Ontario Insurance Commission

Commission des assurances de l’Ontario

Neutral Citation: 1996 ONICDRG 148

Appeal P-007913

OFFICE OF THE DIRECTOR OF ARBITRATIONS

TORONTO TRANSIT COMMISSION (MARKEL INSURANCE COMPANY OF CANADA)

Appellant

and

SONIA P. MURRAY

Respondent

Before:

Susan Naylor, Director's Delegate

Representatives:

Brian Leck (for the Toronto Transit Commission (Markel Insurance Company of Canada))

Ms. Murray (appearing in person)

APPEAL ORDER

Under section 283 of the Insurance Act, R.S.O. 1990, c.I.8, as amended, it is ordered that:

The appeal by the Toronto Transit Commission (Markel Insurance Company of Canada) is denied and the arbitration order dated December 29, 1994 is confirmed.
Ms. Murray's cross-appeal is dismissed.

August 28, 1996

Susan Naylor Director's Delegate

Date

REASONS FOR DECISION

I. NATURE OF THE APPEAL

Sonia Murray applied for arbitration in respect to her entitlement to weekly income benefits after November 15, 1993. A hearing was held and Ms. Murray's claim for further benefits was dismissed. This appeal concerns the arbitrator's exercise of discretion in awarding Ms. Murray her arbitration expenses and in refusing to order her to reimburse Markel Insurance Company of Canada (Markel) for its assessment. The appeal was brought by Markel.

Ms. Murray cross-appealed the arbitrator's order denying her benefits. I found that her appeal was well outside the 30 day time-limit for filing an appeal, and that, since she had been given every opportunity to complete her appeal, there was no basis for extending the time. I therefore dismissed her cross-appeal.

Markel's appeal proceeded on the basis of the arbitration record, with written and oral submissions by the parties. Although Ms. Murray was represented by a lawyer at the arbitration, she represented herself on the appeal.

II. THE LEGISLATION

The discretion to award an insured his or her expenses is found in subsection 282(11) of the Insurance Act¹, which states:

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 Schedule to Ontario Regulation 664, enacted under subsection 121(1) 26 of the Insurance Act, sets out the allowable expenses. The Schedule is reproduced in the Commission's Dispute Resolution Practice Code. The regulations list the expenses that can be claimed, and the maximum amounts, but there are no statutory guidelines as to when expenses should be allowed or denied, what factors should be taken into account, or what principles should govern an award.

The power to award an insured person his or her arbitration expenses was introduced in the 1990 no-fault benefits legislation. It is an integral part of the optional dispute resolution process provided for resolving disputes about accident benefits. Under this legislation, the right to initiate arbitration is limited to insured persons² and expenses can only be awarded to an insured person - not insurers.

The Insurance Statute Law Amendment Act, 1993³, effective January 1, 1994, modified these rules somewhat. An arbitrator now has the power to order the insured to pay a sum to the insurer, up to the amount of the insurer's assessment, in very limited circumstances. Section 282 (11.2) of the amended Act entitled "assessment against insured person" states:

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.

III. THE ARBITRATOR'S DECISION

Ms. Murray was injured in a fall on a T.T.C. bus on January 14, 1993. She received weekly income benefits until September 30, 1993. Two weeks before her benefits were terminated she started a new job but resigned two months later, citing "unfair treatment" and "mental abuse". She submitted her letter of resignation on November 11, 1993, planning to stop work on November 26, 1993. In the meantime, she got a note from her family doctor, stating that she should stay off work indefinitely. She asked the company to substitute it for her letter of resignation. The company refused and she left work on November 15, 1993, earlier than originally planned.

After a two day hearing, the arbitrator found that Ms. Murray was not disabled from work and was not entitled to further benefits.

I make this finding based on the conflicts in Ms. Murray's own evidence, the absence of objective medical evidence of disability to the extent claimed by Ms. Murray after November 15, 1993, the evidence of three witnesses from [Ms. Murray's workplace], Dr. McDonald's opinion that Ms. Murray could return to work and my own assessment of her testimony at the hearing.

