COURT FILE NO.:CV-21-00666764-0000
DATE: 20220721
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
THE DOMINION OF CANADA GENERAL INSURANCE COMPANY
Applicant
- and –
TRAFALGAR INSURANCE COMPANY, ARCH INSURANCE COMPANY and ECONOMICAL INSURANCE COMPANY
Respondents
Rohit Sethi, Joseph Lin, and Alina Apostol for Trafalgar Insurance Company, Respondent/Appellant
Jacob Damstra and Danielle Gauvreau for Economical Insurance Company, Respondent/Appellant
Michael Foulds and Ryan Tinney for Arch Insurance Company, Respondent/Respondent
HEARD: June 16, 2022
PERELL, J.
REASONS FOR DECISION
A. Introduction
[1] Pursuant to the Arbitration Act,[^1] this is an appeal of Arbitrator Kenneth J. Bialkowski’s decision[^2] in a priority dispute among four insurance companies brought under s. 268 (2) of the Insurance Act and Ont. Reg. 283/95 (Disputes between Insurers).
[2] The Appellants, Trafalgar Insurance Company and Economical Insurance Company submit that the issues raised in this appeal will have an impact on all Ontarians involved in motor vehicle accidents in Ontario and is of great importance to the insurance industry, policy holders, and individuals injured in motor vehicle accidents. They submit that the Arbitrator’s decision circumvents the statutory scheme. They submit that if the decision is not overturned the whole insurance industry will suffer from a lack of certainty, predictability, and stability, leaving innocent insureds without statutory accident benefits (SABs) until the coverage issues are determined.
[3] There is no merit to the Appellants’ sky-is-falling argument, and there is no merit to their appeal. For the reasons that follow, the appeal is dismissed.
[4] Economical Insurance also appeals the Arbitrator’s costs award requiring it to pay Arch Insurance partial indemnity costs for the entire proceeding jointly and severally with Trafalgar Insurance. That appeal is dismissed on the grounds of prematurity.
B. Procedural and Evidentiary Background
[5] On October 3, 2012, Jatinderjit Rakhra was the driver of a 2009 Aveo, which she had borrowed from Flash Car & Truck Rentals (“Flash Car”). The vehicle was owned by Satkar Auto Services and Sales (“Satkar Auto”), whose auto insurer was Economical Insurance. The vehicle had been leased to and plated by a corporation that was carrying on business as Flash Car.
[6] On October 3, 2012, the 2009 Aveo was rear-ended by a vehicle that was insured by Trafalgar Insurance. Ms. Rakhra was herself not a named insured or listed driver on any policies of insurance.
[7] As a result of the accident involving the 2009 Aveo, Ms. Rakhra suffered injuries. In 2013, she applied to Dominion Insurance, which had been Flash Car’s insurer, for statutory accident benefits. Dominion Insurance paid the SABs, but it gave notice to Trafalgar Insurance that it should be the primary insurer for Ms. Rakhra’s SABs, and Dominion Insurance demanded that Trafalgar Insurance submit to arbitration pursuant to s. 268 of the Insurance Act, Ont. Reg. 34/10, Ont. Reg. 282/95 and the Arbitration Act, 1991. Six years passed and in 2019, within Dominion Insurance’s proceeding, Trafalgar Insurance initiated an arbitration against Arch Insurance and Economical Insurance to determine which insurer was highest in priority for the payment of the SABs. Economical Insurance was implicated because, as noted above, it had been the insurer of Satkar Auto. Arch Insurance was implicated because the 2009 Aveo had been listed on a Fleet Schedule for an insurance policy issued to Elite Ride Rent-a-Car (“Elite Ride”). In 2021, Arch Insurance brought a notice of motion for a determination of preliminary issue in the priority dispute.
[8] The priority dispute hearing took place on June 14, 2021 before Arbitrator Bialkowski. Dominion Insurance took no position and was not involved in Arch Insurance’s motion. The motion was opposed by Trafalgar Insurance and Economical Insurance.
[9] The evidence for the preliminary motion consisted of transcripts of oral examinations and cross-examinations along with document briefs. There were factums and oral argument. More precisely, the evidence consisted of the document briefs and the following testimony:
• The transcript of the examination on July 24, 2017 of Bharti Vyas on behalf of Baird MacGregor Insurance Brokers. Bharti Vyas was the insurance broker for Flash Car which cancelled its Economical Insurance policy before the accident involving the 2009 Aveo.
• The transcript of the examination on February 22, 2021 of Ravinder Basion, an owner of Satkar Auto, which had leased the 2009 Aveo.
• The transcript of the examination on August 29, 2019 of Tariq Noorhassan, who was a representative of Jones Deslauriers Insurance Management Inc. (“Deslauriers” or “JDIMI”). Deslauriers was an insurance broker, which was involved in a fleet insurance program provided by Arch Insurance.
• The transcript of the examination on August 29, 2019 of Remi Marchildon, who was a representative of Arch Insurance and the transcript of the cross-examination of Remi Marchildon on April 16, 2021 on his affidavits dated February 4, 2021 and April 12, 2021.
