It is difficult to overturn an arbitrator’s decision

Appeal from arbitrators decision regarding waiver and apportionment of fault dismissed. The standard of review was reasonableness and the arbitrator applied the correct legal principles. His finding was reasonable given the evidence before him and it was entitled to deference.

Motors Insurance Co. v. Old Republic Insurance Co., [2009] O.J. No. 3005, June 24, 2009, Ontario Superior Court of Justice, T.P. Herman J.

On March 11, 2005, a Pepsi vehicle, insured by Old Republic, was hit by a UPS truck, insured by Motors Insurance Corporation. On June 22, 2005, Motors provided Old Republic with a Notification of Loss Transfer, indicating its intention to pursue indemnification pursuant to the loss transfer provisions. Old Republic denied the loss transfer. On November 25, 2005, Motors forwarded Old Republic a Request for Indemnification. Old Republic again denied the loss transfer claim. As a result, Motors served Old Republic with a Notice to Participate and Demand for Arbitration. On March 23, 2006, Motors sent a second Request for Indemnification to Old Republic. By letter dated April 19, 2006, Old Republic acknowledged that it would accept Motor’s Loss Transfer Indemnity Request from November 20, 2005 and stated it would respond shortly to the second request. Shortly thereafter Old Republic issued payment for the first Loss of Transfer. Then, on July 13, 2006, Old Republic responded to the second request for indemnification by denying the claim and requesting reimbursement for the funds paid for the first Loss of Transfer Request.

The arbitrator found that Old Republic had waived its right to dispute its insured’s fault for the accident by paying the first Loss of Transfer Request. It also found that it was estopped from disputing responsibility. The arbitrator did not accept Old Republic’s position that it changed its mind after having completed its investigation into the accident. Instead, he found that Old Republic had changed its mind because another person reviewed the file and obtained a new opinion. The arbitrator therefore distinguished the case from Gan General Insurance Company v. State Farm Mutual Automobile Insurance Company, [1999] O.J. No. 447, where the court found that money paid for a loss transfer claim had been paid in error and should be repaid. The arbitrator found that there had been no mistake in this case. Instead, he found that Old Republic had made a conscious decision to pay, after an investigation and receiving a legal opinion, and in order to avoid arbitration expenses. With regard to estoppel, the arbitrator applied the test from Ryan v. Moore, [2005] 2 S.C.R. 53 and found that the elements of estoppel were met.

The arbitrator also found that Old Republic’s insured was 20% at fault for the accident due to the fact that the driver of the Pepsi truck had misjudged the nature of the collision and was on his cell phone at the time.

The court, in reviewing the arbitrator’s decision, used the test set out by the Supreme Court of Canada in Dunsmuir v. New Brunswick, [2008] S.C.J. No. 9, and found the standard of review to be reasonableness. It then found that the arbitrator had applied the correct legal principles with regard to waiver and had come to the correct conclusion based on the evidence before him. However, the court found that the evidence was not clear that Motors relied on the letter and payment to its detriment. Therefore it found that the arbitrator’s decision with respect to estoppel was not reasonable, given the lack of evidence of detrimental reliance.

Lastly, the court found that the arbitrator’s conclusion as to the apportionment of fault was a reasonable one to reach and should be accorded deference.

This case was orginally summarized by Natasha D. Morley and edited by David W. Pilley.

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