COURT OF APPEAL FOR ONTARIO

CITATION: Crosslinx Transit Solutions
    General Partnership v. Ontario (Economic Development, Employment and
    Infrastructure), 2022 ONCA 187

DATE: 20220307

DOCKET: C69486

Rouleau, van Rensburg and Roberts
    JJ.A.

BETWEEN

Crosslinx
    Transit Solutions General Partnership and

Crosslinx Transit Solutions
    Constructors

Applicants

(Respondents)

and

Ontario
    Infrastructure and Lands Corporation,

as representative of the Minister of Economic Development,
    Employment and

Infrastructure, as representative of Her Majesty the Queen in Right
    of Ontario

and Metrolinx

Respondents

(Appellants)

Sharon Vogel, Peter Wardle, Jesse
    Gardner and Cheryl Labiris, for the appellants

Matthew Sammon, Andrea Wheeler and
    Jacqueline Chan, for the respondents

Heard: January 6, 2022 by
    video conference

On appeal
    from the judgment of Justice Markus Koehnen of the Superior Court of Justice
    dated May 17, 2021, with reasons reported at 2021 ONSC 3567.

REASONS
    FOR DECISION

Overview

[1]

This is an appeal of a judgment in application
    proceedings that involved the interpretation and allegations of the breach of a
    complex project agreement respecting the design, construction, and maintenance
    of a large-scale public infrastructure project, the Eglinton Crosstown Light
    Rapid Transit line (Crosstown LRT) in Toronto (the Project Agreement), in
    the context of the effects of the COVID-19 pandemic. The appellants represent
    agencies of the Crown who commissioned the project. The respondents are a
    consortium of four of Canadas largest and most sophisticated construction
    companies that are building the project. The project is in its construction
    phase.

[2]

At issue in the appeal is whether the application judge erred in concluding
    that s. 62.1(c) of the Project Agreement was triggered such that the parties were
    required to engage in a Variation Enquiry, a procedure provided for under the Project
    Agreement that could result in an extension of the time the respondents have to
    substantially complete the Crosstown LRT.

[3]

The application judge granted judgment declaring that the COVID-19 pandemic
    was an Emergency under the relevant terms of the Project Agreement; that the
    appellants had required compliance with additional or overriding procedures in
    response to the COVID-19 pandemic to protect public health and worker safety;
    and that the appellants had a contractual obligation to provide the respondents
    with a Variation Enquiry. The application judge concluded that the appellants
    had notified the respondents by means of a March 25, 2020 email that they
    required compliance with additional and overriding COVID-19 health and safety procedures.

[4]

The appellants submit, among other things, that the application judge made
    a palpable and overriding error in finding that s. 62.1(c) had been triggered by
    the March 25, 2020 email, which was an internal email that was not directed to
    the respondents. They also assert that the application judge erred in his
    interpretation of the Project Agreement by failing to conclude that the
    respondents had assumed the risks of additional health and safety measures
    required by the pandemic in their contractual obligation to comply with Applicable
    Laws, a defined term in the Project Agreement; and in their obligation to prepare
    and to follow an Emergency Response Plan.

[5]

For their part, the respondents disagree that the application judge
    erred in finding that s. 62.1(c) was triggered. They say that there was no
    extricable error of law in the application judges interpretation of the
    Project Agreement, nor did the application judge make a palpable and overriding
    error of fact in concluding that s. 62.1(c) had been triggered by the
    appellants. The respondents submit that to the extent that the application
    judge erred in his characterization of the March 25 email, this was not an
    overriding error because there was other evidence to support this conclusion.
    The respondents argue that, in any event, if the appellants did not invoke s.
    62.1(c), their failure to do so was in breach of their obligation to exercise
    their contractual discretion in good faith. In addition, they rely on the
    doctrine of indivisibility of the Crown to argue that government-mandated
    requirements constituted additional and overriding requirements of the
    appellants under the Project Agreement.

[6]

For the reasons that follow, we allow the appeal, set aside the judgment
    of the application judge and remit the application for a rehearing.

Brief factual
background

[7]

The Crosstown LRT project involves the construction and maintenance of a
    19-kilometre light rapid transit line of which 10 kilometres will be
    underground. At the time of the application in the court below, the project was
    in its construction phase and employed 1,500 people.

[8]

The Project Agreement calls for the construction to be completed by a substantial
    completion date as defined in Schedule 1 to the Project Agreement (Substantial
    Completion Date).
[1]
There are significant penalties if the respondents do not meet the Substantial
    Completion Date. The Project Agreement contains provisions that allow the
    respondents in certain prescribed circumstances to claim extensions of time and
    compensation.

[9]

One of the prescribed circumstances is in the case of an Emergency,
    which is defined by the Project Agreement to include any situation  (b) which
    gives rise to an emergency, as determined by any statutory body. Section 62.1
    of the Project Agreement provides as follows:

62.1
Emergency

(a) From Financial Close until Substantial
    Completion Date, upon the occurrence of an Emergency, Project Co shall comply
    with the Emergency Response Plan.

(b) From and after Substantial Completion
    Date, upon the occurrence of an Emergency, Project Co shall comply with its
    Emergency Response Plan in accordance with the Output Specifications.

(c) If, in respect of any Emergency, HMQ
    Entities notify Project Co that
they require compliance
    with any additional or overriding procedures
as may be determined by HMQ
    Entities or any other statutory body, then Project Co shall, subject to
    Schedule 22 - Variation Procedure (if compliance with such procedures
    constitutes a Variation), comply with such procedures (whether such procedures
    are specific to the particular Emergency or of general application and on the
    basis that such procedures shall take precedence to the extent that they
    overlap with the procedures mentioned in Section 62.1(a) or (b).
[2]

[10]

The
    parties executed the Project Agreement in 2015. Delays ensued prior to the
    outbreak of the COVID-19 pandemic and the respondents invoked the processes
    under the Project Agreement to address the delays. By the time the Ontario
    government declared a state of emergency because of the global COVID-19
    pandemic in March 2020, the project was already about a year behind schedule.

[11]

It
    is common ground that the Ontario government declared construction of public
    infrastructure projects to be an essential service that could continue to
    operate notwithstanding the wholesale shuttering of many businesses. However, significant
    health and safety procedures were imposed. These included social-distancing and
    limiting the number of workers who could attend at a worksite.

[12]

The
    respondents took the position in their correspondence with the appellants that
    the COVID-19 pandemic was an Emergency that required them to implement
    additional or overriding procedures that slowed down construction. They urged
    the appellants to declare an emergency pursuant to s. 62.1(c) of the Project
    Agreement, to direct the respondents to take additional and overriding procedures
    to protect health and safety pursuant to s. 62.1(c) of the Project Agreement,
    and thereby initiate a Variation Enquiry under Schedule 22 of the Project
    Agreement in connection with the additional and overriding procedures.

[13]

The
    appellants refused to declare an emergency. They took the position that declaring
    an emergency was unnecessary given that the province had already done so. The
    appellants advised the respondents in a letter dated April 21, 2020 that [a]t
    this point, [the appellants] do not require that [the respondents] implement
    additional or overriding measures in addition to those presently being
    undertaken by [the respondents] in order to comply with their obligations as a
    Constructor and Employer under the
Occupational Health and
    Safety Act
, R.S.O.
    1990, c. O.1
. The appellants also reminded the respondents that
    they were required to comply with all of [the respondents] obligations under
    the
Occupational Health and Safety Act
and
    the guidance of public health authorities and local, provincial, and federal
    governments.

[14]

The
    respondents invoked the dispute resolution procedures under Schedule 27 of the
    Project Agreement. They alleged that the appellants did not act in good faith
    in refusing to declare an emergency under s. 62.1(c) of the Project Agreement.
    They sought remedies, including a determination that the COVID-19 pandemic is
    an emergency under the Project Agreement and an order that the appellants
    direct the respondents to take additional or overriding procedures. The dispute
    resolution procedures did not resolve the dispute.

[15]

The
    respondents then commenced an application in the Superior Court seeking
    declarations regarding their rights under the Project Agreement, including that
    (i) the COVID-19 pandemic is an Emergency under the Project Agreement; (ii) the
    appellants had breached their contractual obligations including their
    obligation to exercise their contractual discretion reasonably and in good
    faith by (1) refusing to acknowledge that the pandemic is an Emergency and (2)
    failing to direct them to take additional and overriding procedures under s.
    62.1(c) of the Project Agreement; and (iii) the appellants have a contractual
    obligation to provide them with a Variation Enquiry.

Judgment

[16]

The
    appellants brought a preliminary motion seeking a stay of the application on
    the basis that the Project Agreement called for litigation to be postponed
    until after Substantial Completion
[3]
.
    The application judge refused the stay, and the appellants motion for leave to
    appeal this order was denied by the Divisional Court:
Crosslinx
    Transit Solutions General Partnership v. Ontario Infrastructure and Lands
    Corporation
, 2021 ONSC 5905.

[17]

There
    was considerable affidavit evidence filed on the application. The deponents
    were cross-examined, and documents were marked as exhibits, resulting in a
    record exceeding 5,000 pages. The application judge, after considering the
    evidence, granted a declaration that (i) the COVID-19 pandemic is an Emergency
    under the Project Agreement (although the appellants in their communications
    with the respondents had refused to declare an emergency, they ultimately conceded
    that this part of s. 62.1(c) was met); (ii) the appellants had required
    compliance with additional or overriding procedures in response to the pandemic
    to protect public health and worker safety; and (iii) the appellants had a
    contractual obligation to provide a Variation Enquiry under the Project
    Agreement.

