A third party cannot recover directly for benefits provided to an insured under the Ontario SABs
A third party service provider sought to recover payment directly from an insurer for services provided to insured persons under the Statutory Accident Benefits Schedule. The service provider was unable to establish that any exception to the doctrine of privity was contemplated by the provisions of the Insurance Act.
MedCentra Inc. v. Economical Mutual Insurance Co., [2009] O.J. No. 4003, August 14, 2009, Ontario Superior Court of Justice, L.B. Roberts J.
MedCentra Inc. (“MedCentra”) was a third party service provider which provided MRI examinations to persons who were involved in motor vehicle accidents and who were insured persons under standard automobile policies of insurance Economical Mutual Insurance Company (“Economical”). MedCentra directly billed Economical for the MRI services provided to persons insured through Economical pursuant to the direct billing provisions set out in section 44 of the Statutory Accident Benefits Schedule (SABS). Economical paid for some but not all of the services performed by MedCentra. MedCentra sought to compel payment from Economical directly for the MRI examination services that it rendered to individuals insured by Economical. The issue for determination on this motion for summary judgment was whether MedCentra was entitled to bring an action directly against Economical to compel payment of any amounts that might be owing to MedCentra for MRI services rendered to persons insured by Economical.
To be entitled to recover payment directly from Economical for services rendered to insured persons, MedCentra would have to establish that it met the test of the principled exception to the doctrine of privity of contract. The “critical and cumulative” factors necessary to satisfy the test were set out by the Supreme Court of Canada in Fraser River Pile & Dredge Ltd. v. Can-Dive Services Ltd, [1999] 3 S.C.R. 108:
(a) Did the parties to the contract intend to extend the benefit in question to the third party seeking to rely on the contractual provision? and,
(b) Are the activities performed by the third party the very activities contemplated as coming within the scope of the contract in general, or the provision in particular, again as determined by reference to the intentions of the parties?
The Court found no evidence that Economical or any of the insured persons to whom MedCentra provided services intended to confer any benefit on MedCentra, let alone the benefit of direct billing. The Court further found that any attempt by an insured person to confer the benefit of direct billing on MedCentra would be invalid because of the prohibition contained in section 65 of the SABS against an insured person making any assignment of benefits under the SABS. The option of allowing a service provider to bill an insurer directly was within the insurer’s discretion alone. The Court agreed with Economical’s submission that MedCentra could not be in a better position than an insured person under the SABS and thus could not be in a position to compel Economical to extend the benefit of direct billing to it.
The Court also found that to allow MedCentra to compel payment directly from Economical would undermine the statutory benefit regime provided under the Insurance Act and would be contrary to the explicit statutory provisions that kept the claims dispute process between insurers and insured persons. The provision allowing for direct billing at the option of the insurer did not change the basic nature of the claims process, namely, that claims are made by the insured person and any resulting dispute is between the insured person and the insurer, and not between the service provider and the insurer.
In the result, MedCentra had no right to bring an action directly against Economical for payment for the examinations provided to insured persons. There was no contractual relationship between Economical and MedCentra and no basis on which to relax the doctrine of privity of contract.
This case was originally summarized by Emily M. Williamson and originally edited by David W. Pilley.
