IN THE MATTER OF THE INSURANCE ACT, R.S.O c. I. 8, as amended AND REGULATION 283/95 DISPUTES BETWEEN INSURERS, as amended

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1 IN THE MATTER OF THE INSURANCE ACT, R.S.O c. I. 8, as amended AND REGULATION 283/95 DISPUTES BETWEEN INSURERS, as amended BETWEEN: AND IN THE MATTER OF THE ARBITRATION ACT, S.O. 1991, c.17 AND IN THE MATTER OF AN ARBITRATION STATE FARM AUTOMOBILE INSURANCE COMPANY -and- Applicant CO-OPERATORS GENERAL INSURANCE COMPANY OF CANADA Respondent DECISION COUNSEL Valerie Hoag Pavoni, Patton, Di Vincenzo LLP Lawyer for the Applicant, State Farm Automobile Insurance Company (hereinafter called State Farm ) Daniel Strigberger Miller Thomson LLP (Waterloo) Lawyer for the Respondent, Co-operators General Insurance Company of Canada (hereinafter called Co-operators ) ISSUE In the context of a priority dispute pursuant to the Insurance Act, R.S.O. 1990, c.l.8, as amended and Ontario Regulation 283/95, this mailer comes before me as a motion brought by Co-operators to dismiss the Arbitration on the basis that State Farm s claim is time-barred by reason of the application of Section 7(2) of Ontario Regulation 283/95 as having been initiated more than I year after first serving a Notice of Dispute. FACTS On September 22, 2001, Evereil Reece (hereinafter Reece ) had been a passenger in a motor vehicle being driven by Tina Weller (hereinafter Weller ) during a road rage incident. He alleges that at one point he exited the vehicle and was struck by a motor vehicle shortly thereafter.

2 At all material times Tina Weller (hereinafter Weller ) had a valid Ontario Auto Policy of Insurance with the Co-Operators General Insurance Company of Canada (hereinafter Co Operators ) bearing policy number The vehicle involved in the impact with Reece had a valid Ontario Auto Policy of Insurance with State Farm Mutual Automobile Insurance Company (hereinafter State Farm ) bearing policy number C. On or about September 25, 2001, the accident was reported to Co-Operators; a print-out produced by Co-Operators dated September 26, 2001 is entitled Injury AB Everett Reese (sic) 22 September A Co-operators log note dated September 26, 2001 indicates that the investigation was assigned to Barb Buretic will need to check Priority. On September 27, 2001, Weller was interviewed by a Co-operators adjuster; a transcribed version of the interview indicates that Weller stated that on the date of the interview she was single and that she lived with her three children at 179 Tolton Avenue in Hamilton. In response to the question about how she was in relation to Reece, she explained that we are just going out together, my boyfriend. She stated that Reece lived at a different address (101 Kenilworth Avenue). She described the injuries that Reece had. At the conclusion of the interview, Weller confirmed that she had made available her true and complete version of the facts relating to the motor vehicle incident of September 22, On September 27, 2001, another Co-operators adjuster met with Reece. In a signed handwritten statement, Reece identified Weller as his fiancée and that they had been engaged for a year and a half. He also stated that he lived with his son at 101 Kenilworth Avenue. He spent a lot of time at Weller s home on Tolton Avenue, Hamilton. He described his injuries from the incident. He concluded by stating that his handwritten statement was true. Reece signed a Non-Waiver Agreement dated September 27, On October 3, 2001, Co-operators wrote to Reece to advise that the State Farm policy was the only auto policy available to respond to his injuries as he was not in Weller s vehicle at the time of the accident. He was advised to contact State Farm. On October 15, 2001, a State Farm adjuster met with Reece, to provide the forms and to explain the benefits. Reece was advised that he may not have coverage with State Farm. On October 19, 2001, Reece presented a signed application for Statutory Accident Benefits to State Farm. On his application form he checked that he was single and that he lived at 101 Kenilworth Avenue South, Hamilton. There is no evidence that Reece submitted a completed OCF-1 to Co-operators. On November 30, 2001, State Farm sent a Notice of Dispute to Co-operators. On January 10, 2002, Co-operators sent a letter to State Farm advising further investigation concluded Everett Reece was not a spouse, common-law spouse, or other dependent of Tina Weller.

