ONTARIO INSURANCE COMMISSION
BETWEEN:
GUIDO IAPAOLO
Applicant
and
GUARDIAN INSURANCE COMPANY OF CANADA
Insurer
DECISION ON PRELIMINARY ISSUES
Issues:
The Applicant, Guido Iapaolo, was injured in a motor vehicle accident on February 13, 1992. He applied for and received statutory accident benefits from the Insurer, payable under Ontario Regulation 6721. Guardian Insurance Company of Canada paid Mr. Iapaolo $185 per week, "pending confirmation of income." Mr. Iapaolo claimed that he was entitled to receive a weekly income benefit in the amount of $1,100. Mr. Iapaolo later amended his claim to $600. The parties were unable to resolve the dispute at mediation, and Mr. Iapaolo filed for arbitration under the Insurance Act, R.S.O. 1990, c.I.8, as amended.
Mr. Iapaolo filed two applications for arbitration. In his initial application, filed on February 8, 1993, he claimed weekly income benefits in the amount of $600, accounting and legal expenses incurred in the preparation of his claim, and interest on overdue benefits. On June 8, 1993, the Registrar's office was advised by a letter from Mr. Iapaolo's then counsel, Mr. Thomas Andrews, that the matter had been settled.
On January 10, 1994, a second application for arbitration was filed by new counsel, Mr. Jeffrey Gray. Mr. Iapaolo alleged that he was owed the sum of $6,356.61 as a deficiency balance on weekly income benefits prior to July 1993. He also claimed that his weekly income benefits should be reinstated, that he was entitled to supplementary medical and rehabilitation benefits, interest and his costs.
The Insurer alleged that Mr. Iapaolo settled his claims for weekly income benefits up to July 15, 1993 and could not proceed to arbitration with respect to his claim for a deficiency balance. The Insurer alleged that Mr. Iapaolo's other claims had not first been mediated as required by section 281(2) of the Insurance Act. The Insurer took the position that Mr. Iapaolo could not therefore have these claims arbitrated.
In his Reply, Mr. Iapaolo contended that the purported settlement agreement between Mr. Andrews and Guardian Insurance Company of Canada was made without his instructions or his knowledge.
The issues in this hearing are:
Issues:
- Can Mr. Iapaolo proceed to arbitration with his claims for:
(a) a deficiency balance owing on weekly income benefits payable before July 15, 1993?
(b) supplementary medical and rehabilitation benefits?
(c) reinstatement of weekly income benefits after July 15, 1993?
Is Mr. Iapaolo entitled to his expenses in respect of the arbitration?
Is the Insurer entitled to an award in respect of the arbitration?
The hearing was held in North York, Ontario, on May 12, 1994, June 2, 1994, and November 7, 1994.
Present at the hearing:
Applicant: Guido Iapaolo
Applicant's Representative: Filomena Iapaolo
Insurer's Representative: Cameron Godden Barrister and Solicitor
Insurer's Officer: Anne Wilson Claims Manager
Witnesses: Ms. Nancy Ann Clements, Ms. Anne Mary Wilson, and Mr. Thomas Gerald Andrews were witnesses called by the Insurer. Mr. Guido Iapaolo gave evidence on his own behalf.
Translation services in English and Italian were provided by Christina DeGano, Michael Vasta and Joseph Dionigi.
Court reporting services were provided by Kim Scott, and Carman Gillis, Holley & Strauch Reporting Services.
Exhibits: 23 exhibits were filed at the hearing. The exhibits and other documents before the arbitrator are detailed in Appendix A.
Evidence and Findings:
(a) The claim for a deficiency balance of weekly income benefits.
In May 1992, Mr. Iapaolo retained Mr. Thomas Andrews, barrister and solicitor, to represent him in his claims for accident benefits against Guardian Insurance Company. Mr. Iapaolo waived solicitor-client privilege at the hearing.
