Ontario – court enforces legislated cooling off period to prevent settlement ending arbitration – #021

The Ontario Superior Court in Co-operators General Insurance Company v. Doobay, 2017 ONSC 5804 upheld a statutory rule limiting the time before which a negotiated settlement can terminate arbitration. The case should highlight that certain arbitrations, conducted under national legislation, may be subject to similar suspensive or resolutory conditions and that arbitral parties cannot presume their settlements are effective merely upon initial agreement of the parties.  

The brief decision dealt with a dispute over the effect of a settlement entered into by the parties, with the advice of counsel, during an arbitration held before the Financial Services Commission of Ontario (“FSCO”) and pursuant to its Dispute Resolution Practice Code.

The FSCO administers twelve (12) provincial statutes and their related regulations (listed here on FSCO’s website with active links to the statutes and regulations).  (Note: As of April 1, 2016, FSCO no longer accepts applications for mediation or arbitration for auto insurance disputes.  The Safety, Licensing Appeals and Standards Tribunals Ontario now administers those applications.  FSCO continues to administer applications filed as of March 31, 2016.)  The court proceeding highlights an example of procedural formalities applicable in certain statute-created dispute resolution processes.  The statute in question, Ontario’s Insurance Act, RSO 1990, c I.8 has 47 related regulations, one of which is the Automobile Insurance, RRO 1990, Reg 664 (“Regulation 664”).

Regulation 664 at section 9.1 sets a mechanism for resolving disputes but provides specific rules which apply when a settlement arises.  The rules apply even during the course of an arbitration when the insured is represented by counsel. One of those rules provides the insured two (2) business days to rescind the settlement: 

9.1 (1) In this section, 

“settlement” means an agreement between an insurer and an insured person that finally disposes of a claim or dispute in respect of the insured person’s entitlement to one or more benefits under the Statutory Accident Benefits Schedule.   

(2) The insurer shall give the insured person a written disclosure notice, signed by the insurer, with respect to the settlement.   

(3) The disclosure notice shall be in a form approved by the Superintendent and shall contain the following information: 

The insurer’s offer with respect to the settlement.

A description of the benefits that may be available to the insured person under the Statutory Accident Benefits Schedule.

A statement that the insured person may, within two business days after the later of the day the insured person signs the disclosure notice and the day the insured person signs the release, rescind the settlement by delivering a written notice to the office of the insurer or its representative and returning any money received by the insured person as consideration for the settlement.

A description of the consequences of the settlement on the benefits described under paragraph 2 including,

i. a statement of the restrictions contained in the settlement on the insured person’s right to apply to the Licence Appeal Tribunal under subsection 280 (2) of the Act or appeal from a decision of the Licence Appeal Tribunal,

a statement that the tax implications of the settlement may be different from the tax implications of the benefits described under paragraph 2 and.

iii. a statement that the insured person may not apply to the Licence Appeal Tribunal under subsection 280 (2) of the Act with respect to benefits that were the subject of a settlement or a purported settlement unless the insured person has returned the money received as consideration for the settlement. 

A statement advising the insured person to consider seeking independent legal, financial and medical advice before entering into the settlement.

A statement for signature by the insured person acknowledging that he or she has read the disclosure notice and considered seeking independent legal, financial and medical advice before entering into the settlement.  

(4) The insured person may rescind the settlement within two business days after the later of the day the insured person signs the disclosure notice and the day the insured person signs the release.   

(5) The insured person may rescind the settlement after the period referred to in subsection (4) if the insurer has not complied with subsections (2) and (3).  

(6) Subsections (4) and (5) do not apply with respect to a settlement that has been approved by a court under Rule 7 of the Rules of Civil Procedure (Parties under Disability). 

The insurer, The Co-operators General Insurance Company, and the insured, Mr. Bagwandat (Ron) Doobay (“Doobay”), had undertaken four (4) days of arbitration before the FSCO regarding benefits and had entered into as settlement.  Upon settlement, the parties exchanged written terms and advised the arbitrator that the arbitration had ended.  At the end of the same day, Defendant wrote the insurer to advise that he rescinded the settlement. 

Co-operators sued in Ontario Superior Court to enforce the settlement or, in the alternative, an order to continue the proceedings as if there had been no accepted offer.  (It is not clear whether the term “proceeding” referred to the FSCO arbitration or the Superior Court litigation.)  It alleged that Regulation 664’s Rule 9.1 did not apply when the insured was represented by counsel and when the parties had an accepted oral offer under Rule 49 of the Rules of Civil Procedure, RRO 1990, Reg 194.  It relied on the Ontario Court of Appeal’s distinction in Igbokwe v. HB Group Insurance Management Ltd., 2001 CanLII 3804.  In that case, though, the Court of Appeal had ruled that section 9.1 applies before an action is commenced and it dealt with an offer made after the action was commenced.  Co-operators also relied on Chauvette v. Massey, 2013 ONSC 4146 which followed the distinction made by Co-operators about the lack of need for a cooling off period if the insured was represented:  

[12] The most important factor to consider is the purpose of section 9.1 and the settlement disclosure notice.  As the Court of Appeal stated in Igbokwe, the notice is designed to protect self-represented parties, not parties who have counsel.  A party who has counsel, such as the plaintiff in this matter, does not require a two day cooling off period in which he or she can rescind acceptance of an offer.  The plaintiff accepted the offer on the advice of counsel.  Although the defendants sent the notice along with the settlement documents, it was not necessary. 

Doobay acknowledged that both parties were represented by counsel in the FSCO arbitration.  He argued though that if Co-operators did not want him to benefit from the cooling off period then it ought to have stipulated that by making a change to the form containing the offer.  He also noted that Rule 49 did not apply because the offer was not in writing and did not concern a court litigation. As well, correspondence sent by Co-operators to the arbitrator after Doobay rescinded the settlement confirmed that it too understood that the arbitration was still active.  

Mr. Justice James W. Sloan acknowledged that the parties might want to redraft the terms of the settlement but both parties were represented by counsel and he would not accept oral testimony to change the wording of the settlement which did contain a cooling off period. 

Despite commenting that it was unfortunate to have to do so, Sloan J. dismissed the application and observed that the parties were “free, if so advised, to continue with the arbitration and the court action. 

Arbitration proceedings can terminate in a settlement rather than an award written by the tribunal on the contested facts. The International Chamber of Commerce’s Arbitration Rules  provide at Rule 32 that such settlements can be recorded as a consent award provided the parties so request and the arbitral tribunal agrees.  The Canadian Commercial Arbitration Centre’s International Arbitration Rules also signal the opportunity to settle disputes at article 10 and provide for settlement at article 32. The latter expressly provides that no reasons, other than consent, need be mentioned in the consent award.

The decision in Co-operators General Insurance Company v. Doobay underlines that settlements may be within the scope of the parties’ agreements but may be subject to additional rules before they bind the parties. Arbitration counsel ought to be alert to such rules applicable to the legislated benefits claimed in their arbitration.