The Statutory Accident Benefits Schedule and O. Reg. 283/95 require that an insurer promptly provide an application for accident benefits (OCF-1) and other relevant forms to a person once the insurer is advised of an intention to apply for accident benefits.
O. Reg. 283/95 (the priority regulation) specifically provides that an insurer "shall not take any action intended to prevent or stop" that person from submitting their application to the insurer. Once the application is received, the insurer must start adjusting the claim and must resolve any dispute regarding the priority of insurers using the process outlined in the priority regulation and pursuant to Section 268 of the Insurance Act.
The Ontario Court of Appeal and Supreme Court of Canada have confirmed that the overriding public policy of the priority regulation is to provide timely delivery of benefits to persons injured in car accidents in Ontario. The Courts have also confirmed that an insurer cannot refuse to accept a claim unless the connection between the person claiming benefits and that insurer is completely arbitrary or random. This is known as the "nexus" test.
If an insurer does not comply with their obligations to accept and adjust the claim, and "deflects" the claim to another insurer, there are consequences. Section 2.1(7) of the priority regulation specifically provides that an insurer who deflects an application may be liable to reimburse another insurer's legal fees, adjuster's fees, administrative costs and disbursements. Section 7(6) of the priority regulation also provides that the failure of an insurer to comply with Section 2.1 may be subject to a special award made by the arbitrator.
It is notable that Section 2.1 of the priority regulation does not state that an insurer who deflects a claim can be found liable to pay benefits due to its deflection.
However, an insurer who deflects an OCF-1 does so at its own peril, as it can ultimately end up saddled with the claim for failure to comply with Section 3 of the priority regulation. Section 3 provides that the first insurer to receive a completed OCF-1 must send a priority dispute notice within 90 days, or it cannot dispute its obligation to pay benefits. This section also tends to be strictly applied.
The 2022 arbitration decision of Co-operators v. Economical provides an interesting example of the nexus test and consequences of deflection. In this case, the claimant was involved in an accident while driving a borrowed vehicle. The pink slip in the vehicle indicated it was insured with Economical. The claimant submitted her OCF-1 to Economical, who advised there was no such policy. Economical did not open a claim or otherwise respond to the OCF-1, so the claimant subsequently submitted her OCF-1 to the insurer of the other vehicle involved in the accident, Co-operators. Co-operators put Economical on notice and pursued a priority dispute. It was ultimately determined that the Economical pink slip was fraudulent.
Arbitrator Samworth found that Economical was the first insurer to receive the OCF-1. Even though the policy was fraudulent, there was a sufficient nexus to trigger sections 2 and 3 of the priority regulation, as the selection of Economical by the claimant was not random or arbitrary. Rather, it was based on the pink slip in the vehicle she was driving and the insurance noted in the police report. Arbitrator Samworth went on to conclude that Economical deflected the claim and also breached its obligations to put another insurer on notice (i.e. Co-operators) within 90 days, as required under Section 3. As such, Economical was prevented from disputing its obligation to pay benefits. Economical ended up saddled with the claim and was liable to reimburse Co-operators for all of its legal fees and other costs.
In the 2023 arbitration decision of Intact v. Dominion, Dominion (or Chieftain as it was then known) purportedly cancelled its policy 9 months pre-accident. When it received an OCF-1 from the named insured, it did not accept the OCF-1 or open a claim. The claimant then submitted the OCF-1 to Intact, the insurer of the striking vehicle, who immediately put Dominion on notice. Dominion responded by putting Intact on notice and then subsequently admitted to the deflection.
A preliminary issue hearing proceeded regarding the consequences of this deflection. Arbitrator Novick found that the deflection did not automatically result in Dominion being saddled with the obligation to pay benefits permanently. She referenced the decision of Co-operators v. Economical, stating she was not sure she agreed with its reasoning; however, she distinguished it on the basis that Dominion had provided a priority notice to Intact within 90 days. She ultimately awarded Intact full indemnity legal costs, any incurred adjusting fees and reasonable disbursements. However, she did not make a special award on the basis that Dominion admitted to the deflection early on. Additionally, given that this was a preliminary issue hearing solely with respect to the costs consequences of deflection, Arbitrator Novick did not decide which insurer was ultimately responsible for paying the claim.