[18]

The
    application judge did not consider it necessary to address the parties
    arguments respecting the principles of good faith and the indivisibility of the
    Crown. Rather, his conclusion was based on his finding that, by their email of
    March 25, 2020, the appellants had notified the respondents under s. 62.1(c) that
    they required compliance with anticipated government construction protocols.
    The application judge concluded that, when the Ontario government released a
    workplace health and safety protocol on March 29, 2020 (the March 29
    protocol), its provisions constituted additional and overriding procedures.
    Responding to the appellants argument that such measures were part of the
    Applicable Law with which the respondents were bound to comply, the application
    judge concluded that the construction protocols, while issued by the government,
    were not legally binding. He found that it was difficult to hold that the
    protocols fell within the definition of Applicable Law.

Issues and Analysis

[19]

The
    appellants raise several grounds of appeal. They assert that the application
    judge made a palpable and overriding error that the internal March 25, 2020
    email notified the respondents under s. 62.1(c) that they required compliance
    with additional or overriding procedures. They also contend that the application
    judge erred in focusing on the March 29 protocol, which at its highest
    prescribed best practices and not mandatory measures. They argue that the
    application judge made several errors in his interpretation of the Project
    Agreement with respect to the parties contractual allocation of risk, and in
    failing to give effect to the respondents obligation to comply with Applicable
    Law.

[20]

In
    our view, to determine the appeal, it suffices to consider only the question of
    whether the application judge made a palpable and overriding error in finding
    that the appellants had, by their March 25, 2020 email, actually notified the
    respondents under s. 62.1(c) that they required compliance with additional or
    overriding procedures. For the reasons that follow, we conclude that he did
    commit such a reversible error and that the appeal must be allowed.

[21]

The
    standard of review for palpable and overriding error is well-established. In
R. v. Clark
, 2005 SCC 2, [2005] 1 S.C.R. 6, at para. 9,
    the Supreme Court, relying on a long line of decisions including
Housen v. Nikolaisen
, 2002 SCC 33, [2002] 2 S.C.R. 235,
    articulated the standard in the following way:

Appellate courts may not interfere with the
    findings of fact made and the factual inferences drawn by the trial judge,
    unless they are clearly wrong, unsupported by the evidence or otherwise
    unreasonable. The imputed error must, moreover, be plainly identified. And it
    must be shown to have affected the result. Palpable and overriding error is a
    resonant and compendious expression of this well-established norm. [Citations
    omitted.]

[22]

It
    is common ground that the application judges error was palpable. Quite simply,
    he clearly and obviously erred in finding that the appellants March 25, 2020
    email was sent to the respondents. There is no dispute that this email was an
    internal email that was never directed to or sent to the respondents.

[23]

The
    application judges error was also overriding. Central to the application
    judges determination that s. 62.1(c) had been triggered was his finding that
    the appellants, by the March 25 email, notified the respondents that they
    required compliance with additional or overriding procedures.

[24]

The
    respondents argue that the application judges finding that they were notified
    as required by s. 62.1(c) can be supported by substituting the March 25, 2020
    internal email with the appellants April 21, 2020 letter that was sent to the
    respondents.

[25]

There
    are several difficulties with the respondents submission.

[26]

First
    and foremost, the April 21 letter is at best ambiguous. The appellants explain
    in the letter that they did not require any additional and overriding procedures
    in addition to those the respondents had already undertaken to comply with
    their health and safety obligations required by law.

[27]

Further
    and importantly, the respondents never stated in their contemporaneous
    correspondence with the appellants that the April 21, 2020 letter, or any other
    letter from the appellants, constituted actual notification under s. 62.1(c). Rather,
    the respondents repeatedly complained that the appellants
should

declare
    an emergency and direct them to implement additional or overriding procedures
    with respect to the project. This was the primary relief they sought under the
    Notice of Dispute sent to the appellants on May 11, 2020 and was the thrust of
    their application and argument before the application judge.

[28]

The
    respondents did not frame their application or arguments before the application
    judge on the basis that any communication from the appellants constituted
    actual notice under s. 62.1(c). Rather, the respondents maintained on the
    application that the appellants had
effectively

or
should be deemed
to have notified them because
    their actions as Crown agencies were indivisible from those of the provincial
    government that ordered the additional or overriding pandemic procedures or, in
    the alternative, that the appellants failed to exercise their contractual
    discretion in good faith.

[29]

Finally,
    the application judge did not consider, nor did the parties make any submissions
    before us, as to what constitutes notification as required by s. 62.1(c), and
    whether such notification would constitute notice under s. 61.1(a) of the
    Project Agreement. For example, no submissions were made before the application
    judge or before us regarding whether the April 21, 2020 letter (or any other
    communication) complies with the notice requirements under s. 61.1(a) of the Project
    Agreement. Section 61.1(a) of the Project Agreement states:

All notices, requests, demands, instructions, certificates,
    consents and other communications
(
each being a

Notice
)
    required or permitted under this Project Agreement shall be in writing (whether
    or not written notice or notice in writing is specifically required by the
    applicable provision of this Project Agreement) and served by sending the same
    by registered mail, facsimile transmission or by hand. [
Emphasis
in
    original and
added
.]

[30]

The
    parties correspondence contains references to formal notices and responses. A
    Notice under s. 61.1 of the Project Agreement must be in writing and
    delivered by registered mail, facsimile transmission followed by registered
    mail, or personal service. We have no evidence as to whether the April 21, 2020
    letter met these requirements, nor did we have submissions on whether it was
    required to do so. In these circumstances, we reject the submission that the
    application judges finding that the appellant notified the respondents, as
    required by s. 62(1)(c), can be upheld by this court simply by substituting the
    April 21 letter for the March 25 email.

[31]

We
    therefore conclude that the application judge made a palpable and overriding
    error in determining that the appellants notified the respondents by means of
    their March 25, 2020 internal email that was never sent to the respondents.

[32]

Accordingly,
    the appeal is allowed, and the judgment is set aside.

Next steps

[33]

We
    decline, however, to dismiss the application, as requested by the appellants.

[34]

As
    the application judge indicated at para. 39 of his reasons, [t]he nub of the
    issue between the parties is whether [the appellants] asked or
should have asked
[the respondents]
    to implement additional or overriding procedures with respect to the project
    (emphasis added), because, he reasoned, had they done so, this would have given
    the respondents the right to initiate a Variation Enquiry pursuant to s.
    62.1(c) of the Project Agreement. Because he determined that by their March 25,
    2020 internal email, the appellants had
clearly

asked

    the respondents to implement additional or overriding procedures, the application
    judge did not determine whether the appellants
should have asked
 the respondents to do so.
    Specifically, the application judge did not carry out an analysis of the exchanges
    between the parties, including the April 21 letter, to determine whether s. 62.1(c)
    had, in effect, been triggered or, in the circumstances should be deemed to
    have been triggered.

[35]

As
    earlier noted, the respondents submission that s. 62.1(c) had effectively or
    should be deemed to have been triggered is premised on their arguments that the
    appellants did not act in good faith or that as Crown actors, their actions
    were the same as the provincial Crown that legislatively mandated the
    respondents compliance with the additional or overriding pandemic health and
    safety procedures. The application judge did not determine any of these issues
    but only the issue of actual notice based on the March 25 email.

[36]

It
    is not appropriate for this court to engage in the kind of fact-finding process
    that would be required to determine these issues. As this court recently
    observed in
Carmichael v. GlaxoSmithKline Inc.
,
    2020 ONCA 447, 151 O.R. (3d) 609, at paras. 129-132, leave to appeal refused,
    [2020] S.C.C.A. No. 409, while appellate courts have fact-finding powers and the
    power to make any decision that the judge at first instance could have made under
    ss. 134(1) and (4) of the
Courts of Justice Act
,
    R.S.O. 1990, c. C.43, they are cautious about exercising them. Appellate courts
    will not make findings of fact if this requires the court to assess credibility,
    the evidentiary basis needed to draw the necessary inferences is inadequately
    developed in the record, or where the court cannot reach a fair and just
    determination of the merits.

[37]

With
    respect to the issues of good faith exercise of contractual discretion and
    Crown indivisibility, there could be issues of credibility including the reasons
    for the project delays and the appellants refusal to declare an emergency and
    invoke the Variation Enquiry pursuant to s. 62.1(c). The determination of these
    issues requires an interpretation of the Project Agreement and a deep dive into
    the factual matrix surrounding the Project Agreement and the circumstances
    leading up to the commencement of the present proceedings.

[38]

Accordingly,
    we remit the application for a rehearing.

Disposition

[39]

In
    conclusion, we allow the appeal, set aside the application judges judgment and
    costs order, and remit the application to the Superior Court for directions, if
    considered necessary or advisable.
[4]
It will be up to the parties to decide whether they wish to proceed with the
    rehearing before another judge of the Superior Court or continue with the other
    previously invoked dispute resolution procedures under Schedule 27 of the Project
    Agreement.

[40]

As
    agreed, the appellants are entitled to their costs of the appeal in the amount
    of $60,000, inclusive of disbursements and applicable taxes. If the parties
    cannot agree on the disposition of the application costs, they may make brief
    written submissions of no more than two pages, plus costs outlines, within ten
    days of the release of these reasons.

