Dorman v. Economical Mutual Insurance Company et al.

[Indexed as: Dorman v. Economical Mutual Insurance Co.]

Ontario Reports

Ontario Superior Court of Justice

Belobaba J.

July 10, 2020

151 O.R. (3d) 791 | 2020 ONSC 4004

Case Summary

Administrative law — Jurisdiction — Plaintiffs filing proposed class actions against insurers and regulator for improperly deducting HST from accident benefits — Two of 15 insurers settling and plaintiffs seeking approval of settlements — Court had no jurisdiction to approve settlements or to hear actions against insurers, as questions of accident benefits were within exclusive jurisdiction of Licence Appeal Tribunal — Actions against regulator involving improper investigation rather than issues of entitlement to benefits, so those actions could proceed — Insurance Act, R.S.O. 1990, c. I.8, s. 280.

Civil procedure — Class proceedings — Approval of settlement — Plaintiffs filing proposed class actions against insurers and regulator for improperly deducting HST from accident benefits — Two of 15 insurers settling and plaintiffs seeking approval of settlements — Court had no jurisdiction to approve settlements or to hear actions against insurers, as questions of accident benefits were within exclusive jurisdiction of Licence Appeal Tribunal — Actions against regulator involving improper investigation rather than issues of entitlement to benefits, so those actions could proceed — Insurance Act, R.S.O. 1990, c. I.8, s. 280.

Courts — Jurisdiction — Plaintiffs filing proposed class actions against insurers and regulator for improperly deducting HST from accident benefits — Two of 15 insurers settling and plaintiffs seeking approval of settlements — Court had no jurisdiction to approve settlements or to hear actions against insurers, as questions of accident benefits were within exclusive jurisdiction of Licence Appeal Tribunal — Actions against regulator involving improper investigation rather than issues of entitlement to benefits, so those actions could proceed — Insurance Act, R.S.O. 1990, c. I.8, s. 280.

Insurance — Actions against insurer — Plaintiffs filing proposed class actions against insurers and regulator for improperly deducting HST from accident benefits — Two of 15 insurers settling and plaintiffs seeking approval of settlements — Court had no jurisdiction to approve settlements or to hear actions against insurers, as questions of accident benefits were within exclusive jurisdiction of Licence Appeal Tribunal — Actions against regulator involving improper investigation rather than issues of entitlement to benefits, so those actions could proceed — Insurance Act, R.S.O. 1990, c. I.8, s. 280.

Insurance — Automobile insurance — Statutory accident benefits — Deductions — Settlement — Plaintiffs filing proposed class actions against insurers and regulator for improperly deducting HST from accident benefits — Two of 15 insurers settling and plaintiffs seeking approval of settlements — Court had no jurisdiction to approve settlements or to hear actions against insurers, as questions of accident benefits were within exclusive jurisdiction of Licence Appeal Tribunal — Actions against regulator involving improper investigation rather than issues of entitlement to benefits, so those actions could proceed — Insurance Act, R.S.O. 1990, c. I.8, s. 280. [page792]

Multiple plaintiffs filed proposed class actions against 15 insurers and the Financial Services Commission of Ontario ("FSCO") for improperly deducting Harmonized Sales Tax ("HST") from their statutory accident benefits. Shortly after the actions were commenced, two of the defendant insurers entered into settlement agreements. The affected plaintiffs sought approval of those settlements under the Class Proceedings Act. The remaining defendants brought parallel motions for a legal determination that the Licence Appeal Tribunal ("LAT") had exclusive jurisdiction over the dispute.

Held, the motions should be allowed in part.

The actions against the insurers were dismissed for lack of jurisdiction. It was plain and obvious that the claims against the insurers fell within the exclusive jurisdiction of the LAT. The wrongful conduct alleged by the plaintiffs was that the insurers did not consistently pay or reimburse their insureds for applicable HST in the calculation of benefit entitlement. The LAT had been given exclusive jurisdiction over resolution of disputes in respect of entitlement to statutory accident benefits. The fact that the claims were advanced as class proceedings did not change the analysis. The plaintiffs attempted to argue that some of the wrongful conduct pre-dated the enactment of the exclusive jurisdiction provision, but the proposed class actions had all been filed afterwards.

