The insured’s action against her insurer for bad faith handling of her SABs claim is barred by the dispute resolution provisions of section 280 of the Insurance Act.

Insurance law – Automobile insurance – Statutory provisions – Bad faith – Damages – Punitive damages – Aggravated damages – Actions – Appeals

Stegenga v. Economical Mutual Insurance Co., [2019] O.J. No. 3845, 2019 ONCA 615, Ontario Court of Appeal, July 19, 2019, D.M. Brown, L.B. Roberts and B. Zarnett JJ.A.

The insured was injured in a motor vehicle accident. For about three years, the insurer allegedly did not advise the insured or her parents that her injuries qualified as a catastrophic impairment or inform them of the Statutory Accident Benefits (“SABs”) available for such an impairment. The insured commenced an action alleging the insurer acted in bad faith, prolonged the insured’s suffering and caused new difficulties and impairments she would not have otherwise experienced. The insured sought punitive, aggravated and exemplary damages.

The insurer succeeded on a motion to strike the insured’s claim on the basis that the Licence Appeal Tribunal (“LAT”) held exclusive jurisdiction to decide the insured’s claim at first instance by virtue of section 280(1) of the Insurance Act, R.S.O. 1990, c. I.8 (the “Act”). The insured appealed.

The Court dismissed the insured’s appeal. The Court reviewed the SABs statutory scheme and found that the SABs Schedule and section 10 of Automobile Insurance, R.R.O. 1990, Reg. 664 directly contemplate the LAT making determinations about how an insurer has handled a claim and granting relief beyond the payment of SABs when payments have been “unreasonably withheld or delayed”. The Court found the expansive language of section 280(1) covers a wide array of SABs-related disputes including disputes about when an insurer’s obligation to provide SABs should have been performed and how the obligation should have been performed.

Even though a bad faith claim may be a distinct cause of action from a claim for payment and indemnity under an insurance contract, this does not automatically take a bad faith claim outside of the scope of section 280. Section 280 is not limited to claims under an insurance contract. It also covers disputes about the manner in which a claim was handled. If the court action were to proceed, a court would have to determine the amount of benefits the insured was entitled to and when they should have been paid to the insured. The Court held these are predicate determinations exclusively within the LAT’s jurisdiction under section 280(2) of the Act that cannot be decided by court proceedings by virtue of section 280(3) of the Act.