The Dominion of Canada General Insurance Company v. Optimum Insurance Company

[Indexed as: Dominion of Canada General Insurance Co. v. Optimum Insurance Co.]

Ontario Reports

Ontario Superior Court of Justice,

Perell J.

February 8, 2016

129 O.R. (3d) 435 | 2016 ONSC 985

Case Summary

Insurance — Automobile insurance — Statutory accident benefits — Insurer purporting to change motor vehicle liability policy which contained statutory accident benefits ("SABs") coverage to comprehensive [page436] policy without SABs coverage — Insurer not using form OPCF 16 — Arbitrator correctly ruling that policy continued to be motor vehicle liability policy with SABs coverage and that insurer could only eliminate SABs coverage by cancelling policy and issuing new non-motor vehicle liability policy.

Two statutory accident benefits priority disputes between Dominion and Optimum which went to arbitration were based on similar facts. In each case, Dominion issued a motor vehicle liability policy that contained SABs coverage, and before a motor vehicle accident occurred, the coverage on the policy was reduced to comprehensive coverage, without SABs. Dominion did not use an OPCF 16 -- Suspension of Coverage form in reducing the coverage in either case. The arbitrator ruled that the failure to use the OPCF 16 resulted in the policies continuing to be motor vehicle liability policies containing SABs coverage. The arbitrator concluded that Dominion was liable to pay SABs. Dominion appealed.

Held, the appeals should be dismissed.

What was once a motor vehicle liability policy cannot be changed or suspended or renewed without SABs coverage continuing. The insurer can only avoid SABs coverage by cancelling the motor vehicle liability policy and issuing a brand new policy that is not a motor vehicle liability policy.

Certas v. CGU/Aviva, December 5, 2005 (Arbitrator Samis); State Farm v. TD General Insurance Co., August 2011 (Arbitrator Scott), consd

Other cases referred to

Enterprise Rent-a-Car v. ING, November 2006 (Arbitrator Jones); Jevco v. State Farm, July 23, 2013 (Arbitrator Bialkowski); Oxford Mutual Insurance Co. v. Co-operators General Insurance Co. (2006), 2006 CanLII 37956 (ON CA), 83 O.R. (3d) 591, [2006] O.J. No. 4518, 43 C.C.L.I. (4th) 199, [2007] I.L.R. I-4564, 40 M.V.R. (5th) 1, 152 A.C.W.S. (3d) 912 (C.A.); Patterson v. Gallant, 1994 CanLII 45 (SCC), [1994] 3 S.C.R. 1080, [1994] S.C.J. No. 111, 120 D.L.R. (4th) 1, 174 N.R. 380, J.E. 95-46, 125 Nfld. & P.E.I.R. 1, 26 C.C.L.I. (2D) 165, [1995] I.L.R. 1-3133, 7 M.V.R. (3d) 157, 52 A.C.W.S. (3d) 184

Statutes referred to

Insurance Act, R.S.O. 1990, c. I.8 [as am.], s. 1 [as am.], Part VI [as am.], ss. 227 [as am.], 228, 268(1) [as am.]

APPEALS from decisions of an arbitrator.

D'Arcy McGoey, for applicant.

Amanda M. Lennox and Andrew Smith, for respondent.

PERELL J.: —

A. Introduction

[1] Before the court are two appeals from decisions of Arbitrator Ken Bialkowski dated April 25, 2015. The underlying facts for the cases are quite similar and the legal issues to be determined for the cases are identical. Both cases concern a dispute between the Dominion of Canada General Insurance Company ("Dominion") and Optimum Insurance Company ("Optimum") [page437] about liability for the payment of statutory accident benefits ("SABs") associated with motor vehicle insurance policies under Ontario's no-fault insurance scheme under the Insurance Act, R.S.O. 1990, c. I.8. In both cases, which were priority of payment disputes, the arbitrator concluded that Dominion was liable to pay the SABs.

[2] In both appeals, the parties agree on the relevant decision precedents from the arbitration legal community, but they extrapolate the legal principles from those decisions about the Insurance Act, its regulations and its forms differently.

