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CITATION: Intact Ins. Co. v. Allstate Ins. Co. of Canada, 2015 ONSC 4264
COURT FILE NO. : 4473·14
DATE: 2015/07/02
SUPERlOR COURT OF JUSTICE - ONTARlO
RE:
Intact Insurance Company (Applicant)
AND:
Allstate Insurance Company of Canada (Respondent)
BEFORE:
Justice R. Raikes
COUNSEL: Douglas Wallace. for the applicant
Todd McCarthy, for the respondent
HEARD:
May 11,2015
ENDORSEMENT
Overview
[1]
The applicant. Intact Insurance Company (hereafter "Intact"), appeals from an
arbitration decision dated October 16, 2014, in which the arbitrator found that
Intact was liable to pay accident benefits to Paula, Destiny and Athena Chartrand
(hereafter "Paula, Destiny and Athena") arising from a motor vehicle accident on
August 21, 2010. Paula, Destiny and Athena sustained their injuries while
occupants of a motor vehicle owned and operated by Rhonda Lucuk. Intact was
the insurer of Ms. Lucuk's vehicle.
[2]
At the time of the accident, Paula, Destiny and Athena resided at the home of Kyle
Houghton (hereafter "Kyle") in Sarnia. Ontario. Kyle owned two motor vehicles
insured by the respondent, Allstate Insurance Company of Canada (hereafter
"Allstate").
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[3]
The issue for detennination by the arbitrator was whether Paula, Destiny and
Athena were principally dependent for ftnancial SUpp0l1 upon Kyle at the time of
the accident. If so, then responsibility to pay accident beneftts rests with Allstate;
othenvise, responsibility lies with Intact. The arbitration was a priority dispute
under s. 268(2) of the Insurance Act.
[4]
Intact argues that the arbitrator applied the wrong legal test to the detennination of
dependency and, as such, his fmding that Paula, Destiny and Athena were not
principally fmancially dependent on Kyle should be reverSed. Allstate argues that
the arbitrator set out and applied the correct legal principles to the facts and
evidence before him; his rmding is a rmding of fact or mixed fact and law which is
entitled to deference.
[5]
The arbitrator fonnd that the relationship between Paula and Kyle was not
pennanent and was not likely to be pelJl1anent and, as a result, Paula, Destiny and
Athena were not principally financially dependent on Kyle at the time of the
accident. He applied a test ,?f "permanence" or "likely permanence" in
determining the appropriate time frame for the assessment of dependency. Intact
argues that the application of a requirement to demonstrate permanence or likely
pennanence sets the bar too high. It led the arbitrator to improperly speculate as to
the future prospects for the relationship between Paula and Kyle and consideration
of events post-accident.
[6]
This appeal by way of application raises the following issues:
1. Did the arbitrator err in applying a test of "permanence" or "likely
pennanence" to the determination of the appropriate time frame to
be considered as part of the analysis of principal financial
dependency?
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2. Did the arbitrator err in selecting a twelve month timeframe for the
analysis of principal financial dep endency? Is that finding entitled to
deference in this case?
Standard of Review
[7]
The standard of review of an arbitrator's determination of dependency depends on
the characterization of the alleged error by the arbitrator, If the issue is the legal
test applied by the arbitrator, i.e, whether the appropriate legal principles were
used, the standard ofreview is correctness. If the issue is one involving [mdings of
fact or the application of the law to the facts, the standard of review is
reasonableness: Security National Insurance Co. v. The Wawanesa Mutual
insurance Company , 2013 ONSC 7589 at para, 70; Royal & Sun Alliance
Company of Canada v, AXil Insurance Co" 2015 ONSC 217 at para, 10.
[8]
Deference will be given to an arbitrator's determination of a question of fact or
mixed fact and law where the arbitrator has applied the correct legal principles. An
appellate court will not show deference to an adjudicator' s decision on an issue of
law:
Gore Mutual Insurance Company v. Co-operators General Insurance
Compony, 2008 CanLII 46914 (Ont. S.C,) at para. 6.
Legislative Framework
(9]
Section 268(2) sets out the priority rules that apply when there are more than one
motor vehicle liability policies that might respond to a statutory accident benefit
claim by someone injured in a motor vehicle accident. As occupants ofavehicle at
the time of the accident, the following rules with respect to priority apply:
(i)
the occupant )las recourse against the insurer of an automobile in
respect of which the occupant is an' insured; ,
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[10]
(ii)
if recovery is unavailable under (I), the occupant has recourse
against the insurer of the automobile in which he or she was an
occupant;
(iii)
if recovery is unavailable under (1) or (2), the occupant has
recourse against the insurer of any other automobile involved in
the accident from which the entitlement to statutory accident
benefits arose; and
(iv)
if recovery is unavailable under (1), (2) or (3), the occupant has
recourse against the Motor Vehicle Accident Claims Fund.
