In a priority dispute over an auto accident that happened 20 years ago — a case that’ ha’s already gone to the Supreme Court of Canada and back again — the Court of Appeal for Ontario has provided the latest twist in a flip-flopping legal saga.
In Chubb Insurance Company of Canada v. Zurich Insurance Company, the Ontario Court of Appeal found last week that by not paying out accident benefits first — as required by Ontario’s priority dispute rules — and then by not notifying the second payer within 90 days of a priority dispute claim, Chubb Insurance Company of Canada is on the hook to pay for the entire amount of the claimant’s benefits permanently.
The upshot is that Chubb has to pay Zurich Canada almost $1 million to reimburse Zurich for accident benefits it paid to a catastrophically impaired claimant.
Background
Sukhvinder Singh was in an accident while driving a rental car in 2006. No other vehicle was involved. She did not report the crash to the car rental agency.
The rental vehicle at Wheels 4 Rent was insured by Zurich, which Singh did not know.
At the time, Singh believed Chubb was the insurer, and her lawyer contacted Chubb to confirm coverage. Chubb also issued a policy to the rental agency that provided optional accidental death and dismemberment insurance. Singh did not purchase Chubb’s optional coverage.
After experiencing symptoms following her crash, Singh applied for accident benefits from Chubb, thinking she had seen Chubb’s name somewhere at the rental vehicle site. On Nov. 21, 2006, Chubb denied her application, stating: “This is not a personal automobile policy and thus the coverage of Ontario Statutory Accident Benefits does not apply.”
More than a year and a half later, on May 28, 2008, Chubb advised Singh’s lawyer that Zurich was Wheels 4 Rent’s auto insurer. Once Zurich became aware of the claim, it agreed to adjust it, pending the outcome of its priority dispute with Chubb.
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The case reached the Supreme Court, where Chubb argued the link between Singh and Chubb was not strong enough for Chubb to be considered an ‘insurer,’ as defined in the province’s Statutory Accident Benefits Schedule. But the Supreme Court found there was a sufficient connection between Singh and Chubb, since Chubb was an optional benefits insurer and Singh probably knew about this because of something she saw at the rental agency. Chubb was therefore ruled an ‘insurer’ under the priority dispute rules.
Chubb then assumed carriage of the claim, chose to settle out with Ms. Singh (for more than the near-$1 million already paid out on the claim). Chubb then said that the SCC decision did not address all of the issues that were originally before the arbitrator, and thus, the matter needed to go back.
The original arbitrator, Stan Tessis, had passed away and so the court appointed a new arbitrator, Douglas Cunningham. Among other things, he was asked to resolve the issue of whether there wa a deflection of Singh’s claim, and if so, by who, and with what repercussions.
The arbitrator’s decision then flip-flopped its way back up to the Court of Appeal for Ontario. This time, the dispute was over which insurer was responsible for the amount Zurich paid out to Singh once it became aware of the claim. Zurich paid out $$998,387 to Singh, whose claim by then was deemed a catastrophic injury.
An arbitrator ruled Chubb had to reimburse Zurich for the total amount, since Chubb was the first payor and it did not give Zurich the required 90-day notice of a priority dispute. But on appeal, Ontario’s Superior Court ruled both Chubb and Zurich had to split responsibility for the payment.
Ontario’s Court of Appeal overturned that decision, finding Chubb owed the full amount.
“When Chubb received the claim, it simply refused to pay; it made no efforts to identify Zurich as an insurer,” a unanimous three-judge panel of the Ontario Court of Appeal found. “Given that Chubb had a relationship with Wheels 4 Rent, it would have been easy for Chubb to identify and notify Zurich as the correct insurer.
“Instead, Chubb waited a year and a half to provide this information to Ms. Singh. By this point, Ms. Singh was left without benefits and her condition had seriously worsened. In addition, given the delay, Zurich was not able to investigate and adjust the claim in a timely way.
“Section 2 of the [priority dispute regulations] is designed to guard against the type of harm Ms. Singh experienced; the provision is meant to ensure that disputes between insurers do not interfere with the prompt payment of claims to people who were injured in motor vehicle accidents.
“Section 3 is designed to guard against the prejudice Chubb’s delay in notifying Zurich caused; the insurer who is ultimately responsible for paying a claim should have a chance to investigate as soon as possible after the accident to adjust the claim and assess its risk.
“Given the circumstances of this case, the second arbitrator made no errors in exercising his discretion to require Chubb to pay the full amount of benefits owed to Ms. Singh permanently.”
Editor’s Note: The story has been updated to correct the original reporting, which inaccurately stated the Supreme Court had sent the matter back to arbitration. In fact, Chubb found the Supreme Court did not address matters that needed further arbitration. CU apologizes for the error.