When an accident benefits insurer receives an Application for Accident Benefits (OCF-1), their first thought should be whether they are the proper insurer to handle the claim (i.e., whether the Ontario priority scheme might make another insurer the proper benefits payor). When dealing with priority, the insurer must act quickly to investigate and place other potential insurers on notice. Failure to carry out a diligent investigation in a timely manner can be fatal to the insurer’s priority efforts, leaving it stuck with an accident benefits claim – even where it properly belongs with another insurer. This blog focuses on the time constraints on the first insurer who receives the OCF-1.
In Ontario, the priority scheme for accident benefits is dictated by section 268 of the Insurance Act, whereas the procedure for such disputes is largely governed by O. Reg. 283/95: DISPUTES BETWEEN INSURERS.
Section 2(1) of O. Reg. 283/95 states that the first insurer that receives a completed application for benefits is responsible for paying benefits to an insured person pending the resolution of any priority dispute. Section 3 states that an insurer is not permitted to dispute priority unless it gives written notice to every insurer (including the Motor Vehicle Accident Claims Fund) who it claims is required to pay the claim within 90 days of receipt of a completed OCF-1.
Section 3(2) of O. Reg 283/95 includes a limited exception where the insurer is allowed to give notice beyond 90 days. In order to benefit from the exception, both of the following must be true:
(a) 90 days was not a sufficient period of time to make a determination that another insurer or insurers is liable under section 268 of the Act; and,
(b) the insurer made the reasonable investigations necessary to determine if another insurer was liable within the 90-day period.
Where the first insurer provides notice outside the 90-day timeframe, the onus is on the first insurer to establish each of the above requirements. This has been described as a “heavy onus”.1
Therefore, when investigating priority, insurers must act quickly and carefully track their efforts in case they are unable to identify a potential insurer within the 90-day period.
The Ontario Court of Appeal has held that the insurer must adhere strictly to the 90-day timeline, which is important for the overall effectiveness of the priority scheme. In Kingsway General v. West Wawanosh, the Court made the following comments about the priority scheme:
[10] The Regulation sets out in precise and specific terms a scheme for resolving disputes between insurers. Insurers are entitled to assume and rely upon the requirement for compliance with those provisions. Insurers subject to this Regulation are sophisticated litigants who deal with these disputes on a daily basis. The scheme applies to a specific type of dispute involving a limited number of parties who find themselves regularly involved in disputes with each other. In this context, it seems to me that clarity and certainty of application are of primary concern. Insurers need to make appropriate decisions with respect to conducting investigations, establishing reserves and maintaining records. Given this regulatory setting, there is little room for creative interpretations or for carving out judicial exceptions designed to deal with the equities of particular cases.2
Given that insurance companies are considered sophisticated litigants, they are given less slack than an individual confronted by similar legal notice requirements.
“Saving Provisions” in Practice
The exceptions in Section 3(2) of O. Reg. 283/95 are commonly referred to as the “saving provisions”. While they are very helpful to an insurer who finds itself in a jam, they are difficult to apply in practice.
The true test is whether the correct information could have been obtained with reasonable investigation within the 90-day period. This will of course depend on the specific facts of each case. An insurer will face greater difficulty justifying an extension of time when it did not employ obvious or readily available tools that could have revealed the necessary information.3 This might even include making use of section 33 requests under the Statutory Accident Benefits Schedule (“SABS”).
Although the bar is high to engage the saving provisions, the first insurer is not required to prove that it was “impossible” to locate other potential insurers. The investigation does not need to be “perfect”, just “reasonable”.4 There is to be some recognition that adjusters are extremely busy handling more than one complex matter at the same time. The investigation only needs to satisfy the arbitrator that it conducted a diligent / reasonable investigation within the initial 90-days. Therefore, the arbitrator must view things from the perspective of the first insurer in the factual circumstances specific to the case.
