Neutral Citation: 1994 ONICDRG 66
File No. A-002354
ONTARIO INSURANCE COMMISSION
BETWEEN:
PETER KOTSIAKOS
Applicant
and
STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY
Insurer
DECISION ON PRELIMINARY ISSUE
Issues:
This motion raises the question of whether an arbitrator is limited strictly to dealing with the issues that an applicant has chosen to raise in his or her application, or whether an arbitrator's jurisdiction under the Insurance Act, R.S.O. 1990, c. I.8, as amended (the "Act") extends to issues raised by an insurer, notwithstanding that an applicant does not agree to have these issues arbitrated.
The preliminary issues are:
Is State Farm Mutual Automobile Insurance Company ("State Farm") entitled to raise the issue of repayment of weekly income benefits for the period August 20, 1992 to December 19, 1993?
Is State Farm entitled to raise the issue of Mr. Kotsiakos' entitlement to weekly income benefits after December 19, 1993?
Result:
Repayment of weekly income benefits for the period August 20, 1992 to December 19, 1993, is not an "issue in dispute" to be determined by the Arbitrator, under section 282(3) of the Act.
Mr. Kotsiakos' entitlement to weekly income benefits after December 19, 1993, is not an "issue in dispute" to be determined by the Arbitrator, under section 282(3) of the Act.
Hearing:
The preliminary issues were dealt with by way of written submissions, following the pre-hearing conference. I received written submissions, dated April 29, 1994 and June 13, 1994, from Ms. Philippa G. Samworth, on behalf of State Farm. I received written submissions, dated May 25, 1994, from Mr. Tony Lafazanis, on behalf of Mr. Kotsiakos.
Cases Considered:
Rosa DeCicco and State Farm Mutual Automobile Insurance Company, December 18, 1991, OIC File No. A-000277
Rosa DeCicco and State Farm Mutual Automobile Insurance Company, February 21, 1992, OIC File No. P-000277 (Appeal)
Comfort Ayertey and Toronto Transit Commission (Markel Insurance Company of Canada), April 5, 1994, OIC File No. A-004077
Reasons for Decision:
a) Background Facts and Issues:
Mr. Kotsiakos was involved in a motor vehicle accident on October 1, 1991. He applied for weekly income benefits, under section 12 of Ontario Regulation 6721. Mr. Kotsiakos received weekly income benefits in the amount of $185.60 per week from October 8, 1991 until May 23, 1992, when benefits were terminated. He disputed the amount of weekly income benefits and also sought ongoing weekly income benefits.
Mr. Kotsiakos applied for mediation. The Report of Mediator, issued on September 30, 1992, indicates that issues in respect of Mr. Kotsiakos' entitlement to weekly income benefits after May 23, 1992, and the amount of the weekly income benefit to which he was entitled were dealt with, but not resolved. The Report of Mediator also indicates that the parties agreed that Mr. Kotsiakos could proceed to arbitration, in the event of any future disputes regarding his entitlement to weekly income benefits. Following mediation, State Farm re-evaluated Mr. Kotsiakos' claim and paid Mr. Kotsiakos weekly income benefits until December 19, 1993. State Farm also re-calculated Mr. Kotsiakos' gross weekly income and adjusted the amount of the weekly income benefits so that Mr. Kotsiakos was paid weekly income benefits in the amount of $308.52 per week, from October 8, 1991 to December 19, 1993. State Farm arrived at this figure based on Mr. Kotsiakos' average income from employment for the 52 weeks preceding the accident.
Mr. Kotsiakos submitted an Application for Appointment of an Arbitrator, dated February 1, 1994. In the Application, Mr. Kotsiakos raised the issue of the amount of the weekly income benefit to which he was entitled, under section 12 of the Schedule. Mr. Kotsiakos claimed that he was entitled to be paid weekly income benefits in the amount of $412.80 per week. Mr. Kotsiakos arrived at this figure by dividing his gross income for the four weeks preceding the accident by the number of weeks he actually worked. Mr. Kotsiakos also claimed reimbursement for transportation expenses, under section 6(1)(d) of the Schedule.
In the Response by Insurer, dated March 7, 1994, State Farm, in addition to responding to the issues raised by Mr. Kotsiakos in his application, claimed repayment of weekly income benefits paid between August 20, 1992 and December 19, 1993. State Farm took the position that these benefits were paid to Mr. Kotsiakos through error and Mr. Kotsiakos was not entitled to receive these benefits during the period August 20, 1992 to December 19, 1993, as he was substantially able to perform the essential tasks of his employment. Further, at the pre-hearing conference, State Farm requested that the question of Mr. Kotsiakos' entitlement to weekly income benefits after December 19, 1993, also be included in the arbitration.
