CITATION: Travelers Insurance Company v. CAA Insurance Company, 2017 ONSC 5659

COURT FILE NO.: CV-17-572332

DATE: 20170922

SUPERIOR COURT OF JUSTICE – ONTARIO

RE: TRAVELERS INSURANCE COMPANY Applicant

• AND -

CAA INSURANCE COMPANY Respondent

BEFORE: FAVREAU J.

COUNSEL: Daniel Strigberger and Timothy Gilliband for the Applicant

Stacey Morrow and Adina Strong for the Respondent

HEARD at Toronto: August 28, 2017

ENDORSEMENT

Introduction

[1] The applicant, Travelers Insurance Company (“Travelers”) seeks to appeal an arbitration decision issued February 27, 2017, by Kenneth J. Bialkowlski (the “Arbitrator”) finding that Travelers is the priority insurer in relation to the payment of accident benefits for an accident involving Patricia Soloway in Nunavut on July 20, 2014 (the “Arbitration Decision”). Travelers argues that leave is not required under section 45(1) of the Arbitration Act, 1991, S.O. 1991, c. 17 (the “Arbitration Act”) because the parties entered into an arbitration agreement permitting appeals on questions of law or mixed fact and law. Alternatively, Travelers argues that leave should be granted as the proposed appeal meets the test under section 45(1) of the Arbitration Act, 1991.

[2] The respondent, CAA Insurance Company (“CAA”), opposes the application arguing that there is no agreement permitting Travelers to appeal the decision without leave on questions of mixed fact and law, and that the issues raised on the proposed appeal are not issues of law and therefore leave to appeal the Arbitration Decision cannot be granted under section 45(1) of the Arbitration Act.

[3] Before me, the parties did not argue the merits of the proposed appeal. The only issue addressed in these reasons is therefore the preliminary issue of whether the applicant is entitled to appeal the Arbitration Decision.

[4] For the reasons set out below, I find that Travelers is entitled to appeal the Arbitration Decision. The evidence put forward by both parties supports a finding that the parties entered into an arbitration agreement that permits either party to appeal the Arbitration Decision without leave on questions of law or mixed fact and law. Even if I had found that there was no such agreement, in my view one of the proposed issues the applicant seeks to appeal is a question of law and this would be an appropriate case in which to grant leave to appeal from the Arbitration Decision on that issue.

Facts giving rise to the application

[5] The arbitration arose from a dispute between the parties under section 268 of the Insurance Act, R.S.O. 1990, c.I.8 (the “Insurance Act”) over whether Travelers or CAA has priority for paying statutory accident benefits to Ms. Soloway.

[6] For the purposes of the arbitration, the parties entered into an agreed statement of facts that includes the following background to Ms. Soloway’s motor vehicle accident:

The claimant, Patricia Soloway (DOB: September 22, 1954), was involved in a motor vehicle accident on or about July 20, 2014 in Nunavut. The accident occurred at approximately 11:00 a.m.

At the time of the accident, the claimant was driving a Ford Explorer motor vehicle that was owned by her employer, the Government of Nunavut. The Ford Explorer was insured under a Nunavut policy of automobile insurance issued by the Respondent to the Government of Nunavut and it was in full force and effect at the time of the accident.

Following the accident, the claimant made a claim for accident benefits to the Applicant, being the insurer of the claimant’s personal motor vehicle in Niagara Falls, Ontario. At the time of the accident, the Applicant’s Ontario policy of insurance issued to the claimant was in full force and effect.

At the time of the accident, the claimant was a registered nurse. She was employed with the Government of Nunavut commencing March 31, 2014 and employed as Supervisor Health Programs. The claimant’s employment was described as full-time, day but on-call or overtime requirements during evenings or overnight.