Guardian Insurance Company of Canada retained Adjusters Canada to process Mr. Iapaolo's claims for statutory accident benefits. Nancy Clements was assigned the file. Ms. Clements testified that the parties wished to resolve the issues between them prior to the scheduled pre-hearing. On April 1, 1993, she met with Mr. Andrews, Mr. Iapaolo and Mrs. Iapaolo. As a result of that meeting, she recommended to Guardian Insurance Company of Canada that the claim be settled. Ms. Wilson, the Insurer's branch claims manager, testified that a cheque payable to Mr. Guido Iapaolo was issued by the Insurer on May 11, 1993 in the amount of $19,788.39, and forwarded to Mr. Andrews.
Mr. Andrews testified that he had settlement instructions in broad terms from Mr. Iapaolo. He testified that a "broad brush" arrangement was reached with the Insurer on May 4, 1993, along the lines that were acceptable to him and, he believed, to Mr. Iapaolo. Mr. Andrews testified that he did not commit his client to the settlement at that point, and that on May 27, 1993, he met with Mr. Iapaolo to review the actual numbers involved. I find on the basis of Mr. Andrews' evidence and Mr. Iapaolo's admissions in cross-examination, that on May 27, 1993, Mr. Iapaolo instructed Mr. Andrews to proceed with the settlement of his weekly income benefits, and that Mr. Andrews then handed him the cheque in the amount of $19,788.39.
Mr. Andrews testified that on June 3, 1993, he met with Mr. Iapaolo to discuss the amounts for interest, costs and disbursements. Despite his settlement instructions of May 1993, Mr. Iapaolo first wished to review weekly income benefits in the context of reports of two accountants. Mr. Andrews testified that he reviewed the reports carefully, noting that they did not affect the settlement. He reviewed the weekly income benefits with Mr. Iapaolo once again. Mr. Iapaolo was satisfied. They then went on to discuss the other figures for interest, costs and disbursements. At the conclusion of their discussions, Mr. Iapaolo indicated that he would defer to Mr. Andrews with respect to the remaining amounts for interest, costs and disbursements, and stated "I trust you Mr. Andrews, do as you think best." I accept Mr. Andrews' account of the discussion.
By letter dated June 8, 1993, Mr. Andrews advised the manager, arbitration coordination, that the matter had been settled. The pre-hearing which had been adjourned to June 9, 1993 at 8:30 a.m., was therefore cancelled. On June 29, 1993, the Insurer issued a further cheque in the amount of $4,270, payable to Mr. Andrews' firm, in trust.
I find based on the oral evidence of Ms. Clements, Ms. Wilson and Mr. Andrews, and on the basis of the exhibits which outline the detailed calculations of the parties' representatives, that the agreement provided that the Insurer would pay Mr. Iapaolo a weekly income benefit at the rate of $600 from the beginning of his claim, an amount of $6,356.61 would be deducted as income earned after the accident as permitted under section 15 of the Schedule, and the amounts of $185 per week already paid to Mr. Iapaolo would be credited to the Insurer. The Insurer would continue to pay the amount of $600 per week directly to Mr. Iapaolo as a weekly income benefit, subject to medical entitlement. In addition the Insurer would pay a further amount for interest, disbursements and costs. The cheque for $4,270 also included an amount for Mr. Iapaolo's acupuncture expenses.
Mr. Iapaolo's main concern was that $6,356.61 should not have been deducted as post-accident earnings, since his net income for the year ending August 31, 1992, as set out in an unaudited income statement, was $1,553. He also claimed that an inadequate amount had been allowed for interest, and that he should have been credited with the sum of $850 for the report of the accountant, instead of $800.
At the hearing, he filed an invoice dated September 14, 1992, in the amount of $850 from Mr. Boyd, an accountant. When Ms. Clements was asked why $800 had been allowed towards this expense, instead of $850, she stated that she did not recall having been provided with a receipt for the amount. She believes that she had accepted Mr. Andrews' advice as to the amount. When Mr. Andrews was asked about this item, he indicated that he did not recall seeing the actual invoice; he believed that he had simply relied upon Mr. Iapaolo's advice that it had been $800. Mr. Iapaolo provided no evidence which conflicted with that of Ms. Clements and Mr. Andrews on this point, and I accept the evidence of Ms. Clements and Mr. Andrews.