• The affidavit dated March 25, 2021 of Nidhi Mahajan. Nidhi Mahajan is a law clerk for the lawyers for Trafalgar Insurance.
• The affidavit dated March 29, 2021 of Sonia S. Fabiani, a partner of Lerners LLP, lawyers for Economical Insurance.
[10] With respect to the evidentiary record, for reasons that will become apparent in the description of the facts below, it should be noted that there was no evidence: (a) from Ajmal Omarzayi, who purchased the business of Flash Car and kept its name and who failed to attend an examination under oath contrary to the summons issued by the Arbitrator; (b) from Kirndip Parmar, the prior owner of the business of Flash Car; (c) from a representative of Elite Ride, whose insurance policy plays the central role in the coverage problems described below; and (d) from John Enright of Deslauriers, who may have been able to explain the coverage debacle.
[11] On July 7, 2021, the Arbitrator released his 19-page, 79-paragraph decision. In the priority dispute, the Arbitrator concluded that Trafalgar Insurance was responsible for the SABs paid to Ms. Rakhra.
[12] On August 6, 2021, Trafalgar Insurance and Economical Insurance brought an application by way of an appeal of the Arbitrator’s decision. Their position throughout has been that Arch Insurance is primarily responsible for the SABs. Trafalgar Insurance and Economical Insurance both appealed the Arbitrator’s decision that Arch Insurance was not liable. Economical Insurance also appealed the Arbitrator’s costs award requiring Economical Insurance to pay partial indemnity costs for the entire proceeding jointly and severally with Trafalgar Insurance.
C. Facts
[13] The following description of the facts is based on the Arbitrator’s findings of fact.
1. The Insurance Status of the 2009 Black Chevrolet Aveo
[14] In the fall of 2011, Dominion Insurance issued a fleet policy of insurance to 2217503 Ontario Inc. and 2234873 Ontario Inc., a car rental business operating as Flash Car for the period November 5, 2011 to November 5, 2012. At the time, Flash Car was owned by Kirndip Parmar.
[15] In September 2012, Mr. Parmar sold Flash Car, including all its leased vehicles, to 2337509 Ontario Inc. and 2337785 Ontario Inc., corporations whose principal is Ajmal Omarzayi.
[16] Although the lease has not been produced, it appears that one of the leased vehicles that was part of the sale of Flash Car’s business was a 2009 Aveo, owned by Satkar Auto, whose auto insurer was Economical Insurance.
[17] Around the time of the sale of Flash Car’s business assets, including its name and vehicles, Mr. Omarzayi met with John Enright of Deslauriers about insuring the vehicles of Flash Car. Deslauriers was the broker for the Auto Rental Insurance Management Program (“ARIM Program”), an insurance program designed to assist small car rental businesses.
[18] Arch Insurance was the insurer of the ARIM Program. It appears that in meeting with Mr. Enright, Mr. Omarzayi intended that Deslauriers would arrange for Arch Insurance to replace Dominion Insurance as the insurer of the owned and leased vehicles of Flash Car.
[19] Deslauriers, however, did not have the authority to bind Arch Insurance. Indeed, Arch Insurance had told Mr. Enright that it would not be accepting new business under the ARIM Program until outstanding accounting issues had been resolved. Those accounting issues apparently were never resolved, and Arch Insurance issued its last insurance policy under the ARIM Program on August 17, 2012. Nevertheless, in September 2012, Mr. Enright prepared an application for fleet insurance for Flash Car under the ARIM Program for Mr. Omarzayi. The unsigned application included the 2009 Aveo vehicle in its schedule. The application was never submitted to Arch Insurance. Arch Insurance never issued an insurance policy directly to Flash Car.
[20] Meanwhile, on September 26, 2012, Mr. Parmar, the former owner of Flash Car, requested that the Dominion Insurance policy, which included the Aveo 2009 vehicle, be cancelled effective September 30, 2012.
[21] On September 27, 2012, Arch Insurance sent Mr. Enright an email message reiterating that Arch Insurance would not be accepting any new business risks to the ARIM Program until outstanding accounting issues had been taken care of.
[22] On September 28, 2012, despite the fact that Mr. Omarzayi’s application as the new owner of Flash Car to Arch Insurance had not been submitted, Deslauriers sent Motor Vehicle Liability Insurance Cards (“pink slips”) to Mr. Omarzayi. The pink slips showed Arch Insurance as the insurer and 2337509 Ontario Inc. – Mr. Omarzayi’s corporation operating as Flash Car – as the insured. The pink slips, however, identified an Arch Insurance Fleet Insurance policy with Elite Ride.
[23] The September 28, 2012 email also indicated that a finance contract outlining monthly payments would be forwarded. There is no evidence that a financing agreement was ever completed. There is no evidence that Flash Car paid premiums before the 2009 Aveo was involved in an accident.
