[1] PARDU J.A. (PEPALL J.A. concurring): — This appeal concerns the application of the pay first and dispute later rules governing insurers that receive an application for statutory accident benefits ("SABs") following a motor vehicle accident. To reduce delays in payments of the benefits, the regulatory scheme requires that the first insurer who receives the application for benefits pay them, provided that there is some non-random [page163] nexus or connection between the claimant and the insurer. If that insurer takes the position that another insurer should be responsible for payment of those benefits, it must nonetheless pay them, but give notice within 90 days to the other insurer; and follow the statutory scheme of arbitration to determine which insurer should pay SABs.

[2] The issue on this appeal is whether any insurer of any kind or only "motor vehicle liability insurers" are obliged to pay first and dispute later.

[3] Sukhvinder Singh rented a vehicle from "Wheels 4 Rent". The rental vehicle was insured pursuant to a "motor vehicle liability policy" issued by Zurich Insurance Company ("Zurich"). Chubb Insurance Company of Canada ("Chubb") issued an accident policy (the "Chubb policy") to Wheels 4 Rent. This policy contained no coverage for liability to others as a result of a motor vehicle accident. Rather, it provided optional death and dismemberment insurance to Wheels 4 Rent customers, and extended to death or dismemberment unrelated to a motor vehicle accident, provided it occurred during the rental period.

[4] Ms. Singh did not purchase Chubb's optional coverage. She had a single-vehicle motor vehicle accident on September 23, 2006. Having at some point obtained a pamphlet for the optional Chubb policy made available by Wheels 4 Rent, she submitted a claim for SABs to Chubb on November 17, 2006.

[5] Chubb refused to pay. Zurich ultimately began payment of SABs and the two insurers submitted their dispute to arbitration before Stanley C. Tessis.

[6] The arbitration agreement provided:

[7] The manner in which the parties structured the issues for the arbitrator reflects their agreement in correspondence that Chubb's liability depended on whether Chubb was an insurer within the meaning of s. 268 of the Insurance Act, R.S.O. 1990, c. I.8.

[8] The arbitrator concluded that Chubb was not an "insurer" for the purposes of the priority dispute settlement statutory regime because "there was no 'sufficient nexus' existing between Chubb Insurance Company of Canada and Ms. Singh". As a result, Chubb was not obligated to pay her benefits under the pay first and dispute later rules. In his view, no nexus existed because Chubb had never issued a "motor vehicle liability policy" to either Wheels 4 Rent or Ms. Singh. He noted that Zurich had submitted a number of cases where a sufficient nexus had been found, and that,

[9] Zurich appealed from this ruling. The application judge allowed the appeal, concluding that Chubb was an "insurer" under the statutory regime, because the Chubb policy was a "motor vehicle liability policy" as defined by the Insurance Act, and there was a sufficient nexus between Ms. Singh and Chubb to require Chubb to pay SABs first. [page165]

[10] The sole issue on this appeal is whether the application judge erred in deciding that Chubb is an "insurer" for the purposes of the pay first and dispute later rules. If Chubb is an insurer for the purposes of these rules, then it was required to pay benefits to Ms. Singh.

[11] Embedded within this issue are the questions of whether (a) the Chubb policy is a "motor vehicle liability policy" for the purposes of s. 268 of the Insurance Act, and (b) whether there was a sufficient nexus between Chubb and Ms. Singh to justify payment.

[12] The arbitration agreement between Chubb and Zurich provided:

[13] The application judge adopted a standard of review of correctness, on the ground that there were no factual issues in dispute. Mesbur J. summarized the applicable standards of review in Aviva Insurance Co. of Canada v. Royal & Sunalliance Insurance Co., [2008] O.J. No. 3240, 66 C.C.L.I. (4th) 262 (S.C.J.), at paras. 7 and 8:

[14] Here I would characterize the issue of whether Chubb was a "motor vehicle liability" insurer as a question of law reviewable on the standard of correctness and the issue of whether there was a sufficient nexus between Chubb and the claimant as a question of mixed fact and law reviewable on the standard of reasonableness.

[15] The relevant portions of the Insurance Act are as follows:

[16] Disputes Between Insurers, O. Reg. 283/95, governing disputes between insurers, provides:

[17] This court has dealt with these priority disputes in SABs context a number of times.

[18] In Kingsway General Insurance Co. v. Ontario (Minister of Finance) (2007), 84 O.R. (3d) 507, [2007] O.J. No. 290, 2007 ONCA 62, this court stated, at para. 19:

[19] Further, this court noted in Kingsway General Insurance Co. v. West Wawanosh Insurance Co. (2002), 2002 CanLII 14202 (ON CA), 58 O.R. (3d) 251, [2002] O.J. No. 528 (C.A.), at para. 10:

[20] In my view, the application judge erred in concluding that the Chubb policy was a "motor vehicle liability policy". There was no element of that accidental death and dismemberment policy that insured against liability to others arising out of property damage or injury caused by an automobile or the use or operation thereof.

