1

IN THE MATTER OF THE INSURANCE ACT, R.S.O. 1990, c. 1.8AND 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:

SASKATCHEWAN GOVERNMENT INSURANCE COMPANY

Applicant

- and ­

LOMBARD CANADA INC. and HER MAJESTY THE QUEEN IN RIGHT OF ONTARIO AS REPRESENTED BY THE MINISTER OF FINANCE

Respondents

AWARD

COUNSEL:

D. Kevin Carroll, Q.C. Counsel for the Applicant

Albert M. Conforzi Counsel for the Respondent, Lombard Canada Inc.

John Friendly Counsel for the Respondent, Her Majesty the Queen in right of Ontario as represented by the Minister of Finance

ISSUE:

Is Saskatchewan Government Insurance Company (SGI) barred by Ontario Regulation 283/95 under the

Insurance Act, R. S.O. 1990, c. 1.8, as amended and, in particular, Section 3 and Section 7(2), from

disputing with Lombard Canada Inc. and Her Majesty the Queen in right of Ontario as represented by the

Minister of Finance, its liability to pay accident benefits to Timothy Mullen?

RESULT:

Saskatchewan Government Insurance Company is not barred by Ontario Regulation 283/95 under the

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Insurance Act, R. S.O. 1990, c. 1.8, as amended and, in particular, Section 3 and Section 7(2), from

disputing with Lombard Canada Inc. and Her Majesty the Queen in right of Ontario as represented by the

Minister of Finance, its liability to pay accident benefits to Timothy Mullen.

HEARING:

This arbitration was held at the City of Toronto in the Province of Ontario on September 4th, 5th and 25th,

2001, before me, Bruce R. Robinson, pursuant to the provisions of the Insurance Act, R.S.O. 1990, c. I.8,

as amended.

WITNESSES:

Ms. Elke Paulsen was the only witness and was called on behalf of Lombard Canada Inc.

EXHIBITS:

The parties filed 55 exhibits. See Appendix "A" to this Award.

BACKGROUND:

The parties are agreed that Timothy Mullen was involved in a single car accident on June 17th , 1997. At

that time, he was a back-seat passenger in a 1975 Pontiac Parisienne driven by Curtis Joseph Hutt. The

licence number on this vehicle was a Saskatchewan licence plate number WMV 356. The accident took

place on Ridge Road/Shanty Bay Road, east of the City of Barrie in the Province of Ontario. Timothy

Mullen sustained serious injuries in the accident and was taken to St. Michael's Hospital in Toronto for

treatment.

It was agreed that Timothy Mullen had resided with his mother, Lynn Mullen, in Huntsville, Ontario, until

April of 1997, when he took a job with Buttigieg Farms as a general labourer.

Timothy Mullen was not a licensed driver and he did not own or lease a motor vehicle. He was not a

listed driver on anyone's insurance policy.

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His mother, Lynn Mullen, was the owner of a motor vehicle, which was duly insured with Lombard

Canada Inc. at the time of this accident.

Lombard Canada Inc. retained the services of Lindsey Morden Claims Services Limited in Toronto to

investigate this loss on their behalf. Mr. Martin Koretsky assigned Ms. Elke Paulsen the investigation on

June 19th, 1997. As a result of Ms. Paulsen's investigation, Lombard Canada Inc. refused to pay

statutory accident benefits. The Motor Vehicle Accident Claims Fund (the Fund) commenced paying

these benefits while it conducted it's own investigation. Subsequently the Saskatchewan Government

Insurance Company (SGI) took over payment from the Fund. SGI seeks to pursue recovery of benefits

it has paid to Mr. Timothy Mullen from Lombard Canada Inc.

LEGISLATION and DEFINITIONS:

INSURANCE ACT

Section 268

(1) Statutory Accident Benefits - Every contract evidenced by a motor vehicle liability policy, including every such contract in force when the Statutory Accident Benefit Schedule is made or amended, shall be deemed to provide for the statutory accident benefits set out in the Schedule and any amendments to the Schedule, subject to the terms, conditions, provisions, exclusions and limits set out in the Schedule.

(2) Liability to Pay - The following rules apply for determining who is liable to pay statutory accident benefits:

1. In respect of an occupant of an automobile,

(i) the occupant has recourse against the insurer of an automobile in respectof which the occupant is an insured,

(ii) if recovery is unavailable under sub-paragraph (i), the occupant has recourse against the insurer of the automobile in which he or she was an occupant,

(iii) if recovery is unavailable under sub-paragraph (i) or (ii), the occupant has recourse against the insurer of any other automobile involved in the accident from which the entitlement to no-fault benefits arose,

(iv) if recovery is unavailable under sub-paragraph (i), (ii) or (iii), the occupant hasrecourse against the Motor Vehicle Accident Claims Fund.

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MOTOR VEHICLE ACCIDENT CLAIMS ACT, R.S.O. 1990, c. M.41, as amended

Section 6(1) Statutory Accident benefits - Any person who has recourse against the Fund for statutory accident benefits under Section 268 of the Insurance Act may make application, in a form prescribed by the Minister, for payment out of the Fund of the benefits.

(2) Idem - If a person has recourse against the Fund under Section 268 of the Insurance Act,

(a) a reference to an insurer in the Statutory Accident Benefits Schedule shall be deemed to be a reference to the Fund and a reference to an insured person shall be deemed to b e a reference to the person who has recourse against the Fund; and

(b) sections 272, 274 and 279 to 287 of the Insurance Act apply with necessary modifications.

(3) Idem - The Minister shall make payment out of the Fund of the amounts owing to a person described in subsection (2).

(4) Idem - Section 23(6) does not apply to payments under section S.O. 1993, c. 10, ss. 1, 54(2); S.O. 1993, c. 27, Sch.