[3] In both appeals, the major question is whether the so-called "comprehensive coverage" motor vehicle insurance policies issued by Dominion for its insureds were continuations of "motor vehicle liability" policies for which there is SABs coverage. Put differently, the question in both appeals is: how, if at all, can an insurer change a "motor vehicle liability policy", which provides SABs coverage, to a "comprehensive coverage motor vehicle policy", which does not provide SABs coverage?

[4] The parties agree that an insurer can issue a comprehensive coverage motor vehicle policy that does not provide SABs coverage; however, the parties disagree about how this can be brought about. The appellant Dominion's argument is that a motor vehicle liability policy with SABs coverage can be renewed as a comprehensive coverage motor vehicle policy without SABs coverage. In contrast, Optimum's argument is that what was once a motor vehicle liability policy cannot be changed or suspended or renewed without SABs coverage continuing. In effect, it is Optimum's argument that once a motor vehicle liability policy, always a motor vehicle liability policy. Optimum argued that the once an insurer issues a motor vehicle liability policy, the insurer can only avoid SABs coverage by cancelling the motor vehicle liability policy and issuing a brand new policy (new application, new policy number, etc.) that is not a motor vehicle liability policy.

[5] I agree with Optimum and, therefore, I dismiss the appeals in both cases.

B. Factual, Procedural and Jurisdictional Background

1. Factual background

[6] The parties agreed on the relevant facts and submitted an agreed statement of facts to the arbitrator. The claimants, i.e., the recipient of the SABs, were Dalia De Paz and Lawrence Robinson. I have set out the facts of the De Paz case and of the [page438] Lawrence case below. As will appear, the essential facts are similar but not identical. As will be seen, the legal issues are identical.

[Editor's Note: This table could not be reproduced online.]

[page440]

[7] To understand the analysis and discussion below, certain facts need to be kept in mind, namely

in both cases, before the respective accidents, Dominion had issued motor vehicle liability policies that provided SABs coverage to Ms. De Paz and Mr. Robinson respectively;

before the accident, both Mr. De Paz and Ms. McDougall reduced the coverage on the respective Dominion policies to a comprehensive coverage;

in altering the insurance coverage, neither Mr. De Paz nor Ms. McDougall used form OPCF 16 -- Suspension of Coverage;

before the accident both Mr. De Paz (twice) and Ms. McDougall (once) renewed their insurance policies with only comprehensive coverage;

the accidents occurred after the renewals of the insurance policies as comprehensive coverage policies.

2. Procedural and jurisdictional background

[8] Dominion and Optimum have signed arbitration agreements that reserve the right to appeal an arbitrator's decision to the Superior Court on issues of law or mixed fact and law.

[9] The standard of review for decisions of arbitrators under the Insurance Act is correctness on questions of law and reasonableness on questions of mixed fact and law: Oxford Mutual Insurance Co. v. Co-operators General Insurance Co. (2006), 2006 CanLII 37956 (ON CA), 83 O.R. (3d) 591, [2006] O.J. No. 4518 (C.A.).

C. Discussion and Analysis

1. Position of the parties

[10] Dominion's argument is that the renewal of what had been a motor vehicle liability policy as a comprehensive motor vehicle insurance policy constitutes the creation of a new policy of insurance with no SABs coverage. In advancing its argument, Dominion relies on State Farm v. TD General Insurance Co. (August 2011, Arbitrator Scott).

[11] Optimum does not dispute that the renewal of an insurance policy constitutes a new policy of insurance, but it submits that for the purposes of the Insurance Act, the new insurance policy as the successor of what once was a liability motor vehicle insurance policy continues to be liable to provide SABs coverage. [page441]

[12] Optimum submits that an insurer cannot reduce coverage without using an OPCF 16. Optimum submits that OPCF 16 is the prescribed form that must be used to reduce a motor vehicle policy to comprehensive coverage; it, thus, submits that Dominion's failure to use the prescribed form entails that the renewed Dominion policy was a motor vehicle liability policy. Further, Optimum submits that if Dominion had used OPCF 16, as it was required to do, the Dominion policy would still have been a motor vehicle liability policy.