Paul Rouleau J.A.

K.
    van Rensburg J.A.

L.B.
    Roberts J.A.

[1]
Under
    s. 1.566 of Schedule 1 to the Project Agreement Substantial Completion Date
    is defined as the date on which Substantial Completion is achieved as
    evidenced by the Substantial Completion Certificate, as such date shall be
    stated therein. Section 1.528 of the Project Agreement defines Scheduled
    Substantial Completion Date as September 29, 2021, as such date may be
    amended pursuant to s. 40 of the Project Agreement. For the purposes of this
    appeal, nothing turns on these different definitions.

[2]
In the
    Project Agreement Project Co refers to the respondents, while HMQ Entities
    refers to the appellants.

[3]
Substantial Completion is defined in s. 1.564 of Schedule 1 to the Project
    Agreement. Nothing turns on it for the purposes of this appeal.

[4]

The
    proceedings
were
commenced by way of application under
    r. 14.05(3)(d) and (h) of the Rules of Civil Procedure. While the application
    judge,
apparently
without opposition from the
    appellants, proceeded to decide the application in a summary fashion, we do not
    express any view on whether the issues are capable of being determined in a
    summary procedure, or whether, under r. 38.10 any issue would require a trial.
    As such it may be appropriate for the parties to seek direction from the court.


COURT OF APPEAL FOR ONTARIO

CITATION: Continental Casualty Company v.
    Chubb Insurance Company of Canada, 2022 ONCA 188

DATE: 20220307

DOCKET: C69057

MacPherson, Simmons and
    Nordheimer JJ.A.

In
    the Matter of the
Insurance Act,
R.S.O.
    1990, c. I.8
, as amended, and
Ontario Regulation 283/95
made
    under the
Insurance Act

And
    in the Matter of the
Arbitration Act, 1991,
S.O. 1991, c. 17
, as amended

And
    in the Matter of an Arbitration

BETWEEN

Continental
    Casualty Company

Appellant (Respondent)

and

Chubb
    Insurance Company of Canada

Respondent (Appellant)

and

Peter
    Ekstein

Insured Person

Jason R. Frost and Joseph Filice, for
    the appellant

Mark Donaldson and Shelby Chung, for
    the respondent

Heard: November 4, 2021 by video conference

On appeal from the order of Justice
    David G. Stinson of the Superior Court of Justice, dated September 26, 2019,
    with reasons reported at 2019 ONSC 3773, allowing an appeal from a decision of
    Arbitrator Kenneth Bialkowski, dated April 4, 2018.

Simmons J.A.:

A.

introduction

[1]

The issues on this appeal arise out of a
    priority dispute between insurers concerning liability for statutory accident
    benefits (SABS) where the SABS claimant had basic mandatory SABS coverage
    under one policy and both basic mandatory and optional enhanced SABS coverage
    under another policy.

[2]

In July 2015, Peter Ekstein, the owner, President
    and CEO of a forestry products company, suffered catastrophic injuries when he
    was hit by a pickup truck while jogging near his cottage.

[3]

Mr. Ekstein had basic mandatory SABS coverage under
    his personal automobile insurance policy issued by Chubb Insurance Company of
    Canada. In addition, his company had purchased optional enhanced SABS coverage
    under a fleet policy issued by Continental Casualty Company for his companys
    vehicles.

[4]

Following Mr. Eksteins accident, Continental
    denied both that its policy provided optional enhanced SABS coverage and that
    Mr. Ekstein had coverage under its policy.

[5]

Mr. Ekstein accordingly claimed basic mandatory
    SABS from Chubb. Chubb subsequently initiated a priority dispute, claiming that
    Continental was the insurer liable to pay SABS to Mr. Ekstein.

[6]

Section 268 of the
Insurance Act
, R.S.O.
    1990, c.I.8. (the Act) sets out priority of payment rules specifying the
    insurer against which a SABS claimant may have recourse for SABS in particular
    circumstances. Under ss. 268(5) and (5.2) of the Act, if a SABS claimant is a named
    insured under more than one policy, the SABS claimant may decide from which insurer
    to claim SABS
.

[7]

Unless altered by the legislative scheme, within
    the insurance industry named insured generally refers to the person actually named
    in a contract of insurance, while an insured is a person who, whether by
    statute or by contract, has some or all of the rights of the named insured
[1]
. In the case of the
    Continental policy, Mr. Ecksteins company was the named insured.
However, s. 3(7)(f) of the
Statutory Accident Benefits Schedule
     Effective September 1, 2010
, O. Reg. 34/10 (the SABS Schedule) expands
    the scope of the named insured for a company car. A person will be deemed to
    be the named insured under an automobile insurance policy at the time of an
    accident where the insured automobile is being made available for the
    individuals regular use by a corporation.

[8]

In April 2018 an arbitrator found that Mr.
    Ekstein was the named insured under the Chubb policy and a deemed named
    insured under the Continental policy
[2]
because he met the regular use requirements in s. 3(7)(f).

[9]

The arbitrator held that absent misinformation provided
    by Continental, Mr. Ekstein would have elected to receive SABS from Continental,
    the optional enhanced SABS insurer, and that Mr. Ekstein was entitled to
    re-elect in the circumstances. Continental was therefore the priority insurer
    under the s. 268 priority of payment rules and obliged to pay Mr. Ekstein both
    basic mandatory and optional enhanced SABS.

[10]

Further, because the Continental policy included
    optional enhanced SABS benefits, the arbitrator found Continental should have
    issued to its insured an Ontario Policy Change Form 47 endorsement (OPCF 47)
    as required under s. 28 of the SABS Schedule.

[11]

Subject to a requirement that a person, to whom
    an optional enhanced SABS benefit is applicable, does not claim SABS under
    another policy, OPCF 47 allows that person to claim both basic mandatory and
    optional enhanced SABS under the optional enhanced SABS policy, even though the
    s. 268 priority of payment rules may require the person to claim SABS under
    another policy.

[12]

The arbitrator concluded that regardless of the
    s. 268 priority of payment rules
[3]
, Mr.
    Ekstein was entitled to pursue the optional benefits from [Continental].

[13]

Continental appealed the arbitrators finding
    that Mr. Ekstein was a deemed named insured under its policy to the Superior
    Court.

[14]

The Superior Court Appeal judge (the SCAJ)
    found the arbitrators finding that Mr. Ekstein met the regular use
    requirements in s. 3(7)(f) of the SABS Schedule unreasonable. Although as a
    company executive Mr. Ekstein had access to and control over company vehicles,
    he had never used any of such vehicles. The SCAJ accordingly concluded Mr.
    Ekstein was not a deemed named insured under the Continental policy. Therefore
    he could not elect under the s. 268 priority of payment rules to claim SABS
    from Continental and Chubb was the priority insurer under those rules.

[15]

Nonetheless, the SCAJ found that Continental was
    obliged to pay both basic mandatory SABS and optional enhanced SABS to Mr.
    Ekstein under the terms of OPCF 47.

[16]

Over Chubbs objections, the SCAJ went on to
    consider whether Chubb, as the priority insurer under the s. 268 priority of
    payment rules, was obliged to indemnify Continental for basic mandatory SABS
    payments Continental was required to make, an issue not raised in Continentals
    notice of appeal.

[17]

Relying on an arbitrators decision, the SCAJ
    found that an OPCF 47 endorsement does not displace the s. 268 priority of
    payment rules. The SCAJ accordingly set aside the arbitrators order and
    declared that:

·

Continental must pay both basic mandatory SABS
    and optional enhanced SABS to the SABS claimant;

·

Continental is responsible for the cost of all
    optional benefits provided;

·

Continental is entitled to reimbursement from
    Chubb for the cost of basic mandatory SABS benefits paid to the SABS claimant by
    Continental and all expenses associated with administering those benefits.

[18]

Chubb was granted leave to appeal to this court
    on February 28, 2020.

[19]

Chubb raises a variety of procedural and
    substantive issues concerning the SCAJs decision. In my view, this appeal can
    properly be disposed of by answering the following questions:

1.

Did the SCAJ err in overturning the arbitrators
    decision that Mr. Ekstein met the regular use requirement in s. 3(7)(f) of the
    SABS Schedule and was therefore a deemed named insured under the Continental
    policy?

2.

Did the SCAJ err in holding that as the priority
    insurer under the s. 268 priority rules, Chubb was obliged to indemnify
    Continental for basic mandatory SABS payments Continental was obliged to pay to
    Mr. Ekstein under OPCF 47?

[20]

For the reasons, that follow, I would answer no to
    the first question and yes to the second.

B.

the sabs regime

[21]

To provide context for the issues on appeal, I
    will briefly review the SABS coverage regime and the s. 268 priority rules and
    related regulations. I will set out other relevant regulatory and contractual
    provisions when addressing the specific issues to which they relate.

(i)

SABS Coverage

[22]

Subsection 268(1) of the Act states that all
    motor vehicle liability insurance policies are deemed to provide for the SABS
    set out in the SABS Schedule:

268(1) Every contract evidenced by a motor
    vehicle liability policy  shall be deemed to provide for the statutory
    accident benefits set out in the [
Statutory Accident Benefits
]
Schedule
.
[4]

[23]

Under the

SABS Schedule, all insurance
    policies must provide stipulated basic mandatory SABS coverage and all insurers
    must offer stipulated optional enhanced SABS coverage: s. 2(1) and s. 28(1) of
    the SABS Schedule.

