Neutral Citation: 1997 ONICDRG 173

Appeal P97-00013

Appellant

and

Respondent

Before:

David R. Draper, Director's Delegate

Counsel:

Jennifer Ip (for Jevco)

Darrell March (for Mr. Catlos)

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

The appeal is dismissed and the arbitration order, dated February 7, 1997, is confirmed.
Brian A. Catlos is entitled to his reasonable appeal expenses, payable by Jevco Insurance Company.

September 26, 1997

David R. Draper Director’s Delegate

Date

This is an appeal by Jevco Insurance Company ("Jevco") from an arbitration order, dated February 7, 1997. It claims the arbitrator erred in allowing Mr. Catlos to unilaterally withdraw his application for arbitration so close to the hearing date. In the alternative, Jevco submits that he should have been ordered to pay an assessment under Rule 66 of the Dispute Resolution Practice Code.¹

The relevant facts are not in dispute. Mr. Catlos was injured in an automobile accident on July 5, 1994. Jevco paid him weekly income benefits until February 20, 1995. After his benefits stopped, Mr. Catlos applied for mediation, claiming that he remained entitled to benefits under section 12 of Ontario Regulation 776/94, the Statutory Accident Benefits Schedule - Accidents After December 31, 1993, and Before November 1, 1996 ("the Schedule").

The arbitrator found that Mr. Catlos did not retain counsel at this stage, although he might have had some informal legal assistance. The mediation took place on January 5, 1996, without a resolution. Within a few weeks, Mr. Catlos applied for arbitration. At the pre-hearing conference on June 25, 1996, Jevco was represented by a lawyer, but Mr. Catlos appeared on his own.

On July 22, 1996, the pre-hearing arbitrator wrote to the parties confirming what happened at the pre-hearing. Among other things, he set out the issues in dispute, the documents to be exchanged, the witnesses to be called and the hearing dates - October 15, 16 and 17, 1996. He also confirmed that Mr. Catlos intended to retain a lawyer and would advise Jevco and the Ontario Insurance Commission "as soon as possible."

Mr. Catlos contacted a law firm on August 8, 1996, six weeks after the pre-hearing. However, he did not meet with them until September 12, 1996, eleven weeks after the pre-hearing and just under five weeks before the hearing was to start. At the meeting, Mr. Catlos retained the law firm. That same day, Mr. Brian Noel, barrister and solicitor, faxed a letter to the Commission stating that Mr. Catlos wanted to withdraw his application for arbitration. He later clarified that Mr. Catlos intended to withdraw the arbitration and apply to court.

On September 19, 1996, one month before the arbitration hearing, Jevco's lawyer wrote the Commission, as follows:

As I read the Act, there is little my client can do about this except make the submission to the OIC that the insured, having drawn the insurer through a process to the eve of hearing and then withdrawn it, has abused the arbitration process and should be liable for costs to the insurer pursuant to the provisions of s. 282(11.2) and we would ask for such an order.

The arbitration hearing did not go ahead. On October 22, 1996, one week after the hearing had been scheduled to start, Jevco's lawyer wrote to the Commission, as follows:

The insured has withdrawn his above noted arbitration.

I am writing on behalf of my client, Jevco Insurance Company, to ensure that the filing fee of $2,000 paid in respect of this arbitration is credited to their account.

A hearing was then scheduled to deal with the withdrawal. It was heard by the same arbitrator who conducted the pre-hearing. He concluded that Mr. Catlos was entitled to withdraw his application, but ordered that he could not re-apply for arbitration on the issues raised in his application. The arbitrator also denied Mr. Catlos' claim for his arbitration expenses, but did not order him to pay an assessment under section 282(11.2) of the Insurance Act.

As a preliminary objection to Jevco's appeal, Mr. Catlos submits that it fails to raise a question of law and, therefore, I have no jurisdiction to interfere with the arbitrator's order. This argument is based on the amendments to the Insurance Act brought in on November 1, 1996 by the Automobile Insurance Rate Stability Act, 1996 ("Bill 59"). Bill 59 limited appeals to questions of law by repealing subsection 283(1) and substituting the following:

- (1) A party to an arbitration under section 282 may appeal the order of the arbitrator to the Director on a question of law.

In my recent decision in Henriques and Motor Vehicle Accident Claims Fund, (August 21, 1997, OIC P97-00002), I concluded that the new appeal provision applies only to cases where the application for arbitration was filed after November 1, 1996. Parties to arbitrations started earlier can rely on the broader appeal rights in effect at the time the arbitration started.