[13] Optimum submits that there is no means to convert a motor vehicle liability policy into comprehensive coverage; rather, the motor vehicle liability policy must be cancelled and a brand new policy purchased. The position of Optimum is set out in paras. 32 and 33 of its factum for Ms. De Paz. The position is similar for Mr. Robinson. Paragraphs 32 and 33 of the De Paz factum state, with my emphasis added:

32. [Dominion] is arguing that there is no authority for the proposition that OPCF-16 must be used "in entering into a new "non-liability" contract of insurance (emphasis added). [Optimum] agrees that an OPCF-16 is not required when entering into a non-liability contract of insurance. However, [Dominion] is ignoring the fact that Mr. De Paz's contract of insurance was a motor vehicle liability contract of insurance and the failure to use the OPCF-16 to reduce the policy of comprehensive coverage results in the policy continuing to be a motor vehicle liability policy of insurance containing SABS coverage at the time of each renewal. Dominion policy of insurance no. APP1416140 was never a "non-liability only" contract of insurance.

33. If [Dominion] wished to eliminate SABS coverage while maintaining comprehensive coverage [it] would be required to cancel Dominion policy of insurance no. APP1416140 and issue a non-motor vehicle liability policy. If [Dominion] wished to maintain Dominion policy of insurance APP1416140 and reduce the policy to comprehensive coverage, [it] must use an OPCF-16 endorsement. [Dominion] did neither.

34. Statutory background

[14] Under Part VI of the Insurance Act and associated regulations, the content of an automobile insurance policy is prescribed. Pursuant to the legislation, there is a standard form contract that provides different types of automobile insurance coverage, and an insured has choices about the extent of coverage that he or she will purchase. Typically, an owner of a vehicle selects motor vehicle liability coverage because operated vehicles are required to have liability insurance. The owner of a vehicle may also purchase "collision insurance" covering damage to the vehicle if it is involved in an accident. An owner may also purchase "comprehensive coverage" that covers theft and miscellaneous causes of damage to the vehicle (viz., fire, falling tree, storm damage, etc.). [page442]

[15] Section 1 of the Insurance Act defines "motor vehicle liability policy" as follows:

"Motor Vehicle Liability Policy" means a policy or part of a policy evidencing a contract insuring

(a) the owner or driver of an automobile, or

(b) a person who is not the owner or driver thereof where the automobile is being used or operated by that person's employee or agent or any other person on that person's behalf,

against liability arising out of bodily injury to or the death of a person or loss or damage to property caused by an automobile or the use or operation thereof.

[16] Under s. 268(1) of the Insurance Act, every motor vehicle liability policy is deemed to provide SABs coverage. Section 268(1) states:

268(1) Every contract evidenced by a motor vehicle liability policy, including every such contract in force when the Statutory Accident Benefits Schedule is made or amended, shall be deemed to provide for the statutory accident benefits set out in the Schedule and any amendments to the Schedule, subject to the terms, conditions, provisions, exclusions and limits set out in that Schedule.

[17] However, not every motor vehicle policy is a motor vehicle liability policy. It is possible and lawful for a car owner to obtain insurance coverage to provide coverage just for damage or theft of the vehicle and such a policy would not be a "motor vehicle liability policy" under s. 268 of the Act. See Certas v. CGU/Aviva (December 5, 2005, Arbitrator Samis).

[18] Although a car owner is required to obtain a motor vehicle liability policy that would provide coverage for personal injuries caused by operating the vehicle, a car owner is not required to obtain a motor vehicle liability policy if the car owner does not use his or her vehicle on the highway. Visualize: a car owner who stored his or her vehicle for the winter or a car owner that collected but did not drive his or her vehicles on the highway does not require a motor vehicle liability policy. As revealed by the facts of both cases now before the court, the substantially lower underwriting risk for a non-liability motor vehicle policy results in substantially lower premiums than the premiums for a motor vehicle liability policy.