Ontario Regulation 283195 "Dispute Between Insurers" states as follows:

3 (1) No insurer may dispute its obligation to of the Act unless it gives written notice completed application for benefits to erequired to pay under that section.

pay benefits under within 90 days of

very insurer who

Section receipt

it claims of

268 a is

(2) An insurer may give notice after the 90 day period if,

(a) that and

90 days another

was not a sufficient period insurer or insurers is liable

of time under

to make a Section 268

determinof the

ation Act;

(b) the insurer made the reasonable investigations necessary to determine if another insurer was liable within the 90 day period.

(3) The issue of whether an insurer who has not given notice within 90 days has complied with subsection (2) should be resolved in an arbitration under Section 7.

7 (1) If the insurers cannot agree as to who is required to pay benefits or if the insured person disagrees with an agreement amongst insurers that an insurer other than the insurer selected by the insured person shall pay the benefits, the dispute shall be resolved through an arbitration under the Arbitration Act, 1991.

(2) The insurer paying benefits under Section 2, any other insurer against whom the obligation to pay benefits is claimed or the insured person

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who has given notice of an objection to Section 5, may initiate the arbitration, but after one year from the time the insurer first gives notice under Section 3.

a change in no arbitration

paying benefits

inmay under

surbe

ers

Se

under initiated ction 2

10 (1) If an insurer who receives notice under Sto pay benefits on the basis that other giving notice, have equal or higher priority it shall give notice to the other insurers.

ection 3 disputes insurers, exclunder Section

uding 268

its

of the

o

the

bligation insurer

Act,

(2) This regulation applies to the other insurers that it applies to the original insurer given notice unde

given notice r Section 3.

in the same way

(3) The dispute amongst the insurers shall be resolved in one arbitration.

DEFINITIONS: Black's Law Dictionary, Abridged Sixth Edition, 1991

"Initiate" Commence; start; originate; introduce; inchoate.

The Concise Oxford Dictionary of Current English, Seventh Edition, 1982

"Initiate" begin, set going, originate; admit (person)

Webster's Ninth New Collegiate Dictionary

"Initiate" 1: to cause or facilitate the beginning of: set going 2: to induct into membership by or as if by special rites

EVIDENCE AND FINDINGS:

Ms. Paulsen gave evidence that she has been in the insurance industry for approximately 17 years and

had worked with Lindsey Morden for the past 7 years. Her long experience in motor vehicle accident

matters involved tort and accident benefit claims. Her past work involved investigating both accident

benefit claims and, claims for bodily injury for various insurers. It is not disputed that Lombard Canada

Inc. received a telephone call from Lynn Mullen on June 19`", 1997 at about 9:30 a.m. advising them of

her son's accident. An employee of Lombard Canada Inc. opened a claims file and prepared a Notice of

Claim form which was given to Ms. Paulsen. Her writing appears in this form. Other employees of Lombard

Canada Inc. completed the writing at the top and bottom thirds of the page.

At the top of the Notice of Claim Form is the notation "ASAP" which I take to mean "as soon as possible".

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At the bottom, the writing states as follows,

"concurrent interest injuries shown as number 3 (major injuries) " Particulars: Ins. son Timothy in a friend's vehicle. Driver lost control and hit a tree. Sonis seriously injured. Was flown to St. Michael's.

Principal is requesting a police report, complete set of forms ...son's dependency crucial."

Ms. Paulsen understood that her job was to meet with Ms. Mullen, obtain a statement, and provide the

Statutory Accident Benefits claim forms. She met with Ms. Mullen on June 25", 1997 at St. Michael's

Hospital: Ms. Paulsen described Lynn Mullen as upset, confused, emotional, and very distraught. The

meeting took between 3 and 3 '/Z hours in the corridor of the hospital. Ms. Paulsen confirmed that Ms.

was an unsophisticated person when it came to issues involving the Statutory Accident Benefits

Schedule and the Insurance Act. Ms. Paulsen prepared a statement at the hospital, had it printed and

signed on June 25'", 1997. Ms. Paulsen's questions were directed to the issue of "dependency". Her

questions to Ms. Mullen were an attempt to illicit information in that regard. At no time did she explain the

meaning of "dependency" under the appropriate legislation, and I find as a fact that she did not make any

mention to Ms. Mullen that Lombard Canada Inc. had a valid policy of insurance and might be exposed to

this claim for benefits by her son. It was Ms. Paulsen's opinion, from the information supplied by Ms.

Mullen, that Timothy Mullen was not financially or physically dependent upon his mother at the time of the

accident.

I find the statement taken from Ms. Mullen on June 25`", 1997 was taken under extremely emotional

conditions and it is in contrast to contents of the statement given by Paul Buttigieg, on September 23rd ,

1997, wherein he indicated that Timothy Mullen was "general farm help that was only summer

employment until he went back to school in September". A statement taken from Timothy Mullen on

October 20`", 1997 by Cheryl J. Easton of Lindsey Morden Claims Services Inc. in Barrie is also in sharp

contrast to the original statement taken by Ms. Paulsen. In that statement Timothy Mullen states:

“We lived in Thornton until January 1997 when we moved to Huntsville. Our address wasRR #2, Thornton, LOH 2N0. While I was in Thornton, I did work part-time at ButtigiegFarms on the weekends - I would have earned about $114.00 1 weekend. I start

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working for them around December / 97 or January / 97. I did not work for them regularly - only the odd weekend in 1996."

Timothy Mullen also worked as a general labourer for J. C. Drywall for about a week in approximately

April of 1997. He indicated that when he started working at Buttigieg Farms, it was his intention to return

to school and to return to living with his mother. These facts were not known by Ms. Paulsen on June

25th, 1997.

