COURT FILE NO.: CV-18-00606002-0000 DATE: 20190820 ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

INTACT INSURANCE Applicant (Respondent) – and – GORE MUTUAL INSURANCE COMPANY OF CANADA Respondent (Appellant)

Counsel: Doug Wallace, for the Applicant (Respondent) Pino Cianfarani and Shannon Gaudet, for the Respondent (Appellant)

Heard: April 4, 2019 Justice: S. Nakatsuru

Overview

1Gore Mutual Insurance Company of Canada (“Gore”) appeals an arbitration decision dated September 11, 2018. The Arbitrator decided that Gore was in greater priority than Intact Insurance (“Intact”) and should be the insurer paying statutory accident benefits to a young man who was hurt in an automobile accident. The wrinkle in this priority dispute between insurance companies is that the accident took place in Alberta, not Ontario, but the claimant submitted an Ontario claim.

2By the terms of the Arbitration Agreement between Gore and Intact, there is a right of appeal to a judge of the Ontario Superior Court of Justice on a point or points of law or of mixed fact and law. Further, ss. 45(2) and (3) of the Arbitration Act, 1991, S.O. 1991, c. 17 ( Arbitration Act ) provide for an appeal of an arbitration award to this court on a question of law or a question of mixed fact and law if the Arbitration Agreement so provides.

3For the following reasons, the appeal is allowed.

Background

Summary of the Facts

4On the September 14, 2013 the claimant, Jeremy Fulton, aged 20 years old at the time, was involved in a single vehicle accident in Grande Prairie, Alberta. He was a passenger in a car owned and operated by his friend Chris Krul. Mr. Fulton was injured in the accident. The vehicle was insured by Gore under an Ontario policy. At the time, Mr. Fulton was a resident of Alberta, having moved there from Ontario at the end of May 2013.

5When Mr. Fulton was resident in Ontario, he lived with his mother, Cindy Fulton, until he graduated from high school. Once Mr. Fulton left home, he worked different jobs in Ontario until he moved to Alberta. After Mr. Fulton moved out of his mother’s home, his mother occasionally sent him care packages, purchased him odd things, and helped him pay for bus tickets to visit home. She did not provide him with any additional financial assistance. Mr. Fulton supported himself through work.

6When Mr. Fulton moved to Alberta, he bought a car insured with Intact. Within a month of his arrival in Alberta, his car began to have mechanical issues. Mr. Fulton therefore cancelled his automobile insurance with Intact.

7Mr. Fulton supported himself in Alberta working at a construction job. Mr. Fulton intended to settle in Alberta. He planned to get an Alberta driver’s license, apply for Alberta health insurance, and get Alberta plates for his car.

8At the time of the accident, Mr. Fulton had no automobile insurance. Mr. Fulton’s mother Cindy Fulton had a car in Ontario insured by Intact. After he was injured in the accident, Mr. Fulton returned to Ontario.

History of the Claim

9In Alberta, access to no-fault motor vehicle accident insurance follows the vehicle. In Ontario, such insurance follows the person. Both Intact and Gore are licensed to sell insurance in Alberta and Ontario.

10Mr. Fulton advised Intact of his accident on the basis that his mother, Cindy Fulton, held insurance through Intact. The information at the time supported the inference that a sufficient nexus existed between Mr. Fulton and Cindy Fulton’s insurance policy. That nexus was that Mr. Fulton was potentially a dependent of Cindy Fulton. On September 24, 2013, Intact wrote to Mr. Fulton. Intact told him that based on the information he provided, coverage may be available to him through the jurisdiction of Alberta. However, given that Intact’s investigation was ongoing and it had been notified of the claim, it provided Mr. Fulton with a copy of the Ontario insurance forms as Intact was the insurance company operating in the province of Ontario. It did not comment on whether Ontario coverage would be available, and the letter sent to Mr. Fulton was noted “without prejudice.”

11On September 24, 2013, Mr. Fulton submitted an Ontario Application for Accident Benefits (OCF-1) to Intact on the advice of his mother, who believed that her son was still an Ontario resident. Mr. Fulton was also motivated to make an Ontario application because he believed that he would receive more under the Ontario scheme than the Alberta scheme.

12On December 17, 2013, Intact wrote to Mr. Fulton and advised him that he was eligible to receive coverage through the Alberta scheme given that he was a resident there at the time of the accident and that the accident took place in Alberta. Intact had determined that Mr. Fulton was an insured person under the Alberta legislation. Intact advised Mr. Fulton that he was not eligible to elect and/or receive accident benefits through Ontario. Intact provided information to Mr. Fulton about the Alberta benefits that would be available to him. Intact began paying accident benefits to Mr. Fulton in an amount that accorded with the Alberta Schedule “B” benefits. Intact paid medical, examination, and income replacement benefits. It did not pay benefits for catastrophic designation and attendant care as such benefits were unavailable under the Alberta scheme.

13At the time, Intact’s position was that it was not obligated to pay Ontario benefits upon receiving Mr. Fulton’s OCF-1. Rather than relying on the type of form submitted by the claimant, Intact determined that Mr. Fulton would be eligible for Alberta benefits by looking at factors such as the location of the loss. The form of the application, in this case an OCF-1 rather than an Alberta form, did not matter significantly to Intact. The form simply provided information to the insurer about the accident and the claimant. Intact did not encourage Mr. Fulton to submit an application for benefits to any other insurer. However, Intact realized there may be a priority issue and put the appropriate party, Gore (the insurer of Mr. Krul’s car), on notice. Intact decided that since it had received Mr. Fulton’s application first, it was not allowed to deny Mr. Fulton benefits.

