly interpreted duration of dependency and amount of dependency in particular and arrived at the unreasonable and incorrect result that Robert was not a dependent for the purposes of the regulation.

[25] Dominion replies that the arbitrator reasonably and correctly applied the appropriate legal principles set out in Miller v. Safeco and the jurisprudence that has since developed to find that Robert is not principally dependent on his parents for the purposes of the regulation. While much of that jurisprudence is arbitral, it reviews and analyzes in a logical and persuasive fashion the correct approach to these issues. To the extent arbitral decisions have been reviewed in court, the legal principles they have espoused and articulated have largely been upheld.

[26] For the reasons that follow, I find that the arbitrator reasonably and correctly applied Miller v. Safeco and the 51% test to find that Robert was not principally dependent on his parents for the purposes of the SABS.

Duration of Dependency

[27] The Fund claims that the arbitrator erred by restricting his inquiry of dependency into the calendar year prior to the accident, 2006. The Fund submits that at the time of his accident, Robert was in a transitional period in his life and was, as he always had been, dependent on his parents for all of his financial needs. By looking only at the past year, the arbitrator failed to see that Robert was, in fact, dependent on his parents. At arbitration, the Fund suggested a duration of dependency of 20.5 years, Robert’s age at the time of the accident.

[28] Dominion submits that the arbitrator correctly chose the year before Robert’s accident as the timeframe within which to examine whether Robert was principally dependent on his parents. Dominion notes that all arbitration cases have used the duration of dependency criterion in Miller v. Safeco to select an appropriate timeframe by which to measure dependency. In this respect, they have followed Arbitrator Samis’ May 7, 1999 award in Federation Insurance Co. v. Liberty Mutual Insurance Co. which was affirmed by this court ([1999] O.J. No. 5777) and by the Court of Appeal ([2000] O.J. No. 1234). At the arbitration it suggested a measure of duration of either 5 months or 12 months.

[29] In Federation v. Liberty, at pg. 3, Arbitrator Samis explained the process of selecting an appropriate time frame as follows:

When examining the financial and other arrangements of a family or household it is necessary to set some time frame during which to examine income, expense and other matters which necessarily occur over a period of time. Relationships change from time to time, perhaps suddenly. Transient changes may alter matters over a short period, but not change the general nature of the relationship. A momentary snapshot would not yield any useful information about these time dependent relationships.

Choosing the appropriate time frame could be critical. The evaluation should be made by examining a period of time which fairly reflects the status of the parties at the time of the accident.

[30] This approach was followed in, among other cases, Motors Insurance Corporation v. York Fire & Casualty Insurance Company (December 24, 2009 award) where under the heading “Duration of Dependency”, Arbitrator Samworth stated, “The parties have agreed that a reasonable time period to determine the issue of dependency is one year.”

[31] In St. Paul Travellers v. York Fire & Casualty Insurance Co. (August 11, 2011 award), at pg. 3, Arbitrator Samis confirmed that the task at this stage is to “choose a timeframe that most fairly reflects the true status of the claimant on the date of the accident.” He explained:

The law with respect to dependency cases has evolved over the past two decades to recognize the challenges associated with applying the dependency principle to real life fact situations. Amongst the most challenging situations are those where the recent pre-accident history shows a changing environment. The case law calls for us to identify a time period for the purpose of evaluating dependency. It is often not useful, or even sometimes misleading, to look at circumstances in too narrow a time frame (often referred to as a “snapshot). To arrive at an appropriate determination of dependency status, we have to look at the status of a person’s needs and resources over a time period. Then, within a selected timeframe, we can approach the issue of financial needs and resources in order to determine the person’s dependency status.

Utilization of a short timeframe creates risk of error. We cannot always be confident that a short experience is a fair reflection of a person’s status.

The legal test for selection of a timeframe is that I should choose a timeframe that most fairly reflects the true status of the claimant on the date of the accident.

