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At our weekly meeting today, Michael Kryworuk discussed the Court of Appeal’s decision in Continental Casualty Company v. Chubb Insurance Company of Canada, 2022 ONCA 188. The appeal involved a priority dispute between insurers regarding Statutory Accident Benefits Schedule (SABS) coverage, where the claimant had basic mandatory SABS coverage under one policy and both basic mandatory and optional enhanced SABS coverage under another policy.

Background

The claimant was the owner and CEO of a forestry products company and he suffered catastrophic injuries in 2015 after he was struck by a motor vehicle while he was jogging near his cottage.  The claimant had basic mandatory SABS coverage under his personal automobile insurance issued by the appellant, Chubb Insurance Company of Canada (Chubb).

In addition, his company had purchased optional enhanced SABS coverage under a fleet policy that was issued by the respondent, Continental Casualty Company (Continental).

Following the accident, the claimant approached Continental for coverage who denied that its policy provided optional enhanced coverage to the claimant and in fact denied that the claimant had any coverage under their policy.

As such, the claimant claimed basic mandatory SABS from Chubb as his personal automobile insurer. Chubb then initiated a priority dispute claiming Continental was liable to pay SABS to the claimant.

Under section 268 of the Insurance Act, if a SABS claimant is a named insured on more than one policy, the claimant can elect and choose from which insurer to claim SABS.

Arbitration Decision

In 2018, the arbitrator found that the claimant was both a named insured under the personal Chubb policy and a “deemed named insured” under the Continental fleet policy because the claimant met the “regular use” requirements under s. 3(7)f of the SABS Schedule (the Schedule). This section of the SABS Schedule expands the scope of the named insureds in the case of a “company car” so long as that vehicle is being made available for the individual’s regular use by the corporation.

Therefore, the claimant was entitled to elect which insurer to claim SABS.

However, the arbitrator also found that because Continental included optional enhanced SABS benefits, Continental was required by s. 28 of the SABS Schedule to issue to its insured an Ontario Policy Change Form 47 (OPCF 47).

An OPCF 47 allows the insured person to claim both mandatory accident benefits and optional accident benefits under any policy which offers optional enhanced benefits. The insurer providing the optional enhanced benefits cannot deny benefits on the basis that the priority of payment rules set out in s. 268 of the Insurance Act provide that another insurer is liable to pay the mandatory accident benefits amount.

The arbitrator concluded that regardless of the priority rules under s. 268 of the Insurance Act, the claimant was entitled to pursue optional benefit coverage and basic mandatory SABS benefits from Continental.

Continental then appeal the arbitrator’s finding that the claimant was a deemed insured under its company car policy.

Superior Court Appeal

On appeal, the Superior Court held that the finding that the claimant met the regular use requirements under the Schedule as a deemed named insured on the Continental fleet policy was unreasonable.

Although the claimant was a company executive and had access to and control over the company vehicles, he had never used any of these vehicles before the accident.

As such the claimant was not a deemed named insured on the Continental policy and Chubb was the priority insurer as per s. 268 of the Insurance Act.

Nevertheless, the Court found that Continental was obliged to pay both the basic mandatory SABS and optional enhanced SABS to the claimant under the terms of the OPCF 47.

However, while Continental was responsible for both the mandatory basic SABS benefits and the optional enhanced benefits, the Court, citing the earlier arbitration decision of Echelon General Insurance Company v. Co-operators General Insurance Company, 2015 CarswellOnt 20908, ordered that Continental was entitled to reimbursement from Chubb for the cost of the basic mandatory SABS benefit amount.

Court of Appeal

Following the Superior Court decision, Chubb appealed and raised two issues:

1. Did the Superior Court err in finding the claimant did not meet the regular use Requirement and was not a deemed named insured under the Continental policy?
2. Did the Superior Court err in finding that Chubb was obliged to indemnify Continental for the basic mandatory SABS payments Continental was obliged to pay the claimant under the OPCF 47?