[19] In the immediate cases, the parties agree that in the first instance, it would be possible for an owner of a motor vehicle to purchase just comprehensive insurance coverage and if he or she did so then that policy would provide no SABs coverage for the insured and no SABs liability for the insurer. But that scenario did not occur in either of the two cases before the court. In both cases, the insured at one time had purchased a motor vehicle [page443] liability policy but renewed the policy with only comprehensive coverage. In both cases, the reduction of the extent of coverage was accomplished without the use of a form entitled OPCF 16 -- Suspension of Coverage. (I have attached OPCF 16 and also OPCF 17 -- Reinstatement of Coverage as Schedule "A" to these reasons for decision.)

[20] Sections 227 and 228 of the Insurance Act address the creation and use of forms for motor vehicle insurance policies. Sections 227 and 228 state:

Approval of forms

227(1) An insurer shall not use a form of any of the following documents in respect of automobile insurance unless the form has been approved by the Superintendent:

1. An application for insurance.

2. A policy, endorsement or renewal.

3. A claims form.

4. A continuation certificate.

Application for insurance

(1.1) Paragraph 1 of subsection (1) does not apply if, in accordance with the regulations, the insurer uses a form of application for insurance that is prescribed by the regulations.

Approval of policies in special cases

(2) Where, in the opinion of the Superintendent, any provision of this Part, including any statutory condition, is wholly or partly inappropriate to the requirements of a contract or is inapplicable by reason of the requirements of any Act, he or she may approve a form of policy, or part thereof, or endorsement evidencing a contract sufficient or appropriate to insure the risks required or proposed to be insured, and the contract evidenced by the policy or endorsement in the form so approved is effective and binding according to its terms even if those terms are inconsistent with, vary, omit or add to any provision or condition of this Part.

Approval of extensions

(3) The Superintendent may, if he or she considers it to be in the public interest, approve a form of motor vehicle liability policy or endorsement thereto that extends the insurance beyond that prescribed in this Part.

Conditions of approval of extension

(4) The Superintendent, in granting an approval under subsection (3), may require the insurer to charge an additional premium for the extension and to state that fact in the policy or in any endorsement.

Standard policies

(5) The Superintendent may approve the form of standard policies containing insuring agreements and provisions in conformity with this Part for use by insurers in general. [page444]

Publication

(6) If the Superintendent approves a form of standard policy, the Superintendent shall cause a copy of the form to be published in The Ontario Gazette, but it is not necessary to publish endorsement forms approved for use with the standard policy.

Revocation of approval

(7) The Superintendent may revoke an approval given under this section, and, upon notification of the revocation in writing, no insurer shall thereafter use or deliver a form that contravenes the notification.

Reason for decision

(8) The Superintendent shall, on request of any interested insurer, specify in writing his or her reasons for granting, refusing or revoking an approval of a form.

Application form

228. Where so required by the regulations, no insurer shall use a form of application other than a prescribed form.

229. Analysis

[21] Relying on Certas v. CGU/Aviva and the series of cases that followed it, including the decision of the arbitrator in the immediate case, Optimum submits that in the immediate cases the insureds' change from a motor vehicle liability policy to a comprehensive policy did not shed the policies of their SABs coverage and Dominion's attendant liability.

[22] For its part, Dominion does not dispute the authority of Certas v. CGU/Aviva, which is a case about the significance of not using OPCF 16. Rather, Dominion distinguishes the case and its argument is that it was not necessary to use OPCF 16 to effect a change of coverage and indeed Dominion submits it is a non sequitur; i.e., it is not logical to suggest that the OPCF 16 be used for the circumstances of these cases, where the former motor vehicle liability policy was renewed only as a comprehensive coverage policy. In making this argument, Dominion relies on the principle from Patterson v. Gallant 1994 CanLII 45 (SCC), [1994] 3 S.C.R. 1080, [1994] S.C.J. No. 111 that each successive renewal of a motor vehicle insurance policy constitutes a new contract.

[23] Optimum's counterargument is that while it does not dispute the principle from Patterson v. Gallant, the principle begs the question about what is the nature of the new contract being created. Optimum submits that as a matter of contracting that is regulated by statute, the insurance contract continues as a motor vehicle liability policy with attendant SABs coverage and SABs liability for the insurer. [page445]

[24] To resolve the debate between the parties and to determine whether the arbitrator in the two cases now before the court was correct in his decisions, it is necessary to examine closely what Certas v. CGU/Aviva and its line of cases decided and to determine whether or not these decisions are a correct expression of the law.