Section 2(1) of the Statutory Accident Benefits Schedule-Accidents On or After
November 1, 1996, Ontario Regulation 403/96, .s amended, defines an "insured
person" .s follows:
(a) "The named insured, any pel~on specified in the policy as • driver of the
insured .utomobile, the spouse of the named insured, and any
dependent of the named insured or spouse, if the named insured)
specified driver, spouse or dependent
.
(i) is involved in an accident in or outside of Ontario that involves the
insured .utomobile or another automobile." [Emphasis added]
[11]
Section 2(6) of the same Regulation states:
"For the purposes of this regulation, a person is dependent of another
person if the person is principally dependent for financial slipport or care on
the other person or the other person's spouse,"
The Arbitration
[12]
The arbitration was held on August 15 and 20, 2014. The evidence at the
arbitration consisted of document briefs, examinations under oath transcripts and
viva voce evidence. The arbitration proceeded under an Arbitration Agreement
dated August 13, 2013. That agreement asked the arbitrator to determine which .
insurer was in priority to pay statutory accident benefits to Paul., Destiny and
Athena.s. result of the motor vehicle accident. The parties agreed to be bound by
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the decision of the arbitrator, subject to an appeal of his decision to a judge of the
Ontario Superior Court of Justice.
[13]
The parties submitted an Agreed Statement of Facts consisting of 29 paragraphs.
In addition, there was an Agreed Statement of Facts with respect to Post Accident Events which facts were ruled admissible by the arbitrator subject to the
weight, if any, to be glven to them,
The Accident
[14]
On August 21,2010, Paula, Destinyand Athena were returniog from Canada's
Wonderland when they were injured in a motor vehicle accident on Highway 402 ,
Paula is the biological mother of Destiny and Athena. She suffered relatively
minor. injuries. Destiny, born April 30, 2000, was then ten years old. Athena, born
July 13, 2003, was then seven years old. Both girls suffered catastrophic injuries.
Paula, Destiny and Athena were occupants in a motor vehicle that was owned and
operated by Rbonda Lucuk at the time of the accident.
Residence
[15]
At the date of the accident, Paula, Destiny and Athena were living with Kyle at his
home at 314 Collingwood Street in Samia, Ontario. Paula had been residing with
Kyle since shortly after they met in January or February, 2010. Destiny and
Athena only began living at Kyle's home in early July, 2010 after they fInished the
school year and moved from Sudbury where they were living with their father,
Yvan Restoule (hereafter "Yvan").
Pa ula and YvanlPaula and Kyle_
[1 6]
..'
Paula and Yvan met in 2000 when Paula ;vas preguant with Destiny. Yvan treated
Destiny as his own child from the day she was born. Paula and Yvan began living
together in 2000 and had one child of their own, Athena, Paula and Yvan married
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On July 14, 2008. They lived together in Sudbury with their daughters. Their last
residence, which they occupied staning in July, 2009, was a three bedroom
apartment at 180 King Street, Sudbury.
[17)
In July, 2009, Paula began Working at a nightclub in Sudbury as an exotic dancer.
She had worked as an exotic dancer before they married. Yvan did not like this
and their relationship deteriorated as a result. Yvan began sleeping on the couch,
He testified that Paula was not satisfied living the "quiet housewife life". While
working at the nightclub in Sudbury, she was arrested for prostitution in the Spring
of 2010. She was told that she could make more money as a dancer in Samia so
she left Sudbury. The children remained with Yvan.
[18)
Paula obtained employment at a strip club in Sarnia in January or February, 20 10.
That is where she met and began to date Kyle. He was employed full-time at One
Stop Automotive in Samia. He previously worked as a bouncer and manager of
strip , clubs for several years. The arbitrator found that shortly after their first
meeting, Paula started staying at Kyle's house in Samia. Her husband, Yvan, was
unaware of that situation. He knew that she was working in Sarnia at a strip club
but not tbat she was dating and living with Kyle.
[19]
Yvan testified tbat Paula spent three weeks of each month between February and
June, 2010 in Samia. The other week was spent in Sudbury. When she was in
Sudbury, Paula stayed witb Yvan and ber daughters at the apartment. She told ,
Kyle that she was staying with her mother when she was in Sudbury.
