On August 4, 2016, the Ontario Court of Appeal released its decision in Intact v. Allstate1 and changed the correctness standard of review for appeals from private arbitrations to one of reasonableness. The impact of this change will most likely have a chilling effect on the ability to successfully appeal them. However, given the spate of recent priority and loss transfer appeals, skeptical minds might question whether the change perhaps came about by design.
In coming to its decision, the Court of Appeal held that the administrative law framework set out in Dunsmuir v. New Brunswick, [2008] 1 S.C.R. 190 applied, rather than the "appellate" framework, as an appeal of an insurance arbitration reviews the decision of a non-judicial decision maker. As such, even though the review is "styled as an appeal" the administrative law framework should determine the applicable standard
The Court of Appeal noted that insurance arbitrations are not court proceedings but, rather, are governed by a distinct and defined regime which seeks to efficiently resolve such disputes between insurers and which did not warrant judicial intervention, given that courts and arbitrators do not share the jurisdiction at the first instance. The Court of Appeal also noted that insurance arbitrators are recognized to have expertise and experience in interpreting insurance law and since parties select their decision-maker a presumption is created that the parties will choose an arbitrator with relevant expertise. Furthermore, since the decision-maker is interpreting its "home" statute or statutes closely connected to its function, the presumption is that a reasonableness standard of review applies as set out in the Supreme Court's decision in McLean v. British Columbia [2013] S.C.R. 895.
The Court of Appeal considered one "unlikely scenario" in which a correctness standard of review would apply to appeals from an insurance arbitration – where the appeal involved an "exceptional" question, i.e. one that was jurisdictional, constitutional or was both of central importance to the legal system and outside of the arbitrator's expertise. However, since most appeals from an insurance arbitration regarding a priority dispute engage questions of mixed fact and law or questions regarding the interpretation of the SABS, reasonableness was deemed to be the appropriate standard.
In Dunsmuir, at paragraph 47, the Supreme Court of Canada explained:
[a] court conducting a review for reasonableness inquires into the qualities that make a decision reasonable, referring both to the process of articulating the reasons and to outcomes. In judicial review, reasonableness is concerned mostly with the existence of justification, transparency and intelligibility within the decision-making process. But it is also concerned with whether the decision falls within a range of possible, acceptable outcomes which are defensible in respect of the facts and law.
Similarly, in the subject decision, the Court of Appeal set out that when reviewing a decision for reasonableness, a court must consider "the reasons proffered and the substantive outcome in light of the legal and factual context in which the decision was rendered". The Court added that a decision may be unreasonable where the arbitrator failed to carry out the proper analysis, where the decision was inconsistent with underlying legal principles or where the outcome of the decision ignored or could not be supported by the evidence.
Generally, the change from a correctness standard to a reasonableness standard will undoubtedly result in the decisions of arbitrators being granted much greater deference such that greater emphasis will need to be placed on the conduct of the initial private arbitration itself. Moving forward, parties should avail themselves of all the tools available to ensure that a fulsome record of the evidence is presented at the arbitration and that broad rights of appeal are set out in their arbitration agreement.
Footnote
[1] Intact v. Allstate, 2016 ONCA 609 (CanLII)
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