The court could not approve the two settlements. Approval required certification of the proposed class action, which was impossible because the only court proceedings allowed in respect of disputes over statutory accident benefits were appeals from the LAT or an application for judicial review.

It was not plain and obvious that the proposed class actions against the FSCO and its current and former superintendent were barred. The allegations those defendants were not about statutory accident benefit entitlements or amounts. As such, the LAT did not have exclusive jurisdiction. The core dispute was that the FSCO failed to investigate the practices of the insurers after receiving numerous written complaints and failed to enforce its own guidelines. Accordingly, the court had jurisdiction to hear those proposed class actions.

Stegenga v. Economical Mutual Insurance Co. (2019), 147 O.R. (3d) 65, [2019] O.J. No. 3845, 2019 ONCA 615, 436 D.L.R. (4th) 361, 44 M.V.R. (7th) 173, 95 C.C.L.I. (5th) 194 (C.A.), folld

Other cases referred to

16-004520 v. Motor Vehicle Accident Claims Fund, 2017 CanLII 82020 (Ont. LAT); 16-004616/AABS v. Aviva Insurance Canada, 2018 CanLII 76696 (Ont. LAT); 16-00284/AABS, B. (P.) v. RBC Insurance Co., 2017 CarswellOnt 2751 (Ont. LAT); Bisaillon v. Concordia University, [2006] 1 S.C.R. 666, [2006] S.C.J. No. 19, 2006 SCC 19, 266 D.L.R. (4th) 542, 348 N.R. 201, J.E. 2006-1081, 51 C.C.P.B. 163, [2006] CLLC para. 220-033, 147 A.C.W.S. (3d) 811, EYB 2006-105515, 149 L.A.C. (4th) 225; Cain v. 1150320 Ontario Inc. (c.o.b. The Antique Shoppe), [2012] O.J. No. 6150, 2012 ONCA 920 (C.A.); Campisi v. Ontario (Attorney General) (2018), 144 O.R. (3d) 638, [2018] O.J. No. 5825, 2018 ONCA 869, (C.A.), affg [2017] O.J. No. 2777, 2017 ONSC 2884, 279 A.C.W.S. (3d) 733, 68 C.C.L.I. (5th) 228, 382 C.R.R. (2d) 320 (S.C.J.) [Leave to appeal to S.C.C. refused [2019] S.C.C.A. No. 52]; Catherine Brooks v. Intact Financial Corp. (c.o.b. Intact Insurance), CV-18-00607933-CP; Curactive Organic Skin Care Ltd. v. Ontario, [2012] O.J. No. 492, 2012 ONCA 81, 105 L.C.R. 26 (C.A.); JVDA v. Aviva General Insurance, 2020 CanLII 40345 (Ont. LAT); Shelli-Lynn Black v. Belair Insurance Co. Inc. (c.o.b. Belair Direct), CV-18-00607931-CP [page793]

Statutes referred to

Class Proceedings Act, 1992, S.O. 1992, c. 6 [as am.], ss. 2(1), (2), 5(1)(i), 29(2)

Crown Liability and Proceedings Act, 2019, S.O. 2019, c. 7, Sch. 17 [as am.]

Insurance Act, R.S.O. 1990, c. I.8, ss. 280, (1), (2), (3), (4), 283(5) [as am.]

Legislation Act, 2006, S.O. 2006, c. 21, Sch. F, s. 67

Proceedings Against the Crown Act, R.S.O. 1990, c. P. 27 [rep.]

Rules and regulations referred to

Automobile Insurance, R.R.O. 1990, Reg. 664, ss. 19, 21

Rules of Civil Procedure, R.R.O. 1990, Reg. 194, rules 21.01(1) (a), (3)(a)

Statutory Accident Benefits Schedule, O. Reg. 34/10 [as am.], s. 18(1) [as am.]

MOTIONS by the defendants to stay or dismiss actions for lack of jurisdiction; CROSS-MOTIONS by the plaintiffs for approval of settlements.

Paul Harte, Ronald Bohm, Maria Damiano, Kevin E. Kemp and K. Jay Ralston, for plaintiffs.

