July 24, 2019 by Greg Meckbach
When the Ontario government moved accident benefits dispute resolution to the Licence Appeal Tribunal in 2016, it did not intend for two similar issues in a disputed claim to be adjudicated both in court and before the LAT, the Court of Appeal for Ontario suggests.
The ruling in Stegenga v. Economical Mutual Insurance Company, released July 19, nearly closes the door to claimants wanting to pursue bad-faith claims against their accident benefits insurers in court.
In 2015, the Ontario government passed Bill 15, the Fighting Fraud and Reducing Insurance Rates Act. One measure from that omni-bus bill was Section 280 of Insurance Act. It stipulates that insurers and claimants can take accident benefits disputes to the LAT but cannot bring a proceeding to court “with respect to” an accident benefits dispute – unless it’s an appeal from a LAT decision or an application for judicial review.
That new provision was controversial, with some personal injury lawyers arguing it limits accident victims’ access to justice.
The LAT has to the power to determine not only whether the insurer should have paid out on a claim but also whether any delay or failure to pay was reasonable, Justice Benjamin Zarnett wrote for the Court of Appeal for Ontario in its unanimous ruling this past Friday in Stegenga.
Morgan Stegenga, then 15, was catastrophically injured in 2011 in a vehicle accident.
In addition to multiple rib fractures, she had a head injury which resulted in a loss of cognitive ability as well as personality, behaviour and psychological changes. She made an accident benefits claim with Economical, her father’s insurer.
Her family had several disagreements with Economical over how her claim was handled. For example, it was allegedly initially treated as non-catastrophic. Allegations against Economical have not been proven.
Stegenga tried to sue Economical but the lawsuit was quashed, in 2018, by Justice James Ramsay of the Ontario Superior Court of Justice.
That ruling was upheld in the Court of Appeal for Ontario ruling released July 19, 2019.
Removing accident benefits disputes from the courts – in the hopes of making dispute resolution more efficient – was one aim of Bill 15, appeal court Justice Zarnett noted.
Stegenga claims Economical was acting in bad faith. Stegenga further argued her bad faith claim is distinct from a dispute over accident benefits entitlement.
But with Bill 15 the Ontario legislature “did not intend the same, similar, or overlapping issues to be adjudicated in more than one forum,” wrote Justice Zarnett.
Stegenga argued Section 280 of the Insurance Act means the LAT only has the exclusive power to adjudicate disputes over whether or not a benefit should be paid and disputes about whether a benefit was paid in an incorrect amount.
But the LAT has much more power than that, the Court of Appeal for Ontario found in its unanimous ruling.
Ontario regulations give the LAT the power to make a special award – of up to 50 percent of the benefits to which the insured is otherwise entitled – if it finds the insurer unreasonably withheld or delayed the payment of benefits, Justice Zarnett wrote. The LAT can also order the insurer to pay the claimant a higher interest rate than it otherwise would have.
“I agree that bad faith can be characterized as a cause of action which is available to a person insured by an insurance contract but is independent of and distinct from a claim for payment or indemnity under the insurance contract. However, it does not follow that this automatically takes the subject matter of a claim, even when characterized as one for bad faith, outside of s. 280,” wrote Justice Zarnett.
“The legislature made a choice as to what disputes would be within the exclusive jurisdiction of the LAT, and what remedial powers the LAT would have. That was a policy choice it was entitled to make,” wrote Justice Zarnett. “The Insurance Act and its regulations form a comprehensive scheme for the regulation of insurers and insurance. The legislature must be taken to have armed the LAT with the remedial powers it considered appropriate to deal with improper insurer behaviour, knowing those remedial powers were different from the court’s.”