Zurich Insurance Company Ltd. v. Scottish & York Insurance

Ontario Reports

Ontario Superior Court of Justice

Pollak J.

November 19, 2020

153 O.R. (3d) 715 | 2020 ONSC 7084

Case Summary

Insurance — Automobile insurance — Disputes between insurers — Notice — Arbitration — Priority dispute initially between two insurers resulting in third insurer being put on notice — Third insurer moving before arbitrator for production of communications between first two insurers to reveal possible inappropriate cooperation between them — Arbitrator finding insurers acting in good faith such that communications were irrelevant — Appeal dismissed — Arbitrator made no palpable and overriding error.

An automobile insurance priority dispute went to arbitration. The dispute was initially between the insurers S and B. S believed that B insured the owner of the taxi that the claimant was in at the time of the accident. It was later discovered that B did not insure taxis, resulting in further investigation and revealing the insured of the taxi to be Z. B then put the insurer Z on notice pursuant to s. 10 of O. Reg. 283/95 under the Insurance Act. Z took the position that the s. 10 notice was invalid because of possible inappropriate cooperation between S and B. Z submitted that B knew that it was not a priority insurer and did not deliver its s. 10 notice to Z until S convinced it to do so in an attempt to cure S's failure to put Z on notice within the 90-day deadline. Z brought a motion asking for production of the communications between S and B regarding the s. 10 notice delivered by B to Z. The arbitrator found that the notice by S to B was proper and in good faith and that it was not part of a greater scheme to circumvent the 90-day notice period. The arbitrator acknowledged Z's argument that it was wrong for an insurer to deliberately place an unrelated insurer on notice of a priority dispute within 90 days, knowing that the unrelated "second tier" insurer had the ability to place "third tier" insurers on notice without time limitation, but found that those were not the facts. As such, the arbitrator found that the communications were not relevant to the priority dispute and did not have to be produced. Z appealed.

Held, the appeal should be dismissed.

The arbitrator made no palpable and overriding error. The arbitrator clearly identified and properly considered the issue. He did not make, or purport to make, any rulings on the merits of the requirements for a s. 10 notice. He did not misapprehend or misstate Z's arguments and positions, and he properly considered the appropriate jurisprudence.

Cases referred to

Co-operators General Insurance Co. v. Intact Insurance Co., 2018 CarswellOnt 877

Statutes referred to

Insurance Act, R.S.O. 1990, c. I.8, s. 268 [as am.]

Rules and regulations referred to

Disputes Between Insurers, O. Reg. 283/95 [as am.], ss. 3 [as am.], 10

APPEAL from an arbitrator's decision dismissing a motion for production of communications.

Alon Barda, for the Plaintiff/Moving Party.

Derek Greenside, for the Respondent Scottish & York Insurance Company.

Leanne Zawadzki, for the Respondents Belair Direct/ Nordic Insurance.

ENDORSEMENT

[1] POLLOCK J.: — In a priority dispute arbitration proceeding pursuant to s. 268 of the Insurance Act, R.S.O. 1990 c. I.8 ("the Act") and O. Reg. 283/95 (the "Regulation"), between the moving party Zurich Insurance ("Zurich") and the respondents Scottish & York ("S&Y") and Belair Direct Insurance Company/Nordic Insurance Company, ("Belair"), Zurich brought a motion in-writing asking for production of the "communications" between S&Y and Belair with respect to the s .10 notice delivered by Belair to Zurich. Zurich appeals the arbitrator's decision on that motion.

[2] The evidence before the arbitrator was that S&Y believed that Belair insured the owner of the car that the claimant was in. It was later discovered that at the time of the accident, Belair did not insure the owner of the car and it subsequently put Zurich on notice pursuant to s. 10 of the Regulation.

[3] The question before the arbitrator on that motion, was whether or not the productions requested by Zurich were "relevant" in the arbitration proceeding between the parties.

[4] The first insurer to receive a completed application for accident benefits has the obligation of administering the accident benefit claim, and paying all eligible accident benefits, if there is some potential liability between the claimant and that insurer.

[5] An arbitration between S&Y and Belair was commenced before Zürich was given the s. 10 notice pursuant to the Regulation and joined in the arbitration.