At St. Michael's Hospital, Ms. Paulsen produced a copy of the Accident Benefits Application package (Bill 59) and,

in fact, ticked off the boxes in questions 1 to 3 on behalf of Ms. Mullen. Furthermore, and more importantly, she filled

in the address of the Motor Vehicle Accident Claims Fund (MVACF) at the top of page 3. 1 find this extremely

important as this is the address, and the entity, to whom the claim for accident benefits is to be provided. I find as

a fact that Ms. Paulsen did not provide any alternative, such as Lombard Canada Inc., for the addressee and no

explanation to Lynn Mullen as to the possible exposure of any other insurer, including Lombard Canada Inc. It is also

important to consider that Ms. Paulsen introduced herself as the person investigating this claim on behalf of Ms.

Mullen's own insurer, Lombard Canada Inc. It appears that after the meeting at the hospital, Ms. Mullen contacted

Ms. Paulsen on several occasions requesting assistance in finding accommodation in Toronto as she was sleeping

on a bench at the hospital outside her son's room in the neurological department. I find from these facts that Ms.

Mullen was relying upon Ms. Paulsen and, through her, her own insurance Lombard Canada Inc., to assist her and

her son after this tragic accident. Both at the hospital and in subsequent conversations, Ms. Paulsen told Ms. Mullen

to go directly to the Motor Vehicle Accident Claims Fund for benefits and accommodation.

Ms. Paulsen supplied Lombard Canada Inc. with her "first and final" report dated June 26`", 1997 and indicated in

that report the home address of both Lynn Mullen and Timothy Mullen as being the mother's address. With regard

to the Statutory Accident Benefit application forms, she stated in her report as follows:

"We have provided your Insured with an Application for Accident Benefits. She has been instructed to complete this in full and return the Application to the Motor Vehicle Accident Claims Fund as outlined on page 2 of 7 of the Application. "(Emphasis added)

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At the bottom of her report, she goes on to indicate:

"We trust this concludes our assignment, having investigated Mr. Mullen to be financially independent of your Insured. We enclose a copy of the detailed signed statement, the dependent worksheet, and our final fee for services. If we can be of any further assistance, please do not hesitate to contact the writer."

I find as a fact, having listened to the evidence of Ms. Paulsen and reviewed her reports, that she, on her, own,

made a decision that the Lombard Canada Inc. policy would not respond to this loss. I find this to be most unusual

given the fact that Ms. Paulsen has indicated her long expertise in the accident benefit area. She confirmed having

taken various courses through the Insurance Institute and through in house lectures, and having available to her

the Practice Bulletins, Directives and Notices, both in written form and on her computer. The Accident Benefit

Package contains the "Guideline for Statutory Accident Benefit Applications, The Claims Process and the Mediation

Process (Bill 59)". Under the heading Principles for Statutory Accident Benefits Applications and Claims Process

"Insurer's Responsibilities", it states:

"Inform claimants about the kind of accident benefits that are available under the SABS, let claimants know all the procedures to be followed and documentation needed when applying for benefits. When asked, insurers must give a copy of the SABS without charge to any person entitled to benefits.

Give claimants the application for benefits package and other applicable forms and help claimants complete all forms."

Under the guideline provisions, it states:

"The purpose of this guideline is to help insurers and claimants understand their rights and responsibilities when dealing with statutory accident benefit claims. Above all else, there is an obligation on both insurers and insured persons (referred to as "claimants" in this guideline) to act fairly with each other in making an application for benefits and in processing claims." (My emphasis added)

I find that Ms. Paulsen, either innocently or mistakenly, came to the conclusion that Timothy Mullen was not a

"dependent" of his mother and therefore no benefits should be paid by Lombard Canada Inc. to Mr. Mullen. While

I am not required to make nor am I making any finding on the issue of "dependency" in this case, I land that the

actions of Ms. Paulsen deprived Ms. Mullen of an informed choice of Lombard Canada Inc. as opposed to naming

Motor Vehicle Accident Claims Fund on the Application for Accident Benefits (OCF-1/59) Form. The issue of

dependency will be left to be determined at a later date.

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As a result of the directions given to Ms. Mullen by Ms. Paulsen, I find that an incomplete application for accident

benefits was forwarded to the Motor Vehicle Accident Claims Fund (the Fund) on or about the 15`" day of July, 1997.

On July 18`", 1997, the Fund contacted Lombard Canada Inc. to determine if there was a policy in effect and

whether Lombard Canada Inc. had received an application. Mr. Martin Koretsky of Lombard advised that Mr.

Timothy Mullen was not an insured under his mother's policy.

Therefore the Fund commenced their own investigation of the loss and began making payments to the Mullen

family. It is at this point that things become more complicated because the Motor Vehicle Accident Claims Fund

retained the same office, Lindsey Morden, to adjust their claim. The branch manager, Teresa Kayahara, contacted

Ms. Mullen directly, assured her of immediate relief, and then assigned the file to Denise St. Amant to investigate.

At this time the Fund assumed that there was no insurer in place to assist the Mullen family and, therefore, they

stepped into this void to assist them. I would point out that Practice Note #9 issued by the Ontario Insurance

Commission deals with O. Reg. 283/95 - Dispute between Insurers states:

"This regulation insures that accident victims will not be denied statutory accident benefits simply because the first insurer applied to for benefits thinks another insurer should pay . . . . The first insurer cannot refuse to pay accident benefits on the basis that the insured person may have approached the wrong company."

Under Obligations of the Insurers:

"The regulation requires the insurer who first receives an application for benefits to consider any entitlement and adjust the claim as it would any other... It does not allow the insurer to ignore a claim where it believes another insurer is liable to pay under Section 268 of the Insurance Act."