Mark A. Gelowitz, Laura K. Fric and Carla Breadon, for defendant Economical Mutual Insurance Company.

L. Glenn Frelick, Dona Salmon and Adam Mortimer, for defendants Her Majesty the Queen in Right of Ontario, Philip Howell and Brian Mills.

Christine Lonsdale and Alison Bond, for defendant Certas Home and Automobile Insurance Company.

Paul J. Martin, Sarah J. Armstrong and Daanish Samadmoten, for defendants Aviva Insurance Company of Canada, Co-operators General Insurance Company, CUMIS General Insurance Company, and Gore Mutual Insurance Company.

Geoffrey B. Shaw and Arthur Hamilton, for defendant Wawanesa Mutual Insurance Company.

Byron Shaw and Patrick Healy, for defendants Intact Financial Insurance and Belair Insurance Company Inc.

Belinda A. Bain, Scott Kugler and Heyla Vettyvel,for defendant TD Insurance.

Cheryl M. Woodin and Joseph N. Blinick, for defendants St. Paul Fire and Marine Insurance Company and Travelers Insurance Company of Canada.

Paul Tushinski and Gillian Eckler, for defendant Commonwell Mutual Insurance Group, incorrectly named Commonwealth Mutual Insurance Group.

Lisa A. Armstrong, for defendant Echelon General Insurance Company.

Alan D'Silva, Patrick O'Kelly, Glenn Zacher and Alexandra Urbanski, for defendants Allstate Insurance Company of Canada and Unifund Assurance Company. [page794]

BELOBABA J.: —

[1] Unhappy that their auto insurers were improperly deducting HST from their statutory accident benefits, the plaintiffs filed proposed class actions against 15 insurers and the insurers' government regulator.

[2] In principle, the class action was designed for this very purpose -- class-wide allegations about defendant insurers improperly reducing SABs contrary to government guidelines; alleged regulatory negligence in the investigation and enforcement of complaints; individual recourse to the Licence Appeal Tribunal not viable because most of the HST amounts in question were less than the LAT filing fee; a sensible class definition; easily drafted common issues; and a reasonable likelihood that class-wide damages could be determined in the aggregate.

[3] But class actions in the Superior Court, important as they are for access to justice reasons, are at best procedural vehicles that must give way if the court's jurisdiction is ousted by valid legislation.

[4] Here, 13 of the 15 defendant insurers[^1] and the defendant government regulator, the Financial Services Commission of Ontario ("FSCO")[^2] say the proposed class actions that were filed in this court must be stayed or dismissed for lack of jurisdiction. Each of them brings a parallel motion under rules 21.01(1)(a) and (3)(a) [of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194] asking for a legal determination that the LAT has exclusive jurisdiction over all SAB disputes. And, they say, this exclusive jurisdiction doesn't change just because the SAB disputes are being advanced as a class action, or more accurately, as 15 class actions.

[5] The moving parties submit that the language in s. 280 of the Insurance Act[^3] and the recent decision of the Court of Appeal in [page795] Stegenga[^4] make clear that the proposed class actions must be stayed or dismissed.

[6] There are three questions before this court:

(i) Does this court have jurisdiction over the proposed class actions against the insurers?

(ii) Can this court approve the two settlements with defendants Belair and Intact?

(iii) Does this court have jurisdiction over the proposed class actions against the government regulator FSCO?

[7] I will consider each of these questions in turn.

Analysis

(1) Does this court have jurisdiction over the proposed class actions against the insurers?

[8] The short answer is no. Given the nature of the claims against the defendant insurers, this court does not have jurisdiction.

[9] The changes that were made to the LAT in 2016 were described by this court in Campisi:[^5]

In 2014, the provincial legislature adopted one of the key recommendations of the Cunningham Report and amended s. 280 of the Insurance Act so that effective April 1, 2016 all SABS disputes would be resolved solely by [the] LAT, subject only to appeals on questions of law or applications for judicial review. The court option was eliminated.[^6]

[10] Sections 280(1) to (4) of the Insurance Act provide as follows:

Resolution of disputes

280(1) This section applies with respect to the resolution of disputes in respect of an insured person's entitlement to statutory accident benefits or in respect of the amount of statutory accident benefits to which an insured person is entitled.

