Bad faith does not trump jurisdiction in SABs disputes

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The Court of Appeal for Ontario recently rendered a unanimous decision upholding the broad jurisdiction of the Licence Appeal Tribunal (LAT) to resolve disputes “in respect of an insured person’s entitlement to statutory accident benefits (SABs) or in respect of the amount of SABs to which an insured person is entitled” under Section 280 of the Insurance Act.

In Stegenga v Economical Mutual Insurance Company 2019 ONCA 615, the Court heard the Plaintiff’s appeal of a motion in which her Statement of Claim was struck, as the LAT had exclusive jurisdiction to decide the claim at first instance. The Plaintiff claimed punitive and exemplary damages allegedly as a result of the insurance company’s breach of good faith in failing to inform the Plaintiff that her injuries could be qualified as catastrophic impairment. Accordingly, it was alleged that the Plaintiff’s SABs were not adequately provided. The Plaintiff’s position in the underlying motion was that a breach of duty of good faith is separate and distinct from benefits entitlement, and gives rise to a standalone action for bad faith in which aggravated, exemplary and punitive damages are available, which only a court can award.

The Court of Appeal agreed with the motion judge that in determining the issue, the focus should be on the facts giving rise to the dispute as opposed to the legal characterization of the wrong.  The facts alleged in the Statement of Claim centered on the insurer’s failure to provide the benefits to which the Plaintiff was entitled, and the associated delay, circumstances and conduct surrounding that denial. The Court, in deciding the bad faith claim, would have had to make factual determinations concerning entitlement to benefits, which are clearly within the LAT’s jurisdiction. In its analysis, the Court of Appeal correctly sided with focusing on the essential nature of the claim, rather than allowing legal characterizations to determine and defeat a “…legislature’s prohibition on parallel court proceedings.”

The Court also provided some analysis of the language used in Section 280 of the Insurance Act, and found that terms such as “in respect of”, “dispute” and “entitlement” were expansive, and when taken together, they covered a wider array of disagreements connected in some way to the SABs.  Furthermore, the Court determined that the Insurance Act and its regulations provide for a special award in the event an insurer has unreasonably withheld or delayed payments. Although this is not strictly the same as punitive, exemplary or aggravated damages, it does provide some form of comparable relief. In any event, the Court found that “[t]he legislature made its choice as to what disputes would be within the exclusive jurisdiction of the LAT and what remedial powers the LAT would have. That was a policy choice it was entitled to make.”

The general takeaway from this decision is that courts are going to give strong deference to administrative processes set up to deal with disputes that are in any way connected to the subject matter contemplated by the legislation and its regulations. Specifically, this decision leaves little room for doubt that the SABs dispute resolution regime that came into force in 2016, is exclusively before the LAT, and except for an appeal or application for judicial review from that body, there is no jurisdiction to go before the courts at first instance.

For more information, please contact Douglas Stewart, or another member of the Insurance group.