Neutral Citation: 1997 ONICDRG 225

OIC A96-000301

ONTARIO INSURANCE COMMISSION

BETWEEN:

MARIA VIEIRA

Applicant

and

ZURICH INSURANCE COMPANY

Insurer

DECISION ON A PRELIMINARY ISSUE

Issues:

Background:

The Applicant, Maria Vieira, was injured in a motor vehicle accident on August 22, 1994. She applied for and received statutory accident benefits from Zurich Insurance Company (Zurich) payable under the Statutory Accident Benefits Schedule —Accidents after December 31, 1993, and before November 1, 1996, ("the Schedule”)¹ Zurich refused to pay certain invoices from International Managed Health Care ("International") for rehabilitation services provided to Ms. Vieira. The parties attempted to resolve their dispute through mediation; however, they were not successful.

Subsequent to mediation, on January 11, 1996, Ms. Vieira signed a document entitled Full and Final Release (the release) settling her claims arising from the accident, for a lump sum payment of $3,500.00 by Zurich.

On February 20, 1996, Ms. Vieira applied for arbitration under the Insurance Act, R.S.O. 1990, c.I.8, as amended. She claimed entitlement to the cost of rehabilitation services provided to her by International between February 16, 1995 and June 1, 1995. This was the same dispute that was the subject of the failed mediation.

At the pre-hearing discussion in this case, counsel for Zurich raised the issue that the terms of the release precluded Ms. Vieira from commencing an arbitration proceeding against Zurich in respect of any claims for statutory accident benefits arising from the accident. Ms. Vieira's counsel maintained that she did not release Zurich from liability to pay International's account.

Therefore, the preliminary issue I must decide in this hearing is:

Did the parties enter into an agreement that finally disposed of Ms. Vieira's claim to the cost of rehabilitation services provided to her by International?

The parties agree that if I answer the question in the positive, then in accordance with section 279(2) of the Act and section 9.1 (5) of O. Reg. 780/93 (the settlement regulations), Ms. Vieira would be precluded from commencing arbitration proceedings in respect of the claim at issue.

Result:

1. The parties entered into an agreement that finally disposed of Ms. Vieira's claim to the cost of rehabilitation services provided to her by International. Ms. Vieira is therefore precluded from commencing arbitration proceedings in respect of this claim.

2. Ms. Vieira is not entitled to her expenses, incurred in respect of this arbitration proceeding.

3. Ms. Vieira must pay Zurich the assessment fee of $2,000.00 it paid in respect of this arbitration.

Hearing:

The hearing was held at the offices of the Ontario Insurance Commission in North York, Ontario, on August 27, 1996, before me, Asfaw Seife, Arbitrator.

Present at the Hearing:

Applicant:

Maria Vieira

Ms. Vieira's Representative:

Michael J. Henry Barrister and Solicitor

Zurich's Representative:

Aldo Picchetti Barrister and Solicitor

Zurich's Officer:

Kim Thoms

Witnesses:

Ms. Maria Vieira, the Applicant

Gary Spector, Insurance Claims Consultant

Steve Syscopoulous, Employee of International

Ron Henry, Claims Adjuster

Exhibits:

Listed in Appendix A to this decision

Evidence and Findings

Background

Ms. Vieira's family doctor referred her to International by her family physician shortly after the accident. International is a multidisciplinary health care facility that provides rehabilitation services to motor vehicle accident victims. On November 2, 1995, upon her enrollment with International, Ms. Vieira signed an authorization giving International the right to institute on her behalf mediation and arbitration proceedings regarding medical and rehabilitation benefits provided to her by International as well as the "absolute right to compromise" such claims. Ms.Vieira also signed a direction instructing Zurich to pay International directly, upon receipt of invoices for services rendered to her.

Zurich paid International's invoices until December 21, 1995, when it referred the necessity of any future treatment to a rehabilitation D.A.C. (Designated Assessment Centre), under section 39 (10) of the Schedule. The D.A.C. report, dated February 16, 1995, indicated that the services provided to Ms. Vieira by International were no longer necessary. However, despite the D.A.C. report, International continued to treat Ms. Vieira until June 1, 1995. Zurich refused to pay International's invoices after the date of the D.A.C. report.

Following the rehabilitation D.A.C., Zurich began to question Ms.Vieira's entitlement to weekly income benefits. Zurich sent Ms. Vieira to a medical examination for disability assessment.

On April 26, 1995, Ms. Vieira retained Mr. Gary Spector, of Spector & Partners, Insurance/Injury Claim Consultants, to represent her in all claims arising from the accident. Ms. Vieira instructed Zurich to send all future correspondence between herself and Zurich to Spector & Partners.