[25] Before turning to analyze Certas v. CGU/Aviva, it is worth noting that Certas did not involve a renewal of an insurance policy and it is worth repeating that neither party in the immediate cases disagrees with what Arbitrator Samis decided for the Certas case in particular; rather, the parties in the immediate appeals extrapolate the principles from that case differently for cases that do involve renewals of insurance policies, like the immediate cases.

[26] The facts of Certas v. CGU/Aviva were that Oleg Michnevich Jr. was an 11-year-old riding a bicycle when on September 23, 2002, he was struck by a vehicle insured by CGU/ Aviva. At the time of the accident, Oleg Jr. was an insured under a Certas policy that at one time had been a motor vehicle liability policy. However, on August 22, 2001, before the accident, Oleg Sr. requested that only comprehensive coverage should be continued in force for his vehicle. Certas responded to this request by issuing a Certificate of Automobile Insurance, which it described as a policy endorsement. Certas did not use OPCF 16 to effect the change to the insurance policy's coverage. It was after the endorsement was issued that Oleg Jr. was involved in the motor vehicle accident. Certas paid the SABs for Oleg Jr. and then asked to be reimbursed by CGU/Aviva. When CGU/Aviva refused to assume responsibility for the SABs, Certas commenced arbitration.

[27] On the arbitration, Arbitrator Samis ruled that Certas was liable for the SABs and there should be no reimbursement. The arbitrator's reasoning was as follows. Certas' intention was to change the coverage on its policy to remove motor vehicle liability coverage. Under the statutory regime for motor vehicle insurance, the approved and exclusive form to suspend coverage is OPCF 16, but Certas had used an endorsement, which was a confusing and unclear document. Using the endorsement was improper and could not suspend coverage beyond the suspension that would have been possible had the proper form been used. Had OPCF 16 been used, some -- but not all -- liability insurance would have been removed. Because some liability insurance remained, along with the comprehensive coverage that was being continued, the insurance policy continued to be [page446] a motor vehicle liability policy and, therefore, Certas was liable for the SABs.

[28] For present purposes, the passages found on pp. 5, 6 and 7 of Arbitrator Samis' decision are crucial in understanding his holdings and his reasoning; in these passages, the arbitrator stated, with my emphasis added:

On the other hand the Superintendent of Insurance has approved a form of endorsement for this purpose Entitled OPCF 16 Suspension of Coverage. This document is an approved form issued by the Superintendent pursuant to Section 227 of the Insurance Act. It succinctly describes its purpose as follows:

This change is part of your policy. It cancels coverage for the use or operation of the described automobile until coverage is reinstated.

Section 2 of the endorsement describes the various changes. It is notable that the coverage deleted does not include Comprehensive Coverage. In other words, the coverage that would be found under a policy that includes only fire and theft coverage continues to be in force. The endorsement does delete liability coverage and accident benefits coverage for the use or operation of the described automobile. In other words, this approved endorsement which continues Comprehensive Coverage in force does not contemplate total elimination of liability coverage or accident benefits coverage. The approved endorsement would require an insurer to carry on with some residual risk to the extent that there is limited coverage under the policy for Statutory Accident Benefits or for liability coverage that may arise out the use or operation of some other automobile.

If Certas had issued the approved form OPCF 16 instead of the documentation proffered Certas would remain as an insurer on risk for accident benefits coverage with respect to the claims of the dependant son of the named insured Oleg Michnevich.

While it may be that Certas certificate of automobile insurance is also a form which is approved by the superintendent, the regulator has specified a particular form to be used when a person intends to suspend the coverage except for Comprehensive Coverage. By the terms and conditions of that form the Superintendent requires the person to continue to have residual liability coverage and accident benefits coverage and other features. If it is permissible for Certas to delete coverage in the manner in which they have purported to do so, then the approved form the OPCF 16 serves no purpose whatsoever. It is obviously a useful and purposeful document. It explains in reasonably clear language the effect of the changes to the contract. It requires the signature of the insured person thereby communicating the import of the decision taken.

