It is not news to anyone that resolving civil claims is a long and costly process. A great deal of time and money is regularly lost due to the back-logged court system and legal expenses associated with mandatory procedure that must be followed, all while the procedure and jurisdiction of the court are not needed to come to a resolution. It is often in the best interests of insurers to resolve subrogated claims that are defended by insurers without the involvement of the courts.
The Canadian Inter-Company Arbitration Agreement ("the agreement") is an initiative designed to streamline claims disputes as between insurance companies who are signatories to the agreement. All insurance companies who are signatories to the agreement are therefore bound to comply with the obligations set-out therein. The process encourages efficient and cost-effective resolution to these claims.
By utilizing the alternative dispute resolution forum of arbitration, parties agree to enter into a mandatory and legally binding process without the involvement of the courts; which saves both time and associated administrative court fees and legal expenses. While certain procedural restrictions are in place to ensure compliance and efficiency, the process is designed to be practical and informal.
Who is involved and what claims are arbitrated?
The two bodies overseeing the operation and facilitation of the agreement are the Insurance Bureau of Canada ("the IBC") and the Canadian Insurance Claims Managers Association ("CICMA"). While CICMA is responsible for the operation and facilitating the obligations mandated within the agreement, the IBC is the body that has administered the agreement and is responsible for maintaining the list of signatories.1
Here is the most recent published list of signatories to the agreement. All of these listed insurers are bound to comply with the terms of the agreement. While being a signatory to the agreement is a voluntary commitment for all insurers, signatories do not have the option to choose when they will and will not utilize the arbitration process set-out in the agreement. So long as an insurer remains a signatory to the agreement, all matters that satisfy the mandatory criteria for proceeding to arbitration must proceed to arbitration.2 Article Fifth regulates withdrawal from the agreement. Any insurer may withdraw by way of written notice to CICMA which becomes effective 60 days after the notice is provided, save for already pending arbitrations.
The mandatory criteria mentioned are also wide-reaching. All subrogated claims involving losses that occurred within Canada that are valued at $50,000 or less which are defended by an insurer that is signatory to the agreement must proceed to arbitration with few exceptions. The four exceptions are boiler & machinery, aviation, ocean marine, and coverage issue claims.3
How does the process work?
The process is stipulated within the agreement itself. A simplified breakdown of the step-by-step process can be summarized as follows;
- Appoint a pre-arbitration officer;
- Have a pre-arbitration call;
- Submit Inter-Company Arbitration Statement.
- Make submissions to arbitration panel;
- Receive final and binding decision.
Step 1: As quoted in Step 2, a senior claims representative is advised to be appointed as the Pre-Arbitration Officer. This creates the situation where two experienced claims representatives are able to openly discuss a file.
Step 2: " ...senior claims representatives of at least supervisory status of involved companies must make sincere efforts to settle controversies by direct negotiations."4 Failure to have said discussions will result in a return of an application (no return of funds).
Step 3: The statement is available online on the CICMA website.5 It is a straightforward form which attempts to facilitate a simple re-count of the allegations in dispute.Â Do note that the form states what the filing fees are in each chapter (i.e., $226.00 in Ontario).
Step 4: Article Fourth stipulates who can be on the panel and how many members on a panel there will be. Once a panel is formed and the application forms have been submitted, the panel will advise of a hearing date (which will be done either over the phone or in person). Depending on what is in dispute, succinct damages and liability positions are communicated to the panel.
Step 5: After deliberation, the panel will render a final and binding decision.
What are the legal authorities?
Though being a signatory to the agreement is an optional endeavour, once a signatory, an insurer does not have the option when to utilize arbitration and when to pursue litigation if the mandatory claim requirements have been met. For such matters, relevant authorities include the Arbitration Act 1991, S.O. 1991, c. 17 ("the Act") and the court's interpretation of the agreement itself.
The Act is very clear that if parties agree to forego litigation in favor of arbitration, then the courts ought to honour that agreement. This is not only a contractual agreement on how dispute resolution will be addressed, but the encouragement from the court's perspective to honour such agreements also includes encouraging utilizing less court resources.
Sections 6 and 7 of the Act, labelled as "Court
Intervention" are relevant in this regard. Section 6 details
when a Court may intervene in matters that are governed by
arbitration, which include
1. To assist the conducting of arbitrations.
2. To ensure that arbitrations are conducted in accordance with arbitration agreements.
3. To prevent unequal or unfair treatment of parties to arbitration agreements.
4. To enforce awards. 1991, c. 17, s. 6.6
Following these very limited instances in which a court may intervene in matters governed by an arbitration agreement, the court's hands are tied when litigation has been initiated when an arbitration agreement is in place. Where a valid arbitration agreement is in place "the court in which the proceeding is commenced shall, on the motion of another party to the arbitration agreement, stay the proceeding" (emphasis added). Â The courts therefore do not only have very limited intervening powers, but the court is also given no discretion in allowing litigation to continue when an arbitration agreement is in place.
Enforcement of the agreement has also been enshrined in case law. Back in 1984, the now Honourable Justice Clements stated his position on application of the agreement as follows,
Further, where both parties are signatories to the arbitration agreement, they have effectively opted out of the civil litigation process in my view, and the matter will be so resolved. The parties will have clearly and in an unqualified way opted out of the civil litigation process.7
More recently Justice Rideout specifically addressed the application of the agreement in Conrad McIntrye Garage v. Savoie.8 At paragraph 16 he states,
Consequently, I am of the view that the Courts should hold the parties to their agreement. As the authorities have said all parties benefit when disputes are quickly and efficiently resolved the signatories to the agreement have agreed that arbitration is what they want to take place when there is a dispute such as the one now before the Court
These examples act as further confirmation that the agreement is valid, binding, and will be enforced by the courts.
How We Can Help
While the purpose of the agreement is to limit legal costs and be a more efficient means of resolving claims between signatory insurers, the process clearly presents with efforts required in order to communicate one's position on a claim in an effective manner.
In order to assist you with the handling of claims that are directed to arbitration, we are able to provide analysis and opinion on how to proceed, as well as take a hands-on approach to a majority of the steps noted above. This will involve assessment of the claim, preparation of the Arbitration Statement, and attendance at the arbitration itself in order to deliver oral arguments to the panel. Do note that the Agreement currently states that it must be a claims representative that makes the pre-arbitration call, making counsel unable to complete this step on your behalf.
This will allow you to continue to adjust claims in a similar manner to that of non-arbitration matters while also reaping the benefits of reduced costs and encouraging more efficient resolution.
The agreement is a dispute resolution platform which continues to remain unknown to many of its signatories. The process can at times seem foreign and uncertain. However our understanding of the agreement and the associated procedure is in line with the intended purposes of the agreement. We strongly encourage parties to take advantage of out-of-court processes. This particular arbitration agreement can accomplish its intended goals of cost-effective and efficient resolution if the procedure is embraced.
1 IBC Claims Agreements
2 Note that any claims may proceed to arbitration on the consent of all involved parties.
3 Further detail of the exceptions are noted in Article First of the Agreement
4 Article Seventh, Arbitration Rules and Regulations preamble
5 CICMA/ACDSA Inter-Company Arbitration Statement PDF
6 Arbitration Act, s.6
7 Vervaecke v. Hancock, 1984 CarswellOnt 686 (Ont. Co. Ct.)at para 18
8 2014 2014 NBQB 1,  I.L.R. I-5554, 1075 A.P.R. 386, 236 A.C.W.S. (3d) 290, 414 N.B.R. (2d) 386
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.