(On appeal from the Court of Appeal for Ontario) BETWEEN

51 Pages·2015·1.75 MB·English

sec
File No. 36002
IN THE SUPREME COURT OF CANADA
(On appeal from the Court of Appeal for Ontario)
BETWEEN:
ZURICH INSURANCE COMPANY
APPELLANT
(Respondent)
AND:
CHUBB INSURANCE COMPA NY OF CANADA
RESPONDENT
(Appellant)
FACTUM OF THE APPELLANT, ZURICH INSURANCE COMPANY
(Pursuant to Rule 42 of the Rules oft he Supreme Court of Canada)
ZAREK TAYLOR GROSSMAN HANRAHAN LLP GOWLING LAFLEUR HENDERSON LLP
Barristers & Solicitors Barristers & Solicitors
20 Adelaide Street East, Suite 1301 160 Elgin Street, Suite 2600
Toronto, ON MSC 2T6 Ottawa, ON KIP 1C3
Eric K. Grossman Jeffrey W. Beedell
Kate M. MacLeod 613-786-0171 ~
Michael Warfe 613-788-3587 (fax)
416-777-2811 ~ [email protected]
416-777-2050 (fax)
Ottawa Agent for the Cow1sel for the
[email protected]
Appellant
Counsel for the Appellant
KBMLAWLLP SUPREME ADVOCACY LLP
170 University Street, Suite 902 340 Gilmour Street, Suite 100
Toronto, ON M5H 2B3 Ottawa, ON K2P OR3
George Kanellakos Eugene Meehan, Q.C.
416-800-0844 ~ Marie-France Major
647-660-3683 (fax) 613-695-8855 ~
[email protected] 613-695-8580 (fax)
[email protected]
Counsel for the Respondent
Ottawa Agent for Counsel for the Respondent
TABLE OF CONTENTS
Part I - Overview & Statement of Facts 1
A. Overview - Protecting Accident Victims and Ensuring Insurance Companies 1
Play by the Rules
B. Brief Chronology of Facts 2
C. Proceedings Below 5
Dispute Goes to Arbitration -Arbitrator Tessis Finds Chubb is Not an 5
Insurer Under Section 268 of the Insurance Act
Justice Goldstein -Allows Appeal; Well-Established Nexus Test Should 5
Be Applied; Policy ofE ncouraging Insurers to Pay Benefits Immediately
Court ofA ppeal for Ontario -Majority Allows Appeal from Justice 6
Goldstein's Decision; Minority Dismisses Appeal
Justice Juriansz Dissents - Established Nexus Test To be Applied; 6
Unnecessary to Adopt Different Interpretation; Concerns ofP ublic Policy
Part II - Issues 8
Part III - Argument 8
A. The Standard of Review 8
B. The Regulation Governing Disputes Between Insurers Applies to Chubb-It is 8
an Insurer Dealing in Automobile Insurance
Overview of the Legislation - Pay First; Dispute Later 8
Disputes Between Insurers Regulation is About Insurers, Not Policies 11
Court ofA ppeal Errs in Limiting Disputes Between Insurers Regulation to 12
Certain Policies
"Insurer" Has Been Given a Broad Interpretation 12
Under the Disputes Between Insurers Regulation, Liability Not Actually 14
Required
Chubb is Subject to the Regulation - It Has Admitted It Is an Automobile 17
11
Insurer; It Received A Completed Application for Accident Benefits
C. Purpose of the Disputes Between Insurers Regulation-Providing Injured 17
Accident Victims with Timely Access to Benefits
D. Statutory Interpretation and the Modern Approach 19
E. Disputes Between Insurers Regulation Requires Bright Lines; Protecting 21
Consumers & Industry Expectations
The Importance ofC larity and Certainty in the Disputes Between Insurers 21
Regulation
The Reality of the Sophisticated Insurer 23
Decision Creates Disincentives to Do the Right Thing; Generates 24
Needless Costs
Sophisticated Insurers Should Not Be Allowed to Ignore the Rules at the 25
Expense of an Accident Victim's Recovery
Impact on Future Bad Faith Claims - Bad Behaviour May Go 26
Unpunished
F. Nexus Test Provides The Bright Lines Accident Victims and Insurers Require 27
Nexus Test - Supported by Case Law, Presents Low Bar for Requiring 27
Compliance, Nexus Found IfN ot Arbitrary
Court ofA ppeal Erred in Interpretation ofN exus Test - Wrongly Chose 30
Type of Contract Over Connection Between Victim and Insurer
Sufficient Connection in This Case 31
Court qfA ppeal Creates Uncertainty and Confusion 31
Strict Compliance Should Apply - For Insurers It Is the Cost ofD oing 34
Business; For Victims It Is Their Future Health and Recovery
G. Future Impact- What Happens to the Next Susan Singh? 35
Conclusion: Putting People First; Ensuring Insurers Play by the Rules 36
Part IV - Costs 3 7
Part V - Order Sought 3 7
111
Part VI - Table of Authorities 38
Part VII - Statutes and Regulations 43
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PART I- OVERVIEW & STATEMENT OF FACTS
A. Overview - Protecting Accident Victims and Ensuring Insurance Companies Play by the
Rules
1. This case is about how insurance companies treat everyday people who have been in car
accidents - injured victims that need help. More specifically, this case is about protecting
victims from prolonged delays in obtaining no-fault benefits. It is about safeguarding the
regime in place that provides immediate access to no-fault benefits - a regime that puts
injured victims on the immediate road to recovery through rehabilitation and treatment.