14On October 15, 2013, Intact served a Notice to Applicant of Dispute Between Insurers pursuant to the Dispute Between Insurers, O. Reg. 283/95 ( “Dispute Regulation” ) under the Ontario Insurance Act, R.S.O. 1990, c. I-8 (“ Insurance Act ”). Intact submitted that Gore was the priority insurer since it had insured Mr. Krul’s vehicle. Intact concluded that Mr. Fulton had no valid insurance in Alberta or in Ontario. Intact also concluded that Mr. Fulton was not dependent on anyone for physical or financial care and as such, was not a dependent of his mother, Cindy Fulton. Intact also notified the Motor Vehicle Accident Claims Program of Alberta in the event that Mr. Krul did not in fact have valid automobile insurance.

15On October 16, 2013, Gore wrote to Intact and to Mr. Fulton to advise that it would be conducting its own investigation into Mr. Fulton’s claim. Given that the claim dealt with Alberta benefits, Gore asked Intact to request that Mr. Fulton submit the Alberta Notice of Loss and Proof of Claim form (Form AB-1) under the Alberta legislation, since Mr. Fulton had originally submitted an OCF-1.

16On December 18, 2013, Intact wrote to Gore noting that an Intact claims representative had provided the Alberta forms to Mr. Fulton at his lawyer’s office. Mr. Fulton did not sign the forms. His lawyer would not allow him to complete them.

17Mr. Fulton has never applied for Alberta benefits.

18On January 9, 2014, Intact wrote to Mr. Fulton’s lawyer to explain that Mr. Fulton did not meet the requirements of an insured person under the Statutory Accident Benefits Schedule, O. Reg. 34/10 ( SABS ) under the Insurance Act. Section 3(1) of the SABS defines an “insured person” as a person who, among other things, is or was resident in Ontario during the 60 days prior to the accident. As a result of its determination, Intact advised that Mr. Fulton was not entitled to Ontario Accident Benefits. However, since Mr. Fulton was an insured person under the Alberta legislation, Intact was administering such coverage for Mr. Fulton.

19On January 14, 2014, Gore wrote to Intact and to Mr. Fulton advising that its investigation was continuing. Gore also asked Intact to clarify what Intact’s position was on whether Mr. Fulton was an insured person under s. 3(1)(c) of the SABS since he had moved out to Alberta and had not been an Ontario resident in the 60 days before the accident.

20On March 7, 2014, Mr. Fulton’s lawyer wrote to Gore enclosing Mr. Fulton’s OCF-1 application to Gore. Mr. Fulton took the position that since Mr. Fulton was an occupant in a car insured by Gore, Gore was responsible for coverage.

21On March 11, 2014 Gore responded that there was a priority dispute with Intact and that Mr. Fulton should continue dealing with Intact until the determination of priority.

22Gore did not accept priority.

23On March 15, 2014, Intact served Gore with an Ontario Notice of Submission to Arbitration pursuant to the Insurance Act, the Dispute Regulation, and the Arbitration Act. Originally, both the Ontario Motor Vehicle Accident Claims Fund and the Alberta Motor Vehicle Accident Claims Program were served and were both respondents to the arbitration.

24On April 9, 2015, legal counsel for the Alberta Motor Vehicle Accident Claims Program wrote to counsel for both Intact and Gore. Counsel advised that had Mr. Fulton chosen to make an application for Alberta benefits, Gore, as the insurer of the vehicle in which Mr. Fulton was a passenger, would have been obligated to pay benefits under the Alberta Insurance Act, R.S.A. 2000, c. I-3. Since Mr. Fulton chose to apply for benefits under the Ontario scheme, the Alberta Motor Vehicle Accident Claims Program took the position that the arbitration dealt only with issues under the Ontario insurance scheme. As a result, the Alberta Motor Vehicle Accident Claims Program declined to participate in the arbitration or to attorn to the jurisdiction of the arbitrator. Intact agreed to release it from the arbitration. It also released the Ontario Motor Vehicle Accident Claims Fund.

25The arbitration hearing occurred on February 2, 2016. Mr. Fulton did not participate as a party at the hearing, but he was a witness. Cindy Fulton was also a witness. Brenda James, an Intact representative, testified as well.

The Arbitrator’s Decision

26The issue before the Arbitrator was a dispute between two insurers with respect to priority. The Arbitrator’s responsibility was to determine priority and the responsibility for payments to Mr. Fulton as between Intact and Gore. The Arbitrator found that both Gore and Intact had relevant Ontario auto policies. In determining priority, he applied s. 268(2) of the Insurance Act. While the arbitration of a dispute of this nature is not uncommon, the experienced Arbitrator recognized that the case was novel.

27At the arbitration, factual questions arose as to whether Mr. Fulton was principally dependent upon his mother for financial support and where he was resident at the time of the accident. Ultimately, both parties agreed that Mr. Fulton was not a dependent of Cindy Fulton. The parties also agreed that Mr. Fulton had not been a resident of Ontario in the 60 days prior to or at the time of the accident. Rather, he was an Alberta resident. Consequently, neither residency nor dependency were in issue any longer.

28When Mr. Fulton applied for benefits, Intact processed the claim because it had the obligation of the first insurer that received an application for Ontario Statutory Accident Benefits. This obligation required insurers with a “nexus” to the claimant to deal with the claim regardless of priority concerns or other matters. The Arbitrator commended Intact for taking this approach without objection in Mr. Fulton’s case.

