IN THE MATTER OF THE INSURANCE ACT, R.S.O. 1990, c. 1.8 AND ONTARIO REGULATION 283/95 AND IN THE MATTER OF THE ARBITRATION ACT, S.O. 1991, C. 17 AND IN THE MATTER OF AN ARBITRATION

BETWEEN:

LUMBERMENS MUTUAL CASUALTY COMPANY - and - LOMBARD CANADA INSURANCE COMPANY

AWARD

COUNSEL

William G. Scott, Esq.
Counsel for the Applicant

Albert M. Conforzi, Esq.
Counsel for the Respondent

The main issue in this Arbitration is to determine the insurer liable to pay statutory accident benefits to Isadora Araujo (hereinafter referred to as "Araujo") by reason of injuries suffered by Araujo in a motor vehicle accident which occurred on March 3, 1996.

At the time of the accident, Araujo was a passenger in a vehicle which was uninsured. Furthermore, Araujo did not have a vehicle of his own, in respect of which he was an insured.

The vehicle in which Araujo was a passenger had been proceeding in a southerly direction on Franklin Blvd. in Cambridge, Ontario. The operator of the vehicle lost control on slush on the road and spun into the oncoming northbound lanes of traffic. That vehicle then came into impact with a vehicle operated by Helen Smith, which vehicle was insured by Lumbermens. The vehicle in which Araujo was a passenger then went on to come into impact with a vehicle operated by Christina Hembruch, which vehicle was insured by the predecessor company of Lombard.

Section 268(2) of the Insurance Act sets out a series of rules which are to be applied in order to determine which insurer is liable to pay statutory accident benefits to an injured person.

Since Araujo did not have recourse against the insurer of an automobile in respect of which he himself is an insured and since the vehicle in which he was a passenger was not insured, the rule which is applicable is set out in Section 268(2) 1. iii. of the Insurance Act. That rule provides as follows:

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 no-fault benefits arose"

Applying that subsection would mean that Araujo has recourse against both Lumbermens and Lombard. Both companies were insurers of other automobiles involved in the incident in question.

Section 268(4) sets out, in part, as follows:

"If, under subparagraph i or iii of paragraph 1 ... a person has recourse against more than one insurer for the payment of no-fault benefits, the person, in his or her absolute discretion, may decide the insurer from which he or she will claim the benefits.

Since Araujo could have recourse against both insurers, the facts must be examined to determine whether Araujo decided to claim no-fault benefits from Lumbermens or Lombard.

I note the use of the word "may" in Section 268(4). There is no requirement that Araujo make the election. There is no other rule in place to indicate what would happen if Araujo did not make such an election.

In the absence of some provision setting out just what transpires if Araujo does not make an election, I conclude that if no such election was made, since he has recourse against both insurers, both insurers would be required to pay the benefits to Araujo on a 50-50 basis.

DID ARAUJO ELECT TO CLAIM BENEFITS FROM LUMBERMENS OR LOMBARD

I make the following findings of fact based on the oral evidence at the Hearing and the documentary evidence filed:

1. On May 3, 1996, Tom Eddy, an independent adjuster retained by Lumbermens, attended at the hospital in which Araujo was confined. Mr. Eddy had conversations with George Pignalosa, solicitor for Araujo. Those conversations were essentially about the injuries sustained by Araujo. There were also discussions about the uninsured issue. Mr. Eddy provided Mr. Pignalosa with a blank Application for Accident Benefits. Mr. Eddy explained to Mr. Pignalosa
   that there was a third vehicle involved in the accident. Neither Mr. Eddy nor Mr. Pignalosa addressed the issue as to which company should pay benefits to Araujo.
   
   
2. By letter dated May 6, 1996, a paralegal in the office of Pignalosa & Associates wrote to Mr. Eddy and provided to him an original notice of change of address and direction and authorization. signed by Araujo.
   
   
3. By letter dated May 7, 1996, the paralegal wrote to Lombard Canada and forwarded a photocopy of a notice of change of address and direction and authorization. That form of notice was different from the form and notice forwarded the previous day to Mr. Eddy. The difference was that on the notice forwarded by letter dated May 7, 1996, Lombard was identified as the addressee and the Lombard policy number was set out on the notice. On the notice forwarded to Mr. Eddy on May 6, Lumbermens was the addressee and the policy number was that of the Lumbermens policy.
   
   
4. A copy of the May 7, 1996 letter was sent to Mr. Eddy.
   
   
5. Enclosed with the letter of May 7, 1996 sent to Lombard was an original Application for Accident Benefits. Enclosed with a copy of the May 7, 1996 letter sent to Mr. Eddy was a photocopy of that same Application.
   
   
6. It should be noted that on the original Application for Accident Benefits sent to Lombard, the form was not addressed to any company, in the space in which one ordinarily names the company. The same applied to the copy of the Application sent to Mr. Eddy.
   
