IN THE MATTER OF THE INSURANCE ACT, R.S.O. 1990, C. I.8, AS AMENDED, SECTION 275; AND IN THE MATTER OF THE ARBITRATION ACT, S.O. 1991, c.

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1 B E T W E E N : IN THE MATTER OF THE INSURANCE ACT, R.S.O. 1990, C. I.8, AS AMENDED, SECTION 275; AND IN THE MATTER OF THE ARBITRATION ACT, S.O. 1991, c.17 AND IN THE MATTER OF AN ARBITRATION BELAIR DIRECT INSURANCE COMPANY Applicant - and - ZURICH INSURANCE, CHEROKEE INSURANCE and AIG INSURANCE COMPANY Respondents DECISION COUNSEL Amanda Lennox Laxton, Glass LLP Counsel for the Applicant, Belair Direct Insurance Company (hereinafter referred to as Belair ) Kevin Adams Rogers Partners LLP Counsel for the Respondent, Zurich Insurance (hereinafter referred to as Zurich ) Linda Matthews and Saro Setrakian Matthews, Abogado LLP Counsel for the Respondent, Cherokee Insurance (hereinafter referred to as Cherokee ) Bianca Thomas - Moodie, Mair, Walker LLP Counsel for the Respondent, AIG Insurance Company (hereinafter referred to as AIG ) ISSUES In the context of a loss transfer dispute pursuant to s. 275 of the Insurance Act, R.S.O c. I.8 the preliminary issues before me are:

2 2 a) What, if any, Fault Determination Rules apply? If Rule 5 of the Fault Determination Rules applies, the parties agree to remit the issue of fault/liability and indemnity to a full Arbitration hearing. b) If any Fault Determination Rules apply (other than Rule 5), what, if any, percentage of fault is attributable to each of the Insurers insureds and what, if any, rate of indemnity is owing by the Respondents to the Applicant? c) What is the amount of costs to be paid in respect of the preliminary issue arbitration hearing and which party/parties has/have the burden of payment? PROCEEDINGS The preliminary issue arbitration proceeded on the basis of an Agreed Statement of Facts, Joint Document Brief, Books of Authority and written submissions. AGREED FACTS The parties have agreed that the Agreed Statement of Facts is to be utilized solely for the determination of the preliminary issues only and are set out as follows: BACKGROUND 1. The following motor vehicles were involved in an accident on November 17, 2014 on Highway 401, near the exit at Highway 6, in Guelph, Ontario (hereinafter "the accident"): (a) Vehicle 1 was a 2007 transport truck, insured by Cherokee Insurance (hereinafter "the Cherokee transport truck"). (b) Vehicle 2 was a 2004 Toyota Matrix (hereinafter "the Belair vehicle"), insured by Belair Direct Insurance Company (hereinafter "Belair"). Mr. Normano Aguiar (hereinafter "Mr. Aguiar") was driving the Belair vehicle, and Ms. Lucia Aguiar (hereinafter "Ms. Aguiar") was the front seat passenger. (c) Vehicle 3 was a 2004 transport truck, insured by AIG Insurance (hereinafter "the AIG transport truck").

3 3 (d) Vehicle 4 was a 2007 transport truck, insured by Zurich Insurance (hereinafter "the Zurich transport truck"). 2. At the time of the accident, Mr. Aguiar was insured under a motor vehicle liability policy of insurance with Belair, bearing policy number For the purpose of the loss transfer dispute, the Cherokee transport truck, the AIG transport truck and the Zurich transport truck are heavy commercial vehicles. ACCIDENT DETAILS 4. The accident occurred in the westbound lanes on Highway 401 near the exit at Highway 6, in Guelph, Ontario, on November 17, 2014 at approximately 2:45 a.m.. 5. There were three westbound lanes of traffic. Lane 1 is the far left lane (fast lane), Lane 2 is the middle lane, and Lane 3 is the far right lane. All four vehicles were traveling in the same direction. 6. The Cherokee transport truck was the leading vehicle, ahead of the Belair vehicle, in Lane The Cherokee transport truck moved from Lane 3, entered Lane 2, and the driver lost control of the truck. 8. The Cherokee transport truck struck the cement median on the far left side of Lane 1 and bounced back, blocking the three lanes of traffic. 9. The Belair vehicle came to a stop in Lane 3 without striking the Cherokee transport truck. 10. The AIG transport truck was traveling in Lane 3 and struck the Belair vehicle from behind. The AIG transport truck proceeded to drive off the roadway on the far right side of Lane 3.

