When Has FSCO Mediation Failed - Part 1

We previously blogged on the decision in Cornie v. State Farm, in which Justice Sloan held that insureds may commence claims against their accident benefits carriers if 60 days have elapsed since an application for mediation has been filed, even if mediation itself has not occurred.  The Court of Appeal has now released its appeal decision in Hurst v. Aviva, 2012 ONCA 837 (C.A.).

Section 281(2) of the Insurance Act prevents insured persons from commencing court actions or arbitrations against their insurers unless they first seek mediation and mediation has failed.  The claimants waited 60 days after applying for mediation and when no mediation had taken place, they commenced actions.  FSCO`s position was that the prescribed 60 day time limit for conducting mediation did not begin to run until an application for mediation had been assessed by FSCO and found to be complete.  FSCO refused to issue a report declaring the mediations had failed.  The insurers in four actions brought motions to have the actions stayed on the basis that they were barred by s. 281(2) as mediation had not taken place.  Justice Sloan dismissed the motions and the insurers appealed. 

The Court of Appeal dismissed the appeals.  The Court concluded that the process is intended to be completed with 60 days after an application for mediation has been filed; however, if mediation has not taken place within 60 days, insured persons are free to pursue either court action or arbitration. 

The Court rejected the insurers` arguments that the cost to the industry could be $83 million as a result of the interpretation of the Act that does not require mediation to actually take place.  The insurers submitted statistics that 75% of claims are resolved by mediation at FSCO.  One has to expect a flood of court proceedings as a result of this decision, along with significant costs to insurers.

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