Stegenga v. Economical Mutual Insurance Company, 2019 ONCA

Full Decision

Heard: April 26, 2019

Decision released: July 19, 2019

Headline: Court of Appeal closes the door on independent bad faith claims arising from an insurer’s conduct in handling a claim for accident benefits.

This decision arose on appeal of a decision by Justice Ramsey of the Superior Court.

In light of the way her accident benefits insurer administered her claim for accident benefits, Morgan Stegenga brought an action against Economical Mutual Insurance Company (Economical) alleging bad faith and claiming punitive and exemplary damages.

Economical moved to strike Ms. Stegenga’s claim on the basis that the License Appeals Tribunal (LAT) has exclusive jurisdiction to deal with accident benefits disputes, at first instance.

The Superior Court Judge held that in accordance with section 280(1) of the Insurance Act, SO 2014, c. 9, Sched. 3, s. 14., the claim fell within the LAT’s exclusive jurisdiction because it was “in respect of an insured person’s entitlement to statutory accident benefits or in respect of the amount of statutory accident benefits to which an insured person is entitled.”

The Court of Appeal in upholding the lower court’s ruling, reiterated that the amendments enacted in April of 2016, giving jurisdiction to the LAT, do not detract from the legislature’s intention that the provisions continue to constitute a complete code for the resolution of disputes in respect of an insured persons entitlement to SABs or in respect of the amount of SABs to which an insured person is entitled.

The Court of Appeal reviewed jurisprudence from the LAT and concluded that the LATs approach in considering matters that typically constitute a bad faith claim, such as unreasonable delay, are consistent with the approach taken to special awards under prior versions of the Act. Factors relevant to the fixing of a special award include the amount of benefits unreasonably withheld or delayed, the length of the delay, and any failure to respect procedural and other protections for the insured.

The Court of Appeal held, in response to the issue of the court having different powers than the LAT and being able to grant different damages, that the legislature must be taken to have armed the LAT with the remedial powers it considered appropriate to deal with improper insurer behaviour, knowing those remedial powers were different from the court’s.

The Court of Appeal maintained that the reasoning in Arsenault v. Dumfries, 2002 CanLII 23580 (ON CA), [2002] O.J. No. 4 (CA) and Mader v. South Easthope Mutual Insurance Company, 2014 ONCA 714 (CanLII), two cases where bad faith court actions brought against insurers in relation to the administration of accident benefits were dismissed due to the Financial Services Commission of Ontario’s (FSCO) exclusive jurisdiction, continue to be applicable to the new regime under the LAT.

The Court of Appeal also concluded that the legislature in enacting a cost-effective and efficient dispute resolution scheme, could not have intended that both the LAT and the court should be required to determine the same questions on a path to granting different relief. It is not the legal characterization of the claim (unreasonableness v. bath faith) but rather, the facts giving rise to the dispute that are determinative.