In the meantime, International decided to collect the outstanding account from Zurich. On September 13, 1995, International applied for mediation on Ms. Vieira's behalf. Ms. Vieira participated in mediation discussions, represented by Mr. Spiro Papathansakis, an employee of International. Mr. Spector did not attend mediation; however, he was aware of it.

At mediation Zurich agreed to pay International's account from December 21, 1994 to the date of the D.A.C. report, February 16, 1995. The expenses for the period February 16, 1995 to June 1, 1995 remained in dispute.

Subsequent to mediation, Zurich terminated Ms. Vieira's weekly income replacement benefits.

On November 23, 1995, Mr. Spector wrote to Zurich, initiating settlement negotiations. He stated:

[Ms. Vieira] may be willing to forgo the [disability] D.A.C. assessment if we are able to resolve this matter by way of a full and final settlement. If you are interested in the possibility of closing your file and receiving a full and final release in return for a lump sum settlement please contact the undersigned to discuss same. [emphasis added]

Ron Henry, Zurich's claims representative, responded to this letter by telephoning Mr. Spector. The two representatives then conducted a series of discussions, which resulted in Ms. Vieira signing the release on January 11, 1996.

Two days after the signing of the release, Ron Henry forwarded the settlement cheque to Mr. Spector. Ms. Vieira subsequently received and cashed the cheque. International was not involved in the settlement discussions, nor was it aware of the release. It has received no money from the proceeds of the settlement.

In February 1996, International hired Mr. Michael Henry, now counsel for Ms. Vieira in this arbitration, to take legal action to collect the outstanding account from Zurich. Mr. Henry then filed the application for arbitration on Ms. Vieira's behalf.

Summary of Evidence:

Ms. Vieira testified that she was not induced by fraud, misrepresentation or undue influence to sign the release. She signed the release freely. She is happy with the settlement; and has no intention of undoing it or returning the settlement funds.

Ms. Vieira admitted that the release clearly states that the amount she received was in full and final settlement of all claims under the Schedule arising from the accident. She also conceded that when she signed the release, she knew that the dispute about International's account had not been resolved at mediation; however, her understanding was that Zurich and International had dealt with the rehabilitation account since mediation. Ms. Vieira claimed that the release of January 11, 1996 was only about her weekly income benefits because it was negotiated for her by Mr. Spector, whom she hired for "[her]selfto look after her weekly benefit claim. She said that International's account was a dispute between Zurich and International. When she signed the release, she testified Mr. Spector explained to her that the settlement funds were all for her "living expenses".

Ms. Vieira testified that she never called Zurich or Mr. Spector to tell them that she was not satisfied with the settlement. No one from International or Mr. Michael Henry's office had spoken to her about filing for arbitration. The first time she knew about the application for arbitration was when she received a letter from the Commission confirming receipt of the application. She has not spoken to or met Mr. Henry, prior to the date of this hearing. She is not paying his legal fees for this arbitration.

Ms. Vieira has signed an undated retainer appointing Mr. Henry as her representative for this arbitration. She stated that she is willing to participate in this hearing because "it is only fair that International should be paid' .

Ms. Vieira has testified that International's account is a dispute between International and Zurich, and that no one had told her to pay it. However, in her authorization dated November 2, 1994, she has agreed to pay any balance of International's account not paid by Zurich "over and above the insurance payment." I find that Ms. Vieira was aware of her liability to International, but decided to sign the release nevertheless.

Mr. Spector testified that Ms. Vieira retained him to represent her in all of her statutory accident benefit claims, not just for weekly income replacement benefits. He said that he negotiated the settlement based on his understanding that International's account had been settled at mediation, and the only outstanding claim was the weekly income benefit. He received instructions from Ms. Vieira as to the amount and recommended the settlement to her on a full and final basis.

Mr. Spector testified that he knew the terms of the settlement would preclude Ms.Vieira from commencing legal proceedings against Zurich with respect to all statutory accident benefits arising from the accident, including International's disputed account. He stated he explained the terms of the agreement to Ms. Vieira.

Mr. Spector testified that while he was aware of the International account and Ms. Vieira had attended mediation, no one had told him what the outcome of mediation was. Neither Ron Henry nor Mr. Papathanasakis had contacted him after mediation. Ms. Vieira did speak to him after mediation about the International account; however, she did not tell him what happened at mediation. He said she gave him a copy of the Report of Mediator which did not have the last page where unresolved disputes are listed.

