December 16, 2013

SABS Update – Depends on the Definition of “Dependant”

For the week of December 16 to December 20, 2013

State Farm Insurance Companies v. Bunyan, [2013] CanLII 6670,  November 5, 2013

MVC:  September 21, 2007.   In September 2007 the Insured, a pedestrian, was struck by a truck on a highway in Alberta. He claimed statutory accidents benefits (SABS) from State Farm, his mother’s insurer, on the basis that he was a dependant.  State Farm began to pay benefits under the Ontario policy in December of 2007 and it accepted his impairments were catastrophic in 2008.

In 2013, State Farm moved for an Order that the Insured was not a dependant within the meaning of the policy.  It also sought to terminate payment of future benefits approximately 5 years post-collision.

The Court concluded the Insured was primarily dependant on his mother at the time of the collision, notwithstanding the fact he had recently moved to Alberta in search of employment.  Recognizing it is difficult to determine precisely when an adult child ceases to be dependent on  his parents and that the change from dependence to independence is a “transition” more than an “event”, the court considered the following factors:

Bank account held $0.24 in savings

Started a new job 3 weeks before the collision

Day to day expenses covered by his mother

No insurance and no valid driver’s license

Received free room and board and financial support from his mother and grandmother in the year preceding the collision

A serious and untreated alcohol problem would have prevented him from holding down a job

The analysis of “dependency” under s. 2(6) of O. Reg 403/96 of the SABS is both practical and functional.  Given the Insured’s inconsistent progress to independence, it was appropriate to analyze his level of dependency over the year prior to the collision rather than the few weeks he spent in Alberta.  He sought to become self-supporting but half of his day to day expenses were being met by his mother in the form of accommodation and food.  He did not establish the hallmarks of independence, being:  permanent accommodation, personal transportation, payment of child support and steady employment.  Issues related to alcohol contributed to continued dependence and he would have continued to move from job to job, making ends meet when he could but returning to his mother’s home when he was unable to make a “go” of it on his own.

Notwithstanding the fact the Court concluded that the Insured was a dependant , the Court held the Insurer was estopped from withholding  future payment and raising the issue of entitlement to SABS  years post collision.

Under Ontario’s Insurance Act, the Insured was a “non-occupant” for the purpose of determining his recourse to benefits. He did not have insurance of his own.   Pursuant to s. 268(2) of the Insurance Act, the Insured, as a non-occupant and dependant, applied for SABS from the priority insurer but also had recourse against the insured driver of the motor vehicle which struck him.  If State Farm took an off-coverage position, the Insured had recourse against Manitoba Public Insurance Company (MPIC), provided notice was given by the Insured within 90 days.

Based on the Supreme Court of Canada’s test for estoppel by convention, the court concluded the “shared assumption”, manifest by State Farm’s payment of benefits for many years, was that State Farm would not take a position against the Insured on the dependency issue outside a priority dispute between itself and MPIC.

If State Farm wished to deny coverage because the Insured was not a dependant, it was incumbent on State Farm notify  the Insured while a claim for SABS could be pursued against MPIC.  In the absence of a clear indication from State Farm that it would take the position that it should not be required to pay, even if MPIC was not prepared to pay, the Insured had no reason to put MPIC on notice.  The dispute was between the two insurers.

The Court found the Insured changed his legal position by not pursuing a claim against MPIC for SABS in reliance on the shared assumption.  Allowing State Farm to resile from that shared assumption 5 years later would be unjust.

IMPLICATIONS

Pursuant to O. Reg 34/10, the definition of dependency is found in section 3 (7) (b) but the wording is identical.  As more “adult children” return to the nest or retain a close tie to it, the question of financial dependency is likely to be a returning issue when determining entitlement to the SABS.

If you have questions or comments about this post, contact info@md-lawyers.ca