Aviva and Unifund (Sandeep Gill) - Preliminary Issue Hearing Award and Reasons, dated January 13, 2020

IN THE MATTER OF the Insurance Act, R.S.O. 1990, c.I.18, as amended

AND IN THE MATTER OF the Arbitration Act, 1991, S.O. 1991, c. 17, as amended

AND IN THE MATTER OF an Arbitration

Between:

AVIVA INSURANCE COMPANY OF CANADA

Applicant

and

UNIFUND ASSURANCE COMPANY

Respondent

Preliminary Issue Hearing Award and Reasons

1) This Arbitration pertains to a Priority Dispute between the parties in respect of an Accident Benefits claim of Sandeep Gill (Date of Birth: July 18, 1983) for a motor vehicle accident of April 26, 2018.

2) I, Joseph Sullivan, have been appointed Arbitrator by virtue of an Arbitration Agreement dated November 11, 2019. This Arbitration is held pursuant to the Arbitration Act S.O. 1991, c. 17.

Arbitration Issues (set out in Arbitration Agreement as to Priority)

3) The main Arbitration issues are as follows as set out by the parties in the Arbitration Agreement that deal with the substantive priority dispute are:

(i) Is Unifund liable to pay statutory accident benefits to Sandeep Gill in accordance with section 268(2) of the Insurance Act? The parties agree that Unifund is liable to pay Accident Benefits to Sandeep Gill if the Arbitration is not time barred pursuant to section 3 of Ont. Reg. 283/95 and if Sandeep Gill was, at the material time, dependent upon his father Mehar Gill, within the meaning of section 3(7)(b) of the Statutory Accident Benefits Schedule – Effective September 1, 2010, as amended. The parties agree that a Preliminary Issue Hearing will be held in writing to address whether the Arbitration is time barred.

(ii) If it is ultimately determined that Unifund is obligated to pay Statutory Accident Benefits to Sandeep Gill, what is the amount that is due from Unifund to Aviva?

(iii) If there is an amount due from Unifund to Aviva, is there interest due to Aviva and, if so, what is the quantum of that interest?

Preliminary Issue

4) Upon consent, the parties agree that a Preliminary Issue Hearing will be held in writing to address whether the Arbitration is time barred. If the Arbitration is time barred, there is no need to conduct an Arbitration Hearing on whether Sandeep Gill was “dependent” upon his father, Mehar Gill.

Issues for Determination – Preliminary Issue Hearing:

5) The issues for determination in the Preliminary Issue Hearing are as follows:

(a) Does section 3, O. Reg. 283/95 apply to Aviva because Aviva, it is alleged, is a “second tier” insurer?

(b) In the event Issue (a) is answered in the affirmative, was 90 days sufficient time to enable Aviva to determine whether another insurer (Unifund) is liable to pay benefits (section 3(2) O. Reg. 283/95)?

(c) In the event Issue (b) is answered in the negative, did Aviva make the reasonable investigations necessary to determine if another insurer was liable within the 90 day period (section 3(2) O. Reg. 283/95)?

6) If I find that section 3 O. Reg. 283/95 does not apply to Aviva, there is no need to address Issues (b) and (c).

7) If Aviva’s claim is not time barred, then the parties will have a subsequent Arbitration on the dependency issue and issues (ii) and (iii) as set out in the Arbitration Agreement (see paragraph 3 above).

8) Counsel:

(i) Kevin Griffiths, Evans Philp LLP

Counsel for the Applicant, Aviva Insurance Company of Canada

(ii) Ellie Persichilli, Beard Winter LLP

Counsel for the Respondent, Unifund Assurance Company

Documents Submitted on Preliminary Issue Hearing

9) The following documents were submitted to me:

(a) Arbitration Agreement, dated November 11, 2019.

(b) Agreed Statement of Facts (ASF), appended to these Reasons as Schedule “A” (21 paragraphs, executed by counsel November 4 and 8, 2019 with 2 tabs of inter-company correspondence).

(c) Aviva’s Initial Submissions re: Preliminary Hearing (45 paragraphs, dated November 12, 2019) with 9 tabs of caselaw and legislation.

(d) Unifund’s Preliminary Issue Hearing Responding Submissions (received December 10, 2019, 54 paragraphs with 3 tabs of caselaw). Aviva’s counsel advised December 24, 2019 that it would not be filing Reply Submissions.