4 4 11. As a result of being struck from behind by the AIG transport truck, the Belair vehicle struck the Cherokee transport truck. The Belair vehicle came to rest in Lane 2 after striking the Cherokee transport truck. 12. The Zurich transport truck was traveling in Lane 2 and struck the Belair vehicle in Lane 2. APPLICATIONS FOR ACCIDENT BENEFITS 13. Mr. Aguiar submitted an Application for Accident Benefits (OCF-1) to Belair, dated November 17, Ms. Aguiar submitted an Application for Accident Benefits (OCF-1) to Belair, dated December 8, In accordance with the provisions of the Statutory Accident Benefits Schedule, Belair paid statutory accident benefits to Mr. Aguiar and Ms. Aguiar. NOTIFICATIONS OF LOSS TRANSFER 16. On June 10, 2015, Belair sent Zurich Insurance a Notification of Loss Transfer. 17. On June 10, 2015, Belair sent AIG Insurance Company a Notification of Loss Transfer. 18. On January 15, 2016, Belair sent Cherokee Insurance a Notification of Loss Transfer. ARBITRATION AGREEMENT 19. The Arbitration Agreement setting out the scope of the preliminary issue has been agreed to by all parties.

5 5 LAW In the context of a loss transfer dispute pursuant to s. 275 of the Insurance Act, R.S.O c.i.8, Belair seeks indemnity for the statutory accident benefits it has paid to the claimant from the insurers of three heavy commercial vehicles involved in the subject motor vehicle accident. Loss transfer is a creature of statute created in 1990 at a time when there was an expansion of the availability of statutory accident benefits and a restriction to compensation available in tort with the introduction of a verbal threshold and deductible. This shift of compensation toward first party or no-fault benefits and away from the fault based tort system created an imbalance of payment with respect to insurers providing coverage to certain classes of vehicles such as motorcycles and heavy commercial vehicles. For example, the occupant of a motorcycle was more likely to sustain significant personal injury, whereas a heavy commercial vehicle was more likely to cause significant personal injury when involved in a collision. The loss transfer legislation created a scheme to balance or re-allocate the obligation to pay statutory accident benefits. It essentially enabled insurers of motorcycles to seek indemnity from a second party automobile insurer to the extent of liability on the part of the operator of the automobile, as determined by application of the Fault Determination Rules Ontario Regulation 283/95. It essentially enabled automobile insurers to seek indemnity from a second party insurer of a heavy commercial vehicle to the extent of liability on the part of the operator of the heavy commercial vehicle as determined by application of the Fault Determination Rules. The obvious purpose of this legislation was to re-allocate the losses between insurers of certain classes of vehicles so that the losses sustained by the insurers were similar to the losses that would have been paid by the insurers in a traditional tort system and in the absence of statutory accident benefits. Loss transfer legislation was created with the enactment of Section 275(1) of the Insurance Act R.S.O c.i.8 (the Act ), which provides that the Insurer responsible under subsection 268(2) for the payment of statutory accident benefits is entitled to indemnification from the insurers of such class of automobiles as may be named in the regulations involved in the incident from which responsibility to pay the statutory accident benefits arose.

6 6 Section 275(1) specifically states: Indemnification in certain cases 275. (1) The insurer responsible under subsection 268 (2) for the payment of statutory accident benefits to such classes of persons as may be named in the regulations is entitled, subject to such terms, conditions, provisions, exclusions and limits as may be prescribed, to indemnification in relation to such benefits paid by it from the insurers of such class or classes of automobiles as may be named in the regulations involved in the incident from which the responsibility to pay the statutory accident benefits arose. The Regulation identifying the class of vehicles to be subject to loss transfer was Ontario Regulation 664. Section 9 of the Regulation provides as follows: INDEMNIFICATION FOR STATUTORY ACCIDENT BENEFITS (SECTION 275 OF THE ACT) 9. (1) In this section, first party insurer means the insurer responsible under subsection 268 (2) of the Act for the payment of statutory accident benefits; ( assureur de première part ) heavy commercial vehicle means a commercial vehicle with a gross vehicle weight greater than 4,500 kilograms; ( véhicule utilitaire lourd ) motorcycle means a self-propelled vehicle with a seat or saddle for the use of the driver, steered by handlebars and designed to travel on not more than three wheels in contact with the ground, and includes a motor scooter and a motor assisted bicycle as defined in the Highway Traffic Act; ( motocyclette ) motorized snow vehicle means a motorized snow vehicle as defined in the Motorized Snow Vehicles Act; ( motoneige ) off-road vehicle means an off-road vehicle as defined in the Off-Road Vehicles Act; ( véhicule tout terrain ) second party insurer means an insurer required under section 275 of the Act to indemnify the first party insurer. ( assureur de deuxième part ) R.R.O. 1990, Reg. 664, s. 9 (1); O. Reg. 780/93, ss. 1, 6. (2) A second party insurer under a policy insuring any class of automobile other than motorcycles, off-road vehicles and motorized snow vehicles is obligated under section 275 of the Act to indemnify a first party insurer, (a) if the person receiving statutory accident benefits from the first party insurer is claiming them under a policy insuring a motorcycle and, (i) if the motorcycle was involved in the incident out of which the responsibility to pay statutory accident benefits arises, or (ii) if motorcycles and motorized snow vehicles are the only types of vehicle insured under the policy; or (b) if the person receiving statutory accident benefits from the first party insurer is claiming them under a policy insuring a motorized snow vehicle and,

