Foreign auto-mobile insurers must file a Power of Attorney and Undertaking (PAU) with the Canadian Council of Insurance Regulators (“CCIR”) if they want to be able to provide the Canada Non-Resident Motor Vehicle Liability Insurance Card to their policyholders who wish to drive their cars in Canada. PAUs are also filed by Canadian insurers that wish to provide similar cards to policy holders who drive their vehicles in provinces in which the insurer is not registered as an insurance company. As it pertains to first party insurance coverage, the PAU has the effect of requiring a foreign insurer to treat its insurance policy as though it were an Ontario policy while the vehicle is in Ontario.[RK1]
The question of how the signing of a PAU impacts the availability of priority and loss transfer is a more complex one. The courts in Ontario have addressed a number of different factual permutations in answering that question.
In the 2003 Supreme Court Decision in Unifund Assurance Co. v. ICBC, the provincial insurer from British Columbia was the target of a priority dispute arising out of an accident that occurred in British Columbia. In that case, the Supreme Court distinguished the matter from Healy, on the basis that the accident had occurred outside Ontario. However, it also made helpful commentary about the nature of the PAU and the obligations it creates.
The Supreme Court identified the three undertakings within the PAU as follows: 1) to appear and to provide a defence;2) to effect personal services on the insured); not to raise a defence “under a motor vehicle liability insurance contract entered into by it”.
With respect to the second undertaking, the Court noted that it is irrelevant in the context of a priority dispute, and that “the irrelevance of this undertaking to Unifund’s action reinforces the conclusion that this dispute is not one contemplated by the PAU.”
The Supreme Court also held that:
“If… the appellant is not otherwise within the legislative jurisdiction of Ontario, the PAU does not put it there by agreement… even if the PAU were interpreted (wrongly, in my view) to require the appellant to litigate Unifund’s claim in Ontario, there is nothing in the PAU that would prevent the appellant from contesting the purported extraterritorial assertion of s. 275 of the Ontario Insurance Act. For the reasons already discussed, such an objection would succeed.”
In the 2020 Court of Appeal decision in Travelers Insurance v. CAA Insurance, the accident took place in Nunavut. The claimant was in a Nunavut car covered under a Nunavut policy issued by Travelers. The claimant had another vehicle in Ontario, covered by CAA. Claimant applied for accident benefits under the Ontario policy from CAA. CAA initiated a priority dispute against Travelers seeking reimbursement of benefits. CAA succeeded in the arbitration against Travelers, and in reaching the decision Arbitrator relied on two main reasons: 1) Travelers was a signatory to the PAU and; 2) Travelers was considered an Ontario insurer.
The Court of Appeal clarified that being a signatory to the PAU does not extend loss transfer and priority obligation to the insurers. The purpose of PAU is to protect the insureds and not the insurer. The Court of Appeal further provided that, if the accident would’ve happened in Ontario, Travelers would’ve had to provide the claimant with accident benefits at the Ontario level. Secondly, the court held just because Travelers was licensed to write automobile insurance in Ontario and had an office in Ontario, that did not qualify Travelers as an Ontario insurer.
In making this holding, the Supreme Court has drastically reduced the scope of application of the PAU. Unless an extraterritorial insurer is otherwise within the legislative jurisdiction of Ontario, the PAU alone will not suffice to allow a priority or loss transfer dispute.
The 2023 ONSC case of Manitoba Public Insurance v. ICBCinvolved two out of province insurers, attempting to commence a loss transfer dispute following an accident that took place in Ontario. The Superior Court held that the insurers were not able to avail themselves of the loss transfer scheme, as neither of them was an Ontario insurer.
The conclusion to be drawn from these cases is that unless the accident occurred in Ontario, involved a vehicle that was required to be registered in Ontario, and involves a target insurer that is “otherwise within the legislative jurisdiction of Ontario”, a priority or loss transfer claim against an extraterritorial insurer is unlikely to succeed.
