Canada: Principle Dependency

Last Updated: January 18 2018
Article by Kevin Mitchell

In this January 5, 2018 priority dispute private arbitration award of Ken Bialkowski, the main issue was principle dependency; a construct of the definitions contained in s. 3(7)(b) of the SABS.  The definition of 'insured person' in s. 3(1) of the SABS ties in the 'dependant' definition to the authorizing section for priority disputes:  s. 268(2) of the Insurance Act.  RBC, in respect of two claimants injured in an auto accident on April 4, 2015, sought to have TD assume handling of the SABS claims and indemnify it for benefits it had to date expended. 

The elder claimants were both passengers in the RBC insured auto at the date of loss and, by s. 268(5.2), RBC would be the highest priority insurer if the two were found dependent upon their younger son.  At a minimum, however, they were insured persons of RBC, based upon occupancy alone, and that is likely the reason their OCF-1s were sent to RBC in the first place.  Notwithstanding, it was argued the claimants were dependent upon either of their two sons, each of which were the named insureds of the parties to the dispute. 

The arbitrator started by defining the duration of the time period pre-loss to be considered that would give the best indication of the situation that existed as of the date of loss.  This inquiry largely surrounded where they primarily resided.  His review of the case law confirmed the preference by our Superior Court for the statistical LICO methodology over the mathematical one.  The arbitrator astutely noted the mathematical approach was rooted in a criterion for dependency, which was rejected by the Ontario Court of Appeal back in 1986 in the seminal Miller v. Safeco case.  RBC argued a third methodology, the plural approach.  This approach is meant to determine upon whom a claimant is dependent when that claimant provides less than half of their own needs and one, of at least two individuals, provides a financial amount in excess of the claimant or anyone else who is also contributing.  It, however, would appear to go against the established, and in my opinion inaccurately named, '51% rule'.  To be accurate mathematically, it should be named the '50% + 1' rule.  Its distinct departure from the 51% rule is that the individual upon whom the claimant is said to be dependent contributes less than 50% of the claimant's needs (not more) but more than the claimant or anyone else involved. 

In this case it was argued by RBC the majority contributor was the eldest son; TD's named insured.  Even if RBC hadn't admitted dependency upon its named insured (albeit not the greatest contributor), it still had the onus of proof in the dispute since it, at a minimum, was liable to pay benefits, per s. 268(3), based upon mere occupancy.  The arbitrator found the sons to be equal financial contributors to their parents so, although they were each not independent, they were not considered principally dependent upon any one individual.  RBC was found to be the priority insurer for both claimants and responsible for TD's partial indemnity costs and the arbitrator's account.  The arbitrator thereby skirted support for what was said to be the genesis for the plural approach; the January 2013 award of arbitrator Scott Densem in Economical v. Aviva, which was not appealed, while yet paying homage to the 51% rule.  It is too early to tell if this award will be appealed.  However, with the standard of review still reasonableness, although requested to be revisited by the Court of Appeal in a pending decision where our firm was counsel, I doubt RBC will be so inclined.   

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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