The Supreme Court of Canada recently granted leave to appeal in a motor vehicle insurance case addressing the “pay first and dispute later” rules governing priority disputes for Statutory Accident Benefits (“SABs”) claims.

In Zurich Insurance Company v. Chubb Insurance Company of Canada, the claimant had rented a vehicle from “Wheels 4 Rent” and was then involved in a single-vehicle motor vehicle accident. Although she had declined the opportunity to purchase optional death or dismemberment insurance offered through Chubb Insurance Company of Canada (“Chubb”), she submitted her SABs claim to Chubb. Chubb refused to pay on the basis that the optional policy was not a motor vehicle policy; rather, it was a commercial policy. Ultimately, Zurich Insurance Company (“Zurich”), the insurer of the involved vehicle, paid the SABs claim on a without prejudice basis, and took the position that Chubb ought to have paid as it was the first insurer to receive the application. A dispute was submitted for arbitration.

Ontario Regulation 283/95, Disputes Between Insurers, requires that the first insurer who receives an application for SABs is responsible for adjusting  the claim and paying any necessary benefits, provided that there is some nexus or connection between the claimant and the insurer. If the first insurer takes the position that another insurer should be responsible, the first insurer must still respond, but may follow the statutory scheme of arbitration to determine which insurer should pay SABs.

At first instance, the arbitrator found for Chubb, holding that there was no nexus between the claimant and Chubb on the basis that Chubb had never issued a motor vehicle liability policy to either Wheels 4 Rent
or the claimant.

Zurich successfully appealed the arbitrator’s ruling. The Superior Court of Justice held that the Chubb policy was in fact a motor vehicle liability policy, as defined by the Insurance Act, intended for car rental companies and their customers. Further, although the connection between Chubb and the claimant was remote given  that the claimant had declined the Chubb policy, the connection was not arbitrary.

The Court of Appeal allowed Chubb’s appeal, the majority holding that Chubb was not obligated to respond. Chubb was not a “motor vehicle liability insurer” in that no element of the Chubb policy insured against liability to others arising out of property damage or injury caused by an automobile or the operation of  an automobile. In addition, the Chubb policy did not provide for payment of SABs and did not provide for a statutory minimum amount of liability coverage. Accordingly, although the claimant’s choice to send her SABs application to Chubb was based on the optional coverage provided to Wheels 4 Rent customers, and was therefore not random or arbitrary, Chubb was not required to respond.

Leave to appeal this decision to the Supreme Court of Canada has now been granted. Zurich Insurance Company of Canada v. Chubb Insurance Company, 2014 Can LII 70972, 2014 ONCA 400, 2012 ONSC 6363.


George R. Wray


Insurance and Tort Liability