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Statutory Accident Benefits – S.268 Of The Insurance Act – The Pay First Dispute Later Rule

S.268 of the Insurance Act requires the insurers on accident policies to pay first and dispute later for Statutory Accident Benefits (“SABs”).  The policy behind this is to provide payment of payments when families need them and dispute later so that families do not endure unnecessary hardship should an insurer which to dispute the payment of any benefits.

The Court of Appeal was recently called in on the case of Zurich Insurance vs Chubb Insurance Company of Canada (214 O.N.C.A. 400 CA-CanLII).  The issue before the Court of Appeal was whether only “motor vehicle liability insurers” are obliged to pay SABs first and dispute later.  Ms. Singh rented a vehicle from “Wheels for Rent”. The rental vehicle was insured pursuant to a motor vehicle liability policy but contained no coverage for liability to others as a result of a motor vehicle accident. Rather, the policy provided optional death and dismemberment insurance to customers of Wheels for Rent. Ms. Singh was injured in a single car crash.  Chubb refused to pay.  Zurich began payments of SABs.  The two insurers disputed who should pay the benefits to an Arbitrator.  The Arbitrator concluded that Chubb was not a “insurer” for the purposes of the  “pay first – dispute later rule” as they were not typical motor vehicle accident insurers.  While a Judge found that Chubb was a liability insurer, the Court of Appeal said that they were not.  Accordingly, the Arbitrator’s decision not to find liable under a Statutory Accident Benefit policy regime was confirmed by the Court of Appeal in Ontario. Therefore only formal motor vehicle liability policies will attract the pay first-dispute later rule under S.268 of the Insurance Act.