Court File and Parties

COURT FILE NO.: CV-16-564839 DATE: 20170620 SUPERIOR COURT OF JUSTICE – ONTARIO

IN THE MATTER of the Insurance Act, R.S.O. 1990, c.I.8 AND IN THE MATTER of the Arbitration Act, 1991, S.O. 1991, c.17 AND IN THE MATTER of an Arbitration between:

RE: ZURICH INSURANCE COMPANY LTD., Applicant AND: THE PERSONAL INSURANCE COMPANY, Respondent

BEFORE: Monahan, J.

COUNSEL: Kevin S. Adams, for the Applicant Mark K. Donaldson, for the Respondent

HEARD: June 15, 2017

Endorsement

[1] This is an appeal of a motor vehicle arbitration, conducted pursuant to s. 275 of the Insurance Act, R.S.O. 1990, c. I.8 (the “Act”) and an arbitration agreement between Zurich Insurance Company Ltd. (“Zurich”) and The Personal Insurance Company (“The Personal”) (collectively “the Parties”). The arbitration arises out of an accident that is alleged to have occurred between a Honda Civic Sedan insured by The Personal (the “Personal vehicle”) and a heavy commercial vehicle insured by Zurich (“the Zurich vehicle”). In particular, it is alleged that on August 6, 2009, the Personal vehicle was rear-ended by the Zurich vehicle, while both vehicles were travelling westbound on Matheson Blvd in Mississauga, Ontario (the “Alleged Accident”).

[2] The driver and the three passengers of the Personal vehicle submitted claims for accident benefits to The Personal. Although The Personal initially considered whether to deny the claims on the basis that the Alleged Accident had been staged, after further consideration it decided to accept the claims and it duly paid the benefits.

[3] Section 275 of the Act and the associated regulations create a scheme whereby an insurer who has paid accident benefits may, in certain circumstances, claim indemnity from a second insurer who insures a heavy commercial vehicle, to the extent of fault of the operator of the heavy commercial vehicle. If the insurers are unable to agree with respect to any such right of indemnification, the dispute may be referred to arbitration.

[4] Zurich claimed that The Personal had not established that a collision had in fact occurred between the two vehicles and that, therefore, The Personal had no right to claim indemnification under s. 275. The dispute was referred to an arbitrator, who was asked to determine whether there had been an “accident” involving the two vehicles in question and, if so, the respective degrees of fault.

[5] The arbitrator received documentary evidence, including witness statements, the police report regarding the Alleged Accident, information regarding the fact that the driver of the Zurich vehicle was charged with careless driving, property damage documentation, along with engineering reports prepared by a collision reconstruction expert jointly retained by the Parties (the “Seaton Reports”). The arbitrator also held an oral hearing.

[6] The Seaton Reports had concluded that the nature and extent of the damage to the Personal vehicle was not consistent with a collision involving the frontal aspect of the Zurich vehicle. However, notwithstanding this conclusion, the arbitrator found that, on a balance of probabilities, there was contact between the two vehicles. He based his conclusion on a review of the evidence as a whole, particularly the statements made by the occupants of the Personal vehicle. He also identified what he regarded as deficiencies in the Seaton Reports, particularly the fact that the Reports had not directly considered the possibility that certain gouge marks on the rear of the Personal vehicle might have been a result of contact with the Zurich vehicle. He therefore concluded that The Personal had met its onus of establishing that there had been contact between the vehicles. It is common ground that, assuming a collision to have occurred as described, the fault determination rules established under the Act provide that the driver of the Zurich vehicle is to be held fully responsible for the collision. The arbitrator so held and ordered Zurich to reimburse The Personal for the accident benefits reasonably paid to the claimants in the Personal vehicle.

[7] Zurich appeals, seeking to set aside the arbitrator’s decision and substituting an order that The Personal is not entitled to loss transfer indemnity from Zurich.

Standard of Review

[8] The Court of Appeal in Intact Insurance Co. v. Allstate Insurance Co. of Canada, 2016 ONCA 609 (“Intact Insurance”) has held that, in general, an appeal to the Superior Court from an insurance arbitration should be reviewed on a deferential standard of reasonableness. The judgment of LaForme J.A. identifies a number of reasons for applying this deferential standard, including the fact that insurance arbitrations are not court proceedings but are, instead, adjudications by decision-makers selected by the parties on the basis of their relevant expertise. The only circumstances in which the deferential standard of reasonableness might not apply would be in exceptional circumstances, involving “questions of jurisdiction, constitutional questions, or general questions of law that are both of central importance to the legal system as a whole and outside the adjudicator’s specialized area of expertise.” In such exceptional cases a standard of correctness would apply.