There is an approved endorsement which deletes coverage except for comprehensive coverage but which leaves in force certain residual protection for the insured person In effect the approved form deals with the common event where an insured person decides not to use a vehicle for a period of time. Because the vehicle will be stored and is still a property in which they have an insurable interest the people like to continue to have protection against [page447] fire and theft by continuing the comprehensive feature of coverage. Regulators have seen that it is important for people that have coverage under suspension to continue to have residual protection for liability coverage and accident benefits coverage. Hence regulators have issued the OPCF 16 to provide this residual protection. Certas by taking the approach that it did purported to delete the residual liability coverage. The residual liability coverage would arise if Oleg Michnevich incurred a liability while being the driver of someone else's vehicle. In that circumstance, the insurer of the vehicle would be primary insurer and Oleg Michnevich's own insurer would provide excess protection for Mr Michnevich while he was driving the vehicle. Similarly, pursuant to the approved endorsement there would be some coverage for accident benefits but only when the accident benefits do not arise out of the use or operation of the described automobile. In this limited way coverage is extended beyond comprehensive coverage in order to protect interests of the insured person that the regulator considers in need of protection. In my view the transaction entered into by Certas and Michnevich on August 22 2002 is substantially the same transaction which is intended to be governed by the OPCF 16. It is for the most part a suspension of liability coverage and other coverage other than comprehensive. As such in my view Section 227 of the Act requires that the insurer use the available approved form for this purpose the OPCF 16.

[29] Certas v. CGU/Aviva was followed in Enterprise Rent-a-Car v. ING (November 2006, Arbitrator Jones). In this case, which had similar facts to those in the Certas case, Arbitrator Jones reiterated the reasoning of Arbitrator Samis. Arbitrator Jones stated, with my emphasis added:

Counsel for ING argues that the policyholder got exactly what he wanted when he requested comprehensive insurance only. This may or may not be the case. Insurance coverage in Ontario is a highly complex and highly regulated industry. The average consumer will not necessarily have a complete understanding of the complexities of insurance coverage including when accident benefit coverage continues and when it does not. Because of the complexities involved the legislature by means of Section 227 of the Insurance Act has required that changes be made in accordance with the approved forms. Those forms make it relatively clear what coverage is being removed and accordingly what remains. It required that the policyholder sign and return the form.

In short, the legislature by way of Section 227 of the Insurance Act required that changes be made in accordance with the approved form. Because of the complexities of insurance coverage in Ontario there are good reasons for the use of such forms. If ING had used the correct form the statutory accident benefit coverage would have continued to be in place for limited purposes including the factual situation presented in this case. ING cannot benefit by its failure to use the required form. Accordingly, the benefits that would have been in place had the form been used should be deemed to have remained in place and accordingly ING is responsible for payment of accident benefits to or on behalf of the claimant. [page448]

[30] The next case in the Certas line of cases is Jevco v. State Farm (July 23, 2013), a decision of Arbitrator Bialkowski, who is the arbitrator in the immediate cases of De Paz and Robinson.

[31] In Jevco v. State Farm, Jevco was the insurer of the driver and owner of the vehicle (Mr. Azizi) in which Ms. Faizi was injured in a car accident. The driver of the Jevco insured vehicle was Ms. Faizi's husband, and he owned another vehicle insured by State Farm under whose policy Ms. Faizi was an insured. Before the accident, the State Farm policy had been a motor vehicle liability policy, but Ms. Faizi's husband requested a suspension of all coverage and State Farm affected this change by issuing an "Acknowledgement of Vehicle Form". State Farm did not use an OPCF 16. The accident occurred while the policy was under suspension.

