Neutral Citation: 1993 ONICDRG 59

File No. A-003806

ONTARIO INSURANCE COMMISSION

BETWEEN:

MARGARET LOVE

Applicant

and

STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY

Insurer

DECISION ON PRELIMINARY ISSUE

Issues

The applicant, Margaret Love, was injured in a motor vehicle accident on October 4, 1991. She applied for accident benefits from the insurer, State Farm, payable under Ontario Regulation 672 (the "No-Fault Benefits Schedule"), enacted under the Insurance Act, R.S.O. 1990, c. I.8.

Weekly income benefits of $413.26 per week, less collateral benefits, were paid until November 14, 1991, when they were terminated. Ms. Love claimed weekly income benefits of $600 per week until January 31, 1992. State Farm contends that the dispute about weekly income benefits was resolved at mediation. Ms. Love contends that mediation was unsuccessful in resolving the dispute. She applied for arbitration under the Insurance Act.

The only issue in this hearing is:

Was mediation successful in resolving the parties' dispute about weekly income benefits?

Result

Mediation was successful in resolving the dispute about weekly income benefits.

Hearing

The hearing was held in Oshawa, Ontario, on September 21, 1993, before me, Nancy Makepeace, arbitrator.

Present at the hearing were:

Applicant:

Margaret Love

Insurer's

James Flaherty

Representative:

Barrister & Solicitor

Peter Florence

Claims Manager

Ms. Love and Mr. Florence testified.

The following documents were introduced into evidence:

Exhibit 1

Memorandum of Agreement, dated March 24, 1993

Exhibit 2

Report of Mediator, dated March 30, 1993

Exhibit 3

Cancelled cheque payable to Margaret Love, dated March 24, 1993

Exhibit 4

Letter from Mr. Flaherty to Mr. Blair Tully, Commissioner, dated September 10, 1993

Exhibit 5

Letter from Mr. Murray Chitra, Acting Commissioner, to Mr. Flaherty, dated September 17, 1993

The following documents were also part of the record:

Application for appointment of an arbitrator, dated April 17, 1993

Response by insurer, dated May 13, 1993

Letter of pre-hearing arbitrator Christine Gooderham, dated July 27, 1993

Evidence and Findings

Background facts

State Farm relies on the March 24, 1993 Memorandum of Agreement and the March 30, 1993 Report of Mediator in support of its contention that the parties resolved their dispute about weekly income benefits at mediation.

The Memorandum of Agreement is as follows (the portions in bold-face were pre-printed) :

MEMORANDUM OF AGREEMENT

Commission File Number:

M-003806

IN THE MATTER OF: Ms. Margaret Love and State Farm Insurance respecting a dispute over benefits under the No-Fault Benefits Schedule.

As a result of our mediation meeting, the parties have agreed to the following resolution:

1. State Farm Insurance will pay to Ms. Margaret Love the sum of $3000.00 (three thousand dollars) inclusive of interest in settlement of Ms. Margaret Love's claims for weekly income benefits and interest.

2. State Farm Insurance will pay Ms. Margaret Love seventy-five dollars ($75.00) for Dr. J. Treanor's report dated March 15, 1993.

3. Ms. Margaret Love will provide State Farm Insurance with a release applicable to weekly income benefits arising from the automobile accident on October 4, 1991.

4. Ms. Margaret Love agrees that, at the present time there are no outstanding issues with respect to weekly child care benefits, care benefits, supplementary medical, rehabilitation and care benefits.

Dated at the City of North York, this 24th of March 1993.

The Memorandum was signed at the bottom of the page by Ms. Love, Mr. Florence (for State Farm) and Mr. Heerema (the mediator).

The Report of Mediator indicates that mediation occurred between February 3 and March 24, 1993. Ms. Love and Mr. Florence participated. Ms. Love and Mr. Florence agreed in their testimony that the Report of Mediator accurately reflects the Memorandum of Agreement.

Ms. Love contends that she did not agree to accept $3,000 in full and final settlement of her claim for weekly income benefits with interest (items 1 and 3 of the Memorandum). She agrees that there is no ongoing dispute about supplementary medical and rehabilitation benefits, childcare benefits or care benefits (items 2 and 4 of the Memorandum).

Ms. Love admitted that she signed the Memorandum of Agreement. However, she claims that she never agreed to its terms. She gave oral evidence about what happened at mediation and afterwards.