(Decision, page 19)

Ms. Murray's lack of credibility was crucial to the arbitrator's findings. In particular:

Ms. Murray's description of her employment as involving heavy and unremitting work requirements, was contradicted by other witnesses.
The arbitrator preferred the testimony of other witnesses that indicated Ms. Murray resigned because she was not happy with the training and supervision in her new job, not because she was physically unable to do the work. She rejected Ms. Murray's explanation, and found that she had not complained about physical difficulties while at work.
She found Ms. Murray was not "honest and accurate" in reporting her history, symptoms and employment tasks to her family doctor, Dr. Devassy. Ms. Murray did not tell him she had already resigned from her job when she saw him on November 12, 1993, the day he gave her the sick note, and her account of Dr. Devassy's involvement on that day was contradicted by his own testimony. Ms. Murray did not tell him, or any of her other doctors, about an automobile accident seven years earlier, in which she injured her back and neck. The arbitrator concluded that, although Ms. Murray may have been asymptomatic at the time of the 1993 accident, her non-disclosure affected her credibility.

Ms. Murray was also ordered to repay the benefits she received while working between September 16 and September 30, 1993, an amount of $647.28. The arbitrator held that she was responsible for the overpayment because she did not tell Markel that she was starting work when she met with the claims representative the day before.

Although the arbitrator denied Ms. Murray's claim for further benefits and ordered a repayment, she refused to characterise Ms. Murray's application as frivolous, vexatious or an abuse of process for the purposes of imposing an award against her under section 282(11.2) of the Insurance Act. She stated:

The evidence indicates that Ms. Murray was not always "above board" in her dealings with the T.T.C. The evidence also indicates that Ms. Murray provided various doctors who assessed her and/or treated her, after the accident, with incomplete or inaccurate information. However, I am not satisfied, based on all the evidence, that Ms. Murray's application for arbitration was frivolous, vexatious or an abuse of process.

(Decision, page 21)

The arbitrator ordered Markel to pay Ms. Murray's arbitration expenses. In allowing expenses, she relied upon criteria set out in McCormick and Economical Mutual Insurance Company, (October 2, 1991, OIC A-000139), which held that expenses should be allowed unless the application was manifestly frivolous or vexatious or the applicant's conduct unreasonably prolonged the proceedings. She concluded that Ms. Murray was entitled to her expenses "having regard to the criteria set out in McCormick", but did not provide any further explanation for her order.

On appeal, Markel submitted that Ms. Murray engaged in a deliberate and extensive pattern of misrepresentation which continued at the hearing. It argued that the arbitrator erred in finding that Ms. Murray's conduct did not meet the McCormick criteria, justifying disallowance of expenses. It urged me to find that Ms. Murray's conduct unreasonably prolonged the process and constituted an abuse of process, warranting denial of expenses and an award under section 282(11.2).

IV. ANALYSIS AND CONCLUSION

In Allison and Markel Insurance Company of Canada, (August 21, 1996, OIC P-001231), a decision issued at the same time as this one, I made some general comments, which I repeat here, about the discretion to award expenses, and the appeal function in relation to it:

An award of expenses is a matter within the discretion of the arbitrator, although the discretion must be exercised reasonably. Because the discretion is given to the arbitrator, it should not be interfered with lightly on appeal. The arbitrator is able to consider the evidence in totality, including observing and hearing any witnesses, and usually is in the best position to assess the merits of the case and the way it was handled by the parties. Generally, his or her determination should not be disturbed unless the party appealing the order can point to a serious error in the exercise of the discretion: for example, the arbitrator adopted a wrong approach, based the decision on irrelevant considerations or inadequate evidence, or failed to look at the merits of the individual case by inappropriately fettering his or her discretion.

In each case, the expenses decision must be made on the merits of the particular case:

After all, the existence of discretion implies the absence of a rule dictating the result in each case; the essence of discretion is that it can be exercised differently in different cases. Each case must be looked at individually on its own merits.⁴

While consistency of approach is important to the integrity and fairness of the dispute resolution system, there are bound to be shades of difference in individual arbitrators' perspectives of the cases before them. Provided that the arbitrator has approached the discretion on a proper basis, his or her judgement should not be second-guessed merely on the basis that another arbitrator might have reached a different conclusion.

What then is an appropriate approach? In civil cases, while costs are in the discretion of the court, the general rule is that costs follow the result. In McCormick, it was held that the issue of expenses should be approached from the particular perspective of the purpose and goals of the dispute resolution process and that the principles governing court costs do not necessarily apply:

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.

(McCormick, page 23)

Because facilitating access to the process was regarded as a fundamental goal, an approach that necessarily withheld payment of expenses from unsuccessful applicants was considered counter-productive and alternative criteria were suggested:

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.

(McCormick, page 24)

The principles set out in these paragraphs were endorsed "in the main" by the Director of Arbitrations in the appeal decision, Calogero and The Co-operators General Insurance Company, (February 13, 1992, OIC P-000251).⁵ The Director's choice of language recognises the discretionary nature of the award and leaves some flexibility in the principles to be applied.