[32] In these circumstances, the arbitrator followed Certas v. CGU/Aviva and Enterprise Rent-a-Car v. ING, and he stated:

I do not accept the submissions advanced by State Farm. Although the cases may he factually distinguishable, I accept the general proposition that approved forms must be used to modify an existing policy. I am satisfied that Section 227 of the Insurance Act requires all policy endorsements be completed in a form approved by the Superintendent. It is not that Mr. Azizi did not have options available to him. In April 2010, Mr. Azizi had the option of terminating his policy (which cancels all coverage) as contemplated by Section 11(2) of OAP 1 -- Ontario Automobile Policy or, in the alternative execute an OPCF 16 -- Suspension of Coverage, which would maintain comprehensive coverage and certain residual coverages.

In any event, I am not satisfied that the form used by State Farm (Acknowledgement of Vehicle Withdrawn from Use form) was clear enough on its face to eliminate all coverage including accident benefits coverage. The initial policy included accident benefits coverage. The State Farm form suspended accident benefits coverage but there is an asterisk limiting Coverages Suspended with the limiting words set out in the bottom left hand corner of the form which reads as follows:

Liability Coverage Accident Benefits Uninsured Automobile and Direct Compensation Property Damage coverages are suspended with respect only to the use or operation of:

1. The Described Automobile

2. A Newly Acquired Automobile and

3. A Temporary Substitute Automobile as defined in the policy

I interpret this to mean the various coverages are only suspended where they arise out of the use or operation of the described automobile a newly acquired automobile or a temporary substitute vehicle.

[33] For present purposes, I emphasize several aspects of Arbitrator Bialkowski's decision in Jevco v. State Farm. He accepted the proposition that changes in policy coverage be affected by [page449] the use of approved forms, which State Farm did not use. He concluded that, in any event, the form used by State Farm was not clear enough to remove all motor vehicle liability coverage, and he observed that there is a way to remove all coverage by terminating the policy.

[34] Before completing a review of the case law and returning momentarily to the appeals in the immediate cases, as I understand Dominion's argument, it does not dispute the correctness of the arbitrator's decision in Certas v. CGU/ Aviva, but it submits that the situations of Ms. De Paz and Mr. Robinson in the cases now under appeal are different because their respective insurance policies were not only changed to comprehensive coverage, but the policies were also subsequently renewed. Dominion asserts that a renewed policy is in law a fresh contracting.

[35] For the immediate appeals, Dominion relies on the decision of Arbitrator Scott in State Farm v. TD General Insurance Co. (August 2011), supra.

[36] The facts of State Farm v. TD General Insurance Co. were that Elvira Tokaeva was a passenger in a vehicle insured by State Farm that was involved in a collision. At the time of the accident, she held a policy of insurance with TD General Insurance that provided only comprehensive coverage. Several times before the accident, Ms. Tokaeva had changed her policy coverage from liability to comprehensive and back again to liability and then back again to comprehensive. For one of these changes, she had been offered the use of form OPCF 16 but she had declined. Thus, the policy was renewed sometimes with liability coverage and sometimes with just comprehensive coverage. At the time of the accident, Ms. Tokaeva only had comprehensive coverage from TD General Insurance. In a priority dispute, Arbitrator Scott held that TD General Insurance was not liable for SABs notwithstanding that form OPCF 16 had never been actually used.

[37] After reviewing the Certas v. CGU/Aviva line of cases, Arbitrator Scott found as a fact that at the time of the accident Ms. Tokaeva had the insurance coverage that she had asked for. He reasoned that there was an inconsistency in the decisions to the effect that use of an OPCF 16 was mandatory because the decisions held that the resulting comprehensive coverage also included some liability coverage but these decisions and the case law inconsistently accepted that there could be comprehensive coverage without any liability coverage. He stated that an insured should be able to purchase the coverage he or she wants from an insurer. At pp. 12 and 13 of his decision, Arbitrator Scott [page450] described how just comprehensive coverage could be purchased; he stated:

I pause to note that statutory Conditions -- Automobile Insurance, Ontario Regulation 777/93, Section 11(2) deals with termination of a policy. Section 11(2) provides that an insured may terminate a contract "at any time on request."

It is my view that when an insured seeks to reduce coverage to comprehensive only, an insurer and/or a broker likely has an obligation to the injured to describe the availability of an OPCF-16 and the enhanced coverage it provides. As long as the endorsement and the provisions are adequately explained, an insured can then make an informed decision. If enhanced coverage is chosen, the approved form must be used.

