Latest chapter in an 18-year-long priority dispute between insurers

In an 18-year-long priority dispute that has gone to the Supreme Court and back, Ontario’s Superior Court says Chubb and Zurich should be equally responsible for paying accident benefits to a driver injured in a rental car, even though the claimant incorrectly identified Chubb as the insurer of the rental car.

“The anomalous situation giving rise to this arbitration appeal arose from Zurich Insurance Company and Chubb Insurance Company of Canada both being the primary motor vehicle liability insurer of Sukhvinder Singh’s Statutory Accident Benefits (SABS), even though one issued a policy and the other did not,” the Superior Court observed in a decision released May 23.

Zurich insured Singh’s rental Ford Windstar minivan when she was involved in a collision in September 2006. She returned the damaged rental car to Wheels 4 Rent. The rental company tried several times to contact her, without success.

The rental company’s branch manager submitted a ‘records only’ claim for reporting purposes, because the company’s auto policy with Zurich did not provide collision coverage.

He submitted that report to McLarens, the insurance adjusting company administering the fleet coverage on behalf of Zurich. Wheels 4 Rent considered the matter closed and wrote off the damage.

Injury claim

Several weeks later, Singh experienced upper body pain and decided to pursue a SABS claim. To do this, her lawyer needed to know the name of the insurance carrier and policy number. Singh thought the rental agency offered coverage with Chubb.

“She did not know that this was only a policy of optional accidental death and dismemberment insurance, which she had not purchased,” as the Ontario Superior Court decision observes.

Singh’s lawyer, Murray Tkatch, telephoned Wheels 4 Rent to obtain the insurance particulars. After receiving no response, he sent a letter on Nov. 6, 2006, to the company president, Gerry Weintraub, at Wheels 4 Rent’s corporate headquarters.

The next day, Weintraub wrote back saying the rental company was not required to release the requested information because it was unaware of any accident.

Two days later, Singh’s lawyer submitted an OCF-1 Application for Accident Benefits to Chubb.

Tkatch’s covering letter specifically stated he was submitting the claim to Chubb because the rental company refused to provide information about the insurer.

Chubb refused to accept the claim because it did not insure the rental car, as the Superior Court decision explains. “It also failed to assist the claimant by contacting the insurance broker who also placed the Zurich fleet automobile insurance. This turned out to be a costly mistake.”

The case went to the Supreme Court, which found Chubb was the first insurer, even if the claim was misdirected.

What happened next

After the Supreme Court’s decision in 2015, a second arbitrator concluded in August 2022 that Chubb was solely liable to pay Singh’s SABS benefits and that it must reimburse Zurich $998,368.99.

Chubb appealed that decision to the Ontario Superior Court, contending Zurich should have been found solely responsible.

The Ontario Superior Court said the second arbitration decision took into account that Chubb, by initially denying benefits to Singh, did not follow the ‘pay first, dispute later’ terms of the priority dispute regulations. As a result of Chubb’s dispute with Zurich, the arbitrator found, the claimant’s health had suffered while the two insurers disputed who owed benefits.

Nevertheless, the Superior Court found it was inappropriate to find Chubb the permanent payor for the whole claim. Ontario’s priority dispute regulations allow the first payor to transfer their accident benefit obligations over to the correct insurer.

“I have determined that the second arbitrator’s decision was in error by omitting analysis of the interplay between the automobile insurance legislation and the insurance priority dispute regulation,” Ontario Superior Court Justice Lee Akazaki wrote. “However, the error does not lead to the reversal of fortunes sought by Chubb.

“Instead, correction of the error leads to the conclusion that the two insurers were equal in priority and must share liability 50/50. The exception to that equitable remedy is that each insurer must be responsible for the 2% compound interest sanction provided in the SABS regulation, in respect of delay intervals attributable to each insurer.”

Feature image courtesy of iStock.com/cyano66