[9] No such exceptional issue arose for determination in this arbitration. The question before the arbitrator was one of fact, namely, did a collision occur between the vehicles in question? The arbitrator was not called upon to interpret or apply a legal standard or principle. In fact, in oral argument I questioned counsel as to whether the decision of the arbitrator was even appealable since, under the arbitration agreement between the Parties, an appeal lies to this Court only on questions of law or on mixed fact and law. Counsel for both parties were content to allow the appeal to proceed without regard to this limitation in the arbitration agreement. Nevertheless, the factual nature of the issue before the arbitrator reinforces the conclusion that the arbitrator’s decision should be reviewed on a reasonableness standard.

[10] In Intact Insurance, the Court of Appeal, relying on the Supreme Court of Canada’s decision in New Brunswick (Board of Management) v. Dunsmuir, [2009] 1 S.C.R. 190, (“Dunsmuir”), observed that in judicial review “reasonableness is concerned mostly with the existence of justification, transparency and intelligibility within the decision-making process. But it is also concerned with whether the decision falls within a range of possible, acceptable outcomes which are defensible in respect of the facts and the law.” (Intact Insurance at paragraph 63, quoting Dunsmuir at paragraph 47.) This is the standard against which the decision of the arbitrator in this case is to be assessed.

Analysis

[11] In my view the arbitrator’s decision cannot be said to be unreasonable. He reviewed and weighed all the evidence before him carefully. In finding that a collision had occurred, he relied principally on the witness statements of the occupants of the Personal vehicle, all of whom were broadly consistent in their account of the Alleged Accident. He also relied upon an analysis of the Alleged Accident by The Personal’s in-house counsel, which had concluded that the incident did not have the hallmarks of what is normally seen in a staged accident situation.

[12] The arbitrator gave careful consideration to the Seaton Reports which, as noted above, had concluded that the damage to the Personal vehicle was not consistent with a collision having occurred between the two vehicles. The arbitrator argued that the Seaton Reports had failed to consider the possibility that two gouge marks visible in a photograph of the Personal vehicle could have been the result of contact between the two vehicles.

[13] Counsel for Zurich objects to the manner in which the arbitrator considered the Seaton Reports. He argues that the arbitrator made findings that were contrary to the opinions of the expert, without any competing or other expert evidence on which to base his findings. Counsel claims that the arbitrator improperly conducted a collision reconstruction analysis of his own, even though doing so was outside his area of expertise. Counsel for Zurich also argues that the arbitrator erred in permitting The Personal to argue against the findings of an expert that it had itself jointly retained. Counsel also objects to the fact that the criticisms made by the arbitrator in relation to the Seaton Reports were not raised in oral argument or disclosed to counsel by the arbitrator prior to the release of his decision.

[14] I do not find that the manner in which the arbitrator considered the Seaton Reports, in the context of his reasons as a whole, to be unreasonable. The arbitrator had to come to a determination of whether a collision had occurred based on the entire record before him. He gave detailed and careful consideration to the Seaton Reports, finding that the Reports could not necessarily be taken to be conclusive of the issue of whether there was contact between the vehicles in question. He conducted his analysis within the four corners of the record before him. In my view his overall conclusion, to the effect that a collision had occurred, falls well within a range of “possible acceptable outcomes which are defensible in respect of the facts and the law”, in accordance with the Dunsmuir standard. The reasonableness of this factual finding is reinforced by the fact that The Personal’s legal counsel concluded, after internal discussions with knowledgeable staff at The Personal, that “…we are all agreed that based on the current evidence, it appears likely that an impact, albeit very minor, did occur.” (See email from legal counsel at The Personal, quoted in the reasons of the arbitrator, Application Record, Volume I at p.17.) Nor was it necessary for the arbitrator to reopen the hearing and request further submissions from counsel with respect to his concerns regarding deficiencies in the Seaton Reports: see Chernet v. RBC General Insurance Company, 2017 ONCA 337 at paragraph 9 (O.C.A.).

[15] I also note that for this Court to overturn the factual determination of the arbitrator on this factual question would be inconsistent with the scheme of the Act, which is to “provide for an expedient and summary method of reimbursing the first party insurer for payment of no-fault benefits from the second party insurer whose insured was fully or partially at fault for the accident.” (Jevco Insurance Co. v. Canadian General Insurance Co., (1993), 14 O.R. (3d) 545 at 547 (OCA). See also Jevco Insurance Co. v. York Fire & Casualty Co., (1996), 27 O.R. (3d) 483 at 485-86 (OCA).

[16] The appeal is dismissed with costs to the respondent in the amount of $8,000, which is the sum agreed upon by the Parties, payable within 30 days.

Monahan, J. Date: June 20, 2017