[24] The pink slips in the September 28, 2012 email are a mistake. The Certificate of Insurance for the identified Arch Insurance policy indicates that the insured was Elite Ride for a policy effective June 23, 2012 and ending March 31, 2013. Elite Ride is not connected to Flash Car. Elite Ride is not connected to Mr. Omarzayi. Elite Ride’s insurance policy does not mention the Aveo vehicle. Elite Ride did not own or lease the 2009 Aveo.
[25] No Certificate of Insurance was ever issued by Arch Insurance to 2337509 Ontario Inc. o/a Flash Car before the date of the subject accident or at any time. Before the date of the accident, Arch Insurance did not accept the risk of insuring Flash Car and Deslauriers did not have the authority to bind Arch Insurance or to provide pink slips.
[26] Pursuant to the Insurance Act, Elite Ride’s insurance policy with Arch Insurance contained the government approved forms for Ontario automobile policies including: OAP 1, OPCF 5, OPCF 19, OPCF 21A, OPCF 25A, and OPCF 40. For present purposes, the key form is the OPCF-21A Endorsement for fleet insurance policies.
[27] On September 29, 2012, Mr. Omarzayi’s corporation operating as Flash Car plated the 2009 Aveo.
[28] On September 30, 2012, Dominion Insurance’s policy for Flash Car’s vehicles was cancelled, as Mr. Parmar had requested.
[29] On October 1, 2012, Arch Insurance received an e-mail from Deslauriers for the Elite Ride insurance policy. The e-mail attached a Fleet Schedule for an additional 14 vehicles added to the fleet in September. The list included the 2009 Aveo leased to Flash Car. The list also included a 2010 Mazda-3 belonging to Flash Car. Both of these vehicles were subsequently involved in accidents. Both of these vehicles did not belong to Elite Ride. The addition of Flash Car’s vehicles to Elite Ride’s fleet insurance policy appears to be another mistake or unauthorized activity by Deslauriers. There is no explanation why Flash Car’s vehicles were added to a policy issued to Elite Ride, which is not connected to Flash Car or Mr. Omarzayi.
[30] The listing of Flash Car’s vehicles on Elite Ride’s fleet list schedules was perpetuated. The 2009 Aveo was identified on every Fleet Schedule filed with Arch Insurance with respect to Elite Ride’s insurance policy between October 1, 2012 and April 2013, and this notwithstanding that Elite Ride’s policy was itself cancelled in late October 2012.
[31] On October 3, 2012, Jatinderjit Rakhra, who is the sister of Mr. Parmar, was the driver of the 2009 Aveo, which she apparently borrowed or took from her brother at Flash Car. Thus, Ms. Rakhra was the driver of a vehicle: (a) owned by Satkar Auto; (b) plated by Mr. Omarzayi’s corporation that was carrying on business as Flash Car; and (c) listed on a fleet schedule on a policy issued to Elite Ride, which is a corporation that has no connection to Satkar Auto, Flash Car or Mr. Omarzayi.
[32] On October 3, 2012, the 2009 Aveo was rear-ended by a vehicle that was insured by Trafalgar Insurance. Ms. Rakhra was not a named insured or listed driver on any policies of insurance. The motor vehicle accident police report noted the registered owner of the 2009 Aveo as being Satkar Auto, whose insurer was Economical Insurance, and that the 2009 Aveo was also insured by Dominion Insurance. The accident was never reported to Arch Insurance or to Deslauriers. No property damage claim for the 2009 Aveo was advanced to Arch Insurance.
[33] On October 25, 2012, Arch Insurance cancelled Elite Ride’s insurance policy. The cancellation was requested by First Capital, by way of Power of Attorney. First Capital cancelled Elite Ride’s policy because of Elite Ride’s failure to pay for the financing for the insurance being provided by First Capital.
[34] On November 16, 2012, despite the cancellation of the Elite Ride’s policy, 2337509 Ontario Inc. operating as Flash Car was somehow added as a named insured to the cancelled Elite Ride policy by way of endorsement and, as noted above, Deslauriers continued to submit fleet schedules on Elite Ride’s cancelled insurance policy. Just as there was no explanation as to why vehicles were being added to Elite Ride’s fleet schedules, there is no explanation as to why an additional named insured could be added to a cancelled policy.
[35] In late 2013 or early 2014 – after the Accident – the ownership of the Aveo was transferred to Flash Car (2337509 Ontario Inc.). Elite Ride did not own or lease the 2009 Aveo at the time of accident.
2. The Insurance Status of the 2010 Silver Mazda-3
[36] As noted above, on October 1, 2012, a silver 2010 Mazda-3, which belonged to Flash Car, was added to the Fleet Schedule for Arch Insurance’s policy issued to Elite Ride.
[37] On January 23, 2013, the 2010 Mazda-3 was involved in a motor vehicle accident.
[38] On behalf of Flash Car, Mr. Omarzayi reported the accident and made a property damage claim to Arch Insurance.
[39] In February 2013 – which is after Flash Car had been added as a named insured to Elite Ride’s cancelled fleet insurance policy – Arch Insurance reviewed the fleet schedules filed by Deslauriers and concluded that the 2010 Mazda-3 was insured by it at the time of the accident.
