Executive Summary: Key Legal and Evidentiary Issues

• The appeal concerned whether arbitrators can award reimbursement for pre-arbitration expenses under Ontario Regulation 283/95 in cases not involving improper deflection.

• Echelon paid statutory accident benefits (SABs) pending a priority dispute and later sought reimbursement from Unifund after being found not liable.

• The arbitrator denied Echelon’s reimbursement claim, citing the limits of the regulation, while the appeal judge allowed it based on unjust enrichment.

• The Court of Appeal held that the regulation reflects a deliberate policy limiting reimbursements to specific deflection cases under section 2.1(7).

• Equity cannot override regulatory intent in a tightly structured statutory scheme governing disputes between sophisticated insurance entities.

• The Court reinstated the arbitrator’s decision, rejecting the broader application of unjust enrichment absent legislative authority.

Background of the statutory scheme and dispute
This appeal arose under Ontario’s automobile insurance regime, specifically the rules governing which insurer is responsible for paying statutory accident benefits (SABs) following a motor vehicle accident. The dispute centered on whether Unifund Assurance should reimburse Echelon General Insurance Company for over $100,000 in expenses Echelon incurred before an arbitrator ruled that Unifund was the priority insurer.

In July 2012, a claimant injured in a motor vehicle accident submitted her SABs claim to Echelon, which insured the vehicle in which she was a passenger. Believing that the claimant was a dependent of her father, who was insured by Unifund, Echelon initiated a priority dispute under Regulation 283/95. Echelon continued paying benefits as required pending resolution of the dispute and later sought full reimbursement of its expenses, including legal and adjusting fees.

Arbitration and lower court proceedings
In 2018, Arbitrator Kenneth Bialkowski found Unifund to be the priority insurer and ordered reimbursement for the benefits paid, but declined to award the additional expenses incurred by Echelon. The arbitrator held that Regulation 283 did not authorize such expense reimbursement unless there had been “deflection” – a failure by the receiving insurer to comply with its obligation to pay benefits.

Echelon appealed that decision to the Ontario Superior Court of Justice. The appeal judge overturned the arbitrator’s ruling, finding that equity—specifically the doctrine of unjust enrichment—entitled Echelon to recover reasonable expenses that ultimately benefitted Unifund. The judge found that the regulatory silence on such reimbursement did not preclude equitable relief.

Court of Appeal’s analysis and ruling
The Ontario Court of Appeal disagreed and reinstated the arbitrator’s decision. Writing for the court, Justice Dawe emphasized that Regulation 283 is a carefully structured administrative regime governing priority disputes between sophisticated insurers. The court interpreted the 2010 amendments to Regulation 283 as a deliberate policy decision to limit reimbursement of pre-arbitration expenses strictly to deflection cases under section 2.1(7). It held that no general equitable authority exists to extend this reimbursement outside of those specific circumstances.

The court stressed that any enrichment gained by Unifund due to Echelon’s pre-arbitration efforts was not unjust, because Regulation 283 created a “juristic reason” for that outcome. The drafters had opted not to allow expense reimbursements in all cases and intended to avoid inflating the cost of arbitrations. Further, the Court of Appeal emphasized the need for clarity and predictability in the insurance industry and rejected judicial attempts to carve out exceptions based on fairness or policy concerns.

Disposition and costs
The Court of Appeal allowed Unifund’s appeal and restored the arbitrator’s ruling. It held that Unifund was not required to reimburse Echelon’s pre-arbitration expenses beyond the benefits already ordered. The court also awarded $15,000 in costs to Unifund for both levels of court proceedings.

This decision reinforces the limits of equitable relief in the face of comprehensive regulatory frameworks and clarifies that only express provisions in legislation or regulation authorize cost shifting in inter-insurer SABs disputes.