COURT FILE NO.: CV-19-6226699

DATE: 2021-04-01

SUPERIOR COURT OF JUSTICE – ONTARIO

RE: THE ECONOMICAL INSURANCE GROUP Applicant (Respondent in Appeal)

AND:

INTACT INSURANCE Respondent (Appellant)

BEFORE: Mr. Justice Chalmers

COUNSEL: J. Brimfield for the Applicant (Respondent in Appeal)

M. Wilson for the Respondent (Appellant)

HEARD: February 18, 2021, by videoconference

ENDORSEMENT

OVERVIEW

[1] On January 6, 2017, Rachel Legrade was killed in a motor vehicle accident in Thunder Bay, Ontario. Her Pontiac Grand Am was insured pursuant to an Ontario Automobile Policy (“OAP”) issued by The Economical Insurance Group. At the time of the accident, Ms. Legrade’s daughter, Presley Belhumeur, was living in Alberta. She owned a vehicle in Alberta that was insured by Intact Insurance. Ms. Belhumeur sustained psychological injuries as a result of her mother’s death and submitted an accident benefit claim to Economical. Her claim was denied, and no benefits were paid. Ms. Belhumeur did not challenge the denial of benefits.

[2] Economical commenced arbitral proceedings against Intact seeking a declaration that Intact is the priority insurer. The Arbitrator, Ken Bialkowski, found that Ms. Belhumeur was not an “insured person” under the Economical policy and, as such, was not entitled to any accident benefits. The Arbitrator found that Ms. Belhumeur was insured by Intact for the purposes of accident benefit coverage and that Intact was in priority to Economical. Intact appeals the Arbitrator’s decision. For the reasons that follow, I allow the appeal.

BACKGROUND FACTS

[3] The facts are not in dispute.

[4] At the time of the accident on January 6, 2017, Ms. Legrade was an Ontario resident. She owned a motor vehicle which was insured by Economical pursuant to an OAP. Her daughter, Ms. Belhumeur, lived in Edmonton with her spouse. She owned a 2013 Ford Fiesta, which was insured by Intact pursuant to an Alberta automobile policy.

[5] Following the accident, Ms. Belhumeur submitted two applications to Economical for accident benefits for the treatment of psychological injuries arising from her mother’s death. Economical denied the applications on the basis that Ms. Belhumeur was not an insured person under the Economical policy. The policy defines “insured person” in respect of a particular motor vehicle liability policy as follows:

(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 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 from 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 or was a resident of Ontario at any time during the 60 days before the accident, if the accident occurs outside Ontario.

[6] Ms. Belhumeur was not a named insured or listed driver under the Economical policy. She was not a dependant of her mother. As noted by the Arbitrator, Ms. Belhumeur was not an insured person and therefore not entitled to “any benefits whatsoever under the Economical policy”: at para. 31.

[7] Ms. Belhumeur was insured pursuant to the Intact policy issued to her in Alberta. Under the Intact policy, a person who is not involved in an accident is not included in the definition of “insured person”. Ms. Belhumeur did not make a claim for benefits under the Intact policy.

[8] Intact is licensed as an automobile insurer in Ontario and has an office in this province. In addition, Intact is a signatory to a Power of Attorney and Undertaking (“PAU”). Section C of the PAU provides that a signatory insurer is deemed to provide the minimum accident benefits that are required to be provided under the jurisdiction of the province or territory in which an action or proceeding may be instituted. Economical argues that the arbitral proceedings were instituted in Ontario and therefore the Intact policy is deemed to provide Ontario accident benefits. Economical also argues that Intact is subject to the priority dispute rules set out in the Ontario Insurance Act, R.S.O. 1990, c. I.8.

THE ISSUES

[9] The issue in this appeal is whether the Arbitrator erred in finding that Intact is in priority to Economical with respect to the claim of Ms. Belhumeur. The determination of this issue turns on two questions:

i. Is Intact bound by the priority rules in the Ontario Insurance Act because it is an Ontario insurer and a signatory to the PAU?

ii. Is Economical entitled to bring a priority dispute if it did not make any payments to Ms. Belhumeur?