[40] On April 26, 2013, Arch Insurance issued a cheque to Flash Car for the property damage claim related to the 2010 Mazda-3. Arch Insurance also paid on claims by other parties involved in the January 23, 2013 accident involving the 2010 Mazda-3.
3. Jatinderjit Rakhra’s SABs Claim and the Priority Dispute
[41] As a result of the accident involving the 2009 Aveo, Ms. Rakhra suffered injuries. On April 17, 2013, Ms. Rakhra applied for statutory accident benefits (“SABs”) from Dominion Insurance. Dominion Insurance paid Ms. Rakhra’s SABs.
[42] On May 15, 2013, Dominion Insurance issued a “Notice to Applicant of Dispute Between Insurers” to Trafalgar Insurance. Dominion Insurance gave notice to Trafalgar because “the Dominion policy was cancelled per insured’s request […] therefore, Trafalgar would be primary insurer for accident benefits.”
[43] On September 5, 2013, Dominion Insurance issued a demand that Trafalgar submit to arbitration in accordance with s. 268 of the Insurance Act, regulations Ont. Reg. 34/10 and Ont. Reg. 282/95 and the Arbitration Act, 1991.
[44] Six years later, on April 29, 2019, within Dominion Insurance’s proceeding, Trafalgar Insurance initiated an arbitration demand against Arch Insurance and Economical Insurance to determine which insurer is highest in priority for the payment of SABs. (Why it took six years to involve Arch Insurance and Economical Insurance was not explained.)
[45] Pursuant to s. 268 of the Insurance Act, Arch Insurance sought an order that its policy of insurance issued to Elite Ride did not insure the vehicle operated by Ms. Rakhra, and on February 5, 2021, Arch Insurance brought a notice of motion for a determination of preliminary issue in the priority dispute.
[46] The priority dispute hearing took place on June 14, 2021 before Arbitrator Bialkowski. Dominion Insurance took no position and was not involved in Arch Insurance’s motion. The motion was opposed by Trafalgar Insurance and Economical Insurance.
[47] On July 7, 2021, Arbitrator Bialkowski released his 19-page, 79-paragraph decision. In his priority dispute decision, he concluded that Arch Insurance was not an insurer of the 2009 Aveo.
[48] On August 6, 2021, Trafalgar Insurance and Economical Insurance brought an application by way of an appeal of the Arbitrator’s decision.
[49] It may be noted that on January 6, 2022, the Arbitrator granted a separate preliminary motion brought by Economical Insurance and he dismissed the priority dispute as against Economical.[^4] The result is that Trafalgar Insurance is primarily responsible for the SABs.
D. The Arbitrator’s Decision
[50] The thrust of Arch Insurance’s preliminary motion was that the 2009 vehicle was not a “described vehicle” under its fleet insurance policy that it had issued to Elite Ride pursuant to OPCF 21A. Arch Insurance submitted that “Section (a)” of OPCF 21A set out the qualifications for a vehicle to be a “described vehicle,” and that the 2009 Aveo did not qualify.
[51] Section (a) of OPCF 21A reads as follows:
It is agreed that:
(a) The Policy shall provide insurance with respect to all automobiles licensed or required to be licensed in Ontario which are:
(i) owned by and licensed in the name of the insured;
(ii) leased from the following lessor(s) for a period in excess of 30 days on which the insured as lessee is required to provide insurance under a written lease agreement.
Lessor(s) Name(s) and Address(es) As known to the Insurer
(iii) leased for a period in excess of 30 days under a written lease agreement from a lessor other than those listed above providing the name and address of such lessor is reported to the insurer within 14 days following the date of delivery of the first such leased automobile to the insured.
[52] Arch Insurance submitted that the 2009 Aveo was not a “described vehicle” because it was not: (1) owned and licensed in the name of any of Arch Insurance’s insureds at the time of the accident; and (2) it was not leased by any Arch Insurance insured pursuant to a written lease agreement and for which the lessor was made known to Arch Insurance. (Arch Insurance submitted that it was never advised that Satkar Auto or anyone else was the lessor of the vehicle.)
[53] Thus, Arch Insurance submitted that the 2009 Aveo did not qualify as a “described automobile” because the vehicle was never owned by or leased to their named insured Elite Ride.
[54] In response, Trafalgar Insurance and Economical Insurance submitted that the 2009 Aveo was encompassed by an Arch Insurance policy because: (a) the 2009 Aveo was on a Fleet Schedule submitted to Arch Insurance; (b) Flash Car had been invoiced and provided with a pink slip; (c) Arch Insurance or its broker Deslauriers had induced Flash Car into believing that its vehicles were insured. Trafalgar Insurance and Economical Insurance claimed that Flash Car paid a premium and ought to be entitled to coverage.
[55] Further, Trafalgar Insurance and Economical Insurance submitted that by Arch Insurance providing coverage for the 2010 Mazda-3 in January 2013, it waived the right to deny coverage for the 2009 Aveo.