29The Arbitrator found that Mr. Fulton was not an “insured person” as defined in the Ontario SABS, given that he met none of the definitions of “insured person” in s. 3(1). This included as an insured person as defined under s. 59(4), which provides for a special extension of coverage where a person claims benefits as a result of an accident outside Ontario. As a result, Mr. Fulton was not entitled to benefits under Intact’s policy. After concluding that Mr. Fulton had no recourse against Intact, the Arbitrator applied the ranking of priorities under s. 268(2) of the Insurance Act. The Arbitrator concluded that under s. 268(2)(1)(ii), it was Gore who was liable to pay Mr. Fulton.

30At the arbitration hearing, Gore had objected that Mr. Fulton was not an “insured person” under its policy as well. The Arbitrator rejected this submission and held:

Thus, the claimant does not have recourse against Intact “under sub paragraph i”. Absent that recourse, the legislation says that “ the occupant has recourse against the insurer of the automobile which he or she was an occupant”. That is Gore.

Gore does not acknowledge that this claimant was an “insured person” under its policy at least insofar as applying Ontario terms and conditions is concerned. Gore points out that under the Ontario wording coverage would be restricted and would only cover occupants such as this claimant if the accident were in Ontario. It might be the case that Gore has issues that need to be addressed if the claimant approaches Gore for Ontario Statutory Accident Benefits. But for my purposes, I only need to determine whether or not the claimant has recourse against Intact under sub paragraph i. Having made that determination, the legislation is mandatory.

Based on the facts of this case, I can reach no other conclusion but that, in accordance with subsection 2 of section 268 of the Ontario Insurance Act, Gore is the higher ranking insurer with respect to Statutory Accident Benefits.

31The Arbitrator went on to find that Gore would have been the priority insurer under the Alberta legislation, as the insurer of the motor vehicle. The Arbitrator held that as a consequence of this, Gore had to treat Mr. Fulton as a person entitled to an Alberta level of no-fault benefits.

32Finally, the Arbitrator ordered that Gore reimburse Intact for sums reasonably paid to Mr. Fulton in accordance with the Alberta scheme, which otherwise would have been payable by Gore if it had originally received the appropriate application from Mr. Fulton.

Positions of the Parties on Appeal

33Gore submits that the Arbitrator erred by finding pursuant to s. 268(2) of the Insurance Act that Gore was in greater priority than Intact. Gore argues that Mr. Fulton was not an “insured person” under the SABS at the time of the accident as he had not been an Ontario resident in the 60 days prior to the accident. Since Mr. Fulton was not entitled to receive Statutory Accident Benefits from Gore, Gore was in no greater priority than Intact, whose policy also did not cover Mr. Fulton. Given these circumstances, the Arbitrator’s decision was unreasonable because he failed to analyze whether Mr. Fulton was an insured person under Gore’s policy for the purpose of receiving Ontario benefits. Rather, the Arbitrator concluded that because Mr. Fulton was not insured by Intact, Gore was in priority as the insurer of the automobile.

34Gore submits that the priority rules in s. 268 must be read together with the SABS. Thus, unless the claimant is an “insured person” under the SABS and is entitled to receive benefits, the priority rules have no application in Mr. Fulton’s case. According to Gore, Mr. Fulton should have applied for Alberta benefits, something he had the opportunity to do, and was encouraged to do, but chose not to undertake. Mr. Fulton was and continues to be entitled to apply for such benefits regardless of the outcome of this appeal. Gore submits that it cannot be in priority to pay benefits to an individual who is not an insured person under its policy.

35In addition, Gore submits that the Arbitrator exceeded his jurisdiction by determining that Gore was the priority insurer under the Alberta accident benefits legislation. According to the Arbitration Agreement, the issue for arbitration was priority pursuant to the Ontario legislation, not the Alberta legislation. Further, the remedy that Gore reimburse Intact for the Alberta-level benefits Intact had paid to Mr. Fulton was not within the scope and jurisdiction of the arbitration.

36In response, Intact starts with the proposition that it is undisputed that Gore is liable to pay Alberta accident benefits to Mr. Fulton under Alberta law. Intact submits that the Arbitrator properly considered the interjurisdictional issues involved in this priority dispute. The Arbitrator found that Intact acted commendably in paying Mr. Fulton benefits upon receipt of his Ontario application. Intact then instituted the arbitration process mandated by the Dispute Regulation to transfer responsibility for the benefits from one insurer to another.

37Intact submits that arbitrators appointed under the Dispute Regulation frequently consider interjurisdictional issues. The Arbitrator reasonably assessed the facts in accordance with not only Ontario law, but also with Alberta law.

38Intact argues that the Arbitrator’s decision that Gore was in priority under s. 268 was reasonable. Once the Arbitrator determined that Mr. Fulton was not insured under the Intact policy, Mr. Fulton then had recourse under s. 268(2)(1)(ii) against Gore as the insurer of the automobile he was occupying at the time of the accident. Section 268(2)(1)(ii) does not require the occupant to be an “insured” of the insurer for the insurer to be liable to pay benefits. If the Ontario legislature wanted to incorporate the definition of an “insured person” into this section, as it did under s. 268(2)(1)(i), it could have done so. But it did not. As a result, the fact that Mr. Fulton is not an “insured” under the Gore policy was irrelevant to determining the priority dispute. It is similarly irrelevant that Mr. Fulton submitted an application using Ontario forms (OCF-1) rather than Alberta forms. The outcome of a priority dispute is not dependent upon the type of form submitted; what is relevant is the type of benefits the claimant is entitled to by law.

39Alternatively, the Arbitrator was right in deciding that Gore remained the priority insurer under Alberta law. Given the legal framework in place for licensed insurers operating in more than one jurisdiction and the policy rationales surrounding interjurisdictional disputes, Intact submits that the Arbitrator logically went on to consider the Alberta regime. Under that regime, unlike in Ontario, the Alberta Insurance Act provides that accident benefits are to be paid by the insurer of the automobile in which the injured person is an occupant. The Alberta Act deems an injured person to be a party to the contract insuring the vehicle that they occupied. Intact submits that there is no mechanism for disputing priority under Alberta law. As a result, the Arbitrator’s decision that Gore is the liable insurer under Alberta law was reasonable.