3 By letter dated February 27, 2002, State Farm sent Reece a letter, first to 101 Kenilworth Avenue South, Hamilton, and then addressed to 62 Fullerton Avenue, Hamilton, pursuant to section 33 of the SABS advising Reece of his obligation to provide accurate information on his application. On February 22, 2002, State Farm commissioned surveillance to assist in the investigation of the potential priority dispute. The OPSEU strike delayed the ability of the investigators to obtain certain information on Reece. The investigation continued into May 2002 to check out whether Reece was living with Weller and to find out his marital status if possible, to deal with the priority rule issue. On May 16, 2002, State Farm wrote to Co-operators asking if Reece was a listed driver on the Weller policy of insurance. A verbal report to State Farm on June 13, 2002 from the investigators (IRG) indicated that Reece did not co-habit with Weller at prior residences and therefore he would not be considered to be common-law. He was currently living with Weller, post-accident, and therefore he would not qualify as a spouse. The investigation continued. On May 21, 2002, Co-operators wrote to State Farm to advise that Reece was not a listed driver on Weller s policy. A report from Dr. Marton to State Farm dated November 28, 2002 and received January 8, 2003, refers to Reece being in a motor vehicle driven by his fiancée at the time and that he had been married for a year. In an August 19, 2003 report to the Co-operators, Mitchell Lyman advised the Co-operators that they had located Tina Weller s Application for Divorce through the Ontario Superior Court of Justice Family Court. The file included an Affidavit by Tina Weller, sworn June 20, 2001, advising that she wanted to remarry on July 14, State Farm was not provided with this report or related documentation until documentary disclosure took place in 2012 during the course of this arbitration. During the one-year period after State Farm gave Co-operators its priority dispute notice in November 2001, State Farm did not take any steps to locate Tina Weller s Application for Divorce through the Family Court. In a November 22, 2003 report to Co-operators, Mitchell Lyman confirmed government records showed that Reese (sic) married Weller on July 14,2001. State Farm was not provided with this report until documentary disclosure took place in 2012 during the course of this arbitration. During the one-year period after State Farm gave Co-operators its priority dispute notice in November 2001, State Farm did not take any steps to obtain government records showing that Reece married Weller on July 14,2001. On June 25, 2010 at an Examination for Discovery, Reece advised counsel for State Farm that he married Weller on July 14, State Farm s counsel received a copy of the police report on October 21, 2010 pursuant to an undertaking given by Reece at his examination to provide the particulars of insurance for

4 the vehicle in which he had been a passenger. The police report confirmed that the Weller vehicle was insured by Co-operators under policy number State Fami sent a Notice of Dispute to Co-operators dated November 25, State Farm initiated arbitration on April 12, On February 6, 2012, lawyers for State Farm received confirmation from the Office of the Registrar General dated February 1, 2012 that there was a record of Reece and Weller being married on July 14,2001. ANALYSIS AND FINDINGS There are many situations which arise where an individual injured in a motor vehicle accident has access to more than one policy of insurance with respect to payment of statutory accident benefits. Section 268 of the Insurance Act, R.S.O. 1990, c.l.8, is a legislative scheme to determine which insurer must pay statutory accident benefits when more than one policy is potentially accessible. If a dispute arises with respect to the application of s. 268 then the Dispute Between Insurers regulation (Ontario Regulation 283/95), sets out the specific details that govern how a dispute is to be processed and provides for an Arbitration with regards to this dispute, to be in accordance with guidelines set out in the Arbitrations Act, 1991, S.O. 1991, c.17, as amended. The relevant portions of Ontario Regulation 283/95 are as follows: 1. All disputes as to which insurer is required to pay benefits under section 268 of the Act shall be settled in accordance with this Regulation. 0. Reg. 283/95, s.1. 2 The first insurer that received a completed application for benefits is responsible for paying benefits to an insured person pending the resolution of any dispute as to which insurer is required to pay benefits under section 268 of the Act. 0. Reg. 283/95, & 2 3. (I) No insurer may dispute its obligation to pay benefits under section 268 of the Act unless it gives written notice within 90 days of receipt of a completed application for benefits to every insurer who it claims is required to pay under that section. 0. Reg. 283/95, & 3(1). (2) An insurer may give notice after the 90 day period if, a) 90 days was not a sufficient period of time to make a determination that another insurer or insurers is liable under section 268 of the Act; and b) the insurer made the reasonable investigations necessary to determine if another insurer was liable within the 90 day period. 0. Reg. 283/95, 5.3 (2).