In his evidence in chief, Mr. Iapaolo stated that no settlement was reached. He indicated that on July 5, 1993, a settlement was discussed, "but I refused it". He alleged that Mr. Andrews mishandled the claim, abusing his trust and power. In cross-examination, Mr. Iapaolo admitted that he met with Mr. Andrews on May 27, 1993, gave him instructions, that he took the cheque in the amount of $19,788.39, endorsed it, cashed it and spent the proceeds.
Mr. Andrews testified that he had many discussions with Mr. Iapaolo following these meetings. Mr. Andrews testified that it was not until July 1993, in the context of Mr. Iapaolo's dissatisfaction with Mr. Andrews' assessment of a claim involving Mr. Iapaolo's son, that Mr. Iapaolo began to express dissatisfaction with the settlement of his own claim with Guardian Insurance Company of Canada. Mr. Andrews testified that he recommended that Mr. Iapaolo obtain new counsel. He was not instructed to set aside the settlement.
Mr. Iapaolo then retained the law firm of Thomson, Rogers. Ms. Wilson testified that Guardian Insurance Company of Canada first learned that Mr. Iapaolo was disputing the settlement when she received correspondence from Mr. Jeffrey Gray, barrister and solicitor, dated December 2, 1993, advising that he had been retained by Mr. Iapaolo.
Conclusion:
I find that Mr. Andrews acted with authority and instructions from his client, Mr. Iapaolo, in concluding the settlement of Mr. Iapaolo's claims for the amount payable to him as a weekly income benefit, interest, disbursements and costs. Both Mr. Iapaolo and Guardian Insurance Company of Canada are bound by the settlement.
I am troubled that Mr. Iapaolo attempted to rely on some aspects of the settlement, such as the one which entitled him to receive $600 per week, but disowned those aspects which he viewed as unfavourable to him.
In the case of Mehmet Tuzin and Allstate Insurance Company of Canada, May 28, 1992, OIC File No. A-000596, Arbitrator Palmer made the following comments with which I agree:
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.
In my view there was no evidence before me on which the settlement could be set aside. The numbers used to calculate the amounts for the settlement were exchanged in writing between the parties' representatives. These figures and the circumstances of the claim were considered by both parties and a bargain struck. This cannot be considered a case of mistake.
I find that the parties continued to act pursuant to the settlement. According to the payment schedule, five further cheques were issued to Mr. Iapaolo by the Insurer as weekly income benefits, each in the amount of $1,200.
Mr. Iapaolo significantly delayed notifying the Insurer that he was disputing the settlement. He took no steps to communicate his dissatisfaction to the Insurer until December 1993, after he had retained his third lawyer with respect to his claims for statutory accident benefits.
(b) The claims for supplementary medical and rehabilitation benefits
Section 281(2) of the Insurance Act provides:
(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.
Counsel for the Insurer submitted that Mr. Iapaolo's claims for supplementary medical and rehabilitation benefits and his claims for weekly income benefits after July 15, 1993 had not been mediated. Mr. and Mrs. Iapaolo were adamant that the issues had been mediated.
As Mr. Iapaolo was not represented by counsel, had formerly been represented by more than one law firm, and because this was an issue which affects an arbitrator's jurisdiction, I caused a search to be made via the Registrar's office as to whether there had been any mediations between Guido Iapaolo and Guardian Insurance Company of Canada, other than the one which had given rise to the Report of Mediator, dated January 26, 1993, provided to me in the arbitration file. I was advised that there was no record of any other mediation between the parties at the Ontario Insurance Commission, and so advised the parties on the second day of the hearing.
Mediation is a confidential process. In determining whether these issues were mediated, I have had regard to a copy of the Application for Appointment of a Mediator, dated August 1992, to the Report of Mediator, to the evidence of the witnesses, and to the exhibits, as to the nature and context of the dispute at the time Mr. Iapaolo applied for mediation.
I was provided with no evidence that supplementary medical and rehabilitation benefits were mediated. Without the Insurer's consent, Mr. Iapaolo cannot have this issue arbitrated unless he first seeks mediation with respect to this issue as required by section 281(2) of the Insurance Act.
c) The claim for weekly income benefits after July 15, 1993
With respect to his claim for weekly income benefits, Mr. Iapaolo contends that as the broad category of weekly income benefits was mediated, his claim for ongoing entitlement to weekly income benefits after July 15, 1993 can be arbitrated. I do not agree.
