By way of update to our October 8, 2015 blog featuring Ayr Farmers Mutual v. Wright: “Insurer’s Attempt to Short Circuit Dispute Resolution Process Shut Down”, the insurer’s appeal was dismissed by the Court of Appeal on all grounds October 27, 2016.

As you will recall, Ayr Farmers took the position that Mr. Wright was not involved in an “accident” as defined by the Statutory Accident Benefits Schedule – Effective September 1, 2010, O. Reg. 34/10 (the “Schedule”) so as to entitle him to benefits under the Schedule.

Rather than participate in the statutorily prescribed mediation process, Ayr Farmers went directly to court by way of application under Rule 14, seeking a determination of the “accident issue”. Mr. Wright objected to this process, arguing that the prescribed dispute resolution process in sections 279 to 283 of the Insurance Act applied to a determination of “accident”, including prescribed FSCO Mediation.

Mr. Justice Sweeney, at first instance, agreed with Mr. Wright on all points, confirming that the dispute resolution process set out in sections 279 to 283 of the Insurance Act was the process to be applied with respect to such determinations. “Entitlement to benefits” in section 279 of the Act included, on a plain reading, whether or not a person was involved in an accident. The definition of “insured person” in sections 279 to 283 should not be read down so narrowly as to exclude a person seeking a determination of whether or not an accident occurred.

The question on appeal was whether determination of the ‘accident’ issue was a preliminary issue which fell outside the section 279 scheme. In other words, until Mr. Wright was found to have been involved in an accident, he was not an ‘insured person’ for the purposes of sections 279 to 283 and therefore could not avail himself of those sections.

Ayr Famers argued this was a “coverage issue” rather than a benefit entitlement issue. Accordingly, before the statutory scheme in sections 279 to 283 was triggered, coverage must first be determined.

The Court of Appeal found that the scheme in section 279 provided for a comprehensive alternative process to the courts, which included a separate administrative body for resolving disputes between claimants and insurers concerning entitlement to and amounts of benefits. Part of this statutory scheme involved limiting access to the courts and providing incentives for claimants to pursue arbitration rather than litigation. Accordingly, to interpret sections 279 to 283 in a manner which would require claimants or an insurer to apply to the court for a preliminary determination of whether the claimant qualifies as an “insured person” would be inconsistent with the creation of a comprehensive alternate dispute process. Given the legislative intent to create a comprehensive alternate dispute process, the Court found it unlikely that a “coverage application” would be required as a condition precedent to accessing such a process.

Further, the Court found it unlikely that the legislature intended to create a bifurcated process which required a court application prior to advancing the claim under section 279 of the Insurance Act. The Court did acknowledge this could be more expeditious if it were ultimately determined the claimant would not qualify as an “insured person”; however, it would deprive the claimant of their right under sections 279 to 283 to make the choice of forum.

Finally, having regard to the purpose and scheme of the Act, the Court of Appeal determined that the term “insured person”, in section 279, can reasonably be read as encompassing all persons claiming entitlement to benefits, whether or not it is ultimately determined that they are entitled to benefits. In this regard, the Court of Appeal adopted the “modern approach” to statutory interpretation which requires the statute to be read in a manner which accorded with the scheme and object of the Act and the intention of Parliament. The Court of Appeal also applied a purposive analysis, noting that a statute cannot be construed in such a way as to defeat the object and intent of the legislation, which in this case was providing coverage to the insured person. In other words, given that the legislature had enacted the dispute resolution provisions and created the statutory body (OIC/FSCO) and empowered OIC/FSCO to provide an alternative to the courts, the purpose of sections 279 to 283 was to be inclusive of all entitlement issues rather than exclusive.

While it is tempting to dismiss this decision as anachronistic, given the changes to the dispute resolution process effective April 1, 2016, this decision raises some interesting considerations applicable to the post-April 1, 2016 regime.

The Court of Appeal noted specifically that the arguments on appeal were largely confined to the dispute resolution process as it existed until March 31, 2016, and that the judgment should not be read as opining on the post-April 1, 2016 amending scheme. This comment suggests that the judgment may not be applicable to determinations on a go forward basis.

Section 280(1) of the Insurance Act currently uses the term “insured person” in mandating the LAT as the forum for disputes concerning entitlement to statutory accident benefits or in respect of the amount of such benefits.

Section 280(3) provides that no person may bring a proceeding in any court with respect to such a dispute other than as an appeal from the LAT or an application for judicial review.

As the definition of “insured person” has not changed from the previous wording, similar reasoning would likely apply to prevent parties from going to court for preliminary coverage issues. Furthermore, to suggest that section 280 of the Insurance Act limits access to the courts would be an understatement, given the explicit wording in section 280(3). That said, however, some of the rationale applied by the Court of Appeal is less likely to have traction in the post-April 1, 2016 regime. For instance, the Court of Appeal noted specifically that at the time that statutory accident benefits were introduced, the legislature created a specialized tribunal, the Ontario Insurance Commission (predecessor to the Financial Services Commission) as regulator of the insurance industry. The Court of Appeal specifically noted that FSCO was given a broad mandate which included regulatory, supervisory and dispute resolution responsibilities and powers. The Court of Appeal specifically noted that FSCO had been cited (ironically) with approval by the Court of Appeal for decisions on entitlement and had been described by the Court of Appeal as “a specialized body of arbitrators who routinely adjudicate claims for statutory accident benefits”.

Clearly, with the dismantling of FSCO’s dispute resolution process and the empowerment of the Licence Appeal Tribunal, the Court of Appeal’s rationale is less compelling. The Licence Appeal Tribunal cannot in any way be considered as a “new regulator of the insurance industry.” Given its broad mandate to adjudicate disputes under a myriad of statutes, it could not be considered “a specialized body of arbitrators who routinely adjudicate claims for accident benefits.” Furthermore, the post-April 1, 2016 amendment eliminating the forum ‘choice’ between litigation and (FSCO) arbitration, eliminates any ‘incentivization’ to proceed in a specialized forum. Therefore, certain elements of the purposive analysis enunciated by the Court of Appeal would have less application.

Furthermore, section 280(3) limits court proceedings to appeal of a LAT adjudicator’s decision and/or judicial review. It is clear from the Insurance Act itself that the courts will be called upon as the highest arbitor of statutory accident benefits disputes. Accordingly, the argument in favour of preliminary “coverage” determinations by the courts, who will in any event, be the ultimate arbitors of the issue, suggests engagement of the courts at the earliest (“coverage”) stage would be a more expeditious route. In other words, if the courts are ultimately going to decide the disputes between the parties, it makes sense that this be done sooner rather than later.

The application process under Rule 14 of the Rules of Civil Procedure allows for:

“The determination of rights that depend on the interpretation of a … contract or other instrument, or on the interpretation of a statute, order-in-council, regulation …”

This process appears to be designed to expeditiously adjudicate coverage issues such as “accident” issues. While the Rules specify that an application may be brought in respect of any matter where it is unlikely there will be any material facts in dispute, presumably, well-intentioned counsel could agree on the basic facts, so as to have the ‘coverage’ matter expeditiously determined by the courts, who would be the ultimate arbitors in any event.

As for Mr. Wright, it appears that he has had his day in court whether he intended it or not.