[24]

Sections 4-27 of the SABS Schedule set out the
    specified basic mandatory benefits that must be provided, including, for
    example, a maximum income replacement benefit of $400 per week: s. 7(1) of the
    SABS Schedule.

[25]

Section 28(1) of the SABS Schedule requires that
    every insurer offer specified optional enhanced SABS benefits. For example, s.
    28(1)(1.) requires that the following optional enhanced benefit be offered:

1. An optional income replacement benefit that
    increases the maximum weekly amount of $400 referred to in the definition of
    B in subsection 7 (1) to $600, $800 or $1,000, as selected by the named
    insured under the policy.

[26]

Under s. 28(2) of the SABS Schedule, the
    optional benefits referred to in s. 28(1) are applicable only to: the
    named insured, the spouse of the named insured, their dependants and persons
    specified in the policy as drivers of the insured automobile.

[27]

Put another way, even if the s. 268 priority
    rules afford recourse against an insurer to a SABS claimant with no connection
    to the policy (for example, a pedestrian struck by the insured automobile where
    the pedestrian has no automobile insurance), any optional enhanced SABS
    coverage available under the policy would not be applicable to that claimant.

(ii)

The Section 268 Priority Rules and Related
    Regulations

[28]

Subsections 268(2)-(5.2)
[5]
of the Act set out the rules for determining the insurer against
    which a person has recourse for SABS and for determining the insurer liable to
    pay SABS.

[29]

Whether an occupant or non-occupant of an
    automobile at the time of an accident, a SABS claimants first avenue of
    recourse is against the insurer of an automobile in respect of which the person
    is an insured: s. 268(2)(1.)(i) and (2)(2.)(i) of the Act. As Mr. Ekstein was a
    pedestrian (non-occupant) when he was injured, s. 268(2)(2.) therefore
    applies:

268(2) The following rules apply for
    determining who is liable to pay statutory accident benefits:

2. In respect of non-occupants,

i.
the non-occupant has recourse against
    the insurer of an automobile in respect of which the non-occupant is an insured
,

ii. if recovery is unavailable under
    subparagraph i, the non-occupant has recourse against the insurer of the
    automobile that struck the non-occupant,

iii. if recovery is unavailable under
    subparagraph i or ii, the non-occupant has recourse against the insurer of any
    automobile involved in the incident from which entitlement to statutory
    accident benefits arose,

iv. if recovery is unavailable under
    subparagraph i, ii or iii, the non-occupant has recourse against the Motor
    Vehicle Accident Claims Fund. [Emphasis added.]

[30]

Where a person has recourse against more than
    one insurer under subparagraphs (i) or (iii) under paragraphs (1.) or (2.) of
    s. 268(2), the person may decide the insurer from which the person will claim
    benefits: s. 268(4) of the Act.

[31]

Despite s. 268(4), if a person is a
named
insured under a policy, the person
must
seek recourse for SABS under
    that policy: s. 268(5) of the Act.

[32]

However, subject to s. 268(5.2), if a person is
    a
named
insured under more than one policy providing SABS coverage, the
    person may choose the insurer against which the person will seek recourse: s.
    268(5.1) of the Act.
[6]

[33]

As noted, s. 3(7)(f) of the SABS Schedule
    expands the notion of a named insured if a SABS claimant can establish regular
    use of a company vehicle. It provides:

3(7)(f) an individual who is living and
    ordinarily present in Ontario
is deemed to be the named insured under the
    policy
insuring an automobile at the time of an accident
if, at the time
    of the accident
,

(i) the insured automobile is being made
    available for the individual's regular use by a corporation. [Emphasis added.]

[34]

Section 268(3) of the Act stipulates that the
    insurer against whom a person has recourse for SABS is liable to pay SABS:

268(3) An insurer against whom a person has
    recourse for the payment of statutory accident benefits
is liable to pay
the benefits. [Emphasis added.]

[35]

Further, s. 2(4) of the SABS Schedule states:

2(4) Benefits payable under this Regulation in
    respect of an insured person shall be paid by the insurer that is liable to pay
    under s. 268(2) of the Act.

[36]

Section 2.1(6) of O. Reg. 283/95 (
Disputes Between Insurers
) requires the
    first insurer that receives an application for SABS to pay SABS pending the
    resolution of any dispute as to which insurer is required to pay the benefits. This
    provision ensures SABS payments are not delayed by priority disputes between
    insurers. If the insurers cannot agree as to which insurer is required to pay
    benefits, the dispute must be resolved through an arbitration under the
Arbitration Act, 1991
, S.O. 1991, c. 17:
    s. 7(1), O. Reg. 283/95.

C.

Analysis

(1)

Did the SCAJ err in overturning the arbitrators
    finding that Mr. Ekstein
meets
    the regular use requirement in s. 3(7)(f) of the SABS Schedule and is therefore
a deemed named insured under Continentals policy?

(a)

The Arbitrators Decision

[37]

The arbitrators decision that Mr. Ekstein was a
    deemed named insured under the Continental policy was premised on a finding that
    Mr. Ekstein met the regular use requirement set out in s. 3(7)(f) of the SABS
    Schedule.

[38]

The evidence before the arbitrator was that Mr.
    Eksteins name appeared on a schedule of drivers attached to the Continental
    fleet policy. However, it was undisputed that he had never driven any of the
    corporate vehicles, most of which were tractor-trailers used in the forestry
    products business. Although Mr. Ekstein was involved in the day-to-day
    operations of the business, others were responsible for day-to-day decision-making
    concerning the fleet of vehicles and the assignment of vehicles to particular
    drivers. Nonetheless, Mr. Ekstein testified that he had access to the keys for
    the vehicle fleet, which were kept in the corporate business office, and had
    the power to take one of the lighter trucks out 24/7 if he chose to do so. He
    called the shots.

[39]

The
    arbitrator noted that there are two arbitration decisions that deal in
    particular with the control executives and owners have over vehicles used in
    their businesses and the impact of that control on the regular use issue:
The Dominion of Canada General Insurance Company v. Federated
    Insurance Company of Canada
(Arbitrator Densem  October 31, 2012)
    and

The Dominion of Canada General Insurance Company v.
    Lombard Insurance Company (McLean)
, 2013 CarswellOnt 19270,
    (Arbitrator Bialkowski  September 11, 2013).

[40]

Taking
    account of those decisions the arbitrator concluded that Mr. Ekstein had
    sufficient authority and control over the vehicles to meet the requisite
    standard. The arbitrator said:

Mr. Ekstein had sufficient control over the vehicles insured by
    [Continental] to be found a deemed named insured by reason of s. 3(7)(f) of
    the SABS [Schedule]. As President and CEO, he had control and access to them
    whenever he wanted, as he stated, I call the shots.

I find that Mr. Ekstein
was a deemed named insured
pursuant to s. 3(7)(f) of the SABS and his control of the corporate vehicles
by
    reason of his ownership interest, ultimate control of the vehicles and
    accessibility to the keys
. [Emphasis added.]

(b)

The SCAJs decision

[41]

Before the SCAJ, the parties agreed that the
    standard of review was reasonableness. The SCAJ distinguished the two cases on
    which the arbitrator relied by noting that, in each case, the SABS claimant
    made actual use of the vehicle that was the subject of the policy.

[42]

In
Dominion v. Federated
, the claimant
    was a dependant of a co-owner of a used car lot.
[7]
The used cars on the lot were insured under a garage policy issued
    by Federated. At the time of the accident, the claimant was a passenger in one
    of the used vehicles which was being driven by a third party with the father/co‑owners
    permission. There was no issue that the father/co-owner made regular use of the
    vehicles on the lot. The real issue was whether a company vehicle was being
    made available to the father at the time of the accident as the used car lot
    was closed when the accident occurred and there was no business purpose
    associated with the claimants travel. The issue turned on the fathers access
    to and control over vehicles on the lot such that they were being made
    available at the time of the accident.

[43]

In
Dominion v. Lombard
, the claimant
    was struck by a vehicle while riding a bicycle in Oregon. She was a team leader
    and highest-ranking person at an Ontario group home. She used the group homes
    vehicle while working and was also responsible for assignment of, record
    keeping in relation to, and responsibility for the maintenance and repair of
    the vehicle. She claimed SABS under the group home fleet policy. The insurer
    conceded regular use. The issue as framed by the arbitrator was whether the
    vehicle was available to the claimant at the time of the accident. The
    arbitrator concluded that the claimant had sufficient residual control over the
    vehicle to be considered a deemed named insured.

[44]

In considering the application of those decisions
    to this case, the SCAJ stated, while there was an element of so-called residual
    control over the vehicles  what is missing  is any evidence of those
    vehicles being made available for [Mr. Eksteins] regular use. Further, it
    was unreasonable for the Arbitrator to impute regular usage to Mr. Ekstein
    when none existed.

[45]

The SCAJ found that the arbitrator failed to
    consider Mr. Eksteins evidence that he never used a company vehicle prior to
    or at the time of the accident, or that a company vehicle was not being made
    available to him at the time of the accident. The SCAJ concluded:

I conclude that the Arbitrators decision is
    unreasonable because he failed to carry out the proper analysis, it is
    inconsistent with underlying legal principles, and the outcome ignores or
    cannot be supported by the evidence.
To the contrary, the evidence supports
    the finding that no automobiles that were subject to the [Continental] policy
    were made available for Mr. Eksteins regular use by the company
. Since the
    outcome ignores that uncontroverted fact, I find it is unreasonable. [Emphasis
    added.]

