April 03, 2018, Kitchener, Ontario
Posted by: Robert Deutschmann, Personal Injury Lawyer
Stegenga and Economical Mutual Insurance Company, 2018 ONSC 1512 (CanLII)
Date of Decision: March 6, 2018
Heard Before: Mr. Justice Ramsay
SUPERIOR COURT OF JUSTICE – ONTARIO
JURISDICTION: plaintiff attempts to bring claim for bad faith to courts on accident benefits issue; insurer argues LAT has exclusive jurisdiction
Economical moves under Rule 21 for an order to strike the statement of claim on the ground that it discloses no reasonable cause of action, and for determination of a question of law: whether Ms. Stegenga’s claim is within the exclusive jurisdiction of the LAT.
Ms. Stegenga pleads:
- that she was injured in a car accident,
- that Economical is liable to pay her Statutory Accident Benefits, and
- that it has shown bad faith, negligence and fraud in administering her claim.
She claims damages for mental distress and aggravated and punitive damages. Ms. Stegenga says that the legislation prevents her from suing for accident benefits but does not bar her independent claims for bad faith in the administration of accident benefits. Section 280 of the Insurance Act provides that an insured person or the insurer may apply to the Licence Appeal Tribunal to resolve a dispute. It also states that without limiting what else the regulations may provide for and govern, the regulations may provide for and govern the following:
- Orders, including interim orders, to pay costs, including orders requiring a person representing a party to pay costs personally.
- Orders, including interim orders, to pay amounts even if those amounts are not costs or amounts to which a party is entitled under the Statutory Accident Benefits Schedule. 2014, c. 9, Sched. 3, s. 14.
Section 10 of RRO 1990, Reg. 664 provides:
If the Licence Appeal Tribunal finds that an insurer has unreasonably withheld or delayed payments, the Licence Appeal Tribunal, in addition to awarding the benefits and interest to which an insured person is entitled under the Statutory Accident Benefits Schedule, may award a lump sum of up to 50 per cent of the amount to which the person was entitled at the time of the award together with interest on all amounts then owing to the insured (including unpaid interest) at the rate of 2 per cent per month, compounded monthly, from the time the benefits first became payable under the Schedule. O. Reg. 43/16, s. 4.
Economical submits that the claim is barred by the Insurance Act.
The question the court is whether a dispute “in respect of an insured person’s entitlement to statutory accident benefits or in respect of the amount of statutory accident benefits to which an insured person is entitled” includes a claim for administration of accident benefits fraudulently, negligently or in bad faith. The words of a statute are to be read in their entire context and in their grammatical and ordinary sense harmoniously with the scheme and object of the Act and the intention of Parliament.
The ordinary meaning of the words “in respect of” imports a connection in a very broad sense. The phrase “in respect of” is probably the widest of any expression intended to convey some connection between two related subject-matters: Nowegijick v. the Queen, 1983 CanLII 18 (SCC),  1 SCR 29. In connection with accident benefits, a previous version of this part of the Act has been held to establish a “comprehensive alternative process to the courts” that governs “all” disputes concerning entitlement to SABs: Ayr Farmers Mutual Insurance Company v. Wright, 2016 ONCA 789 (CanLII).
As its title suggests, the Fighting Fraud and Reducing Insurance Rates Act is designed to provide a cost efficient and fair mechanism for resolving disputes between insurers and insured in respect of Accident Benefits. It does this by mandating that disputes be heard at first instance by a tribunal and limiting the involvement of the court to appeals and review. Formerly, claimants could not go to court or arbitration until they had attempted mediation. Under the present legislation, claimants cannot go to court at all at first instance. Instead they go before a tribunal. The tribunal cannot make an award for bad faith, but it can award an additional 50% of benefits if the insurer has denied benefits unreasonably. In addition, a punitive rate of pre-judgment interest is payable by insurance companies that unsuccessfully contest benefits disputes, whether they have acted unreasonably or not. The exclusive jurisdiction of the tribunal is essential to the goal of reducing the cost of litigation.
If the tribunal’s exclusive jurisdiction can be defeated by the sort of clever pleading the object of the legislation will be defeated at least in part. In interpreting the impact of legislation on the jurisdiction of courts and the tribunals, Justice Ramsay was bound by Weber to look “not to the legal characterization of the wrong, but to the facts giving rise to the dispute.”
That is what the Court of Appeal did when it attributed the "widest possible scope" to the words "in respect of":
The phrase "in respect of" is probably the widest of any expression intended to convey some connection between two related subject-matters.
Justice Ramsay was prepared to assume, without deciding, that there can be an independent claim for bad faith conduct in respect of the insurer's refusal to pay or continue to pay no-fault benefits. In order to establish such a claim, the appellant would first have to establish that the insurer's termination of her benefits was improper. Such a claim must comply with the requirements outlined in ss. 280-283 of the Insurance Act, one of which is the two-year limitation period for the institution of proceedings to determine this question. The appellant cannot, by the device of a claim for bad faith damages, extend threefold the length of that termination period.
Ms. Arsenault's characterization of the insurer's refusal as bad faith conduct is merely an attempt to circumvent the mandatory requirements of the dispute resolution scheme in the Insurance Act through the guise of linguistic reformulation. Her allegations, distilled, are that the refusal was inappropriate in the circumstances, the very issue contemplated for resolution under the scheme, and a claim that is clearly subject to the two-year limitation period set out in s. 281(5).
Accordingly, Justice Ramsay ordered that the statement of claim be struck without leave to amend. The Licence Appeal Tribunal has exclusive jurisdiction to decide the claim at first instance.