7 7 (i) if the motorized snow vehicle was involved in the incident out of which the responsibility to pay statutory accident benefits arises, or (ii) if motorcycles and motorized snow vehicles are the only types of vehicle insured under the policy. R.R.O. 1990, Reg. 664, s. 9 (2); O. Reg. 780/93, s. 1. (3) A second party insurer under a policy insuring a heavy commercial vehicle is obligated under section 275 of the Act to indemnify a first party insurer unless the person receiving statutory accident benefits from the first party insurer is claiming them under a policy insuring a heavy commercial vehicle. R.R.O. 1990, Reg. 664, s. 9 (3); O. Reg. 780/93, s. 1. [emphasis mine] Indemnification under subsection 275(1) of the Insurance Act shall be made according to the respective degree of fault of each insurer s insured, as determined under the Fault Determination Rules as set out in Ontario Regulation 668/90 under the Insurance Act ("Fault Determination Rules"). Subsection 275(2) of the Insurance Act provides as follows: 275.(2) Indemnification under subsection (1) shall be made according to the respective degree of fault of each insurer s insured as determined under the fault determination rules. If the insurers are unable to agree with respect to indemnification under s.275 of the Insurance Act, the dispute shall be resolved through arbitration under the Arbitration Act, 1991, S.O. 1991, Chap 17. Subsection 275(3) of the Insurance Act provides as follows: 275(3) If the insurers are unable to agree with respect to indemnification under this section, the dispute shall be resolved through arbitration under the Arbitration Act. So in the case here, Belair seeks to be indemnified by Zurich, Cherokee and AIG for payment of statutory accident benefits paid to the claimants to the extent of liability imposed upon each operator of the heavy commercial vehicles by the Fault Determination Rules.

8 8 ANALYSIS AND FINDINGS To assist in the analysis, the police report describes the incident as follows: V 1, V 2, V 3, V 4 W/B R 1. V 1 initially L 3, V 1 entered L 2. D 1 lost control of V 1. V 1 struck median and bounced back across lanes. V 2 slowed to a stop in L 3. V 3 struck V 2. V 3 ran off roadway. V 2 then struck V 1. V 4 unable to stop struck V 2 in L 2. Belair submitted that it is entitled to indemnification from Zurich Insurance, Cherokee and AIG in respect of statutory accident benefits paid to Normano Aguiar and Lucia Aguiar on the basis of Section 275 of the Insurance Act and Section 11 of the Fault Determination Rules under Regulation 668 (pile up rule). As a result, Zurich, Cherokee and AIG are obliged to indemnify Belair at the rate of 100%, divided evenly amongst the three insurers for the heavy commercial vehicles. In the alternative, Belair submitted that it is entitled to indemnification from AIG in respect of statutory accident benefits paid to Normano Aguiar and Lucia Aguiar on the basis of Section 275 of the Insurance Act and Section 6(2) of the Fault Determination Rules under Regulation 668 (rear end rule). As a result, AIG is obliged to indemnify Belair at a rate of 100%. Zurich submitted that s.10(4) ought apply (lane change rule) with Cherokee obliged to indemnify Belair at a rate of 100%. In the alternative, Zurich has submitted that either s.5 requiring the application of the ordinary rules of negligence or s.11 (pile up rule) ought apply the latter, requiring each of the insurers of the heavy commercial vehicles being responsible for 1/3 of the 50% collective responsibility.

