Automobile insurance is compulsory in Ontario. However, municipalities and large corporations have the financial means to arrange private contracts with their insurers that allow them to handle any claims, including accident benefits claims, that arise as a result of incidents involving their vehicles. The practical result is that these entities are essentially self-insured, despite not being “insurers”. The City of Toronto is one such entity.

Following two separate motor vehicle accidents involving heavy commercial vehicle owned by the City of Toronto, both Wawanesa Mutual Insurance Company and Certas Direct Insurance sought indemnification for accident benefits payments made from ACE INA Insurance pursuant to the loss transfer provisions outlined in s. 275 of the Insurance Act. ACE had issued a policy of auto insurance to the City covering the involved vehicles, however, there was a private contract (claims handling agreement) between ACE and the City, whereby the City was essentially self-insured and handled all accident benefits claims arising under the policy.

ACE refused to indemnify both Wawanesa and Certas and, as a result, private arbitrations were commenced. ACE’s argument was that it should not be subject to loss transfer as it was actually the City who has to handle these claims. ACE also relied on St. Paul v. Intact, wherein the arbitrator found that an insurer who never pays accident benefits, because the claim is being handled and paid by another self-insured entity pursuant to a private contract, is not entitled to indemnification because the accident benefits must be “paid by it” ie. actually paid by the insurer. ACE argued that it would be unfair to subject ACE and/or the City to loss transfer, but not allow it to claim loss transfer in the “mirror image” situation.

This matter went to hearings before both Arbitrators Samworth and Bialkowski. Both arbitrators released decisions in December 2016 finding that ACE was required to indemnify Wawanesa (per Samworth) and Certas (per Bialkowski). ACE appealed both of these decisions.

The joint appeal hearing proceeded before Justice Monahan on February 14, 2018. Justice Monahan dismissed the appeals and stated that the underlying decisions of both arbitrators were not only reasonable, they were also correct. He identified three criteria that must be met for loss transfer to apply: (i) there must be a first party insurer responsible for payment of benefits; (ii) there must be a second party insurer, such as a heavy commercial vehicle insurer as in these cases; and (iii) the first party insurer must have paid accident benefits under a policy that did not insure a heavy commercial vehicle. As he found that all three conditions were met in this case, he concluded that it was plain and obvious that loss transfer applied. He rejected ACE’s unfairness argument on the basis that ACE’s positon was inconsistent with the loss transfer scheme, which was both clearly worded and well understood. He also agreed with Arbitrator Samworth’s comments that the interpretation urged by ACE was both “foolish and pointless”.

This decision confirms the well-known principles of loss transfer and that private contracts between heavy commercial insurers and self-insured entities do not prevent other insurers from seeking indemnification under the loss transfer provisions.

Please contact me by email if you would like a copy of the handwritten endorsement of Justice Monahan.


  • Julianne Brimfield

    Born and raised in Sydney, Australia, Julianne (known around the office as Jules) left the Outback and her Vegemite to finish her legal studies in New Brunswick. Don’t let her bright smile fool you: like most native Australian species, Jules is lethal.