[21] The content of "motor vehicle liability policies" is highly regulated. These policies must provide for payment of SABs, and a statutory minimum amount of liability coverage. The Chubb policy has none of these characteristics.

[22] The rationale expressed in Kingsway General Insurance Co. v. West Wawanosh Insurance Co. would not be furthered by requiring insurers other than "motor vehicle liability insurer[s]" to respond to a claim for SABs. An insurer providing fire or life insurance or some group or accident or disability insurance not having the features of a "motor vehicle liability policy" may have no expertise in adjusting these claims, and should not be expected to respond to them where it has not issued a motor vehicle liability policy even if there is a nexus or relationship between the claimant and such insurer.

[23] The priority and dispute resolution regime established under O. Reg. 283/95 applies to "disputes as to which insurer is required to pay benefits under s. 268 of the Insurance Act" (emphasis added).

[24] Section 268 says every contract "evidenced by a motor vehicle liability policy" shall be deemed to provide for SABs. These benefits are not incorporated into insurance policies which are not motor vehicle liability policies and those insurers may have no expertise in adjusting these claims.

[25] All of the cases cited in which an analysis is made to ascertain whether there was a sufficient nexus between the claimant and the first insurer to review an application for SABs are premised on there having been an actual or purported motor vehicle liability policy in place at some time.

[26] For example, in Ontario (Minister of Finance) v. Royal & Sun Alliance Insurance Co. (January 2003, Arbitrator M. Guy Jones), the investigating officer was given a certificate of insurance issued by Royal which had expired four years earlier and covered a different vehicle. This was found to be a sufficient nexus to a motor vehicle liability insurer to justify an obligation to pay. In Ontario (Minister of Finance) v. Progressive Casualty Insurance Co. of Canada (2009), 95 O.R. (3d) 219, [2009] O.J. No. 1216, 2009 ONCA 258 and Lombard Canada Ltd. v. Royal & SunAlliance Insurance Co. (2008), 2007 CanLII 82792 (ON SC), 94 O.R. (3d) 62, [2008] O.J. No. 5239 (S.C.J.), motor vehicle liability policies expired two [page169] months before the accident. In these cases, the claimants' choice of recipient of the claim for SABs was not random or arbitrary and was connected to a "motor vehicle liability policy". Similarly, in Danilov v. Unifund Assurance Co., [2009] O.F.S.C.D. No. 69 (Bujold), there was a fraudulent pink motor vehicle liability policy slip purporting to evidence a "motor vehicle liability insurance policy".

[27] Ms. Singh's choice to send her application to Chubb was not random or arbitrary, but was based on the optional coverage provided to Wheels 4 Rent customers. Nonetheless, Chubb was not required to respond as it was not a "motor vehicle liability insurer", nor had it held out or represented to have ever provided such coverage at any relevant time.

[28] Both the plain meaning of s. 268 of the Insurance Act and O. Reg. 283/95, and the underlying policy behind the legislation, favour excluding non-motor vehicle liability insurers from the obligation to pay first and dispute later.

[29] Accordingly, I would allow the appeal. I would set aside the order of the application judge of April 3, 2013, setting aside the decision of Arbitrator Stanley Tessis and awarding costs to Zurich, and substitute an order dismissing the application and awarding costs in favour of Chubb in the sum of $7,149.

[30] I would award Chubb the costs of this appeal fixed in the agreed upon sum of $12,000, inclusive of all disbursements and HST.

[31] JURIANSZ J.A. (dissenting): -- I have read the decision of Pardu J.A. and, with respect, I am unable to agree with either the reasons or the result. I would simply apply the established "nexus" test to determine whether Chubb, as the first insurance company to receive a completed application for benefits, was obliged by O. Reg. 283/95 (the "Regulation") to pay those benefits while disputing coverage.

[32] There is a mature and stable jurisprudence relating to the "nexus" test and the application of the Regulation. Both the courts and arbitrators of the Financial Services Commission of Ontario have applied the nexus test on numerous occasions to determine whether an insurance company must pay benefits under s. 2 : see, for example, Allstate Insurance Co. of Canada v. Brown (1998), 1998 CanLII 18877 (ON SC), 40 O.R. (3d) 610, [1998] O.J. No. 2318 (Div. Ct.); Lombard Canada Ltd. v. Royal & SunAlliance Insurance Co. (2008), 2007 CanLII 82792 (ON SC), 94 O.R. (3d) 62, [2008] O.J. No. 5239 (S.C.J.); [page170] Kingsway General Insurance Co. v. Ontario (Minister of Finance) (2007), 84 O.R. (3d) 507, [2007] O.J. No. 290, 2007 ONCA 62; Rozmerets v. Wawanesa Mutual Insurance Co., [2002] O.F.S.C.D. No. 99 (FSCO Arb.); Bianca v. Wawanesa Mutual Insurance Co., [2004] O.F.S.C.D. No. 185 (Slotnick); Vieira v. Royal & SunAlliance Insurance Co. of Canada, [2005] O.F.S.C.D. No. 7 (FSCO Appeal, Draper). It is, in my view, both unnecessary and unwise to adopt a new and different interpretation of the Regulation.