Ms. Kayahara contacted Ms. Paulsen and requested 'a copy of her report of June 25`", 1997 which also included

the statement of Ms. Mullen under the same date. I find it highly unusual to have two adjusters in the same office,

working for totally independent clients, and clients who have conflicting interest, to share information. Ms. St. Amant

then assigns Donna Spark to interview Lynn and Timothy Mullen and to obtain information with regard to the claim

for Accident Benefits.

On July 27`", 1997, Donna Spark interviewed Lynn and Timothy Mullen and discovered that a statement had

previously been taken by Ms. Paulsen. Ms. Spark reported to Denise St. Amant in a letter dated July 29`", 1997. I

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find that there were several ongoing issues, including (i) whether or not Timothy was dependent upon his mother

and, (ii) due to having been given an incorrect car Saskatchewan licence number, whether or not there was valid

insurance coverage through Saskatchewan Government Insurance Company. (iii) There still had not been any

information obtained from the employer, Mr. Buttigieg, at this stage and Ms. Spark was following up on that aspect

of the claim.

Donna Spark prepared a Notice to Applicant of Dispute Between Insurers which she sent to Lynn Mullen on July

315`, 1997. It indicated Lombard as the Insurer required to pay the accident benefits. It appears that this was not

sent either to Lombard Canada Inc. or to Saskatchewan Government Insurance Company.

On August 14`", 1997, Mr. Roderic G. Ferguson, Q.C. of the law firm, Ferguson & Boeckle in Midland, Ontario,

wrote to Donna Spark, Elke Paulsen, and to Mr. Doug DeCou of the Saskatchewan Government Insurance

Company on behalf of his client, Timothy Mullen. He stated:

"As you know, for most of the year he lives with his mother, a single parent with two other school aged children in Huntsville. At the time of the accident, he was employed in a summer employment situation but had every intention of returning to school in the fall. We take the position that this youngster is dependent upon Lynn Mullen and that Lombard Insurance policy should respond and no further delay take place. I understand, however, that there is a dispute that it may be considered that Mr. Tim Mullen is not a dependent on Mrs. Lynn Mullen and therefore the insurer of the automobile in which he was a passenger should respond. Mr. Doug DeCou represents Saskatchewan Government Insurance Company, the nominal insurer of the vehicle.

I cannot emphasize too much how much stress this accident has placed on Mrs. Mullen and her other two sons in. To not be in receipt of assistance that our fabled no-fault auto insurance system is supposed to provide is a scandal."

Mr. Ferguson was attempting to set up a meeting of all interested parties to sort out the accident benefit claim but

prior to this on July 18`", 1997, Ms. Maria Gardanis, the claims coordinator of the Fund had written to Mr. Martin

Koretsky at Lombard Canada Inc. inquiring whether or not a valid policy of insurance was in effect, and if Lombard

would be processing the accident benefit claim of Tim Mullen. Mr. Koretsky replied in a letter dated July 25`", 1997

that Tim Mullen was not a named insured under their policy for the purpose of claiming accident benefits. The Fund

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commenced paying benefits from July of 1997 through to February 12, 1998, at which time the Saskatchewan

Government Insurance Company (SGI) assumed responsibility for adjusting the claim and continued thereafter to

pay benefits to Mr. Mullen. The Fund was reimbursed for their payments up to February 12`", 1998.

It is clear that Lombard was the first " insurer" to be advised of Mr. Tim Mullen's loss. The first notice was by

telephone call shortly after the accident on June 19`", 1997; then through their agent, Ms. Paulsen, and her delivery

of the Statutory Accident Benefit Package to Ms. Mullen; then the obtaining of information at the June 25`", 1997

meeting; then the letter from the Fund of July 18`", 1997; and the letter from Mr. Ferguson on August 21`", 1997 with

a "completed application for accident benefits".

During the Fund's initial investigation with regard to any insurance through SGI, an incorrect licence number had

been submitted to SGI. The number was corrected and, at that point I find that SGI entered into discussions with

the Fund with regard to taking over the claim on a without prejudice basis. I find from the evidence that from August

14`", 1997 until November 3'/, 1997 the Fund had been involved in a diligent pursuit of facts and a diligent

investigation to determine (a) whether or not there was insurance coverage in Saskatchewan and (b) whether or

not Mr. Timothy Mullen was dependent upon his mother. This investigation was conducted in spite of information

that had been supplied by Ms. Paulsen and was not complete until all information was gleaned from the appropriate

sources, including that of Mr. Paul Buttigieg.

The Fund initiated a Dispute Between Insurers in accordance with O. Reg. 283/95 on November 3`d, 1997 against

both Lombard Canada Inc. and Saskatchewan Government Insurance Company. The form was prepared by

Denise St. Amant of Lindsey Morden on behalf of the Fund. It was acknowledged by both SGI and Lombard Canada

Inc. that the Notice was received by them. By letter dated November 6`"; 1997, Mr. Martin Koretsky of Lombard

wrote to Denise St. Amant confirming that Lombard had provided Ms. Mullen with an Application Package and

"when we were first advised of this claim". The letter states "there is no liability under our insured's policy for this

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loss" and goes on to refuse to participate in a telephone mediation call scheduled for November 10, 1997.

On January 9`", 1998, Mr. Conforzi, who had been retained on behalf of Lombard Canada Inc., wrote to Denise St.

Amant (who was acting for the Fund) requesting that they abandon their Dispute Between Insurers as it related to

Lombard Canada. He wrote:

"If you are not prepared to do so, please appoint counsel so that we can discuss the selection of an arbitrator and affix a date for the hearing of this matter."

This was followed up by Mr. Conforzi in his letter of July 12`", 1998 where he states:

"Further to our letter to you of January 9`", 1998, may we assume from your silence you are no longer pursuing recovery against Lombard. We look forward to hearing from you in this regard."