10) Result – Preliminary Issue Hearing

(a) I find section 3(1), O. Reg. 283/95 does not apply to Aviva as a “second tier” insurer.

(b) There is no need to address whether 90 days was a sufficient time to enable Aviva to determine whether another insurer is liable to pay benefits as Aviva was not obliged to abide the 90 day notice period.

(c) Similarly, there is no need to address the reasonableness of Aviva’s investigations within the 90 day time period as Aviva was not obliged to abide the 90 day notice period.

11) Evidence

As indicated, I have appended the ASF to these Reasons, but I can provide some highlights.

(This is not intended to be an exhaustive list.):

(a) Sandeep Gill (DOB: July 18, 1983) was involved in a serious single vehicle accident in the City of Vaughan, Ontario.

(b) Sandeep Gill was an occupant of an Aviva insured vehicle.

(c) Sandeep Gill was seriously injured.

(d) Sandeep Gill retained legal counsel who submitted an Application for Accident Benefits (hereinafter referred to as an OCF-1) on Sandeep Gill’s behalf to the Motor Vehicle Accident Claims Fund (hereinafter referred to as “MVACF”). ClaimsPro was retained by MVACF to adjust Sandeep Gill’s claims for accident benefits. Aviva received on August 14, 2018 Notice from MVACF that Aviva was responsible for paying Sandeep Gill’s Accident Benefits on the basis that Sandeep Gill was an occupant of a vehicle insured by Aviva at the time of the accident.

(e) Importantly, note that Aviva had received the properly executed OCF-1 as aforementioned on August 14, 2018.

(f) From September 5, 2018 – September 28, 2018, Aviva undertook investigation (as outlined in the ASF, paragraphs 8-13).

(g) On October 2, 2018, Aviva accepts priority from MVACF.

(h) Between October 8, 2018 – October 15, 2018, Aviva attempts to arrange an Examination Under Oath (EUO) which is finally booked for November 28, 2018 (the earliest date Sandeep Gill’s counsel was available (paragraphs 15 -17, ASF).

(i) November 13, 2018 would be 90 days from the time that Aviva received the OCF-1 from MVACF.

(j) On November 28, 2018, Aviva conducts an EUO of Sandeep Gill where testimony is given that Sandeep resides with his father Mehar Gill.

(k) On December 6, 2018, Aviva discovers that Mehar Gill owns a vehicle insured with Unifund, the Respondent.

(l) On December 6, 2018, Aviva sends a Notice to Unifund demanding Unifund take over paying Accident Benefits. This is 113 days after Aviva received the OCF-1 from MVACF (August 14, 2018).

Position of the Parties

Aviva

12) Aviva takes the position that the insurer first to receive a completed OCF-1 is a first tier insurer and it believes that this would be MVACF.

13) Aviva contends that it would be the second tier insurer as it was put on notice by MVACF and Unifund would be a third tier insurer as it was put on notice up the ladder by Aviva.

14) Aviva rely upon two Private Arbitration Decisions:

(a) Wawanesa and Peel

(b) Certas v. Security National

15) Aviva believes that the 90 day timeline set out in section 3, O.Reg.283/95 has no application to second and third tier insurers, but that this regulation only applies to first tier insurers when they are notifying second tier insurers. Arbitrator Lee Samis in Wawanesa felt that imposing a 90 day deadline second tier (or later tiered insurers) is completely unsuitable as these second and third tier insurers lack the basic access to information that might be critical to determine who is the ultimately responsible insurer and that an injustice would arise resulting in the payment of benefits by the wrong insurer.

16) As to Issues (b), (c) in this Preliminary Issue Hearing (paragraph 5 above), Aviva correctly points out that these need only be addressed in the event that it is determined that Aviva was obligated to provide notice to Unifund within 90 days pursuant to section 3(1) O. Reg. 283/95.

17) It is not necessary for me to address these issues in view of my findings as above-noted.

Unifund

18) Unifund takes the position that Aviva failed to give Unifund notice within the 90 day timeframe outlined in section 3 (1) O.Reg. 283/95, but rather gave notice on December 6, 2018, some 113 days after it received the completed OCF-1 from MVACF.

