Insurer not Precluded from Challenging CAT

December 29, 2009, Kitchener, Ontario

Posted by: Robert Deutschmann, Personal Injury Lawyer

Director’s Delegate: David Evans
Decision Date: October 2, 2009
As a result of an impairment sustained in a motor vehicle accident on June 25, 1998, Ms. Shaughnessy claimed from Aviva Canada Inc. certain benefits under the SABS–1996 that are only available to those suffering from a catastrophic impairment. Aviva denied those benefits.

Ms. Shaughnessy relied on an assessment for catastrophic impairment at a Designated Assessment Centre (CAT DAC) that determined her impairment was catastrophic. Aviva sought to challenge that CAT DAC finding as part of the dispute resolution process commenced by Ms. Shaughnessy. Aviva appealed the arbitrator's preliminary issue decision that, notwithstanding Fernandes, it is precluded from doing so.


The issue was how an insurer can challenge a CAT DAC's finding of catastrophic impairment.

In Fernandes, the Court of Appeal found that insurers can challenge disputed CAT DACs in the dispute resolution system but not in the courts. It found that the relevant dispute resolution provisions, discussed below, form a complete code that removes any common law right that an insurer may have had to bring such an action. However, the arbitrator concluded that the only remedy for an insurer would be to seek judicial review of the CAT DAC's finding.


When the matter came before him as a preliminary issue regarding Aviva's right to dispute the CAT DAC in the dispute resolution process, the arbitrator stated: “What I take to be the main point of the Fernandes decision is the finding that the dispute resolution system created by sections 279 to 283 is a complete procedural code and that, consequently, an insurer may not launch an action in a court or commence an arbitration for the purposes of challenging a catastrophic DAC assessment.”

The further comments concerning the alternatives available to an insurer who challenges a DAC, while illuminating, are not necessary to the court's central findings. Consequently, they are obiter dicta (
supplementary opinion by a judge in deciding a case, upon a matter not essential to the decision) and while they should be given consideration and respect, they remain non-binding on courts and arbitrators.

The court agreed with the insurer that both ss. 40(4) and 37(5) of the SABS – the former dealing with the binding nature of a CAT DAC and the latter with income replacement, non-earner and caregiver benefits – provide that an insurer has the right to have a dispute resolved under the Act, and it also agreed that those provisions should be interpreted to give the insurer access to the dispute resolution regime. The Court of Appeal concluded that "it was not the intent of the legislature that an insurer would be forever bound by a CAT DAC that is favourable to the insured, and that the dispute resolution mechanism is only available to an insured who wishes to dispute an unfavourable CAT DAC finding."

Having established that insurers may seek a remedy in the dispute resolution process, the court then looked at how. The court concluded that despite the binding effect of the CAT DAC, the insurer could seek mediation and, if it failed, it could pay according to its last offer and leave it up to the insured to initiate dispute resolution.

The Court of Appeal decision in Fernandes is binding.

This conclusion is also consistent with the SABS and the Act. It would be inconsistent to block the insurer from seeking the determination of a dispute specifically allowed for in the SABS, especially since s. 40 provides that the CAT DAC's finding is binding on both the insured and the insurer.

The insurer was therefore within its rights to raise the issue after the filing for arbitration by Ms. Shaughnessy.

Accordingly, the arbitrator erred in law in not following Fernandes and in excluding the insurer's remedy of seeking a ruling during arbitration at the Commission. Aviva was allowed to proceed to dispute the designation of catastrophic impairment as part of the dispute resolution procedure at the Commission commenced by Ms. Shaughnessy.

Posted under Accident Benefit News, Automobile Accident Benefits, Catastrophic Injury, Pain and Suffering

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Deutschmann Law serves South-Western Ontario with offices in Kitchener-Waterloo, Cambridge, Woodstock, Brantford, Stratford and Ayr. The law practice of Robert Deutschmann focuses almost exclusively in personal injury and disability insurance matters. For more information, please visit or call us toll-free at 1-866-414-4878.

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