ANALYSIS

The standard of review

[10] This appeal raises questions of law; namely, the interpretation of the priority dispute process set out in the Ontario Insurance Act. The issues on this appeal involve a complex statutory regime. For questions of statutory interpretation, the standard of correctness applies: see Travelers Insurance Company v. CAA Insurance Company, 2020 ONCA 382, 151 O.R. (3d) 78, at para. 14.

Is Intact bound by the priority rules in the [Ontario Insurance Act](https://www.canlii.org/en/on/laws/stat/rso-1990-c-i8/latest/rso-1990-c-i8.html)?

[11] Ms. Belhumeur submitted an accident benefits claim to Economical following her mother’s death. Economical did not pay the claim. Instead, it commenced an arbitration against Intact on the basis of the priority rules set out in the Ontario Insurance Act. Economical takes the position that, because it is licensed as an automobile insurer in Ontario and is a signatory to the PAU, Intact is bound by the priority rules in the Insurance Act.

[12] Ms. Belhumeur was not an occupant of a motor vehicle at the time of the accident. The priority rules are set out in s. 268(2) of the Ontario Insurance Act:

2. In respect of non-occupants,

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

ii. if recovery is unavailable under subparagraph i, the non-occupant has recourse against the insurer of the automobile that struck the non-occupant,

iii. if recovery is unavailable under subparagraph i or ii, the non-occupant has recourse against the insurer of any 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 non-occupant has recourse against the Motor Vehicle Accident Claims Fund.

[13] Ms. Belhumeur is an insured pursuant to the Intact policy. Economical is the insurer of the automobile involved in the accident from which the entitlement to accident benefits arose. Pursuant to the non-occupant priority rules, Intact is in priority to Economical.

[14] At issue is whether the priority rules set out in the Ontario Insurance Act apply to Intact.

As an insurer licensed in Ontario, is Intact subject to the priority dispute rules set out in the [Ontario Insurance Act](https://www.canlii.org/en/on/laws/stat/rso-1990-c-i8/latest/rso-1990-c-i8.html)?

[15] The Arbitrator found that Intact was an insurer licensed in Ontario. He also found that Intact, as a signatory to the PAU, was required to provide the same level of accident benefits as an insurer in the jurisdiction in which the proceedings were commenced. He concluded that Intact was subject to the priority dispute rules set out in the Ontario Insurance Act.

[16] The Arbitrator relied on his earlier decision of CAA Insurance Company and Travelers Insurance Company, Re, 2017 CarswellOnt 3229, aff’d Travelers Insurance Company v. CAA Insurance Company, 2018 ONSC 3911. In that case, he found that Travelers Insurance Company was an Ontario insurer because it was licensed to provide automobile insurance in Ontario, and therefore Travelers was subject to the priority rules set out in the Ontario Insurance Act: see para. 28. He also found that Travelers was a signatory to the PAU and was essentially an insurer in Ontario and, therefore, subject to the loss transfer and priority obligations of the Insurance Act: see para. 27. The Superior Court upheld the Arbitrator’s decision, and this was appealed. The Court of Appeal allowed the appeal and rejected the conclusion that Travelers was bound by the priority rules set out in the Act: Travelers Insurance Company of Canada v. CAA insurance Company, 2020 ONCA 382.

[17] In Travelers, the claimant, Patricia Soloway, was catastrophically injured in an accident in Nunavut, where she was working as a nurse supervisor. Her employer had provided a vehicle to her that was licensed in Nunavut and insured by a Nunavut policy issued by Travelers. Ms. Soloway was ordinarily resident in Ontario. She owned a car licensed in Ontario and insured pursuant to an Ontario automobile policy issued by CAA Insurance Company. She applied for accident benefits from CAA. CAA paid the benefits and then pursued Travelers for reimbursement of some or all of the amounts paid. CAA argued that Travelers was subject to the priority and dispute provisions set out in the Ontario Insurance Act and, as a result, was in priority to the CAA policy.

