Ontario – court endorses reasonable standard of review in insurance arbitration – #027

The Ontario Superior Court in Belairdirect Insurance v. Dominion of Canada General Insurance Company, 2017 ONSC 367  prioritized an arbitrator’s reliance on other arbitration awards over the arbitrator’s application of a contrary Superior Court decision with which the arbitrator disagreed but felt bound to follow.  The court effectively endorsed the arbitrator following arbitral precedent in the area of his expertise by declaring that his application stare decisis was not within his expertise. 

Two insurers disputed which of the two should be considered the insurer with first priority to respond to a claim for benefits following an accident.  Dominion of Canada General Insurance Company (Travelers) (“Dominion”) and Belairdirect (“Belair”) disagreed as to whether an “excluded driver” was still an “insured driver” for the purposes of Ontario’s Statutory Accident Benefits Schedule, O Reg 34/10 (“SABS”) issued pursuant to the Insurance Act, RSO 1990, c I.8.  The answer would affect which insurer had the higher priority to respond to the claimant’s accident benefits claim.   

The insurers submitted their dispute to private arbitration.  The arbitrator, referred to in the Superior Court’s reasons for judgment as “Arbitrator Cooper,” determined in his April 19, 2016 award that:  

(a) on his analysis, including reference to other arbitral reasoning, Dominion should be the insurer with first priority to respond to claimant’s accident benefits claim, because the claimant is an “insured person” under the Dominion policy ; but, 

(b) he was bound by a decision of the Ontario Superior Court which reached the opposite conclusion – that an excluded driver was not an “insured person” – and concluded that Belair was the insurer with first priority to respond. 

Belair challenged the arbitration award by way of application to the Ontario Superior Court. Madam Justice Jasmine T. Akbarali had to determine (a) what the standard of review was and (b) whether the award met that standard. 

Both parties submitted that the standard of review was correctness.  Akbarali J. disagreed.  She applied the reasoning of the Ontario Court of Appeal in Intact Insurance Company v. Allstate Insurance Company of Canada, 2016 ONCA 609 paras. 47 and 53 which she observed answered the question “definitively”.  Akbarali J. noted that the standard applicable to an arbitrator resolving a dispute between insurers recognizes the insurance arbitrator’s expertise.  Where the arbitrator interprets the arbitrator’s “home” statute or statutes closely connected to that statute’s function, the presumption is that the standard of reasonableness applies.  She did point to some exceptions.  

[17] The exceptions to the reasonableness standard do not apply here.  The question of which insurer has priority is not a question over which the arbitrator and the court share jurisdiction at first instance. It is not an “exceptional” question, those being questions of jurisdiction, constitutional questions, or general questions of law that are both of central importance to the legal system as a whole and outside the arbitrator’s specialized area of expertise: see Intact Insurance Company at para. 51. To the contrary, the question of the priority of the insurers involves the interpretation of the policy, the Insurance Act, and the SABS – all squarely within the expertise of the insurance arbitrator. 

Akbarali J. concluded that the issue before her involved the interpretation of provisions of the SABS and the Insurance Act and how the policy of insurance interacts with its legislative framework and therefore a reasonableness standard.   

Dominion resisted, arguing that an appeal involving the interpretation of a standard form contract having precedential value should be subject to a correctness standard, relying on Ledcor Construction Ltd. v. Northbridge Indemnity Insurance Co., [2016] 2 SCR 23, 2016 SCC 37. 

Akbarali J. distinguished their reliance on that case by reviewing the sequence of cases issuing before and after Ledcor Construction Ltd. v. Northbridge Indemnity Insurance Co. That sequence led her to conclude that the Ontario Court of Appeal had refined its approach to the standard of review for reviewing decisions involving the interpretation of standard form contracts.  

She noted that Intact Insurance Company had issued after MacDonald v. Chicago Title Insurance Company of Canada, 2015 ONCA 842.  Intact Insurance Company’s lengthy analysis revealed to her that the Court of Appeal in that case had turned its attention directly to the issue and had nuanced its earlier approach and applied the reasonableness standard.  She observed : “I cannot depart from this clear guidance.” 

The case is noteworthy because the arbitrator relied on two other arbitrators, Arbitrator Bialkowski and Arbitrator Densem, and having accepted their analysis came to his first conclusion that Dominion had priority.  Having come to that conclusion, shared by others well-versed in the matter, he specifically reversed his first conclusion based on the fact he felt bound by a particular Superior Court on the same subject which had decided otherwise (See: Dominion of Canada v. State Farm Mutual Automobile Insurance (26 October 2015), Toronto, CV-15-533119 (Ontario Superior Court of Justice) (“Dominion of Canada” ).  He then issued an award which said Belair had priority. 

 Akbarali J. applied a reasonable standard because the arbitrator’s determination of the issue fell within his particular expertise and “it is that expertise that lies at the heart of the policy rationale that supports the reasonableness standard.”  The question of whether the Dominion of Canada decision bound the arbitrator was not a question within his expertise but was an application of the doctrine of stare decisis, a general question of law.  She refused expressly to be bound by the Dominion of Canada decision relied on by the arbitrator because that court decision itself applied the correctness standard, not the reasonableness standard. 

Akbarali J. then conducted a full analysis of the applicable rules to determine if the arbitrator’s award was reasonable.  She concluded, as had the arbitrator in his initial conclusion, that the claimant was an insured under Dominion’s policy and that Dominion had higher priority to respond to the claims. She determined that this conclusion was reasonable.  But, to agree with the arbitrator, she had to overturn his arbitral award and apply the first conclusion to which his own analysis and other arbitral awards led him. 

She allowed Belair’s application, reversed the arbitrator’s final decision so as to coincide with the his initial conclusion which she held met the reasonableness standard.