June 16, 2014

SABS Update – Not All Insurers Are Created Equal: Court of Appeal Divided in Nexus Case

For The Week Of June 16 to June 20, 2014

Zurich Insurance Company v. Chubb Insurance Company of Canada, 2014 ONCA 400

On January 27, 2014, the Ontario Court of Appeal heard the appeal from an application decision involving the pay first and dispute later rules governing statutory accident benefits (SABS) insurers.

The regulatory regime requires the first insurer who receives an application for benefits to pay them provided that there is some non-random nexus or connection between the claimant and the insurer. If the insurer takes the position that another insurer is responsible for payment of those benefits, it must nonetheless pay them, but give notice to the other insurer and have the dispute as between insurers. The purpose of the regime is to reduce delays in payment of benefits.

In this case, the Plaintiff rented a vehicle and was subsequently involved in a single motor vehicle accident. The rental vehicle was insured pursuant to a motor vehicle liability policy issued by Zurich Insurance Company (“Zurich”). At the time of rental, the Plaintiff was offered optional insurance for death and dismemberment unrelated to a motor vehicle accident. The optional policy was offered by Chubb Insurance Company of Canada (“Chubb”) and was declined by the Plaintiff.

Following the accident, the Plaintiff found a pamphlet for the optional Chubb policy and submitted her claim for SABS to Chubb. Chubb refused to pay. Zurich ultimately began payment of the SABS and disputed its priority.

The dispute first went before an arbitrator who decided that no sufficient nexus existed between Chubb and the rental company or Plaintiff because Chubb had never issued a motor vehicle liability policy to either. The arbitrator’s decision was overturned on appeal. The application Judge found that Chubb had provided a motor vehicle liability policy and that there was a sufficient nexus between Chubb and the Plaintiff.

The sole issue before the Court of Appeal is whether an insurer of any kind or only a motor vehicle liability insurer is obliged to pay first and dispute later. In a split decision, the Court of Appeal concluded that despite the nexus test being met, Chubb was not a motor vehicle liability insurer and would not be required to respond.

The majority rationalized that a non-motor vehicle liability insurer may lack expertise in adjusting claims for SABS. Conversely, the dissent suggested that it would offend public policy to allow insurance companies that write motor vehicle liability policies to argue, in a case in which the nexus test is satisfied, that they are not motor vehicle liability insurers.


This decision places the onus on consumers to apply to an appropriate motor vehicle liability insurer. If a consumer applies to an insurer that is not a motor vehicle liability insurer, he or she may be required to re-apply and may be face with a delay in payment, which is precisely the problem that the pay first and dispute later regime was introduced to avoid.

While the rules are clear for now, the dissent offers some hope that this issue will be decided differently should the Court of Appeal be asked to address it in the future.

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