Court Finds Nexus even though Claimant Declines Policy

November 16, 2012

The Superior Court has found another “sufficient nexus” in a battle between two insurance companies.

In Zurich v. Chubb, the claimant was driving a Ford Windstar that she had rented from Wheels4Rent, a car rental agency.  She had an accident and was injured.  No other vehicle was involved.

Wheels4Rent offered an optional accident policy providing coverage in the event of accidental loss of life and injury.  Chubb was the insurer of the optional policy.  The claimant declined the optional policy. After the accident, the claimant applied for benefits under the optional policy.  Chubb declined to provide benefits on the basis that the optional policy was not a motor vehicle policy, but rather was a commercial policy. In other words, Chubb refused to accept her application on the basis that it was not an automobile insurer with respect to her claims.

The claimant then applied for accident benefits to Zurich, which insured Wheels4Rent. Zurich administered the claim on a “without prejudice” basis.  Zurich took the position that Chubb was the first insurer under Ontario’s statutory accident benefits scheme and should have paid first, pursuant to section 2 of O. Reg. 283/95.

At arbitration, the arbitrator found that that Chubb was not an insurer for the purposes of the Insurance Act and O. Reg. 283/95. Her wrote:

Based on the facts agreed upon by the parties, and as set out in the documentary evidence, that at no time did Chubb ever issue a motor vehicle liability policy to either Wheels4Rent or Ms. Singh, I am of the opinion that there was no nexus or connection between Chubb and Ms. Singh, such that Chubb was obligated under Regulation 283/95 to pay statutory accident benefits to Ms. Singh as a result of the September 23, 2006 accident.

On appeal, the judge disagreed with the arbitrator’s finding that Chubb was not an insurer or that there was no nexus/connection between Chubb and the claimant. The judge found that the arbitrator erred in finding that the optional policy was not a “motor vehicle liability policy” under the Insurance Act. He found that the policy was specifically intended for car rental companies and their customers. The obvious intent was to provide extra insurance for renters.

With respect to the nexus argument, the judge held that the arbitrator erred buy applying a “remoteness” test instead of an “arbitrariness” test:

The connection between Ms. Singh and Chubb may have been remote, but it was not arbitrary.  Ms. Singh rented a vehicle from Wheels4Rent.  Wheels4Rent was insured by Chubb.  Chubb made the optional policy available to Ms. Singh through Wheels4Rent.  Although Ms. Singh did not take up the optional policy, the obvious inference that the parties agree can be drawn is that she learned of it through Wheels4Rent when she rented the vehicle.

This decision highlights two important points:

Firstly, insurers who purport to issue “commercial policies” might unknowingly be also issuing motor vehicle liability policies, which could obviously expose them to additional risks and costs.

Secondly, the “sufficient nexus” test is subjective. As long as the claimant has a reason for applying to her choice of company there will almost always be a sufficient nexus. Which begs the question: Why would a reasonable claimant apply for benefits to a company issuing an optional policy that she declined to buy?

See Zurich Insurance v. Chubb Insurance, 2012 ONSC 6363 (CanLII)


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