[20]
ThJ, evidence at the arbitration was that Paula was telling Kyle that she wanted to
leave her ex-husband and move the girls to Samia. Kyle testified that the plan was
that the three of them wou ld move in with him, the girl, would be enrolled in
school in Samia in September at which time Paul~ would look for a legitimate job.
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Tho Mov.
[21]
Destiny and Athena attended school in Sudbury until the end of June, 2010, They
lived with their father, Yvan, while their mother was working in Sarnia. In early
July, Paula asked her mother to drive her and the girls from Sudbury to Parry
Sound where they met Kyle at a gas station. There, they transferred their
belongings to his vehicle including their clothes, toys, blankets and sheets. He
transported them to Samia where they moved into his home. That is where they
resided until the accident. Kyle purchased bunk-beds where Athena and his
daughter from a previous relationship slept.
[22]
Soon after the girls left for Sarnia with their mother at the beginning of July, 2010,
Yvan began "couch surfing" at friends' homes. He testified that he believed the
move to Sarnia was pcnnancnt. He continued to express on social media his love
for Paula during this period. He was unaware that Paula was cohabiting with Kyle
and that that was where the girls were now residing,
Paula's Addictions
[23]
The arbitrator found that each of Paula, Yvan and Kyle suffered from addictions
either to alcohol, drugs or both. It appears that Paula', addictions were the most
severe. Virtually all of her income from any source went to feed those addictions,
She earned money as an exotic dancer. She also received Family Allowance
benefits, She received $800 from Yvan for support for the girls. It also appears
that she was receiving some money from prostitution, a fact which was unknown
to Kyle.
[24]
During the seven weeks that Paula and the girls resided with Kyle, he was
fmancially responsible for virtually all of their needs and expenses, Paula
contributed a very small amount to groceries and to entertainment expenses for the
girls. Her financial contributions beyond this were negligible. This new
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arrangement was a significant financial burden which Kyle could not afford to
continue indefinitely. The plan was for Paula to fInd new employment starting in
September so that she could contribute frnancially to the household expenses.
[25)
On August 18, 2010, Ms. Lucuk drove Paula, Destiny and Athena to Canada's
Wonderland. After she dropped them off, she continued to Sudbury where she
picked up the rest of their belongings. The acc ident happened on the return trip.
[26]
Kyle and Paula spoke of marriage during the summer of 2010, but it was not a
serious discussion. Kyle was asked during his examination in chief whether the
relationship with Paula was going to be permanent or temporary. He responded:
"You hope it is permanent . You have no idea. You hope for the best and
expect the worst.
[27]
I)
Kyle also testifIed that he would not have continued in his relationship with Paula
if he had known that she was engaged in prostitution, nor if he had determined that
she was an addict. He would not have tolerated Paula staying with Yvan when she
was in Sudbury if he had been aware of it. Thus, Paula's relationship with Kyle
was to some extent built on lies.
Arbitrator's Findings and Analysis
[28)
It is not disputed that the arbitrator stated the correct legal principles that apply to
the detelmination of the issue of principal financial dependency. At page twelve of
his decision, he wrote:
"The Ontario Court of Appeal affirmed the "correct legal principles" to
be applied to questions of dependency in Oxford Mutual Insurance
Company v. Co-operator 's General Insurance Company (2006) OJ.
No. 4518. This decision incorporated some of the principles from earller
decisions involving dependency namely Miller v. Safeco 1986, 13
C.C.L.I. 31,50 OK (2d) 797 (CA) and Liberty Mutual Insurance Co.
v. Federation Insurance Co of Canada (1997) OJ. No. 1234 (CA).
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The "correct legal principles" set out in Oxford Mutual v. Co-operator's
(supra) can be summarized as follows:
(a)The 51% principle from Liberty Mutual Insurance v. Federation
Insurance should be applied. It is not sufficient that the claimant
simply be dependent, but rather must be principally dependent. 'Ifthe
claimant had sufficient resources to fund ' 51 % of their ' financial
needs than the person could not be dependent upon others.
(b) The time frame to be looked at may encompass days, weeks or even
years , One does not simply look at a "snap shot" of the actual day of
the Accident to determine the issue of dependency.
(c) The factors from Miller v. Safeeo should be considered:
(i) the duration of the dependency
(ii) the amount of dependency
(iii) the fmancial or other needs of the alleged dependent
(iv) the ability ofthe alleged dependent to be self-supporting.
(d) Each case must be factually driven.
