Neutral Citation: 1994 ONICDRG 57

P-002621

ONTARIO INSURANCE COMMISSION

BETWEEN:

RAJ AGGARWAL

Applicant (Respondent)

and

ALLSTATE INSURANCE COMPANY

Insurer (Appellant)

Before:

Elisabeth Sachs Director of Arbitrations

Counsel:

James M. Flaherty(for Insurer, Appellant)

Frank Loreto (for Applicant, Respondent)

APPEAL ORDER

I. NATURE OF PROCEEDINGS

By Notice of Appeal filed July 15, 1993 the insurer, Allstate Insurance Company (the appellant), appeals from the decision on a preliminary issue of Arbitrator F. Sampliner, dated June 17, 1993 which determined the respondent had not finally settled her weekly benefits claim under s. 13 of Ontario Regulation 672¹, the former No-Fault Benefits Schedule, with the appellant, and was entitled to proceed with an arbitration hearing. The appellant seeks an order setting aside the arbitrator's decision, contending the parties settled all claims for weekly income and supplementary medical benefits at mediation.

There is no transcript of the oral testimony. The parties' disagreement does not involve the credibility of any witness but whether the arbitrator was correct in admitting evidence about the mediation, and then taking it into account to determine whether a settlement had been reached.

II. ISSUES AND SUBMISSIONS

The parties say there are three issues:

1. Is evidence of positions taken, statements made and the parties' conduct in the mediation process admissible at an arbitration hearing to determine whether there has been a final and conclusive resolution of a dispute;

2. What constitutes a "settlement" within the dispute resolution process of the Commission;

3. Was a settlement achieved in this case?

(a) Appellant's Position

(i) Admissibility of Evidence

The appellant argues a combination of provisions in the Insurance Act, R.S.O. 1990, c.I-8, as amended, (the Act) and the Dispute Resolution Practice Code, (the Code) leads inevitably to the conclusion that everything taking place during the mediation process is confidential, indeed privileged, among three parties - the mediator, insurer and insured person - and must be protected.

Starting with s. 279(2) of the Act, parties are encouraged to settle at each stage in the dispute resolution scheme. Mediators are charged with trying to effect settlements whenever possible. To achieve this goal, open and frank discussions are necessary. Consequently, what is said or done in mediation should not and cannot be used by or against any party in subsequent proceedings.

The appellant states this result is reinforced by s. 11(3) of the Act precluding mediators from being summoned to testify in a civil proceeding or before any other tribunal (arbitration) touching on information he or she may have acquired in discharging the duties under the Act without the express consent of the Commissioner. Coupled with s.26(2) of the Act relating to official documents signed on behalf of the Commission and their force as evidence of the facts in them, it is an error to go behind the Report of Mediator and, in this case, the Confirmation of Settlement document signed by both parties.

The appellant supports the view expressed in the arbitral decision Tuzin v. Allstate Insurance Company of Canada, (OIC File No. A-000596, May 28, 1992) wherein it was noted the mediation process is confidential and a "privilege of confidentiality", which attaches to it, belongs to the parties. Generally an arbitrator should not receive evidence about discussions at a mediation meeting. The appellant also relies on Leon Bailey v. C.A.A. Insurance Company (Ontario) (OIC File No. A-001139, October 29, 1992) which held there is a tripartite confidentiality among the mediator and the parties.

It is submitted this approach is necessary to preserve the integrity of the mediation process, permit the parties to explore alternative solutions, weigh options openly, and achieve a resolution free from the threat of having their positions or statements come back at them in another forum. Without the protection of confidentiality it is unlikely parties will participate in any meaningful way, thereby frustrating the goal of achieving settlement wherever possible. Mediation will become an exercise in posturing.

(ii) What is "Settlement"

Given the mediation process is confidential, and its nature recognized in s. 3.3 of the Code and s. 280(4) of the Act, it follows that the outcome of the process, namely the Report of Mediator, Confirmation of Settlement and other documents generated must be taken at face value.

The appellant argues extrinsic evidence should not be permitted by the arbitrator unless the documents themselves do not set out an agreement. The appellant states the facts in this case and the unambiguous wording of the documents are conclusive of a final settlement having been reached. If they do not fully outline the agreement or are capable of different reasonable interpretations, then the Report of Mediator must be analyzed for what it actually is, in the context of the Act.

It is argued the section in the Report entitled "Issues Remaining in Dispute" is only a mediator's opinion, and not a statement of fact. The appellant finds support for this in s. 280(6) of the Act which states:

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.

