Those that handle priority disputes in the insurance industry know that there is no shortage of decisions from private arbitrators regarding Ontario Regulation 283/95 and section 3(2) which sets out the 90 day notice period to that a first tier insurer is required to put a second tier insurer on notice.
What has emerged out of a recent line of arbitral decisions is a finding that a second tier insurer has the ability to put a third tier insurer on notice of a priority dispute BEYOND the 90 day period set out in s.3(2).
The recently released decision of Arbitrator Bialkowski dated December 19, 2016 went further to clarify the interaction of the provisions in the legislation that led him to his conclusions in his original decision of Certas Direct Insurance Company v. Security National Insurance Company (February 2, 2012), in addition to three other decisions released in 2011 and 2015.
The relevant sections of Regulation 283/95 considered in the recent Allstate decision state as follows:
2. (1) 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. (2) Subsection (1) applies in respect of benefits that may be payable as a result of an accident that occurs before September 1, 2010. … 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 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.
… 7. (1) If the insurers cannot agree as to who is required to pay benefits, the dispute shall be resolved through an arbitration under the Arbitration Act, 1991 initiated by the insurer paying benefits under section 2 or 2.1 or any other insurer against whom the obligation to pay benefits is claimed. … 10. (1) If an insurer who receives notice under section 3 disputes its obligation to pay benefits on the basis that other insurers, excluding the insurer giving notice, have equal or higher priority under section 268 of the Act, it shall give notice to the other insurers. O. Reg. 283/95, s. 10 (1). (2) This Regulation applies to the other insurers given notice in the same way that it applies to the original insurer given notice under section 3. O. Reg. 283/95, s. 10 (2). (3) The dispute among the insurers shall be resolved in one arbitration. O. Reg. 283/95, s. 10 (3).
The facts of the dispute are simple. A motor vehicle accident occurred on June 22, 2008. The 13 year old claimant was a rear seat passenger in a vehicle that was rear-ended and driven at the time by a State Farm insured unbeknownst to anyone at the time.
Allstate was erroneously identified in the motor vehicle accident report as the insurer of the vehicle the claimant was in.
The claimant’s counsel submitted an OCF-1 to Allstate on November 22, 2013 and received by Allstate on the same date. Therefore the 90 day deadline for Allstate to put all other priority insurers on notice was February 20, 2014. Allstate sent a Notice to Applicant of Dispute Between Insurers to State Farm, the claimant’s father’s policy on January 21, 2014. State Farm wrote to Allstate on February 4, 2014 acknowledging the notice from Allstate and indicating that it refused to accept priority as it needed to establish if the claimant had coverage under any other policies. The Allstate adjuster left a voicemail State Farm on April 17, 2014 requesting an update. On April 22, 2014 Allstate pursued State Farm and indicated that the MVAR incorrectly identified Allstate as the insurer of the vehicle in which the claimant was a passenger.
On July 10, 2014 Allstate again wrote to State Farm and enclosed an Autoplus search dated June 9, 2014, for the claimant’s father. On August 19, 2014, State Farm advised Allstate that the claimant’s parents had a policy with Dominion in effect at the date of loss and that it was a regular auto policy.
On August 19, 2014, a Notice to Applicant of Dispute Between Insurers was provided by Allstate to State Farm and provided to Dominion. A Notice Demanding Arbitration was sent by Allstate to State Farm and Dominion under cover of letter dated November 18, 2014, which was served on State Farm and Dominion on November 19, 2014. Dominion received a separate Notice of Dispute Between Insurers on January 6, 2015, this time from State Farm pursuant to section 10 of O. Reg. 283/95.
The arbitrator had to determine whether Dominion was provided with proper and timely Notice of the priority dispute. More specifically, the issue was whether Allstate, as the first tier insurer, which did not provide Notice to Dominion of a priority dispute within 90 days as required by section 3 of Regulation 283/95, was somehow saved by notice having been provided by State Farm (as second tier insurer) to Dominion (as third tier insurer). It was also argued by Dominion that State Farm provided Notice beyond the required time under s.10 of Regulation 283/95
Ultimately, the arbitrator had to determine whether there was any time limit on notice of second tier insurer to a third tier insurer, and if so, what was a reasonable time for such notice.