[7] After the parties agreed to participate in an arbitration for the purpose of resolving the issue of which insurer was the priority insurer, counsel for CAA, Jamie Pollack, sent a letter to counsel for Travelers, Ruth Henneberry, attaching a draft arbitration agreement. In his cover letter, Mr. Pollack sought Ms. Henneberry’s confirmation that she agreed to the terms of the draft arbitration agreement:

Further to our previous correspondence, please find enclosed a draft Arbitration Agreement for your review and consideration. We look forward to receiving an executed copy of same at your earlier convenience.

[8] The draft arbitration agreement stated that the parties agreed to submit to arbitration pursuant to the Insurance Act and Arbitration Act to determine which insurer was in priority to pay Ms. Soloway’s statutory accident benefits. The draft agreement also dealt with a number of matters related to the conduct of the arbitration and included the following appeal provision:

The parties expressly reserve the right of automatic appeal to a single Judge in the Superior Court of Justice on issues of law or mixed fact and law.

If either party wishes to appeal the decision of the Arbitrator, written notice of the appeal must be served on the responding party within thirty (30) days from the release of the Arbitrator’s written decision, following which the appellant shall bring the appropriate court motion or application to the Superior Court of Justice on the first date for the hearing of the said proceedings mutually agreeable between counsel.

[9] The draft agreement was never signed and there is no written correspondence from Ms. Henneberry to Mr. Pollack addressing the agreement.

[10] However, in her affidavit in support of this application, Ms. Henneberry’s evidence is that she authorized Mr. Pollack to sign the agreement on her behalf during the course of a telephone case conference with the arbitrator, and that she made a contemporaneous note of the conversation. In her affidavit, she states that, based on the conversation, she assumed that Mr. Pollack had signed the agreement and sent it to the arbitrator:

The first pre-hearing was held by way of a telephone call with Mr. Pollack, Arbitrator Bialkowski and myself on February 24, 2016. During the call, Arbitrator Bialkowski inquired about the status of the Arbitration Agreement. I told Mr. Pollack and Arbitrator Bialkowski that the Arbitration Agreement looked fine to me and I asked Mr. Pollack to sign the Agreement on my behalf. Mr. Pollack agreed to do so and to send the executed Arbitration Agreement to Arbitrator Bialkowski. I noted this exchange in my handwritten notes, which I made contemporaneously during the call:

Jamie will send Ken Arb Agrmt for both of us + will do a draft of Agreed Smt of Facts

After the telephone conference call had ended, I was under the impression that Mr. Pollack and I had concluded the Arbitration Agreement and that Mr. Pollack would execute the Arbitration Agreement on my behalf and forward it to Arbitrator Bialkowski. At no time after this call did Mr. Pollack or Arbitrator Bialkowski ever ask or inquire again about the status of the Arbitration Agreement. Further, from my experience having several arbitration files with Arbitrator Bialkowski, I know that he is usually very strict when it comes to having an executed Arbitration Agreement in place before conducting a hearing that would require him to make a decision affecting the rights of a party. Accordingly, I believed that Mr. Pollack would execute the Arbitration Agreement on my behalf as well as his own, and I conducted the arbitration hearing under the impression that there was a signed Arbitration Agreement in place between the parties.

[11] For his part, Mr. Pollack in his affidavit does not explicitly deny the conversation Ms. Henneberry recalls from the first pre-hearing conference with the Arbitrator. Rather, he states that he does not recall having a discussion about the arbitration agreement during the call. He also relies on the fact that his report about the call to his client does not mention the arbitration agreement:

I attended at the Pre-Hearing teleconference between the parties on February 24, 2016. On February 24, 2016, I wrote a report to my client regarding what had occurred at the pre-hearing. This report specifically stated that a preliminary issue hearing was to be completed with an Agreed Statement of Facts that I was to draft for circulation, and the timetable for the delivery of submissions to Arbitrator Bialkowski. This report does not mention an Arbitration Agreement and further, does not suggest that there was any expectation that I would execute this agreement on behalf of counsel for Travelers and provide a copy to Arbitrator Bialkowski.