[18] With respect to whether Travelers was an Ontario insurer and bound by the dispute resolution process and priority rules set out in the Ontario Insurance Act, the Court of Appeal stated, at para. 25:

In my view, the correct approach is not quite so simple. Like Travelers, many of Canada’s car insurers are licensed to write car insurance here and elsewhere in Canada. Mere licensing, or the presence of an office, does not convert these insurers into Ontario insurers for all purposes, nor does it make the Ontario Insurance Act the governing legislation for all of the automobile insurance policies they underwrite. Treating mere Ontario licensing as the sole reason to constitute an insurer as an “Ontario insurer” would give Ontario insurance legislation extraterritorial effect, which would be contrary to the essential holding in Unifund [Assurance Company of Canada v. ICBC, 2003 SCC 40, [2003] 2 S.C.R. 63].

[19] The Court of Appeal held that as a matter of statutory interpretation Travelers was not an Ontario insurer subject to the Ontario dispute resolution process. Section 224(1) of the Ontario Insurance Act defines “automobile” as “a motor vehicle required under any Act to be insured under a motor vehicle liability policy”. Section 226 provides that this part does not apply to a contract of insurance in respect of an automobile not required to be registered in Ontario. And s. 226.1 provides that an out of province insurer may provide an undertaking that the insurer’s motor vehicle policy will provide at least the minimum coverage described in the Insurance Act when the insured automobiles are operated in Ontario. The Court of Appeal found that these provisions make it clear that Part VI of the Insurance Act [Automobile Insurance] did not apply to the Nunavut vehicle because it was not being operated in Ontario at the time of the accident and, therefore, was not required to be registered in Ontario: see para. 32.

[20] The Court of Appeal held that the priority dispute process set out in s. 268 of the Ontario Insurance Act applies only if both insurers are bound by the Act. In support of its conclusion, the Court referred to its analysis in Young v. Ontario (Minister of Finance) (2003), 2003 23640 (ON CA), 68 O.R. (3d) 321 (C.A.). In that case, a policy of insurance issued in New Mexico was held not to be a policy of insurance within the meaning of s. 268 of the Insurance Act. The plaintiff in Young was injured in an accident in New Mexico. She returned home to Ontario and sought benefits from the Motor Vehicle Accident Fund. The Fund took the position that it was the insurer of last resort and the New Mexico insurer was in priority. The Court of Appeal, at para. 31, held that the New Mexico insurer was not bound by the Ontario legislation:

The respondent’s vehicle did not need to be registered in Ontario. Nor did the respondent’s insurance policy need to comply with the mandatory coverage provisions of the Compulsory Automobile Insurance Act. The respondent’s insurance policy could not be deemed by s. 268(1) of the Insurance Act to provide for the statutory accident benefits set out in the Schedule. This is because the respondent’s vehicle was not being operated in Ontario. Moreover, the respondent did not sustain injuries in a motor vehicle accident in Ontario. It follows that Part VI of the Insurance Act, including s. 268, has no application to the respondent or her vehicle.

[21] Here, Intact insured Ms. Belhumeur’s vehicle in Alberta pursuant to an Alberta policy. The vehicle was not operated in Ontario and therefore did not have to be registered or insured in Ontario. I find that Intact is not subject to the dispute resolution process or the priority rules set out in the Ontario Insurance Act.

As a signatory to the PAU, is Intact subject to the priority dispute rules set out in the [Ontario Insurance Act](https://www.canlii.org/en/on/laws/stat/rso-1990-c-i8/latest/rso-1990-c-i8.html)?

