Court says insurer that failed to comply with notice obligations bears full responsibility
The Ontario Court of Appeal has restored an arbitration award requiring one insurer to bear full responsibility for statutory accident benefits after failing to comply with obligations under Ontario’s “pay now, dispute later” insurance regime.
In Chubb Insurance Company of Canada v. Zurich Insurance Company, 2026 ONCA 302, the court held that the application judge erred by treating the two insurers as having equal priority under the Insurance Act.
The Court of Appeal allowed Zurich Insurance Company’s appeal. It reinstated an arbitrator’s decision requiring Chubb Insurance Company of Canada to reimburse Zurich for nearly $1 million in accident benefits paid to the insured, as well as assume permanent responsibility for ongoing benefits.
The dispute arose from a 2006 single-vehicle accident involving the insured's rental car. The vehicle was insured pursuant to a motor vehicle policy issued by Zurich. Chubb also issued a policy to the rental company that provided optional accidental and dismemberment insurance. The insured did not purchase Chubb’s optional coverage.
After developing injuries following the accident, the insured applied to Chubb for statutory accident benefits because of the insurance information observed at the rental company’s location. Chubb denied the application, stating that the policy in question was not a personal automobile policy and that statutory accident benefits did not apply.
More than 18 months later, Chubb advised the insured’s counsel that Zurich was the rental company’s automobile insurer. Zurich subsequently began paying benefits on a without-prejudice basis while pursuing a priority dispute against Chubb.
The matter proceeded through multiple levels of adjudication, including a prior appeal to the Supreme Court of Canada. In 2015, the Supreme Court held that Chubb qualified as an “insurer” for Disputes Between Insurers, O. Reg. 283/95 (Regulation) because there was a sufficient nexus between the insured and Chubb, triggering Chubb’s obligations under the Regulation.
A second arbitration later determined that Chubb had breached its obligations under sections 2 and 3 of the Regulation by failing to pay benefits promptly and by failing to notify Zurich within the required 90-day period that it disputed responsibility for the claim. The arbitrator concluded that Chubb should permanently bear responsibility for the insured’s benefits because it failed to investigate the claim or identify the correct insurer despite having the ability to do so.
The Superior Court overturned that ruling, holding that Chubb and Zurich should share responsibility equally because Chubb’s breaches effectively placed it on equal footing with Zurich under the Insurance Act’s priority scheme.
In a 34-page decision, the Ontario Court of Appeal rejected that approach. The court held that the purpose of the Regulation is to ensure injured claimants receive timely benefits and are not caught in disputes between insurers. It found that Chubb’s conduct undermined that objective by leaving the insured without benefits for an extended period while also depriving Zurich of the opportunity to investigate and manage the claim promptly.
The appeal court concluded that the arbitrator reasonably exercised discretion in requiring Chubb to pay the insured’s benefits permanently and restored the arbitration award in full.
