IN THE MATTER OF the Arbitration Act, S.O. 1991
c.17, as amended
AND IN THE MATTER of an Arbitration between:
JEVCO INSURANCE COMPANY
- and -
STATE FARM INSURANCE COMPANY
Counsel for the Applicant, Jevco Insurance Company
(hereinafter referred to as “Jevco”)
James S. Greve
Counsel for the Respondent, State Farm Insurance Company
(hereinafter referred to as “State Farm”)
Which insurer, Jevco or State Farm, is responsible for the payment of statutory accident benefits to the claimant Fatemah Faizi, as a result of personal injuries sustained by her in a motor vehicle accident which took place on June 27, 2010.
On June 27, 2010, the claimant, Ms. Fatemah Faizi was injured while she was a passenger in a vehicle owned and operated by Mr. Khabbat Azimi. Jevco insured the Azimi vehicle at the time of the accident. After the accident, the claimant applied for statutory accident benefits to Jevco. Jevco commenced paying statutory accident benefits to Ms. Faizi. Jevco claims that State Farm is the priority insurer and therefore responsible for payment of statutory accident benefits to the claimant.
An individual may have accident benefits coverage available to him or her under more than one policy of motor vehicle liability insurance. The Insurance Act, R.S.O. 1990, c.I.8, as amended, provides a priority mechanism for determining which insurer stands in priority to another with respect to the payment of statutory accident benefits. Since the claimant was an occupant of a motor vehicle at the time she sustained her injuries, it is Section 268(2)(1) which determines priority. It reads as follows:
Section 268 (2) – Liability to pay – The following rules apply for determining who is liable to pay statutory accident benefits:
1. In respect of an occupant of an automobile,
i. The occupant has recourse against the insurer of an automobile in respect of which the occupant is an insured,
ii. If recovery is unavailable under subparagraph I, the occupant has recourse against the insurer of the automobile in which he or she was an occupant,
iii. If recovery is unavailable under subparagraph I or ii, the occupant has recourse against the insurer of any other automobile involved in the incident from which the entitlement to statutory accident benefits arose,
iv. If recovery is unavailable under subparagraph i, ii, or iii, the non-occupant has recourse against the Motor Vehicle Accident Claims Fund.
Under Section 268(2) of the Insurance Act, an occupant of an automobile has priority recourse against an insurance policy in which the occupant is an insured in priority to the policy of the vehicle the occupant was in at the time of the accident. Section 2 of the Statutory Accident Benefits Schedule states that an “insured person” includes the spouse of the named insured. As a result, the State Farm policy issued to the claimants husband Mr. Azizi would be first in priority provided the policy provided accident benefit coverage. Jevco would only be liable if the claimant had no recourse as against State Farm. As a result, the question is whether the State Farm policy provided accident benefit coverage to the claimant at the time of the accident and in particular, whether the “Acknowledgement of Vehicle Withdrawn from Use” form used by State Farm to purportedly suspend coverages was effective in cancelling or suspending accident benefits coverage to the claimant under the State Farm policy, even though the claimant was not using or operating the “described automobile” as particularized in the State Farm policy at the time of the accident.
Counsel for Jevco submits that an insurer cannot delete, suspend or cancel coverage by using unapproved forms, such as the one used by State Farm in this case. Counsel for Jevco relies on Section 227 of the Insurance Act, R.S.O. 1990, c.I.8, which reads as follows:
“227.(1) An insurer shall not use a form of any of the following documents in respect of automobile insurance unless the form has been approved by the Superintendent:
Counsel for Jevco also relies on two Arbitration Decisions to support his contention that only approved forms can be used to delete, suspend or cancel a policy:
Counsel for the Respondent State Farm submits that there is no approved form for the fact situation herein, where an insured wishes to suspend all coverage. State Farm takes the position that the authorities cited and relied upon by the Applicant, as outlined aforesaid, involve factual circumstances distinguishable from the present facts. The cases referred to above involve situations where the insured was seeking to reduce “road coverage” temporarily eliminating all but comprehensive coverage. For such a situation, OPCF16 would be the appropriate form. This is a form approved by the Superintendent as contemplated by s. 227. However, in the case at bar, Mr. Azizi’s intention was to eliminate all coverage, including comprehensive coverage. They take the position that there was simply no approved form for this policy change. State Farm submits that the form used by them provides for the suspension of all coverage while maintaining a relationship with the insurer that would permit a reinstatement of the policy without the necessity of a new application and the enquiries that are required of new applicants.