9 9 AIG submitted that s.11 (pile up rule) ought apply and like Zurich, maintained that each of the insurers of the heavy commercial vehicles involved be responsible for 1/3 of their 50% collective responsibility. Cherokee submitted that s.9 (chain reaction rule) ought apply with no fault being attributed to the lead vehicle insured by Cherokee. In the alternative s.11 (pile up rule) ought apply but like the other Respondents, maintains that Chrokee ought only be responsible for 1/3 of their 50% collective responsibility. On the evidence before me, I do not see s.6(2), often referred to as the rear end rule, as being applicable. It is only applicable to two vehicles travelling in the same direction and lane. As will be explained in greater detail, I am of the view that there were four vehicles meaningfully involved in the collisions herein and the individual impacts ought not be viewed in isolation when dealing with the issue as to whether a particular rule applies. It is only when a rule is determined to apply that requires the individual impacts to be considered where that should occur. In Personal Insurance Co. and Kingsway General Insurance, Ms. Chai was travelling as a passenger in a minivan on the highway. The driver of the minivan noticed some lights ahead of him in the right lane. The car in front of him applied its brakes, as did the driver of the minivan, causing the van to skid off the road and hit the guardrail on the left shoulder of the highway. An eighteen-wheel Freightliner truck collided with the left rear side of the minivan. The trailer portion of the truck then struck another vehicle. Counsel for the Applicant argued that Rule 11 was not applicable to the case. However, Arbitrator Novick found that the incident was best captured by Rule 11, which captured incidents involving at least three vehicles travelling in the same direction in adjacent lanes. Member Novick agreed with the Respondents submission that Rule 6 only captured part of the incident that transpired and should therefore not be applied in that case. I agree with such analysis to the extent that rules meant to involve two vehicles ought not be used when another rule is available capturing the number of vehicles actually meaningfully involved. On the evidence before me, I do not see s.10(4), often referred to as the lane change rule, as being applicable. The section relates to the involvement of two vehicles where, as I have found, there were four vehicles meaningfully involved on the present facts. The facts before me clearly involve more than a lane change and a resultant collision. Applying the rationale

10 10 of Personal essentially eliminates s.10(4) as being the rule best depicting the events of the subject incident. On the evidence before me, I do not see s.9, often referred to as the chain reaction rule, as being applicable. The section clearly states that it applies with respect to three or more vehicles travelling in the same lane and direction. On the facts before me, there were four vehicles meaningfully involved in the incident and they were not all travelling in the same lane. The Cherokee vehicle was originally travelling in lane 3 and while in the process of making a lane change into lane 2 lost control, striking the centre guardrail and bouncing to the left to a stopped position across all 3 lanes. The Cherokee vehicle was struck by the Belair vehicle in lane 3. The agreed upon facts confirm that the Zurich vehicle was travelling in lane 2. The police report diagram shows the collision between the Belair vehicle and the Zurich vehicle in lane 2. In my view, it is clear that this was not a straightforward chain reaction collision. Furthermore, it is clear that the four vehicles were not travelling in the same lane as required for s.9 to apply. Based on these findings, I must consider whether it is s.1, often referred to as the pile up rule, which is applicable, or whether it is the ordinary rules of negligence which ought be used by reason of s.5 of the Fault Determination Rules under Regulation 668 which reads: 5(1) If an incident is not described in any of these rules, the degree of fault of the insured shall be determined in accordance with the ordinary rules of law. I will first deal with whether Rule 11 (the pile up rule) ought apply. Rule 11 is contained in the section of rules under the heading RULES FOR AUTOMOBILES TRAVELING IN THE SAME DIRECTION AND IN ADJACENT LANES and reads: 11(1) This section applies with respect to an incident involving three or more automobiles that are travelling in the same direction and in adjacent lanes (a pile-up ) (2) For each collision between two automobiles involved in the pile up, the driver ofeach automobile is 50% at fault for the incident. Diagram

11 11 I am satisfied that Section 11 of the Fault Determination Rules applies if the following criteria are met: 1. The vehicles were involved in an incident ; 2. There were three or more vehicles; 3. The vehicles were travelling in the same direction; and, 4. The vehicles were travelling in adjacent lanes. (1) The Vehicles were Involved in an Incident Section 11(1) of the Fault Determination Rules indicates that this section applies with respect to an incident involving three or more automobiles that are travelling in the same direction and in adjacent lanes. Belair submitted that Section 11 of the Fault Determination Rules applies to this case because it captures the entire sequence of events that transpired, which was an incident for the purposes of the Fault Determination Rules. In Dominion of Canada General Insurance Co. v. Kingsway Insurance Company, 1999 Carswell Ont (upheld in an unreported decision of Justice Sachs of the Ontario Superior Court of Justice, January 11, 2000), Arbitrator Samis established the criteria for determining whether a vehicle was involved in the incident for the purposes of the Fault Determination Rules. The criteria are as follows:

12 12 (a) Whether there was contact between the vehicles; (b) The physical proximity of the vehicles; (c) The time interval between the relevant actions of the two vehicles; (d) The possibility of a causal relationship between the actions of one vehicle and subsequent actions of another; and, (e) Whether it is foreseeable that the actions of one vehicle might directly cause harm or injury to another vehicle and its occupants. As evidenced by the Motor Vehicle Accident Report, there was contact between the Belair vehicle and the AIG transport truck, the Belair vehicle and the Zurich transport truck, and the Belair vehicle and the Cherokee transport truck. As the Belair vehicle made contact with all three transport trucks, all four vehicles were involved in the incident and criteria (a) outlined in Dominion v. Kingsway is met. As evidenced by the Motor Vehicle Accident Report, the Belair vehicle was involved in collisions with all three transport trucks. The contact between the Belair vehicle and the three other vehicles occurred in a short period of time, there being no evidence to suggest there was any significant time gap between the collisions and the vehicles were close to one another. As such, all four vehicles were in close proximity to each other and criteria (b) outlined in Dominion v. Kingsway is met. As evidenced by the Motor Vehicle Accident Report, the Cherokee transport truck blocked three lanes of traffic. The Belair vehicle stopped to avoid colliding with the Cherokee transport truck, then the impacts occurred between the Belair vehicle and the AIG transport truck, Zurich transport truck and Cherokee transport truck. There is no suggestion that the events described did not occur in rapid succession. There is no evidence that there was a significant time gap between the multiple impacts. As such, criteria (c) outlined in Dominion v. Kingsway is met. As evidenced by the Motor Vehicle Accident Report, the Cherokee transport truck struck the median and straddled the three lanes of traffic. This resulted in the Belair vehicle stopping in Lane 3 to avoid striking the Cherokee transport truck. The Belair vehicle was then struck by the AIG transport truck and the Zurich transport truck, as these trucks were unable to stop.

13 13 Belair submits that there is a causal relationship between the actions of the Cherokee transport truck striking the median and straddling the three lanes of traffic and the subsequent actions of the Belair vehicle, the AIG transport truck and the Zurich transport truck. As such, the actions of the Cherokee transport truck affected the actions of the other vehicles. Based on the above, criteria (d) outlined in Dominion v. Kingsway is met. It is clear on the evidence before me that it was foreseeable that the actions of the Cherokee transport truck would directly affect the actions of the vehicles travelling behind the Cherokee transport truck. In addition, it was foreseeable that the Cherokee transport truck blocking three lanes of traffic might cause harm or injury to other vehicles and their occupants travelling behind the Cherokee transport truck. As such, criteria (e) outlined in Dominion v. Kingsway is met. I am satisfied all of the criteria set out in Dominion v. Kingsway with respect to vehicles being involved in an incident are met, the entire sequence of events that transpired between the Cherokee transport truck, Belair vehicle, AIG transport truck and Zurich transport truck constitute an incident for the purposes of Section 11 of the Fault Determination Rules. (3) The Vehicles were Travelling in the Same Direction As evidenced by the Motor Vehicle Accident Report, the Cherokee transport truck was travelling westbound on Highway 401, when it struck the median. The Belair vehicle was travelling westbound on Highway 401 and came to a stop in Lane 3, without striking the Cherokee transport truck. The AIG transport truck was travelling westbound on Highway 401 in Lane 3 and struck the Belair vehicle from behind. The Zurich transport truck was travelling westbound on Highway 401 and struck the Belair vehicle in Lane 2. In the Co-Operators General Insurance Co. v. Canadian General Insurance Co Carswell Ont 2560 (ONSC) (refused leave to appeal to ONCA December 15, 1998), Justice Lax found that the term travelling should be interpreted to refer to the direction of travel of the vehicle as opposed to whether or not it was in motion. I find that although the Belair vehicle was stopped when it was struck from behind by the AIG transport truck and then by the Zurich transport truck, based on Co-Operators it would be considered to be travelling.