Disputes under the heading of weekly income benefits may involve different issues, such as the amount of the benefit, or ongoing entitlement. Disputes arise in a context. The evidence before me indicates that at the time of his application for mediation, the only issue in dispute was the amount of weekly income benefits that Mr. Iapaolo was entitled to receive. His weekly income benefits were terminated on July 15, 1993, approximately 11 months after he applied for mediation. There could have been no dispute about his ongoing entitlement to receive a weekly income benefit while that benefit was still being paid.
On the basis of the evidence before me, I find that the issue of Mr. Iapaolo's ongoing entitlement to weekly income benefits was not mediated. In the result, as with his claims for supplementary medical and rehabilitation benefits, Mr. Iapaolo must either have the issue of his entitlement to weekly income benefits after July 15, 1993 mediated, or secure the Insurer's consent before he can have the issue arbitrated.
Expenses:
(1) Mr. Iapaolo's claim for expenses:
The Applicant seeks an award of his expenses. An arbitrator has a discretion to award these expenses pursuant to the Insurance Act, R.S.O. 1990, c.I.8, section 282(11), as amended. I have considered the principles guiding an award of expenses, as set out by Senior Arbitrator Naylor in the case of Ralph McCormick and Economical Mutual Insurance Company, October 2, 1991, OIC File No. A-000139, and approved by the Director of Arbitrations in the case of Vito Luigi Calogero and The Co-Operators General Insurance Company, February 13, 1992, OIC File No. P-000251:
The discretion to award expenses should be exercised, having regard to the intent and purpose of the legislative scheme. The arbitration process has been established under the Insurance Act, as amended, in order to facilitate applicants' access to relatively inexpensive, speedy and informal adjudication of disputes regarding no-fault benefits. The discretion to award expenses should be exercised in accordance with this objective, having regard to the individual circumstances of each case.
Accordingly, it is appropriate to award an applicant his or her expenses, unless, in the circumstances of the particular case, it is determined that the application for appointment of an arbitrator was manifestly frivolous or vexatious, or that the applicant's conduct unreasonably prolonged the proceedings.
I have also considered the submissions of counsel and of Mrs. Iapaolo with respect to the manner in which I should exercise my discretion. I conclude that the Applicant is not entitled to his expenses in respect of this arbitration. I find that the second arbitration was manifestly frivolous and vexatious and an abuse of process for the following reasons:
Mr. Iapaolo commenced the second arbitration knowing that he had in fact instructed his lawyer to settle his claims raised in the first arbitration application. He maintained his position that there had been no settlement until his cross-examination on the last day of the hearing.
On the first day of the hearing, when it appeared that it would be necessary to adjourn the hearing for a variety of reasons, and as both parties expressed a willingness to attempt to resolve the matters in dispute, the Insurer offered to pay directly to a lawyer of Mr. Iapaolo's choice up to $1,000, so that he might obtain legal advice with respect to the issues before me. It was a generous offer. On the resumption of the hearing, I learned that Mr. Iapaolo had spurned the offer and was now suggesting that counsel for the Insurer had acted in bad faith. I do not accept his allegations with respect to Mr. Godden.
Mr. Iapaolo made scandalous allegations with respect to the conduct of Mr. Andrews, one of his former lawyers. Four pre-hearing dates were scheduled in this matter. Time which had been set aside for hearing evidence was used to address Mr. Iapaolo's attempt to out-manoeuvre the Insurer, thereby delaying the arbitration process. Mr. Iapaolo refused to accept a courier delivery detailing the names of the witnesses to be called by the Insurer at the arbitration, and then requested that I prevent the Insurer from calling these persons as witnesses under section 18.4 of the Dispute Resolution Practice Code. Given his misleading statements with respect to critical issues before me, I do not accept his unsworn version of what took place with respect to the courier delivery.