[56] The Arbitrator considered the arguments of the parties, and he concluded that identifying a vehicle on a monthly fleet list does not result in insurance coverage. He concluded that to be insured on a fleet policy a vehicle had to meet the requirements of Section (a) of OPCF-21A. This meant a vehicle must be owned by or leased to a named insured in order to be a “described vehicle”. At the time of the accident, since the 2009 Aveo was not owned by or leased by Elite Ride, the named insured under the Arch Insurance policy, accordingly, the Arbitrator concluded that the 2009 Aveo was not insured by Arch Insurance.
[57] In coming to his conclusion, the Arbitrator relied on the decision of the Court of Appeal in Lombard Canada Ltd. v. Zurich Insurance Company[^5] as authority for the propositions that: (a) a fleet list is not part of an insurance policy; and (b) whether a vehicle is insured under a fleet insurance policy depends on satisfying the qualifications of OPCF 21A; and (c) whether or not a vehicle is covered under OPCF 21A is not affected by whether the vehicle is listed on a fleet list schedule; submitted fleet lists do not establish coverage for vehicles listed on the fleet lists. In paragraph 58 of his Reasons for Decision, the Arbitrator stated:
- As a result of my finding that there was no signed application by 2337509 Ontario Inc. o/a Flash Car & Truck Rental or Certificate of Insurance issued to that entity, it is only the Elite fleet policy that can be looked to as possibly providing coverage with respect to the Aveo motor vehicle. In so doing, it cannot be said that the subject vehicle meets any of the requirements set out in the OPCF-21A so as to be considered a “described automobile”. The [2009-Aveo] was neither owned nor leased by the named insured Elite.
[58] For a variety of largely factual reasons, the Arbitrator concluded that the doctrines of waiver and estoppel were of no assistance to Trafalgar Insurance and Economical Insurance. Arch Insurance did not induce Flash Car into believing that either the 2009 Aveo or the 2010 Mazda-3 were insured by it. Arch Insurance was unaware of Flash Car until November 16, 2012 when it was added to the cancelled Elite Ride’s insurance policy. The fact that pink slips were issued was irrelevant because a pink slip is not part of a car insurance policy and a pink slip is not equivalent to an insurance policy.[^6]
[59] The Arbitrator accepted Trafalgar Insurance’s and Economical Insurance’s argument that pursuant to Section 4.4 of OAP 1, that SAB benefits are available to an injured occupant of a vehicle even where the insured makes misrepresentations,[^7] but the Arch Insurance case was not about misrepresentations, it was about whether an insurance policy covering the 2009 Aveo even existed, which was not the case given that the qualifications set out in OPCF 21A had not been satisfied.
[60] The Arbitrator rejected Trafalgar Insurance’s and Economical Insurance’s argument that the circumstance that Arch Insurance had paid claims with respect to the 2010 Mazda-3 on behalf of Flash Car meant that Arch Insurance had waived its right to deny coverage with respect to the 2009 Aveo. He rejected that there had been any waiver or estoppel because those concepts are codified in s. 131 of the Insurance Act, but s. 131 requires that a waiver of a term or condition of an insurance contract must be in writing and there was no evidence that Arch Insurance had made any written waiver.
[61] Moreover, for there to be a waiver, the person relinquishing rights must do so knowingly with knowledge of the rights and a conscious intention to abandon them[^8] and for there to be an estoppel there must be (a) a representation or conduct amounting to a representation; (b) the representation must be reasonably relied upon by the representee; and (c) the representee must have acted to its detriment.[^9] In the case before him, the Arbitrator concluded that there was no evidence of a representation and no evidence of detrimental reliance on the part of Flash Car since Arch Insurance was not even aware of Flash Car on October 3, 2012, the date of the accident. In paragraphs 72 and 73 of his decision, the Arbitrator stated:
Further and most importantly, the suggestion that payment of a claim in respect of a January 23, 2013 accident, after the subject accident had occurred, constitutes a representation relied upon for the purposes of estoppel, does not withstand scrutiny because it juxtaposes the temporal requirement for estoppel, namely a representation must first be made, before there can be detrimental reliance. In this case, Trafalgar asserts that somehow 2337509 Ontario Inc. detrimentally relied on the coverage extended for the January 23, 2013 accident, for coverage for an earlier accident. First, Economical and Trafalgar have submitted no actual evidence to support any detrimental reliance, so their arguments fail upon this basis alone. Second, detrimental reliance could not possibly have occurred, since the October 3, 2012 accident occurred before the January 23, 2013 accident.
Given the aforesaid, I do not believe the legal doctrines of waiver and estoppel are applicable.