19) It is submitted that Aviva is precluded from proceeding with a Priority Arbitration as a result.

20) Unifund submits that section 3(1) makes no reference to the insurer having to be the “first insurer” or “first tier insurer” to receive an Application for Benefits and points out that section 2(1) does refer to “the first insurer”. It is submitted that a strict reading of section 3 ought to be implied unless otherwise clearly stipulated by the legislature.

21) Moreover, Unifund argues that the legislature did choose to exclude one class of insurers from the obligation under section 3 and that is MVACF and this is set out in section 3(2.1).

22) Unifund submits that Aviva would be the first tier insurer under Arbitrator Samis’ Wawanesa reasoning as Aviva was the insurer who was administering the benefits of Sandeep Gill at the time Unifund was put on notice.

23) As a consequence, Unifund could only be considered the second tier insurer.

24) In asserting that Aviva is the tier 1 insurer, Unifund contends that Aviva had the ability to obtain the necessary information to investigate the issue of priority and the concerns considered by Arbitrator Samis have no application to Aviva.

25) Unifund relies upon Co-operators v. Intact which is a Decision of Arbitrator Shari Novick which attempts to tie in section 3 and section 10 of O.Reg. 283/95.

26) It is submitted that the Notice provided by Aviva was not a Notice pursuant to section 10(1) of the Regulation as there was no unresolved priority dispute as between Aviva and the Fund at the time the Notice was provided to Unifund as Aviva had already accepted responsibility for the claims of Sandeep Gill.

27) It is submitted that the Notice given to Unifund was a section 3 Notice and not a section 10 Notice and therefore any analysis of Section 10 has no application to the facts of this dispute.

Analysis

28) As indicated, I find that Aviva, as the “second tier insurer”, was under no obligation to provide the Notice contemplated under section 3, O. Reg. 283/95.

29) I agree with the analysis of Arbitrator Lee Samis in Wawanesa and supported by Arbitrator Kenneth Bialkowski in Certas v. Security National.

30) In Wawanesa, Arbitrator Samis states on page 2 of his Reasons,

“For the sake of clarity in these Reasons, I refer to the insurer that has received the first completed Application and who is administering the benefits as the ‘first tier insurer’. I refer to an insurer identified by the first tier insurer as potentially liable, and against whom notice is given for reimbursement claims, as a ‘second tier insurer’.

This case raises the procedural problems which arise when a second tier insurer identifies yet another insurer that is even higher ranking (in accordance with the Insurance Act) than the second tier insurer. In those cases, the second tier insurer logically seeks to involve the third tier insurer and claim reimbursement from that company.

The procedural question which this raises in this instance is whether or not the second tier insurer must meet the same procedural hurdles as the first tier insurer must meet when initially giving notice to the other insurers. The Regulation requires the first tier insurer who has received the completed Application to notify other insurers within 90 days. In practice, it is common for a prescribed form to be used for this purpose. What is not clear is whether or not a second tier insurer, intending to pursue other insurers, must also provide notice within 90 days as is contemplated as the obligation of the first tier insurer.

I conclude that the second tier insurer does not have that obligation.”

31) I pause here to point out that on the facts of the case before me, MVACF would be the first tier insurer, Aviva would be the second tier insurer, and Unifund would be the third tier insurer.

32) I agree with Arbitrator Samis’ comments that the second tier insurer is disadvantaged by the fact that it does not have the effective tools the first tier insurer has to investigate possible priority issues.

33) In this regard, Arbitrator Samis states, “The second tier insurer does not enjoy the benefit of SABS sections 31 and 32 that allows that SABS insurer to obtain information from the claimant that might assist in identifying higher ranking insurers that should be shouldering the burden of payment.”

34) Arbitrator Samis continues, “While meeting the 90 day deadline might be challenging for the first tier insurer, that standard of response seems completely unsuitable when cast over an insurer that lacks the most basic access to information that might be critical to impleading the ultimately responsible insurer.”

35) Correctly, in my view, Arbitrator Samis concludes that applying the section 3 provisions to second tier insurers would give rise to an injustice, ultimately resulting in the payment of benefits by the wrong insurer.

36) Like Arbitrator Samis in Wawanesa, I think it is unnecessary for me to address the application of section 3(2) of the Regulation in view of my aforementioned findings.