Where Allstate was nine months out of the required 90 day period to put Dominion on notice, the Notice provided to Dominion by the second tier insurer State Farm was alleged to “save” Allstate from having not conducted reasonable priority investigations to determine all potential priority insurers within the 90 day period following receipt of the completed Application for Accident Benefits.
Dominion argued that a first tier insurer (Allstate) cannot be saved from its own failure to conduct priority investigations within the 90 day period pursuant to section 3 of Regulation 283/95 by subsequent Notice being provided by a second tier insurer (State Farm) to a third tier insurer (Dominion). That is, Allstate ought not be permitted to do through section 10 of Regulation 283/95 what it was required, but failed to do, by section 3 of Regulation 283/95. Dominion further argued that given the factual circumstances of the within dispute, State Farm ought to be held to a 90 day Notice Requirement under s.10 of Regulation 283/93. Dominion argued that Allstate did not conduct sufficient priority investigations within 90 days of receiving the OCF-1, apart from reviewing the MVAR and that had Allstate conducted such investigations, including the step of obtaining an Autoplus search on the claimant’s parents given that he was a minor, it would have been able to identify Dominion as a potential priority insurer, and would therefore have been able to provide Notice to Dominion within 90 days.
Dominion received Notice of Dispute on January 6, 2015, from State Farm which was 410 days following the receipt by Allstate of the completed OCF-1 on November 22, 2013, and 350 days from when State Farm received Notice from Allstate on January 21, 2014.
Dominion maintained that such delay was not in keeping with what ought to be the strict time lines that the legislation requires and relied on the appeal decision in Liberty Mutual Insurance Co. v. Zurich Insurance Co. (2007) 88 O.R. (3d) 629, where Justice Perell completed a thorough analysis of the case law relating to s.3 of Ontario Regulation 283/95.
Arbitrator Bialkowski noted that it should be kept in mind that Justice Perell was dealing with s. 3(2) and not s.10, and stated the difficulty with Dominion’s position where there were the four other decisions already decided that concluded that there was no time limit on a second tier insurer putting a third tier insurer on notice which all dealt with many of the arguments advanced by Dominion.
Arbitrator Bialkowski adopted the reasoning by Arbitrator Samis in Wawanesa v. Peel Mutual and Economical Mutual Insurance Company (January 28, 2011 and June 21, 2011) and concluded that the second tier insurer would unlikely have access to the kind or type of information and documentation available to the first tier insurer to conduct a thorough priority investigation, and so cannot be held to the same 90 day deadline. Conceivably, the second tier insurer might only have the Notice itself and no completed Application for Accident Benefits and no right to examine the claimant through the provisions of the Statutory Accidents Benefits Schedule as they are only available to the insurer presented with the application for accident benefits. The wording of section 10 provides no obligation on the part of the first tier insurer to provide the application, police report, Autoplus search or Examination Under Oath transcript which may be in their possession. Obviously, the second tier insurer would be in much disadvantageous position to that of a first tier insurer.
Arbitrator Bialkowski concluded that the importance of identifying the correct priority insurer was more important than applying a time requirement for notice not specified in clear and specific language in s.10. which had the absence of any wording creating a time limit for putting a third tier insurer on notice, and was satisfied that no such time requirement existed, EVEN where a first tier insurer likely had enough information to identify and put on notice a third tier insurer within 90 days of receipt of the OCF-1.
What we can interpret from this line of cases is straightforward: if a first tier insurer puts a second tier insurer on notice in a timely way, within the initial 90 days, the act of so doing will likely insulate them if they name the wrong insurer. So long as that second tier insurer adds another insurer as per the rights pursuant to section 10, that additional insurer can be added by the second tier insurer at any time. It does not appear to be the case that the identity of the third tier insurer being known or knowable by the first tier insurer within the initial 90 days is relevant, nor is it relevant that the second tier insurer may ultimately have no exposure to the priority claim when it seeks to add the third tier insurer.