Subsection 11 (3) of the Insurance Act is as follows:

(3) Except with the consent of the Commissioner, no person mentioned in subsection (1), other than the Commissioner, shall be required to testify in a civil proceeding, in a proceeding before the Commissioner or in a proceeding before any other tribunal respecting information obtained in the discharge of his or her duties under this Act or any Act listed in the Schedule to subsection (1).

On behalf of Ms. Love and Allstate, Mr. Flaherty wrote to the Commissioner, Mr. Blair Tully, requesting that he permit the mediator, Fred Heerema, to testify about the mediation proceeding. Acting Commissioner Murray Chitra declined to permit Mr. Heerema to testify.

Evidence about mediation proceedings

As Ms. Love began her testimony about what happened at mediation, Mr. Flaherty objected that this evidence was inadmissible. He submitted that a Report of Mediator, which states that mediation succeeded, is conclusive evidence that the issues between the parties were resolved, especially where, as in this case, the mediator is not available to testify. He also submitted that evidence about discussions between the parties at mediation is inadmissible because mediation is a confidential process.

I made an oral ruling that the Report of Mediator is not conclusive evidence that a settlement was reached and that evidence about discussions at mediation is admissible. My reasons follow.

In submitting that the Report of Mediator is conclusive evidence that mediation was successful, Mr. Flaherty noted that the only reference in the Act to the "opinion" of the mediator is in subsection 280(6), which says, "If at any time before a settlement is effected the mediator is of the opinion that mediation will fail, he or she shall forthwith notify the parties". He contrasted subsection 280(6) and (7), which deal with failed mediation, and subsection 6.1 of the Dispute Resolution Practice Code, which deals with successful mediation, and provides:

6.1 If all or any of the issues in dispute are resolved,

(a) the mediator shall record in the Report of Mediator the issues that have been settled, and the amounts that have been agreed upon, including any applicable interest; and

(b) the parties shall confirm all settlements and agreements set out in the Report.

In the arbitration decision, Leon Albert Bailey and CAA Insurance Company (Ontario), Commission File No. A-001139, October 29, 1992 (Decision on Preliminary Issue), arbitrator Janice Mackintosh held that the Report of Mediator is not conclusive evidence that mediation succeeded, but represents the opinion of the mediator. She noted that mediation is mandatory under subsection 281(2) of the Act. She accepted the applicant's submission that "there will be times when the opinion of the Mediator is simply wrong" and stated that "the legally unsophisticated Applicant must be permitted to challenge the accuracy of the mediator's Report in a simple, direct and procedurally uncomplicated way". I concur with these comments.

Subsection 281(1) of the Act entitles an insured person to refer a matter to an arbitrator if mediation fails. This is an important right. It would have been easy for the legislature to include in the Act a provision stating expressly that the Report of Mediator conclusively determines whether a matter was settled at mediation. In the absence of such a provision, the applicant is entitled to a hearing about whether mediation failed or succeeded.

With regard to the confidentiality of mediation and the privilege attaching to settlement discussions, Mr. Flaherty relied on the Bailey decision, referred to above, in which arbitrator Mackintosh excluded the parties' testimony about mediation.

The scope of the privilege attaching to communications in furtherance of settlement must be interpreted in accordance with its purpose, which is to encourage the frank discussion by the parties of the merits of their respective cases in order to facilitate settlement.

In the decision Mehmet Tuzin and Allstate Insurance Company of Canada (Commission File No. A-000596, May 28, 1992), arbitrator K. Julaine Palmer noted that subsection 279(2) of the Act recognizes the parties' ability to settle disputes that are the subject of arbitration proceedings. She made the following comments, with which I concur, about the test for setting aside settlement agreements:

It is not the role of an arbitrator to go behind a settlement which has been achieved between competent parties, in cases where there has been no fraud, mistake, misrepresentation, undue influence, unconscionability, or other vitiating factor.

Where the issue in the hearing is whether a purported settlement agreement was obtained through "fraud, mistake, misrepresentation, undue influence, unconscionability, or other vitiating factor", the parties' evidence about settlement discussions is highly relevant, and may be the best and only evidence available. The harm that could be caused by excluding the evidence outweighs the potential harm of discouraging settlement discussions. I find that evidence about settlement discussions at mediation is admissible where the issue is the existence or validity of a settlement agreement.