[22] The Arbitrator found that Intact was a signatory to the PAU and therefore could not raise any defence that would be unavailable to an insurer in Ontario. The Arbitrator accepted the argument advanced by Economical that, since the accident occurred in Ontario and the arbitration was brought in Ontario, Intact was subject to the Ontario legislation, including the priority and dispute resolution process: see para. 29. In support of this conclusion, the Arbitrator relied on an earlier decision of the Ontario Court of Appeal in Healy v. Interboro Mutual Indemnity Insurance Co. (1999), 1999 1485 (ON CA), 44 O.R. (3d) 404 (C.A.). In that case, Interboro, a New York based insurer and signatory to the PAU, was required to pay Ontario statutory accident benefits to the claimant, who was a New York resident injured in an accident that occurred in Ontario. The Arbitrator stated that the underlying principle in the case was the fact that Interboro had agreed to participate in a reciprocal scheme that prevented it from raising any defences not available in Ontario.

[23] The Court of Appeal in Travelers also considered the issue of whether a signatory to the PAU is bound by the Ontario priority rules or dispute resolution process. The Court of Appeal found that the purpose of the PAU is to assist insureds; it is not intended to assist insurers in seeking reimbursement from other insurers. The Court of Appeal relied on the Supreme Court of Canada’s decision in Unifund and stated, at para. 21:

The PAU is a complex document containing many provisions designed to protect insureds, which Binnie, J. discussed at length. He quoted and agreed with Professor Vaughan Black’s observation: “The reciprocal system, of which the PAU is a key part, thus has what might loosely been described as a pro-compensation, consumer-protection function.” … The PAU’s purpose is to protect insureds, not insurers. It therefore offers no assistance to CAA in this dispute.

[24] The Court of Appeal concluded that the PAU operates to protect insureds. If the insured had driven the vehicle into Ontario and had the accident there, Travelers would be required to provide benefits at the Ontario level. The Court of Appeal held that the arbitrator was not correct in his assertion that a signatory to the PAU essentially becomes an insurer in the jurisdiction where the claim is brought. The Court of Appeal stated, at para. 22:

Accordingly, the arbitrator was not correct in his bald assertion that “a signatory to the PAU essentially becomes an insurer in the province or Territory where the claim is brought and with that exposure to the liability limits, accident benefit limits, as well as the loss transfer and priority obligations, if any, of that jurisdiction”: at p. 16. The use and application of the PAU in favour of the insureds is context specific. If, for example, the claimant had driven the Nunavut vehicle into Ontario and had the accident here, Travelers would have had to provide her with statutory accident benefits at the Ontario level under the Nunavut policy. That is how the PAU is designed to work. But there is no basis for the arbitrator’s assertion that the PAU operates to extend “loss transfer and priority obligations” between or among insurers otherwise liable to compensate an insured under the Ontario Insurance Act’s provisions.

[25] Economical takes the position that this case is distinguishable. Ms. Legrade’s accident occurred in Ontario and, therefore, there is a connection to Ontario that did not exist in Travelers. Economical argues that the case is “on all fours” with the Healy decision. In Healy, the New York insurer was required to provide Ontario level benefits when the accident occurred in Ontario.

[26] I am not satisfied that Healy applies in the circumstances of this case. In Healy, the person making the benefit claim was in Ontario at the time of the accident. Here, Ms. Belhumeur was in Alberta. Also, in Healy, the Ontario insurer had not paid benefits and, as a result, was not seeking to apply the Ontario priority and dispute resolution process to an extraterritorial insurer. The claimant brought the action in Ontario against both the Ontario and New York insurers for coverage. The Court of Appeal held that the New York insurer was liable, and benefits were to be paid at the Ontario level. Healy is consistent with the purpose of the PAU as described in Unifund, which is to provide protection to insureds so that, in a claim brought in Ontario against their insurer, they can recover benefits at the Ontario level. As noted by the Supreme Court of Canada in Unifund and by the Court of Appeal in Travelers, the PAU is not intended to help insurance companies by extending the loss transfer and priority obligations to extraterritorial insurers.