Application to Tribunal

(2) The insured person or the insurer may apply to the Licence Appeal Tribunal to resolve a dispute described in subsection (1).

Limit on court proceedings [page796]

(3) No person may bring a proceeding in any court with respect to a dispute described in subsection (1), other than an appeal from a decision of the Licence Appeal Tribunal or an application for judicial review.

Resolution in accordance with Schedule

(4) The dispute shall be resolved in accordance with the Statutory Accident Benefits Schedule.

[11] In short, no court actions are permitted with respect to disputes about the entitlement to an SAB or the amount of the SAB. These disputes fall within the jurisdiction of the LAT.

[12] That this jurisdiction is wide-ranging and "exclusive" was made clear by the Court of Appeal in Stegenga:[^7]

The amendments enacted in April 2016 -- giving the LAT jurisdiction (subject to appeal or judicial review) over the same disputes that were previously subject to mandatory mediation, and prohibiting proceedings in court -- do not detract from the legislature's intention that the provisions continue to constitute a complete code for the resolution of disputes in respect of an insured person's entitlement to SABs or in respect of the amount of SABs to which an insured person is entitled.

Disagreements between an insurer and insured about the SABs the insured should receive, their amount, the timeliness of their provision, and the conduct and process of the insurer in providing them (that is, the handling or administration of the claim) constitute disputes in respect of the insured person's entitlement to SABs or their amount ... These are matters the legislature has empowered the LAT to decide, and has taken away from the court.

The legislature made a choice as to what disputes would be within the exclusive jurisdiction of the LAT, and what remedial powers the LAT would have. That was a policy choice it was entitled to make.

[13] Both sides agree that the "plain and obvious" test applies in jurisdiction motions under rule 21.01(1)(a) and (3) (a).[^8]

[14] In my view, it is plain and obvious that the plaintiffs' claims against the defendant insurers fall within the exclusive jurisdiction of the LAT.

[15] At their core, the facts alleged by the plaintiffs in the amended statements of claim are about the insurers' improper inclusion of HST and their failure to provide the full amount of the SABs to which the plaintiffs were entitled. The plaintiffs describe the defendant insurers' "wrongful conduct" as follows: that they "did not consistently pay or reimburse [their] Insureds for [page797] Applicable HST and / or included Applicable HST in the calculation of the benefit entitlement under the SABS".

[16] To repeat what was said by the Court of Appeal in Stegenga: "These are matters the legislature has empowered the LAT to decide and has taken away from the court."[^9]

[17] The fact that the plaintiffs' claims are being advanced as proposed class actions does not change the analysis. The Class Proceedings Act[^10] cannot confer jurisdiction over cases that would otherwise fall within the jurisdiction of another tribunal such as the LAT. As the Supreme Court of Canada noted in Bisaillon:[^11]

[T]he class action procedure cannot have the effect of conferring jurisdiction on the Superior Court over a group of cases that would otherwise fall within the subject-matter jurisdiction of another court or tribunal. Except as provided for by law, this procedure does not alter the jurisdiction of courts and tribunals.

[18] And the fact that s. 280 prohibits court actions by "an insured person" (in the singular) does not mean that a class action on behalf of several or many insured persons should therefore be allowed to proceed. Provincial interpretation statutes provide that any reference to the singular also includes the plural.[^12]

[19] However, there is a more direct answer in the CPA itself. Every proposed class action begins with the filing of a single proceeding that must then be judicially certified as a class proceeding with a representative plaintiff.[^13] Here, for example, Mr. Dorman as the "insured person" has filed a proposed class action against his defendant insurer and the defendant regulator. It is this initial and singular filing that is barred by s. 280 of the Insurance Act. The proposed class action cannot proceed because the filing of the initial action is prohibited by statute.

[20] The plaintiffs try one final argument. They submit that because the suggested class period for the alleged "wrongful conduct" dates back to 2010, the exclusive jurisdiction provision of s. 280 of the Insurance Act, which was enacted on April 1, [page798] 2016, applies to "only a small proportion of the proposed class period".