(c)

Discussion

[46]

Chubb contends that, post-
Vavilov
[8]
, the standard of review to be
    applied in this case is the appellate standard. I agree.

[47]

At para. 37 of the majority reasons in
Vavilov
,
    the court stated that it should be recognized that where the legislature has
    provided for an appeal from an administrative decision to a court, a court
    hearing such an appeal is to apply appellate standards of review to the
    decision.

[48]

The arbitration in this matter was conducted
    pursuant to the
Arbitration Act, 1991
. Subsections 45(2) and (3) of that
    Act provide for an appeal on questions of law and mixed fact and law if
    permitted by the arbitration agreement. Paragraph 6 of the parties arbitration
    agreement provides for an appeal without leave to a Superior Court judge on
    questions of law or mixed fact and law.

[49]

Chubb submits that the SCAJ made a palpable and
    overring error in reversing the arbitrators finding that Mr. Ekstein met the
    regular use requirement. In particular, there was evidence before the
    arbitrator that Mr. Ekstein had control over and access to the company vehicles
    whenever he wanted. As noted by the arbitrator, Mr. Ekstein stated, I call the
    shots. Mr. Ekstein could have used, or directed the use of, any of the corporate
    vehicles at any time had he chosen to do so. Chubb submits that the SCAJ erred
    by effectively removing the phrase available for from the regular use
    definition. He further erred by failing to defer to the factual findings of the
    arbitrator when he concluded that no automobiles were being made available by
    the company for Mr. Eksteins regular use.

[50]

I would not accept these submissions.

[51]

As a starting point, I consider that the issue
    presented may be a question of law requiring a correctness standard of review.
    It is undisputed that although Mr. Ekstein could have driven at least some
    of the company vehicles at any time he wished, he never did so. Accordingly, the
    question arises, can the regular use requirement set out in s. 3(7)(f) of the
    SABS Schedule be met based on access to and control of a vehicle, standing
    alone, without any use? For reasons that I will explain, I would answer no.

[52]

However, even assuming that the standard of
    review is palpable and overriding error, I agree with the SCAJ that the
    arbitrator erred by focusing on the evidence concerning Mr. Eksteins potential
    access to and control over his companys vehicles. In doing so, the arbitrator effectively
    ignored, or failed to give effect to, the evidence that, as of the date of the
    accident, Mr. Ekstein had
never
used any of the company vehicles insured
    under Continentals policy.

[53]

I reach these conclusions for several reasons. I
    will begin by repeating the regular use requirement set out in s. 3(7)(f) of
    the SABS Schedule for ease of reference:

3(7)(f) an individual who is living and
    ordinarily present in Ontario
is deemed to be the named insured
under
    the policy insuring an automobile at the time of an accident
if, at the time
    of the accident
,

(i)
the insured automobile is being made
    available for the individual's regular use
by a corporation.

[54]

Read as a whole and in the context of the
    legislative history of the section, the language of s. 3(7)(f) makes the actual
    situation at the time of the accident the focus of the section rather than
    theoretical possibilities.

[55]

Belobaba J. made this point in
ACE INA
    Insurance v. Co-operators General Insurance Company
(2009), 79 M.V.R.
    (5th) 312 (Ont. S.C.), at paras. 25-26, when he compared the language of the current
    section (at the time, s. 66(1) of the SABS Schedule under the heading Company
    Automobiles and Rental Automobiles) to the language of the comparable section
    under the same heading in the immediately preceding insurance regime:

Section 66(1) [now s. 3(7)(f)]: if,
at the
    time of the accident
, the insured automobile
is being
made available
    for the individuals regular use by a corporation.

Former section (s. 91(4) under O. Reg. 776/93):
    if an insured automobile
is made available
for the regular use of an
    individual [Emphasis added.].

[56]

By focusing on the time of the accident and adding
    the phrase
is being
, the current requirement speaks to reality, not hypotheticals.

[57]

Thus, in
ACE INA Insurance v. Co-operators
,
    even though an employee of rental car company made regular use of rental car
    vehicles during working hours, he did not meet the regular use requirement
    because the accident did not happen during working hours. At para. 17, Belobaba
    J. said:

The question is not whether the car would be
    available to the claimant when he went back to work the next day but was it
    being made available to him at the time of the accident, when he was off work
    and on his way downtown in a friends car.

[58]

In
ACE INA

Insurance v.
    Co-operators
, there was no issue about regular use. The sole issue was whether
    a company vehicle was being made available at the time of the accident. The
    answer turned on whether the employee had access and control at the time of the
    accident  he did not.

[59]

In this case, the primary issue is regular use. Mr.
    Ekstein had never made
any
use of company vehicles. Accordingly, the
    primary issue was not whether a company vehicle was available to him at the
    time of the accident. Rather, it was whether a company vehicle
was being
    made available
for his
regular
use at the time of the accident.

[60]

Although Mr. Eksteins control over the fleet of
    corporate vehicles may mean that at least some of them were theoretically
    available for him to use
[9]
at the time of the accident, to hold that a company vehicle
was being made
    available
for his
regular
use at the time of the accident would
    amount to speculation.

[61]

Like the SCAJ, I fail to see how availability
    for
regular
use can be imputed in the absence of
any
use up to
    the point of the accident.

[62]

Second, in the decisions relied on by the
    arbitrator, regular use was not in issue. Rather, the main issue in each case
    was again whether a corporate vehicle was being made available to the SABS claimant
    (or to a person on whom the SABS claimant was dependent) at the time of the
    accident. Again, the issue turned on access and control. The term available
    obviated any requirement that the SABS claimant actually be using an insured
    vehicle at the time of the accident. The decisions held that access to and
    control over a vehicle can support a finding that a vehicle was available to
    a claimant at the time of an accident. However, in both decisions, the claimant
    (or the insured upon whom the claimant was dependent), had regular use of an
    insured company vehicle. Accordingly, these decisions do not address the
    question whether, absent
any
use, access to and control over a company
    vehicle, standing alone, is sufficient to meet the requirement that a company
    vehicle
is being made
available for [an] individuals
regular
use at the time of the accident.

[63]

Third, in
Dominion v. Federated
, at p.
    4, Arbitrator Densem canvassed the meaning ascribed to regular use in the
    caselaw and noted the propositions set out below (footnotes omitted). Not all
    of the cases from which these propositions are derived were dealing with the
    regular use provision of the SABS Schedule. However, it is noteworthy that none
    of these cases contemplated that
no
use could amount to
regular
use:

·

regular is intended to describe periodic,
    routine, ordinary or general as opposed to irregular, or out of the ordinary,
    or special;

·

the language of s. 66(1)(a) (the predecessor to
    s. 3(7)(f)) does not require that the use be frequent, exclusive (in the case
    of fleets), or personal, to be regular;

·

regular use has been defined in several
    arbitration decisions as being use that is habitual, normal and recurred
    uniformly according to a predictable time and manner. However, the cases where
    the individuals have been found not to be regular users of the subject vehicles
    were only those cases where the characterization of the use was irregular at
    best and out of the ordinary;

·

regular use does not require that the person
    for whom the vehicle is being made available be driving or operating the
    vehicle being made available. The person could be a pedestrian or even a
    passenger in someone elses car.

[64]

Fourth, with the introduction of the no-fault
    benefits regime, the legislature chose to make an individuals own insurer in
    most cases the first avenue of recourse for SABS: see s. 268(2) of the Act. According
    to Arbitrator Samis, as quoted in
Kingsway General Insurance Company v.
    Gore Mutual Insurance Company
, 2012 ONCA 683, 112 O.R. (3d) 1, at para.
    44, with the introduction of what was originally referred to as the company
    car provision, the legislature made a policy choice that the first avenue of
    recourse for a regular user of a company car would be the corporate insurer:

The traditional company car scenario
    involves situations where a business purchases a vehicle, and insurance for the
    vehicle, and then makes that vehicle available for the regular, personal, and
    frequent use of its employees or officers.

Given the known frequency of these types of
    transactions, the legislature attempted to address how the new priority rules
    would apply to these situations.

The apparent purpose of the regulation
    provision is to deem the person, for whom a vehicle is made available for
    regular use, to be a named insured. This is clearly a recognition that in
    these types of transactions the regular user is in such a relationship with the
    vehicle and the vehicle insurer that that person should claim their benefits
    first from the insurer of the vehicle, rather than claim benefits from some
    other insurance company.

[65]

Given the apparent purpose of the company car or
    regular use provision, I find it difficult to conceive that the
    legislature intended to make the corporate insurer the customary first avenue
    of recourse for SABS for a corporate owner/executive who has never used a
    corporate vehicle.

[66]

I conclude that the arbitrator made at least a
    palpable and overriding error in failing to give effect to the evidence that
    Mr. Ekstein had never used any of the corporate vehicles and in finding that
    Mr. Ekstein met the regular use requirement in s. 3(7)(f) of the SABS Schedule
    and was therefore a named insured under Continentals policy.

(2)

Did the SCAJ err in finding that, as the
    priority insurer under the s. 268 priority rules, Chubb is obliged to
    indemnify Continental for basic mandatory SABS payments made to Mr. Ekstein
    under OPCF 47?

[67]

To answer this question, it is necessary to review
    OPCF 47, s. 227 of the Act, Financial Services Commission of Ontario (FSCO) Bulletins
    A-17/96 and A‑10/97, and the SCAJs reasons.