The first insurer may be able to take advantage of the saving provisions in circumstances where the insured misled them intentionally or innocently.5 In such cases, the insurer will need to demonstrate that the misrepresentation was material to the investigation. However, this is not the end of the analysis. The test focuses on whether the insurer conducted a “reasonable investigation”. Therefore, it will be important to assess whether the first insurer had other reasonable investigation tools it could have employed to corroborate the information obtained and locate the other potential insurers for its priority dispute. It will also be a relevant consideration whether the first insurer asked the right questions when conducting its investigation. Simply because a claimant misled the insurer on one issue, does not imply that the insurer would have obtained misleading information if it asked some further questions or requested certain records.
Even though an insured’s statements may mislead the insurer, such as the information contained in the OCF-1, the insurer must not place too much emphasis on these statements. They should still investigate whenever it is possible to shift the claim based on the priority scheme.
In the case of Allstate v. Security National, the claimant submitted an OCF-1 to Allstate, as its named insured.6 The OCF-1 indicated he was 58 years’ old, separated, unemployed, receiving social assistance, and had no other insurance policies. Allstate completed a minimal initial priority investigation as it did not identify any obvious targets from the initial records. When Allstate later conducted an EUO (beyond 90 days) in relation to a clinic involved in the claim, it discovered the claimant was potentially dependent upon his sister, TD’s insured. The arbitrator held that Allstate could not benefit from the saving provisions. Even though the claimant included false information on the OCF-1 (i.e., that he was not dependent on anyone), Allstate had good reason to conduct further priority investigation from the outset based on some key indicators: the claimant had indicated he was separated, receiving social assistance, and that he was not in Allstate’s insured vehicle at the time of loss.
Best Practices
When the insurer receives an OCF-1, it should start a priority investigation as soon as possible. This is particularly important for claims of high value. Priority targets are not always obvious based on the initial application. Insurers will not typically benefit from the saving provisions where they drag their heels or conduct minimal investigation – regardless of whether the insured provided misleading information.
As a best practice, an adjuster who receives a new OCF-1 should take the following steps:
- Review Part 2 “Policy Details” to determine whether the claimant has identified any other policies. If it is incomplete, call the insured to clarify. This section should not be treated as a source of truth but as a starting point for the investigation. In our experience this section is rarely completed correctly.
- Conduct an AutoPlus search for any policies belonging to the insured.
- Obtain the police report to clarify the vehicles involved and their insurers.
- Request a statutory declaration or examination under oath to determine whether the insured might have other policies. This should be done early in the process to allow time for follow-up investigation based on the answers.
- Keep detailed notes of all steps taken to investigate priority, including any phone calls made. These notes may be critical if notice is given beyond 90 days, and the insurer needs to prove that it conducted a reasonable investigation to engage the saving provisions.
If the first insurer identifies any possible other insurers during its priority investigation, they should be placed on notice immediately. There is no cost associated with this step and virtually no downside, even if the reasons for the notice end up being wrong.
If the first notice is not given until after the 90-day period, the insurer may benefit from the saving provisions. However, it is critical to be able to demonstrate that the insurer acted quickly and made best efforts to overturn every stone in its priority investigation.
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1See, Primmum Insurance Co. v. Aviva Insurance Co. of Canada, 2005 CanLII 11975 (ON SC), para 27 and The Dominion of Canada General Insurance Company and Travelers Insurance Company v. The Personal Insurance Company of Canada (Dominion v. the Personal), (Arbitrator Ken Bialkowski, March 29, 2018), paras 46 and 53.
2Kingsway General Insurance Co. v. West Wawanosh Insurance Co., 2002 CanLII 14202 (ON CA), para. 10.
3Liberty Mutual Insurance Company v. Zurich Insurance Company, 2007 CanLII 54080 (ON SC), para 33.
4Primmum Insurance Co. v. Aviva Insurance Co. of Canada, 2005 CanLII 11975 (ON SC), para. 31 and Liberty Mutual Insurance Company v. Zurich Insurance Company, 2007 CanLII 54080 (ON SC), para 17
5Primmum Insurance Co. v. Aviva Insurance Co. of Canada, 2005 CanLII 11975 (ON SC), paras. 20-24.
6Allstate Insurance Company v. Security National Insurance Company (Arbitrator Shari Novick, October 2013).