That section of the Report is to be contrasted with the one entitled "Issues Resolved". The appellant argues this section deals with facts subsequently confirmed or adopted as true by the parties when they sign a Confirmation of Settlement form or similar documentation as set out in s. 6.1 of the Code. The mediator's opinion, then, is only as to failure of resolution, not on settlement. The way to contest an inaccurate statement of fact (resolved issue) in the Report is to refuse to sign a Confirmation of Settlement or take steps to have the Report amended by the mediator. It is submitted the arbitrator cannot look behind a "settlement" so set out where there is no allegation of fraud, mistake, misrepresentation, undue influence, unconscionability or similar factor present. The appellant relies on the Tuzin test, and various cases set out in Appendix 1.

(iii) Settlement in this Case

The appellant says the arbitrator misapprehended certain facts it alleges were uncontroverted, namely:

1. There were no issues remaining in dispute according to the mediator's Report;

2. No request to correct or amend the Report was made;

3. A Confirmation of Settlement adopting the terms of the Report was signed by both parties;

4. The mediator's letter accompanying the Confirmation stated all issues had been resolved;

5. The mediation was in a face-to-face format and the respondent had legal representation.

Further, the appellant contends the evidence surrounding payment of the amounts agreed to shows the parties conducted themselves in a manner more consistent with settlement than not. It makes no sense, for example, for an insurer to pay a lump sum for a benefit period not yet accrued when entitlement is disputed. If the arbitrator had given the appropriate weight to properly admissible evidence of the parties' subsequent conduct, the conclusion of a settlement having been reached was inescapable.

The appellant also submits the parol evidence rule operates in this context. Evidence of the respondent's lawyer (via a letter subsequent to the mediation) who was not present at the face to face meeting should not have been admitted, nor the evidence of the articling student who was present as to her "understanding" of what the terms of the settlement were. These cannot be used to qualify the Report, confirming letter of the mediator, or the executed Confirmation of Settlement.

The appellant states the agreements reached were clearly reduced into written form, and evidence of what passed between the parties during the mediation process cannot be admitted. Signing of additional documents as suggested by the arbitrator to indicate a "full and final" release of claims is not only unwieldy, but unnecessary.

Finally, the respondent herself did not testify. Only she was able to give evidence as to her understanding of the agreement, if such evidence was admissible at all. It is suggested an adverse inference must be drawn from this failure to appear.

(b) Respondent's Position

The respondent approached the issues in a different way. No argument was specifically directed on what, generally, constitutes a settlement in the Commission's processes, or whether there is any merit to the "opinion versus fact" approach in looking at a mediator's Report. Rather, the respondent focused on the settlement alleged to have been reached in this case, and the nature of confidentiality in mediation as it relates to the evidence the arbitrator was entitled to hear.

1. Settlement in this Case

The respondent frankly admits there was a settlement. Supplementary medical benefits were paid by the appellant and treated as final by both parties, as the "reimbursement" outlined in the Report of Mediator.

The issue of weekly benefits, though was not settled in a manner which finally disposed of Mrs. Aggarwal's right to claim them. The respondent says it is not inconceivable parties come to a resolution of an ongoing benefits dispute on a "wait and see" basis, pending further medical investigation or other inquiries to determine whether a claimant continued to be entitled to benefits within the meaning of the Schedule, or confirmation of income amounts. These types of settlements, genetically called "procedural", are common given the short legislated 60 day period in which mediation must take place. What happened in this case, the respondent says, was a "wait and see" resolution of her weekly benefits claim.

On the facts, it is submitted the actions of the respondent and her representatives after mediation are consistent with her understanding of the "procedural" settlement reached and thus the arbitrator's conclusion to permit the claim to proceed to an arbitral hearing is correct.

2. Admissibility of Evidence

In any event, the respondent argues the Report of Mediator is vague and cannot be interpreted to reflect a final release of rights. The disputed paragraph reads:

"Amount:"

"$6,000.00"

"Details:"

"The insured has agreed to accept this amount paid to her as a lump sum, inclusive of interest."

The Report can be read as indicating either a lump sum settlement for all time, or an amount for an earlier period of time which remained unpaid (here December 21, 1991 - February 27, 1992) combined with an amount for a future time (February 27, 1992 - July, 1992) and further consideration of the respondent's condition and claim thereafter. Once the arbitrator found the Report to be ambiguous, doing justice between the parties meant inquiries had to be made to decide if a binding, final, agreement was achieved, or a meeting of the minds had occurred, so it could be said the respondent gave up her right to claim benefits after the close of mediation.

The door having been opened by the ambiguity of the Report, the arbitrator could permit evidence to be led surrounding the entire process to interpret what agreement, if any, was reached.

