Discriminatory Auto Insurance Rates Allowed for Bona Fide Reasons

Zurich Insurance Co. v. Ontario (Human Rights Comm.) (1992), 16 C.H.R.R. D/255 (S.C.C.)

The majority of the Supreme Court of Canada finds that Zurich Insurance did not discriminate against Michael Bates contrary to the Ontario Human Rights Code by charging him higher premiums for automobile insurance because of his age, sex, and marital status.

In 1983 Michael Bates alleged that he was discriminated against because Zurich Insurance charged him higher premiums for his automobile insurance than a young, single, female driver with the same driving record, or than drivers over age 25. He alleged that the rate classification system discriminated by grouping drivers by age, sex, and marital status and determining their premiums based on these factors.

The majority of the Supreme Court of Canada finds that charging higher automobile insurance premiums to young, unmarried, male drivers is prima facie discriminatory and contravenes the Ontario Human Rights Code. However, the issue in this appeal is whether that discrimination is permitted by virtue of s. 21 of the Code. Section 21 states that the prohibitions against discrimination are not infringed where a contract of automobile insurance differentiates on reasonable and bona fide grounds because of age, sex, marital status, family status or handicap.

The Board of Inquiry which originally heard Michael Bates' complaint concluded that Mr. Bates was discriminated against because the insurer could not establish that not using the rates based on discriminatory criteria would undermine the essence of the business.

On appeal, the Ontario Divisional Court overturned this decision. It concluded that the Board of Inquiry had applied the wrong test and that the words "reasonable and bona fide" found in s. 21 should be given their plain meaning. It ruled that at the relevant time no other statistical data was available on which to base the risk classification of automobile drivers and that consequently there were reasonable and bona fide grounds to rely on the statistics that were available.

This decision was upheld by the Ontario Court of Appeal.

The majority of the Supreme Court of Canada in a decision written by Mr. Justice Sopinka finds that the test in s. 21 is whether (a) a discriminatory practice is based on sound and accepted insurance practices and (b) there is no practical alternative.

The majority finds that the premiums were based on sound and accepted insurance practices. Statistical evidence shows that young, male drivers are involved in proportionately more, and more serious, accidents than other drivers.

However, the fact that there is a statistical correlation between age, sex and marital status, and insurance losses does not fully satisfy s. 21. Human rights values cannot be overridden by business expediency alone. To allow discrimination simply on the basis of statistical averages would only serve to perpetuate traditional stereotypes with all their invidious prejudices. It is necessary therefore to consider whether there is a practical alternative in the circumstances.

The majority finds that there was no practical alternative. Alternative statistical bases of risk classification were not available at the time. The Superintendent of Insurance requires reporting based on certain criteria, but at the time of the complaint statistical data was not available to support classification based on other relevant, non-discriminatory criteria.

The appeal is dismissed.

In a dissenting judgment, Madam Justice L'Heureux-Dubé disagrees with the majority regarding the appropriate test to be applied under s. 21. She concludes that the appropriate test of whether there are reasonable and bona fide grounds for a distinction in premiums based on age, sex, and marital status should be similar to the test set out in Brossard. Following Brossard, the distinction must:

  1. be imposed honestly, and in the sincerely held belief that it accurately reflects the cost of the risk insured,
  2. be based on a rational, that is a causal, connection between the distinction and the insured risk, and
  3. be a reasonable means of identifying and classifying similar risks.

L'Heureux-Dubé finds that the discriminatory classification scheme was imposed in good faith. However, she finds that there is no causal connection established between being young, single and male and being a higher risk with respect to automobile safety. A mere statistical correlation is not satisfactory, because it accepts the very stereotyping that is deemed unacceptable by human rights legislation.

Age, sex, and marital status have never been controlled or isolated in the statistics used by insurers to determine whether there is a causal connection. The insurance industry has attempted to bridge this gap in its knowledge by reliance on myth and stereotype. This does not satisfy the burden of proof.

In addition, L'Heureux-Dubé finds that there was a reasonable alternative means available to the insurer. It set rates for drivers over 25 years of age based on individual accident records and distance driven. There is no evidence to indicate that the same criteria could not be used for rate classification for drivers 25 and under.

For these reason, L'Heureux-Dubé finds that Zurich Insurance has not satisfied the requirements of s. 21 of the Ontario Human Rights Code. She would allow the appeal.

In her dissenting judgment Madam Justice McLachlin agrees with the majority regarding the test to be applied, but concurs with L'Heureux-Dubé regarding the result.

She finds that Zurich Insurance has failed to prove that there was no practical alternative to using discriminatory criteria as the basis for rate classification. The fact that Zurich Insurance cannot prove that there is no practical alternative does not mean that there is no practical alternative. It cannot prove that there is no practical alternative because it does not have the statistical data necessary to do so. The absence of evidence of alternatives must not be confused with an absence of alternatives. The insurer bears the burden of showing that no reasonable alternative exists, and through its own failure to collect the required data it has failed to meet the burden. That it does not know if there is a practical alternative is not a defence.

Madam Justice McLachlin finds that Zurich Insurance has not discharged the onus of proof on it. She would allow the appeal.

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