[6] It was Zurich's submission, in its in-writing motion for production, that the s. 10 notice delivered by Belair to Zurich is invalid because Belair has no priority rank based on s. 268 of the Act as it does not insure the owner of the car and can therefore not dispute its obligation (because there is none) to pay benefits on the ground that Zurich is "equal or higher to in priority under section 268 of the Act".

[7] Zurich alleges that Belair's s. 10 notice is an attempt by S&Y to circumvent the s. 3 90-day notice requirement in the Act.

[8] Zurich's theory is that the s. 10 notice delivered by Belair to Zurich is invalid because of possible inappropriate cooperation "between S&Y and Belair". Zurich submits that Belair knew that it was not a priority insurer and did not deliver its s. 10 notice to Zurich until S&Y convinced it to do so to attempt to cure S&Y's failure to provide Zurich with a s. 3 notice. Zurich argued that it requires these productions to assess whether the s. 10 notice delivered by Belair is part of a greater scheme to circumvent the 90-day notice provisions of the Act and to determine the details of that scheme.

[9] S&Y emphasizes that although Belair disputes priority because it did not insure the car at the time of the accident, it also disputes priority as Zürich being the insurer has a higher priority status than S&Y or Belair. The respondent's submit that the appellant is trying to introduce irrelevant requirements for the validity of a s. 10 notice. The fact is, Zürich is the insurer highest in priority. The respondents, therefore, request that this appeal be dismissed with costs.

[10] Zurich submits that the arbitrator erred in law and committed palpable and overriding errors in failing to accept their reasons raised for the relevance of the productions, and finding that the communications between counsel for Belair and counsel for S&Y regarding the s. 10 notice were not required to be produced.

[11] Zurich agrees that as the appeal issues raise questions of mixed fact and law and the test for review of the Arbitrator's ruling is "palpable and overriding error".

[12] Zurich asks this court to set aside the ruling and to substitute an order for production of the communications between S&Y and Belair respectively, including communications between counsel with respect to the notice delivered by Belair to Zurich. Zurich further asks for an order referring the matter back to the arbitrator for determination of the remaining issues in the priority dispute arbitration proceeding.

[13] The arbitrator found that there was no evidence that the notice of S&Y to Belair was not proper and in good faith as part of a greater scheme to circumvent the 90-day notice applicable to S&Y. He found that S&Y in good faith thought that Belair was an insurer based on the information it had received.

[14] To determine whether this appeal should be granted, the arbitrator's reasons for his findings must be considered as a whole in the context of the arbitrator's analysis, rather than isolating certain phrases. In my view, the underlined portions of the reasons below, demonstrate that the arbitrator made no errors as alleged by the appellant. I find that the reasons properly summarize Zurich's argument and clearly identify the relevant issues to be considered and the reasons for the conclusions reached on the basis of evidence before him. He was entitled to make the findings he made and I cannot find any bases to conclude that the arbitrator made a palpable and overriding errors. The reasons below are as follows:

With the backdrop of this jurisprudence, I must determine whether communications between the solicitor for S&Y and the solicitor for Belair are relevant to the issues before me. I find on the facts before me that they are not and I am not prepared to order their production. I am satisfied that the notice by S&Y to Belair was proper and in good faith. The information provided by the operator of the taxi was that it was owned by Ataur Rahman. An Autoplus search conducted by S& Y showed that he was insured by Belair. It was only when advised by counsel for Belair that Belair did not insure taxis that further investigation was conducted by way of a Freedom of Information Request of the City of London, which showed Zurich as insurer of the taxi and although Ataur Rahman was the plate lessor, the taxi was actually owned by 1874676 Ontario Inc. This, in my view, was not part of a greater scheme to circumvent the 90 day notice applicable to the first insurer to have received a completed application for benefits. S&Y in good faith thought that Belair was the insurer based on the information provided by the operator of the taxi and an Autoplus search.

There is merit to the argument advanced by Zurich that it would be wrong for an insurer to deliberately place an unrelated (but friendly) insurer on notice of a priority dispute within 90 days, knowing the friendly "second tier" insurer has the ability to place "third tier" insurers on notice without a time limitation, while it completed an investigation that ought to have been completed within 90 days. On different facts, the communications in issue may be relevant in circumstances where there is no valid nexus between the first and second tier insurers. For example, a company that markets insurance under several different corporate entities had a scheme to simply put a brother company on notice where an adjuster had neglected to complete a proper investigation within 90 days, so as to avoid a notice limitation. Such circumstances wold likely be dealt with by application of an arbitrator's jurisdiction for equitable remedies as set out in s. 31 of the Arbitration Act and find such notice invalid as an abuse of process. The doctrine of abuse of process engages the inherent power of the court to prevent the misuse of its procedure in a way that would bring the administration of justice into disrepute. I find that there was nothing of the sort here. S& Y had a valid reason to put Belair on notice. I do not believe that the motivation of Belair putting Zurich on notice is relevant, given the jurisprudence set out above and the communications sought by Zurich are not relevant, given the jurisprudence set out above and therefore no requirement for the communications to be produced.