Mr. Kotsiakos objected to the inclusion of these issues in the arbitration.
b) Submissions:
State Farm submitted that once an applicant has referred a matter to arbitration then any issues within the context of that matter that have been mediated may be arbitrated at the behest of either party. State Farm submitted that, in this case, the matter that was referred to arbitration by Mr. Kotsiakos was a dispute in respect of weekly income benefits. The issues within the context of that matter include quantum and duration of those benefits. State Farm submitted that since Mr. Kotsiakos had raised the issue of quantum, State Farm was entitled to request that the issue of duration be arbitrated.
In support of this proposition, State Farm relied on the two decisions in Rosa DeCicco and State Farm Mutual Automobile Insurance Company, December 18, 1991, OIC File No. A-000277 and the appeal decision dated February 21, 1992, OIC File No. P-000277. State Farm also relied on the recent decision in Comfort Ayertey and Toronto Transit Commission (Markel Insurance Company of Canada), April 5, 1994, OIC File No. A-004077. State Farm submitted that this proposition is also built into the proceedings at the Ontario Insurance Commission as set out in the Dispute Resolution Practice Code.
Mr. Kotsiakos submitted, essentially, that an applicant's wishes as to what should or should not proceed to arbitration should be determinative. Mr. Kotsiakos submitted that, in this case, he did not wish for any issues other than those stated in his Application for Appointment of an Arbitrator to be dealt with at this time. Mr. Kotsiakos stated that he was not disputing State Farm's refusal to pay weekly income benefits after December 19, 1993, at this time. He suggested that, after State Farm's refusal to pay these benefits, he has two years within which to commence a proceeding in a court or proceed to arbitration. Specifically in respect of the issue of quantum of weekly income benefits raised in the Application for Appointment of an Arbitrator, Mr. Kotsiakos submitted that he was seeking to have a straightforward issue determined. The parties had agreed that quantum was either the Applicant's or the Insurer's figure. Mr. Kotsiakos submitted that the issue could be resolved with legal argument in a hearing lasting probably less than half a day.
c) TheLaw:
An arbitrator's jurisdiction to determine issues between the parties is limited by sections 281(1), 281(2) and 282(3) of the Act, which provide:
281.-(1) If mediation fails, the insured person may bring a proceeding in a court of competent jurisdiction or may refer the matter to an arbitrator.
(2) No person may bring a proceeding in any court or refer a matter to arbitration unless mediation has first been sought and has failed.
282.-(3) The arbitrator shall determine all issues in dispute and such other issues as the parties may agree.
[emphasis added]
Only an insured person may refer a matter to arbitration. Whether an arbitrator can deal with issues other than those raised by an applicant in the Application for Appointment of an Arbitrator depends on the scope of the "matter" that an applicant has referred to arbitration, and, in the absence of agreement between the parties, the scope of the "issues in dispute" in the case.
The words "matter" and "issues in dispute" are not defined in the Act. In the case of DeCicco, Senior Arbitrator Naylor interpreted "matter" and "issues in dispute" as follows:
The legislation appears to draw a distinction between a "matter" and "issues". "Matter", it is suggested, is the broader term, and means the thing in dispute; "issues", the specific questions of fact or law that form the basis of the dispute.
The wording and scheme of the statute is therefore best reconciled by construing "the matter" referred to arbitration as a dispute between an insurer and insured over a specific no-fault benefit claimed. The questions that either party raises in relation to an applicant's entitlement to the benefit or to the amount of the benefit in dispute comprise the issues.
These questions are "issues in dispute" under s. 242d(3) if they have been identified as such in the course of mediation, they remain unresolved, and they are raised by either party to the arbitration. If such issues have not been mediated, however, they are not arbitrable under the terms of s. 242(3) unless both parties consent to their inclusion.
However, the scope of the issues before the arbitrator should not be defined in a narrow and technical way. The authority of the arbitrator extends to anything that reasonably and consequentially flows from the issues that are before her. In my view, this includes an applicant's liability to repay any benefits found to have been overpaid in light of the arbitrator's findings.
An applicant's liability to repay a benefit under s. 27 of the No-Fault Benefits Schedule relates directly to the applicant's entitlement to the benefit or the amount of the benefit payable. In my view, therefore, an order for the repayment of benefits - if raised by a party - falls squarely within the jurisdiction of the arbitrator. (pages 8 and 9)
In DeCicco, the Applicant's application for arbitration was confined to her continuing entitlement to weekly income benefits and care benefits. The Insurer not only responded to the issues raised by the Applicant, but also raised questions in respect of the amount of the care benefits, repayment of care benefits already paid, the Applicant's entitlement to costs of transportation to and from medical treatment and repayment of payments made, and the Applicant's entitlement to expenses for rehabilitation. Senior Arbitrator Naylor found that questions in respect of the Applicant's entitlement to care benefits for the period before they were terminated, the amount of such benefits, and the Applicant's liability to repay any such benefits were necessarily and properly before her in the arbitration because these issues represented "issues in dispute" in the proceeding. She found that the Applicant's entitlement to rehabilitation and transportation expenses, and the amount of such expenses, were not issues in dispute in the proceeding and, therefore, beyond the jurisdiction of the arbitrator.