40With respect to the Arbitrator’s jurisdiction to order reimbursement, Intact submits that the Arbitrator did a comprehensive analysis before concluding that Gore was required to reimburse Intact. According to Intact, the Arbitrator had the jurisdiction to order equitable remedies under s. 3(1)1 of the Arbitration Act and the Arbitration Agreement.

41Intact concludes that the Arbitrator’s decision was a justifiable, transparent and intelligible decision that falls within a range of possible, acceptable outcomes which are defensible in respect of the facts and law.

Analysis

The Standard of Review

42In Intact Insurance Co. v. Allstate Insurance Co. of Canada, 2016 ONCA 609, 131 O.R. (3d) 625, at para. 53, LaForme J.A. held the standard of review on appeal of an arbitration decision to be:

In general, an appeal to the Superior Court from an insurance arbitration regarding a priority dispute will engage questions of mixed fact and law that must be reviewed for reasonableness. Even if the appeal involves an extricable question of law regarding SABS, a reasonableness standard of review will still generally apply. In the unlikely scenario that the issue before the insurance arbitrator is an "exceptional" question (one of jurisdiction, a constitutional question, or a general question of law that is both of central importance to the legal system as a whole and outside the adjudicator's specialized area or expertise), a correctness standard of review may be applicable.

43In that case, LaForme J.A. applied a reasonableness standard of review to an appeal of an arbitrator’s decision regarding a priority dispute under s. 268.

44This exposition of the standard of review of an arbitrator’s decision has been reaffirmed by the Court of Appeal for Ontario in more recent cases: The Dominion of Canada General Insurance Co. v. State Farm Mutual Automobile Insurance Co., 2018 ONCA 101, 141 O.R. (3d) 129, at para. 31 ( State Farm ); The Dominion of Canada General Insurance Co. v. Unifund Assurance Co., 2018 ONCA 303, 290 A.C.W.S. (3d) 681, at para. 35.

45Reasonableness is a deferential standard concerned with the existence of justification, transparency and intelligibility within the decision-making process. The Appeal Court looks at the question of whether the decision falls within the range of possible, acceptable outcomes that are defensible in respect of the facts and law: State Farm, at para. 56.

46On the other hand, correctness is the standard of review for jurisdictional error. In Alectra Utilities Corp. v. Solar Power Network Inc., 2019 ONCA 254, 145 O.R. (3d) 481, at para. 30, a case involving a judicial review of an arbitrator’s decision, Huscroft J.A. commented on the difficulty in determining what amounts to a jurisdictional error and counseled curial caution:

But this proved easier said than done, and the concept of jurisdiction has continued to bedevil Canadian law despite Dickson J.'s admonition. That is so because, as Lord Denning explained in Pearlman v. Keepers and Governors of Harrow School, [1978] EWCA Civ 5 (Eng. & Wales C.A. (Civil)), the distinction between an error that is jurisdictional in nature ­­ — which justifies judicial intervention — and an error made within jurisdiction — which does not — is so fine as to be manipulable. The same matter can be characterized as jurisdictional or non-jurisdictional depending on whether one seeks to intervene or defer.

47In the case before me, Gore argues that both the reasonableness and correctness standards apply. Gore submits that correctness applies on its argument that the Arbitrator exceeded his jurisdiction. Intact submits that all issues are governed by the reasonableness standard.

The Arbitrator’s Decision Regarding Priority Under the Ontario Scheme was Unreasonable

48Both parties submit that a reasonableness standard of review should apply to the Arbitrator’s decision regarding priority under s. 268. I agree.

49I find the Arbitrator’s decision that Gore was in priority to Intact under s. 268 to be unreasonable, having considered the Arbitrator’s reasons and the substantive outcome in light of the legal and factual context in which he made the decision.

50There are two main reasons why I have concluded so. First, the decision is unreasonable in that the Arbitrator failed to carry out a complete analysis under the priority scheme. Second, the decision is unreasonable because the Arbitrator’s conclusion is simply incompatible with the applicable legal principles.

51In coming to this conclusion, I appreciate that deference should be afforded to the Arbitrator in his interpretation of legislation which falls within his expertise. Despite this, the Arbitrator’s decision that s. 268(2) resulted in Gore being in priority to Intact does not fall within a range of possible, acceptable outcomes that are defensible in respect of the facts and the law.

52Regarding the first reason why I find the decision unreasonable, the Arbitrator began his decision by determining that Mr. Fulton was not an “insured person” under s. 3(1) of the SABS for the purpose of Intact’s policy. The Arbitrator noted that Intact, commendably, had extended benefits to Mr. Fulton upon receiving his application, as required by the Dispute Regulation and the case of Zurich Insurance Co. v. Chubb Insurance Co. of Canada, 2015 SCC 19, [2015] 2 S.C.R. 134. The information at the time supported the inference that a sufficient nexus existed between Mr. Fulton and Cindy Fulton’s insurance policy, the nexus being that Mr. Fulton was potentially a dependent of Cindy Fulton. The Arbitrator noted the uncertainty that initially surrounded Mr. Fulton’s status in that regard.

53However, by the time of the arbitration, the evidence and the position of the parties led the Arbitrator to conclude that Mr. Fulton was not a dependent of his mother. Therefore, he was not covered by Intact’s policy. Having concluded as much, the Arbitrator simply moved down the priority scheme in the sequential approach and found Gore in priority. This reasoning is captured in the excerpt of his decision quoted in para. 30 of these Reasons.

