Director’s Delegate Blackman released his appeal decision in Aviva Canada Inc. and Shamima Parveen and Joshua Fredric dismissing the appeal and upholding Arbitrator Alves earlier decision that a settlement can be rescinded outside of the two day cooling off period due to deficiencies in the Superintendent’s approved Settlement Disclosure Notice.
Subsection 9.1(5) of the Settlement Regulation permits an insured to rescind a settlement “if the insurer has not complied with subsections (2) and (3).” Subsection 9.1(2) provides that the insurer shall give the insured a written disclosure notice signed by the insurer. Under subsection 9.1(3), the disclosure notice shall be in a form approved by the Superintendent of Financial Services (the “Superintendent”) and shall contain specified information
Among other things, Director’s Delegate Blackman found that, “paragraph 9.1(3)3 (of the Settlement Regulation) requires that the SDN include specific, succinct information. The SDN in question provides incomplete and inconsistent segments information concerning the prerequisite of a signed release and signed SDN for a binding settlement, the time period for rescinding the settlement and the restricted manner in which the Settlement Regulation allows a settlement to be rescinded”.
Aviva argued that if the SDN did not comply at all with the Settlement Regulation or if the omission in the SDN went to the heart of the Settlement Regulation, the settlement could be rescinded without proof that the insured person was misled. However, if it was found that the Superintendent-approved SDN was not technically compliant with the Settlement Regulation, rescission should only be allowed where any omitted relevant information or misinformation misled the insured person. Director’s Delegate stated however that “the question in this case is not whether the information provided induced the Respondents to agree to the settlement. The onus is on the insurer to prove that there has been a settlement. The focus is on the insurer’s compliance. Again, the question in issue is whether the SDN informed insured persons, in a straightforward and clear language directed towards an unsophisticated person, of the information in paragraph 9.1(3)3 of the Settlement Regulation that the Legislature mandated be provided. Non-compliance by the insurer by itself, without anything more, as set out in subsection 9.1(5), allows the insured person to rescind the settlement”.
Finally, Director’s Delegate gave little weight to Aviva’s argument that upholding the Arbitrator’s decision would cause uncertainty and lack of finality in the insurance industry as any settlement entered into since the inception of the SDN could be rescinded as long as the settlement money is returned, regardless of whether the failure to provide any information resulted in any confusion or had any impact on an insured’s decision to enter into the settlement or later resile. This of course would not accord with the legislative objective of finality, or with balancing finality with an insured’s right to reconsider their settlement.
In response to the initial Arbitration decision FSCO posted the following bulletin on its public website:
On March 30, 2012 two Decisions on a Preliminary Issue (Shamima Parveen and Aviva Canada Inc. and Joshua Fredric and Aviva Canada Inc.) were released by FSCO’s Dispute Resolution Services Branch. In the context of these decisions, it is the Superintendent’s position that the current version of the Settlement Disclosure Notice (SDN) form complies with the Regulation.
However, insurers are reminded and encouraged to ensure that applicants understand the SDN and the settlement process. There is nothing preventing insurers from providing information additional to the SDN to improve claimant communication and enhance the settlement process.
Immediately following the appeal decision, FSCO released a new SDN to be used effective January 1, 2013. The industry can only hope that this new Superintendent approved form will be sufficient to the decision makers at FSCO to create binding settlements between insurers and insureds.