Mr. Conforzi again wrote on October 5`", 1998, as it appeared that no reply had been received at that time.

I find that SGI, when it realized that there was a possible exposure on their policy, took the reasonable steps of

dealing with the Fund and taking over payment of benefits to Timothy Mullen. It further indicates that SGI intended

to pursue Lombard Canada Inc. and that they were aware that a Notice of Dispute Between Insurers had been filed

and received by said-company in November of 1997.

The firm of Ferguson and Boeckle wrote to Lombard Canada on August 215, 1997 enclosing "the completed

application for accident benefits regarding our client". Mr. Koretsky responded in a letter dated September 4th, 1997,

denying the application, returning the Application for Accident Benefits, and referred the Ferguson and Boeckle firm

to the "Fund".

Mr. Kevin Carroll wrote to Martin Koretsky at Lombard Canada Inc. on November 2"d, 1998 on behalf of SGI with

regard to the outstanding dispute between insurers and who should be paying the accident benefits. He suggested

that the matter proceed to an early arbitration date.

SGI was aware of the Notice of Dispute Between Insurers of November 1997 and wished to continue to resolve this

matter through arbitration with Lombard Canada Inc. On the evidence before me, I find that there was neither

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discontinuance nor abandonment of the claim by SGI against Lombard Canada Inc.

I find that Practice Directive No. 9 is well known to the insurance industry in general and that Ms. Paulsen and

Lombard were aware of its terms. As this legislation is remedial, its purpose and philosophy is to ensure that

the statutory accident benefits be paid to injured parties as quickly as possible. Any dispute between "insurers"

would be resolved by way of arbitration between those insurers. It is inappropriate and contrary to the

philosophy of the legislation and the regulations to refuse to pay benefits when an insurer is the first to receive a

completed application. The Regulation does not allow an insurer to simply ignore or to deflect such an

application.

I find that the Fund set things in motion within 90 days under Section 3(1) "within 90 days of receipt of completed

application". In the alternative, I find that the Fund was conducting "reasonable investigations necessary to

determine if another insurer" was liable vis a vis SGI and Lombard Canada Inc. under s. 3(2). On the facts as I find

them in this case, I would grant the appropriate extension required under s. 3 given the particular circumstances

of this case.

There is no definition of "initiate" neither in Ontario Regulation 283/95 nor in the Insurance Act. The Notice of Dispute

Between Insurers was issued and received on or about November 3`/, 1997 against Lombard and SGI. I find that

the correspondence emanating from Mr. Conforzi of January 9'", 1998 and May 12'", 1998 indicate that Lombard

considered the matter to be an open issue.

In Gore Mutual Insurance Co. v. Market Insurance Co. [1999] O.J. No. 2688 (S.C.J.) (Decision of Archibald J., June

25, 1999) at Page 3, Justice Archibald at paragraph 11 states as follows:

"The issue to be resolved by this Court is upon what basis can an applicant initiate an arbitration .... The only guidance provided to this Court are the relevant provisions of the Arbitration Act, 1991 and in particular, section 23. Section 23(1) of the Arbitration Act reads as follows:

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23(1) An arbitration may be commenced in any way recognized by law, including the following:

1. A party to an arbitration agreement serves on the otherparties notice to appoint or to participate in the appointment of anarbitrator under the agreement.

3. A party serves on the other parties a notice demandingarbitration under the agreement.

Counsel for the Applicant submits that the letter of July 3, 1998 constitutes service on the other party of a notice demanding arbitration under the agreement. Counsel submits that the agreement in this case is the Insurance Act and Ontario Regulation 283/95. I agree with that submission."

This case indicates that letters can be sufficient to "initiate" the arbitration. Arbitrator Makepeace in the decision of

Ready and Progressive Casualty Insurance Company, O.LC., File No.: A-005403 deals with a dispute between

Progressive Casualty Insurance Company and Zurich Insurance Company over who should pay benefits. The

insured had approached Progressive first who denied his benefits, and he then applied to Zurich who paid the

benefits. Arbitrator Makepeace placed:

"no significance on the fact that Mr. Ready never completed and filed an Application for Accident Benefits form for Progressive . . . . Accordingly, it appears that Progressive denied benefits before Mr. Ready had a chance to complete the application forms. The Statutory Accident Benefits scheme was intended to provide for speedy and informal adjustment of claims. It would contravene the remedial character of the legislation to allow Progressive to frustrate Mr. Ready's election under Section 268 (5) simply by denying benefits before Mr. Ready had filed a written application form."

Arbitrator Makepeace goes on to comment,

"Finally, Zurich's conduct in paying benefits pending resolution of the dispute with Progressive was consistent with the remedial character of the statutory accident benefits scheme."

She found that Progressive was liable to pay the benefits to Mr. Ready. This decision was upheld on appeal by

Director's Delegate Naylor on June 25`", 1997 where at page 8 she states as follows:

"She (Arbitrator Makepeace) relied on the fact that Mr. Ready approached Progressive first, and applied to Zurich only after receiving Progressive's letter indicating that benefits were not available. In my view, her finding that Mr. Ready decided on Progressive was reasonable and supported by the agreed facts.

Progressive appeals the arbitrator's finding that Zurich's subsequent payment of benefits did not stop Zurich from disputing liability. Progressive did not expand on this ground of appeal and I am puzzled by it. According to the undisputed findings, Zurich put Progressive on notice from the outset that it would pay under protest. Progressive also apparently agreed at mediation that it would not raise an estoppel against

15

Zurich. In these circumstances, there is little merit to Progressive's position."

