The Economical Insurance Group v. Desjardins Insurance

[Indexed as: Economical Insurance Group v. Desjardins Insurance]

Ontario Reports Ontario Superior Court of Justice C. MacLeod J. March 5, 2020 149 O.R. (3d) 752 | 2020 ONSC 1363

Counsel: Pat C. Peloso, for applicant (appellant) Kelly P. Hart, for respondent

[1] C. MACLEOD J. : — The applicant seeks to set aside an arbitration decision determining that the Economical Insurance Group ("Economical") and not Desjardins Insurance ("Desjardins") is liable to pay statutory accident benefits ("SABS") to two catastrophically injured pedestrians. The applicant contends that the arbitrator erred in fact and law in making this determination, that the award should be set aside and the court should make an order that the respondent bears this obligation instead.

[2] When it comes to the payment of no fault accident benefits to an injured pedestrian, Ontario insurance legislation provides for what is supposed to be a relatively simple and arbitrary allocation of responsibility between insurers. In simplest terms, benefits are paid by the pedestrian's own insurer if there is one and otherwise must be paid by the insurer of the vehicle which struck the pedestrian.

[3] The injured pedestrian need not be a driver or have their own car insurance for this to apply. If the pedestrian lives with a family member who has a policy and if the pedestrian is a dependent within the meaning of the legislation, then that policy must pay. This hinges on the definition of "dependent" and that is the question which was before the arbitrator. On the facts of this case, the arbitrator held that the injured pedestrians were not dependents and so Economical and not Desjardins was responsible for the SABS.

[4] The decision of the arbitrator was appealed to this court. For the reasons that follow, I am not persuaded that the arbitrator committed a reviewable error. The appeal will be dismissed.

Background and Context

[5] To put the matter in context, the claimants, Mr. Liu and Ms. Wang, were pedestrians who suffered significant injuries in a motor vehicle accident in November of 2012. Under Ontario law, any person injured in a motor vehicle collision has access to statutory accident benefits on a "no fault" basis. In this case, the claimants were assessed as catastrophic so that the liability to pay benefits is significant.

[6] The question of which insurer bears the liability for paying SABS is what is generally referred to as a "priority dispute". As discussed in the introduction, it arises because the scheme for claiming no fault benefits establishes a hierarchy of insurance. Specifically, s. 268(2)2. of the Insurance Act provides that a pedestrian injured by an automobile (a non-occupant of an automobile) has recourse against the "insurer of an automobile in respect of which the non-occupant is an insured" and if there is no such insurer then against "the insurer of the automobile that struck the non-occupant". Essentially an injured party claims no fault benefits from their own insurer even if the insured vehicle is not involved in the accident. It is only if there is no coverage for the injured person that the insurer of the other vehicle pays SABS. SABS coverage is distinct from third party liability insurance which responds to tort claims.

[7] The injured claimants were neither licensed drivers nor the owners of an automobile but they resided with their daughter and son-in-law who owned two vehicles insured by Desjardins. The issue before the arbitrator was whether the injured pedestrians were "insured" under their children's motor vehicle policy (Desjardins) or whether liability to pay benefits lay with the insurer of the vehicle that struck them (Economical).

[8] The claimants were not named insureds under the Desjardins policy but pursuant to O. Reg. 34/10 they are insured under that policy for SABS purposes if at the material time they were "dependents of the named insured". The regulation then further refines the meaning of "dependant" to mean that a person is a dependent if the person is "principally dependent for financial support or care" on the named insured or his or her spouse.

[9] The singular question as a result of the statutory scheme is whether the claimants were principally dependent on their children at the time of the accident. After a review of the evidence and consideration of applicable jurisprudence, the arbitrator concluded that they were not. He therefore determined that Economical was the insurer liable to pay the SABS. Economical appeals that finding.

The Standard of Review

[10] Counsel agree that the standard of review of an arbitrator's decision in relation to priority disputes is one of reasonableness. There are decisions from the Court of Appeal holding that "reasonableness" is the appropriate standard of review even for questions of law. Those decisions remain binding on me and it is not necessary to engage in an analysis of whether the same policy reasons would apply to a private arbitrator as applied for FSCO. It is worth noting, however, that the question may have to be revisited in an appropriate case because when the Court of Appeal decided that question, it was influenced by the framework established by the Supreme Court of Canada in Dunsmuir.

[11] The Dunsmuir framework was significantly revised by the Supreme Court at the end of last year. Under the new framework there is a significant difference between judicial review and a right of appeal. Under the new framework an "appeal" requires that an appellate court will scrutinize the decision on a true appellate basis on the standard set out in Housen v. Nikolaisen. In short, pure questions of law will be reviewed on a correctness standard while findings of fact are entitled to deference. Questions of mixed fact and law are also entitled to deference and it will only be appropriate to intervene if the lower court or tribunal has proceeded on an incorrect legal principle or if the evidence cannot sustain the finding of fact. Whether the new framework should apply in Ontario to appeals from arbitrators deciding SABS issues remains to be seen.