54With respect, this decision is neither intelligible nor justified. Gore had argued that Mr. Fulton was not an insured person under s. 3(1) of the SABS for the purposes of Gore’s policy. The relevant portion of the definition that could have potentially pertained to Mr. Fulton in the factual circumstances of the accident was:

“insured person” means, in respect of a particular motor vehicle liability policy …

(c) a person who is an occupant of the insured automobile and who is a resident of Ontario or was a resident of Ontario at any time during the 60 days before the accident, if the accident occurs outside Ontario.

55It was agreed at the hearing that Mr. Fulton was not an Ontario resident within 60 days of the accident and thus that he did not fall under this definition. Mr. Fulton was not an insured person under Gore’s Ontario policy for the automobile. Consequentially, Gore argued that it was not in priority under s. 268 to pay any benefits.

56In my view, the Arbitrator simply ignored this issue. His reasons reveal that he felt this would be only relevant if Mr. Fulton asked for Ontario level benefits. He did not feel it was relevant to the issue of priority. However, his reasons do not indicate why he came to this conclusion. Put another way, the Arbitrator essentially gave no reasons for why Gore would be in priority under the Ontario legislation. The Arbitrator does not explain why, if it was relevant that Mr. Fulton was not an insured person under Intact’s policy, it was not also relevant that Mr. Fulton be an insured person under Gore’s policy. If it was the case that the Arbitrator was interpreting s. 268(2)(1)(ii) in a way that did not require Mr. Fulton to be an insured person under the SABS, the Arbitrator does not say so. Nor does he explain how he reached this interpretation, if that was his interpretation. The Arbitrator finds it merely sufficient that once Intact was excluded, Gore was on the hook as the insurer of the automobile.

57I will now move to the second reason why I find the decision unreasonable. I do not accept Intact’s submission that s. 268(2)(1)(ii) does not require the occupant to be an “insured person” in order that the insurer be liable to pay benefits. Intact relies on the language in the provision which states that if recovery is unavailable under subparagraph i, then the occupant has recourse against the insurer of the automobile in which he or she was an occupant. Intact’s submission, which seems to have at least implicitly found favour with the Arbitrator given his result, is that the fact that Mr. Fulton is not an “insured” under the Gore policy is irrelevant to the determination of priority between the insurers.

58In my view, such an interpretation is contrary to the legislative scheme and decided authorities.

59First, the relevant legislative provisions expressly make entitlement to Statutory Accident Benefits a consideration in determining priority under s. 268(2).

60The resolution of this issue is essentially a matter of statutory interpretation. When it comes to statutory interpretation, the starting point is Driedger’s definitive formulation which states:

Today there is only one principle or approach, namely, the words of an Act are to be read in their entire context and in their grammatical and ordinary sense harmoniously with the scheme of the Act, the object of the Act, and the intention of Parliament.

61This approach has been adopted by the Supreme Court of Canada as the authoritative approach to statutory interpretation across a wide range of interpretive settings: Rizzo & Rizzo Shoes Ltd. (Re), 1998 SCC 837, [1998] 1 S.C.R. 27, at para. 21; R. v. Sharpe, 2001 SCC 2, [2001] 1 S.C.R. 45, at para. 33, per McLachlin C.J.; Chieu v. Canada (Minister of Citizenship and Immigration), 2002 SCC 3, [2002] 1 S.C.R. 84, at para. 27.

62The starting point in this interpretative exercise is s. 268(1) of the Insurance Act, which provides for no-fault benefits in Ontario. This section specifically makes the payment of Statutory Accident Benefits subject to the exclusions and limits in the SABS:

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. [Emphasis added.]

63Thus, the limitations on the eligibility for benefits, such as the definition of an “insured person” in s. 3(1) of the SABS, applies to the payment of those benefits under s. 268(1).

64Section 268(2), which deals with the priority of insurers to pay benefits, makes specific reference to the payment of “statutory accident benefits.” The material provision on the facts of this case, inter alia, makes this clear:

(2) The following rules apply for determining who is liable to pay statutory accident benefits:

1. In respect of an occupant of an automobile,

i. the occupant has recourse against the insurer of an automobile in respect of which the occupant is an insured,

ii. if recovery is unavailable under subparagraph i, the occupant has recourse against the insurer of the automobile in which he or she was an occupant,

iii. if recovery is unavailable under subparagraph i or ii, the occupant has recourse against the insurer of any other automobile involved in the incident from which the entitlement to statutory accident benefits arose,

iv. if recovery is unavailable under subparagraph i, ii or iii, the occupant has recourse against the Motor Vehicle Accident Claims Fund. [Emphasis added.]

65Under s. 268(3), the liability of the insurer is again for “statutory accident benefits:”

(3) An insurer against whom a person has recourse for the payment of statutory accident benefits is liable to pay the benefits. [Emphasis added.]

66Under s. 224, “statutory accident benefits” are defined to be those benefits enacted in the SABS:

“[S]tatutory accident benefits” means the benefits set out in the regulations made under paragraphs 9 and 10 of subsection 121(1).

67The territorial limit on the obligation of the insurer to pay “statutory accident benefits” also refers to the SABS under s. 243(2):

(2) Statutory accident benefits provided under section 268 apply to the use or operation of any automobile in Canada, the United States of America and any other jurisdiction designated in the Statutory Accident Benefits Schedule, and on a vessel plying between ports of Canada, the United States of America or a designated jurisdiction.

68I will now turn to the SABS. SABS s. 2(4) states that the statutory accident benefits listed in the Schedule are only payable to an “insured person” by the priority insurer:

(4) Benefits payable under this Regulation in respect of an insured person shall be paid by the insurer that is liable to pay under subsection 268(2) of the Act.

