Section 5(1) of the Fault Determination Rules Interpreted

January 8, 2016 | Ashleigh T. Leon

The Court of Appeal recently released a decision in State Farm Mutual Automobile Insurance Company v. Aviva Canada Inc., 2015 ONCA 920 which interprets section 5(1) of the Fault Determination Rules. 

Rule 5(1) reads as follows:

5(1) If an incident is not described in any of these rules, the degree

of fault of the insured shall be determined in accordance with the

ordinary rules of law. [Emphasis added]


At the time of the accident, Ali was driving his motorcycle southbound in the curb lane of Yonge Street, approaching the intersection where the accident took place. Some cars were stopped in the southbound passing lane to Ali’s left. Meanwhile, Eric was driving his car in the northbound passing lane on Yonge Street. He needed to turn left at the intersection. The intersection does not have traffic lights guiding the flow of traffic. Traffic was heavy. Eric stopped his car in the northbound passing lane and waited for a break in the southbound traffic so that he could turn left. He waited for a while and was then “waved through” the intersection by a driver who was stopped in the southbound passing lane. Eric did not see Ali and his motorcycle before he turned. It was only after Eric completed his turn that he heard skidding sounds. When he checked his rearview mirror, he saw a motorcycle skidding through the intersection. There was no collision between the two vehicles. However, as a result of Eric’s turn into the southbound lane of traffic, Ali swerved, lost control of his motorcycle, fell to the ground and was injured.

Ali applied to his insurer, State Farm Mutual Automobile Insurance Company (“State Farm”), for accident benefits payments. State Farm paid him the benefits and then sought indemnification from Eric’s insurer, Aviva Canada Inc. (“Aviva”), under the loss transfer provisions of the Insurance Act.

The Arbitration

At arbitration, Shari Novick heard the oral testimony of both drivers and also had the transcripts from the drivers’ examinations for discovery.  She made several findings of fact, including that: Ali had the right of way; Ali’s view of the intersection was partially blocked by the vehicles stopped to his left; and, Eric did not see Ali’s motorcycle before he made his left hand turn although “it is clear the motorcycle was there to be seen”.

Arbitrator Novick found that the FDRs are a complete code for determining fault under section 275 of the Insurance Act, and any fault determination under the FDRs must be informed by section 3 of the FDRs which requires that the degree of fault be determined without reference to various circumstances, including the weather and road conditions, actions of pedestrians, and the location on the insured’s automobile of the point of impact.  Therefore, in interpreting section 5(1), which both parties agreed applied to this case, she found that a pure tort analysis would be inappropriate.  Instead, she referred to section 12(5) of the FDRs as well as section 141(5) of the Highway Traffic Act to come to her conclusion that Eric was 100% at fault for the accident.

The Appeal

On appeal to an applications judge, the Arbitration Award was overturned on the basis that nothing in the FDRs required the ordinary rules of tort law be ignored.  The applications judge found that Ali was 50% at fault for the accident for failing to be alert while he approached the intersection, relying on a case called Nash v. Sullivan

Court of Appeal

At the Court of Appeal, State Farm argued that the applications judged erred by making a finding of fact not made by the arbitrator, failing to give deference to the arbitrator’s finding of fact and negligence under the ordinary rules of law, applying Nash to this case and finding that the arbitrator incorrectly applied section 5(1) of the FDRs.

The Court of Appeal found that the applications judge improperly made a finding of fact (that Ali was not alert while approaching the intersection) which was not made by the arbitrator.  It was also held that the facts of the Nash case, as applied by the applications judge were distinguishable from the case at hand.

With respect to the interpretation of section 5(1) of the FDRs, the Court of Appeal found as follows:

(A)      The legislation which creates the loss transfer scheme consists of the relevant provisions of the Act together with the FDRs. The purpose of the loss transfer scheme is to provide for an expedient and summary method of spreading the cost of statutory accident benefits among insurers, in a gross and somewhat arbitrary fashion, favouring expediency and economy over finite exactitude.

(B)      Rule 3 informs all fault determinations made pursuant to the FDRs, including those made pursuant to section 5(1).

(C)      Finally, having determined that Rule 3 informs fault determinations made under Rule 5(1), “the ordinary rules of law” cannot be interpreted as “the ordinary rules of tori law”. A determination of fault based on tort law rules would necessarily engage a consideration of the circumstances that the legislature purposefully excluded from consideration by Rule 3. Furthermore, as already discussed, resort to pure tort law for the determination of fault would run contrary to the purpose of the loss transfer scheme, which is to provide an expedient and summary way of resolving indemnification claims.

The full case can be found at

There have been numerous other cases which have applied the rules of tort law to the application of section 5(1) of the FDRs but the Court of Appeal has now made it  clear that a pure tort analysis is inappropriate to the interpretation of that section and contrary to the loss transfer scheme as a whole.


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