An insured cannot sue for claims, arising from a motor vehicle accident, that have been arbitrated

The Insurer was successful, in part, on its motion for summary judgment to have portions of the Insured’s claim against it dismissed.  When accident benefits arising under a motor vehicle policy have been arbitrated, all aspects of the claim subject to the arbitration are a nullity.  In this case only the claims for bad faith and attendant care were not subject to earlier arbitration and could be maintained in a civil action.

Champaigne v. Co-Operators, [2008] O.J. No. 3400, Ontario Superior Court of Justice, R.D. Gordon J., August 11, 2008

The Insured was involved in a motor vehicle accident on August 22, 2002 and subsequently submitted a claim for accident benefits to the Insurer.  Two unsuccessful mediations were held in respect of the Insured’s claim for accident benefits, after which he initiated arbitration proceedings.  The Insured appealed the arbitrator’s decision, and, before receiving a ruling on the appeal, he commenced this action against the Insurer claiming damages for loss of accident benefits, damages for breach of contract, negligence, misrepresentation, breach of fiduciary duty and allegations, which can generally be described as “bad faith” claims.

The Insurer argued that the Insured’s claims were res judicata given that he had already adjudicated his claims through arbitration proceedings, which were available to him under the Ontario Insurance Act.  The Insurer’s second argument was that certain claims made by the Insured were prohibited because they had not proceeded through mediation, as required by the Insurance Act.  In particular, the Insured had not mediated his claim for attendant care benefits.  The Insured, on the other hand, took the position that because the “bad faith” claims had not been the subject of arbitration proceedings and since his Statement of Claim asked for “damages for the loss of accident benefits”, these claims were distinct from the claims that had been considered by the arbitrator.

The Court considered the factors, which must exist for a finding of res judicata to apply, these being that the same question or issue has been decided, that the decision was judicial and final, and that the parties to the judicial decision or their privies are the same persons as the parties to the proceedings in which res judicata is raised.  The Court found that the second and third elements had been satisfied and that the only issue to be decided was whether the issues that the Insured was seeking to have litigated had been decided during the arbitration proceeding.  The Court concluded that the claims being made by the Insured in the present action for damages for loss of accident benefits were all considered and determined by the arbitrator, with the exception of his claim for attendant care benefits.  As the Insured had not engaged in mediation of this part of his claim, as required by Section 281(2) of the Insurance Act, the claim was a nullity and could not be brought against the Insurer.

With regard to the Insured’s claim against the Insurer for bad faith, the Court found that the arbitrator had not specifically considered or made any findings on the allegations of bad faith advanced by the Insured, with the exception of his determination relative to the special damages.  Accordingly, the Court concluded that the arbitrator’s decision did not decide the same issue as presented in the Insured’s “bad faith” claim in these proceedings and res judicata did not apply to this part of the Insured’s claim.

This case was originally summarized by Shanti Davies and originally edited by David W. Pilley.

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