While the Respondent concedes the mediation itself was confidential, she says the confidentiality is no different than the traditional one surrounding settlement negotiations. Offers made and rejected are not to be disclosed, nor are any concessions or admissions parties may have made. However, statements by the mediator to the parties are not caught in this net and should be admitted, as well as what the parties themselves thought was being negotiated. The Report was not confidential, so to the extent the mediator and the parties discussed the terms of the lump sum, such evidence is admissible to not supplement or modify, but explain, the settlement.

The arbitrator also had the right to admit and consider evidence otherwise excluded as hearsay on the basis of s. 15 of the Statutory Powers Procedure Act, R.S.O. 1990, c. 22 (S.P.P.A.), s. 18 of the Code, and the distinctive characteristics of arbitration. The arbitrator's concern then becomes the weight to be given to the evidence received. The parties' understanding, what they and their representatives thought at relevant times and their actions subsequent to mediation are all admissible, without offending the principles of the Bailey case (supra) as the mediator did not give evidence and his statements were not referred to at the hearing.

III. FINDINGS

1. Mediation Process

To determine whether evidence about mediation should be received in an arbitration, the starting point is the nature of that process.

The unusual feature of mediation in this dispute resolution scheme is that it is mandatory. Section 281(2) of the Act provides:

No person may bring a proceeding in any court or refer a matter to arbitration unless mediation has first been sought and has failed.

In voluntary systems, parties are free to select a mediator and agree whether a mediation is open and any statements made or positions taken admissible in subsequent proceedings, or closed. The confidentiality which attaches to a closed mediation may be absolute or qualified. If absolute, nothing about the process, occasionally even non-disclosure about whether it actually took place or what was said and who participated, is admissible. If qualified, the parties might agree only some aspects, such as final positions taken, may be revealed through them or the mediator. In some instances, a right of confidentiality extends only to the mediator who is not compellable as a witness notwithstanding the mediation was open. The structure of dispute resolution in this statutory scheme does not lend itself to the possibility of these variations.

In the Tuzin case, the arbitrator accepted the mediation process was confidential and held the right to assert or waive confidentiality belonged to the insurer and insured person accepting, it seems, the traditional view of settlement negotiation privilege. In the Bailey case, after analysing that decision and the statutory sections and arguments already referred to, the arbitrator concluded the privilege was not just between the parties but included the mediator and thus is much wider both as to person and subject matter than held in Tuzin.

There is a clear public policy thrust in the legislation and regulations promoting settlement and discouraging litigation. Starting with mandatory mediation and following through with the protection of the mediator from testifying without the Commissioner's consent, the emphasis is on promoting open and free discussions between the parties and with the mediator which hopefully will be effective in producing a resolution. Confidentiality must extend beyond the parties and include the mediator for the process to work, as recognized in the Act and Code.

The so called "protection" of the mediator from giving evidence without the Commissioner's consent is, in some quarters, regarded as a clause of pure administrative necessity. Several statutes contain similar provisions, with the object of preventing persons with statutory duties spending much of their time explaining their activities in court or other proceedings. While such clauses may be construed to preserve the business efficacy of statutory organizations, I find s. 11(3) means more than that. In a mandatory system, the ability of the mediator to remain impartial and have the parties retain confidence in the process is more vital than mere bureaucratic convenience. The section promotes the neutral participation of a mediator and at the same time protects the parties, leaving to the Commissioner a discretion to permit the giving of evidence in what must be seen as exceptional cases.

The real issue becomes what kind of privilege, or confidentiality attaches to mediation? There is the familiar model of privilege, which extends to settlement negotiations between the disputants, and limits permissable evidence about compromises or admissions of weakness in their positions. In a mandatory system I believe there is another model, made necessary by the compulsion the parties are under to take part in the process, which extends privilege to all statements made to and by a third party neutral. Without this, I agree with the appellant, the result is a sham - an exercise in game playing.

It follows the parties cannot unilaterally determine they will waive confidentiality and bring evidence of what was said and done during mediation before an arbitrator.

After the conclusion of mediation, the parties are entitled to receive a Report of Mediator. The importance of this document is manifest. There is no right to an arbitration or court action if settlement was reached in mediation. The Report sets out resolved issues as well. The arbitrator's jurisdiction to hold a hearing, which he or she must define, can only be about an unresolved dispute.

The Report of Mediator is not written by the parties and of itself, constitutes the opinion of a disinterested third party participant. It is not the agreement of the parties, but rather evidence about what issues were referred to mediation, subsequently resolved or not. When one party alleges settlement has been reached on a particular issue, and the other party takes an opposing view, the jurisdiction of the arbitrator must be to determine as a preliminary matter whether the issue is capable of being arbitrated.