5 (3) The issue of whether an insurer who has not given notice within 90 days has complied with subsection (2) shall be resolved in an arbitration under section Peg. 283/95, & 3 (3). 6. The insured person shall provide the insurers with all relevant information needed to determine who is required to pay benefits under section 268 of the Act. 0. Peg. 283/95, & & 7. (1) If the insurers cannot agree as to who is required to pay benefits or if the insured person disagrees with an agreement among insurers that an insurer other than the insurer selected by the insured person should pay the benefits, the dispute shall be resolved through an arbitration under the Arbitration Act, Reg. 283/95, s.7(1). (2) The insurer paying benefits under section 2, any other insurer against whom the obligation to pay benefits is claimed or the insured person who has given notice of an objection to a change in insurers under section 5 may initiate the arbitration but no arbitration may be initiated after one year from the time the insurer paying benefits under section 2 first gives notice under section Peg. 283/95, s. 7(2) Co-operators argues that State Farm initiated this Arbitration roughly 9.5 years after it first gave Co-operators notice of its intention to claim priority and is therefore time-barred by reason of the application of Section 7(2) of Ontario Regulation 283/95, as outlined above. Co-operators claims that Section 7 of the Regulation creates a one year limitation period to initiate Arbitration from the time the insurer paying benefits first gives notice under Section 3. In this case, notice of dispute was forwarded to Co-operators by State Farm on November 30, Co-operators claims that it had one year to initiate the Arbitration and since the Arbitration was commenced roughly 9.5 years later, it is time-barred. State Farm takes the position that their claim for priority against Co-operators is not timebarred on the basis that they have satisfied the requirements of Section 3(2) of Ontario Regulation 283/95 in that given the facts outlined above 90 days was not sufficient to make a determination that another insurer had priority and that within the 90 day period, State Farm made reasonable investigations necessary to determine if another insurer was liable. State Farm further submits that an insurer is not precluded from satisfying Section 3(2) of the Regulation because it made a decision within the 90 day period to accept responsibility for paying benefits, relying upon incomplete or inaccurate reporting of material facts. State Farm cites three decisions in support of this proposition: 1. Dominion of Canada General Ins. Co. v. Certas Direct Insurance Co. [2009] O.J. No.2971 (S.C.); leave to appeal refused December 24, 2009, (C.A.); 2. Farmers Mutual Insurance Company (Lindsay) v. The Co-operators, July 3, 2009, Lee Samis Arbitrator 3. Primmum Insurance Company v. Aviva Insurance Co. of Canada [2005] O.J. No.1477 (S.C.) On careful review, I am satisfied that all three cases are distinguishable from the present fact situation. All three cases deal with whether 90 days was not sufficient to make a determination that another insurer had priority and the reasonableness of the investigation

6 conducted within 90 days of having received the Application as required by Section 3(2) of the Regulation and not the limitation issue arising out of Section 7 of the Regulation. All three cases deal with situations where no Notice of Dispute was served within 90 days. The three cases dealt with whether the saving provisions of Section 3(2) ought apply. In the case before me Notice of Dispute was served within 90 days so it is not a notice issue but a limitation issue. I am satisfied that Section 7 of the Regulation creates an absolute limitation period once notice has been served. The first party insurer has one year to commence its Arbitration. In this case, notice was served on Co-operators on November 30, State Farm had until November 30, 2002 to complete any investigation and to commence its Arbitration as against Co-operators. The Arbitration was not commenced until April 12, It is clear from the agreed upon facts that both insurers were misled by both Reece and Weller as to their marital status. One can only hazard a guess as to why the two of them wanted someone to think that they were living at separate addresses and not married. In my view, the language of Section 7(2) is plain on its face. The one year limitation period begins to run from the date the insurer paying benefits under Section 2 first gives notice under Section 3. Unlike Section 3 of the Regulation, there are no savings provisions under Section 7 of the Regulation. I am of the view that when a company misses the one year period, it cannot proceed to Arbitration at a later date even though there may be equitable circumstances that arguably might warrant an extension. Support for this is found in the Ontario Court of Appeal s comments in Kincjsway General Insurance Co. v. West Wawanosh Insurance Co., 2002 CanLlI (On.C.A): The Regulation sets out in precise and specific terms a scheme for resolving disputes between insurers. Insurers are entitled to assume and rely upon the requirement for compliance with those provisions. Insurers subject to the Regulation are sophisticated litigants who deal with these disputes on a daily basis. The scheme applies to a specific type of dispute involving a limited number of parties who find themselves regularly involved in disputes with each other. In this context, it seems to me that clarity and certainty of application are of primary concern. Insurers need to make appropriate decisions with respect to conducting investigations, establishing reserves and maintaining records. Given this regulatory schedule, there is little room for creative interpretations or for carving out judicial exceptions designed to deal with the equities of particular cases. Given the fact that State Farm served Notice of Dispute within 90 days as required by Section 3, there is no need for me to look at the reasonableness of extending the time to provide notice. As I have indicated previously, the facts before me outline a limitation issue and not a notice issue. It is unfortunate that both insurers were misled by both the claimant Reece and State Farm s insured Weller as to their spousal status. However, once it served its Notice of Dispute on November 30, 2001, State Farm had one year to complete its own independent investigation and any searches which might have been available through govemment agencies as to the relationship between Reece and Weller. In the alternative, State Farm could have commenced the Arbitration within the one year time limit, sought an Order from an Arbitrator for an Examination Under Oath of both Weller and Reece, or simply proceed to an Arbitration hearing to obtain their evidence under oath. It is unfortunate that the misrepresentations of Weller and Reece have led to such an inequitable result, but as indicated in Kinpsway (supra), the primary concern is to preserve clarity and certainty. There

7 is little room for creative interpretations or for carving out judicial exceptions designed to deal with the inequities of particular cases. The limitation set out in Section 7(2) of the Regulation is plain on its face and must be applied. ORDER I hereby Order that the Arbitration herein be dismissed with costs payable on a partial indemnity basis to Co-operators. I further Order that State Farm pay the Arbitrator s costs. DATED at TORONTO this 26th day of March, KENNETH J. BIALKOWSKI Arbitrator

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