In the present case, Lombard, through its agent Ms. Paulsen, made a decision at St. Michael's Hospital on the

evening of June 25th, 1997 that their policy would not respond, and Mr. Koretsky maintained this decision

thereafter. Ms. Paulsen directed the application form to be sent to the Fund, ignoring the fact that the first notice

of the claim was to Lombard Canada Inc. The Notice of Dispute Between Insurers filed by the Fund and the

ongoing correspondence amongst the three parties to the dispute indicated that all parties contemplated an

arbitration and, therefore, issue estoppel would not apply to these facts.

I find on the evidence in this case that it is not necessary under the legislation, for SGI to serve a separate Notice

of Dispute Between Insurers upon Lombard Canada Inc. The Notice served by the Fund on Lombard Canada Inc.

was sufficient and in compliance with the regulations. Lombard was not deprived of their right to investigate or

caught by surprise when the matter proceeded to arbitration. The evidence is clear that the Fund never received

a completed application, SGI has never received any application for accident benefits and that Lombard received

a completed application form in the letter of August 21st, 1997 from the Ferguson and Boeckle law firm.

In the decision of Mr. Justice Nordheimer in State Farm v. Her Majesty the Queen, 53 O.R. (3d) 436, Justice

Nordheimer considers the purpose of s. 3 and agrees with the decision of Mr. Galligan, Arbitrator, in Canadian

General Insurance Company v. AXA Insurance Company (December 19`", 1996) and the decision of Arbitrator

Robinson in Cooperators v. State Farm Mutual Automobile Insurance Company (May 19`", 2000). In the latter

decision, Justice Nordheimer quotes from the decision in his paragraph 12 as follows:

"I find that Ontario Regulation 283/95 was put in place to avoid confusion and prejudice in disputes between insurers. It provided a simple procedural scheme to assist insurers in dealing with disputes in a prompt and efficient manner, while ensuring that the injured party received accident benefits. It furthermore put in place a limitation period with a provision to extend to review the reasonableness of that period. This limitation period allows and encourages each of the insurers to deal expeditiously with their disputes."

Justice Nordheimer indicated that he would more accurately describe this as a notice period and not a limitation

16

period. At paragraph 30, he goes on to state:

"In that regard, the section is really directed toward the ability of the insurer to gather the necessary factual information to make a determination as to whether its policy or the policy of another insurer should answer for the benefits to be paid."

That is definitely the situation that presented itself to the Fund in this case. The Fund was left with attempting to

obtain a proper statement from Lynn and Tim Mullen as to his status as a dependent and to ascertain whether or

not there was insurance on a vehicle in Saskatchewan. I find that their attempts to investigate were reasonable

given the complexities. that arose out of the initial investigation by Ms. Paulsen and the possible conflict between

two adjusters at the same firm acting for divergent interests.

I agree with Arbitrator Galligan in his decision in Canadian General Insurance Company and AXA at page 4 where

he states:

"It is my view that in order to obtain the benefit of subsection (2) the insurer must establish that, because of the peculiar circumstances of an individual case, the 90 day period was not sufficiently long for a determination of the issue."

I find those “peculiar circumstances" in this case.

With regard to the definition of "completed" application I have been referred to the decision of Arbitrator Kirsch in

Sebastian and Canadian Surety Company, O.LC. File No. A-011358 dated February 9`", 1996. At page 16 of that

decision, she states as follows:

"When I consider the term "completed" application I must look at what makes the most sense given the remedial nature of the statute.

I find that the term "completed in section 24(1) should be given its plain and ordinary meaning. Taken literally and on its face, the section means that the application for accident benefits is finished and interest is owed within 30 days after the application is received by the insurance company."

The plain and ordinary meaning of the word "completed" are sufficient for our purposes given the facts in this

particular case.

I find that from August 1997 to the November 3`/, 1997 notice, the Fund was still in the process of gathering

17

information with regard to all aspects of this claim. The statement of the employer dated September 23`/, 1997

indicated "summer employment" and more importantly, that Mr. Mullen would be returning to school in September.

The original incomplete application, which was sent to the Fund, was time stamped received July 15th", 1997. The

Employer's Confirmation of Income Form was not signed, nor dated. This form does not surface until mid or late

September 1997 when that form is forwarded to Lombard Canada Inc. by the law firm of Ferguson and Boeckle.

It is further important to refer to the November 2"d, 1998 letter from SGI's counsel, Mr. Carroll, to Martin Koretsky

at Lombard Canada Inc. This letter confirms the dispute in question amongst Lombard, Fund and SGI and requests

that the arbitration be proceeded with. This is within the one year period set forth in s. 7(2) of O. Reg. 283195.

I therefore find that the Fund never obtain a signed, dated, and completed application until either September 18`"

or September 25th", 1997; therefore, the 90 day period referred to in s. 3(1) has been complied with as the notice

is issued and received on November 3rd, 1997.

The reported cases that I have been referred to on the issue of notice deal with insurers giving notice to other

insurance companies. In this matter we have a unique case involving the Fund. It is therefore necessary to look at

the special status of the Motor Vehicle Accident Claims Fund.

The Fund is not an "insurer". The Fund was established under the Motor Vehicle Accident Claims Act, R.S.O. 1990,

c. M.41, as the "payor of last resorts" available to Ontario residents who do not have recourse to an insurer. There

are several cases, which deal with the status of the Fund, and I will refer to only a few of them. In Miller v. Gibbons

(1976), 10 O.R. (2d) 301, Mr. Justice Lacourciere, speaking on behalf of the Court of Appeal, reviews the prior law

and, in particular, refers to comments made by Chief Justice McRuer in Re Telfer and Telfer v. Kerr and Seager,

[1949] O.R. 232 at p. 234, as follows:

"In Re Macbeth v. Curran, [1948] O.R. 444, [1948] 3 D.L.R. 85, Mr. Justice Gale considered the purpose of the statute here in question and laid down some principles to be applied in the exercise of the discretion

18

vested in the Court . . . the object of the legislation is to relieve against hardship and to provide a fund in the nature of a free reinsurance scheme for insurers of those who have suffered damage as the result of the operation of motor vehicles, or any means by which insured persons may be twice compensated for injuries sustained. As I indicated on the argument, this is a public fund set up by means of a levy on all licensed operators of automobiles, and is to be regarded as a sort of last resort."

