Priority dispute can proceed in mechanic test-drive case

Canada’s highest court announced Thursday it will not hear a dispute arising from a vehicle repairman who got hurt while test-driving a customer’s car.

The dispute is over a provision in Ontario Regulation 283/95 that sets out rules for auto insurers who receive an accident benefits claim and think a different insurer should pay. The regulation says the insurer must notify another insurer of an intent to dispute priority within 90 days. The same regulation requires notification to the claimant, but does not specify a time limit, raising the question of whether the same 90-day rule applies.

As a result of Thursday’s ruling, The Dominion of Canada General Insurance Company can proceed with a “priority dispute” against Unifund. The top court effectively upheld the Appeal Court ruling, which found that it was “not essential” that the claimant be notified in 90 days so long as their right to attend a hearing was not prejudiced.

It all started in 2011 when repair shop owner Jing Hua Fan was test-driving a customer’s vehicle. Fan was injured. He filed an accident benefits claim under his garage policy, written by The Dominion, which has since been acquired by The Travelers Companies Inc.

Fan’s own vehicle is insured by Unifund, which The Dominion argues should be paying Fan’s claim.

Ontario auto insurance law stipulates that whichever insurer gets an accident benefits claim must normally adjust (and pay benefits on) that claim. So with Fan’s claim, The Dominion has to adjust the claim and can seek reimbursement from Unifund, part of RSA Canada.

The Dominion and Unifund took their dispute to an arbitrator with the Financial Services Commission of Ontario. Unifund argued that The Dominion is precluded from even trying to go after Unifund. The Dominion did not inform Fan until June, 2014 – more than two years after Fan filed his claim – that The Dominion was intending to make a priority dispute.

The Insurance Act stipulates that the Dominion 90 had days to tell Unifund it would proceed with a priority dispute – which The Dominion did, within 20 days. The Insurance Act also stipulates that the claimant needs to be informed but does not explicitly say this must happen within 90 days.

Unifund argued – unsuccessfully as it turns out – that one should “read in” a requirement to notify the claimant within 90 days.

FSCO arbitrator Shari Novick disagreed. In 2015, Novick ruled that The Dominion could proceed with its priority dispute. This ruling was reversed by Justice Mario Faieta of the Ontario Superior Court of Justice but restored by the Court of Appeal for Ontario in a ruling released March 27, 2018.

Unifund applied for leave to appeal with the Supreme Court of Canada, which announced Nov. 15 it will not hear Unifund’s appeal. This means the Court of Appeal for Ontario ruling is final.

In its unanimous ruling, the Court of Appeal for Ontario said judge Faieta should have applied the “reasonableness” standard, rather than the “correctness” standard, to arbitrator Novick’s decision.

The rules are spelled out in Ontario Regulation 283/95.

Section 3.(1) of that regulation states that no accident benefits insurer may dispute its obligation to pay benefits “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.”

Section 4.(1) of that same regulation states that a carrier who gives notice under section 3 “shall also give notice to the insured person.”

Judge Faieta “interpreted the word ‘also’ in s. 4 to require that notice be given in a like manner to the notice provided under s. 3,” wrote Judge Katherine van Rensburg of the Court of Appeal for Ontario.

“It was reasonable for the arbitrator to conclude that a 90 day time limit was not essential to protect the claimant’s rights to object and participate, which could be protected in other ways. In this case for example, the claimant’s rights were protected by ensuring that he received notice and had the opportunity to object before the arbitration hearing to determine the priorities dispute was underway.”