[27] Economical also relies on Coseco v. Liberty, 2019 ONSC 4918. In that case, the claimant was a resident of New York. GMAC Insurance Company insured the claimant’s vehicle there. The claimant was involved in an accident in Toronto on July 4, 2015 as a passenger in a vehicle insured pursuant to an Ontario policy issued by Coseco Insurance Company. Liberty Mutual General Insurance Company insured the spouse of the claimant in New York. The claimant applied for accident benefits from Coseco, which paid accident benefits and then brought an arbitration against GMAC and Liberty to determine which policy was in priority. The arbitrator concluded that the case was in concordance with the Healy decision. The appeal of the arbitrator’s decision was dismissed by the Superior Court.

[28] It is my view that Coseco is distinguishable on its facts. Here, the claimant was not in Ontario at the time of the accident. I also note that Coseco was decided before the Court of Appeal released its decision in Travelers. In that case, the Court of Appeal stated that the PAU cannot be relied on to find an extraterritorial insurer bound by the Ontario priority dispute process.

Conclusions

[29] In my view, the Arbitrator erred in law in finding that Intact was subject to the priority rules in the Ontario Insurance Act. As stated by the Court of Appeal in Travelers, the mere fact that an insurer is licensed to provide automobile insurance in Ontario does not necessarily result in a finding that the insurer is bound by the priority rules set out in s. 268 of the Insurance Act. The priority rules apply only if both insurers are subject to the Ontario legislation. An extraterritorial insurer will be subject to the Insurance Act if the vehicle it insured is being operated in Ontario at the time of the accident and, therefore, is required to be registered in Ontario. Here, the vehicle insured by Intact was not being operated in Ontario at the time of the accident and there was no requirement that it be registered in Ontario. Also, the fact that Intact is a signatory to the PAU does not result in a finding that it is bound by the priority dispute rules set out in the Act. The PAU operates to protect insureds and is not designed to assist insurers in extending priority rules to extraterritorial insurers.

Is Economical entitled to bring a priority dispute if it did not make any payments to Ms. Belhumeur?

[30] Ms. Belhumeur submitted two applications to Economical to claim accident benefits for the treatment of psychological injuries arising from her mother’s death. Economical insured the vehicle owned and operated by Ms. Legrade at the time of the accident. Economical denied the claim on the basis that Ms. Belhumeur was not an insured person. It did not pay her any accident benefits. This decision was not challenged by Ms. Belhumeur and she did not participate in the arbitration, although she was entitled to do so.

[31] The Ontario Statutory Accident Benefits Schedule – Effective September 1, 2010, O. Reg. 34/10, s. 3, provides that a person not involved in an accident can claim benefits if they are a “named insured, specified driver, spouse or dependant” and suffer a psychological injury as a result of physical injury to their parent. Ms. Belhumeur claims that she suffered a psychological injury as a result of the death of her mother. However, she was not a named insured, specified driver, spouse, or dependant of the insured. The Arbitrator concluded that Ms. Belhumeur was not entitled to any accident benefits pursuant to the Economical policy. He stated as follows, at para. 31:

The Claimant was not an “insured person” under the Economical policy. Specifically, she was not a named insured or listed driver. She was not a dependent of Economical’s insured, given that she was employed and living in Alberta for years prior to the accident. As such, she was not entitled to any benefits whatsoever under the Economical policy.

[32] Intact argues that the priority dispute process applies only if there are at least two insurers who have the potential to pay a claim. Here, there is no potential for Economical to pay the claim and, therefore, no basis for Economical to invoke the priority dispute process. Intact also argues that the arbitration was moot in that no amount was paid by Economical and there was nothing to dispute.