69An “insured person” is defined in the SABS in s. 3(1):

“insured person” means, in respect of a particular motor vehicle liability policy,

(a) the named insured, any person specified in the policy as a driver of the insured automobile and, if the named insured is an individual, the spouse of the named insured and a dependant of the named insured or of his or her spouse,

(i) if the named insured, specified driver, spouse or dependant is involved in an accident in or outside Ontario that involves the insured automobile or another automobile, or

(ii) if the named insured, specified driver, spouse or dependant is not involved in an accident but suffers psychological or mental injury as a result of an accident in or outside Ontario that results in a physical injury to his or her spouse, child, grandchild, parent, grandparent, brother, sister, dependant or spouse’s dependant,

(b) a person who is involved in an accident involving the insured automobile, if the accident occurs in Ontario, or

(c) a person who is an occupant of the insured automobile and who is a resident of Ontario or was a resident of Ontario at any time during the 60 days before the accident, if the accident occurs outside Ontario

70When the foregoing provisions of the legislation are read as a whole and harmoniously, it is clearly intended that the determination of the priority of the insurers to pay benefits under s. 268(2) includes the limitation on eligibility set out in the definition of an “insured person” under s. 3(1) of the SABS.

71This was the task set out for the Arbitrator to determine. Intact brought the arbitration under the Disputes Regulation, which provides for the settlement of all disputes about the payments of benefits under s. 268. If the insurers cannot agree as to who is required to pay benefits, the dispute is to be resolved through this arbitration method. The Disputes Regulation defines “benefits” as “statutory accident benefits as defined in subsection 224(1) of the Act.” That definition is the same definition of benefits as defined in the SABS. Thus, the Arbitrator was required to consider whether Mr. Fulton was an “insured person” under Gore’s policy in making his decision.

72Second, the Arbitrator’s decision is contrary to the legal principles set out in the case law. Binding authority has held that the definition of an “insured person” under s. 3(1) of the SABS governs both entitlements to benefits and the priority of insurers.

73In Warwick v. Gore Mutual Insurance Co. (1997), 32 O.R. (3d) 76 [ Warwick ], the Court of Appeal for Ontario held that entitlement to Statutory Accident Benefits is determined by the definition of “insured person” in the SABS and not the definition of “insured” in the Insurance Act. Section 268(1) delegated to the Schedule-maker the authority to determine what classes of persons would be entitled to benefits under any particular contract. Warwick illustrates that contractual entitlement to benefits is determined by the definition of “insured person” in the SABS.

74Warwick was considered in the case of Co-operators Insurance Co. v. Axa Boreal Assurances (2000), 50 O.R. (3d) 395 (C.A.). This case involved a priority dispute between two insurers under s. 268. A truck insured by Boreal was involved in an accident in Ohio. The injured truck driver, an Ontario resident, was a listed driver under the Boreal policy. The truck driver had his own personal automobile policy with Co-operators. The issue of who was responsible for paying the accident benefits depended on whether the driver was an “insured person” under the policies. If the driver was a named insurer under the Boreal policy, Boreal would be required to pay. The issue was whether the driver was a “deemed named insured” pursuant to s. 91(4) of the SABS-1994 (as the SABS was then), which provided that the driver would be a “deemed named insured” if the insured automobile was made available for the regular use of someone who was living and ordinarily present in Ontario.

75The main point argued by Boreal was that s. 91(4) of the SABS-1994 could not make the claimant a named insured under the insurance policy of Boreal for the purpose of determining priority under s. 268. Boreal submitted that the term “named insured” had a well-understood meaning in the industry and it was contended that the Schedule could not alter this meaning when applying the legislative priority rules. Laskin J.A. held that Warwick governed the issue. Warwick held that the legislature had decided that the Schedule would determine who would fall within the class of persons entitled to benefits. From this, Laskin J.A. concluded, at para. 15, that the SABS-1994 also governed the priority provisions:

Boreal submits, however, that Warwick does not apply because it dealt with entitlement, not priority. I reject this submission. Distinguishing between entitlement and priority is artificial. Entitlement to benefits is meaningful only if an insurer is liable to pay these benefits. And, in cases like the present one, liability to pay depends on determining priority. The underlying rationale of Warwick is that the Schedule and the statute must be read together to determine who receives accident benefits and who is responsible for paying them. That rationale applies to this case. In my view, because of s. 91(4) of the SABS, Hounsell is a named insured under the Boreal policy for the purpose of determining which insurer must pay accident benefits under s. 268 of the Act. Boreal must therefore pay. [Emphasis added]

76In my opinion, these two authorities stand for the proposition that the SABS must be referred to in determining the priority of insurers under s. 268. This is in keeping with my above-noted statutory analysis. The priority scheme must take into account whether the claimant is an “insured person” under the SABS. From this proposition, I find that the Arbitrator’s decision, which does not take this into account, is simply incompatible with the legal principles established by these authorities.

77I will refer to one final case. State Farm Mutual Automobile Insurance Co. v. Griffiths, (FSCO Appeal P01-00018, [2002] O.F.S.C.I.D. No. 46) was an appeal of an arbitrator’s decision to Director D.R. Draper, the Director of Arbitrations. In that case, Mr. Griffiths, a resident of Colorado, was injured in New York while occupying an Ontario-insured automobile. Director Draper overturned the arbitrator’s decision to grant Mr. Griffiths Ontario accident benefits from State Farm. Director Draper concluded that Mr. Griffiths was not entitled to receive accident benefits under State Farm’s policy on the basis that the policy expanded the definition of “insured person” in the SABS in a way that included Mr. Griffiths.