I have no recollection of Ms. Henneberry and I discussing the Arbitration Agreement at the pre-hearing or of any expectation that I was to execute the Arbitration Agreement on her behalf, or to send it to the Arbitrator. I have no note that speaks to the foregoing. My report to the client, which I would have drafted immediately follow [sic] the teleconference, makes no mention of the foregoing.

[12] Notably, Mr. Pollack did not attach his report of the case conference to his affidavit nor does he provide any evidence as to whether it would be his normal practice to report to a client about an agreement to sign an arbitration agreement on opposing counsel’s behalf or to make a file note about a discussion on this type of issue.

[13] The parties did participate in an arbitration before Mr. Bialkowski. The Arbitration Decision was released on February 27, 2017, wherein the arbitrator found that Travelers had priority for paying statutory accident benefits to Ms. Soloway under Ontario’s Insurance Act.

Analysis

[14] There are two issues to be decided on this application:

a. Did the parties have a binding arbitration agreement allowing for appeals on issues of law or mixed fact and law?

b. If the parties did not have such an agreement, should leave be granted to appeal the Arbitration Decision?

Appeal rights under the Arbitration Act

[15] Section 7(1) of O. Reg 283/95 made under the Insurance Act provides that disputes between insurers over priority obligations are to be resolved by arbitration under the Arbitration Act.

[16] Pursuant to section 45(1) of the Arbitration Act, where an arbitration agreement does not address the issue of appeals, in order to appeal an arbitration decision to the Superior Court, parties are required to obtain leave and the appeal can only proceed on a question of law:

45 (1) If the arbitration agreement does not deal with appeals on questions of law, a party may appeal an award to the court on a question of law with leave, which the court shall grant only if it is satisfied that,

(a) the importance to the parties of the matters at stake in the arbitration justifies and

(b) determination of the question of law at issue will significantly affect the rights of the parties.

[17] However, the Arbitration Act does allow parties to an arbitration to agree that they can appeal the decision without leave on questions of law or on questions of law or mixed fact and law:

45(3) If the arbitration agreement so provides, a party may appeal an award to the court on a question of fact or on a question of mixed fact and law.

[18] Accordingly, in this case, in the absence of an agreement to the effect that the parties can appeal the arbitration decision on questions of law or mixed fact and law to the Superior Court, leave of this Court would be required under section 45(1) of the Arbitration Act.

Issue 1: Did the parties have an arbitration agreement

[19] Section 5(3) of the Arbitration Act provides that arbitration agreements need not be in writing.

[20] In my view, based on the evidence before me, it is clear that it was the intention of the parties to enter into an arbitration agreement that provided for a right of appeal on issues of law or mixed fact and law:

a. CAA’s intention to do so is evident from Mr. Pollack’s letter and the draft agreement wherein the terms of the agreement he proposed included such an appeal provision. Mr. Pollack has provided no evidence that his client sought to alter or remove the appeal provision.

b. Traveler’s intention is evident from Ms. Henneberry’s evidence on this motion that she verbally communicated that she was satisfied with the draft arbitration agreement during the first conference call with the arbitrator, as supported by her contemporaneous note. I do not see Mr. Pollack’s evidence as conflicting with Ms. Henneberry’s evidence; at most his evidence is that he does not have a recollection of Ms. Henneberry’s statement and that he did not report the statement to his client or make a note of it.

c. Most notably, as evidence that the parties agreed to participate in an arbitration on the terms set out in Mr. Pollack’s draft agreement is the fact that the parties did in fact participate in the arbitration.

[21] I note that it is especially disingenuous for CAA, having been successful on the arbitration, to seek to resile from the appeal provision when it was the party that drafted the agreement and proposed the provision. I have no doubt, as conceded by counsel for CAA during argument, that if CAA had been unsuccessful on the arbitration it would be seeking to enforce the appeal provision on the basis that Travelers’ participation in the arbitration is evidence that it intended to be bound by the terms of the unsigned arbitration agreement.