There is no foundation, in my view, for saying some parts of the Report are fact, others opinion. Indeed, there is no requirement in the statute or Schedule for a mediator to record an agreement. The only reference to noting settlements in the Report is in the Code, reflecting the service commitment of the mediation unit of the Commission to provide the parties with a comprehensive summary of the outcome. If settled issues were not set out, misunderstandings which could arise might be increased. There is greater merit in the inclusion than exclusion of "settled" issues, particularly where many claimants using the process are unrepresented by advocates.

When a party challenges the notion that settlement of a particular issue was reached in mediation, the reference point is the Report. If it is clear and unambiguous, it will lend weight to the position of the party asserting a conclusion was reached as written. It is not the determining factor by itself.

Where the Report is followed by a signed Confirmation of Settlement document in exactly the same terms its reliability may take on more significance. Prior to executing a confirming document, the parties have the opportunity to review the Report and take exception to statements made in it. The confirming document, though, if mimicking the words of the Report or merely stating that the parties confirm the Report as written, does not become a release or binding agreement or necessarily an exclusive record of a settlement.

In this case, the Confirmation stated the parties agreed the outcome of the mediation process was as set out in the Report. By themselves, the words in the disputed section of the Report are capable of several meanings. The arbitrator found there were at least two reasonable interpretations of what was meant. Thus the arbitrator was entitled to receive evidence about the process that led to the issuing of the Report and the subsequent conduct of the parties in furtherance of a purported agreement.

2. Evidence in the Arbitration Process

It has been argued that extending the mediation privilege to the mediator will discourage use of the process because parties will not be able to obtain valid interpretations of the agreements they reach and cannot defend against agreements which might have been obtained through fraud. As in this case, arbitrators may be faced with evidence from two adverse parties, directly in conflict with one another and there is a third, presumably objective, person who is able to present evidence that might resolve the issue. The dilemma highlighted in this situation is that of maintaining the neutrality, both perceived and real, of the mediator while at the same time foregoing the benefit to be derived from his or her evidence in order to get at the true facts.

The public policy interest in maintaining the mediator's impartiality outweighs the potential benefit in an adjudicative process. In my view, receiving evidence about what was said to or by the mediator, or by the parties to each other in the mediator's presence should not be admitted through the mediator. So doing creates an appearance of partiality and turns the mediator into a quasi adjudicator. It is in the Commissioner's sole purview to order disclosure where the need for the evidence clearly outweighs the public policy purpose served by its non-disclosure. Similarly, the parties cannot seek to introduce what the mediator said to each of them through their own testimony.

Arbitrator Sampliner admitted oral evidence by the respondent's son (agent), her lawyer's articling student who represented her interests, and the appellant's representatives, all of whom attended the mediation. He also permitted the introduction of letters (Exhibits 1 and 2) from the respondent's lawyer created after the event, outlining his understanding of what was negotiated at the mediation.

As there is no transcript, I cannot precisely determine how far afield the oral testimony went. From the decision, there is no question all those who testified were accepted as credible. The mediation itself was not classically face-to-face. Here the mediator shuttled back and forth between the parties and they did not negotiate directly. The chance of misunderstandings arising in that approach was very high.

The parties are entitled to adduce evidence about what they thought and what they did in the mediation. It does no violence to the confidential nature of the process to permit this testimony. To the extent the evidence the parties gave included statements about what the mediator said to each of them or the proposals one party made to the other, or what the parties' representatives discussed among themselves, it was to be excluded.

There is nothing to be gleaned from the arbitrator's decision which indicates statements made by or to the mediator or by the parties between themselves were offered or admitted. The mediator did not testify. The arbitrator took into account the wording of the Report, what the parties thought they were agreeing to and looked to their subsequent actions. I find no indication that the arbitrator permitted evidence about what happened at the mediation to be given, but rather what the parties thought they were gaining or giving up as a result of the process and their actions thereafter. The arbitrator had to do this once he found the mediator's written recording of the alleged agreement was not clear and the Confirmation of Settlement document adopting the Report did not render it any more understandable. It was the correct approach to take.

As well as the oral evidence properly admitted, the arbitrator considered two letters from the lawyer representing the respondent, whose articling student attended the mediation. Exhibit 1, dated March 6, 1992, offered by the respondent who waived any privilege attaching to it, requested the Confirmation of Settlement be signed and noted, as the student had explained, it "does not preclude...reapplying for additional accident benefits after July, 1992.". The articling student who made the statement to the respondent and her principal testified but the letter sets out the conclusion of the lawyer. The student gave evidence as to her views of what the respondent thought she had accepted. The letter was tendered, presumably, to indicate why a Confirmation of Settlement was signed by the respondent when requested by counsel, and no action taken to disagree with the Report or clarify its terms.

