IN THE MATTER OF THE INSURANCE ACT R.S.O. 1990 CHAPTER 1.8, SECTION 266(2) AND IN THE MATTER OF THE ARBITRATIONS ACT, S.O. 1991 AND IN THE MATTER OF AN ARBITRATION

BETWEEN:

CANADIAN GENERAL INSURANCE COMPANY ("Canadian General") Applicant - and - AXA INSURANCE COMPANY "Axa") Respondent

AWARD

Heard on: December 17th, 1996

Brian C. Atherton
Counsel for the Applicant
Canadian General Insurance Company

Geoffrey D.E. Adair
Counsel for the Respondent
Axa Insurance Company

This arbitration involves an issue of priorities between two insurance companies concerning accident benefits paid and payable to Sandra Santos respecting injuries which she sustained in a motor vehicle accident. The accident occurred on December 14th, 1993. The arbitration agreement is annexed as Schedule "A" to this award. By paragraph 5 thereof, the parties agreed to have a preliminary point of law determined.
Most of the facts are set out in an Agreed Statement of Facts which is attached hereto as Schedule "B". Those facts were supplemented by the testimony of Dianne Montaigne. Ms. Montaigne's evidence was taken under oath but, upon agreement of counsel, it was not transcribed by a reporter.
The point of law is whether Canadian General is prohibited from claiming that Axa is liable to pay statutory accident benefits because of the provisions of Section 3 (1) of Regulation 283/95 made under the Insurance Act. Section 3 provides as follows:

3. (1) No insurer may dispute its obligation to pay benefits under Section 268 of the Act unless it gives written notice within 90 days of receipt of a completed application for benefits to every insurer who it claims is required to pay under that section.
   
   (2) An insurer may give notice after the 90 day period if,
   
   (a) 90 days was not a sufficient period of time to make a determination that another insurer or insurers is liable under section 268 of the Act; and,
   
   (b) the insurer made the reasonable investigations necessary to determine if another insurer was liable within the 90 day period.
   
   (3) The issue of whether an insurer who has not given notice within 90 days has complied with subsection (2) shall be resolved in an arbitration under section 7".

There is no doubt that Canadian General failed to give notice to Axa pursuant to subsection (1). Canadian General relies upon the provisions of subsection (2).

Before discussing the provisions of subsection (2), I should make some brief references to the circumstances as disclosed from the evidence of Ms. Montaigne, and the documents which she produced. At the time of the accident Sandra Santos was 17 years of age. She was an occupant of her boyfriend's motor vehicle when it was involved in an accident resulting in very serious injuries to her. Her right leg had to be amputated below the knee.

Axa insured the boyfriend's vehicle. Canadian General insured a motor vehicle owned by Sandra Santos' father. Mr. Santos notified his broker of his daughter's injury and the broker notified Canadian General. A completed application for statutory benefits was received by Canadian General on or about December 17th, 1993. Canadian General has been paying benefits since shortly after that date and benefits are still payable.

If at the time of the accident Sandra Santos was "a dependent" of her father she would, because of the provisions of Sections 2 and 3 of Regulation 672/93, be an insured person within the meaning of Section 268 of the Insurance Act. In such case Canadian General would be liable to pay her accident benefits. If however she were not "a dependent" of her father, Axa would be liable to pay accident benefits to her because it is the insurer of the automobile in which she was an occupant at the time of the accident. The ultimate issue in the arbitration would be the question of whether or not Sandra Santos was "a dependent" of her father at the time of the accident.

Since Canadian General did not give notice to Axa within 90 days of December 17th, 1993, subsection (1) would prohibit it from claiming that Axa is required to pay the accident benefits.

Canadian General contends, however, that it is relieved from that prohibition because of the provisions of subsection (2).

From the time it received the completed application in December of 1993 until December of 1995, Canadian General paid accident benefits to Sandra Santos without ever doubting its obligation to do so. In December of 1995, Ms. Montaigne was performing an audit of accident benefit files in Canadian General's London office.

During the course of her audit of this file, which was one of a number of files selected at random for audit, she found two pieces of evidence in rehabilitation reports which came into the file in the latter part of March, 1994. Those pieces of evidence raised questions in her mind about whether Sandra Santos was "a dependent" of her father at the time of the accident. She caused an investigation to be commenced which cast doubt upon Canadian General's belief that Sandra Santos was "a dependent" of her father at the time of the accident. This led Canadian General to give notice to Axa on February 6th, 1996, over two years after receiving the completed application.