[33] Further, I am unclear as to the meaning of the term "non-motor vehicle liability insurer", which Pardu J.A. introduces [at para. 28] in concluding that "[b]oth the plain meaning of s. 268 of the Insurance Act and O. Reg. 283/ 95, and the underlying policy behind the legislation, favour excluding non-motor vehicle liability insurers from the obligation to pay first and dispute later".

[34] If the term "non-motor vehicle liability insurer" were used broadly to denote an insurer that does not offer motor vehicle liability policies to the public, I would agree with Pardu J.A. that the legislature could not have intended that the Regulation would apply to such insurers. The scope of the Regulation does not permit a "nexus" to be found between a claimant and an insurer that does not write motor vehicle liability policies in Ontario. However, counsel for Chubb acknowledged that Chubb does regularly write motor vehicle liability policies in Ontario. Chubb is not a "non-motor vehicle liability insurer" in the broad sense.

[35] The policy that Chubb offered to Ms. Singh in this case was not a motor vehicle liability policy as it did not provide liability coverage. However, it is also apparent that Pardu J.A. does not use the term "non-motor vehicle liability insurer" in the narrow sense to denote an insurer who, as a matter of fact, has not issued a motor vehicle liability policy that provides coverage to the applicant. To apply this narrow sense of the term would effectively overturn existing case law under the Regulation. Instead, Pardu J.A. avoids overruling the earlier case law by suggesting that the Regulation will continue to apply to an insurance company that has not issued a policy to any relevant person so long as there was "purported" or "represented" coverage. On this basis, she distinguishes Danilov v. Unifund Assurance Co., [2009] O.F.S.C.D. No. 69 (Bujold), which involved a fraudulent insurance certificate, and Ontario (Minister of Finance) v. Royal & Sun Alliance Insurance Co. (January 2003, Arbitrator M. Guy Jones), which involved a long-expired certificate that covered a different vehicle. Justice Pardu's use of the term "non-motor vehicle liability insurer" does not exclude such [page171] insurers despite the fact they have not issued a relevant motor vehicle liability policy.

[36] I expect that adjudicators in future cases will struggle with determining whether an insurer is a "non-motor vehicle liability insurer". They will have difficulty reconciling the conclusion that the plain meaning of the Regulation excludes "non-motor vehicle liability insurers" with the proposition that the pay first obligation will continue to apply in cases where there is no actual coverage, but only "purported" or "represented" coverage.

[37] In the earlier cases, the rationale for applying the Regulation in cases of "purported" or "represented" coverage was that the applicant chose the insurance company based on a non-arbitrary belief that the insurance company provided coverage on the relevant vehicle. This is the crux of the nexus test. If the claimant's non-arbitrary but mistaken belief is a basis for requiring the insurance company to pay benefits in cases of "purported" or "represented" coverage, I see no reason to treat claimants differently if their non-arbitrary beliefs are based on information other than a false representation. In my view, it would be best to allow adjudicators to continue to consider whether there is some connection between the parties as set out in the familiar and established nexus test. I now turn to the application of that test.

[38] With the advantage of hindsight, it is evident that, as a matter of fact, Zurich is the motor vehicle liability insurer of Wheels 4 Rent's vehicles, and Chubb is not. However, there is no hint in the record that Ms. Singh knew anything about the relationship between Wheels 4 Rent and Zurich when she was injured in the rental car or when she applied to Chubb. The application judge reasoned that [at para. 34]:

[39] The mistaken inference that Chubb insured Wheels 4 Rent's vehicles could not be described as completely arbitrary. Justice Pardu states that "Ms. Singh's choice to send her application to Chubb was not random or arbitrary". I agree. Given the non-arbitrariness of Ms. Singh's choice of insurer, I see no reason why the result should be different than it would have been had someone falsely represented to her that Chubb was the insurer. [page172]

[40] The overriding public policy of the Regulation is to provide timely delivery of benefits to all persons injured in car accidents in Ontario, despite the inconvenience to insurance companies who must provide benefits immediately and seek reimbursement from the correct insurance company later. As Laskin J.A. said, at para. 21 of Kingsway General Insurance Co. v. Ontario (Minister of Finance), "I am inclined to agree . . . [o]nly in the most extreme cases, where the connection with the insurers is totally arbitrary should the insurer refuse to pay". In my view, that public policy would be seriously eroded by allowing an insurance company that writes motor vehicle liability policies in Ontario to argue, in a case in which the nexus test is satisfied, that it is a "non-motor vehicle liability insurer".

[41] For these reasons, I would apply the established nexus test and find that it is satisfied on the facts of this case. Consequently, I would dismiss the appeal.