Ontario Superior Court affirms arbitrator's ruling on insurers' duty in claims management

The case arose from a car accident involving a cement truck and a private vehicle

Ontario Superior Court affirms arbitrator's ruling on insurers' duty in claims management

The Ontario Superior Court of Justice upheld an arbitrator’s decision in an insurance dispute involving the insurers’ obligation to manage claims reasonably and in good faith under Ontario’s no-fault automobile insurance scheme.

The dispute in Certas Home and Auto Insurance v. Intact Insurance, 2024 ONSC 1122 arose from a motor vehicle accident involving Sarah Lenssen, who was insured by Certas Home and Auto Insurance, and a cement truck insured by Intact Insurance.

Lenssen sustained injuries, and Certas, adhering to the Insurance Act, paid her statutory accident benefits (SABs). Years later, seeking indemnification under the loss transfer scheme of the Insurance Act, Certas claimed reimbursement from Intact. Intact, alleging mismanagement of Lenssen's SABs claim by Certas, refused to reimburse $392,919.94 in benefits paid out.

The loss transfer dispute failed to find a resolution between the insurers. Consequently, it was escalated to arbitration under the Arbitration Act. In her decision, the arbitrator mandated Intact to reimburse Certas a portion of the claimed amount, specifically $32,000 regarding Income Replacement Benefits, finding no other reimbursements necessary.

Certas challenged this arbitration decision, leading to a review by the Ontario Superior Court of Justice. In its deliberation, the court examined the management of Lenssen’s SABs claim, highlighting the rigorous expectations for insurers to adjust claims reasonably. It pointed out Certas' missteps in handling the claim, especially in following through with their rehabilitation plan for Lenssen, who had not returned to work post-accident and had undergone extensive treatments and assessments.

The court noted Certas’ failure to reassess Lenssen's entitlement to benefits following her completion of a General Educational Development (GED) program and additional computer skills training, a plan Certas itself had set. Despite receiving reports in 2015 suggesting Lenssen might be capable of returning to work, Certas continued the benefits without the due reassessment, effectively "dropping the ball" in managing her claim.

The arbitrator's decision to limit Intact's indemnification to Certas was based on this perceived gross mishandling of the claim. The court, affirming the arbitrator's findings, emphasized that decisions on managing SAB claims must be based on the evidence available at the time, cautioning against retrospective judgment based on later developments.

In its decision, the court highlighted insurers' responsibilities in administering SAB claims and the potential implications of mismanagement. It also underscored the delicate balance between providing for the insured's needs and adhering to procedural diligence required by the Insurance Act.

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