Similar sentiments are expressed by Justice Blair in the Court of Appeal decision in Minister of Consumer and

Commercial Relations v. Employers Mutual Liability Insurance Company of Wisconsin, 28 O.R. (2d) 397. At page

400, Justice Blair states as follows:

"The Courts have from the beginning emphasized the dual purpose of the Act. The Fund was created to avoid hardship and, as a result, the Act has been liberally and beneficially interpreted to ensure payment to persons injured by uninsured vehicles. At the same time, the Courts have been vigilant to ensure that no profit is made at the expense of this public fund."

He then goes on to adopt the dictum set forward above in the Miller decision. At page 402, he goes on to

state:

"It is clear that the Legislature intended that payments from the Fund should not be delayed until disputes about insurance coverage are judicially resolved or every possibility of the discovery of insurance coverage has been eliminated. If this were not so, the public would be deprived of the protection afforded by the statute because prompt settlement of claims against the Fund would be impeded . . . . It can never be known whether a proper search was directed to determine if a record of the insurance policy was on file in the appropriate department. The liability of the respondent is not affected by any lack of diligence on the part of the appellant."

Madam Justice Dunnet in Peake v. Canadian Surety Co., 13 O.R. (3d) at 344 dealt with the issue of nofault

benefits and claims brought against the Motor Vehicle Accident Claims Fund. She reviewed the priority

provisions of s. 268 of the Insurance Act and indicated that the MVACF was the last on the list. At page 349,

she stated:

"The rules governing the operation of this section continue until a claimant looks to all potential insurers in subparagraphs (i), (ii) and (iii) before a claim can be made against the Fund. The claims must be made in the order established under the section."

At page 350, she goes on to state:

"The determination of liability for payment of no-fault benefits under any available policy of automobile insurance is a condition precedent to the plaintiffs recourse to the Fund. Although she is entitled to apply to the Fund, there is no less a requirement on her to seek out potential insurers under the Act . . . . Should recourse against the Fund be automatic once the insurer simply denies coverage? I think not. It would lead to the result that potential insurers need only advise a claimant that coverage is denied before access to the Fund need be sought."

19

Madam Justice MacFarland in Ontario Minister of Finance v. Allstate Insurance Co. [2001 ] O.J. No. 1181 dealt

with a claim wherein the Fund had paid benefits and was seeking to recover these benefits from Allstate Insurance

Co. At paragraph 12 she states:

"The MVACF is not an insurer. It is a statutory body created by the legislature as a payor of last resort to provide a fund by which payment can be made to accident victims who would otherwise fall through the cracks where insurance coverage is absent."

At paragraph 13, she states:

"The scheme of the various legislative provisions is to provide for prompt payment to accident victims leaving the sorting of who pays later. It is in this vein that the MVACF began to pay Tran in the circumstances of this case. It is apparent from the correspondence quoted at the beginning of these reasons that the availability of insurance coverage was very much up in the air and there is nothing in the record where it is stated nor from which it might reasonably be inferred that MVACF had unequivocally accepted responsibility to pay these claims - to borrow the language of Davarzan J. in Blanchard, supra."

While the Justice found that the handling of the file by the adjuster left something to be desired, the judgment went

against the insurer for repayment of movies paid out.

I find that the position of the Fund under s. 268 of the InsuranceAct places them at the bottom of the priority ladder.

Furthermore, the Fund is not obliged to pay accident benefits under the provisions of the Insurance Act. We must

look to the Motor Vehicle Accident Claims Act, R.S.O. 1990, c. M.41, as amended and, in particular, Section 6(1)

which states as follows:

6.(1) Statutory Accident Benefits - Any person who has recourse against the Fund for statutory accident benefits under section 268 of the Insurance Act may make application, in a form prescribed by the Minister, for payment out of the Fund of the benefits.

In the usual course payments are made but recovery is pursued by the Fund if an insurer raises its head later.

In the Statutory Accident Benefit Package, which is required to be given to all claimants, there is no reference to

the MVACF whatsoever nor is there any mention of the Fund in Practice Note No. 9 which deals with disputes

between insurers under Ontario Reg. 283/95.

20

In this case, I find a very unusual situation has arisen. Lombard has placed the Fund in the primary position for

payment of accident benefits. This is a complete reversal of the priority provisions set out in s. 268 of the Insurance

Act. I find that there was a diversion of the claim for accident benefits, either mistakenly or innocently, arising on

the evening of June 25th", 1997 and continuing thereafter.

Both the Fund and SGI came in as required in order to fulfill their obligations under the provisions of the Insurance

Act to Ms. Mullen and her son Timothy Mullen. The Fund was able to complete its investigation and to issue the

appropriate Notices of Dispute Between Insurers. I find that the SGI is not barred by Ontario Regulation 283/95

under the provisions of the Insurance Act from disputing with Lombard Canada Inc. its liability for accident benefits

paid to Timothy Mullen. I find that there has been compliance with s. 3 due to the actions of the Fund, that an

appropriate notice was given within 90 days of receipt of the completed application, and that the initiation of the

arbitration took place within the year as provided under provisions of s. 7(2). If I am in error with regard to s. 3(1),

I would grant an extension of the time available beyond the 90 day period due to the most peculiar circumstances

in this case and the amount of investigation that was required to ascertain the particulars of dependency and that

of insurance with regard to a motor vehicle in Saskatchewan.