(2) The Insurer's claim against Mr. Iapaolo:
The Insurer sought an order requiring that Mr. Iapaolo pay the Insurer's expenses in an amount of $1,000. Section 282(11.2) of the Insurance Act provides as follows:
If an insured person commences an arbitration that, in the opinion of the arbitrator is frivolous, vexatious or an abuse of process, the arbitrator may award an amount to be paid by the insured person to the insurer that does not exceed the amount assessed against the insurer in respect of the arbitration under section 14.
In view of my findings that a frivolous and vexatious arbitration was commenced, which was an abuse of this tribunal's resources and process, I award an amount of $1,000 in favour of the Insurer.
Order:
- Mr. Iapaolo cannot proceed to arbitration with his claims for:
(a) a deficiency balance owing on weekly income benefits payable before July 15, 1993;
(b) supplementary medical and rehabilitation benefits until this issue has been mediated;
(c) reinstatement of weekly income benefits after July 15, 1993, until this issue has been mediated.
Mr. Iapaolo is not entitled to his expenses in respect of the arbitration.
The Insurer is entitled to an award of $1,000 to be paid by Mr. Iapaolo in respect of the arbitration.
May 30, 1995
Suesan Alves Arbitrator
Date
APPENDIX A
Exhibit 1 Letter from Cameron Godden to OIC, dated May 24, 1994, with envelope addressed to Guido Iapaolo
Exhibit 2 Affidavit of Kelly Connell, legal secretary, Bell, Temple
Exhibit 3 Letter from Thomas G. Andrews to Nancy Clements, dated April 6, 1993
Exhibit 4 Fax memo from Adjusters Canada to Tom Andrews, dated June 2, 1993
Exhibit 5 Letter from Thomas G. Andrews to OIC, dated June 8, 1993
Exhibit 6 Letter from Thomas G. Andrews to Nancy Clements, dated June 10, 1993
Exhibit 7 Letter from Thomas G. Andrews to Nancy Clements, dated June 17, 1993
Exhibit 8 Letter from Nancy Clements to Thomas G. Andrews, dated July 6, 1993
Exhibit 9 Letter from Nancy Clements to Thomas G. Andrews, dated August 5, 1993
Exhibit 10 Letter from Anne Wilson to Thomas G. Andrews, dated May 18, 1993
Exhibit 11 Copy of cheque from Guardian Insurance payable to Guido Iapaolo, issued May 11, 1993
Exhibit 12 Copy of cheque from Guardian Insurance payable to Borden & Elliot in trust, issued June 29, 1993
Exhibit 13 Copy of payments made by Guardian Insurance re claims of Mr. Iapaolo from April 24, 1992 to September 16, 1993
Exhibit 14 Copy of letter from Thomas Andrews to Nancy Clements, dated April 13, 1993
Exhibit 15 Letter from OIC to Thomas Andrews, dated June 9, 1993
Exhibit 16 Letter from Thomas Andrews to Guido Iapaolo, dated July 7, 1993
Exhibit 17 Speakers' Biographies of the Canadian Institute re Thomas Andrews
Exhibit 18 Letter from Nelson Boyd to Guido Iapaolo, dated September 14, 1992
Exhibit 19 Three invoices and unaudited year-end Statement of Income
Exhibit 20 Letter from Stanley Paul to Guido Iapaolo, dated April 26, 1993
Exhibit 21 Letter from Nelson Boyd to Guido Iapaolo, dated June 2, 1993
Exhibit 22 Application for Appointment of a Mediator, dated August 1992
Exhibit 23 Application for Appointment of an Arbitrator, dated February 2, 1993
Other Documents Before the Arbitrator:
Report of Mediator, dated January 26, 1993
Applications for Appointment of an Arbitrator, dated February 2, 1993 and January 6, 1994
Responses by Insurer, dated March 9, 1993, February 3, 1994 and May 3, 1994
Replies by Insured Person, dated February 15, 1994, May 16, 1994 and May 30, 1994
Pre-hearing letters, dated May 12, 1993, April 8, 1994 and April 12, 1994
Notice of Preliminary Objection, dated February 11, 1994
Cases Referred to:
Scherer v. Paletta (1966), 1966 CanLII 286 (ON CA), 57 D.L.R. (2d) 532 (Ont. C.A.)