The first challenge therefore is to make a selection of an appropriate timeframe on the facts of this case. Clearly, selection of an appropriate timeframe is important, perhaps determinative, with respect to the dependency question. In this case it is a critical finding.

[32] In the present case, in years past, Robert had been a student with little or no income. At that stage he likely was dependent on his parents within the meaning of the Regulation. He had ceased to be a student by December 2004, however, and for a period of approximately 25 months prior to the accident, he worked full time. The Fund argued before the arbitrator that Robert was in a “transitional” phase of his life, and would likely have returned to school. The arbitrator, having heard the evidence first hand, declined to accept that argument. Instead, he held that Robert’s potential return to school did not detract from the fact that, for over two years, he had a full time job and earned an income. The arbitrator’s selection of a 12 month “window” over which to measure dependency bears a logical relation to the length of Robert’s status as a non-student and his potential return to a student status. It was, in my view, a finding that fairly reflected Robert’s true status and is entitled to deference. I also find it was correct on the evidence.

[33] I therefore hold that the arbitrator reasonably and correctly applied the law in Miller v. Safeco and the jurisprudence which has followed it by selecting the 12 months immediately prior to Robert’s accident as the “duration of dependency” or, more accurately, the appropriate timeframe within which to measure Robert’s possible dependency.

Amount of Dependency

[34] The Fund argues that the arbitrator erred in assessing Robert’s amount of dependency in a hypothetical manner without recognizing that, factually, in the past 12 months before his accident, Robert was financially dependent on his parents. He did not contribute any of his earnings to the family expenditures and was dependent on his parents for all of his financial needs. The Fund submits that Robert’s earnings for 2006 were between $16,200 and $16,720. The 51% rule, the Fund submits, has overtaken the Miller v. Safeco legal test and the arbitrator’s focus on it without giving any weight to the other Miller v. Safeco criteria was an error. According to the Fund, s. 2(6) of the SABS is phrased in the present tense, “is principally dependent”, rather than in the hypothetical, and at the time of Robert’s accident, he was dependent on his family for all of his financial needs.

[35] The Fund relies on Personal Insurance Co. v. Allstate Insurance Co., 2009 64827 (ON SC), [2009] O.J. No. 5021 (S.C.J.), where Gordon J. found that the son, who was studying in the United States on a full athletic scholarship, was nevertheless found to be principally dependent on his parents for financial support for the purposes of the SABS. In that case, the scholarship was clearly a third party benefit whereas in the present case, Robert had been working and earning income as a full time employee for more than two years. Thus, Robert’s income and means of independence were self-generated. I therefore distinguish Personal from the facts of the present case.

[36] Dominion submits that the arbitrator correctly followed established jurisprudence which has held if an individual is able to meet 51% of his financial needs with his own earnings, that individual will not be considered principally dependent for the purposes of SABS. Dominion assessed Robert’s financial needs as $8710 for the year (and the family’s financial needs at $38,850.76 for the year). Because Robert’s 2006 earnings were more than $16,000 net, the arbitrator was correct to find that Robert was able to meet 51% of his costs.

[37] The 51% test traces its origins to Federation v. Liberty, where Arbitrator Samis held, at pg. 5, that a person:

only becomes ‘principally’ dependent on another when that person provides for most of his needs. In other words, Jonathan can only be considered principally dependent for financial support if the cost of meeting Jonathan’s needs is more than twice Jonathan’s resources.

On appeal to this court, at pg. 2, O’Leary J. interpreted this phrase to mean that, “if Jonathan’s resources were sufficient to pay for 51% of his financial needs, then he would not be dependent on others” and held that this was a correct statement. As noted above, the Court of Appeal also upheld Arbitrator Samis’ approach as consistent with the decision in Miller v. Safeco and stated, at para. 23, that “There is nothing in the language of the present legislation that would dictate a different approach to measuring dependency.”

