Law Times

Law Times • OctOber 6, 2014 Page 13 www.lawtimesnews.com Insurer disputes pay-first rule questioned despite new appeal decision By marg. Bruineman For Law Times Q uestions remain over the rules requiring insurers to pay first and dispute later despite a recent ruling by the Ontario Court of Appeal on the issue. "I think it's still a live issue," says Brent Hodge, a lawyer whose practice at Legate & As- sociates LLP focuses on plaintiff personal injury. "Whenever you get a dissent, you know it's still out there to be decided." Zurich Insurance Co. v. Chubb Insurance Co. of Canada involved a car rented by Sukh- vinder Singh from Wheels 4 Rent with a motor vehicle li- ability policy through Zurich. Chubb issued an accident policy to the rental company with no coverage for liability. Singh didn't buy Chubb's optional death and dismember- ment insurance coverage and had a single vehicle accident. She submitted a claim for statu- tory accident benefits to Chubb. Chubb refused to pay. Zurich began payment and the two companies went to arbitration to settle the dispute. The arbitrator concluded Chubb wasn't an insurer in the priority dispute settlement statutory regime due to a lack of nexus between Chubb and Singh because the insurer hadn't issued a motor vehicle liability policy to either the rental com- pany or Singh. As a result, there was no obligation on Chubb to pay her benefits under the rules requiring insurers to pay first and dispute later. The application judge al- lowed Zurich's appeal, deter- mining that the Chubb policy was a motor vehicle liability policy and there was a sufficient nexus. In reviewing that deci- sion, the Ontario Court of Ap- peal examined whether the Chubb policy was indeed a motor vehicle liability policy and whether the link between Chubb and Singh was sufficient. "In my view the application judge erred in concluding that the Chubb policy was a 'motor vehicle liability policy.' There was no element of that accidental death and dismemberment pol- icy that insured against liability to others arising out of property damage or injury caused by an automobile or the use or opera- tion thereof," wrote Justice Glad- ys Pardu for the majority in the appeal court decision. "Ms. Singh's choice to send her application to Chubb was not random or arbitrary, but was based on the optional cov- erage provided to Wheels 4 Rent customers," she added. "Nonetheless Chubb was not required to respond as it was not a 'motor vehicle liability insurer,' nor had it held out or represent- ed to have ever provided such coverage at any relevant time." But in dissent, Justice Russell Juriansz wrote that he would ap- ply the established nexus test to determine whether Chubb, as the first insurance company to receive the application for ben- efits, must pay them while dis- puting coverage. "There is a mature and stable jurisprudence relating to the 'nexus' test and the applica- tion of the regulation. Both the courts and arbitrators of the Fi- nancial Services Commission of Ontario have applied the nexus test on numerous occasions to determine whether an insur- ance company must pay benefits under s. 2," wrote Juriansz. The whole point of the pay- first, dispute-later approach is to allow accident victims to have quick access to benefits without having to figure out which in- surance company is responsible and with the insurers duking it out behind the scenes later, says Gregory Chang of Bougadis Chang LLP. "I see the reasoning behind the dissent there," he says. "There was a reason here why the injured party chose Chubb. When you get a close call, both sides are always reaching for what they can get." The Zurich case, he adds, demonstrates some of the dif- ficulties involved. As a result, he expects it to arise in future cases because the court didn't fully resolve the issue. "I think it just added more fuel to the discussions in this narrow area," says Chang. For Jonathan Schrieder of Reisler Franklin LLP, the dis- senting opinion seems cor- rect. He says the dissent applies the regulation as written and is therefore more faithful to the legislation. It's also good public policy, he adds. The dissent, of course, isn't the law of the land and Schrieder suspects the case is unlikely to make it to the Supreme Court. "This decision doesn't alter the general regulatory imperative that insurers should respond to a claim pending any dispute be- tween insurers. However, it does narrow the application of the rule to only insurers that wrote a relevant automobile insurance policy," he says. "Chubb, which wrote another type of policy, was excused from the rule because their policy was not an automobile insurance policy. So, motor vehicle insur- ers are still obligated to pay first and dispute later." Hodge says while the fact pattern in this case was very unusual, he feels there's a risk of an insurer potentially denying a legitimate claim and putting the claimant in a vulnerable situ- ation, something the pay-first, dispute-later approach was an effort to avoid. "I'd like to see it go back to the Court of Appeal," says Hodge. "It's a problem when you look at the reason behind the pay- now and dispute-later system and that's to protect the victim. This decision could stand in contrast to that." LT FOCUS What do your clients need? The means to move on. Guaranteed. ™ Baxter Structures customizes personal injury settlements into tax-free annuities that can help your clients be secure for life. » Pre- and post- settlement consultation and support » Caring professionalism for over 30 years » No fee to you or your clients Need more information? Contact us at 1 800 387 1686 or baxterstructures.com Kyla A. Baxter, CSSC PRESIDENT, BAXTER STRUCTURES Baxter_LT_Oct7_13.indd 1 13-10-01 4:03 PM It's a problem when you look at the reason behind the pay-now and dispute-later system and that's to protect the victim

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