[12] In this case, there is no doubt about the law. The arbitrator has correctly cited the provisions of the Insurance Act and the regulations. Both parties agree that the statutory test hinges on a finding that the claimants are dependents. They agree that the finding of the arbitrator is one of mixed fact and law entitled to deference. They disagree about whether the evidence supports that finding and whether or not it is reasonable.

The Critical Facts and Findings

[13] The facts are set out in detail in the arbitral award. I will not repeat them with the same level of detail. The injured claimants had immigrated to Canada and were living with their daughter and her family at their home in Ottawa.

[14] It is undisputed that the claimants were retired engineers from China who do not speak English or French. They are entitled to pensions in China but cannot access them while in Canada. They arrived in Canada with a significant amount of cash but out of the funds they had deposited in their Canadian bank account, they had lent $16,000 to their daughter and son-in-law to purchase their home. At the time of the accident, there remained $1,500 in savings in the bank. The other money in the bank consisted of funds paid by the daughter and son-in-law to the claimants for providing child care.

[15] The claimants were not dependent on their children for care. To the contrary, the claimants came to Ottawa with the intention of providing child care and some household services. Significantly, the parties had discussed the services to be provided and had agreed to pay something similar to market rates for child care. Unlike some of the cases cited to the arbitrator, in this case the fees for child care were actually deposited into the claimants' bank account. The daughter and son-in-law claimed the amounts as child care deductions and the claimants filed Canadian tax returns in which they claimed those amounts as income.

[16] The arbitrator used the 12 months preceding the accident to assess the issue of dependency. Neither party takes issue with this. In the absence of specific evidence on the point, the arbitrator used statistical and other evidence to establish the annual financial needs of the claimants at $23,180. This finding and the methodology for reaching that conclusion are also accepted by both parties.

[17] The arbitrator then calculated the financial resources available to the complainants in the year preceding the accident. He found that through a combination of the money paid to them for child care services, their savings and federal and provincial GST/HST payments, the claimants were able to meet 81 per cent of their financial needs. On that basis, he concluded that they were not financially dependent on the named insured and consequently were not entitled to SABS coverage under the Desjardins policy.

[18] In reaching this conclusion, the arbitrator was conscious of the existence of the immigration sponsorship agreement which provided that the daughter and son-in-law would be responsible for the financial needs of their parents should they require assistance. He also understood that the payment for child care was a somewhat artificial income splitting arrangement but found that the funds were actually paid and actually declared as income by the injured claimants. It was his conclusion that the claimants were capable of meeting the majority of their own financial needs from this income and the other sources he identified. He ruled that this took them out of the statutory definition of parties that were principally dependent on the named insured and therefore Desjardins was not responsible for the payment of SABS.

The Arguments

[19] The appellant argues that the arbitrator erred in treating the payment of a fee for child care as income. Although the fees were paid, receipted and declared for income tax purposes, they were only paid at the beginning of the next year during tax season and not on a regular basis. Although the funds were deposited into the complainants' joint bank account, they did not actually use the funds to meet their living expenses. The appellant argues that it was an error to treat the lump sum fee as if it was income earned during the previous 12 months or to regard it as anything other than an artificial income splitting device.

[20] In any event, the appellant argues that the arbitrator erred in applying the "50% +1" rule rather than the "big picture" approach. The appellant argues that if the relationship between the parties was examined in context, the parents are clearly dependent on their children for most of their financial needs and should be treated as dependents for purposes of the legislation.

[21] Not surprisingly, the respondent takes the opposite view. First, the respondent argues that the arbitrator was well aware that "50% + 1" was not a rigid formula and applied the correct legal test. Second, the respondent argues that the arbitrator reached the correct conclusion based on the evidence of the resources actually available to the injured complainants and it would have been improper for the arbitrator to speculate about other employment or resources that might or might not have been available. The respondent argues that the findings of the arbitrator were open to him on the basis of the evidence he properly considered, are reasonable under all of the circumstances and are entitled to deference.

Analysis

[22] The factors set out in Miller v. Safeco Insurance Co. of America continue to guide the correct analysis. Those factors are the amount of dependency, the duration of the dependency, the financial and other needs of the alleged dependent and the ability of the alleged dependent to be self supporting. Those factors continue to apply notwithstanding changes to the legislation.

[23] The "50% +1" rule is derived from decisions of arbitrators and this court holding that a person is not principally dependent on another person if the majority of their financial needs could be met by their available resources at the time of the accident. In a number of decisions, it was held that as long as more than half of the needs of the injured party could be met then they are not "principally dependent" within the meaning of the legislation. Recall that what is at stake is not whether the injured party receives SABS but which insurer pays.