A subsequent letter dated May 10, 1993 (Exhibit 2) purporting to re-confirm the understanding outlined in the earlier letter was also tendered by the respondent who again waived solicitor-client privilege in respect of it.

Notwithstanding s. 15 of the S.P.P.A., it was going too far to accept Exhibits 1 and 2 and give them any weight. The lawyer's letters were removed from the mediation to such a degree they cannot be seen as reliable. They have no probative value and cannot offer any meaningful insight to what the respondent's understanding of the purported agreement was.

On the other hand the articling student, who discussed the matter with her principal and was at the mediation to assist the respondent, could testify as to her conversations with the client, the client's agent, and the understanding she had of the outcome of the process.

At page 8 of the decision, the arbitrator refers to the lawyer's letters as lending weight to the respondent's position. While I find the evidence inadmissible, this does not mean the overall decision loses its force and effect. Without the letters, the oral testimony which excluded statements made to and by the mediator and the findings surrounding the actions subsequently taken by the respondent, in particular, are sufficient to support the conclusion that the parties had completely disparate views of what had been negotiated and no settlement was reached.

3. What Constitutes a Settlement

Although this was an issue before the arbitrator, the question of what constitutes a settlement in the Commission's dispute resolution process is too wide. Whether an agreement has been arrived at will turn on the specific facts of each case. The actions of the parties, coupled with statements in the Report of Mediator and any other documents (Confirmations, releases and so on) must be looked at in light of their peculiar circumstances. These documents are not conclusive of settlement but evidence to be weighed in each case to determine whether particular issues have been settled.

If the Report of Mediator or other documents confirming its terms were held, as a matter of policy, to be conclusive of settlement having been achieved there would be no safeguard for either party to dispute what has occurred in a mandatory process. There must be a right, whenever a settlement is challenged, to inquire into the surrounding circumstances.

The protection of the parties' interests and the ability to overcome situations, for example, involving fraud in this system are found in the right to submit these issues to an adjudicator. Everything turns on the outcome of mediation - to pursue other remedies or assert the finality of the bargain. Therefore it is inappropriate, indeed dangerous, to lay down hard rules on what weight is to be given a Report of Mediator or what constitutes settlement in general.

IV. EXPENSES

The extent of confidentiality in the mediation process and what is admissible in arbitration about it are important concerns for the proper functioning of the dispute resolution mechanisms in the Act. The appellant raised significant legal and policy issues which the respondent was obliged to answer. The issues in this case go beyond its facts.

For the respondent, however, the outcome is the continuation of litigation for a matter she thought, not unreasonably, was to be concluded directly with the appellant without further involvement of the Commission. I believe it appropriate the respondent be given her expenses of this appeal. In the event the parties are unable to agree, the assessment of expenses will be conducted by the arbitrator presiding at the arbitration.

V. ORDER

1. The appeal from the preliminary decision of Arbitrator F. Sampliner is dismissed, and an arbitration may proceed on the issue of the respondent's entitlement to weekly benefits.

2. The respondent is entitled to her expenses of this appeal to be assessed by the arbitrator presiding at the hearing, if so required.

June 30, 1994

Elisabeth Sachs

Director of Arbitrations

Date

APPENDIX I

Cases and Authorities Cited

Leon Bailey v. CAA Insurance Company (Ontario), (OIC File No. A-001139, October 29, 1992)

Cambrian Ford Sales (1975) Ltd. v. Horner (1989), 1989 CanLII 4259 (ON HCJ), 69 O.R. (2d) 431 (Div. Ct.)

International Loan Co. v. Kostniuk, 1936 CanLII 539 (MB KB), [1936] 3 D.L.R. 227 (Man. K.B.)

Saunders v. Anglia Building Society, [1971] A.C. 1004 (H.L.)

Taylor v. Armstrong (1979), 1979 CanLII 1811 (ON HCJ), 24 O.R. (2d) 614 (H.C.J.)

Tuzin v. Allstate Insurance Company of Canada, (OIC File No. A-000596, May 28, 1992)

Vieczorek et. al. v. Piersma et. al. (1987), 1987 CanLII 4403 (ON CA), 58 O.R. 583 (C.A.)

Waddams, S.M., The Law of Contracts, 3rd ed., 1993, p. 210-211

¹ Before January 1, 1994, O.Reg. 672 was called the No-Fault Benefits Schedule. As of that date, it became the Statutory Accident Benefits Schedule - Accidents Before January 1, 1994. The term "'Schedule" herein refers to O.Reg. 672.