The principle that applicants with legitimate claims, conducted reasonably, can expect to recover their allowable expenses, win or lose, has been adopted in numerous subsequent decisions, and can be taken to be the basic ground rule. While arbitrators have uniformly accepted this general principle, they have built on the criteria set out in McCormick. Expenses have been denied, for example, where the claim is found to have been without any merit,⁶ in the case of fraud⁷ or dishonesty⁸ or where documents have been fabricated.⁹This case-by-case development is to be expected in an evolving adjudication process, as individual arbitrators bring their perspectives to bear on the numerous fact situations presented. It seems to me that the general thrust of these decisions is reasonable and consistent with the purpose and scheme of the legislation. It balances the need for access to the system, with some relatively mild deterrent to undeserving claims or undesirable behaviour.

In my view, arbitrators are not restricted to applying the three criteria set out in McCormick, nor should the words used in the decision be subject to the same rigorous standard of interpretation as statutory language, which they are not. In Calogero, the Director did not state that the McCormick principles should be treated as fixed rules, or that they are the only factors that may be considered.

The discretion to award expenses is not, nor should it be, applied restrictively. Applicants are reasonably assured that they will recover their expenses even if they are unsuccessful, unless their case is without merit or their conduct is sufficiently serious to disqualify them. The fact that the arbitrator prefers other evidence over that of the applicant or his or her witnesses is generally not sufficient to deny an applicant his or her expenses. More is required than some embellishment or exaggeration. However, applicants who deliberately make false or misleading statements or are dishonest, especially if the dishonesty continues in the hearing, run a real risk that they will be denied their expenses.

It is open to an arbitrator to disallow expenses but to refuse to make an order against the insured person under section 282(11.2). While the factors to be considered in each may overlap, the nature of the two awards is different. An expenses award is principally intended to reimburse an insured, to the extent allowed, for the cost of bringing a legitimate application forward and conducting the case in a reasonable fashion. In contrast, an order against an insured person under section 282(11.2) is more in the nature of a penalty. It can only be made if the arbitrator finds that the application for arbitration was frivolous, vexatious or an abuse of process and in no other circumstances. The discretion of the arbitrator is limited to determining whether an amount should be levied in these specific circumstances, and, if so, how much.

These comments have equal application to this case. There were clearly serious problems with Ms. Murray's case, and with the veracity of her evidence. The arbitrator did not accept her testimony about her job tasks and reasons for resigning her employment, and found that she was not "upfront" or forthcoming with her doctors or the insurance company. It is clear that Ms. Murray made a number of misrepresentations in the course of the hearing. Another arbitrator might well have concluded that, at the very least, she did not deserve her expenses given her conduct.

The arbitrator did not adopt this view, and implicitly at any rate, seems to have rejected the insurer's contention that Ms. Murray engaged in a deliberate pattern of dishonesty and misrepresentations, tantamount to fraud. The arbitrator had the benefit of reviewing the evidence in its totality, including observing and hearing the witnesses; she is therefore in the best position to evaluate the merits, and bona fides, of Ms. Murray's claim. I am not persuaded that the arbitrator's determination that Ms. Murray's application was not frivolous, vexatious or an abuse of process should be overturned.

An award of expenses is in the discretion of the arbitrator. It is not to be disturbed on appeal readily. In my view, the arbitrator's order was unquestionably generous. However, the issue is not whether I agree with the award, or would have made the same order if I had heard the case. The question is whether the arbitrator exercised the discretion given to her in an unreasonable manner. I am not convinced that she did.

It was not argued that the arbitrator unreasonably fettered her discretion by the application of rigid rules, but that her findings of fact should have led to a different result. A party's misrepresentation or dishonesty, especially if they are carried through to the hearing, are important factors to consider, and may well disqualify the party from expenses. As I said in Allison, applicants who engage in this type of conduct run a real risk that their expenses will be denied. But an arbitrator must be given considerable leeway to exercise the discretion as he or she sees fit, according to the circumstances of the particular case.

It may be that Markel can point to other cases, involving seemingly similar findings of facts, in which a different result was reached. Such differences are part and parcel of the individual nature of a discretionary power and of the multiple factual situations involved. Markel has not persuaded me the arbitrator ignored or failed to consider Ms. Murray's conduct in the particular circumstances, that she adopted a wrong approach or that she exercised her discretion unreasonably. Therefore, its appeal of the arbitrator's order is denied.