Neutral Citation: 1996 ONICDRG 133

OIC A96-000327

ONTARIO INSURANCE COMMISSION

BETWEEN:

DOROTHY RICKETTS

Applicant

and

CANADIAN GENERAL INSURANCE COMPANY

Insurer

DECISION ON A PRELIMINARY ISSUE

The Issue:

The Applicant, Dorothy Ricketts, was injured in an accident on August 1, 1992, when she was struck by a go-cart. She applied for and received accident benefits¹ from Canadian General Insurance Company ("Canadian General") on the basis that she was disabled from her pre-accident employment. Weekly income benefits were terminated by Canadian General on May 17, 1995. The parties were unable to resolve their disputes through mediation and on February 14, 1996, Ms. Ricketts applied for arbitration under the Insurance Act, R.S.O. 1990, c.I.8, as amended.

At the commencement of the pre-hearing arbitration, Ms. Ricketts advised, through her counsel, that she wished to withdraw from arbitration and proceed with her claim for accident benefits in court. The Insurer consented to a withdrawal but sought repayment of its $2,000.00 filing fee, which the Applicant refused. The parties therefore agreed that I would determine what terms, if any, attach to the withdrawal.

The issue in this hearing is:

1. On what terms should the Applicant be permitted to withdraw from the arbitration?

Result:

1. The Applicant must pay $2,000.00 to Canadian General within 30 days of settlement or judgment in the court action against Canadian General for accident benefits.

Hearing:

Ms. Ricketts was represented by Marinus Lamers. Canadian General was represented by Robert Robinson. Counsel filed written submissions on July 15, 22 and 24, 1996.

The Facts:

Ms. Ricketts was injured in an accident on August 1, 1992, when she was struck by a go-cart. She applied for and received accident benefits from Canadian General on the basis that she was disabled from her pre-accident employment.

While Ms. Ricketts was receiving no-fault benefits, she began a court action for damages (the "tort action") against the owner of the go-cart, who is insured by State Farm under a homeowner's policy. State Farm denied coverage on the basis that the go-cart was motorized and, therefore, exempted under the homeowner's policy. Consequently, in March 1995, the Applicant issued third party proceedings against State Farm.

Canadian General continued to pay accident benefits until May 17, 1995, when it determined that the Applicant was no longer disabled from her pre-accident employment. Following an unsuccessful mediation, Ms. Ricketts filed an Application for Arbitration dated February 14, 1996. The Insurer delivered its Response on March 4, 1996, and the arbitration pre-hearing took place before me on July 8, 1996.

At the opening of the pre-hearing, Ms. Ricketts, through her counsel, advised that she wished to withdraw from arbitration and proceed with her claim for accident benefits in court. She explained that because State Farm denied coverage in the tort action, she intended to bring a court action against Canadian General under the uninsured provisions of the policy. She felt that it would be simpler and more economical to combine both the accident benefit claim and the uninsured claim in the General Division.

Canadian General agrees that it is preferable to combine both actions in General Division, but seeks repayment of the $2,000.00 assessment fee which it was required to file in its Response to Arbitration.

The Legislation:

Rule 66 of the Dispute Resolution Practice Code (the Code) sets out the procedure for withdrawal from arbitration, and confers discretion on the arbitrator to impose terms. It states:

6. Withdrawal

66.1 An applicant may seek permission to withdraw all or part of an application:

(a) by serving on the parties a request to withdraw the application that is signed by the applicant or the applicant's representative; and

(b) by filing the request to withdraw the application together with a Statement of Service in FORM D; or

(c) at the hearing.

66.2 The adjudicator may permit an applicant to withdraw all or part of an application if the other parties agree.

66.3 Where a party does not agree to the withdrawal, the adjudicator may:

(a) permit the applicant to withdraw on such terms as the adjudicator considers appropriate;

(b) where the applicant is the insured person, require the applicant to pay the insurer an amount not more than the amount the insurer is required to pay the Commission to participate in the hearing, if the adjudicator decides that the withdrawal is an abuse of process.

