The priority arbitrator, Ken Bialkowski, ruled that the owner of a lumber business had 24 hour, 7 day per week control & authority to use any of his company vehicles, and he was therefore a deemed named insured under the Continental policy.
The Continental policy included optional benefits. The broker's underwriting notes confirmed this policy was intended to provide enhanced coverage for executives of the company who did not have WSIB coverage. The insured, as owner of the company, was found to be a listed driver under the Continental policy. Continental also failed to advise the insured's family of the optional benefits coverage and improperly deflected the claim to Chubb.
Continental appealed the arbitration decision to the Superior Court on the regular use ground, only.
Chubb argued that Continental's failure to appeal the Decision on the other grounds, including:
- the finding of deflection;
- the incorrect advice to the insured's family at the outset of the claim that the policy did not contain optional benefits coverage;
- the proper application of the OPCF-47 endorsement had it been appended to the policy (the broker erred and failed to include it, as required by the Insurance Act - which deems it to have been included); and
- the conclusion that the claimant was a listed driver on the Continental policy,
meant that Continental would remain the priority insurer, regardless of the determination of the regular use issue on appeal.
During oral reply submissions at the Superior Court Appeal, Continental argued, in response to a question from the Bench, that priority for the accident benefits claim should be birfurcated between the two insurers, and that contrary to its prior written position to the insured and Chubb, counsel would now "recommend" that Continental accept priority for optional benefits, only.
Chubb argued that bifurcation was not an issue before the arbitrator, not listed within the arbitration agreement, not argued at arbitration, not a part of the arbitrator's decision, not listed as a ground in the Notice of Appeal to the Superior Court, not within Continental's written submissions on appeal, not the subject of a notice of motion at least 7 days before the oral appeal hearing (to add it as a ground of appeal or otherwise notify Chubb and the Court that fresh evidence and argument would be introduced on appeal), and not raised during the moving oral appeal submissions of Continental.
As practical matter, at the time of the oral hearing at the Superior Court Appeal, Continental had not yet decided to accept liability to pay for optional benefits under the policy.
Accordingly, Chubb argued, the bifurcation issue was not properly before the Superior Court on Appeal, and should not have been considered.
Alternatively, Chubb argued on a procedural basis that this fresh issue (birfurcation of mandatory and optional benefits) and evidence (that Continental would now consider accepting responsibility to pay the optional benefits, only, on the basis of a forthcoming recommendation by their counsel), which should not be raised for the first time on appeal, could be remitted back to the arbitrator, if the Court felt that was in the interest of justice.
Instead, the Superior Court determined the substantive birfucation issue - finding that Chubb would remain liable for the mandatory benefits and Continental liable for the optional benefits.
This "splitting of the baby" creates havoc for insurers:
1. How is one insurer responsible for payment of the first $400 in IRBs and the second responsible for $401 - $800?
2. How do the two insurers agree on timing for IEs?
3. Is one insurer is liable for a s. 10 award if the other is late in remitting payments?
4. What if one insurer suspends or wants to suspend benefits pursuant to s. 33 or 44 and the other does not?
5. What if one insurer wants to deny or terminate benefits and the other does not?
6. Is one insurer liable to idemnify the other for adjusting expenses, and if so, on what basis and with what procedure?
7. How will priority arbitrators handle disputes between insurers created by bifurcation, which is not contemplated by FSCO or under the Insurance Act and associated Regulations?
These are perhaps some of the reasons why FSCO clarified with Bulletin A-10/97:
"Effect of the Endorsement
The OPCF 47 provides that if optional accident benefits are purchased and are
"applicable" to a person under the policy, the insurer will permit the insured person to claim both mandatory accident benefits and optional accident benefits under that policy. The insurer will not deny benefits on the basis that the priority of payment rules set out in section 268 of the Act provide that another insurer is liable to pay the mandatory accident benefits."
Hopefully the Court of Appeal corrects both the procedural and substantive errors of the Court below, and finds that Continental is liable to pay both mandatory and optional benefits under their policy.
Until then, there are many other optional benefits cases waiting in the wings, with insurers uncertain of what to do.