2. Ontario Regulation 283/95 ~Disputes Between Insurers ("the Regulation") is designed to
protect injured accident victims from suffering on the sidelines as insurers dispute their
obligation to pay benefits. An insurance company that receives a completed application for
no-fault benefits is to "pay first, dispute later". The Regulation has been supported by a
stable, mature foundation of case law. The decision below from the Court of Appeal for
Ontario puts this protection in jeopardy. When it comes to no-fault benefits, it exposes
future car accident victims to suffering insult after their initial accident injury.
3. This case is also about fair play. It deals with a sophisticated insurance company who knew
the rules and chose to ignore them. Chubb Insurance Company of Canada ("Chubb") has
underwritten automobile policies/or decades. Nonetheless, this insurer:
• Refused to pay benefits to a person genuinely injured in a car accident;
• Failed to notify any other insurers of a potential dispute or its denial of benefits;
and
• Left an injured victim without any access to no-fault benefits/or years.
4. Chubb is an insurer that is subject to the disputes between insurers regulation . It regularly
deals in automobile insurance. It knows the legislation. This legislation puts Chubb squarely
in the category of the insurer obligated to "pay first, dispute later". Chubb chose to disregard
an Application for Accident Benefits. It deprived an accident victim of access to early
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treatment. It also left the Appellant Zurich Insurance Company ("Zurich"), an insurer totally
unaware of the existence of this potential claim, to pick up the pieces - dealing with the
ramifications of a claim that went unadjusted for many years.
5. The Court of Appeal for Ontario (with a vigorous dissent) condones this conduct. In doing
so, the majority interpreted the legislation in a way that deprives its words of their meaning.
It undercuts the very purpose for the statutory regime - the timely provision of no-fault
benefits to victims of car accidents. This interpretation puts the well-being and recovery of
injured people at risk.
6. The majority decision is out of step with longstanding case law. It leaves accident victims
and the insurance industry on shaky ground when it comes to the "pay first, dispute later"
rule in Ontario. Such uncertainty has negative implications on victims, insurers and
commercial insured entities. When it comes to access to treatment, it also leaves accident
victims shut out, waiting for help on the sidelines as insurers squabble over payments.
7. This Honourable Court's guidance is now required on the important issue of affording
injured accident victims access to no-fault benefits as provided for by Ontario's disputes
between insurers regulation.
B. Brief Chronology of Facts
Susan Singh is in an Accident; Applies to Chubb for Benefits; Application Denied
8. In September 2006, Susan Singh (an Ontario resident) decides to rent a car - a Ford
Windstar - from Wheels 4 Rent.1 She gets into a car accident on September 23, 2006 in
Toronto. Susan strikes a guard rail and almost ends up in the lake.2 She is injured as a
result.
1 Arbitration Decision of Arbitrator Tessis, dated March 13, 2012, at p. 1 [Arbitration Decision]. Tab 1 of the
Appellant's Record [AR].
2 Appl,ication for Accident Benefits of Susan Singh, dated Oct 31, 2006 [Application for Benefits]. Tab 10 of the
AR.