37) Moving on to the Certas Decision, I note that Arbitrator Kenneth Bialkowski also agrees with the Wawanesa reasoning and Decision.

38) As noted in Aviva’s submissions, there is also support in the Arbitration Decision of Arbitrator Shari Novick in Co-operators General Insurance Company v. Intact Insurance Company and Northbridge General Insurance Corporation. The facts of Co-operators are different, but Arbitrator Novick found that once a valid 90 day notice has been given (by a first tier insurer), it does not matter when other insurers are brought in.

39) I do not accept Unifund’s submission in the case before me that it is assisted by the Wawanesa Decision where Unifund alleges that Aviva is the first tier insurer because Aviva was paying benefits when Unifund was put on notice. As indicated, I have found that there are 3 tiers of insurers on these facts.

40) Having commented on the above-noted cases, I accept Aviva’s position that a second tier insurer lacks the access to information and critical tools to determine if there is another insurer in higher priority (in this case, Unifund).

41) Aviva clearly was in a higher priority than MVACF and Aviva took responsibility for the claim on October 2, 2018.

42) Although it is unnecessary for me to address Issues (b) and (c) for the Preliminary Issue Arbitration, it seems Aviva was alive to the possibility that there may be another insurer in higher priority in September 2018.

43) An important tool in these cases is the EUO under section 33 (SABS O.Reg. 34/10 as amended) because it is an “under oath” opportunity for an insurer to gather information. Aviva had no right to demand an EUO until it assumed priority from MVACF on October 2, 2018.

44) When the EUO did in fact occur November 28, 2018, it did reveal information to lead to the possibility that Unifund might be in higher priority. The “tier” analysis in Arbitration Samis’ Wawanesa Decision is necessary to protect “lower rung” insurers (like Aviva here) from having to pay Accident Benefits because they lacked the regulatory rights to acquire information (under sections 32 and 33 of the SABS) belonging to the first tier insurer (MVACF in this case).

45) No cases were submitted to me disagreeing with the Wawanesa “tier” analysis.

Award – Preliminary Issue Hearing

46) I find as follows.

(a) I find section 3(1), O. Reg. 283/95 does not apply to Aviva as a “second tier” insurer.

(b) There is no need to address whether 90 days was a sufficient time to enable Aviva to determine whether another insurer is liable to pay benefits as Aviva was not obliged to abide the 90 day notice period.

(c) Similarly, there is no need to address the reasonableness of Aviva’s investigations within the 90 day time period as Aviva was not obliged to abide the 90 day notice period.

Costs

47) Under paragraphs 2-4 of the Arbitration Agreement, I am given discretion with regard to costs.

48) First dealing with costs between the parties. Paragraph 2 of the Arbitration Agreement reads as follows: “Legal costs shall be as determined by the Arbitrator, taking into account the success of the parties, any Offers to Settle, the conduct of the proceedings, and the principles generally applied in litigation before the Courts of Ontario.”

49) Aviva is successful in this Preliminary Issue Hearing and therefore costs should follow the event between the parties. Both counsel provided able argument and were cooperative throughout. As this is a Preliminary Issue Hearing on a point of law, I am presuming that there are no Offers to Settle between the parties. As indicated, costs will follow the event and Unifund shall pay Aviva’s costs, which I assume the parties can agree upon. If there is other material from the parties for me to consider with regard to a Preliminary Issue Costs Award, they may submit it within 30 days of the date of these Reasons.

50) Insofar as the costs of the Arbitrator, this is dealt with in paragraphs 3 and 4 of the Arbitration Agreement.

51) I order Unifund to pay the Arbitrator’s costs of the Preliminary Issue Arbitration fixed at $6,500.00 plus HST. There are no disbursements of the Arbitrator.

Further Activity

52) Aviva may therefore proceed with its Priority Arbitration under O.Reg. 283/95. Counsel may contact me by email to schedule a Pre-Hearing to deal with the balance of the Arbitration issues set out in paragraph 3 of these Reasons.

53) I presume the parties can work out, between themselves, documentary disclosure, but this is something we can deal with at the next Pre-Hearing.

I thank counsel for their fine assistance in this matter.

Dated: January 13, 2020

Arbitrator Joseph J. Sullivan

In the presence of:

Witness: Zola Bottenfield, Clerk