[38] The 51% test has been applied in most subsequent arbitrations, including Motors Insurance v. York, Security National Insurance Company v. AXA Insurance Canada (February 15, 2011 award), and more recently, St. Paul Traveller v. York, where Arbitrator Samis confirmed that:

A person’s dependency must be determined by comparing his/her resources (capacity or otherwise) with the cost of meeting his/her needs and determining whether the resources exceed 50% of the costs.

[39] For the purposes of the SABS regulation, then, the first calculation is whether the alleged dependant is capable of meeting at least 50% of his or her needs from his or her financial earnings. If so, the inquiry ends and the individual is not considered to be principally dependent for financial support pursuant to s. 2(6). It should be highlighted that the test is 51% and not 100%; as Arbitrator Samis confirmed at pg. 6 of St. Paul Traveller v. York, “a person may well be in need of other resources to meet the full cost of his/her needs, but this does not create ‘dependency’ for SABS priority purposes.”

[40] If Robert was capable of meeting at least 51% of his own financial needs with his own financial earnings within the relevant time period, he would not be considered a dependent of his parents, regardless of whether his parents were, in fact, providing for all of his financial needs. This approach was confirmed by Arbitrator Samis at pgs. 9-10 of Insurance Corporation of British Columbia v. Federated Insurance Co. of Canada, (July 3, 2009 Award):

The mere fact that parents might have provided more than the child does not mean that the child received more than 50% of the cost of his basic needs from the parents. This would only be so if the aggregate amount met the basic needs, and no more. Only then would the mathematics yield an answer that is called for by the regulation. …

In my view, we must strive to find the cost of meeting Craig’s needs and then compare that with his resources. If, and only if, his resources are less than 50% of the cost of meeting the needs do we look further for possible dependency on others. When looking at resources we must look at earnings, but might also take into account capacity to earn. … Again, I reiterate that the dependency in this context means dependency for more than 50 percent of meeting needs.

I hasten to add that it is clear on the record that Craig T. was very much in need of the help and support of his family from time to time over the years preceding the accident. Their financial support was no doubt important, but in my opinion, it did not create principal financial dependency support in the context of the terminology of the regulation.

[41] In the present case, I find that the arbitrator reasonably and correctly followed the established jurisprudence by confirming that the appropriate test is whether Robert is able to meet at least 51% of his financial needs with his earnings over the relevant time period. Once again, the decision of the arbitrator is entitled to deference.

Financial and Other Needs and Ability to be Self-Supporting

[42] The arbitrator went on to consider the final two Miller v. Safeco criteria: Robert’s financial and other needs and his ability to be self-supporting.

[43] The arbitrator accepted Dominion’s calculations, which indicated that Robert’s annual financial needs were $8,170. His finding in this regard is reasonable and is entitled to deference. As Robert’s earnings of over $16,000 per year amounted to more than 51% his needs (51% of $8,170 = $4,085), the arbitrator concluded that Robert was not principally dependent on his parents for financial support at the time of the accident.

[44] The Fund submitted that for 2006, Robert’s expenses were $17,482.52, his share of the family expenses were $6,564, and he required $28,240 to be self-sufficient. The arbitrator noted that even using the numbers submitted by the Fund, Robert earned more than 51% of his financial needs in the 12 months before his accident (51% of $28,240 = $14,402) compared to earnings of more than $16,000.00.

[45] Finally, the arbitrator concluded that Robert was a healthy young man gainfully employed in a full-time capacity, earning more than $16,000.00 a year. The arbitrator concluded that Robert had the ability and was self-supporting, as his earnings amounted to more than 51% of his financial needs in the 12 months before his accident.

[46] I find no error in Arbitrator Robinson’s calculation of Robert’s financial needs and his ability to be self-supporting. To the contrary, I find they are correct.

[47] In view of the foregoing determinations, it is unnecessary to address the submissions of the Fund regarding the correct calculation of the income of Robert’s parents.

Conclusion

[48] For the reasons stated above, I find that the arbitrator’s decision was reasonable, correct and in accordance with established jurisprudence. I dismiss the Fund’s appeal and uphold Arbitrator Robinson’s finding that Robert was