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9. Susan applies to Chubb for no-fault benefits in an application dated October 31, 2006 and
received by Chubb on or about November 17, 2006.3 When she rented her car, Wheels 4
Rent provided information noting that Chubb offers insurance for people renting its cars.4
Based on this information, Susan takes the first formal step in advancing a claim for
accident benefits. She sends an Application for Accident Benefits (the statutorily mandated
form) to the insurer she associates with the car rental, Chubb.5
10. Chubb denies Susan's application on November 21, 2006.6 It does this despite having
received a completed Application for Accident Benefits and knowing the applicable no-fault
benefits disputes between insurers regulation. Chubb asserts that its insurance with Wheels 4
Rent is only "accidental insurance".7 It tells Susan that this insurance does not cover her
claims for no-fault benefits under an automobile insurance policy.
Chubb is An Insurance Veteran; Writes Auto Policies and Deals with Accident Benefit Claims
Routinely
11. At the time of its dispute with Susan, Chubb' s business involved the underwriting of
insurance policies in Ontario dealing with no-fault accident benefits.8 This is a sophisticated
insurer with specific knowledge of the no-fault accident benefits regime.
Chubb Fails to Help Susan; Pays No Benefits
12. Chubb does nothing further to help Susan. It simply refuses her Application for Accident
Benefits and fails to tell her that Zurich also insures Wheels 4 Rent.9 Chubb pays no
accident benefits to Susan. Wheels 4 Rent gives Susan no other information on potential
3 Transcript of the Examination Under Oath of Beth Buss, dated September 25, 2009, at p. 21 [Buss Transcript]. Tab
18 of the AR.
4 Arbitration Decision, supra note 1 at p. 1. Tab 1 of the AR.
5 See e.g., Correspondence from Tkatch & Associates to Blouin Dunn LLP, dated September 8, 2008. Tab 15 of the
AR.
6 Arbitration Decision, supra note 1 at p. 2. Tab I of the AR.
7 Correspondence from Chubb to Tkatch & Associates, dated November 21, 2006 [Chubb Letter]. Tab 12 of the AR;
Chubb Insurance Company of Canada, Accident Policy No. 640-46765. Tab 9 of the AR.
8 See e.g., Decision of the Court of Appeal, dated May 15, 2014, at para. 34 [Appeal Decision]. Tab 4 of the AR;
Buss Transcript, supra note 3 at pp. 10-11. Tab 18 of the AR.
9 See Chubb Letter, supra note 7. Tab 12 of the AR.
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next steps available to her.10 She is left with no information on how to dispute Chubb's
decision or how to pursue recovery from another insurer.
13. It takes more than 20 months after the accident for Chubb to tell Susan that Zurich also
insures Wheels 4 Rent. 11
Chubb Notifies No Insurer of Dispute; Zurich Becomes Aware of Situation; Zurich Agrees to
Help Susan on a Without Prejudice Basis
14. At no time does Chubb ever notify Zurich of Susan's accident, her claim for benefits or its
refusal to pay her benefits. In fact, Chubb formally notifies no one. 12
15. Susan talces Chubb to mediation at the Financial Services Commission of Ontario ("FSCO")
to determine her entitlement to benefits.13 Mediation is the mandatory first step in the
dispute resolution process under the Insurance Act.14 The mediation fails as Chubb
maintains it is not responsible to pay the benefits.
16. Zurich becomes aware of the situation, and Susan's personal circumstances. In August
2009, Zurich steps in and begins adjusting Susan's claims on a without prejudice basis
pending the outcome of a dispute with Chubb. 15 Zurich does this despite the fact that the
disputes between insurers regulation imposes the obligation to pay on the first insurer that
receives an application. It adjusts the claim, knowing that Chubb was the first insurer to
receive an application.
1° Correspondence from Tkatch & Associates to Chubb, dated November 9, 2006. Tab 11 of the AR.
11 Correspondence from Blouin Dunn LLP to Tkatch & Associates, dated May 28, 2008. Tab 13 of the AR.
12 Buss Transcript, supra note 3 at pp. 37-38. Tab 18 of the AR.
13 Report of Mediator, dated June 25, 2008. Tab 14 of the AR.
14 Insurance A ct, R.S.O. 1990, c. LS, ss. 280(1), 281 (2). Tab 34 of the Appellant's Book of Authorities [BOA].
15 See e.g., Decision of Justice Goldstein, dated November 13, 2012 at para. 5 [Superior Court Decision}. Tab 2 of
the AR; Correspondence from McLaren's Canada to Tkatch & Associates, dated September 22, 2009. Tab 17 of the
AR.
