As arbitration becomes a more and more common form of dispute resolution, the intersection between arbitral decisions and the courts will need to be watched more and more closely. Frequently, such decisions are immune from appeal to the courts. But not always. And when an arbitration decision is appealed to a court, what is the standard of review of the arbitrator’s decision? This is what the Ontario Court of Appeal considered in Zurich Insurance Company v. Chubb Insurance Company of Canada, 2014 ONCA 400, released May 15, 2014.

Though much of the analysis is clearly confined to the “pay first, dispute later” rules in the context of Ontario insurance law, the sentiment from the decision may be applicable beyond that context. And in determining the standard of review of the arbitrator’s decision, Pardu J.A. (Pepall J.A. concurring) started in an obvious place – the words of the arbitration agreement. Though a correctness standard of review was applied to reviewing a narrow question of law, the decision as a whole generally suggests that an arbitrator’s decision should be accorded deference, even when issues of law are in play.

The case emerged from statutory arbitration to determine whether Chubb Insurance Company (“Chubb”) wrongfully refused to pay a particular individual Statutory Accident Benefits (“SABs”). Zurich Insurance Company (“Zurich”) paid the SABs but then commenced arbitration, alleging that Chubb had unlawfully refused to pay after the individual asked for payment from Chubb first. The arbitrator concluded that due to the nature of the insurance policy it had issued, the statutory regime which Zurich alleged was the basis for Chubb indemnifying it was inapplicable.

Pardu J.A. discussed the standard of review of the arbitrator’s decision as follows:

[12]     The arbitration agreement between Chubb and Zurich provided:

The decision of the Arbitrator shall be binding upon the parties, but any party may appeal the Arbitrator’s decision on a point of fact or on a point of law or on a point of mixed fact and law to a Judge on the Ontario Superior Court of Justice, without leave of the Court, within thirty (30) days of the date of the Arbitrator’s written decision. The standard of review to be applied on appeal with respect to the Arbitrator’s decision(s) on questions of law shall be correctness. The standard of review to be applied on appeal with respect to the Arbitrator’s decision(s) on questions of fact and questions of mixed fact and law shall be reasonableness.

[13]     The application judge adopted a standard of review of correctness, on the ground that there were no factual issues in dispute. Mesbur J. summarized the applicable standards of review in Aviva Insurance Co. of Canada v. Royal & SunAlliance Insurance Co. (2008), 66 C.C.L.I. (4th) 262 (Ont. S.C.), at para. 7:

First, on a question of law, the standard is one of correctness. Second, on a question of fact, the decision below can only be set aside on the basis of an overriding and palpable error. Last, on a question of mixed fact and law, the standard is one of reasonableness.

The Ontario Court of Appeal has also commented that on a question of mixed fact and law, where the decision is highly dependent on a factual finding, the standard is more akin to “overriding and palpable error”. It is noteworthy that this case also dealt with an appeal from an arbitrator’s decision under the provisions of the Insurance Act. The court commented that arbitrators have a special expertise “in evaluating facts for determination of dependency for statutory accident benefits entitlement”, and unless the arbitrator was unreasonable, he is entitled to deference. I infer arbitrators have similar special expertise in determining issues of loss transfer, and thus their conclusions should be equally afforded deference. [Citations omitted by Pardu J.A.]

[14]     Here I would characterize the issue of whether Chubb was a “motor vehicle liability” insurer as a question of law reviewable on the standard of correctness and the issue of whether there was a sufficient nexus between Chubb and the claimant as a question of mixed fact and law reviewable on the standard of reasonableness.

[Emphasis added]

Pardu J.A. ultimately agreed with the arbitrator that Chubb was not a “motor vehicle insurer” on these facts. She thus re-instated his decision, which had been set aside on an appeal to the Superior Court. Though she applied the correctness standard of review in this context (and found the arbitrator’s decision was correct), a sentiment of deference is nonetheless apparent in her discussion of standard of review, especially in her determination that “the issue of whether there was a sufficient nexus between Chubb and the claimant [is] a question of mixed fact and law reviewable on the standard of reasonableness”.

Interestingly, Juriansz J.A. dissented on the appeal (he advocated a different approach to the sort of “pay first and dispute later” insurance rules at issue in this case), but he did not address the standard of review.