[33] Intact relies on Unifund Assurance Company v. Security National Insurance Company, 2016 ONSC 6798. In that case, the claimant was injured while operating an ATV. The claimant had a standard automobile policy issued by Unifund Assurance Company, which did not include recreational vehicles in the definition of “automobile”. The owner of the ATV had a policy with Security National Insurance Company. The claimant applied for accident benefits from Security National, which paid the benefits and brought arbitration proceedings against Unifund to determine priority. The arbitrator found that Security National could access the priority provisions of s. 268(2) of the Insurance Act to claim that the Unifund policy was in priority. Unifund successfully appealed this finding to the Superior Court, which held that there was no coverage under the Unifund policy because the ATV was not an automobile as that term was defined therein. Therefore, there was only one policy that provided accident benefit coverage. As a result, Security National could not pursue Unifund on a priority dispute. The court stated, at para. 59:

[T]he Arbitrator erred in finding that there was access to the priority scheme in s. 268(2). That scheme is only available, and only needed, if both policies provide statutory accident benefits. In this case, there is only one policy that provides recourse to statutory accident benefits.

[34] Here, the Arbitrator found that Ms. Belhumeur was not entitled to “any benefits whatsoever” under the Economical policy. As a result of this finding, Economical did not pay benefits to Ms. Belhumeur. Intact argues that, in this case, there were not two or more insurers that provide accident benefit coverage and therefore the priority dispute provisions do not apply.

[35] Economical argues that Unifund is distinguishable. In that case, the threshold issue was whether there was an accident. The court found that there was no accident as that term is defined in the Unifund policy and, therefore, there was no accident benefit coverage under that policy. Here, both the Economical and Intact policies provide coverage for accident benefits.

[36] Economical also relies on Lombard Canada Limited v. Royal & SunAlliance Insurance Company (2008), 2007 82792 (ON SC), 94 O.R. (3d) 62 (S.C.) and Zurich Insurance Company v. Chubb Insurance Company, 2014 ONCA 400, 120 O.R. (3d) 161, rev’d 2015 SCC 19, [2015] 2 S.C.R. 134. In Lombard, the claimant was injured as a passenger in a vehicle that was previously insured by Lombard Canada Limited. The Lombard policy had been cancelled two months before the accident and Lombard rejected the claim for accident benefits on the basis that there was no policy of insurance. Lombard later discovered that the claimant was a listed driver on a Royal & SunAlliance Insurance Company policy that had been issued to the claimant’s employer. Lombard provided notice to Royal & SunAlliance of its intention to dispute priority. The notice was sent beyond the 90-day notice period. The arbitrator accepted that the Lombard policy was properly cancelled in August 2002. However, there was a sufficient nexus between the claimant and the insurer and, as a result, Lombard was required to pay benefits before disputing priority. At the Court of Appeal, Strathy, J.A. (as he then was) found Lombard liable to pay benefits, notwithstanding that the policy had been cancelled before the accident. He stated that the statutory scheme of pay first and arbitrate later, if necessary, would be frustrated if an insurer could dispute its liability at the outset, no matter how well-founded its dispute may ultimately prove to be: see para. 50.

[37] In Chubb, the claimant rented a vehicle from Wheels 4 Rent. The rental vehicle was insured pursuant to an automobile policy issued by Zurich Insurance Company. Chubb Insurance Company issued an accident policy to Wheels 4 Rent, which offered optional death and dismemberment coverage to customers. The claimant did not purchase the optional coverage from Chubb. However, the claimant kept the information booklet and, after the accident, sought benefits from Chubb. Chubb argued that no benefits were owing because it had not issued an automobile policy. The arbitrator concluded that Chubb was not an insurer and there was no nexus between it and the claimant. The arbitrator’s finding was upheld by the majority of the Court of Appeal. In dissent, Juriansz, J.A. found there was a sufficient nexus between the claimant and Chubb. Although Chubb did not issue an automobile policy, it is an insurance company that writes automobile insurance in Ontario and, in the broader sense, is not a “non-motor vehicle liability insurer”: para. 34. Juriansz, J.A. found that Chubb was required to pay benefits on the basis that the insurer who receives a claim for benefits is to pay first and dispute liability later. The Supreme Court of Canada adopted the dissenting reasons.