[62] The Arbitrator summarized his reasons for his decision in paragraphs 75 and 77 of as follows:
In the final analysis, I find that as of the date of the subject accident, no Arch policy had been issued to 2337509 Ontario Inc. o/a Flash Car & Truck Rental and the subject Pontiac Aveo was not a “described vehicle” under the fleet policy issued to Elite. Arch did not insure the subject Pontiac Aveo. To find otherwise may well lead to absurd results in many situations. For example, a company has a fleet of vehicles for which it has fleet insurance. A friend of the owner is operating an uninsured vehicle and is involved in an at-fault accident and is exposed to numerous personal injury claims. The owner of the company, in an attempt to help his friend, simply adds the uninsured vehicle involved to the delivery of his next monthly fleet list, so as to provide his friend after the fact with insurance coverage for both accident benefits and third party liability. This would be an absurd result. Another example is where the individual is uninsurable or subject to exorbitant premiums by reason of driving violations or history of late payment of premiums. The owner of a fleet could simply have this individual’s vehicle added on the monthly lists in exchange for a monthly under the table cash payment so that the individual would have insurance that would otherwise be unavailable or at an exorbitant monthly premium amount. These would be absurd results, if simply adding any vehicle to a monthly fleet list, even after the fact, is expected to provide coverage for both accident benefits and third party liability. Such absurd results are avoided by requiring that covered vehicles qualify under the specific wording set out in Section (a) of the OPCF-21A. The vehicle must be owned or leased to the named insured, along with the other requirements set out with respect to leased vehicles as set out in Section (a), for there to be coverage.
Having considered the submissions of Trafalgar and Economical, I find that no policy was ever issued by Arch to 2337509 Ontario Inc. o/a Flash and that the subject Pontiac Aveo motor vehicle was not a “described automobile” under the Arch policy issued to Elite, as it was not owned or leased to Elite at the date of the subject motor vehicle accident. Commercial reality must be considered. In many instances, fleet policies cover hundreds of vehicles with vehicles being added and deleted each month. It is not the insurer’s obligation to complete an ownership and plate search each time a new vehicle is added to the fleet list. The insured must realize that a fleet policy only provides coverage with respect to those vehicles owned or leased to the insured and meeting the other requirements set out in section (a) of the OPCF-21A.
E. Standard of Appellate Review
[63] With respect to issues of law, issues of fact, and issues of mixed fact and law, the standard of appellate review of an appeal of an arbitral award in a priority dispute arbitration is the normal appellate standard of review.[^10] For questions of fact, the standard of review is palpable and overriding error; for questions of mixed fact and law, the standard is palpable and overriding error, except where there is an extricable error of law, in which case the standard of review on the extricable question of law is correctness; and a palpable and overriding error is an error that is plainly seen and that affects the result.[^11]
[64] The appellate standards of review are set out in Housen v. Nikolaisen.[^12] Where a ground of appeal raises an issue of law alone, the standard of review is correctness.[^13] Where the ground of appeal raises a question of fact, the appellate court must pay substantial deference to it. Before it may properly interfere, the appellate court must conclude that the submitted error amounts to a “palpable and overriding error”. The word “palpable” means “clear to the mind or plain to see”[^14], and “overriding” means “determinative”[^15] in the sense that the error “affected the result”.[^16] The Supreme Court has held that other formulations capture the same meaning as “palpable error”: “clearly wrong”, “unreasonable” or “unsupported by the evidence”.[^17]Matters of mixed fact and law lie along a spectrum; where the error of the decision-maker can be traced to a clear error in principle, it may be characterized as an error of law and subjected to a standard of correctness; where the legal principle is not readily extricable, then the matter is subject to standard of palpable and overriding error.[^18]
[65] Where the appeal relates to a breach of procedural fairness or natural justice, the court is required to analyze whether the rules of procedural fairness or natural justice have been adhered to[^19] in accordance with the principles identified in Baker v. Canada (Minister of Citizenship and Immigration).[^20]
F. Economical Insurance’s Costs Appeal
[66] As I shall explain below, Trafalgar Insurance’s and Economical Insurance’s appeal fails on its merits. Had the appeal been successful, Economical Insurance’s appeal about the Arbitrator’s costs award would have been moot.
[67] Addressing then Economical Insurance’s appeal of the Arbitrator’s costs award, it may be quickly dealt with – and dismissed on the grounds of prematurity.
[68] The Arbitrator dealt with the matter of costs in paragraphs 78 and 79 of his decision as follows:
- On the basis of the findings aforesaid, I hereby order:
(1) That the priority application as against Arch is dismissed;
(2) That Trafalgar and/or Economical pay the costs of Arch throughout on a partial indemnity basis;
(3) That Trafalgar and/or Economical pay the account of the Arbitrator with respect to this motion.
- If Trafalgar and Economical cannot agree on their respective contributions to the costs of Arch and the account of the Arbitrator, I would appreciate submissions within seven (7) days, otherwise I will assume that the contributions are to be equal.
[69] As an unsuccessful party at the arbitration, Economical Insurance accepts that it was appropriate for it to be ordered to pay costs, but it has appealed the Arbitrator’s costs award because it submits that the Arbitrator made the award without inviting submissions from the parties or providing reasons for making an award requiring Economical to pay partial indemnity costs to Arch Insurance for the entire proceeding jointly and severally with Trafalgar Insurance.