My interpretation of section 3 of the Regulation is made in the light of the fact that accident benefits can often amount to very substantial claims and that insurers, required to pay those benefits, are entitled to have an early opportunity to investigate the claim and to manage the performance of the insurers' obligations to the injured person. It seems to me that when the regulatory authority chose a 90 day period for notice it did so in recognition of the importance of the right of the insurer, who will ultimately be responsible for payment, to have control of the claim from a very early stage.

As I read section 3, in order for an insurer to escape the rigours of subsection (1), it must comply with the provisions of subsection (2). The plain words of subsection (2) lead me to the view that the insurer must establish both of two things:

1. that 90 days was not a sufficient time to make a determination that another insurer was liable and,
   
   
2. that it made reasonable investigations within the 90 day period to determine if another insurer was liable.

Mr. Atherton, in his very capable argument, suggested that an interpretation of subsection (2) which requires a detailed investigation of the priority issues within 90 days would place an undue burden upon insurers. He contended that they do not have the resources sufficient to examine the priorities issue in detail in all of the many accident benefit claims which they receive. While I recognize the force of that contention it seems to me that it is, in effect, an argument that the 90 day period required in subsection (1) is itself unreasonable. I do not think an arbitrator is entitled to second guess the regulatory authority. I think that the case must be decided on the assumption that the regulatory authority considered and weighed the problem suggested by Mr. Atherton when it arrived at a 90 day period for notice.

It is my view that in order to obtain the benefit of subsection (2) the insurer must establish that, because of the peculiar circumstances of an individual case, the 90 day period was not sufficiently long for a determination of the issue. In this case Canadian General knew that Sandra Santos was injured while an occupant of a vehicle insured by Axa. It, therefore, knew immediately that there was another potential insurer who might be liable for Sandra Santos' accident benefits. I knew that there was the potential for a priority problem. it knew that its liability depended upon Sandra Santos' being "a dependent" of her father. Once Ms. Montaigne conducted her audit in December of 1995, she was able to have an investigation into the dependency completed within a period of two months. It therefore seems to me to be established that, in this case, 90 days was a sufficient period of time to determine whether or not Sandra Santos was "a dependent" of her father.

I have concluded therefore that Canadian General has not satisfied the onus resting upon it to show that 90 days was not a sufficient period of time for it to make a determination of whether or not Sandra Santos was "a dependent" of her father at the time of the accident. I have concluded therefore that Canadian General is not entitled to the saving provisions contained in section 3 (2) of the Regulation.

I therefore find that Axa must succeed on the preliminary point of law. I hold that Canadian General is prohibited by section 3 of the Regulation from disputing its obligation to pay accident benefits to Sandra Santos. Because this determination ends the arbitration, I find that pursuant to paragraph 4 of the arbitration agreement, Axa is entitled to its costs. Counsel agreed that I should fix those costs at the sum of $2,500.00. Accordingly Axa will have its costs of the arbitration fixed at $2,500.00 plus GST.

The arbitrator's account for the arbitration will be sent from ADR Chambers directly to counsel for Canadian General.

AWARD issued at Toronto this 19th day of December, 1996.

"P.T. Galligan"

THE HON. P.T. GALLIGAN, Q.C.

SCHEDULE "A" IN THE MATTER OF THE INSURANCE ACT
R.S.O. 1990 CHAPTER 1.8, SECTION 268(2) AND IN THE MATTER OF THE ARBITRATIONS ACT, S. 0. 1991 AND IN THE MATTER OF AN ARBITRATION BETWEEN: CANADIAN GENERAL INSURANCE COMPANY Applicant - and - AXA INSURANCE COMPANY
Respondent

ARBITRATION AGREEMENT

The parties hereto, preserving all rights of Appeal on questions of law, and on questions of mixed fact and law, pursuant to the provisions of the Arbitrations Act, S.O. 1991, chapter 17, agree to arbitrate this dispute as follows:

1. The Arbitration is brought pursuant to the provisions of the Insurance Act and in particular Regulation 283/95 governing disputes between insurers as to priority of payments.
   
   
2. This Arbitration shall be conducted in accordance with the Arbitrations Act.
   
   
3. The parties agree to nominate (former) Justice Galligan of A.D.R- Chambers as the single Arbitrator to resolve this dispute.
   