   
7. Lombard returned the original Application to the paralegal. By fax communication dated May 29, 1996, Lombard took the position that since the vehicle insured by Lumbermens was involved in the initial impact and since the vehicle insured by Lombard was involved in the second impact, Lumberrnens ought to respond to the claim.
   
   
8. In the meantime, Mr. Eddy. on behalf of Lumbermens, when receiving the letter of May 7, 1996 and the copy of the Application for Accident Benefits, took the position that Lumbermens had not been supplied with an original Application for Accident Benefits. When the paralegal received back the original Application from Lombard, he then sent the original Application to Mr. Eddy by courier. That was received by Mr. Eddy on June 3, 1996. Upon receiving the Application back from Lombard, the paralegal also addressed the Application to Lumbermens, in the space in which one ordinarily identifies the insurer to which an Application is to be sent.
   
   
9. In the sequence of events, the first written document sent to either company was the letter of May 6, 1996 sent to Mr. Eddy, in which letter was enclosed an original notice of change of address and direction and authorization.
   
   
10. The letter dated May 7, 1996 in which the paralegal enclosed the original Application for Accident Benefits was received by Lombard on May 14, 1996. A copy of the letter of May 7, 1996, in which was enclosed a copy of the Application for Accident Benefits, was received by Mr. Eddy, as the adjuster for Lumbermens on May 13, 1996. That letter of May 7, 1996 was received by the companies on those dates notwithstanding that both letters were sent out by the paralegal on the same day. According to the evidence of the courier service representative, if both letters were picked up the same day, they should have been delivered the same day.
    
    
11. By letter dated June 20, 1996 to Lumbermens, Lombard took the position that since Mr. Eddy received the Application for Accident Benefits a day earlier than Lombard received the same, Lumbermens was obliged to begin paying benefits to Araujo, pending the resolution of any dispute between Lumberrnens and Lombard.
    
    
12. By fax communication dated July 9, 1996, Lumbermens wrote to the paralegal. Lumberrnens set out that it was its understanding that by forwarding the original Application for Accident Benefits to Lombard with the letter of May 7, 1996. a choice had been made to claim benefits from Lombard. The fax communication set out that that was the understanding of Lumbermens. The fax communication went on to state that if the paralegal would confirm that Araujo did so elect to choose benefits from Lombard, that the Lumbermens representative would speak to Lombard directly about paying benefits and that further, Lumbermens would commence paying the benefits if Lombard would not do so.
    
    
13. The paralegal took up Lumbermens' suggestion. By letter dated July 9, 1996. the paralegal confirmed that Araujo did elect to claim benefits from Lombard and "therefore submitted the original AB Application to them". He then requested that he be able to pick up the cheque as to payment of accident benefits.
    
    
14. By reason of the ongoing dispute, ultimately, Lumbermens and Lombard agreed to pay benefits on a 50-50 basis, pending the resolution of the dispute.
    
    
15. The evidence was that as at February i2, 1998, total payments of $241,964.24 had been paid to Araujo. Lombard had reimbursed Lumbermens in the sum of $102,332.05. However, there was no issue as between Lumbermens and Lombard as both companies agreed that if less than 50 percent of the total payout had been paid, Lombard would make up the difference.
    
    
16. The paralegal gave oral evidence at the Hearing. I accept his evidence that there was no intention to elect one insurer or the other when the letter of May 7, 1996 was sent out. There was no intention to send the original form to one company or the other. No conscious choice had been made as at that time. The idea was that the paralegal would send the forms to both companies and the companies would sort it out. Araujo did not care which company paid the benefits, so long as the benefits were paid.
    
    
17. The paralegal gave evidence that he had not addressed the Application for Accident Benefits to one company or the other. It was only where he received the original form back from Lombard that he then wrote the name of Lumbermens on the spot where the name of the insurer was ordinarily put. He was uncertain as to when he wrote that in. However, it is clear that it was written in after the original form was returned by Lombard prior to the submission of the original form to Mr. Eddy, the representative of Lumbermens.
    
    
18. The paralegal said that when he received the fax communication of July 9, 1996 from Lumbermens that he simply did exactly what Lumbermens requested in order to get the benefits paid to his client. I accept that evidence.

CONCLUSIONS

Regulation 283/95, made under the Insurance Act is a regulation which is intended to ensure that benefits are paid to an injured insured person when there is an issue between insurers as to which company ought to pay. Section 2 sets out that:

"The first insurer that receives a completed application for benefits is responsible for paying benefits to an insured person pending the resolution of any dispute as to which insurer is required to pay benefits under Section 268 of the Act. "

The main reason for issuing Regulation 283/95 was that prior to the Regulation coming into force, if insurers were in a dispute as to which insurer ought to pay benefits, an insured person, though entitled to benefits, often went without benefits. Accordingly, the Regulation required that the insurer first receiving a completed Application, pay, pending the resolution of any dispute as to which insurer should pay.