On the evidence, I find that Saskatchewan Government is not barred by Ontario Regulation 283/95 from disputing

its liability to pay accident benefits to Timothy Mullen with Lombard Canada Inc. and Her Majesty the Queen in the

right of Ontario.

COSTS:

The parties have agreed that costs in this matter will follow the cause. I therefore find that Lombard Insurance Inc.

will pay the costs of the Saskatchewan Government Insurance Company and Her Majesty the Queen in Right of

Ontario as represented by the Minister of Finance. The parties may speak to me with regard to assessment or fixing

of these costs.

21

22

REMAINING ISSUES:

The parties may speak to me about the issues that remain outstanding.

ORDER:

1. Saskatchewan Government Insurance Company may proceed with its arbitration against

Lombard Canada Inc.

2. Lombard Canada Inc. will pay the costs of Saskatchewan Government Insurance Company and

Her Majesty the Queen in Right of Ontario as represented by the Minister of Finance.

DATED at Toronto this 15 day of November, 2001.

Bruce R. Robinson, Arbitrator

23

APPENDIX "A" - LIST OF EXHIBITS

1. Notice of Claim to Lombard - June 19, 1997

2. Notes of Elke Paulsen

3. Statement of Lynn Mullen - June 25, 1997

4. Application for Accident Benefits Package

5. Blank Application for Accident Benefits

6. Practice Note No. 9

7. Ms. Paulsen's report of June 26, 1997

8. Letter of August 14, 1997 from Mr. Ferguson to Ms. Spark, Ms. Paulsen, and Mr. DeCou

9. Letter of July 18, 1997 from Ms. Gardanis to Lombard

10. Letter of July 25, 1997 from Mr. Koretsky to Ms. Gardanis

11. Letter of August 2, 1997 from S. Mitchell to Lombard

12. Faxed letter of September 26, 1997 from Ms. Spark to SGI

13. Faxed letter of October 27,'1997 from Ms. Dickie of SGI to Ms. St. Amant

14. Notice of Dispute Between Insurers and cover letter dated November 3, 1997

15. Letter of November 6, 1997 from Mr. Koretsky to Ms. St. Amant

16. Letter of December 4, 1997 from Mr. DeCou to Ms.St. Amant

17. Letter of January 6, 1998 from Ms. St. Amant to Mr. DeCou

18. Letter of January 9, 1998 from Mr. Conforzi to Ms. St. Amant

19. Letter of January 30, 1998 from Mr. DeCou to Ms. St. Amant

20. Letter of February 5, 1998 from Ms. St. Amant to Mr. DeCou

21. Letter of March 3, 1998 from Ms. St. Amant to Mr. DeCou

22. SGI cheque - March 5, 1998

23. Letter of June 12, 1998 from Mr. Conforzi to Ms. St. Amant

23A. Copy of Exhibit 23 with handwriting of Denise St. Amant

24

24. Letter of October 5, 1998 from Mr. Conforzi to Ms. St. Amant

25. Letter of November 2, 1998 from Mr. Carroll to all parties

26. Letter of March 16, 1998 from Mr. DeCou to Mr. Kerr

27. Letter of September 4, 1997 from Mr. Koretsky to Ferguson & Boeckle

28. Kayahara file - July 25, 1997

29. Bundle of correspondence for July 25, 1997 including assignment and correspondence of Ms. Spark

30. Report of Ms. Spark to Ms. St. Amant - July 29, 1997

31. Memo from Ms. Spark to Ms. St. Amant -August 5, 1997

32. Letter of July 30, 1997 from Ms. Spark to Ms. Lynn Mullen with draft statement

33. Letter of August 11, 1997 from Ms. Spark to Ms. St. Amant

34. Correspondence dated August 20, 1997 from Ms. Spark to Ms. St. Amant

35. Correspondence dated August 21, 1997 from Ms. Spark to Bracebridge office

36. Report of August 20, 1997 from Ms. Easton to Ms. St. Amant

37. ' Correspondence dated September 3, 1997 from Ms. Easton to Ms. St. Amant

38. Correspondence dated September 23, 1997 from Ms. St. Amant to Mr. Ferguson

39. Correspondence dated September 25, 1997 from Ms. St. Amant to Mr. Ferguson

40. Correspondence dated September 22, 1997 from Ms. Easton to Ms. St. Amant with Employer's Statement

41. Report of September 26, 1997 from Ms. Spark to Ms. St. Amant

42. Letter of September 3, 1997 from Ferguson & Boeckle to Buttigieg Farms

43. Employer's Confirmation of Income date stamped September 18, 1997

44. Letter of September 19, 1997 from Ms. Spark to Ferguson & Boeckle

45. Letter of September 22, 1997 from Ferguson & Boeckle to Ms. St. Amant

46. Employer's Confirmation of Income - single page - name of Lombard struck out

47. Report dated October 27, 1997 from Ms. Easton to Ms. St. Amant with statement of Tim Mullen

25

48. Correspondence from Ms. Spark to Ms. St. Amant with draft Notice to Applicant of Dispute Between Insurers, unsigned

49. Letter of July 31, 1997 from Ms. Spark to Tim and Lynn Mullen enclosing Notice of Dispute Between Insurers

50. Examination for Discovery Transcript of Susan Lynn Mullen

51. Undertaking letter with regard to discovery of Mr. DeCou

52. Lombard facsimile message of November 6, 1997 from Mr. Koretsky to Ms. St. Amant

53. Memo of May 14, 2001 from Carroll, Heyd, Chown with regard to undertakings

54. Examination for Discovery Transcript of Mr. DeCou - pages 129 and 130

55. Bulletin A-5195 from the Ontario Insurance Commission