[24] The "big picture" approach derives from cases in which either there was insufficient evidence to apply a 50% + 1 analysis or in which it simply appeared to be too arbitrary and nuanced a cut-off when viewed against the overall circumstances or the "big picture". The need to consider the big picture also takes into account some inconsistency in the case law as to what period of time should appropriately be used to assess dependency. In reality, these are not inconsistent. If most of a person's needs can be met from their own resources, they are not principally dependent on the other person but a strict mathematical approach will seldom be conclusive.

[25] In this case, the arbitrator was aware of the guiding jurisprudence. He referred to the Miller v. Safeco Insurance Co. of America criteria, at para. 14, to the 50% +1 rule at para. 15 and to the big picture at para. 16. In the latter paragraph, he quoted Faieta J. in Dominion of Canada General Insurance Co. v. Intact Insurance Co., 2015 ONSC 3689 and Myers J. in Allstate Insurance Co. of Canada v. ING Insurance Co. of Canada, 2015 ONSC 4020 to the effect the assessment of "principally dependent" "does not turn on the mathematical analysis of whether a person provides more than 50% of the needs of another . . . but rather requires a broader consideration of the various factors approved by the Ontario Court of Appeal in Miller".

[26] It is incorrect to say that the arbitrator relied on the 50% +1 rule. Rather the arbitrator found that in the 12 months immediately preceding the accident, the claimants had the capacity to meet approximately 81 per cent of their financial needs.

[27] As discussed earlier, this conclusion was reached primarily on the basis of the injured claimants' income from rendering child care services to their daughter and son-in-law. That this was a legitimate source of income available to the injured claimants at the time of the accident and would have been sufficient to cover their needs was a finding of fact. It is not unreasonable nor did the arbitrator misdirect himself as to the applicable legal principles.

[28] The key finding is summarized at para. 66 of the arbitral award. After a careful analysis of all of the evidence, the arbitrator concluded as follows:

Each case must be determined on its own facts. In the circumstances of this case, the evidence supports a finding that the claimants had the physical and mental ability to meet the childcare requirements of their particular family at that particular time. Whether these claimants had an income earning capacity outside of this family environment is not a determining issue. On the evidence provided at the hearing, the claimants were capable of providing the childcare needs of the family at the time, did in fact provide those childcare needs and were in fact paid market rates for their services. I find that the claimants were gainfully employed in the 12 month period immediately prior to the date of the motor vehicle accident under a legitimate agreement with their daughter and son-in-law.

[29] These conclusions are entitled to deference. They lead to the conclusion that the injured claimants had the capacity to cover most of their own financial needs and so were not principally dependent on the named insureds at the time of the accident.

[30] The issue is not whether I would have reached the same conclusion but whether it is a reasonable conclusion supported by the evidence. In my view it was, and the appeal must be dismissed.

Costs

[31] The respondent was successful in resisting the appeal and is entitled to costs. The respondent sought costs of $4,746 on a partial indemnity scale and $7,119 on a substantial indemnity scale and asks for the latter. I am advised there were no offers to settle that need to be considered and no agreement about the quantum of costs. I have the cost outlines of each of the parties. There is no reason to depart from the usual rule that costs should follow the event and no basis for substantial indemnity costs.

[32] I consider the costs sought by the respondent to be eminently reasonable under the circumstances. The costs incurred by the appellant were significantly greater consistent with the fact that the appellant bears the burden of preparing the materials and assembling the record. Still, the costs incurred by the appellant are a consideration in examining the costs sought by the opposing party.

Conclusion and Summary

[33] The appeal is dismissed with costs on a partial indemnity scale fixed at $4,746.

Appeal dismissed.

Notes

1. Insurance Act, R.S.O. 1990, c. I.8.
2. See Unifund Assurance Co. v. Dominion of Canada General Insurance Co., 2018 ONSC 303 and see Belairdirect Insurance v. Dominion of Canada General Insurance Co. (Travelers), 2018 ONCA 101.
3. Dunsmuir v. New Brunswick, 2008 SCC 9.
4. See Canada (Minister of Citizenship and Immigration) v. Vavilov, 2019 SCC 65, at para. 37. The standard of appellate review is that set out in Housen v. Nikolaisen, 2002 SCC 33.
5. See Dominion of Canada General Insurance Co. v. Ontario (Minister of Finance), 2013 ONSC 4747, at para. 17.
6. See Allstate Insurance Co. of Canada v. ING Insurance Co. of Canada, 2015 ONSC 4020 (S.C.J.), at para. 14, in which the benefits of this approach are endorsed.
7. Miller v. Safeco Insurance Co. of America (1985), 50 O.R. (2d) 797, [1985] O.J. No. 2742 (C.A.).
8. Security National Insurance Co. v. Wawanesa Mutual Insurance Co., 2014 ONCA 850, at para 2.
9. See Dominion of Canada General Insurance Co. v. Intact Insurance Co., 2015 ONSC 3689 (S.C.J.), at para. 10.
10. See State Farm Insurance Companies v. Bunyan, 2013 ONSC 6670 (S.C.J.).