78On appeal, Mr. Griffiths relied on Laskin J.A.’s decision in Axa Boreal and submitted that s. 268(2) was not limited to the determination of priorities, but rather could also provide entitlement to benefits. Mr. Griffiths submitted that s. 268(2)(1)(i) referred to an “insured” and not to an “insured person” as the term is found in the SABS. Thus, he submitted that s. 268 provided entitlement to benefits in addition to the definition of “insured person” in the SABS. Mr. Griffiths argued that s. 268(2)(1)(ii) and (iii) operate independently of the definition of an “insured person” in the SABS. Ultimately, Mr. Griffiths argued that an insurer can be liable to pay benefits to someone who is an occupant of a car under s. 268(2)(1)(ii) even if they are not an “insured person” as defined in the SABS. This is the same interpretive argument that Intact makes in the case at bar.

79Director Draper rejected this interpretation of Axa Boreal. Director Draper held instead that the case stood for the proposition that the Insurance Act, the SABS, and the policy all had to be read together to establish entitlement. He held that nothing in s. 268 obligates an insurer to pay benefits not provided for in the policy. Entitlement under the SABS could affect priority, but the priorities rule did not determine entitlement.

80Interpreted properly, Director Draper was of the view that Ontario’s scheme draws a clear line between residents and non-residents (at p. 16):

In reaching this conclusion, I am influenced by the fact that Ontario legislation and automobile insurance policies are drafted in the North American context, where there are extensive reciprocal enforcement arrangements among the various jurisdictions. As a general proposition, this is done by requiring the insurer, through legislation or an undertaking, to provide the mandatory coverages established in the the other jurisdictions and to respond to any action brought in another jurisdiction as if it were an insurer of that jurisdiction. It is not surprising that in this context, Ontario legislation focuses on protecting people injured in Ontario accidents, and its residents injured in accidents outside of Ontario. This does not mean that non-residents such as Mr. Griffiths are without recourse, but they must look to the jurisdiction in which the accident occurred, just as they could if the accident occurred in Ontario.

81I agree with these comments. In my view, the fact that Mr. Fulton is not eligible to receive benefits from either Gore or Intact under the Ontario scheme does not run contrary to the important public policy of providing timely access to accident benefits to victims of motor vehicle accidents. Mr. Fulton was entitled to timely accident benefits for his injuries; it is simply that he had to apply for them under the Alberta scheme.

82In summary, these authorities hold that the definition of “insured persons” in the SABS is highly relevant in determining priority under s. 268(2). When the SABS and s. 268(2) are read together, as they must be, the outcome is clear. If Mr. Fulton is not an “insured person” to whom Gore is obligated to provide Statutory Accident Benefits, Gore’s Ontario contract of insurance cannot fall within the priority scheme set out in s. 268. As a result, Gore is in no greater priority to Intact than Intact is in greater priority to Gore to pay Statutory Accident Benefits to Mr. Fulton under s. 268.

83Thus, I find that the Arbitrator’s decision is unreasonable, as it is inconsistent with applicable legal principles as set out in the legislation and the authorities.

The Arbitrator Erred in Determining Priority Under Alberta Legislation

84The Arbitrator determined that Gore was the priority insurer on two grounds. The first was his interpretation of s. 268. I have found his decision on this to be unreasonable. The second ground is the Arbitrator decided that under Alberta’s scheme of motor vehicle insurance, Gore was the priority insurer under s. 591(1) of the Alberta Insurance Act. Further, the Arbitrator made an order based on the equitable principle of restitution for the reimbursement by Gore to Intact for the Alberta-level benefits paid to Mr. Fulton by Intact.

85Let me begin my analysis by saying that if these issues fell within the Arbitrator’s jurisdiction, I would have found both of these decisions to have been reasonable.

86That said, these two issues were not before the Arbitrator to determine. They were beyond the Arbitration Agreement. The relevant portions of the Arbitration Agreement state:

1. The arbitration is in respect of a dispute between the parties regarding which insurer or entity is liable to pay statutory accident benefits to Jeremy Fulton arising out of the injuries he sustained in a motor vehicle accident on September 14, 2013.

2. It is the intention and desire of the parties that there be a resolution and determination of the dispute by arbitration pursuant to section 268 of the Insurance Act, R.S.O. 1990, c. I. 8, as amended, O. Reg. 283/95 thereto, and the Arbitration Act, 1991, S.O. 1991, c. 17.

87I have also examined the Arbitration Agreement in its entirety. The other provisions do not expand this jurisdiction given to the Arbitrator.

88An arbitrator is not entitled to go beyond the scope of the jurisdiction given to him by an arbitration agreement. The standard of review on this issue is correctness. In Smyth v. Perth & Smiths Falls District Hospital et al., 2008 ONCA 794, 92 O.R. (3d) 656, after citing the leading Supreme Court of Canada case of Dunsmuir v. New Brunswick, 2008 SCC 9, [2008] 1 S.C.R. 190, the Court of Appeal for Ontario held, at paras. 16-17:

In Dunsmuir, the court reduced the standards of review to two -- correctness and reasonableness. In its discussion of the correctness standard, Bastarache and LeBel JJ. said, at para. 59:

Administrative bodies must also be correct in their determinations of true questions of jurisdiction or vires... "Jurisdiction" is intended in the narrow sense of whether or not the tribunal had the authority to make the inquiry. In other words, true jurisdiction questions arise where the tribunal must explicitly determine whether its statutory grant of power gives it the authority to decide a particular matter. The tribunal must interpret the grant of authority correctly or its action will be found to be ultra vires….