Again, an insured seeking to reduce comprehensive coverage is likely entitled, from a broker or an insurer, to be informed about the availability and benefits coverage of an OPCF-16. It is not my view that an insured must purchase the additional coverage when reducing the coverage mid-policy.

In conclusion, at the time of the motor vehicle accident in issue, the TD policy had only collision coverage. The Certificate of Insurance issued at the time of renewal, for the policy covering the date of the loss, which was not changed in any way from the renewal through the date of the loss, clearly provided only comprehensive coverage. The insured, when applying for Accident Benefits, believed that she did not have any other coverage to turn to. As a result, State Farm [not TD General Insurance] is obliged to pay Accident Benefits [SABs][.]

[38] As I read Arbitrator Scott's decision, it does not assist Dominion in the immediate cases except to the extent that it supports the propositions (1) that OPCF 16, which does not eliminate all liability coverage, is not mandatory; and (2) that it is possible to eliminate liability coverage mid-policy. The effect of renewing a policy, i.e., that a renewal is a new contracting, does not play a role in the arbitrator's decision, and, rather, the key to his decision is the proposition that provided that the insured makes an informed decision, including being informed about the coverage available under OPCF 16, the insured can decide to purchase a comprehensive coverage without the enhanced coverage of some liability coverage available under OPCF 16. In State Farm v. TD General Insurance Co., the insured was offered OPCF 16, rejected it and made an informed decision about comprehensive only coverage.

[39] This brings the discussion and the analysis to the arbitrator's decisions in the immediate appeals. In the immediate cases, Arbitrator Bialkowski preferred the reasoning in the Certas v. CGU/Aviva line of cases and concluded that there was a flaw in Arbitrator Scott basing his decision on the idea that mid-policy, [page451] provided the insured made an informed decision, he or she had the choice of not using OPCF 16 and of just purchasing comprehensive coverage.

[40] Arbitrator Bialkowski felt that the fallacy in State Farm v. TD General Insurance Co.was that the arbitrator ignored the reality that automobile insurance is highly regulated and the legislature often restricts the choices available to insureds and there were public policy reasons that would justify requiring a continuance of some liability coverage mid-term when the insured otherwise reduces his or her coverage to comprehensive.

[41] My own opinion is that Arbitrator Bialkowski's decision in the immediate cases was both reasonable and correct in law.

[42] There are sound policy reasons for requiring the use of OPCF 16 mid-term even though its use means that the insured cannot cancel all of his or her liability coverage. The fact that the insurance policy is subsequently renewed as just a comprehensive policy begs the question of what was renewed and begs the question of whether the insured understood what he or she was purchasing in renewing a policy that at one time included liability coverage.

[43] Recognizing that an insured has the alternative of terminating his or her policy mid-term and starting afresh by purchasing just comprehensive insurance, I agree with the Certas v. CGU/Aviva line of decisions. I see no inconsistency in the legislated scheme for motor vehicle insurance accepting that an insured could have applied for and purchased just comprehensive coverage at the outset (without attendant SABs coverage) and requiring an insured who did not at the outset apply for just comprehensive coverage but who has changed insurance needs mid-term to terminate his or her policy and start afresh by filing out an application for a new policy for just comprehensive coverage.

[44] The public policy advantages supporting the use of OPCF 16 mid-term or the alternative of starting afresh with a genuinely new policy is that it sustains the purpose of a non-fault insurance regime where more than one insurer may be liable for paying SABs unless they have clearly limited their exposure and it makes it more likely that the insured, as a consumer, understands what insurance coverage he or she has.

D. Conclusion

[45] For the above reasons, I dismiss the appeals.

[46] If the parties cannot agree about the matter of costs, they may make submissions in writing, beginning with Optimum's submissions within 20 days of the release of these [page452] reasons for decision, followed by Dominion's submissions within a further 20 days.

Appeals dismissed.

SCHEDULE "A"

[Editor's Note: This table could not be reproduced online.]

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