Even if Henriques is wrong, I am satisfied that Jevco's appeal raises questions of law. It contends the arbitrator failed to deal with the first issue before him - whether Mr. Catlos should be allowed to withdraw the arbitration. On the question of whether Mr. Catlos should be ordered to pay an assessment, Jevco submits that the arbitrator applied the wrong test. Therefore, the appeal can proceed.

A. Withdrawal

Arbitrators can and should control the arbitration process. Where an insured person elects arbitration rather than court, the insurer is entitled to rely on that election and prepare accordingly. The insured person does not have an absolute right to withdraw his or her application for arbitration and go to court. However, the election is not absolute. Rule 66.3 of the Practice Code gives arbitrators a discretion with respect to withdrawals:

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.

I accept that Rule 66.3 includes a discretion to refuse a withdrawal. Jevco claims the arbitrator failed to exercise this discretion, instead moving directly to the question of whether an assessment should be ordered.

Reading the arbitration decision as a whole, I am satisfied that the arbitrator dealt with all the issues before him. He was faced with an argument from Mr. Catlos that Jevco conceded the withdrawal and, therefore, was estopped from objecting to it. At page 6 of the decision, the arbitrator rejects that submission, concluding that "Jevco was free to challenge the withdrawal, and to make submissions regarding any conditions to be imposed on Mr. Catlos." This clearly suggests that he considered Mr. Catlos' right to withdraw the arbitration, as well as the consequences that should follow if the withdrawal was allowed.

Jevco's objection is based on the fact that the decision does not clearly separate the two issues. In my view, however, that is because they overlap to such a large extent. The arbitrator reviewed Mr. Catlos' actions, finding nothing to suggest that he decided to go to court for any improper purpose, or that he attempted to delay the hearing or avoid his disclosure obligations. On the contrary, the arbitrator found that Mr. Catlos began the arbitration process in good faith, conscientiously participated in the pre-hearing conference, communicated his intention to retain counsel, did not seek to thwart the process or harass Jevco, and decided to withdraw the arbitration in good faith and on the advice of counsel. Looking at Jevco's position, he found only that "Jevco may have incurred expenses in the process." Jevco simply failed to persuade the arbitrator that its position would be sufficiently prejudiced that the withdrawal should be refused. I find no reason to second-guess the arbitrator's findings which amply support his decision to allow the withdrawal.

B. Assessment

Jevco's alternative position is that Mr. Catlos should have been ordered to pay $2,000.00, the amount its assessment. The arbitrator properly stated that this was not a request for arbitration expenses. Section 282(11) of the Insurance Act, as it stood at the time of the arbitration hearing, allowed the arbitrator to award expenses to the insured person, but not the insurance company. The issue was whether Mr. Catlos should be ordered to pay an assessment under section 282(11.2) of the Insurance Act, which states:

- (11.2) 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.

A similar authority is found in Rule 66.3(b) of the Practice Code, set out above. Under Rule 66.3(b), an arbitrator can order the insured person to pay an amount up to the amount of the insurer's assessment if he or she "decides that the withdrawal is an abuse of process." This rule explains how the assessment provision operates for withdrawals, although it is not clear it can expand the authority in section 282(11.2).

The question, therefore, was whether Mr. Catlos' withdrawal was an abuse of process. Jevco claims the arbitrator erred in applying the wrong standard, set out on page 6 of the decision:

. . . a finding that an applicant has abused the Commission's process should not, in my view, be made lightly. Neither Rule 66.3 nor section 282(11.2) is a general expenses provision. More must be shown than that an insurer has incurred costs in the course of the proceeding. An applicant must have pursued the matter for an improper purpose. His or her conduct must have been contemptuous of the arbitration process. I do not find either of these conditions existed here.

[emphasis added]

While abuse of process may not be limited to situations of improper purpose or contemptuous conduct, the arbitrator's findings support his decision not to order an assessment against Mr. Catlos. I do not accept Jevco's submission that the decision to pursue the same claim in court is in itself an abuse of process. The arbitrator should exercise his or her discretion based on the position of both parties. I am satisfied that is what happened here.

The arbitrator found that Mr. Catlos acted reasonably in retaining counsel after the pre-hearing conference and in following his new lawyers' advice to go to court. Although the arbitrator agreed that Mr. Catlos could have acted more quickly, he decided that the notice to Jevco was not so late that the withdrawal should be refused. This was well within the arbitrator's discretion and I find no reason to interfere.

IV. EXPENSES

Given the outcome, Mr. Catlos should receive his reasonable appeal expenses.