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AUTOMOBILE insurance - Compulsory government scheme - Uninsured or underinsured motorist coverage

Wednesday, September 18, 2019 @ 6:25 AM  


Lexis Advance® Quicklaw®
Appeal by the insurer from a decision confirming an arbitrator’s order that the appellant was required to pay insurance benefits. The appellant mistakenly believed it was not liable to pay the benefits to the claimant and persuaded the Motor Vehicle Accident Claims Fund to accept the payment obligation. When the appellant’s coverage mistake eventually came to light and the Fund requested the appellant to resume paying the claimant and to reimburse the Fund for payments made, the appellant refused. The Fund and the appellant arbitrated their dispute. The arbitrator determined that the Disputes Between Insurers Regulation did not on its own provide a remedy by which the Fund could be reimbursed. In his view, his authority under s. 7(6) of the Regulation to make a special award did not permit him to order the appellant to reimburse the Fund but that he had authority to make such an order under the Arbitration Act. The appellant argued that the Fund lost its ability to contest priority once the Fund accepted responsibility for paying benefits. The appeal judge found that the appellant’s failure to conduct a reasonable investigation was fatal to its notice to require the Fund to pay benefits to the claimant.

HELD: Appeal dismissed. According to the Regulation, the Fund could dispute its obligation to pay benefits at any time and need not initiate an arbitration within one year of the time that it first began paying benefits. The appeal judge was not correct in concluding that the arbitration was void from the outset. By basing his reasoning on a finding that the arbitration was void from the outset, the appeal judge nullified the arbitration award. If the arbitration was void, it was unclear on what basis the Fund could obtain the remedy it sought and to which it was entitled. There was no doubt that the arbitration was properly initiated by the Fund and duly constituted. The arbitrator did not err in refusing to apply the arbitral jurisprudence to the Fund in this instance. Even though the Fund was an insurer for some purposes, it stood apart from ordinary insurers in priority disputes under the Regulation. The arbitrator’s interpretation of s. 7(6) of the Regulation as it related to the jurisdiction to make a special award was unreasonable. Contrary to his view, it permitted an arbitrator to resolve the priority dispute by requiring an insurer to fully reimburse the Fund for benefits paid for which the insurer was properly responsible, in addition to the costs of the investigation and legal fees and ordering any sanctions the arbitrator might find to be warranted. The arbitrator, however, imposed a reasonable award.

Ontario (Minister of Finance) v. Echelon General Insurance Co., [2019] O.J. No. 3942, Ontario Court of Appeal, P.D. Lauwers, J.M. Fairburn and I.V.B. Nordheimer JJ.A., July 25, 2019. Digest No. TLD-September162019008