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insurers cannot be party in Ontario arbitration
August 3, 2000

The Ontario Court of Appeal has ruled that insurers cannot be made parties to labour arbitrations. In a trio of decisions, the court clarified its controversial earlier decision in Pilon, ruling that the Supreme Court of Canada decision in Weber v. Ontario Hydro does not empower arbitrators to join as parties to an arbitration persons who are not parties to the collective agreement.

Pilon was repeatedly argued by unions in BC as authority for the proposition that as a result of Weber, arbitrators have jurisdiction over all disputes between employees and insurers under benefit plans provided in accordance with a collective agreement. Accordingly, the unions argue, if the insurer and not the employer is liable for denial or discontinuance of benefits, the employee can still grieve and the insurer can be joined as a party to the arbitration. Some arbitrators in Ontario have accepted this proposition. The cases before the Ontario Court of Appeal were appeals from judicial review decisions overturning two such arbitration awards (London Life v. Dubreuil Brothers Employees Association; Sun Life Assurance v. CAW-Canada) and upholding an award that declined jurisdiction (IWA-Canada v. Longlac Wood Industries).

Arbitrators in BC have generally resisted this approach and have not followed the lead of Ontario arbitrators. The Labour Relations Board has also declined to interpret Pilon in the way urged by unions and ruled last year that arbitrators do not have the power to join strangers to a collective agreement as parties to an arbitration.

The Ontario Court of Appeal followed similar reasoning in its judgment. The court distinguished Pilon on the basis that it dealt with a collective agreement into which the insurance policies had been incorporated. The employer therefore was liable for the provision of benefits and entitlement could be arbitrated against the employer. This did not require joining the insurer as a party, nor did it address cases where the collective agreement obligated the employer only to provide insurance plans, where only the insurer may be liable for failure to pay benefits.

The court held in London Life that the arbitrator had no jurisdiction over the insurance company which was not a party to the collective agreement.

“It is not a dispute arising out of the interpretation, application, administration or violation of the collective agreement, which has admittedly been fully complied with. It is instead a dispute about entitlement to benefits under the insurance policy. The facts which give this dispute its essential character were not intended by the parties to be governed by the collective agreement and do not engage the rights and obligations of the parties found expressly or by inference in that agreement. The dispute therefore does not arise out of the collective agreement and the arbitrator has no jurisdiction to deal with it. …just as the arbitrator had no jurisdiction to hear this dispute, he had no jurisdiction to add the insurer.”

It appears that any remaining doubts about the state of the law in this area have now been settled.