[22] Accordingly, I am satisfied that the parties agreed in accordance with section 45(3) of the Arbitration Act that they could appeal the arbitration decision on questions of law or mixed fact and law, and that Travelers therefore does not require leave to appeal and can appeal on questions of mixed fact and law.

Issue 2: If there was no arbitration agreement, should leave be granted to appeal the Arbitration Decision

[23] Given my conclusion on issue 1, it is not necessary for me to decide whether to grant leave to appeal under section 45(1) of the Arbitration Act. However, if I am wrong on the first issue, I would nevertheless grant leave to appeal on one of the two issues decided in the arbitration.

[24] In argument, counsel for the parties indicated that the only aspect of the test under section 45(1) of the Arbitration Act in dispute is whether the proposed appeal raises a question of law. The respondent concedes that the proposed appeal meets the requirements in subsections (a) and (b) of section 45 that the importance of the issues justify the appeal and that the issues significantly affect the rights of the parties.

[25] In his decision, the Arbitrator indicated that there were two issues for him to decide:

a. Whether the priority provisions of the Ontario Insurance Act apply to an accident occurring in Nunavut involving a vehicle owned by, plated in and licensed to the Government of Nunanut?

b. Whether Ms. Soloway had “regular use” of her employer’s vehicle, thereby making Travelers the priority insurer under section 268(5.2) of the Insurance Act?

[26] In its factum, the respondent appears to concede that the first issue is a question of law stating that “the issues with respect to the application of Ontario law in Nunavut and interpretation of the PAU are issues of law”. Despite this concession in its factum, during argument, the respondent took the position that none of the proposed issues for appeal raised questions of law. In my view, the first question considered by the Arbitrator does raise a question of law alone while the issue of whether Ms. Soloway had “regular use” of her vehicle requires findings of mixed fact and law.

[27] The first issue required the Arbitrator to interpret provisions of the Insurance Act, and to determine the impact of a “Power of Attorney and Untertaking” entered into by Travelers.

[28] The sections of the Insurance Act at issue are section 268 that deals with the priority of claims as between insurers, section 226(2) that provides that the Act does not apply to automobiles that are not required to be registered under the Ontario Traffic Act, and sections 224(1) and 226.1 that deal with undertakings provided by automobile insurers to provide certain types of coverage when the insured vehicles are operated in Ontario. In this case, Travelers entered into such an undertaking.

[29] The arbitrator’s finding that the Insurance Act applies turned on his analysis of the statute and its interplay with the undertaking. He had regard to other cases dealing with insurers’ extra-provincial obligations arising from similar undertakings. Accordingly, there is no doubt that the first issue he dealt with is a question of law.

[30] However, the second issue required him to determine whether Ms. Soloway had “regular use” of the government of Nunavut’s vehicle. Determining this issue required the Arbitrator to undertake an exercise in statutory interpretation and a factual inquiry, and therefore it cannot be characterized as a question of law alone.

[31] Therefore, if leave were required, I would grant leave to appeal on the question of whether the Insurance Act applies in this case but not on the issue of whether Ms. Soloway had regular use of the vehicle.

[32] As conceded by the parties, the case meets the criteria under subsections (a) and (b) of section 45 of the Arbitration Act. There is no doubt that the proposed appeal raises important issues about the extra territorial obligations of insurers. The issue will also significantly affect the parties. Even proceeding on the first issue alone, if Travelers were to succeed, this would lead to a reversal of the Arbitrator’s decision and is determinative of whether Travelers has an obligation to pay statutory benefits in this case and similar cases.

Conclusion

[33] For the reasons set out above, Travelers is successful on the preliminary issue of its appeal rights and I find that it is entitled to appeal the Arbitrator’s decision on questions of law or mixed fact and law in accordance with the agreement entered into between the parties.

[34] The parties have agreed that the successful party should be entitled to costs in the amount of $3,500, inclusive of disbursement and HST. Travelers is therefore entitled to its costs in the amount of $3,500.

FAVREAU J.

Date: September 22, 2017