The consequence of a deflection was most recently addressed in the 2024 Superior Court decision of Chubb v. Zurich. This dispute arose following an accident in 2006 involving a rental car. The claimant subsequently sought to make an AB claim but had difficulty confirming who the rental car insurer was. She ultimately submitted her claim to Chubb because she recalled seeing something about insurance with Chubb when she took out the rental. Chubb refused to accept the claim on the basis that its policy did not contain AB coverage. The OCF-1 was subsequently submitted to Zurich, the insurer of the rental vehicle, which then pursued a priority dispute against Chubb.
After proceeding to the Supreme Court regarding the issue of nexus in 2015 (the Court found there was a nexus with Chubb), this matter was sent back to a new arbitrator. Both Chubb and Zurich argued that the other had deflected. However, the arbitrator ultimately concluded that Chubb was the first insurer to receive a completed OCF-1 and it allowed the 90-day period to lapse without giving the required notice under Section 3 of the priority regulation. As such, Chubb was saddled with the claim.
On appeal, the Superior Court Judge stated that the arbitrator correctly cited the public policy decision to require an automobile insurer to open and begin adjusting a claim under Section 2 (the precursor to the current Section 2.1),even if priority was with another insurer. The Court also noted that the case law confirms that a breach of Section 2 does not saddle an insurer with a claim permanently. However, the Court affirmed the arbitrator's conclusion that the failure to avail itself of Section 3 does result in an insurer being saddled with the claim. Chubb's permanent liability to pay benefits was "a self-inflicted consequence of its failure to adhere to the requirements of both s. 2 and s. 3."
Interestingly, despite finding that Chubb was liable to pay benefits, and explicitly sating that "There is no basis to disturb the arbitrator's findings that Chubb was the first recipient of the OCF-1 application and that it allowed the 90-day period to lapse", the Court went on to conclude that Chubb and Zurich were equal in priority, as they both insured the vehicle in which the claimant was an occupant, and they both had to contribute equally to the claim payments and overall claim settlement. Unsurprisingly, this decision is being appealed to the Court of Appeal.
Notwithstanding the pending appeal, the finding in Chubb v. Zurich essentially confirms Arbitrator Samworth's conclusion in Economical v. Co-operators.
As such, provided there is some connection, an insurer who receives but does not respond to an OCF-1 might end up not only having to pay all legal fees and adjusting costs incurred by the other insurer, but could ultimately end up saddled with a claim even if their policy was previously cancelled, invalid, fraudulent, or did not provide AB coverage.
In terms of best practices for insurers, if an OCF-1 is submitted by a person involved in an accident, a claim should be opened and a priority investigation should be commenced immediately. If the policy was previously cancelled, the pink slip was fraudulent, or the policy does not provide AB coverage, then it is highly likely that the claim will properly end up transferred to another insurer who either insured the claimant, another vehicle involved in the accident or potentially even the Fund – you just need to find them and put them on notice within the first 90 days. Ultimately, deflecting the claim could cost you and should be avoided under all circumstances.
Footnotes
1 See Kingsway General Insurance Company v.Ontario, 2007 ONCA 62 (CanLII), paras 19-21; and Zurich Insurance Company v.Chubb Insurance Company of Canada, 2014 ONCA 400 (CanLII), paras 38-40, dissenting reasons of Jurianz J affirmed on appeal, Zurich Insurance Co.v.Chubb Insurance Co.of Canada, 2015 SCC 19 (CanLII), [2015] 2 SCR 134
2 Kingsway General Insurance Company v. Ontario, 2007 ONCA 62 (CanLII); State Farm Mutual Automobile Insurance Company v TD Home & Auto Insurance Company, 2016 ONSC 6229 (CanLII)
3 Kingsway General Insurance Co. v. West Wawanosh Insurance Co., 2002 CanLII 14202 (ON CA)
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