[70] Economical Insurance submits that in making the award in the absence of costs submissions and without reasons, the Arbitrator erred in law and in principle in failing: (a) to give Economical Insurance an opportunity to make submissions on the appropriate award of costs contrary to s. 19 of the Arbitration Act; (b) to provide reasons for the Costs Award contrary to s. 38 of the Arbitration Act; and (c) to consider or apply the principles generally applied in litigation in Ontario governing the award of costs, expressly incorporated into the Arbitration Agreement between the parties, contrary to s. 33 of the Arbitration Act.
[71] Economical Insurance’s submissions, however, are premature and misconceive the Arbitrator’s reasons for decision. Properly read, the Arbitrator did the opposite of denying Economical the opportunity to make costs submissions. Rather, he invited submissions, but those submissions were never forthcoming. Had submissions been made, then the Arbitrator would undoubtedly have given reasons for decision, and he would have undoubtedly explained how much should be paid by Economical Insurance and how much should be paid by Trafalgar Insurance.
[72] To date, the Arbitrator has not fixed the costs, and strictly speaking, there should not have been an appeal of his costs award, which has never been completed. I, therefore, dismiss Economical Insurance’s costs appeal on ground of prematurity, and the matter of costs should be remitted to the Arbitrator.
G. Is Arch Insurance an Insurer within the Priority Scheme for SABs?
[73] The fundamental issue before the Arbitrator in the priority dispute and on this appeal is whether Arch Insurance was the insurer of the 2009 Aveo. Trafalgar Insurance and Economical Insurance submit that if the Arbitrator’s conclusion that Arch Insurance was not the insurer is upheld, the precedent would circumvent the statutory scheme and the whole insurance industry will suffer from a lack of certainty, predictability, and stability, leaving innocent insureds without SABs until the coverage issues are determined.
[74] This submission of dire consequence is without merit for four reasons.
a. First, the design of the Insurance Act is to separate the availability of SABs from the priority issue of which insurer is responsible for payment and thus the whole insurance industry will not suffer leaving innocent insureds without SABs until the coverage issues are determined. The facts of the immediate case reveal the stability of the scheme. Ms. Rakhra began receiving SABs in 2013 and the priority dispute was resolved, including an appeal to this court nine years later in 2022.
b. Second, the bizarre and complicated facts of this case with its superabundance of mishandling of fleet insurance schedules is unlikely to be replicated, so the case will have limited precedential utility.
c. Third, there is far more likely to be dire consequences if the Arbitrator’s decision were not upheld than if it were overturned. In paragraph 75 of his Reasons for Decision, the Arbitrator gives several examples of the problems that would occur if the appearance of a vehicle on a fleet schedule was all that was required to engage insurance coverage.
d. Fourth, the Arbitrator made no errors of fact, of mixed fact and law, or of law. I can find no fault in his Reasons for Decision.
[75] A priority dispute arises when there are multiple motor vehicle liability policies that could apply to a SABs claim. Section 268 (2) of the Insurance Act sets out the priority rules to be applied to determine which insurer is liable to pay the SABs. Since Ms. Rakhra was an occupant of a vehicle at the time of the accident, the following rules with respect to priority of payment applied:
(1) The occupant has recourse against the insurer of an automobile in respect of which the occupant is an insured;
• [Ms. Rakhra was not an insured occupant of an automobile.]
(2) If recovery is unavailable under (1), the occupant has recourse against the insurer of the automobile in which he or she was an occupant;
• [Dominion Insurance had been the insurer of the Aveo under its policy with Flash Car. Arch Insurance was the insurer for Elite Ride and the Aveo was on a Fleet Schedule to Elite Ride’s insurance policy, although Arch Insurance had no insurance policy with Satkar Auto, the owner of the vehicle or with Flash Car, the lessee of the vehicle. Economical Insurance was the insurer of Satkar Auto, the owner of the Aveo, which had been plated by Flash Car.]
(3) If recovery is unavailable under (1) or (2), the occupant has recourse against the insurer of any other automobile involved in the incident from which the entitlement to statutory accident benefits arose;
• [Trafalgar Insurance was the insurer of the striking vehicle.]
(4) If recovery is unavailable under (1), (2) or (3), the occupant has recourse against the Motor Vehicle Accident Claims Fund.
[76] In the immediate case, consistent with the Court of Appeal’s decision in Lombard Canada Ltd. v. Zurich Insurance Company, the Arbitrator sensibly concluded that in the circumstances where Arch Insurance was the insurer for Elite Ride – and not Flash Car – and the 2009 Aveo was on a Fleet Schedule to Elite Ride’s insurance policy, although Arch Insurance had no insurance policy with Satkar Auto, the owner of the vehicle or with Flash Car, the lessee of the vehicle, then it followed that the 2009 Aveo was not an insured vehicle. In these circumstances, no priority order could be made making Arch Insurance responsible for the SABs.