In addition, section 282 (11.2) of the Insurance Act provides:

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 this case, the Insurer was assessed $2,000.00 under section 14.

Submissions and Findings:

Canadian General argues that the Applicant has abused the arbitration process by filing an application for arbitration instead of bringing a claim in court. It submits that by March 1995, when the Applicant issued the third party claim against State Farm, she knew or ought to have known that it would be necessary to proceed against Canadian General under the uninsured provisions. In those circumstances, it argues, it was pointless for the Applicant to apply for arbitration. She should have brought her claim for accident benefits in the General Division and joined it with the uninsured claim.

The Insurer submits that as a result of the Applicant's actions, it has incurred a $2,000.00 filing fee plus the expense of retaining counsel to review the file, submit a Response, and arrange and prepare for a pre-hearing. In addition, counsel prepared correspondence setting out his production request and particulars of the overpayment being claimed. Canadian General argues that in these circumstances, "the unilateral conduct of the Applicant in withdrawing her claim at the pre-hearing stage constituted an abuse of process, and the Insurer should therefore be awarded its filing fee of $2,000..."

Ms. Ricketts submits that it would be unfair to require her to reimburse the Insurer's filing fee when both parties benefit by moving the claim into court. She argues that by joining the claim for accident benefits with the uninsured claim, the parties avoid multiple proceedings and thus save time and money. She adds that the merit of a single proceeding was "significantly heightened" when the Insurer, in its Response to the Application for Arbitration, sought a repayment on the basis that the go-cart was not motorized and therefore the Applicant was not entitled to any accident benefits whatsoever. On this basis, she submits, Canadian General also has a stake in the dispute over whether the go-cart was motorized, and benefits by participating in the court proceedings.

The problem with Ms. Rickett's argument is that the issue of uninsured coverage arose initially because of the position taken by State Farm and the issuance of third party proceedings by the Applicant in March 1995, almost one year before she filed for arbitration. Therefore, Ms. Ricketts knew or should have known well before she commenced arbitration that it would be necessary to bring an uninsured claim against Canadian General. With that information, she could have combined a claim for accident benefits and uninsured coverage in court and saved Canadian General its filing fee of $2,000.00 at the Commission. The fact that Canadian General, because of its claim for an overpayment, also has an interest in the issue of coverage does not change the fact that it would have been less costly to bring this claim in court at the outset.

I therefore agree with Canadian General that while both parties benefit by moving this claim to court, this could and should have been considered between March 1995, when Ms. Ricketts learned that State Farm was taking an off-coverage position, and February 14, 1996, when she filed her Application for Arbitration.

Canadian General submits that the Applicant's conduct and the resultant expense to the Insurer amounts to an "abuse of process," as contemplated by Rule 66.3(b) of the Code. However, the cases relied on by the Insurer as examples of abuse of process deal with far more reprehensible conduct such as fraud, refusal to comply with production orders, etc. I am therefore reluctant to categorize this case an abuse of process. At the same time, the Applicant proceeded unwisely and wastefully, conduct which, in my view, is encompassed by the terms "frivolous" and/or "vexatious" in section 282 (11.2) of the Insurance Act. Accordingly, Ms. Ricketts must reimburse Canadian General its filing fee of $2,000.00.

Section 66.3 of the Code authorizes me to permit the Applicant to withdraw "on such terms as [I] consider appropriate." In order to avoid undue hardship to the Applicant, she is not required to pay that sum to Canadian General until 30 days have elapsed from settlement of or judgment in the court action against Canadian General for accident benefits.

Order:

1. The Applicant may withdraw from arbitration. She must pay $2,000.00 to Canadian General within 30 days of settlement or judgment in the court action against Canadian General for accident benefits.

August 8, 1996

Deena Baltman Arbitrator

Date

Footnotes

1. 1Pursuant to Ontario Regulation 672. Prior to January 1, 1994, that Regulation was called the No-Fault Benefits Schedule. After that date it became the Statutory Accident Benefits Schedule —Accidents Before January 1, 1994. In this decision, the term "Schedule" will be used to refer to Regulation 672.