In Wawanesa v. Peel Mutual and Economical Mutual Insurance Company (Arbitrator Samis -- January 28, 2011 and June 21, 2011) Arbitrator Samis wrote:

"To apply the section 3 provisions to second tier insurer's would give rise to the injustice, ultimately resulting in the payment of benefits by the wrong insurer. The regulation is designed to facilitate a process that will lead to the cost of the claim being visited upon the correct insurer, without burdening the insured person with prosecution of the priority dispute issues.It would be abhorrent to interpret the regulation in any manner which has the opposite result unless that outcome is required by the clear and specific language of the regulation. The language of that regulation does not have that clarity."

I am of the view that the importance of identifying the correct priority insurer is more important thanapplying a time requirement for notice not specified in clear and specific language in Section 10 or, as is the case here, exploring the rationale of a second tier insurer putting a third tier insurer on notice pursuant to Section 10, provided there was a bona fide basis for the first tier insurer putting the second tier insurer on notice. As I have indicated, I do not believe that on the existing jurisprudence the communications between counsel for S&Y and Belair are relevant to the priority dispute here and therefore need not be produced.

[15] Specifically, Zurich submits that the arbitrator erred in law and committed palpable and overriding errors by:

-- Failing to properly consider the issue before him, being the request for production of the communications between the respondents either directly or through counsel, regarding the delivery of notice of the priority dispute to Zurich. I find that the issue is clearly identified in the reasons and properly considered by the arbitrator.

-- At para. 20 of his decision, the arbitrator summarizes Zurich's position as:

Zurich submitted that the communications between counsel for S&Y and counsel for Belair (and communications between their respective principles), which lead to the delivery of Belair's notice to Zurich are relevant to the dispute regarding the validity of Belair's notice as those communications will inform the tribunal regarding: the basis of Belair's dispute of its obligation to pay benefits; the source of the information leading to the delivery of Belair's notice; Belair's motivation to avoid injustice (or otherwise); and whether Belair's notice is part of a greater scheme to assist S&Y in avoiding its 90 day notice requirement. Zurich therefore has sought production of such communications and its costs of this motion.

-- Making a decision on the substantive issue of the validity of the notice provided by Belair to Zurich, rather than determining if the documents sought to be produced were relevant to the issue of validity of the notice, which was the issue of the motion before him. The arbitrator decided whether the communications were relevant, as he was required to do. He could not make a ruling on the relevance of the documents any other way. I find that he did not purport to make, or make any rulings on the merits of the requirements for a s. 10 notice.

-- Misapprehending the issue and misstating the arguments and positions advanced by Zurich in regards to the relevance of the documents sought to be produced and the issue of validity of Belair's notice to Zurich. I disagree and refer to his reasons wherein he referred to and analyzed the parties' arguments as well as referring to and considering the jurisprudence relied on by the parties to arrive at his decision on relevance, without erring in law as alleged.

-- Applying the decision in Co-operators General Insurance Co. v. Intact Insurance Co., 2018 CarswellOnt 877 ("Co-operators v. Intact"), despite clear differences in the facts, the arguments advanced and the relief sought in the motion before him. The analysis of the arbitrator is clearly set out in his reasons. I can find no errors as alleged.

-- Finding the decision in Co-operators v. Intact binding upon him in regards to the issues in dispute in the motion. I find no error in this regard.

[16] As a result of these findings, there is no need to consider the alternate argument regarding solicitor-client and litigation privilege. I therefore, dismiss this appeal.

Costs

[17] The parties have reached an agreement on costs to be awarded on a partial indemnity basis of $5,000, to the successful parties on this appeal at the hearing of this matter. The successful parties, the respondents, are therefore awarded costs on a partial indemnity basis of $5,000, in accordance with the agreement of the parties.

Appeal dismissed.