Intact Insurance Company v. Allstate Insurance Company of Canada, 2016 ONCA 609

In this case, Ms. Paula Chartrand had commenced a long-distance relationship with Mr. Kyle Houghton. As the relationship progressed, Ms. Chartrand decided to leave her husband and move from Sudbury, Ontario with her two daughters to Sarnia, Ontario to live with Mr. Houghton. The Claimants and Mr. Houghton both acknowledged that this move was intended to be permanent. Mr. Houghton was responsible for the majority of the Claimants’ day-to-day expenses, as Ms. Chartrand had not yet secured employment. Approximately seven weeks after having made the move, Ms. Chartrand and her two daughters (the “Claimants”) were being driven by a friend, when they were involved in a motor vehicle accident in which Ms. Chartrand suffered minor injuries, but her daughters suffered catastrophic injuries.

After the accident, the Claimants applied for and received accident benefits from Intact, the insurer of the car that they were passengers in at the time of the accident. Intact took the position that Allstate, the insurer for two of Mr. Houghton’s vehicles, was instead obligated to pay the benefits on the grounds that the Claimants were financially dependent on Mr. Houghton at the time of the accident, and were therefore also insureds under the applicable policy. The matter went to arbitration where it was held that the Claimants were not principally dependant for financial support on Mr. Houghton at the time for the accident, and that Intact was therefore responsible for payment of the accident benefits. The decision was appealed to the Superior Court of Justice, where Raikes J. held that the arbitrator had committed an error of law and held that Allstate was responsible for the accident benefits. Allstate appealed.

On appeal, two issues were raised: i) what standard of review applies to the review for the arbitrator’s decision; and ii) whether Raikes J. erred by setting aside the arbitrator’s decision.

In his decision, LaForme J.A. held that the appeal should be dismissed, stating that while Raikes J. erred in reviewing the arbitrator’s decision on a correctness standard instead of on a reasonableness standard, the arbitrator’s decision itself was unreasonable, and should not be restored.

In reviewing the arbitrator’s decision, the Court noted that the arbitrator considered the year-long period prior to the accident in determining whether the Claimants were dependant on Mr. Houghton.  The arbitrator took this position solely because the arbitrator viewed the seven-week pre-accident period in which the Claimants lived with Mr. Houghton as inappropriate on the basis that the relationship between Ms. Chartrand and Mr. Houghton was “not one of permanence”.  He subsequently concluded that the Claimants were not financially dependent on Mr. Houghton. In his decision, LaForme J. held that this was unreasonable in that the arbitrator failed to conduct the necessary analysis, that the “permanence” requirement was incompatible with the applicable legal principles, and that the ultimate conclusion was inconsistent with the evidence provided by the parties, and “the result of indefensible speculation”.

In dismissing the appeal, LaForme J.A. held that where arbitrators and courts are asked to determine whether or not one party is dependent on another, they must sometimes fit “fluid and transitory human relations into rigid legal categories”. By creating a “permanency” test, and concluding that a shorter time frame in which to determine dependency is only appropriate where the relationship is of requisite permanence, the Court held that the arbitrator’s approach conflicted with the applicable legal principles as outlined by jurisprudence. Instead, the time period chosen in which to conduct a dependence analysis should have been “a period of time which fairly reflects the status of the parties at the time of the accident”. On the facts, the Claimants were not living with Mr. Houghton within the year-long period prior to the accident, and Ms. Chartrand had not yet commenced her relationship with him a year before the accident. Considering this, the seven-week timeframe would have reflected the true nature of the relationship at the time of the accident. During the seven-week period after the move, Mr. Houghton was responsible for almost all of the household expenses and paying for the majority of the Claimant’s needs, resulting a determination that the Claimants were indeed dependent on him. Ultimately, the period in which dependency is evaluated cannot be a one-size-fits-all period, and must be one that appropriately reflects the true nature of the individual relationship.

What the Insurer Should Know

The courts should take into account changing and fluid relationships when determining the idea of dependency.

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Mitch Kitagawa

Kate Craner