[21] I do not accept this submission. I agree with the defendant insurers' response. Section 21 of the Automobile Insurance regulation[^14] is the legislative transition provision that addresses the 2016 amendments to s. 280. Section 21 provides that proceedings -- whether mediations, arbitrations or court cases -- "commenced but not completed" by the transition date, April 1, 2016, are "continued" under the previous version of the Insurance Act.[^15] But if a proceeding is commenced after April 1, 2016, then the present version of s. 280 which grants exclusive jurisdiction to the LAT applies -- and the plaintiff is barred from proceeding in court to determine disputes in respect of SAB entitlement or amount. Here the proposed class actions were all filed in 2018 or later.

[22] I must therefore stay or dismiss the proposed class actions against the defendant insurers.

[23] This means of course that many SAB claimants affected by the insurers' alleged "wrongful conduct" will not get their day in court. Individual claimants with larger SAB claims and thus more significant HST disputes can appeal to the LAT -- and some have done so, albeit with mixed results.[^16] But in the vast majority of minor injury cases where the disputed HST amounts are generally less than the $100 LAT filing fee, individual claims will not be pursued and the impugned insurers will arguably be enriched in the millions of dollars. Such is the consequence of the jurisdiction design decision.

[24] The plaintiffs can take some comfort from the fact that the SAB Schedule has recently been amended so that as of June 3, 2019 [page799] insurers can no longer use HST to reduce SAB entitlements or amounts.[^17]

(2) Can this court approve the settlements with defendants Belair and Intact?

[25] Shortly after the actions against them were commenced, two of the insurers, Belair and Intact, entered into settlement agreements.[^18] The affected plaintiffs ask the court to approve these settlements under s. 29(2) of the CPA.

[26] The jurisdiction answer is the same. This court cannot approve the two settlements. The settlements cannot be approved unless the proposed class action is certified. The proposed class action cannot be certified because, as discussed above, the initial action as filed is barred by s. 280(3) of the Insurance Act.

(3) Does this court have jurisdiction over the proposed class actions against the government regulator FSCO?

[27] This final question involves a different analysis and leads to a different result. In my view, it is not at all plain and obvious that the proposed class actions as against the government defendants are barred by s. 280 of the Insurance Act.

[28] The allegations against the defendant regulator are not about actual SAB entitlements or amounts. The core dispute with the regulator is that FSCO failed to investigate the practices of the insurers after receiving numerous written complaints and failed enforce its own guidelines and bulletins about HST and SABs.

[29] The plaintiffs allege regulatory negligence, bad faith and misfeasance of public office. None of these disputes fall within the language of any of the subsections of s. 280.

[30] FSCO is right to argue that the defendant insurers' "wrongful conduct" is a predicate determination that will have to be made before allegations of regulatory negligence can be sustained. But this alleged prerequisite goes to causes of action (not jurisdiction) and is best argued at the certification motion when causes of action are considered under s. 5(1)(a) of the CPA. [page800] Indeed, counsel for the government regulator acknowledged this very point in their factum:

Without a predicate determination that how the Defendant Insurers handled the Plaintiffs' SAB benefit claims was wrongful, the 29 Statements of Claim disclose no cause of action against the Crown Defendants.

[31] There is nothing in s. 280 of the Insurance Act or in the Court of Appeal's decision in Stegenga that gives exclusive jurisdiction to LAT over claims of regulatory negligence against a third-party government regulator. FSCO may well prevail on its cause of action submissions but this is a matter for the certification motion.

[32] On the motions before me, I cannot conclude that it is plain and obvious that this court lacks jurisdiction to hear the proposed class actions against FSCO and its former and current Superintendents.

Disposition

[33] This court lacks jurisdiction to hear the proposed class actions against the defendant insurers. These actions are dismissed.

[34] This court lacks jurisdiction to approve the settlements reached with Belair and Intact. The proposed settlements are not approved.

[35] This court has jurisdiction to hear the proposed class actions against FSCO and its former and current superintendents.

[36] The costs of these motions and cross-motions should ideally be resolved by the parties. If no resolution is possible, I would be pleased to receive brief written submissions -- within 14 days from the defendant insurers; within 14 days thereafter from the plaintiffs; and within 14 days after that from the government defendants.

