Regulation limits application of unjust enrichment doctrine in priority dispute, ruling says
The Ontario Court of Appeal has ruled that a higher-priority insurer had no obligation to reimburse a lower-priority insurer for its pre-arbitration expenses in a case involving a priority dispute over which automobile insurer should pay Statutory Accident Benefits (SABs).
In Echelon General Insurance Company v. Unifund Assurance, 2025 ONCA 324, the claimant was riding as a passenger in a vehicle when she suffered injury in an accident in July 2012. The woman filed a claim for benefits the next month.
The appellant, Unifund Assurance, was the automobile insurer of the claimant’s father. The respondent, Echelon General Insurance Company, insured the vehicle the claimant was riding during the motor vehicle accident.
Echelon believed that Unifund had higher priority under s. 268 of Ontario’s Insurance Act, 1990, which governed the priority scheme for deciding which insurer should pay SABs to motor vehicle accident victims.
However, s. 2.1(6) of Regulation 283 required Echelon to pay the claimant’s SABs until a determination of the issue of which insurer had higher priority. Echelon complied with its obligation under this provision.
Echelon served Unifund a notice of dispute. Echelon alleged that the claimant was her father’s dependent, which would bring her claim under his automobile insurance policy and make Unifund the priority insurer.
In July 2018, an arbitrator agreed that Unifund was the priority insurer and ordered it to reimburse Echelon for the SABs it had paid to the claimant and its costs in connection with the arbitration.
The parties disagreed over whether Unifund should also reimburse Echelon for its expenses of over $100,000 – including independent adjusting and mediation fees, legal costs, and disbursements – in defending and adjusting the SABs claim before the arbitral decision determined Unifund’s responsibility for the claim.
In December 2019, the arbitrator made a supplemental decision denying Echelon’s claim for Unifund to reimburse its pre-arbitration expenses.
An appeal judge of the Ontario Superior Court of Justice allowed Echelon’s appeal. The judge determined that the doctrine of unjust enrichment entitled Echelon to reimbursement for reasonable expenses incurred for Unifund’s ultimate benefit. Unifund appealed the Superior Court’s decision.
The Court of Appeal for Ontario allowed Unifund’s appeal, set aside the judge’s expense reimbursement order in Echelon’s favour, and restored the arbitral decision finding that Unifund was not obliged to reimburse Echelon for its pre-arbitration expenses.
The appeal court first discussed the applicable regulatory provisions. Under Regulation 283, SABs claimants had to apply to a single insurer, while insurers had to accept any SABs applications received and begin paying benefits to the claimants until the resolution of any priority disputes.
Section 7 of the regulation imposed arbitration on insurers who could not agree on which of them should pay benefits. Deflection would occur if an insurer receiving a SABs application failed to meet its obligation to pay the claimant pending the priority dispute’s resolution.
Under s. 2.1(7) of the regulation, an arbitrator could sanction an insurer improperly deflecting a SABs claim by requiring it to reimburse the other insurer for any legal fees, adjuster’s fees, administrative costs, and disbursements that the other insurer reasonably incurred due to the deflection.
The appeal court noted that neither the Insurance Act nor Regulation 283 contained any other provision explicitly allowing arbitrators to order an insurer to pay another insurer’s expenses in situations other than the one contemplated by s. 2.1(7).
The appeal court cited Allstate Insurance Company of Canada v. Motor Vehicle Accident Claims Fund, 2025 ONCA 61. In that case, the Ontario Court of Appeal held that:
In the present case, the appeal court concluded that the Lieutenant Governor in Council intentionally limited expense reimbursements to deflection cases falling under s. 2.1(7) to help reduce the length and cost of priority arbitrations.
In reaching this conclusion, the appeal court disagreed with the judge’s interpretation of Regulation 283 and supported the arbitrator’s interpretation.
“If the Lieutenant Governor in Council had been trying to implement the competing policy objective that the appeal judge found “preferable” – that is, letting lower-priority insurers routinely recoup their pre-arbitration expenses, in order to remove higher-priority insurers’ incentive to delay taking responsibility for SABs claims – one would again expect the Lieutenant Governor in Council to have gone about this directly, by making express provision in the regulation for arbitrators to make expense reimbursement orders even when there has been no improper deflection,” wrote Justice Jonathan Dawe for the appeal court.