(a)

OPCF 47

[68]

Continental has acknowledged that, in addition
    to basic mandatory SABS coverage, Mr. Eksteins company purchased optional
    enhanced SABS coverage under Continentals fleet policy.

[69]

Section 28(4) of the SABS Schedule provides that
    where an insured purchases optional enhanced SABS coverage the insurer shall
    issue an OPCF 47 endorsement as approved by the Commissioner of Insurance under
    s. 227 of the Act:

28(4) If a person purchases an optional
    benefit referred to in subsection (1), the insurer shall issue to the person
    the endorsement set out in Ontario Policy Change Form 47 (OPCF 47), as approved
    by the Commissioner of Insurance on December 3, 1996 under section 227 of the
    Act.

[70]

Subject to the requirement that the person not
    claim SABS under another policy, OPCF 47 allows a person with optional enhanced
    SABS coverage under a motor vehicle insurance liability policy to claim
    SABS under that policy even though the s. 268 priority of payment rules may
    require the person to claim SABS under another policy. The endorsement reads as
    follows:

OPCF 47 Agreement Not to Rely on SABS Priority
    of Payment Rules

1. Purpose of This Endorsement

This endorsement is part of your policy. It
    has been made because
persons who are entitled to receive optional statutory
    accident benefits under this policy may, by the priority of payment rules
    in Section 268 of the
Insurance Act
, be required to claim under another policy that does not provide
    them with the optional statutory accident benefits
that have purchased under this policy. This endorsement
allows these persons
    to claim Statutory Accident Benefits (SABS) under this policy, including the
    optional statutory accident benefits
provided by this policy, provided they
    do not make a claim for
SABS
under another policy.

2. What We Agree To

If optional statutory accident benefits are
    purchased and are applicable to a person under this policy, and the person
    claims
SABS
under
    this policy as a result of an accident and agrees not to make a claim for
SABS
under another policy,
we
    agree that we will not deny the claim, for both mandatory and optional
    statutory accident benefits coverage purchased, on the basis that the priority
    of payment rules
in
Section 268
of the
Insurance Act
may require that the
    person claim
SABS
under
    another insurance policy.

All other terms and conditions of the policy
    remain the same. [Emphasis added.]

(b)

Section 227 of the Act

[71]

Section 227(2) of the Act permits the Chief
    Executive Officer to approve an endorsement where any provision of Part VI of
    the Act is inappropriate to the requirements of a contract with the result that
    the approved endorsement is effective in accordance with its terms even if its
    terms are inconsistent with or vary a provision of Part VI:

227(2)
Where
, in the opinion of the
Chief
    Executive Officer, any provision of this Part
, including any statutory
    condition,
is
wholly or partly
inappropriate
to the requirements
    of a contract or is inapplicable by reason of the requirements of any Act, he
    or she
may approve

a form of
policy, or part thereof, or
endorsement
evidencing a contract
sufficient
or appropriate
to insure the risks
required or
proposed to be insured
,
and the
contract evidenced by
    the policy or
endorsement in the form so approved is effective and binding
according to its terms
even if those terms are inconsistent with, vary
,
    omit or add to
any

provision or condition of this Part
. [Emphasis
    added.]

[72]

As noted above, OPCF 47 was approved in December
    1996.

(c)

FSCO Bulletins A-17/96 and A-10/97

[73]

FSCO Bulletin A-17/96 was issued soon after OPCF
    47 was approved to assist insurers in interpreting s. 268 of the [Act]. The
    Bulletin notes that the insurance industry had expressed concern that certain
    interpretations of the Act could frustrate the objectives of optional statutory
    accident benefits.

[74]

Bulletin A-17/96 states, in part, that a key
    objective of the
Automobile Insurance Rate Stability Act, 1996 (Bill 59)
[was] to lower the cost of compulsory automobile insurance by establishing basic
    mandatory SABS coverage suitable for most consumers but allowing for the
    purchase of optional enhanced benefits for consumers who required such
    coverage. The optional enhanced coverage was intended to be portable, meaning
    it would apply to the consumer, their spouse and dependent(s) and any listed
    driver on the policy, whether the accident took place in the vehicle covered by
    the policy or any other vehicle. Further, the rate filings of insurers for the
    optional statutory accident benefits reflects this portable aspect of the
    coverage.

[75]

However, because certain interpretations of the
    Act may not reflect the intended portability, endorsement form OPCF 47,
    Agreement Not to Rely on SABS Priority of Payment Rules was developed to protect
    purchasers of optional statutory accident benefits from different
    interpretations of the Act which may result in denial of coverage. An example
    of this potential was explained as follows:

An example is a consumer who has purchased his
    or her own policy with optional statutory accident benefits. The consumer is
    injured in an accident while occupying the vehicle of a spouse or dependent who
    is insured under a separate policy without optional statutory accident benefits.
    The Act can be interpreted, in this case, to require the consumer with optional
    statutory accident benefits, to claim under the spouses or dependents policy
    instead [under s. 268(5.2)]. As a result, the consumer who has purchased
    optional statutory accident benefits would not be able to claim these benefits.

[76]

FSCO Bulletin A-10/97 was issued on November 19,
    1997 as a supplement to Bulletin A-17/96 because of questions about how [OPCF 47]
    should be interpreted in certain situations. Bulletin A-10/97 notes that OPCF 47
    was mandated, in part, to ensure insured persons are able to access optional
    enhanced SABS regardless of how the priority of payment rules set out in
    subsections 268(2), (4), (5), (5.1) and (5.2) of the Act are interpreted. Under
    the heading Effect of the Endorsement, Bulletin A-10/97 states , in part, the
    following:

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.

The endorsement also provides that where an
    insured person claims both mandatory accident benefits and optional accident
    benefits from an insurer, the insured person agrees not to apply for SABS under
    another policy. This is to prevent double compensation. [Emphasis in original.]

[77]

Bulletin A-10/97 goes on to explain that an
    optional accident benefit would be applicable if the insured person was
    involved in an accident and met the eligibility criteria for the benefit as set
    out in the SABS [Schedule] and provides an example.

(d)

The SCAJs decision

[78]

On the arbitrators findings, Continental was both
    the s. 268 priority insurer and the OPCF 47 optional enhanced benefits insurer.
    However, because the SCAJ reversed the arbitrators finding that Mr. Ekstein
    was a deemed named insured under the Continental policy, Chubb became the
    priority insurer under s. 268(5) of the Act.

[79]

In the SCAJs view, this created a dichotomy
    between Mr. Eksteins right to SABS coverage, which was governed by contract,
    and the rights and obligations as between the two insurers for SABS, which, in
    his view, were governed by the Act.

[80]

In concluding that, as between the insurers, the
    statutory priority regime in s. 268 of the Act prevails, the SCAJ adopted the
    arbitrators reasoning in
Echelon General Insurance Company v. Co-operators
    General Insurance Company,
2015 CarswellOnt 20908,

at paras. 26-28,
    43 and 45.

[81]

In
Echelon
, the claimant applied to
    Echelon for SABS under a policy for the automobile she was driving when the
    accident occurred, which included basic mandatory SABS coverage. Echelon initiated
    a priority dispute with Co-operators, which had issued a policy to the
    claimants father that included optional enhanced SABS coverage. The claimant
    was a listed driver under the Co-operators policy. Co-operators denied coverage
    on the basis that the claimants injuries appeared to fall within minor injury
    guidelines such that optional enhanced benefits would not be applicable. The
    dispute proceeded to arbitration under the Disputes Between Insurers
    regulation.

[82]

In his reasons, the
Echelon
arbitrator noted
    the evolution of the automobile insurance regime in Ontario, from a tort regime
    to a system with significant no-fault benefits to a more hybrid regime  and
    the corresponding evolution of the mandatory SABS scheme, from a broad and
    extensive scheme to a less extensive scheme coupled with the requirement in s.
    28 of the SABS Schedule to offer optional enhanced benefits.

[83]

The arbitrator also noted that it became
    apparent that receipt of optional enhanced SABS might be jeopardized by the s.
    268 priority rules, which could require a claimant to apply for SABS to an
    insurer other than their optional enhanced SABS insurer. But rather than revise
    the Act, the government responded with OPCF 47, which the arbitrator described
    as an undertaking given solely in respect of a denial of the claim and [which]
    does not speak to priority dispute issues, between insurers.

[84]

At paras. 26-28 and 45 of his reasons, the
    arbitrator considered what would have happened had the claimant applied to
    Co-operators for SABS. He concluded that, under OPCF 47, Co-operators would
    have been obliged to pay both basic mandatory and optional enhanced SABS. He
    was also of the view that there was nothing in OPCF 47, the Act or the SABS
    Schedule that would have precluded Co‑operators from seeking
    reimbursement, at least for basic mandatory SABS and any optional enhanced SABS
    that might be available under Echelons policy from Echelon, a higher ranking
    insurer under the s. 268 priority rules. To hold otherwise would be a windfall
    for the higher ranking insurer and a dislocation of risk which would
    necessarily make optional benefits coverage inordinately expensive, far more
    expensive than the breadth of extended coverage obtained for the consumer.
    Nonetheless, in his view, Co-operators would not have been entitled to off-load
    the continuing handling of the claim.