(e) The ability to be self-supporting must be taken into account when
measuring dependency
[29]
,ll
The arbitrator indicated at page 13 of his decision that he was satisfied on the
evidence overall that for the seven week period pre-aCcident. Paula and her
children were principally financially dependent on Kyle. He also indicated that he
was satisfied on the evidence that if One were to analyse the one year period preaccident, Paula and her children were not principally fmanciaU y dependent On
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Kyle. He noted that:
"In the circumstances, the result in this case is totally
dependent on the appropriate time frame to use for the calculation of financial
dependency. ))
[30]
The arbitrator then went on to consider a number of cases dealing with "persons in
transition". Typically, tbis arises in the context of a young adult who is
transitioning from living at home as a dependent with his or her parents to
independent status, but the principles are not confined to that context.
[31]
Following his review of the decis ions, including his own past decisions, the
arbitrator wrote;
''The common theme through these cases where a short time frame was
considered appears to be that each arbitrator wrestled with the question
as to whether the relationship existing during that period was of
pelIDanence and likely to continue into the future or was it transitional.
The same analysis must be done here. n
[32]
At page 17, he applied that reasoning to the case before him. He wrote: "If! were
satisfied that the situation with Kyle was likely permanent and likely to have
continued I would have no trouble finding that tbe three claimants were principally
dependent for fmancial support on Kyle Houghton at the time of the accident. I am
not so satisfied."
[33]
He found at page 18 that he was not satisfied on the evidence that the situation
with Kyle was permanent and Ijkely to continue; rather, this was a convenient
fling that was unlikely to last given Paula's addictions. Specifically, he found that
Paula was a troubled woman and addic!' Kyle would have eventually found out.
Her addictions would have led her to prostitution to maintain her habits. She was
unlikely to find a legitimate job, nor had she completely severed her ties to h~r exhusband.
[34]
Finally, he concluded at page 18 that:
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"On the evidence before me Intact has failed to satisty the onus upon it
to establish the relationship between Kyle Houghton and Paula
Chartrand was On the balanCe of probability likely to be permanent. As a
result I find that a seven week time frame for the analysis of financial
dependency is inappropriate. Accordingly, one must look at the "big
picture" .. ,,"
[35]
He then applied a twelve month pre-accident timeframe for the determination 'of
whether Paula and her daughters were prinCipally fmancially dependent upon
Kyle. In doing so, his decision was predicated entirely on the premise lhat the
relationship between Paula and ' Kyle had to be one which was "permanent or
likely to be permanent". That approach is at the heart of this appeal.
Analys;s
(36]
The first issue to be addressed is whether the arbitrator erred in applying a test of
"permane~ce"
Or "likely pellnanence" to the determination of the appropriate time
frame to be considered as part of the analysis of principal fmancial dependency,
That is clearly the standard or test he applied in determining the timeframe
applicable in this case,
[37]
The decisions of the courts and arbitrators acknowledge the challenges faced by an
arbitrator when dealing with situations where lives are in transition. Court
decis ions have largely provided only general guidance as to the factors that should
be considered in the overall context of the relationship in question. Certainly, the
decisions have not established a requirement of permanence or likely pennanence;
rather, the arbitrator is
ask~d
to choose a time frame that most fairly reflects the
true status of the claimant on the date of the accident: Ox/ord Mutual Insurance
CO.
Y.
Co-operator's General Insurance Co .. supra, at paras, 26 and 27; Dominion
a/Canada General Insurance Co. v. Ontario, 2013 ONSC 4717 at para. 31 ,
[38]
The arbitrator in this case mistakenly concluded that the arbitral decisions that he
reviewed. including his own decisions, supported a requirement of permanency or
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likely permanency where a shorter time frame is to be used for the determination
of principal fmaneial dependency. In my view, the decisions do not go that far.
[39]
The objective is to determine tbe claimant's status as of the date of the accident.
Dependency must be determined in context. This is why the Ontario Court of
Appeal indicated that status cannot be determined by simply looking at the day of
the accident. More than a mere snapshot is necessary to arrive at a true picture.
However, it is noteworthy that the Court of Appeal did not specity that in selecting
the appropriate time frame to be considered, one must ask whether the claimant's
condition was permanent or likely permanent at that time. Instead, the Court of
Appeal indicated that such decisions must be made with regard to the whole oftbe
evidence of tbe circumstances of the claimant within a reasonable time period
preceding the accident: Security National Insurance Co. v. Wawanesa Mutual
Insurance Co., 2013 ONSC 7589 at para. 18; see also The Guarantee Company of
North America v. Wawanesa Insurance Company and Zurich Insurance Company
(May 7, 2010 private arbitration per Arbitrator Samis) at page 18, and Intact
Insurance y, Economical Mutual Insurance Company (June 1, 2011 private
arbitration per Arbitrator Novick) at page 11,
[40]
Generally, that inquiry involves looking at the particular circumstances of the
claimant. Where there has been recent change, does that change materially affect
the nature of the relationship? What plans were existing at the time vis-A-vis the
relationship? Was there a settled intention in place to continue that relationship or
not? In my view, the arbitrator in this case also erred in speculating on the future
prospects for the relationship between Paula and Kyle and using that speculation
to inform tbe determination of the appropriate time frame to be considered.