14 14 As evidenced by the Motor Vehicle Accident Report, all four vehicles were travelling in the same direction, as they were travelling westbound on Highway 401 immediately prior to the collisions occurring. As a result, the accident meets the third condition with respect to Section 11 of the Fault Determination Rules. (4) The Vehicles were Travelling in Adjacent Lanes In The Personal Insurance Company v. Kingsway General Insurance Company 2008 Carswell Ont 11429, the issue was whether Section 11 of the Fault Determination Rules applied. There were two lanes of traffic, two vehicles were stopped in the right lane, a truck was straddling both lanes, and a minivan was partially in the left lane, when it was struck. It was found that that the vehicles were in adjacent lanes and that this scenario met the requirements of Section 11 of the Fault Determination Rules. The scenario in The Personal is similar to the subject case. As evidenced by the Motor Vehicle Accident, there were three lanes of traffic. The vehicles were in adjacent lanes, as the Cherokee transport truck was straddling the three lanes of traffic; the Belair vehicle was first in Lane 3 and was pushed into Lane 2 by the AIG transport truck; the AIG transport truck was in Lane 3 and came to a rest on the shoulder of the highway; and the Zurich transport truck was in Lane 2. Based on the above, the fourth criteria with respect to Section 11 of the Fault Determination Rules is met. I therefore find that all four criteria with respect to Section 11 of the Fault Determination Rules are met, Section 11 applies to this case. Liability and Percentage of Indemnity Belair submitted that it is entitled to 100% indemnity as result of the accident from the three commercial vehicle insurers. The three other insurers submitted that if s.11 was applicable, they ought each only be responsible for 1/3 of the only 50% of indemnity to which Belair would be entitled.

15 15 Belair relied on the case of State Farm Mutual Insurance Company v. Old Republic Insurance Company of Canada 2015 ONCA 699, in which a vehicle insured by State Farm Mutual Insurance Company ( State Farm ) was stopped, a second vehicle stopped behind the State Farm vehicle, and a transport truck insured by Old Republic Insurance Company ( Old Republic ), failed to stop, causing a chain reaction collision between the three vehicles. The Old Republic transport truck did not come in contact with the State Farm vehicle. The parties agreed that Section 9(4) of the Fault Determination Rules applied and the issue at Arbitration was whether State Farm could seek indemnity from Old Republic despite lack of contact between the vehicles. Rule 9 deals with automobiles travelling in the same direction and same lane unlike our situation where at least one vehicle was travelling in the adjacent lane and the lead vehicle straddling all three lanes. In the underlying Arbitration decision of State Farm v. Old Republic 2012 Carswell Ont 16458, Arbitrator Novick determined that, based on Section 9 of the Fault Determination Rules, despite the lack of contact between the State Farm vehicle and the Old Republic vehicle, Old Republic was responsible for indemnifying State Farm for benefits paid to the insured as the Old Republic heavy commercial vehicle caused the chain reaction. On appeal, and as reported at 2014 ONSC 3887, Justice Perrell affirmed the decision of Arbitrator Novick. On appeal and as reported at 2015 ONCA 699, the Ontario Court of Appeal reversed the decision of Justice Perrell. The Court of Appeal compared sections 9 and 11 of the Fault Determination Rules and determined the following: [69] The difficult problem posed by this case is that the obvious interpretation of s. 9(4), when read in isolation, is that "incident" should retain the same meaning in sub-clauses (a) and (b) as it carries in the main clause of s. 9(4) and in s. 9(1) that is, "incident" refers to the chain reaction. The problem, however, with that interpretation is that it does not appear to make sense when applied to s. 9(3) which is a parallel provision to s. 9(4). [70] Accordingly, applying the modern rule of statutory interpretation to s. 9(4), I conclude that the word incident as it appears in sub-clauses (a) and (b) of s. 9(4) can refer only to the collision identified in the particular sub-clause and that it cannot reasonably refer to the entire chain reaction. I reach this conclusion for six reasons. As one of the six reasons that the Court of Appeal came to the determinations regarding section 9 of the Fault Determination Rules, at paragraph 82, the Court of Appeal discussed Section 11(2) of the Fault Determination Rules as follows:

16 16 [82] Third, s. 11 also supports the conclusion that "incident" as it appears in subclauses (a) and (b) of ss. 9(3) and (4) can refer only to the collision identified in the particular sub-clause. [83] As indicated above, apart from s. 9, s. 11 is the only other provision of the FDRs that addresses an incident involving more than two automobiles. I repeat s. 11 for ease of reference. 11. (1) This section applies with respect to an incident involving three or more automobiles that are travelling in the same direction and in adjacent lanes (a "pileup"). (2) For each collision between two automobiles involved in the pile-up, the driver of each automobile is 50 per cent at fault for the incident. [84] Section 11(2) uses similar language to the language that appears in sub-clauses (a) and (b) of ss. 9(3) and (4). Like s. 9(3), s. 11(2) would produce absurd results over-indemnification of a first party insurer if incident as it appears in that section were interpreted to mean the pile-up and if one or more of the automobiles involved in the pile-up were entitled to indemnification under the motorcycle Loss Transfer provisions or if multiple heavy commercial vehicles were involved in the incident. [85] I therefore conclude that incident as it appears in s. 11(2) refers to each collision between two vehicles as those words appear in s. 11(2) and that it does not refer to the entire pile-up. This supports interpreting s. 9(4) as I have suggested. Incident as used in the FDRs means different things in different contexts (emphasis added). The Court of Appeal in State Farm v. Old Republic found that pursuant to Section 9 of the Fault Determination Rules, the fault was determined between each set of vehicles and indemnity was based on each collision between two vehicles. Belair submitted that based on a plain reading of Section 11(2) of the Fault Determination Rules, and based on the State Farm v. Old Republic case, each collision between two vehicles must be examined independently, with 50% liability apportioned to each party. Belair submitted that the diagram in Section 11(2) of the Fault Determination Rules clearly contemplates that where a vehicle collides with more than one vehicle, there will be an apportionment of 50% to each party in each collision. Belair acknowledged that the diagram is for illustrative purposes only and is not determinative, however, the diagram supports the Court of Appeal s determination that each collision between two vehicles must be examined independently, with 50% liability apportioned to each party. The Belair vehicle was in a collision with three heavy commercial vehicles. In each collision, 50% liability is apportioned to Zurich, AIG and Cherokee respectively. Belair has submitted

17 17 that applying the Court of Appeal s rationale in State Farm v. Old Republic, this would result in 150% liability against the three heavy commercial vehicles (50% each). It was acknowledged by Belair and was confirmed by the Court of Appeal at paragraph 77 of State Farm v. Old Republic, that the legislature did not intend for one insurer to be indemnified by other insurers for 150% of the statutory accident benefits paid to an insured. Belair acknowledges that the maximum indemnity available under any Fault Determination Rule is 100%. Belair maintained that the Court of Appeal in State Farm v. Old Republic did not contemplate an incident where there were multiple collisions between an automobile and several heavy commercial vehicles. Nor can the Court of Appeal s decision, according to Belair, stand for the proposition that because the legislature did not intend for one insurer to be indemnified by other insurers for 150% of the statutory accident benefits paid to an insured, that Belair should be indemnified for less than 100% of the benefits paid to its insureds as the Belair vehicle had the misfortune of colliding with three heavy commercial vehicles as opposed to only two heavy commercial vehicles. Belair maintained that if the Belair vehicle collided with only two heavy commercial vehicles, there would be no dispute that Belair would be entitled to 50% indemnity from each collision. The Court of Appeal acknowledged and quoted with approval from Jevco Insurance Co. v. Canadian General Insurance Co. [1993] O.J. No. 1774, that the loss transfer regime is meant to provide an "expedient and summary method" of reimbursement. The Court of Appeal also acknowledged and quoted from Jevco Insurance Co. v. York Fire & Casualty Co. [1996] O.J. No. 646 (C.A.), that the "purpose of the legislation is to spread the load among insurers in a gross and somewhat arbitrary fashion, favouring expedition and economy over finite exactitude." Based on Section 11(2) of the Fault Determination Rules, Belair submitted that it is entitled to 100% indemnity, to be divided evenly amongst the insurers for the three heavy commercial vehicles that struck the Belair vehicle. According to them, this result accords with the Court of Appeal s determination in State Farm v. Old Republic, and also results in an "expedient and summary method" of reimbursement that accords with the purpose of the loss transfer legislation.