On appeal, in DeCicco (Appeal), the Director of Arbitrations commented as follows, in respect of Senior Arbitrator Naylor's findings:
Where an arbitrator is called upon to determine "the matter" referred to him or her, the arbitrator must define that matter and, in each case, determine the scope of the arbitration. In this case, Arbitrator Naylor determined that the issue of the insured person's entitlement to care benefits, and the amount of such benefits were properly an "issue in dispute" and using the natural or consequential flow position, so was any liability to repay care benefits an "issue in dispute" of "the matter" the applicant had referred to arbitration. The insurer's concerns over the entitlement of the applicant to transportation or rehabilitation expenses, not forming part of the matter of entitlement to care benefits could not properly be an "issue in dispute" unless it was agreed to be such by the applicant. The claim of the insurer, was in fact, another "matter" which the applicant had not put before the arbitrator. Whether or not it may be more expeditious for the parties to deal with all of these items in one hearing is not a relevant consideration given the structure and scheme of the Act as a whole and given the necessity of having each section, general or specific, carry with it a coherent and logical meaning.
[emphasis added, pages 10 and 11]
The Director of Arbitrations dismissed the appeal from the order of Senior Arbitrator Naylor.
In DeCicco (Appeal), the Director of Arbitrations rejected the view that the word "matter" in section 281(2) of the Act encompasses all issues raised in mediation by the parties.
The Director of Arbitrations also rejected the restrictive view which would limit the Arbitrator's jurisdiction to a single question or a single issue as defined by the Applicant. She stated that that could not have been the purpose of the word "matter" in section 281 as it would render section 282(3) meaningless. The Director of Arbitrations stated:
The words "all issues in dispute" in s.282(3) must be referenced to "the matter" and there must be a natural, or consequential, flow from the general to the specific.
[emphasis added, page 10]
In Ayertey, Arbitrator David Draper concluded that:
...DeCicco stands for the proposition that the Insurer cannot raise a matter (benefit category) that is not included in the Applicant's Application for Appointment of an Arbitrator, even if that matter was included in the mediation, unless the Applicant consents. The Insurer's remedy is to apply to court.
[emphasis added, pages 11 and 12]
The conclusion reached by Arbitrator Draper appears to support the proposition advanced by State Farm, in this case. The proposition advanced by State Farm is that where, for example, an applicant raises the issue of the quantum of weekly income benefits, the "matter" referred to arbitration is weekly income benefits (benefit category) and an insurer can raise the issue of duration of weekly income benefits, if this issue was included in mediation, notwithstanding that an applicant does not agree to have this issue arbitrated.
I do not agree with Arbitrator Draper's view that, in DeCicco (Appeal), the Director of Arbitrations defined "matter" as equivalent to a benefit category. This is not my reading of the Director's decision. The Director did not define "matter". Rather, she stated that it was up to the arbitrator called upon to determine "the matter", to define that matter, and, in each case, determine the scope of an arbitration. The Director suggested, however, that once "the matter" referred by an applicant to arbitration is defined by the arbitrator, any questions or concerns that naturally or consequentially flow from "the matter" comprise the "issues in dispute".
I do not believe that it is open to an arbitrator, where the matter or thing in dispute that an applicant has referred to arbitration is restricted, to expand the scope of the arbitration to include an unrelated question or concern raised by an insurer. If the question or concern is directly related to the matter or naturally or consequentially flows from the matter, then it is properly an "issue in dispute".
In respect of section 11.2 of the Dispute Resolution Practice Code ("the Code") this provision appears to imply that an insurer may raise, in the arbitration, any issue or matter, not raised by an applicant, that is set out in the Report of Mediator. Section 11.2 of the Code provides:
11.2 The Response by Insurer shall be in Form 5,
(b) Form 5 shall include,
(i) a response to the issues raised by the insured person in the Application, including the reasons for the insurer's denial of benefits;
(ii) a description of the remedy sought by the insurer; and
(iii) a response to the issues set out in the Report of Mediator;
(iv) a statement whether the insurer waives an oral hearing of the arbitration.
(c) An insurer shall respond to all issues and other matters raised in the Application for Appointment of an Arbitrator and to the issues set out in the Report of Mediator.