I do not accept the submissions advanced by State Farm. Although the cases may be factually distinguishable, I accept the general proposition that approved forms must be used to modify an existing policy. I am satisfied that Section 227 of the Insurance Act requires all policy endorsements be completed in a form approved by the Superintendent. It is not that Mr. Azizi did not have options available to him. In April 2010, Mr. Azizi had the option of terminating his policy (which cancels all coverage) as contemplated by Section 11(2) of OAP 1 - Ontario Automobile Policy or, in the alternative, execute an OPCF16 - Suspension of Coverage (see Tab 2) which would maintain comprehensive coverage and certain residual coverages.
In any event, I am not satisfied that the form used by State Farm (Acknowledge of Vehicle Withdrawn from Use form – Tab 1) was clear enough on its face to eliminate all coverage, including accident benefits coverage. The initial policy included accident benefits coverage. The State Farm form suspended accident benefits coverage, but there is an asterisk limiting “Coverages Suspended” with the limiting words set out in the bottom left-hand corner of the form which reads as follows:
“* Liability Coverage, Accident Benefits, Uninsured Automobile, and Direct Compensation Property Damage, coverages are suspended with respect only to the use or operation of:
I interpret this to mean the various coverages are only suspended where they arise out of the use or operation of the described automobile, a newly acquired automobile or a temporary substitute vehicle.
Arguably there appears to be a discrepancy on the face of the form given the words “Coverage(s) Now in Force – None”. However, in parenthesis immediately below these words it is stated “See Below”. This could be interpreted as incorporating the same limiting words as outlined above, that is coverages with regard only to the described automobile, a newly required automobile or a temporary substitute automobile, as opposed to coverages available to the insured while a pedestrian, or a driver or occupant of another vehicle. In my view the form used by State Farm only restricts coverages with respect to the use and operation of the described automobile, a newly acquired automobile or a temporary substitute vehicle or, in the alternative, it is so ambiguous on its face so as to be ineffective. It is probably to avoid such ambiguity and confusion in the mind of the consumer that the Insurance Act requires the use of approved forms to modify an insurance contract.
The insurance product is a complicated one. The insurers product should be delivered in a way that makes it understandable to the consumer. The use of approved forms help attain this goal. As Arbitrator Samis stated on page 3 of his Decision in Certas v. Aviva (December 5, 2005):
“Automobile insurance in the Province of Ontario is a highly regulated product. The price of the product is controlled by regulatory authorities, the characteristics of coverage are defined, limited, and mandated by the provisions in Part VI of the Insurance Act, and the documentation issued by insurers to their policy holders is highly regulated in accordance with the statute. There is a strong public policy, evidenced by the extensive legislative activity, that the insurance product should be delivered in a way that makes it understandable to the consumer. There are many instances of limitations on the ability of an insurer, or a consumer, to enter into agreements that vary from the mandatory characteristics.”
In a situation where an individual removes coverages with respect to the described automobile, there continues in my view to be some residual coverages. The residual liability coverage would arise, for example, if the insured incurred a liability while being the driver of someone else’s vehicle. In the circumstance, the insurer of the vehicle would be primary insurer and the driver’s own insurer would provide excess protection. Similarly, there would be some coverage for accident benefits, but only when the accident benefits claim did not arise out of the use or operation of the described automobile. This would occur if the claimant was a pedestrian or a passenger in someone else’s vehicle, as is the case here. In this limited way, coverage is extended beyond coverages associated with the described automobile, a newly acquired automobile or a temporary substitute automobile. It is perhaps for that reason that State Farm provided Mr. Azizi with the refund of $78.30 (as set out in paragraph 12 of the Agreed Statement of Fact), representing premiums paid beyond April 23, 2010 when purportedly, all coverage was suspended. Why would there be premiums paid for a time when all coverage had been suspended? That premium may well have been for the residual coverages that I have referred to, which would include coverages of the type available to Faizi in the present case - accident benefit coverage arising from the use or operation of a vehicle other than the described vehicle. At the time she was a passenger in someone else’s vehicle and not the vehicle owned by her husband as particularized as the “described vehicle” in the State Farm policy.
I find that the State Farm policy continued to provide accident benefits coverage to the claimant at the time of the motor vehicle accident. Policy modification was not done with use of a form approved by the Superintendent as required by Section 227 of the Insurance Act. In any event, the form used by State Farm, in my view either provided residual coverages of the type referred to above or was so ambiguous on its face and not of sufficient clarity to remove accident benefits coverage where it arose outside of the operation and use of the described automobile. I therefore find that State Farm is the priority insurer with respect to statutory accident benefits available to the claimant.
I hereby order that State Farm is the priority insurer and responsible for payment of statutory accident benefits to the claimant Fatemah Faizi.
I hereby order that State Farm pay the costs of Jevco with respect to this arbitration proceeding on a partial indemnity basis.
I hereby order that State Farm pay the Arbitrator’s costs.
DATED at Toronto this 23rd day of July, 2013
KENNETH J. BIALKOWSKI