Successful motion by the insurer for summary judgment dismissing the Motor Vehicle Accident Claims Fund's action because the Fund had commenced the arbitration process and, as a result, was unable to pursue litigation.

[2012] O.J. No. 4801

2012 ONSC 5381

Ontario Superior Court of Justice

R.F. Goldstein J.

September 25, 2012

In November 2008, Ms. Begum, a pedestrian, was struck by an uninsured driver. Ms. Begum claimed she was not covered under any other insurance policy and, as a result, Ms. Begum was eligible for benefits from the Motor Vehicle Accident Claims Fund (the "Fund").

A private investigator retained by the Fund learnd that Ms. Begum appeared to have a policy with McLarens Canada, an insurance broker. In July 2009, the Fund wrote to McLarens indicating that Ms. Begum appeared to have access to benefits through McLarens' principal. The Fund also stated, "please consider this our formal Notice of Dispute". The formal Notice of Dispute commenced the arbitration process under Ontario Regulation 283/95. McLarens was slow in responding and after the Fund followed up McLarens wrote to Ms. Begum requesting confirmation of her employer. Ms. Begum's reply was not helpful in determining coverage.

In July 2010, the one-year time period for commencing the arbitration after the receipt of a Notice of Dispute expired. The Fund subsequently learned that Ms. Begum's husband was insured by McLarens' principal and Ms. Begum had access to his insurance. The Fund then commenced an action against Zurich Insurance Co., McLarens' principal, and Ms. Begum.

Zurich brought a summary judgment motion arguing the Fund was prohibited from commencing a legal action because the arbitration process had been commenced.

The Court found that the Fund is an insurer and is bound to use the arbitration process, except in rare cases: Allstate Insurance Co. of Canada v. Motor Vehicle Accident Claims Fund, [2007] O.J. No. 292 (C.A.). In Ontario (Minister of Finance) v. Progressive Casualty Insurance Co. of Canada, [2009] O.J. No. 1216 (C.A.), the Court set out two questions that assist in identifying situations that constitute a proper case to permit a party to proceed by way of a restitution claim:

Having regard to the purpose of the provisions, the nature of s. 268 disputes, and the ongoing relationship of the parties to those disputes, the "proper case" exception exists for those cases where the merits of the dispute cannot be reached through the Dispute Regulation and there is no prejudice caused to the defending party by addressing those merits in the context of a restitution claim. Without laying down any hard and fast rules, I suggest that the answer to the two questions posed below will assist in identifying those cases that constitute a "proper case" to permit a party to proceed by way of a restitution claim:

  • Were the ultimate parties to the s. 268 dispute engaged in a dispute over payment of benefits within the time limits set out in s. 3 of the Dispute Regulation and did the parties, either expressly or by implication from their conduct, choose not to proceed under the Dispute Regulation?
  • Was arbitration in accordance with the process set out in the Dispute Regulation no longer possible when objection was first taken to a party proceeding by way of a restitution claim?

The Court concluded that the exceptions did not apply in this case. The Fund expressly chose to use the arbitration process by serving a Notice of Dispute and the Court concluded the real problem was that the Fund simply failed to follow up. Allstate Insurance Co. of Canada v. Motor Vehicle Accident Claims Fund stands for the proposition that the Fund cannot have it both ways by choosing when to pursue arbitration and when to pursue litigation. The Court concluded that the Fund could not pursue litigation simply because it missed the time limit for arbitration through its own inaction. As a result, the Court dismissed the Fund's action.