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C. Proceedings Below
Dispute Goes to Arbitration - Arbitrator Tessis Finds Chubb is Not an Insurer Under Section
268 of the Insurance Act
17. Zurich is forced to commence arbitration against Chubb despite the fact it is not the first
insurer to receive Susan's completed application for benefits. Zurich does the right thing,
providing Susan with the benefits she needs. It pays first and then disputes later - even
though this is Chubb's obligation under the disputes between insurers regulation.
18. Arbitrator Tes sis is asked to consider whether Chubb was "an insurer" in the context of the
legislation governing disputes between i~surers.16 He holds that there is no nexus or
connection between Chubb and Susan to cause that insurer to be obligated to pay accident
benefits. 17 He bases this finding on the fact that there is no suggestion that Chubb had ever
issued a motor vehicle liability policy on a vehicle owned by Wheels 4 Rent or to Susan that
had expired or was cancelled, nor that Chubb had issued a motor vehicle liability policy for
any motor vehicle connected to the accident. Arbitrator Tessis concludes that Chubb was not
an "insurer".
Justice Goldstein -Allows Appeal; Well-Established Nexus Test Should Be Applied; Policy of
Encouraging Insurers to Pay Benefits Immediately
19. The Arbitrator's decision is appealed, as of right in accordance with the terms of an
executed arbitration agreement. Justice Goldstein considers Chubb's position. He notes that
the optional accident coverage policy issued by Chubb could be considered a "motor vehicle
liability policy" under the Insurance Act.18 He finds that the Arbitrator did not apply the
well-established "nexus test" described by the Court of Appeal for Ontario in Kingsway
General Insurance Company v. Ontario.19 Although the connection between Susan and
Chubb may be "remote", Justice Goldstein finds it is not "arbitrary". He concludes there is a
nexus between Susan and Chubb. He also notes that insurers should be encouraged to pay
16 Arbitration Decision, supra note l at p. 2. Tab 1 of the AR.
17 Ibid at pp. 5-6.
18 Superior Court Decision, supra note 15 at para. 31. Tab 2 of the AR.
19 ibid at paras. 33-34.
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benefits immediately to victims. Afterwards, they can determine through dispute resolution
which insurer should ultimately bear the obligation of dealing with the claim.
20. Justice Goldstein sets aside the Arbitrator's decision and remits the matter back to the
Arbitrator to determine the remaining issues in dispute.
Court of Appeal for Ontario - Majority Allows Appeal from Justice Goldstein's Decision;
Minority Dismisses Appeal
21. Justice Goldstein's decision is appealed, with leave. The majority of the Court of Appeal
(Justice Pardu with Justice Pepall concurring) concludes that Justice Goldstein erred in
finding that the Chubb policy was a "motor vehicle liability policy."20 Justice Pardu finds
that an insurer providing fire or life insurance (not having the features of motor vehicle
policies) "may have no expertise in adjusting these claims, and should not be expected to
respond to them."21 The majority finds that Chubb is not required to respond to Susan's
application as it is not a "motor vehicle liability insurer".22 No analysis on the underlying
policy considerations or future implications is provided in the majority decision.
Justice Juriansz Dissents - Established Nexus Test To be Applied; Unnecessary to Adopt
Different Interpretation; Concerns ofP ublic Policy
22. Justice Juriansz disagrees with the majority decision. He concludes:
• Nexus Test Should Be Applied.23 The proper analysis is to simply apply the
established nexus test to determine if Chubb (being the first to receive a
completed Application for Accident Benefits) is obligated to pay the benefits;
• Mature Case Law on Issue, No Need for Dijferent Interpretation.24 There is
mature and stable case law on the nexus test and the application of the disputes
between insurers regulation. Judges and arbitrators have applied this test on
20 Appeal Decision, supra note 8 at para. 20. Tab 4 of the AR. .
21 ibid at para. 22.
22 Ibid at paras. 27-28.
23 ibid at para. 31.
24 Ibid at para. 32.