Gordyukova v. Certas Direct Insurance Company, 2012 ONCA 563

On August 30, 2012, the Ontario Court of Appeal released the long awaited decision of Gordyukova v. Certas Direct Insurance Company. At issue in the case is the interpretation of the limitation period set out in section 281.1(1) of the Insurance Act, R.S.O. 1990, C.1-8, as amended.

On November 9, 2001, the claimant, Gordyukova, was involved in a motor vehicle accident. She sought statutory accident benefits from her insurer, Dominion of Canada General Insurance Company ("Dominion"). After an unsuccessful FSCO mediation regarding her entitlement to medical benefits, she issued a Statement of Claim on September 15, 2002 seeking damages and a declaration that she was entitled to continued accident benefits.

On October 28, 2005, Dominion advised Gordyukova that she had reached the limits of the non-catastrophic medical and rehabilitation benefits. Gordyukova applied for a determination of catastrophic impairment, which was denied. The issue of whether Goryukova met the definition of "catastrophic impairment" failed at a FSCO mediation and arbitration was applied for on November 28, 2008.

Certas Direct Insurance Company ("Certas") was found to be the priority insurer and was added as a party to both the arbitration and court action. On July 9, 2010, Certas brought a motion within the arbitration proceedings seeking to stay the arbitration on the grounds that the catastrophic impairment determination should be added to the existing court action. On July 30, 2010, a FSCO arbitrator held that both proceedings could not continue as there were issues common to both the arbitration and court action, and allowing the separate proceedings to both go forward created a risk of inconsistent findings. However, the arbitrator gave the claimant a choice of which proceeding she would discontinue.

Gordyukova gave notice that she wanted to discontinue the court action and proceed with arbitration of all issues. Certas then brought a further motion claiming that the arbitration was time-barred. The same FSCO arbitrator allowed Gordyukova to add all the issues in the court action to the arbitration proceeding. Certas appealed this decision to the Director's Delegate on the basis that a Claimant should not be allowed to "re-elect the mode of proceeding from the Superior Court to a FSCO arbitration some eight years after having commenced the court action" and relied upon the fact that section 281.1(1) of the Insurance Act provides that an arbitration or court action must be commenced within two years. The Delegate allowed Certas' appeal and stayed the arbitration proceeding, reasoning that while the claimant has the choice between forums, once the two year limitation period expires the claimant cannot move the matter from one forum to the other.

Gordyukova sought judicial review and the Divisional Court found the Delegate's decision to be unreasonable and set it aside. Certas appealed to the Court of Appeal.

Court of Appeal Ruling

The Court of Appeal emphasized that the case is about the interpretation of section 281.1(1) of the Insurance Act, which reads:

A mediation proceeding or evaluation under section 280 or 280.1 or a court proceeding or arbitration under section 281 shall be commenced within two years after the insurer's refusal to pay the benefit claimed. (emphasis in original)

The Court agreed with the Delegate, in that the use of the word "or" to separate each option and the phrase "shall be commenced", meant that any one of the available options must be pursued within the two year limit. The Court emphasized that the standard of review was reasonableness, and they found that the Delegate was therefore allowed "a margin of appreciation in his decision-making" and his interpretation of section 281.1(1) is owed deference. The Court agreed with the Delegate that if claimants were permitted to change forums after the limitation period had expired that this would lead to wasted court dates, unnecessary delay, and "a good deal of wasted effort" and costs.

It was acknowledged by all parties that the claimant should be permitted the choice of forum. It was further acknowledged that a claimant could choose to have some issues determined by a court and others by arbitration. However, the Court of Appeal held that "what an insured cannot do is change forums after the expiry of the limitation period."

The Court noted where a motion to stay an arbitration is commenced to avoid conflicting findings or duplications, the arbitrator must consider various factors, including whether or not the court action would be "broad enough to include the benefits claimed in the arbitration proceeding" and whether or not there "is no obvious impediment to adding the issues to the court action." The Court agreed with the Delegate that contemplation of any limitations period issues as part of the stay motion is required to avoid putting the claimant into an "impossible position." In this particular case, the Delegate and Court of Appeal found that Gordyukova was not put in an "impossible position" because her catastrophic impairment claim did not have to be abandoned, as it would be decided as a part of the pending Court action.

What are the Implications?

While the Court of Appeal ruled in the insurer's favour, the ruling is of mixed use to insurer's going forward. On one hand, the Court has acknowledged and further emphasized the right of the claimant to "forum shop" and to unilaterally select whichever forum he or she feels is most favourable. On the other hand, the Court has precluded a claimant from re-electing and changing forums after the limitation period expires.

Finally, while the Court has precluded re-elections and forum changing after the expiry of the limitation period, this ruling does not speak to re-election before the expiry of the two year period. Additionally, while section 281.1(2) of the Insurance Act establishes a 90 day window in which a claimant can apply for arbitration after receipt of the mediation report indicating a failed mediation, this still leaves open the possibility that claimants could initially elect for arbitration in this 90 day period and simply discontinue an arbitration proceeding and issue a Statement of Claim at a later date. In keeping with this theory, the Divisional Court's decision specifically noted this as an option for Gordyukova.

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