Tuesday, 8 May 2012

How Should Insurers React to Parveen vs. Aviva / Fredric vs. Aviva?

FSCO released Preliminary Decisions in two cases Parveen vs. Aviva and Fredic vs. Aviva both dated March 30, 2012 in which an arbitrator determined that both insureds had rescinded a settlement with Aviva Canada thus allowing Ms. Parveen and Mr. Fredric to proceed to arbitration.

In this particular case the arbitrator had agreed with the insureds that Aviva had failed to comply with the requirements of the Settlement Regulation, and she was entitled to rescind the agreement after the two-day period, in accordance with ss. 9.1(5) of the Settlement Regulation. The arbitrator was of the opinion that the Settlement Disclosure Notice was did not comply with the Settlement Regulation.

These decisions are the cause of considerable frustration within the system. The Settlement Disclosure Notice has been in effect since September 2010 and prior to that a very similar notice form was being used for years. The form is approved by the Superintendent of Financial Services following considerable involvement by both Dispute Resolution and Legal staff at FSCO and insurers and counsel representing insureds and insurers. In light of this, the arbitrators decision makes no sense.

Still these cases are relatively unique. A Settlement Disclosure Notice was executed. Over a month later a Release was executed. Following which the insurer received a letter rescinding the settlement. Settlement funds were then forwarded, and then returned.

Since the decisions have come out FSCO has posted a notice on its website stating that it is the Superintendent’s position that the current version of the Settlement Disclosure Notice form complies with the Regulation.

So how should insurers proceed in light of the decisions and the Superintendent's position?

I'm not so sure that revising he form will provide much additional protection. The Settlement Disclosure Notice is adequate. There will always be a risk that an arbitrator will make a similar ruling in the future. Insurers need to ensure that insureds understand the Settlement Disclosure Notice and the settlement process. Insurers who are concerned that they may not be providing sufficient disclosure should consider providing information additional to improve claimant communication and enhance the settlement process.

It would be a good idea to execute Releases first or at the same time as the Settlement Disclosure Notice. A Release terminates an insurers obligation to pay accident benefits which can be argued is not accomplished by the Settlement Disclosure Notice.

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