In the recent decision, Allstate Insurance Company v Her Majesty the Queen, 2020 ONSC 830, the Ontario Superior Court of Justice revisited the standard of review in appeals from insurance arbitrations mandated by legislation. The court, in applying the Vavilov framework, concluded that appeals under section 45 of the Arbitration Act, SO 1991, c 17 (Arbitration Act), attract standards of appellate review.
In October 2014, Mr. Miller suffered catastrophic injuries in a motor vehicle accident and was diagnosed a quadriplegic (Accident). Allstate Insurance Company (Allstate) insured Mr. Miller in July 2012, but the policy was subsequently cancelled for non-payment of premiums in April 2013.
In March 2014, Mr. Miller paid the outstanding premiums and reapplied for motor vehicle insurance with Allstate. Allstate reissued an annual policy effective that month. However, in May 2014, Allstate sent Mr. Miller a notice of termination for non-payment of premiums by registered mail. The notice of termination was returned to Allstate and marked as “Moved/Unknown”. Mr. Miller did not pay the outstanding premiums and Allstate cancelled the insurance policy. Allstate refused to extend coverage to Mr. Miller for the Accident.
Mr. Miller nevertheless benefited from the statutory accident benefits (SABS) by submitting a claim to the motor vehicle accident claims fund (Fund). Afterwards, the Fund sought reimbursement from Allstate for the SABS paid to Mr. Miller. Allstate refused and maintained its no coverage position. The parties proceeded by way of arbitration to determine whether Allstate had properly cancelled Mr. Miller’s policy.
The arbitrator concluded that Mr. Miller’s policy had not been terminated and, as such, he remained insured by Allstate. Specifically, the arbitrator ruled that Allstate’s notice of termination:
- Did not contain an address where Mr. Miller could pay the outstanding premiums and fees to avoid the policy cancellation; and
- Was not sent to “the insured’s latest post office address as notified to the insurer”.
Standard of review
In determining which standard of review to apply in the circumstances, the court noted that “in the past, the standard of review of insurance arbitration decisions was determined by applying the administrative law framework, not the appellate framework.”
This meant that “insurance arbitration decisions dealing with priority disputes were generally reviewed on a reasonableness standard.” This was true even on appeals dealing with “an extricable question of law regarding SABS.” Courts only applied the standard of correctness on appeals raising (a) jurisdictional issues, (b) a constitutional question, or (c) a general question of law of central importance to the legal system.
The Vavilov framework “starts with a presumption that reasonableness is the applicable standard whenever a court reviews administrative decisions.” This presumption can be rebutted in cases where (i) “the legislature has provided a statutory appeal mechanism from an administrative decision to a court”; and (ii) “the rule of law requires that the standard of correctness be applied.”
Standard of review
The court began its analysis with section 7(1) of O. Reg. 283/95, which states that “if the insurers cannot agree as to who is required to pay benefits, the dispute shall be resolved through an arbitration under the Arbitration Act”.
Pursuant to section 45 of the Arbitration Act, a party may appeal an award to the court on a question of law, a question of fact, or a question of mixed fact and law, where the arbitration agreement so provides. In this case, the arbitration agreement stated that any party to the arbitration may appeal the arbitrator’s decision “on a point of law, or mixed point of law and fact to a Judge of the Ontario Superior Court of Justice, without leave of the Court.”
The court determined that while the parties have some flexibility to define the scope of an appeal from an arbitration award, the right to appeal remains “a statutory appeal mechanism” created by the Ontario legislature. Accordingly, standards of appellate review must apply, namely, correctness on issues raising questions of law, and palpable and overriding error on issues raising questions of mixed fact and law.
With respect to the termination for non-payment
In light of its conclusion regarding the standard of review to apply, the court determined that there were two questions in issue, which attracted different standards of appellate review.
First, the arbitrator’s interpretation of the regulation governing the content of a notice of termination is a question of law and thus reviewable on a correctness standard. The court held that the arbitrator’s interpretation of section 11(1.3) of O. Reg. 777/93 was correct in requiring strict compliance with the information to be included on a notice of termination for non-payment of premiums.
Second, whether Allstate’s notice of termination complied with the statutory requirements is a question of mixed fact and law, and thus reviewable on a palpable and overriding error standard. The notice of termination in issue contained the past due amount, the administrative fee, and advised Mr. Miller to pay the amount to avoid the termination of his policy. Contrary to the regulatory requirements, there was no address to send payment to. The court found no error in the analysis by the arbitrator, who concluded that Allstate failed to demonstrate strict compliance with the regulation.
Insurers should be mindful of this decision in considering whether to appeal an insurance arbitrator’s award, as this is one of the first Ontario decisions to apply the Vavilov framework to determine the standard of review for appeals of statutorily mandated insurance arbitrations. In light of the switch from a reasonableness standard of review to the more stringent standards of appellate review, a thorough understanding of the body of jurisprudence underlying the standards of appellate review is critical to an insurer contemplating an appeal of this nature.
Interestingly, in Cove Contracting Ltd v Condominium Corporation No 012 5598 (Ravine Park), 2020 ABQB 106, the Court of Queen’s Bench of Alberta considered what standard of review applied to an appeal from an arbitration award. The court held that:
Vavilov does not change the standard of review on commercial arbitration appeals, because Vavilov and its two companion decisions deal with judicial review of administrative bodies, and because the Supreme Court makes no reference in its December 19, 2019 decisions to its earlier decisions in Teal Cedar Products Ltd v British Columbia, 2017 SCC 32 and Creston Moly Corp v Sattva Capital Corp, 2014 SCC 53, which establish reasonableness as the standard of review on commercial arbitration appeals.
While the most prudent working assumption at this time, at least in Ontario, is that appeals from arbitration awards arising from statutorily mandated insurance arbitrations attract standards of appellate review, the reasoning set out in Cove Contracting nevertheless makes a compelling argument in favour of the reasonableness standard. Given the differing opinions as to the effect of the Vavilov decision on appeals from arbitration awards, we anticipate that courts will further clarify this issue in the foreseeable future.
For more information, please contact Alexandre Toupin or another member of Dentons’ Insurance group.
 Intact Insurance Co v Allstate Insurance Co of Canada, 2016 ONCA 609 at para 25.
 Ibid. at para 53.
 Canada (Minister of Citizenship and Immigration) v Vavilov, 2019 SCC 65 at para 16.
 Ibid. at para 17.
 Ibid. at para 17.
 Disputes Between Insurers.
 Housen v Nikolaisen, 2002 SCC 33 at para 8.
 Ibid. at paras 26-37.
 Statutory Conditions – Automobile Insurance.
 Cove Contracting Ltd v Condominium Corporation No 012 5598 (Ravine Park), 2020 ABQB 106 at para 6.
[DJ1]As this is now the abbreviated form, we do not italicize.