[85]

However, the claimant had applied to Echelon for
    SABS and the question before the arbitrator was whether Echelon could claim
    reimbursement for basic mandatory SABS from Co-operators. The issue whether
    OPCF 47 applied and made Co-operators responsible for SABS raised four
    questions:

·

had optional enhanced SABS been purchased?;

·

were the optional enhanced SABS applicable to
    the claimant?;

·

had or could the claimant claim SABS under the Co-operators
    policy?; and

·

had or could the claimant agree not to make a
    claim for SABS under another policy?

[86]

The first condition was obviously satisfied.
    Further, the arbitrator found the policy was applicable to the claimant because
    she fell within the category of persons to whom optional enhanced benefits were
    applicable under s. 28(2) of the SABS Schedule.
[10]
Without foreclosing the
    possibility that the claimant could, at some point in the future, successfully satisfy
    the third and fourth conditions and advance a claim for optional enhanced SABS directly
    against Co-operators, the arbitrator found that Echelon could not seek
    reimbursement from Co-operators for the basic mandatory SABS it had paid. The
    arbitrator reasoned that Echelon would not have had that right if optional
    enhanced SABS had not been purchased. Further, he saw nothing in OPCF 47 or the
    Disputes Between Insurers regulation that would permit Echelon to seek
    reimbursement from Co-operators. In his view, this outcome was consistent with
    what would have happened had the claimant applied to Co-operators for SABS.
    Either way, the s. 268 priority insurer would ultimately be responsible for
    basic mandatory SABS, a result which precluded unduly loading costs onto the
    optional benefits insurer:

[T]he net result is that the obligation for
    the mandatory benefits ultimately rests with the insurer having the highest
    ranking under
section 268
of the
Insurance Act
. This is entirely appropriate.
    It supports the legislative intention of making optional benefits available at
    reasonable cost. Any other interpretation would have the effect of unduly
    loading costs onto the optional benefit insurers and would discourage individuals
    from purchasing that coverage for their protection. [Emphasis added.]

[87]

The SCAJ adopted the arbitrators reasoning and held
    that while Continental must pay both standard and optional SABS to Mr. Ekstein under
    OPCF 47, Chubb must reimburse Continental for all basic mandatory SABS paid to
    Mr. Ekstein together with associated administrative expenses.

(e)

Discussion

[88]

Continental submits that the SCAJ reached the correct
    conclusion: nothing in OPCF 47, the Act or the SABS Schedule displaces the
    right of an insurer that provides optional enhanced SABS coverage to seek
    reimbursement for basic mandatory SABS from another insurer in accordance with
    the s. 268 priority rules. Further, optional enhanced SABS only come into play once
    basic mandatory SABS are exhausted. To hold otherwise could lead to the
    anomalous situation that persons who mistakenly apply to the wrong insurer
    (i.e., under the policy that does not provide optional enhanced SABS coverage) will
    be left without recourse against any insurer.

[89]

I would not accept this submission for four reasons.

[90]

First, OPCF 47 is clear in requiring the
    optional enhanced SABS insurer to pay both basic mandatory and optional
    enhanced SABS:

OPCF 47

1.
Purpose of This Endorsement

This endorsement allows these persons to claim
    Statutory Accident Benefits (
SABS
) under this policy, including the optional statutory accident
    benefits provided by this policy, provided they do not make a claim for
SABS
under another policy.

2. What We Agree To

If optional statutory accident benefits are
    purchased and are applicable to a person  and the person claims SABS under
    this policy  and agrees not to make a claim for SABS under another policy, we
    agree that we will not deny the claim, for both mandatory and optional
    statutory accident benefits coverage purchased, on the basis that the priority
    of payment rules in
Section 268
of the
Insurance
    Act
may require that the person claim
SABS
under another insurance
    policy.

[91]

Second, contrary to the SCAJs conclusion and
    the
Echelon
arbitrators reasons, I conclude that OPCF 47 displaces the s. 268 priority
    rules. That is because OPCF 47 is inconsistent with those rules and because s.
    227(2) of the Act makes OPCF 47 effective in accordance with its terms even
    though it may be inconsistent with the s. 268 priority rules.

[92]

Section 268(2) of the Act specifies the insurer
    against which a person may have recourse for SABS in particular circumstances.
    Section 268(3) requires that insurer to pay SABS:

268(3) An insurer against whom a person has
    recourse for the payment of statutory accident benefits is liable to pay the
    benefits.

[93]

Where applicable, on its face, OPCF 47 contradicts
    those provisions. If a claimant applies for SABS to an insurer providing
    optional enhanced SABS coverage, the coverage is applicable and the claimant
    agrees not to apply for SABS to another insurer, OPCF 47 requires the optional
    enhanced SABS coverage insurer, and not the s. 268 priority insurer, to pay
    both basic mandatory and optional enhanced SABS. When OPCF 47 was approved it
    1996, it became effective in accordance with its terms: s. 227(2) of the Act.

[94]

Section 227(2) provides an apparently rarely
    used power to the Chief Executive Officer to make an endorsement that is
    inconsistent with the Act effective in accordance with its terms despite its
    inconsistency with the Act. In
Prasad v. GAN Canada Insurance Co.
(1997),
    33 O.R. (3d) 481 (Ont. C.A.) appl. for leave to appeal to S.C.C.
    dismissed, [1997] S.C.C.A. No. 389, this court held that a territorial
    limitation in an approved policy could not limit the statutorily mandated coverage
    specified in the SABS Schedule and rejected an argument that policy approval
    meant that the territorial restriction overrode the SABS Schedule
[11]
. This court observed that
    there was no evidence that a decision had been made to approve a policy
    inconsistent with the Act.

[95]

However, in
Prasad
, the policy did not
    reference the regulation and the conflict was not apparent from the face of the
    document. Here, the conflict is identified in OPCF 47 and it cannot
    realistically be suggested that the Chief Executive Officer did not turn
    his/her mind to the conflict or to approving an endorsement inconsistent with
    the Act.

[96]

Fundamentally, both s. 268 of the Act and OPCF 47
    address who must
pay
SABS in particular circumstances. They do not
    address reimbursement. Any right of reimbursement arises only where one insurer
    has paid SABS when another insurer has the obligation to pay. Where it applies,
    OPCF 47 obliges an insurer that provides optional enhanced coverage to pay both
    basic mandatory and optional enhanced SABS. An optional enhanced SABS coverage
    insurer cannot claim reimbursement from another insurer when the optional
    enhanced coverage insurer undertook the obligation to pay.

[97]

The FSCO Bulletins support the interpretation
    that the OPCF 47 insurer undertakes the obligation to pay both basic mandatory
    SABS and optional enhanced SABS; that the risk of doing so is built into the
    premiums; and that the ultimate intention of the legislature was to reduce the
    cost of compulsory automobile insurance. The
Echelon
arbitrator noted
    that the Bulletins address contractual rights between insured and insurer, not
    rights or reimbursement between insurers. However, this is because there is no
    independent right of reimbursement. The right only arises where one insurer, as
    the first insurer to receive a SABS application, is required to assume another
    insurers obligation to pay. By virtue of OPCF 47, the optional enhanced SABS
    insurer assumes the obligation to pay.

[98]

Third, on their face, the s. 268 priority rules
    and s. 268(3) of the Act (and s. 2(4) of the SABS Schedule) make an
    insurer liable to pay SABS; they do not make an insurer liable to pay basic
    mandatory SABS alone. Put another way, nothing in s. 268, the SABS Schedule, or
    the Disputes Between Insurers regulation, makes an insurer liable for only a
    portion of the SABS payable to a particular person or stipulates that SABS
    obligations can be bifurcated.

[99]

Fourth, two arbitration decisions, neither of
    which was brought to the SCAJs attention, have made comments critical of the
Echelon
arbitrators analysis and
    support the conclusion that OPCF 47 displaces the s. 268 priority rules:
Jevco Insurance Company v. Chieftain Insurance Company
(Arbitrator Samworth  March 11, 2016) and
Co-operators General Insurance Company v. Certas Home & Auto
    Insurance Company
(Arbitrator Cooper  April
    2019).

[100]

Like
Echelon
, the comments in
Jevco
were
obiter
. However, in
Co‑operators
, the arbitrator refused an optional enhanced SABS insurers request
    for reimbursement for basic mandatory SABS payments from a s. 268 priority
    insurer largely on the basis of the
Jevco
analysis.

[101]

In
Jevco
,
    the claimant was injured while riding a motorcycle. He applied for SABS to his
    motorcycle insurer, Jevco. The Jevco policy did not include optional enhanced
    SABS but the claimants car insurance policy, issued by Chieftain, did. Jevco
    initiated a priority dispute with Chieftain.

[102]

The
Jevco
arbitrator expressed the view that the wording of OPCF 47, which speaks to an
    insurer not denying a claim for benefits on the basis of the s. 268 priority
    rules, is both antiquated and meaningless. Because of O. Reg. 34/10, which
    amended the Disputes Between Insurers regulation (O. Reg. 283/95) and
    developments in the caselaw, an insurer cannot deny SABS on the basis it is not
    the priority insurer: [t]hat battle is left up to an inter-company dispute. Accordingly,
    the only reasonable way to interpret OPCF-47 is that if the optional benefits
    insurer receives a SABS claim, then they do not have the right to make a
    priority dispute claim under Regulation 34/10 for any of the benefits they are
    paying to their insured.

