First auto insurer to receive claim pays, even if the policy expired before the accident

An injured claimant who learned the driver who hit him had a policy with an auto insurer — even though that policy was expired — is enough to make him eligible to receive benefits under dispute resolution rules in Ontario’s Statutory Accident Benefits Schedule (SABS).

The insurer, Coachman Insurance Company, argued in a reconsideration motion that the Ontario Licence Appeal Tribunal (LAT) only had the jurisdiction to determine the claimant’s entitlement to accident benefits. But since the driver’s insurance policy with Coachman had expired months before the accident, the claimant was not entitled to benefits.

Also, Coachman argued, the LAT does not have the authority to settle priority disputes between auto insurers, which the LAT decision to grant benefits effectively did.

However, in its decision on reconsideration, the LAT found it did not find in favour of the claimant on the basis of entitlement, nor did it decide the priority dispute. It simply upheld the SABS, which states the first auto insurer to receive a claim for benefits pays, as long as there is some kind of connection, or ‘nexus,’ between the claimant and the insurer. Any priority disputes are then settled later.

“Section 2 of [the SABS Regulation] is critically important in the timely delivery of benefits to victims of car accidents,” writes LAT Vice-Chair Craig Mazerolle in his reconsideration decision, released Jan. 22. “The principle that underlies section 2 is that the first insurer to receive an application for benefits must pay now and dispute later.

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“The rationale for this principle is obvious: persons injured in car accidents should receive statutorily mandated benefits promptly; they should not be prejudiced by being caught in the middle of a dispute between insurers over who should pay, or as in this case, by an insurer’s claim that no policy of insurance existed at the time.

“Insurers cannot avoid their obligation under section 2 by claiming that another insurer should pay or that an insurance policy was cancelled shortly before the accident. If they could deny an application for accident benefits on either of these grounds, section 2 would be rendered meaningless.

“Thus, arbitrators and the courts have developed a nexus test for triggering an insurer’s obligation under section 2. As long as there is some nexus – some connection – between the insurer receiving an application for benefits and the insured, the insurer must pay pending the determination of its obligation to do so.”

Claimant’s connection to Coachman

A pedestrian, Conrad F.R. Wilson, was injured when he was struck by a driver in 2022.

The Motor Vehicle Accident Report stated the driver was insured by Coachman, although this insurance policy had in fact expired several months before the accident.

Wilson filed an Application for Accident Benefits (OCF-1) with Coachman several weeks after the accident. Coachman denied the claim based on the driver’s invalid insurance policy.

Wilson then filed a second OCF-1 with the Motor Vehicle Accident Claims Fund (MVACF). But MVACF declined to consider the claim because Wilson had submitted his first OCF-1 with Coachman. In a March 22, 2022, email to Wilson, MVACF said the first insurer to receive the OCF-1 must pay benefits, pending a resolution of the priority dispute.

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LAT found there was a connection, or ‘nexus,’ between Wilson and Coachman, since Wilson had obtained information that Coachman insured the driver who hit him. Whether or not the information proved to be inaccurate did not matter: Wilson was not obligated to find this out, the LAT ruled.

Since Wilson filed his first OCF-1 with Coachman, Coachman was obliged to pay first, and resolve the priority dispute with MVACF later, the LAT ruled.

Coachman appealed, but on reconsideration, the LAT upheld its decision because the legal authorities upon which Coachman relied were not analogous to the facts in this case.   

David Gambrill

David has twice served as Canadian Underwriter’s senior editor, both from 2005 to 2012, and again from 2017 to the present.