Ms. Love's testimony

Ms. Love testified that the Memorandum of Agreement was prepared by Mr. Heerema near the end of the March 24, 1993 mediation meeting, which lasted about two or three hours. She did not read the Memorandum, but Mr. Heerema read it aloud before presenting it to the parties for their signatures, and Ms. Love admitted that she knew what it said. She testified that she did not agree to the terms of items 1 and 3 of the Memorandum. It was clear in her mind that she would not accept $3,000 in settlement of her claim for weekly income benefits plus interest, and she initially refused to sign the Memorandum for this reason. Later, she signed it.

She gave the following reasons for signing the Memorandum, despite her disagreement with its terms:

1. At the end of the meeting, everyone seemed anxious to go. Mr. Florence was on the phone arranging for a ride. He seemed anxious to sort things out.

2. After the parties had agreed on three issues [rehabilitation and medical expenses, care benefits, childcare benefits], "it came to light" that she didn't have any automobile insurance coverage. Mr. Heerema continued preparing the Memorandum. Mr. Florence, who is a Claims Manager, gave her the phone number of someone at State Farm, who she could call about her coverage. She called that person either near the end, or after, the mediation meeting. The matter was later sorted out. However, once the matter arose, she was "focused" on her insurance coverage, and not on the issues at hand. Moreover, she felt that she could only pursue her claim through arbitration if she was "prepared for what was coming my way".

3. When she refused to sign the Memorandum, Mr. Heerema told her she was being emotional. She also felt pressured because Mr. Heerema was sitting between her and the door.

4. She did not understand the Memorandum of Agreement to be a final "sealing" document. She thought only a release could prevent her from proceeding to arbitration. She works as a banker with the Canadian Imperial Bank of Commerce. She is an appointed officer, and she has authority to commit the bank to loans or mortgages to a given maximum. She testified that "in the bank, a 'memorandum' is nothing".

5. She believed that the insurer had to pay her what, in her view, she was entitled to under the policy, regardless of any discussion at mediation.

After the Memorandum was signed, Mr. Florence handed Ms. Love a cheque for $3,075. Ms. Love understood that $75 of this amount was to pay for Dr. Treanor's report, and $3,000 for weekly income benefits. Ms. Love did not accept the cheque at first, and Mr. Florence said it didn't matter to him whether she took it or not. She testified that she did not understand the cheque to be in full settlement of her claim, but believed the insurer was paying in accordance with its last offer.

Mr. Florence and Mr. Heerema explained that a release would be mailed to her for her signature.

Ms. Love read the Memorandum for the first time while on the subway going home. She phoned Mr. Heerema early the next morning and told him that she didn't agree to its terms and would not sign a release. She asked him whether she should return the cheque to State Farm, but he did not say. She called him again, but again received no answer to her question. She felt she could not contact State Farm directly at this point.

She received the Report of Mediator about two weeks after the mediation meeting. She cashed the cheque on April 14 in order to pay Dr. Treanor's bill.

Mr. Florence's testimony

Mr. Florence denied making any threats to Ms. Love in the course of mediation. He was unable to recall Ms. Love refusing an offer of $3,000. He also could not recall Mr. Heerema telling Ms. Love that she was being emotional. However, he stated that he has been to a number of mediations subsequently, and admitted he may not have a good recall of the proceedings in this case. He did remember Ms. Love stating earlier in the meeting that she believed she was entitled to $600 per week.

Findings

I find that a valid settlement agreement was reached at the mediation meeting of March 24, 1993, and that its terms are accurately set out in the Memorandum of Agreement and Report of Mediator.

Ms. Love is fluent in the English language, and has the British equivalent of Canadian grade 12 education. She admitted that she understood the terms of her insurance policy, and knew she had the right to a lawyer at mediation. As a banker with signing authority, she must be presumed to understand that when two parties sign an agreement, a mutual obligation is created. She admitted on cross-examination that in the course of her work she normally reads any document with which she is unfamiliar. She explained that she didn't read the Memorandum before signing it because she wasn't focused on the issues being discussed at the mediation, but had her mind on the issue of her insurance coverage. She admitted that she knew what the Memorandum said before she signed it because Mr. Heerema had read it aloud. Furthermore, Ms. Love admitted that the terms of the agreement, as reflected in the Memorandum, had been fully discussed during the face-to-face mediation meeting, which Ms. Love and Mr. Florence agreed lasted over two hours.

