Court of Appeal Rules for Insurer in Topsy-Turvy FSCO Dispute

August 30, 2012

The Court of Appeal for Ontario has set aside a Divisional Court decision from a weird FSCO ruling dealing with multiplicity of proceedings and limitation issues.

The facts in Gordyukova v. Certas Direct are somewhat extraordinary, which might explain the differences of opinions between the FSCO arbitrator, Director’s Delegate (allowed the appeal), Divisional Court (set aside the Delegate’s decision), and Court of Appeal (agreed with the Delegate). In a “nutshell”:

The claimant initiated a court action in September 2002 against her insurer, claiming entitlement to various benefits that were denied. She also claimed entitlement to punitive damages and costs.

A few years later, a dispute arose with the insurer about her claim for catastrophic-level benefits. This time, after mediation failed she decided in November 2008 (some six years after she issued her Statement of Claim) to apply for arbitration at FSCO.

The insurer brought a motion to stay the arbitration, arguing that there was a multiplicity of proceedings and that the catastrophic issue could be argued in the Superior Court action. The FSCO arbitrator agreed that the claimant could not proceed in both forums, but refused to stay the proceedings. Instead, he found that the claimant could add the issues in dispute in the action to the FSCO arbitration if she also discontinued the court action.

The claimant then decided to discontinue the court action and add the benefits in dispute there to the FSCO arbitration. The insurer then raised a limitation issue because the benefits being added to the FSCO arbitration had been denied in 2002 and the arbitration was initiated in 2008. The FSCO arbitrator ruled for the claimant on that issue.

The Director’s Delegate allowed the insurer’s appeal. He found that although section 281.1(1) of the Insurance Act allowed the claimant to choose whether to proceed either by arbitration or through the courts, once the two year limitation period expired, the claimant could not move a matter from one forum to the other.

The claimant then sought judicial review from the Divisonal Court, which found that the Director’s Delegate’s decision was unreasonable. The Divisional Court began by noting that the claimant had commenced both the arbitration and the court action within the limitation period.

The Court of Appeal disagreed with the Divisional Court and allowed the insurer’s appeal. The Court of Appeal found that section 281.1(1) requires applicants to choose a forum to dispute a benefit claim within the time limit and prevents them from initiating a proceeding in the other forum claiming the same benefit after expiry of the time limit.

There are a couple of interesting aspects about this case:

  1. The matter highlights some of the “forum shopping” concerns that insurers face, as only the claimants decide the forum that will determine the issues in dispute.
  2. The Court of Appeal affirmed that the FSCO Director’s Delegate’s interpretation of section 281.1(1) is owed deference because, among other things, interpreting the SABS provisions and s. 281.1(1) of the Insurance Act is “at the core of the Delegate’s expertise.”

Read the Court of Appeals’s decision.


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