[103]

Further, the
Jevco
arbitrator opined that claims for reimbursement for a portion of
    benefits paid is not permitted:

I do not find the wording of the regulation,
    the OPCF-47 and Section 268 of the Insurance Act provides a basis for pursuing
    a portion of benefits paid. Clearly Chieftain could not pursue Jevco for the
    optional benefits as they did not provide for those benefits.

[104]

In addition, the
Jevco
arbitrator rejected the idea that a complex scheme of reimbursement
    such as that contemplated in
Echelon
was intended:

I believe that the regulation and the
    endorsement was intended to simplify the process for the insureds receipt of
    optional benefits  and to pre-empt private disputes between insurers on this
    issue and not set up a complex scheme for priority disputes, reimbursements
    between various insurers nor placing the administration of a [SABS] claim with
    an insurer who would not be actually making the payments.

[105]

In the result, the
Jevco
arbitrator concluded that, as between Jevco and Chieftain, Jevco
    was responsible to pay SABS to the claimant. As noted above, the SABS claimant
    had applied to Jevco for SABS. In the result, the SABS claimant did not have
    access to the optional enhanced benefits in the Chieftain policy.

[106]

The
Co-operators
arbitrator agreed with the
Jevco
arbitrators interpretation of OPCF 47.
Co-operators
also involved a motorcycle
    accident, a motorcycle policy including basic mandatory SABS only and a motor
    vehicle policy with optional enhanced SABS. However, in that case, the claimant
    applied to the optional enhanced SABS insurer, Co-operators, for SABS benefits.
    Relying on
Echelon
, Co‑operators
    subsequently initiated a priority dispute with the motorcycle insurer, Certas,
    seeking reimbursement for benefits paid. The Co-operators arbitrator said:

The OPCF 47 endorsement changes everything
and, provided that the claimant satisfies the four conditions
    present in the endorsement,
the optional benefits insurer is required to
    administer both mandatory and optional benefits coverages without regard for
the priority of payment rules in
Section 268 of the Insurance Act
.
    [Emphasis added.]

[107]

The
Jevco
arbitrator acknowledged that the result in that case was harsh because the SABS
    claimant was not afforded access to the optional enhanced SABS coverage he had
    purchased. However, the issue before her was obligations as between insurers.
    While she had commented that the SABS claimant was not entitled to re-elect
    from which insurer he wished to claim benefits, she was not purporting to
    decide the claimants options. That question was for another forum.
[12]

[108]

I observe that potential unfairness arising from an insureds errors
    when applying for SABS may, in some cases, be corrected by invoking relief from
    forfeiture as happened in this case.

[109]

I conclude that the SCAJ erred in holding that liability for SABS
    can be bifurcated under s. 268(2) of the Act. I would therefore set aside his
    order requiring Chubb to reimburse Continental
for the
    cost of basic mandatory SABS payments and all expenses associated with
    administering those benefits.

D.

disposition

[110]

Based on the foregoing reasons, the appeal is allowed and paras.
    1(c) and (d) of the SCAJs order requiring that Chubb reimburse Continental for
    the cost of basic mandatory SABS and related benefits are set aside.

[111]

Costs of the appeal are to Chubb on a partial indemnity scale fixed
    in the amount of $20,000 inclusive of disbursements and applicable HST. The
    parties may file brief written submissions within 21 days if further costs
    orders are required (14 days for initial submissions, 7 days for a response).

Released: March 7, 2022 J.C.M.

Janet
    Simmons J.A.

I
    agree. J.C. MacPherson J.A.

I
    agree.
I.V.B. Nordheimer J.A.

Appendix A

Liability to pay

268
(2) The following rules apply for determining who is liable to pay
    statutory accident benefits:

1.  In respect of an occupant of an automobile,

i.  the occupant has recourse against the insurer of an
    automobile in respect of which the occupant is an insured,

ii.  if recovery is unavailable under subparagraph i, the
    occupant has recourse against the insurer of the automobile in which he or she
    was an occupant,

iii.  if recovery is unavailable under subparagraph i or ii, the
    occupant has recourse against the insurer of any other automobile involved in
    the incident from which the entitlement to statutory accident benefits arose,

iv.  if recovery is unavailable under subparagraph i, ii or
    iii, the occupant has recourse against the Motor Vehicle Accident Claims Fund.

2.  In respect of non-occupants,

i.  the non-occupant has recourse against the insurer of an
    automobile in respect of which the non-occupant is an insured,

ii.  if recovery is unavailable under subparagraph i, the
    non-occupant has recourse against the insurer of the automobile that struck the
    non-occupant,

iii.  if recovery is unavailable under subparagraph i or ii,
    the non-occupant has recourse against the insurer of any automobile involved in
    the incident from which the entitlement to statutory accident benefits arose,

iv.  if recovery is unavailable under subparagraph i, ii or
    iii, the non-occupant has recourse against the Motor Vehicle Accident Claims
    Fund.

Liability

(3) An insurer against
    whom a person has recourse for the payment of statutory accident benefits is
    liable to pay the benefits.

Choice of
    insurer

(4) If, under
    subparagraph i or iii of paragraph 1 or subparagraph i or iii of paragraph 2 of
    subsection (2), a person has recourse against more than one insurer for the
    payment of statutory accident benefits, the person, in his or her absolute
    discretion, may decide the insurer from which he or she will claim the benefits

Same

(5) Despite
    subsection (4), if a person is a named insured under a contract evidenced by a
    motor vehicle liability policy or the person is the spouse or a dependant, as
    defined in the
Statutory Accident Benefits Schedule
, of a named
    insured, the person shall claim statutory accident benefits against the insurer
    under that policy.

Same

(5.1) Subject to
    subsection (5.2), if there is more than one insurer against which a person may
    claim benefits under subsection (5), the person, in his or her discretion, may
    decide the insurer from which he or she will claim the benefits.

Same

(5.2) If there
    is more than one insurer against which a person may claim benefits under
    subsection (5) and the person was, at the time of the incident, an occupant of
    an automobile in respect of which the person is the named insured or the spouse
    or a dependant of the named insured, the person shall claim statutory accident
    benefits against the insurer of the automobile in which the person was an
    occupant.

[1]

Axa Boreal Assurances v. Co-operators
    Insurance Co.
(2000), 50 0.R. (3d) 395 (C.A.),
    at paras.
18 and 19.

[2]
The arbitrator also found that Mr. Ekstein was a listed driver and
    an insured under the Continental policy.

[3]
At
    para. 119 of his reasons, the arbitrator referred to the priority provisions of
    s. 268 of O. Reg. 283/95. However, it is obvious from the context that the
    arbitrator was referring to s. 268 of the Act.

[4]
Section 268(1.1) provides an exception concerning occupants of public transit
    vehicles.

[5]
The full text of these sections is set out in Appendix A.

[6]

Section
268(5.2) does not apply to the facts of this case. It stipulates
    that if a person is a named insured under more than one policy and was, at the time
    of the incident, an occupant of an automobile in respect of which the person is
    a named insured (or the spouse or a dependant of the named insured), the person
    must claim SABS against the insurer of the automobile in which the person was
    an occupant. As noted, Mr. Ekstein was a pedestrian, or non-occupant,
    when struck by the pick-up truck.

[7]
Access to the Federated policy depended on s. 268(5.2) of the Act which
    reads:

If there is
    more than one insurer against which a person may claim benefits under subsection
    (5) and the person was, at the time of the incident, an occupant of an
    automobile in respect of which the person is the named insured or the spouse or
    a dependant of the named insured, the person shall claim statutory accident
    benefits against the insurer of the automobile in which the person was an
    occupant.

[8]

Canada (Minister of
    Citizenship and Immigration) v. Vavilov
, 2019 SCC 65, 441 D.L.R. (4th)
    1.

[9]
Continental disputes this factual point because the accident
    occurred on a weekend when Mr. Ekstein was at his cottage and the corporate
    office was closed.

[10]

This
    reasoning may not accord with FSCO Bulletin A10/97 concerning the meaning of
    applicable. The arbitrator said he found the Bulletin inconsistent in
    addressing the issue and, overall, not helpful.

[11]
In
Prasad
, this court also
    noted that the territorial limitation provision in the Act was amended after
    the date on which the events in that case occurred to encompass SABS benefits.
Prasad
has subsequently been distinguished
    on that basis but not in relation to the comments concerning s. 227 of the Act.

[12]
Unlike in this case, in
Jevco
, the
    claimant did not seek status on the arbitration.


COURT OF APPEAL FOR ONTARIO

CITATION: IT Haven Inc. v. Certain Underwriters at Lloyds,
    London, 2022 ONCA 189

DATE: 20220303

DOCKET: C68990

Strathy C.J.O., Zarnett J.A. and Wilton-Siegel J.
    (
ad hoc
)

BETWEEN

IT Haven Inc. and Ryan Hunt

Applicants (Respondents)

and

Certain Underwriters at Lloyds, London

Respondent (Appellant)

Jamie Spotswood and Camille Beaudoin, for the appellant

Rebecca Huang and Vincent DeMarco, for the respondents

Heard: October 19, 2021 by video conference

On appeal from the order of Justice Mark L. Edwards of
    the Superior Court of Justice, dated December 15, 2020, with reasons reported
    at 2020 ONSC 7835.

COSTS ENDORSEMENT

[1]

Having considered the submissions of the parties, costs are awarded to
    the respondent in the appeal, fixed at $25,000, inclusive of disbursements and
    all applicable taxes.

G.R. Strathy C.J.O.

B. Zarnett J.A.

Wilton-Siegel J.