(d) An insurer will not be permitted to raise an issue or other matter not set out in the Response or Report of Mediator except with leave of the arbitrator.
This provision appears to be in conflict with section 281 of the Act, as interpreted by the Director of Arbitrations in DeCicco (Appeal). The rules for the practice and procedure to be observed for an arbitration proceeding set out in the Code have been made by the Director of Arbitrations under the authority of section 21 of the Act. The Code is subordinate to the Act and in the event of a conflict between them, the Act prevails.
d) Findings in this Case:
In determining whether State Farm can raise the issues in respect of Mr. Kotsiakos' entitlement to weekly income benefits after December 19, 1993, and his liability to repay weekly income benefits paid during the period August 20, 1992 to December 19, 1993, in the arbitration, I must define "the matter" that Mr. Kotsiakos has referred to arbitration and determine whether the issues which State Farm seeks to include in the arbitration comprise "issues in dispute" in accordance with the Director of Arbitrations' decision in DeCicco (Appeal).
I consider that the matters referred to arbitration by Mr. Kotsiakos are the calculation of his gross weekly income, under section 12(7) of the Schedule, in conjunction with the calculation of his weekly income benefit, under section 12(4) of the Schedule, and his entitlement to transportation expenses under section 6(1)(d) of the Schedule. The issues which State Farm seeks to include in the arbitration are Mr. Kotsiakos' entitlement to weekly income benefits after December 19, 1993, and his liability to repay weekly income benefits paid during the period August 20, 1992 to December 19, 1993. The question is whether these issues were mediated and are directly related or naturally or consequentially flow from the matters referred to arbitration.
The Report of Mediator indicates and the parties, in their submissions, acknowledge that mediation of the issue of Mr. Kotsiakos' entitlement to weekly income benefits after May 23, 1992, was attempted and failed.
I find that the issues that State Farm seeks to add to the arbitration do not directly affect or naturally or consequentially flow from the matters referred by Mr. Kotsiakos to arbitration. The nature of the Arbitrator's inquiry and the type of evidence which may be led by the parties in respect of the issues that State Farm seeks to add to the arbitration will be different from the nature of the Arbitrator's inquiry and the type of evidence which may be led by the parties in respect of the matters referred by Mr. Kotsiakos to arbitration.
The hearing of this arbitration is scheduled for October 24, 1994. The Arbitrator's inquiry in respect of the issues that State Farm seeks to add to this arbitration for the period August 20, 1992 to October 7, 1994, will be whether Mr. Kotsiakos was substantially unable to perform the essential tasks of his employment. For the period after October 7, 1994, i.e.. the period in excess of 156 weeks, the Arbitrator's inquiry will be whether the injury sustained by Mr. Kotsiakos in his motor vehicle accident continuously prevents him from engaging in any occupation or employment for which he is reasonably suited by education, training or experience. The parties will likely lead extensive medical evidence on these issues.
It is important to emphasize that the matter that Mr. Kotsiakos has referred to arbitration, in respect of weekly income benefits, is a narrow one. Mr. Kotsiakos is not disputing State Farm's refusal to pay weekly income benefits to him after December 19, 1993, at this time. Mr. Kotsiakos is simply seeking a ruling in respect of the correct amount of weekly income benefits to which he is entitled during the period that State Farm determines he is eligible to receive weekly income benefits. The Arbitrator's interpretation of section 12(7) of the Schedule will likely determine the correct amount. The period of time during which this amount should be paid will not be determined by the Arbitrator.
State Farm's claim for repayment does not relate directly to the amount of weekly income benefits to which Mr. Kotsiakos is entitled. State Farm is not claiming that it has overpaid Mr. Kotsiakos because of an error in the calculation of his weekly income benefits. State Farm's claim for repayment relates to Mr. Kotsiakos' ability or inability to perform the essential tasks of his employment after August 19, 1992.
In conclusion, I find that the issues of Mr. Kotsiakos' entitlement to weekly income benefits after December 19, 1993, and his liability to repay weekly income benefits paid during the period August 20, 1992 to December 19, 1993, are not properly "issues in dispute" under section 282(3) of the Act. They do not fall within the jurisdiction of the Arbitrator.
Order:
The issue of repayment of weekly income benefits paid to Mr. Kotsiakos during the period August 20, 1992 to December 19, 1993, is not an "issue in dispute" to be determined by the Arbitrator in the arbitration, under section 282(3) of the Act.
The issue of Mr. Kotsiakos' entitlement to weekly income benefits after December 19, 1993, is not an "issue in dispute" to be determined by the Arbitrator in the arbitration, under section 282(3) of the Act.
July 26, 1994
Shemin Manji Arbitrator
Date