Ontario Superior Court rejects insurance company's reimbursement claim in snowmobile accident case

The insurer grossly mishandled its adjusting responsibility: court

Ontario Superior Court rejects insurance company's reimbursement claim in snowmobile accident case

In a recent snowmobile accident case, the Ontario Superior Court of Justice dismissed an insurance company's claim for reimbursement due to gross mishandling of adjusting responsibility.

In Wawanesa Mutual Insurance Company v. Motor Vehicle Accident Claims Fund, 2023 ONSC 4779, Jeremy Bragdon was involved in a catastrophic snowmobile accident, where he sustained injuries. Criminal charges were filed against him in connection with the accident but were later withdrawn.

Bragdon claimed insurance coverage under his mother's motor vehicle insurance policy with Wawanesa Mutual Insurance Company. Wawanesa eventually paid some benefits to Bragdon, but the insurance company discovered that the snowmobile was uninsured. As a result, Wawanesa claimed reimbursement from the Motor Vehicle Accident Claims Fund, the entity responsible for uninsured vehicles.

The Fund accepted priority of insurance coverage for Bragdon's accident benefits claim but declined to reimburse a portion of the benefits paid by Wawanesa to Bragdon. The parties agreed to proceed to arbitration.

The arbitrator partially denied reimbursement to Wawanesa, so the insurance company appealed to the Ontario Superior Court of Justice. However, the court ultimately ruled that the arbitrator applied the correct law to the facts and circumstances and, in doing so, made no palpable and overriding error.

The arbitrator found that Wawanesa failed to re-consider entitlement to benefits after Bragdon presented evidence that "reliably established the snowmobile was not insured." Wawanesa then sent letters to the Fund, demanding it assume priority for coverage because there was no available motor vehicle insurance policy.

The arbitrator also found that Wawanesa had grossly mishandled its adjusting responsibilities. The Statutory Accident Benefits (SABS) provisions stipulate that the insurer is not required to pay certain benefits when an occupant of an automobile knew or should have known that the driver was operating the automobile without the owner's consent.

The appeal court said the arbitrator correctly applied the law and the test of bad faith and gross mishandling. The arbitrator concluded that Wawanesa was grossly negligent in failing to withhold certain benefits in trust at the outset of the claim. Under the SABS, certain benefits are not payable when an automobile was being used in connection with a criminal offence at the time of the accident. Criminal charges were filed against Bragdon after the accident. The arbitrator said Wawanesa should have held in trust the amounts payable to Bragdon following his criminal charge, but it failed to do so.

The arbitrator noted that the evidence demonstrated that Wawanesa was aware of Bragdon’s repeated denial that he was criminally charged, but there were "red flags" that Bragdon had given false information about the criminal charge. Despite these red flags, Wawanesa continued to adjust and pay Bragdon full benefits.

The arbitrator concluded that Wawanesa ignored the red flags, which resulted in Bragdon receiving full benefits during the pendency of his criminal charge. The arbitrator further ruled that Wawanesa’s act contravened its responsibility to hold the subject benefits in trust following the accident.

Accordingly, the appeal court ruled that the arbitrator correctly applied the law, and no palpable and overriding error was made in his determination that Waanesa should have held in trust amounts payable to Bragdon. The court upheld the arbitrator's decision and dismissed the appeal.

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