By parity of reasoning, an arbitrator must address the issues, and only the issues, referred to him in the arbitration agreement. In this case, the respondent's position was that the Arbitration Agreement set out two specific issues for resolution and did not authorize the arbitrator to go beyond those questions in order to determine whether the board of the Hospital should accept or reject the respondent's application for reappointment. In my view, the respondent's position raised a jurisdictional issue within the description above in Dunsmuir. Accordingly, the application judge's review of the arbitrator's decision on this issue on a correctness standard was appropriate.

89There is no doubt that an arbitrator’s jurisdiction is broad under the Arbitration Act: Primmum Insurance Co. v. ING Insurance Co. of Canada, 2007 CarswellOnt 616 (S.C.J.). Further, there is no doubt that when the issues to be decided involve the law of an out-of-Ontario jurisdiction, an arbitrator can and, indeed may be very well-placed, to decide such issues. However, in my opinion, such jurisdiction is not limitless. It must be confined to what was agreed to in the Arbitration Agreement.

90The difficulty that may have arisen in this arbitration was the narrow focus given to it by the Arbitration Agreement. It may well be that this was inevitable, given that s. 1 of the Dispute Regulation seems to encompass only disputes as to which insurer is required to pay statutory accident benefits under s. 268. That acknowledged, the Arbitrator was still not entitled to go beyond the scope of the Arbitration Agreement to arrive at what he considered to be a just result.

91Intact relies on State Farm Insurance Cos. v. Bunyan, 2013 ONSC 6670, [2013] O.J. No. 5043, to support its position that the Dispute Regulation can determine interjurisdictional priority disputes. In that case, the court considered the issue of the payment of accident benefits following an accident that happened in Alberta in a vehicle insured in Manitoba. Years after paying benefits to the claimant, State Farm attempted to terminate the payment of benefits on the grounds that the claimant was not principally dependent on the insured, the claimant’s mother. Corbett J. considered the law of three jurisdictions and concluded that the claimant was a dependent. Further, Corbett J. found that State Farm was estopped from terminating benefits.

92I do not find this case helpful. First, this was an application brought to the Superior Court to decide the issue. It was not an arbitration under the Dispute Regulation, nor was it an appeal from such an arbitration award. Consequently, the court was fully entitled to look at the claimant’s entitlement under any jurisdiction without restriction. Second, the issue before court was not about a priority dispute between insurers but rather a dispute between the claimant and the insurer. As the court noted, the Manitoba Insurer took the position that it was not subject to Ontario legislation and could not be compelled to arbitrate liability under Ontario law. In other words, there was no lis between the insurers in that case. The decision must be viewed in light of those factual circumstances.

93In this case, the terms of the Arbitration Agreement are clear and focused. I recognize that clause four of the Arbitration Agreement gives the power to the Arbitrator to grant any relief appropriate to the facts and circumstances that a judge of the Ontario Superior Court would have at trial. I have considered whether this clause could provide the jurisdiction for the Arbitrator to proceed under the Alberta scheme. Certainly, it could provide the Arbitrator the jurisdiction to invoke the equitable remedy of restitution, as he did when he ordered Gore to reimburse Intact the Alberta-level benefits paid to date. However, I find that clause four is merely a remedial provision. Clause four does not provide the Arbitrator with the jurisdiction to determine priority under the Alberta legislation.

94There are other minor points raised by Intact. It is true that the Arbitrator considered s. 45 of the Insurance Act, the fact that both Intact and Gore were licensed in Ontario and Alberta, and the fact that both Intact and Gore were signatories to the Power of Attorney and Undertaking. In my view, these matters illuminate how insurance companies and different governments have created mechanisms to try and meet the challenges of administering insurance schemes across differing jurisdictions. The Arbitrator’s reference to these matters also illustrates the depth of knowledge he has in his field of expertise. However, the matters do not have direct application to the main issues he had to decide. Furthermore, the Arbitrator clearly did not anchor his decision in any of these considerations. Finally, and most importantly, these matters do not expand the Arbitrator’s jurisdiction regarding the issues he had to decide.

95I have assessed this ground of appeal on the standard of correctness. I find that the Arbitrator erred in determining that Gore was in priority to Intact under the Alberta law. He had no jurisdiction to do so.

96As a result of my conclusions, there was no basis for the Arbitrator to have ordered that Gore reimburse Intact the Alberta-level benefits Intact had paid to Mr. Fulton.

Conclusion

97I have no doubt that the Arbitrator attempted to come to the just result. Under Alberta law, Gore was the priority insurer and should have paid Mr. Fulton Alberta benefits. There seems to be little question about that. The Arbitrator found that Intact responded to the claimant in a compassionate and commendable manner at a time when his status as an insured person was uncertain. This decision by Intact was in the best tradition of the insurer community and reflected the important policy principles underlying automobile insurance, particularly in the context of an interjurisdictional claim.

98However, the manner in which the Arbitrator came to that result was not legally available to him. His decision based on s. 268(2) was unreasonable. His determination that Gore was the priority insurer under the Alberta legislation was beyond the scope of the Arbitration Agreement.

99Intact has argued strongly that on the unusual facts of this case, it has no other way to transfer liability to the correct insurer. There is an obvious equitable appeal to this argument. But I am limited in my ability to respond. I am only hearing this matter as an appeal judge. As a result, I am constrained in what I can do.

100The appeal is allowed. I declare that Gore is not in priority to Intact under s. 268(2) of the Insurance Act. The finding made by the Arbitrator regarding Gore’s priority under the Alberta law and his reimbursement order are set aside.

101The parties have agreed that the successful party should receive $7,500 in costs. Therefore, Intact will pay Gore $7,500 in costs inclusive of disbursements and HST.