EDITORS NOTE: This entry was written by one of our students, Anisa Arra, and full credit should go to her.
The decision closely follows the Court of Appeal’s reasoning in State Farm v Old Republic (2015 ONCA 699) in which our own Kadey Schultz and Jason Frost successfully argued that loss transfer in a chain reaction is limited to vehicles that directly collide.
In Kingsway General v Dominion of Canada, 2017 ONSC 498, the Superior Court of Justice took another look at a chain reaction collision involving a heavy commercial vehicle. The Appellant, Kingsway, insured a commercial vehicle which rear ended a moving passenger vehicle. That vehicle subsequently struck the claimant’s vehicle insured by Dominion. The force of the second collision caused the claimant’s car to strike a stationary fourth vehicle. All vehicles were travelling in the same direction and lane on Gardiner Expressway in Toronto. The parties agreed that if all vehicles were in motion at the time of the collision, the appropriate FDR is s. 9(3). As a result of the decision in State Farm, loss transfer would not apply between Dominion and Kingsway.
The presence of the fourth stationary vehicle, in Dominion’s view, removed the accident from the purview of s. 9. The Respondent further submitted that as no other rule applied the degree of fault should be determined in accordance with the ordinary rules of law.
Kingsway argued that the Regulation had to be approached in clusters of three vehicles. Arbitrator Novick agreed with Dominion. Subsection 9(3) requires that all automobiles involved in the collision be in motion. This was not the case, and according to the ordinary rules of law the driver of the commercial vehicle was 100 percent at fault for the accident, making Kingsway responsible to reimburse Dominion for accident benefits it paid to the claimant. Kingsway appealed.
On appeal, the case turned on the definition of the words “all automobiles” in s. 9(3). Following State Farm, Justice Charney applied a standard of correctness to the arbitrator’s decision for the appeal dealt exclusively with a pure issue of law.
O. Reg. 668 provides that s. 9 applies with respect to an incident involving three or more automobiles travelling in the same direction and lane, nicknamed a “chain reaction” in the Regulation. Subsection 9(3) deals with fault determination where “all automobiles in the incident are in motion and automobile ‘A’ is the leading vehicle… and ‘C’ is the third vehicle.”
In State Farm, after a thorough review of the FDRs, the appellate court interpreted the word “incident” to refer to a collision identified in the particular sub-clause and not the entire chain reaction collision. This decision effectively “broke” the chain into the constituting collisions permitting loss transfer only in circumstances of direct impact with a heavy commercial vehicle. So, where s. 9 applies, no determination of liability is to be made between vehicles that do not directly collide. In this sense, the ONCA rejected “leapfrogging” in collisions under s. 9.
Justice Charney found that the following three reasons advanced by the Court of Appeal in interpreting s. 9 were most relevant in the dispute at bar. First, Arbitrator Novick’s interpretation could lead to the absurd result of indemnifying the insurer of vehicle “C” by 150 percent. Second, s. 9(2) directs that the degree of fault for each collision between two automobiles be determined “without any reference to any related collisions.” The court commented that it made no sense the degree of fault between vehicle A and vehicle C would depend on whether a fourth vehicle Z was in motion when it was hit by vehicle A. In this vein, Justice Charney added that “it is unlikely that the FDRs were deliberately drafted to effect such a result.” Third, the ONCA was further guided in its interpretation of s. 9 by analogy with the text of s. 11(2), a rule dealing with “pile-up” collisions. In determining fault, s. 11(2) refers to “each collision between two vehicles” and not the entire pile-up.
In conclusion, the court held that s. 9 determines fault, and subsequently indemnification pursuant to s. 275(2) of the Insurance Act, only as between two vehicles that directly collide. As a result, the presence of a fourth stationary vehicle cannot disturb the Court of Appeal’s analysis and voiced policy rationales in interpreting ss. 9(3) and 9(4). The court commented that to some this conclusion might appear arbitrary but such is the nature of the FDRs which, in the words of the Court of Appeal in State Farm, are intended to “spread the load among insurers in a gross and somewhat arbitrary fashion” and provide and “expedient and summary method” of reimbursement.
Kingsway v Dominion keeps the chain reaction analysis closely aligned with State Farm. The decision upholds the status quo and refuses to complicate matters between insurers in loss transfer disputes. The word “all” in s. 9(3) only refers to vehicles A, B and C as described and depicted in the regulation. Ergo, the commercial vehicles involved will not be exposed to potential unlimited liability because a fourth or sixth vehicle farther down the chain was stopped.