18 18 I do not agree with the submissions of Belair with respect to the apportionment of fault on application of s.11. I am of the view that the apportionment suggested by Zurich, AIG and Cherokee to be that resulting from application of s.11 is the proper approach to be used. Based on a plain reading of Rule 11, 50% fault is attributable to each of the AIG, Zurich, Cherokee and Belair insured drivers for each collision between two automobiles. As such, when determining fault for the three separate collisions with the Belair vehicle, 150% fault is collectively attributed to the Cherokee, AIG and Zurich insured drivers (50% for each collision), and a total of 150% fault is attributed to the Belair driver (50% for each collision). Applying the plain language of Rule 11 and following it to its logical extreme (without any common sense adjustment), would lead to the absurd result that Belair is entitled to 150% indemnity even though its driver is also 150% at fault for the collisions. This does not make sense. The fault attributed by the rule to the driver of the Belair vehicle must be considered. If a separate 50% measure of fault is apportioned to each of the drivers involved in each of the collisions in a pile-up pursuant to Rule 11, then it would be necessary to also apportion damages to each of the collisions (i.e. what SABS benefits were paid or are payable as a result of each separate collision). However, rather than engaging in an impossible apportionment exercise and creative mathematics, a straightforward and logical approach to Rule 11 should be adopted, in keeping with the Ontario Court of Appeal s direction that loss transfer should favour expedition and economy over finite exactitude. As suggested by the language of Rule 11, I am satisfied that fault for the incident should be shared based on an equal apportionment of fault for each collision involving the applicant s insured vehicle. In this case, there were three collisions involving the Belair vehicle, resulting in six equal shares of fault to be apportioned, totaling 100%. Therefore, only a total of 50% fault should be attributable to the Cherokee, AIG and Zurich insured drivers collectively (16.67% each) and 50% fault (16.67% x 3) should be attributable to the Belair insured driver, for the purpose of loss transfer indemnity. Another way of looking at it would be to say that each of the three collisions resulted in 1/3 of the injuries and responsible for 1/3 of the accident benefits paid to or on behalf of the claimant. Attributing 50% of fault to each driver in each of the three collisions would make each insurer of the heavy commercial vehicles responsible for 1/6 th of the benefits paid or 16.67%.

19 19 In reaching this conclusion, I have considered the fact that the application of s.11 as proposed by the insurers of the heavy commercial vehicles, may well impose responsibility upon the driver of a vehicle, such as the driver of the Belair vehicle, where arguably no responsibility might attach with application of the ordinary rules of negligence. The driver of the Belair vehicle had come to a safe stop before being struck from the rear and pushed into the Cherokee truck. Similarly, it is conceivable that any one of the drivers of the vehicles in the middle of a chain as depicted in the diagram accompanying Rule 11 may have come to a safe stop before being hit by other vehicles but must still bear 50% responsibility for each impact. In my view, such inequities are more than made up by the costs savings to the insurance industry and in keeping with the principle from Jevco Insurance Co. v. Canadian General Insurance Co., supra, that the loss transfer regime is meant to provide an "expedient and summary method" of reimbursement and the principle in Jevco Insurance Co. v. York Fire & Casualty Co., supra, that the "purpose of the legislation is to spread the load among insurers in a gross and somewhat arbitrary fashion, favouring expedition and economy over finite exactitude." Application of s.11 avoids the significant costs of an arbitration to determine fault according to the ordinary rules of negligence in a multi-party dispute which would involve numerous witnesses and oftentimes expensive involvement of forensic and human factor engineers. There may be some inequity in the application of s.11 but an insurer such as Belair, who may be affected negatively today, may be in a position tomorrow on different facts to benefit from its application. Upon these principles, keeping in mind that the purpose of the legislation is to spread the load among the insurers in a gross and somewhat arbitrary fashion, favouring expedition and economy over finite exactitude, I cannot help but find that Rule 11 of the Fault Determination Rules applies to this situation and results in a situation where of Zurich, Cherokee and AIG are responsible for 1/3 of the 50% collective share of fault upon them. For ease of calculation, this represents a payment 16.67% by each of the three insurers of the heavy commercial vehicles. It would be unfair to ignore the 50% responsibility placed on the driver of the Belair vehicle for each of the three collisions in which the vehicle was involved.

20 20 ORDER I hereby order that: 1. Zurich, Cherokee and AIG each indemnify 16.67% of those payments, which are subject to indemnification, made to or on behalf of the claimants by Belair together with interest calculated in accordance with the Courts of Justice Act. 2. Belair pay to Zurich, Cherokee and AIG their costs of this arbitration on a partial indemnity basis. If there have been offers to settle I will reconsider the costs disposition. 3. Belair pay the Arbitrator s costs. DATED at TORONTO this 2nd ) day of May, ) KENNETH J. BIALKOWSKI Arbitrator