[77] On the preliminary motion, Arch Insurance sought a finding that the 2009 Aveo did not qualify as an insured vehicle under the Arch Policy because it did not meet the specific requirements of the OPCF 21A endorsement. The determination of that issue was dispositive regardless of whether Deslauriers had authority or ostensible authority to bind Arch Insurance to an insurance policy with Flash Car, which never occurred in the immediate case. The only insurance policy binding on Arch Insurance was its policy with Elite Ride which was not the owner or lessee of the 2009 Aveo. An application for insurance for Flash Car was never submitted to Arch Insurance and a policy of insurance was never issued by Arch Insurance to Flash Car. In any event, regardless of any broker authority to bind Arch Insurance in respect of Flash Car, the 2009 Aveo does not qualify as a covered vehicle under the insurance policy that was issued to Elite Ride. Adding or removing a vehicle from a fleet schedule is essentially a mechanism for determining what the amount of the premium should be paid, which amount would depend on the composition of the insured’s fleet of owned and leased vehicles. In the immediate case, Elite Ride never owned or leased the 2009 Aveo.
[78] I am not persuaded that the Arbitrator made any reversible error. It follows that Trafalgar Insurance’s and Economical Insurance’s appeal should be dismissed.
H. Conclusion
[79] For the above reasons, Trafalgar Insurance’s and Economical Insurance’s appeal is dismissed.
[80] If the parties cannot agree about the matter of costs, they may make submissions in writing beginning with Arch Insurance’s submissions within twenty days of the release of these Reasons for Decision followed by Trafalgar Insurance’s and Economical Insurance’s submissions within a further twenty days.
Perell, J.
Released: July 21, 2022
COURT FILE NO.: CV-21-00666764-0000
DATE: 20220721
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
THE DOMINION OF CANADA GENERAL INSURANCE COMPANY
Applicant
- and –
TRAFALGAR INSURANCE COMPANY, ARCH INSURANCE COMPANY and ECONOMICAL INSURANCE COMPANY
Respondents
REASONS FOR DECISION
PERELL J.
Released: July 21, 2022
[^1]: S.O. 1991, c.17.
[^2]: The Dominion of Canada Insurance Company v. Trafalgar Insurance Company and Economical Insurance Company, 2021 CarswellOnt 10776.
[^3]: R.S.O. 1990, c. I.8.
[^4]: The Dominion of Canada Insurance Company v. Trafalgar Insurance Company and Economical Insurance Company, 2022 CarswellOnt 794.
[^5]: 2010 ONCA 292.
[^6]: Patterson v. Gallant, 1994 CanLII 45 (SCC), [1994] 3 S.C.R. 1080.
[^7]: Morino v. ING Insurance Company of Canada, 2019 ONCA 326; Ontario (Minister of Finance) v. Unifund Assurance Co., 2008 CarswellOnt 11535; ING v. Non-Marine Underwriters, 2005 CarswellOnt 12044; Campanaro v. Kim, 1998 CarswellOnt 3499.
[^8]: Campbell v.1493951 Ontario Inc., 2021 ONCA 169.
[^9]: Bradfield v. Royal Sun Alliance Company of Canada, 2019 ONCA 800; Ryan v. Moore, 2005 SCC 38.
[^10]: Continental Casualty Company v. Chubb Insurance Company of Canada, 2022 ONCA 188, at paras. 46-48; Wawanesa Mutual Insurance Company v. Unica Insurance Inc., 2021 ONSC 4266, at paras. 54-57, 71; Allstate Insurance Co. v. Her Majesty the Queen 2020 ONSC 830; Canada (Minister of Citizenship and Immigration) v. Vavilov. 2019 SCC 65.
[^11]: Canada (Minister of Citizenship and Immigration) v. Vavilov, 2019 SCC 65.
[^12]: 2002 SCC 33.
[^13]: Housen v. Nikolaisen, 2002 SCC 33.
[^14]: Housen v. Nikolaisen, 2002 SCC 33 at para. 5.
[^15]: Schwartz v. Canada, 1996 CanLII 217 (SCC), [1996] 1 S.C.R. 254.
[^16]: L. (H.) v. Canada (Attorney General), 2005 SCC 25, [2005] 1 S.C.R. 401 at para. 55.
[^17]: L. (H.) v. Canada (Attorney General), 2005 SCC 25, [2005] 1 S.C.R. 401 at paras. 55-56.
[^18]: MacDonald v. Chicago Title Insurance Co. of Canada, 2015 ONCA 842 at paras. 1-41, leave to appeal refused [2016] S.C.C.A. No. 39; Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53; Housen v. Nikolaisen, 2002 SCC 33.
[^19]: Canaccede Credit LP v. Dyment, 2020 ONSC 325 at para. 19 (Div. Ct.); Brooks v. Ontario Racing Commission, 2017 ONCA 833 at para. 5.
[^20]: 1999 CanLII 699 (SCC), [1999] 2 S.C.R. 817. See: Bayfield v College of Physiotherapists of Ontario, 2015 ONSC 6808 (Div. Ct.); Summitt Energy Management Inc. v. Ontario Energy Board, 2013 ONSC 318 (Div. Ct).