[37] I am obliged to all counsel for their assistance.

Motions allowed in part and cross-motions dismissed.

Notes

[^1]: A total of 29 actions were filed: 15 were filed in 2018 and then 14 duplicate actions (all but Mieyette v. Allstate) were refiled in 2019 out of an abundance of caution to comply with the requirements of the newly enacted Crown Liability and Proceedings Act, 2019, S.O. 2019, c. 7, Sch. 17, which took effect in June, 2019 and replaced the Proceedings Against the Crown Act, R.S.O. 1990, c. P. 27. Two of the 15 insurers, Belair and Intact entered into early settlements with the plaintiffs and are not contesting jurisdiction. I will discuss the two settlements in more detail later in these reasons. Hence, there are 13 defendant insurers as moving parties.

[^2]: The government defendants include FSCO and its former and current Superintendents, Phillip Howell and Brian Mills.

[^3]: Insurance Act, R.S.O. 1990, c. I.8.

[^4]: Stegenga v. Economical Mutual Insurance Company (2019), 147 O.R. (3d) 65, [2019] O.J. No. 3845, 2019 ONCA 615 (C.A.).

[^5]: Campisi v. Ontario, 2017 ONSC 2884, aff'd 2018 ONCA 869, leave to appeal refused, [2019] S.C.C.A. No. 52.

[^6]: Ibid. at para. 5.

[^7]: Stegenga, supra, note 4, at paras. 37, 53 and 52.

[^8]: Cain v. 1150320 Ontario Inc. (The Antique Shoppe), 2012 ONCA 920, at para. 4.

[^9]: Stegenga, supra, note 4, at para. 53.

[^10]: Class Proceedings Act, 1992, S.O. 1992, c. 6 ("CPA").

[^11]: Bisaillon v. Concordia University, 2006 SCC 19, at para. 22. See, also, Curactive Organic Skin Care Ltd. v. Ontario, 2012 ONCA 81, at para. 4.

[^12]: See, for example, s. 67 of the Legislation Act, 2006, S.O. 2006, c. 21, Sch. F, which provides that "[w]ords in the singular include the plural and words in the plural include the singular".

[^13]: CPA, s. 2(1) and (2).

[^14]: R.R.O. 1990, Reg. 664.

[^15]: See s. 19 of Automobile Insurance, R.R.O. 1990, Reg. 664; s. 283(5) of the Insurance Act; and Proclamation 149-G162E, O. Gaz. 2016, 547 (Vol. 149-11). Section 19 of Reg. 664 provides that "transition date" has the same meaning as in subs. 283(5) of the Insurance Act. Subsection 283(5) of the Act provides that "transition date" means the date on which subs. 283(5) (as re-enacted by s. 14 of Sch. 3 to the Fighting Fraud and Reducing Automobile Insurance Rates Act, 2014) comes into force. Subsection 283(5) of the Act came into force on April 1, 2016: see Proclamation 149-G162E, O. Gaz. 2016, 547 (Vol. 149-11).

[^16]: See for example: 16-004520 v. Motor Vehicle Accident Claims Fund, 2017 CanLII 82020 (Ont. LAT); 16-004616/AABS v. Aviva Insurance Canada, 2018 CanLII 76696 (Ont. LAT); 16-00284/ AABS, B.(P.) v. RBC Insurance Co., 2017 CarswellOnt 2751 (Ont. LAT); and JVDA v. Aviva General Insurance, 2020 CanLII 40345 (Ont. LAT).

[^17]: See O. Reg. 123/19, amending O. Reg. 34/10. Section 18(1) provides: "The sum of the medical and rehabilitation benefits payable in respect of an insured person who sustains an impairment that is predominantly a minor injury shall not exceed $3,500 plus the amount of any applicable harmonized sales tax payable . . . for accidents that occur on or after June 3, 2019".

[^18]: Shelli-Lynn Black v. Belair Insurance Company Inc. c.o.b. Belair Direct, CV-18-00607931-CP and Catherine Brooks v. Intact Financial Corporation c.o.b. Intact Insurance, CV-18-00607933-CP.