In this case, Lombard takes the position that the first written document, containing an original Direction, was sent to an independent adjuster representing Lumbermens. Lombard argues that that evidenced an intention by Araujo to elect to claim benefits from Lumbermens. That is contradicted by the direct evidence of the paralegal, who said that there was no conscious choice or election at that stage of the matter. Given that evidence, I cannot find that by sending the letter of May 6, 1996, Araujo made an election to claim benefits from Lumbermens.

Lombard next argues that a copy of the Application for Accident Benefits, sent with the letter of May 7. 1996, reached Mr. Eddy on May 13, 1996, the day before Lombard received the same letter and the original Application for Accident Benefits. Lombard argues that because Lumbermens first received a copy of the Application, that that constituted an election by Araujo to claim benefits from Lumbermens. I do not accept that argument. Firstly, the paralegal denies that a conscious choice or election was made at that stage. Secondly, first receipt of an Application. when there is a dispute between insurers as to which insurer ought to pay, would simply invoke Section 2 of Regulation 283/95. It is not determinative as to which insurer is liable to pay under the Rules set out in Section 268(2) of the Insurance Act.

Lumbermens argues that since the original Application for Accident Benefits was sent to Lombard, that that evidenced an election by Araujo to claim benefits from Lombard. The evidence of the paralegal is that no conscious choice or election was made at the stage when the letter of May 7, 1996 and the Application for Accident Benefits were sent out. I accept the evidence of the paralegal and reject Lumbermens' argument.

Lombard returned the original Application for Accident Benefits and took an erroneous position that by reason of the fact that the first impact involved the Lumbermens' vehicle, that that meant that Lumbermens had to pay in priority to Lombard.

All the while, Araujo was not receiving benefits. That prompted the paralegal to write to both companies by letter dated July 8, 1996. That letter prompted Lumbermens to write the fax communication of July 9, 1996. In that fax communication, Lumbcrinens set out a version of the events in which Lumbermens attempted to extract confirmation of an election to claim benefits from Lombard by promising to commence payment of benefits, in exchange for that confirmation, if Lombard would not accept liability.

At that point, the paralegal would have confirmed anything that Lumbermens would have requested, so long as benefits would be paid to his client.

I accept the evidence of the paralegal that no conscious choice or election was made to claim benefits from one company or the other when the letters of May 6 and May 7, 1996 were sent out. Furthermore, I accept the evidence of the paralegal that it was by accident and not by choice that the original Application found its way to Lombard rather than Lumbermens.

I conclude that the fact that the first letter enclosing the Direction was sent to Lumbermens, the fact that an original Direction went to Lumbermens, the fact that the original Application went to Lombard and the fact that Mr. Eddy received a copy of the letter of May 7, 1996 one day earlier than the letter was received by Lombard, are of no assistance in determining whether an election was made by Araujo. None of those matters assist me in making my decision, in the face of the evidence of the paralegal that there was no conscious choice or election made on or about May 6 or May 7, 1996.

I find, on the evidence of the paralegal, that there was no election made, even when the paralegal confirmed that Araujo had chosen to elect Lombard Canada as the payor, as confirmed in the letter from the paralegal to Lumberrnens, letter dated July 9, 1996. It is obvious from the evidence and the production of documents that the paralegal simply acceded to the request by Lumbermens for written confirmation of an election, simply to ensure that payments to Araujo would begin.

I find that neither Araujo nor his solicitors decided the insurer from which Araujo would claim the benefits.

In this case, both insurers attempted to avoid paying the benefits to Araujo.

Both insurers were in the same priority position, subject to any decision made by Araujo as to the insurer from which he would claim the benefits.

This is a very unusual case. In most cases, an insured person would make a definite election as to the insurer from which he seeks to receive benefits. An insured person will usually pick the insurer which he or his advisors feel is the most reasonable and fair insurer. However, in this case, that issue was not addressed by Araujo or his solicitor.

Absent a finding that Araujo elected to claim from one insurer or the other, no assistance is provided in Section 268 as to which insurer need respond. Accordingly, since Araujo clearly has recourse against both insurers under Section 268(2) 1. iii, I conclude that both insurers are required to respond. Each insurer will be responsible to pay 50 percent of the benefits otherwise due to Araujo.

Counsel for Lombard made reference to the case of Ready v. Progressive Casualty Insurance Company and Zurich Insurance Company (OIC File A-005403). In that case, Arbitrator Nancy Makepeace found that Mr. Ready had decided to claim benefits from Progressive because he first approached Progressive about claiming benefits. The difference between that case and the subject case is that there was no evidence in the Ready case from the Applicant or his solicitor as to the intention to claim from one insurer or another. It was agreed in the Ready case, that Ready approached Progressive first. He only approached Zurich after Progressive had denied benefits. That was the basis for the Decision of Arbitrator Makepeace. In the subject case, there was oral evidence from the paralegal that no election was made to claim from one insurer or another. Based on the facts in this case, the Ready case is distinguishable.

The parties have already agreed that they will each pay half of the fees and disbursements of the Arbitrator. In the circumstances, each party will bear its own costs.

Dated this 19th day of February, 1998

Stephen M. Ma!ach, Q.C.