The Memorandum does not incorporate a release and does not expressly say that Ms. Love waives her right to proceed to arbitration. In my view, it is preferable that any settlement agreement should do so. I concur with the comments of arbitrator Fred Sampliner in the decision, Raj Aggarwal and Allstate Insurance Company (Commission File No. A-002621, June 17, 1993): "Where an insurer is seeking to permanently exclude the insured's right to further benefits, it should take steps to obtain a release or other agreement which clearly and specifically sets forth the bargain struck."

However, I find that Ms. Love understood that settlement of the issues at mediation would dispose of the matter and preclude her proceeding to arbitration. The preamble to the Memorandum clearly provides that the parties have agreed to resolve the dispute as a result of mediation. Item 3 states that "Ms. Margaret Love will provide State Farm Insurance with a release applicable to weekly income benefit".

Ms. Love implied in her testimony that she felt she had to accept State Farm's offer in order to make sure they would renew her insurance. She did not allege that Mr. Florence or any other State Farm representative made any threats in this regard, and Mr. Florence denied doing so. It was unclear in Ms. Love's testimony how this matter arose in the discussion; she said the matter "came up" while Mr. Heerema was preparing the Memorandum. Mr. Florence testified that Ms. Love had asked whether she would receive a renewal notice. I find it likely that the matter of the renewal was raised by Ms. Love. I accept that Ms. Love may have been concerned about her insurance coverage, but I can find no basis for this concern in any conduct on the part of State Farm.

With regard to Mr. Heerema's alleged remark, I note that he was not available to testify. Mr. Florence could not recall the remark. Even if I were to accept that the remark was made, in my view it does not amount to undue influence.

I find that Ms. Love signed the Memorandum, though reluctantly, because she wanted to finalize the matter. She may have been influenced in her decision by her desire to end a long meeting, and to focus on ensuring that her coverage would be renewed. Later, she had second thoughts.

It is inherent in settlement and mediation discussions that the parties must make difficult decisions affecting their rights to significant sums of money, often in a short period of time. Everyone may be tired and frustrated. In my view, it would be preferable if a cooling-off period were provided following settlement and mediation discussions; however, none is required under the Insurance Act and No-Fault Benefits Schedule.

I find that Ms. Love understood the terms of the settlement set out in the Memorandum of Agreement, and understood that signing the Memorandum would resolve her dispute with State Farm and prevent her from proceeding to arbitration. I find nothing in the circumstances of the meeting which would vitiate the agreement. Accordingly, Ms. Love is precluded from proceeding to arbitration.

Expenses

After a short discussion, State Farm agreed to pay certain of Ms. Love's claimed expenses in the mediation and arbitration. However, Ms. Love claims the cost of lunch ($6) on March 24, 1993, the day of the mediation meeting, and the cost of refreshments ($2.75) on the morning of the arbitration hearing. She relies on the brochure, "When your insurance company and you disagree", which states "Assistance for resolving disputes with your company about accident benefits is available to you at no cost ..." [emphasis added]. Mr. Flaherty submitted that lunch and refreshment expenses are expenses the applicant would have to pay in any case, and therefore are not payable.

An award for expenses may be made under section 282(11) of the Insurance Act, which provides as follows:

The arbitrator may award to the insured person such expenses incurred in respect of an arbitration proceeding as may be prescribed in the regulations to the maximum set out in the regulations.

The prescribed expenses and maximum amounts are set out in Schedule 1 of the Dispute Resolution Practice Code and in Ontario Regulation 664 (R.R.O. 1990), Dispute Resolution Expenses.

The Schedule does not provide for an award of expenses incurred at mediation, and only deals with "expenses incurred in respect of an arbitration proceeding". Accordingly, I am unable to award Ms. Love her lunch expenses for March 24, 1993.

Ms. Love is entitled to be reimbursed for her expenses incurred in the arbitration proceeding. Though she was unsuccessful in her application for arbitration, she raised a legitimate issue about whether her claim was settled at mediation, and she conducted her case properly and expeditiously. Her expenses for refreshments on the day of the arbitration hearing are payable under paragraph 6(2)(a) of the Schedule, which provides for travel, accommodation and meal expenses.

Order

Mediation was successful in resolving the dispute between Ms. Love and State Farm about weekly income benefits. Accordingly, Ms. Love cannot proceed to arbitration.

Ms. Love is entitled to her expenses incurred in respect to the arbitration. I remain seized with respect to any dispute the parties may have about the amount of expenses payable.

October 13, 1993

Nancy Makepeace Arbitrator

Date