Canada: Dual Retainers In Priority Disputes And First Party Claims

Last Updated: April 3 2019
Article by Kevin Adams and Sara Baum, Student-at-Law

The recent Licence Appeal Tribunal ("LAT") reconsideration decision in PYJ and LJ v. The Personal Injury Company (17-004636/AABS) may have troubling implications for insurers who retain the same counsel to pursue its interests in regards to both priority disputes and first party claims.


The applicants, family members of the deceased who died as a result of an accident, applied to The Personal for death and funeral benefits.

The benefits were denied as the insurer had not received any financial documentation demonstrating their dependency on the deceased, and as such, the insurer could not determine if the claimants were dependants on the deceased.

At the same time, The Personal initiated priority dispute arbitration against CAA Insurance. As part of the priority dispute and before applying to the LAT, the applicants participated in examinations under oath in which they described their relationship with the deceased.

Counsel for The Personal acted in both the priority dispute and the EUOs, as well as in the LAT dispute. He submitted the EUO transcripts from the priority dispute proceeding as part of The Personal's Case Conference Summary and Brief in the LAT dispute, without notifying the applicants.

Preliminary Decision

On a preliminary motion decision, the LAT denied the applicants' request to remove counsel for The Personal and to exclude the transcripts from the EUOs. The applicants then filed this request for reconsideration.

Reconsideration Decision

On reconsideration, the Vice-Chair agreed with the applicant, and concluded that counsel for the Personal should be removed as representative for the LAT proceeding.

She found that "the Tribunal erred in its characterization of the priority dispute as a proceeding that does not create an adversarial relationship between The Personal and the applicants".

At paragraph 16, she states:

In the priority dispute, The Personal is seeking to prevent potential liability for paying any benefits to the applicants. This is in clear opposition to the duty of utmost good faith that The Personal owes to the applicants in the accident benefits context. In this way, the priority dispute creates a similar adversarial relationship between the insurer and the applicants as in a tort proceeding.

In doing so, the Vice-Chair relied on the decision in Dervisholli, stating that while it deals with counsel representing the insurer in both an accident benefits claim and a tort claim, the same rationale applies.

As such, a firewall should have been set up to prevent the transfer of confidential information between the accident benefit and priority dispute files or dialogue between the adjusters and counsel handling them, unless specifically consented to by the insured.

The Vice-Chair also agreed with the applicant that to admit the EUO transcripts into evidence would enable The Personal to circumvent the statutory requirements of s.33.

She found that, while Tribunal appropriately considered the relevancy of the evidence contained in the EUO transcript obtained as part of the priority dispute, the Tribunal failed to conclude that the relevancy of the evidence cannot override the requirements outlined in s.33.

At paragraph 25, she states:

When compelling an applicant to attend an EUO, the insurer, among other things, must provide the applicant with notice. Specifically, s.33(4) requires that the insurer provide reasonable advance notice of the reason or reasons for the examination and that the scope of the examination will be limited to matters that are relevant to the applicant's entitlement to benefits.

The Vice-Chair ultimately held that despite the relevant information generated by the EUO, the applicants would suffer great prejudice if The Personal were permitted to rely on EUO transcripts that were not part of the accident benefits process and did not comply with the Schedule.


The rationale applied on reconsideration at the LAT seems clearly wrong for the following reasons:

  • The fundamental misunderstanding that priority disputes create adversity between the claimant and the handling insurer
  • The principles in Dervisholli were applied outside the context in which they were decided and intended
  • The priority EUO (conducted pursuant to O. Reg. 283/95) was misconstrued as a s.33 EUO to which the strict SABS rules and notice provisions apply
  • The concept of prejudice to the applicants was conflated with the notion that disclosure of sworn evidence may be contrary to their interests

We understand that The Personal is seeking judicial review of this decision.

The impact of this decision, if it is allowed to stand, will be significant, as not only might it require an insurer to retain separate counsel to pursue its interests in regards to priority disputes and first party claims, but it will also require multiple claims examiners to be appointed and separate files to be maintained by the insurer.

We believe that this duplication of effort and staffing and the significant additional expense it will create is unnecessary.

Despite the Vice Chair's general statements regarding the adversarial nature of priority disputes, until clarification is provided on appeal/judicial review, we suggest that the impact of this decision can be confined to cases where the insurer has taken an off-coverage position and denied payment of accident benefits completely, while also pursuing a priority dispute against another insurer.

In the meantime, we look forward to further guidance from the Divisional Court.

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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