Priority Dispute: Parents Not Dependants of Children

By Micah Pirk O’Connell, Student-at-Law

The case of The Economical Insurance Group v. Desjardins Insurance, 2020 ONSC 1363, concerned a priority dispute between Economical and Desjardins regarding an elderly couple who suffered catastrophic injuries as pedestrians when they were hit by a motor vehicle. Economical sought to set aside the decision of an arbitrator who found Economical, not Desjardins, was liable to pay statutory accident benefits (SABS).

Background

The claimants were neither licensed drivers, nor did they own an automobile. However, as they resided with their daughter and son-in-law who held policies with Desjardins, the issue before the arbitrator was whether or not they were insured by Desjardins for the purposes of the SABS. This issue turned on whether or not they were “dependents of the named insured” pursuant to Ontario Regulation 34/10.

The sole determination to be made in this case was whether or not the claimants were principally dependent on their children at the time of the accident.

If they were not principally dependent on their children, then Economical, as the insurer of the vehicle that struck them, would be responsible to pay benefits.

Standard of Review

As established through the common law, the standard of review of an arbitrator’s decision in priority disputes is one of reasonableness pursuant to Dunsmuir v. New Brunswick, 2008 SCC 9. At the end of 2019, the Supreme Court of Canada significantly revised the Dunsmuir framework in Canada (Minister of Citizenship and Immigration) v. Vavilov, 2019 SCC 65.

Under the new scheme, there is a significant difference between judicial review and a right of appeal.

An appeal attracts the standard set out in Housen v. Nikolaisen, 2002 SCC 33, whereby pure questions of law attract the correctness standard and findings of fact are entitled to deference. In other words, when an arbitrator’s decision is based on a pure legal analysis, that analysis must be correct; where it is based on findings of fact, the decision attracts deference from appellate courts. Questions of mixed fact and law will only be overturned if there is palpable and overriding error.

Justice MacLeod stated that it remains to be seen whether the new framework should apply to priority disputes. Both parties agreed that the issues were of mixed fact and law, and entitled to deference. Justice MacLeod followed a reasonableness standard of review.

Arbitration Decision

The important facts in this case were as follows. The claimants moved from China and did not speak English or French. They had pensions from China, which could not be accessed while they were in Canada. While they had some funds when they moved, the majority of the money was given to their daughter in order to put a down payment on a house. What money the claimants did have was given to them by their daughter and son-in-law in exchange for providing childcare.

This was an important consideration. The claimants were not dependent on their children for care; on the contrary, they came to Canada with the express purpose of providing childcare and household services to their children. The money they received for providing these services was actually deposited into their bank account and was claimed as income tax.

The arbitrator found that through these payments, combined with savings and federal and provincial GST/HST payments, 81% of the claimant’s financial needs were met.

The arbitrator also considered that the claimants were subject to an immigration sponsorship agreement, which provided that their daughter and son-in-law were responsible for their financial needs. The arbitrator also understood the childcare payments to be a somewhat perfunctory income splitting arrangement. Regardless, it was found that the claimants were capable of meeting their own needs and were therefore not covered under the Desjardins policy.

Economical argued that the childcare fee ought not to have been treated as income. Although the fees were deposited and declared as income, they were only paid at the beginning of the year during tax season, and not on a regular basis. It was argued that the funds were not being used to fund living expenses. It was also argued that the arbitrator erred in applying the so-called “50% + 1” rule rather than the “big picture” approach.

The “50% + 1” rule was established in cases where a person is not dependent on another person financially if their needs can be met by their available resources at the time of the accident. The common law dictates that, provided more than half the needs of the injured party could be met, they are not “principally dependent” for the purposes of the legislation.

The “big picture” approach comes from cases where there was insufficient evidence to find “50% + 1” or in which that standard was found to be too arbitrary when compared to the “big picture”.

In order to determine which approach is most appropriate, arbitrators and the court will look to the factors as set out in Miller v. Safeco, (1985) 50 OR (2d) 797 (CA), namely “the amount of dependency, the duration of the dependency, the financial and other needs of the alleged dependent, and the ability of the alleged defendant to be self supporting.”

In this case, the arbitrator was aware of Miller v. Safeco, citing the case and discussing the “50% + 1” and “big picture” analysis in his decision. Rather than explicitly relying on the “50% + 1” rule, he found that 81% of the claimants’ financial needs were met through their own means.

On the evidence, the claimants provided childcare for their grandchildren. They were compensated for providing that care at market rates, and were effectively gainfully employed in the 12-month period prior to the accident.

Appeal Decision

The conclusions by the arbitrator were entitled to deference. The claimants were found to have been able to provide for themselves financially, and were not principally dependent on the named insureds under the Desjardins policy at the time of the accident.

The question is not whether the court in this instance came to the same conclusion, but rather whether the arbitrator’s decision was reasonable and deserved deference. In this case, it was, and the appeal was accordingly dismissed with costs. Therefore, Economical is the insurer responsible to pay benefits.

Conclusion

If most of a person’s needs can be met from their own resources, they are not principally dependent on another person. A strict mathematical approach will seldom be conclusive.

Absent a legal error, it is very difficult to overturn an arbitrator’s determination of dependency.