   
4. The costs of this Arbitration shall be borne by the unsuccessful party, and assessed in accordance with Section 56 of the Arbitrations Act. 1991; the issues in dispute involve a determination of whether Sandra Santos, the claimant, is a dependent as that term is defined in subsection 3(2) of Regulation 672.
   
   
5. The insurers agree to proceed on a preliminary point of law to determine whether notice of the dispute was provided to Axa within the time periods mandated in Regulation 283/95. If it is determined that this Application is not barred by any applicable limitation period, the matter will then proceed to a determination of dependency, on an as yet unspecified date.
   
   
6. The parties agree that the Arbitrator so appointed shall exercise all the powers and rights provided for in the Arbitrations Act, S.O. 1991, chapter 17.

Dated at Toronto this 13th day of December, 1996

"Brian C. Atherton"
Brian C. Atherton
Samis, Blouin, Dunn
Solicitors for Canadian General
Insurance Company

"G. Adair"
Geoffrey D.E. Adair
Enfield, Hemmerick, Adair & Wood Solicitors for Axa Insurance Company

SCHEDULE "B" IN THE MATTER OF THE INSURANCE ACT
R.S.O. CHAPTER 1.8, SECTION 266(2) AND IN THE MATTER OF THE ARBITRATIONS ACT, S.O. 1991 AND IN THE MATTER OF ARBITRATION BETWEEN: CANADIAN GENERAL INSURANCE COMPANYApplicant - and - AXA INSURANCE COMPANY
Respondent

AGREED STATEMENT OF FACTS

1. The claimant, Sandra Santos, was injured as a result of a motor vehicle accident which occurred on December 14, 1993.
   
   
2. At the time of the accident, Sandra Santos was an occupant of an automobile insured by Axa Insurance Company ("Axa").
   
   
3. As of the date of the motor vehicle accident, Sandra Santos was living with her parents, who had a policy of motor vehicle insurance with Canadian General Insurance Company ("Canadian General").
   
   
4. An unsigned application for Accident Benefits on behalf of Sandra Santos was presented to Canadian General on or about December 17, 1993. The parties agree that this is to be considered a "completed applications pursuant to s. 22 of the No-Fault Benefits Schedule.
   
   
5. Canadian General commenced payment of benefits to Sandra Santos and payment of those benefits continues to date.
   
   
6. Canadian General did not make any investigation to determine if another insurer was liable to pay benefits under the priority provisions of the Insurance Act until following a file audit which occurred in December of 1995.
   
   
7. No Notice of Dispute Between Insurers was provided to Axa until a letter regarding the dispute was submitted to Axa on or about February 6, 1996. Attached as Schedule "A" is a copy of the said letter.
   
   
8. A request to submit this matter to Arbitration was submitted to Axa under cover of letter dated April 17, 1996.
   
   
9. The parties hereto have executed an Arbitration Agreement and have agreed to be bound by its terms.

ALL OF WHICH IS RESPECTFULLY SUBMITTED

"Brian C. Atherton"
Brian C. Atherton
Samis, Blouin, Dunn
Solicitors for Canadian General
Insurance Company

"G. Adair"

Geoffrey D.E. Adair
Enfield, Hemmerick, Adair & Wood
Solicitors for Axa Insurance Company

SCHEDULE "A"

LINDSEY MORDEN
CLAIM SERVICES LIMITED
Suite 202, 460 Frederick St.,
Kitchener, Ontario

February 6, 1996

Axa-Boreal Insurance Company
217 York Street, 4th Floor,
London, Ontario.
N6A 5P9

Re: Our Insured: Armand Santos
Claimant: Sandra Santos
Your Insured: Vaughan Hilts
Your Policy No: MAAM2032627
Your Vehicle: 1973 Plymouth Roadrunner
Our File No: KJ: 95/2730
Date of Loss: December 14, 1993

Dear Sir/Madam:

We have been requested on behalf of our principals, the Canadian General Insurance Company, to put you on notice regarding the above claim for Sandra Santos.

Our investigation to date, indicates that Sandra Santos should be looking to the Axa-Boreal for accident benefits, as an injured passenger in your insureds vehicle.

We shall be in touch with you further in the very near future, in regards to the above mentioned.

Yours very truly,

LINDSEY MORDEN CLAIM SERVICES LIMITED

Joan Jones, A.I.I.C.
Accident Benefit Co-ordinator