[38] The Arbitrator found it “very difficult” to reconcile Unifund with the earlier binding decisions of the Court of Appeal in Lombard and the Supreme Court of Canada in Chubb. He noted that even in cases in which the insurer claims the automobile policy had been cancelled (Lombard) or was never issued (Chubb), there is a requirement on the insurer who receives the claim to pay first and dispute priority later. The Arbitrator distinguished Unifund on its facts. In Unifund, there was only one policy that provided accident benefits. Here, each of the Intact and Economical policies provides accident benefit coverage and, therefore, Economical could bring a priority dispute against Intact.

[39] It is my view that the Arbitrator erred in his application of Lombard and Chubb. The Court of Appeal in Lombard and the Supreme Court of Canada in Chubb found that the insurer who first receives the claim for accident benefits is required to “pay first and dispute priority later”. The threshold requirement for bringing a priority dispute is that the insurer that receives the claim must first pay benefits. If there is no payment, the insurer cannot bring a priority dispute. This policy is consistent with the wording of the regulation, which provides that the “first insurer that receives a completed application for benefits from the applicant shall commence paying the benefits in accordance with the provisions of the Schedule pending the resolution of any dispute as to which insurer is required to pay benefits”: Disputes Between Insurers, O. Reg. 283/95, s. 2.1(6) (emphasis added).

[40] Economical argues that s. 3(1) of that regulation imposes strict time limits on an insurer to put another insurer on notice of a priority dispute, and it may be necessary for an insurer to provide notice of a priority dispute before it makes a payment to the claimant. Economical argues that paying a claim is not a prerequisite to providing notice pursuant to s. 2.1(6) of Disputes Between Insurers. I acknowledge that there may be circumstances in which notice must be provided before the first insurer makes a payment. Although a payment may not be a prerequisite to providing notice, it is my view that the insurer cannot proceed to an arbitration hearing to dispute priority unless it first makes a payment to the claimant.

[41] Here, Ms. Belhumeur applied to Economical for accident benefits. Economical took the position that there was no coverage and did not pay benefits. It is my view that Economical cannot bring a priority dispute against Intact when it did not first pay benefits to Ms. Belhumeur. The rationale behind the “pay first and dispute priority later” policy is to promote the timely delivery of accident benefits: see Chubb, at para. 40. To permit Economical to pursue a priority dispute without making any payment is inconsistent with this policy. Also, if no payment is made by Economical, there is nothing for Intact to reimburse on a priority dispute.

DISPOSITION

[42] I conclude that the Arbitrator erred in law in finding that Economical could pursue a priority dispute against Intact. I allow the appeal.

[43] The Appellant is successful on this appeal and is presumptively entitled to its costs. At the conclusion of the hearing and before this endorsement was released, I received Bills of Costs from each party. The Appellant is seeking costs on a partial indemnity basis in the amount of $4,502 for the counsel fee, plus $8,927.51 in disbursements. The disbursement amount includes $7,592.80 for the Arbitrator’s fee. The Respondents submitted a Bill of Costs in the amount of $5,023.42 for the counsel fee. The Respondent’s Bill of Costs does not provide for payment of the Arbitrator’s account.

[44] I am of the view that the amounts claimed for the counsel fee by both parties are fair and reasonable, given the complex legal issues involved in the appeal.

[45] I award partial indemnity costs to the Appellant fixed in the amount of $5,250, inclusive of counsel fee, the cost of filing the Notice of Appeal, and HST. I reserve with respect to whether the Appellant is entitled to the cost of the Arbitrator’s account. If the Appellant wishes to pursue this amount, and the parties cannot come to an agreement, it may deliver written submissions on the issue of no more than 3 pages in length within 14 days of the date of this endorsement. The Respondent may provide responding submissions on the same basis within 14 days of receiving the Appellant’s submissions.

DATE: April 1, 2021