Speculation of this sort is a mug's game, to use the vernacular, There are too many
variables and doing so runs contrary to the matter to be determined, i.e. the status
of the relationship at the date of the accident.
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[41)
In this c'ase, Paula had been living with Kyle since January or February, 2010,
almost seven months. They were cohabiting, not merely dating. Her children had
moved in with them with the expectation and plan that they would be enrolled in
school in Samia for the upcoming school year. There was a plan that Paula would
look after the children over the summer and would find new employment in
September to assist with the financial burden .ofthe enlarged household.
[42)
The evidence supports a serued intention on the part of Paula and Kyle to engage
in a relationship that was more than merely transitory. It is an error for the
arbitrator to prognosticate the fate of that relationship. No doubt there were issues
to be confronted, not least of which were their respective addictions. Would she
have faced her addiction for the sake of their relationship? We will never know the
answer to that question because the accident intervened and the dynamic changed.
[43)
The arbitrator' s decision to select the longer twelve month timeframe is predicated
entirely upon his conclusion first, that the relationship between Paula and Kyle
must on a balance of probabilities be permanent or likely to be permanent, and
secondly,. his fmding that their future relationship was unlikely to succeed ..In my
view, he misapprehended the approach to be taken to the determination of the
appropriate time frame. In doing so, he then embarked on an analysis of future
events which he ought not to have done.
[44)
I am also concerned that for the purpose of determining the appropriate time frame
to be used to assess dependency, the decision of the arbitrator in this case focuses
almost entirely on the relationship between Paula and Kyle. There is no separate
consideration or analysis of the relationship between the two girls and Kyle as at
the date of the accident. The impliCit assumption is that their dependency status is
inextricably tied to the relationship between Paula and Kyle.
[45)
As children, Destiny and Athena had no means of self-support. They were at all
times dependent upon the adults witb whom they Jiyed for their needs and care.
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Certainly, from their perspective, they were financially dependent upon Kyle once
they moved from Sudbury to Sarnia. At that point, what worldly possessions they
had came with them. They had no choice in the move. They could not go back to
Sudbury to live with their father who was by then himself itinerant. They expected
to live and attend school in Samia while living with Kyle and Paula.
[46)
The ultimate issue to be determined is whether at the date of the accident the girls
were principally financially dependent on Kyle. They were and were expected to
continue to be dependent as at that date. This is not a case where the gid s were
going to return to live with their father at the end of the summer, nor was it up in
the air as to where they would be living. Their move from Sudbury to Samia to be
with their mother was then expected to be a permanent one.
[47]
The application of a requirement of permanency or likely permanency is an errOr
of law which is not entitled to deference. Likewise, the arbitrator's speculation as
to future events Or outCOmes is an error in principle.
Conclusion
[48)
The arbitrator indicated in his reasons that if the seven week period was used as
the appropriate timeframe, he was satisfied on all of the evidence that Paula,
Destiny and Athena were principally financially dependent on Kyle at the date of
the accident.
However, he went On to iroproperly speculate on the likely
permanence of the relationship between Kyle and Paula, which was an error of
law. As it relates to Destiny and Athena, I find that the seven week period is
adequate and appropriate for the detennination of their dependency. Had the
arbitrator used the seven week pel10d to deterni.ine Destiny and Athena's
dependence, he would have correctly concluded that they were principally
financially dependent upon Kyle at the date of the accident on August 21,2010.
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[49]
With respect to P aula, the evidence supports the consideration of a longer
timeframe given her relationship with Kyle. It started in January or February,
2010. They had been cohabiting for nearly seven months as at August 21 , 2010 .
She had separated from Yvan. She planned to live with Kyle with her daughters
and was already doing so.
On the whole of the evidence, I fmd that she was
principally fmancially dependent On Kyle when the accident occurred.
[50]
In lighlofmy decision above, larder as follows:
1. The applicant's appeal is allowed;
2. Allstate is responsible for p ayment of statutory accident benefits for
each of Paula, Destiny and Athena;
3. If the parties cannot agree on the issue of costs, written submissions
may be made within 15 days not to exceed ten pages.
tice R. M. Raikes
Date: July 2, 2015