Section 275 of the Insurance Act, R.S.O. 1990, c. I–8, provides that when an automobile insurer has paid no-fault benefits to its own insured, the company is entitled to recover those benefits from the insurer of the at-fault driver.  Indemnification for the no-fault benefits is to be apportioned between the insurers based on the respective degree of fault of each insurer’s driver.  Section 275(4) states that if the insurers cannot agree on indemnification, the dispute is to be resolved by means of arbitration under the Arbitrations Act, S.O. 1991, c. 17.

In a case that was recently argued before the Court of Appeal, the insurer for the at-fault driver resisted arbitration on the grounds that its policy was not issued in Ontario, arguing that the loss transfer scheme established by section 275 of the Ontario Insurance Act was therefore inapplicable.

An Ontario resident was injured in a car accident in North Carolina.  Primmum Insurance Company, an Ontario insurer, paid statutory accident benefits under its standard Ontario auto policy.  The at-fault driver was insured under a policy issued by Allstate Insurance in North Carolina.

When Allstate refused to participate in arbitration, Primmum brought an application to the Superior Court.  The application Judge concluded that the Ontario loss transfer scheme did apply to Allstate, but on appeal, Allstate argued that section 275 of the Insurance Act cannot apply to insurance contracts between parties who are not resident in Ontario respecting losses that occur outside of Ontario.

The Court of Appeal concluded that the Ontario loss transfer scheme applies to Ontario insurers, regardless of where the policy was issued or where the loss takes place.  Since Allstate is an Ontario insurer, it was required to arbitrate Primmum’s claim, and the Allstate appeal was dismissed.

Link: Primmum Insurance Company v. Allstate Insurance Company, 2010 ONCA 756

Richard Hayles

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