By Gary Cerriku and Douglas Treilhard
In Echelon General Insurance Company v. Unifund Assurance, 2025 ONCA 324 (Echelon), the Ontario Court of Appeal clarified the proper interpretation of the regulation that governs disputes between automobile insurers over which insurer must pay Statutory Accident Benefits (“SABs”).
Arbitrators adjudicating disputes under Regulation 283/95 (“Regulation 283”) of the Insurance Act cannot order expense reimbursements outside the limited scope provided by s. 2.1(7). Section 2.1(7) mandates that insurers who improperly deflect claims shall reimburse a fund or another insurer for any legal fees, adjuster’s fees, administrative costs and disbursements that are reasonably incurred by the Fund or other insurer as a result of the non-compliance.
Justice Dawe, writing for the court, held that the regulation reflects a deliberate policy choice to limit reimbursement to deflection cases. Insurers should bear their own pre-arbitration expenses, even if a different insurer is ultimately found to be the one with priority to pay Statutory Accident Benefits
Factual Background
In July 2012, a woman injured in a motor vehicle accident submitted a SABs claim to her insurer, Echelon, which insured the vehicle in which she was riding. Echelon paid the benefits in compliance with s. 2.1 of Regulation 283[1], while simultaneously issuing a notice of dispute to Unifund, her father’s insurer. Echelon maintained that the claimant was a dependent and thus Unifund should be the priority insurer under s. 268 of the Insurance Act.[2]
An arbitrator in 2018 ruled that Unifund was indeed the priority insurer, ordering it to reimburse Echelon for benefits paid and the costs of arbitration.[3] However, the arbitrator did not require Unifund to reimburse over $100,000 in pre-arbitration expenses.[4] On appeal to the Superior Court, the judge reversed that finding, holding that unjust enrichment entitled Echelon to reimbursement.[5] Unifund appealed.
Court of Appeal Decision
The central issue before the Appeal Court was whether Regulation 283 permits arbitrators to routinely award reimbursement of pre-arbitration expenses in the absence of deflection or non-compliance under s. 2.1.
Justice Dawe allowed the appeal and reinstated the arbitrator’s decision. The Court held that Regulation 283 intentionally limited reimbursement to deflection cases. When read in its full context, Regulation 283 is designed to prioritize clarity and certainty of application. The limited scope of s. 2.1(7) reflects a deliberate policy choice by the drafters.
The court highlighted that Regulation 283 governs disputes between sophisticated insurers within a highly regulated industry.[6] As such, it is essential that its terms be applied with clarity and consistency. Referring to Kingsway General Insurance Co. v. West Wawanosh Insurance Co., the court highlighted that insurers rely on the precise terms of the regulation to make informed business and litigation decisions.[7] Introducing reimbursement outside the regulation would undermine the predictability and efficiency purpose of the scheme.
The court emphasized the amendments in 2010, noting that it would have been common knowledge to the drafters that insurers commonly incur legal fees, adjuster’s fees, administrative costs and disbursements during the pre-arbitration period. The decision to distinguish deflection cases for special treatment implied that the drafters did not expect arbitrators to routinely make reimbursement orders in other cases. [8]
Justice Dawe also rejected the Superior Court’s view that permitting expense reimbursement would not increase arbitration costs. He emphasized that expanding the arbitrator’s discretion in this way would lead to greater litigation over expenses, undermining the goal of timely and cost-efficient resolution of disputes.[9]
The Minister representing the Motor Vehicle Accident Claims Fund intervened, arguing that the public purse should be protected by permitting the Fund to recover expenses in these disputes.[10] The Court declined to rule on that issue since the Fund was not a party to the arbitration at issue but left open the possibility that special considerations may apply where public funds are at stake.[11]
Takeaways
The court’s decision in Echelon provides clarity for insurers operating within Ontario’s SABs regime.
Echelon holds that arbitrators are not empowered to routinely award cost reimbursement beyond the deflection cases explicitly covered by s. 2.1(7). Insurers should not assume that expenses incurred in SABs claims will be recoverable in priority disputes, unless the claim expressly falls under deflection.
Oddly, the court explicitly left unanswered the questions of whether undefined “special circumstances” might justify an expense reimbursement order. Its own reasons in Echelon would seem to foreclose this possibility. It is unclear why the court chose to invite further litigation on this point.
The court’s repeated references to the “equitable doctrine of unjust enrichment” are also noteworthy. This is the basis on which reimbursement of claims handling expenses was sought. Unfortunately, the court did not take the opportunity to clarify that unjust enrichment is a common law cause of action and that the claims handling expenses in question would not qualify as an enrichment for the purpose of that cause of action. (See Peel (Regional Municipality) v Canada, [1992] 3 SCR 762.)
This decision may prompt regulatory reform if policymakers wish to reopen the reimbursement question for public actors like the Fund, but until then, the appeal court has closed the door on routine reimbursements of costs incurred in a SABs claim.
[1] Echelon General Insurance Company v. Unifund Assurance, 2025 ONCA 324 at para 9
[2] Ibid at para 10.
[3] Ibid at para 11.
[4] Ibid at para 12.
[5] Ibid at para 13.
[6] Ibid at para 21.
[7] Ibid at para 22.
[8] Ibid at para 45.
[9] Ibid at para 48.
[10] Ibid at para 49.
[11] Ibid at para 50.