Analysis

Issue 1: Was Claimant a Deemed Named Insured under Continental Policy?

The Court of Appeal began by stating the relevant standard of review was the appellate standard of review of palpable and overriding error. The Court of Appeal disposed of this issue rather easily as they were unable to reconcile how availability for regular use of the company vehicles, as required by s. 3(7)f of the Schedule, could be imputed in the absence of any use of the company car by the claimant.

The Court pointed to language in the arbitration decision of Dominion v Federated which specified that regular use encompasses “periodic, routine, ordinary or general use” as opposed to “irregular, or out the ordinary or special” use.

As such, the Court found the arbitrator made a palpable and overriding error in finding that the claimant qualified as a deemed named insurer for the company car despite never using the vehicle at any point and upheld the finding of the Superior Court.

Issue 2: Was Chubb obligated to reimburse Continental for the amount of the basic mandatory SABS Continental had to pay?

The Court of Appeal began by restating the purpose and legislative history of OPCF 47. Subject to the requirement that the person does not claim SABS under another policy, OPCF 47 allows a person with optional enhanced SABS coverage under a motor vehicle insurance liability policy to claim SABS under that policy even though the s. 268 priority of payment rules may require the person to claim SABS under another policy.

Turning back to the decisions below, the Arbitrator found that Continental was both the s. 268 priority insurer and the OPCF 47 optional enhanced benefits insurer, so it had to pay in any respect.

However, with the Superior Court’s reversal and finding that the claimant was not a deemed named insured, Chubb became the priority insurer under s. 268 of the Insurance Act. Continental, however, was bound by the terms of the OPCF 47 and the claimant was entitled to seek basic mandatory and optional enhanced benefits from Continental, with Chubb obligated to reimburse Continental for the amount of the basic SABS coverage amount.

On the appeal, Continental argued that the Superior Court had reached the correct decision. However, the Court of Appeal rejected this position for four reasons.

First, the language of OPCF 47 was clear. The optional enhanced SABS insurer has to pay both the mandatory basic and optional enhanced SABS benefits.

Second, contrary to the arbitration decision and an earlier decision, OPCF 47 displaces the s. 268 priority rules. The OPCF was officially adopted in 1996 through the rarely used power under s. 227(2) of the Insurance Act which allows the Chief Executive Officer of the Financial Services Commission of Ontario (FSCO) to provide for policy endorsements that are inconsistent with the terms of the Insurance Act but are still nonetheless and of force and effect.

The Court also pointed to two FSCO Bulletins, Bulletins A-17/96 and A‑10/97, which supported the interpretation that the OPCF 47 insurer undertakes the obligation to pay both the basic mandatory and optional enhanced SABS benefits.

Third, there was no language in the priority rules set out in s. 268 of the Insurance Act which suggested an insurer can be liable for only a portion of the SABS payable to a particular claimant or that SABS obligations can be bifurcated.

Fourth, the Court pointed to two other arbitration decisions, Jevco Insurance Company v. Chieftain Insurance Company (Arbitrator Samworth – March 11, 2016) and Co-operators General Insurance Company v. Certas Home & Auto Insurance Company (Arbitrator Cooper – April 2019), which supported the conclusion that OPCF 47 displaces the s. 268 priority rules.

Decision

As such, the Court of Appeal allowed the appeal in part. The Court upheld the finding that the claimant was not a deemed named insured on the Continental policy because he did not satisfy the required use provisions. However, the Court set aside the portions of the Superior Court order that Chubb was required to reimburse Continental for the costs of the basic mandatory SABS benefits paid to the claimant.

Takeaway

This decision stands for the proposition that the “regular use” requirements in s. 3(7)f of SABS necessitate some actual use of a vehicle that is beyond irregular or special use.

It also stands for the proposition that the presence of an OPCF 47 can supersede the normal priority rules in s. 268 of the Insurance Act and also that SABS payment obligations cannot be bifurcated amongst insurers.