Mr. Spector testified that he considers himself an expert in the area of statutory accident benefit claims, and he has considerable experience in representing injured persons in settlement negotiations with insurance companies. Over 90 per cent of his practice is comprised of such cases. He indicated that 60 to 70 per cent of all the cases he handles result in a full and final settlement, and he has settled at least 200 cases in the last two years on the basis of insured persons signing a full and final release.

I find Mr. Spector's testimony that he thought International's account had been settled at mediation unconvincing. Mr. Spector commenced settlement negotiations within a month of the failed mediation, offering to settle Ms. Vieira's claims on a full and final basis. He was aware that International's account had been the subject of mediation, and that Ms. Vieira had participated in mediation. He had spoken to Ms. Vieira after mediation. If, as he says, no one told him whether mediation failed or succeeded, I find it difficult to understand why he, as an experienced consultant, assumed that mediation was in fact successful.

Mr. Steve Syscopoulous, an employee of International, testified that International's disputed account was approximately $4,500.00 at the time of mediation. This amount represented the cost of treatment provided to Ms. Vieira after the date of the D.A.C. report and Zurich's termination of rehabilitation benefits. Mr. Syscopoulos stated that although International may be legally entitled to demand that Ms. Vieira pay this amount, it has not taken this step since it is not International's practice to collect its bills directly from insured persons. He admitted that the filing of this arbitration is an attempt by International to collect its bill from Zurich. International has hired Mr. Michael Henry for this purpose, and is paying his legal fees.

Mr. Syscopoulous stated that when International initially took the matter to mediation, it did so with Mr. Spector's approval. He testified that International was not contacted by anyone during or after the settlement negotiations, and became aware of the release only after the application for arbitration had been filed.

Mr. Ron Henry testified on behalf of Zurich. He testified that once Ms. Vieira retained Mr. Spector, Zurich started dealing with her only through Mr. Spector. As far as Zurich was concerned, Mr. Spector was handling all of Ms. Vieira's accident benefit claims, and had authority to engage in settlement discussions on her behalf.

Mr. Henry testified that Zurich had no intention of paying International's account after February 16, 1995 because the D.A.C. assessment had determined that the treatment was unnecessary. At the time of the settlement negotiations, Ms. Vieira's weekly income replacement benefit had been terminated and International's account was still in dispute. He said he was discussing settlement on the basis of a full and final release, including International's disputed account.

Mr. Henry testified that he knew that International's account was not settled at mediation; however, since Ms. Vieira herself knew this, and she was represented, he did not feel it was his duty to provide Mr. Spector with this information. He said the issue of International's account did not come up during the settlement discussions with Mr. Spector. He said Zurich conducted the negotiations in good faith.

Analysis and Conclusion

The language of the release is clear. It states that in consideration of the payment of $3,500.00 by Zurich Ms. Vieira agreed to:

release and forever discharge [Zurich] from any and all actions, causes of action, mediation, arbitrations, claims and demands for Statutory Accident Benefits including PAST, PRESENT AND FUTURE CLAIMS under [the Schedule]for medical benefits, rehabilitation benefits, care benefits, child care benefits and weekly benefits [arising out of the motor vehicle accident of August 22, 1994]

In Tuzin and Allstate², Arbitrator J. Palmer stated:

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 Abedi and Pilot Insurance Company,³ , the Director of Arbitrations stated that:

It is not the arbitrators role to consider what is "fair" to the parties in the sense of reviewing an agreement's adequacy. The freely made choices of the parties, whether represented or not, are and remain, their responsibility

I agree with both of the above comments.

On behalf of Ms. Vieira, Mr. Henry submitted that the release should be set aside for the following reasons:

Mr. Henry also submitted that neither Ms. Vieira nor Mr. Spector intended to settle the rehabilitation expenses.

Ms. Vieira had two separate representatives for two separate issues: Mr. Spector for her weekly income replacement benefits, and International for her rehabilitation benefits. He suggested that Mr. Spector had no authority to settle Ms. Vieira's rehabilitation claims.

Mr. Henry also suggested that Zurich had an obligation to inform Mr. Spector of International's disputed account during settlement discussions. By withholding this information from Mr. Spector, Mr. Henry submitted, Zurich has acted in bad faith.

I do not accept Mr. Henry's submissions. Ms. Vieira was represented in the settlement discussions by an experienced representative. She knew about International's claim at the time she was considering settlement. She signed the release after she read it and the terms of the agreement were explained to her by her representative. Ms. Vieira does not allege fraud, misrepresentation, undue influence or other factors that could vitiate the agreement. Zurich has complied with the requirements of the settlement regulation.

The evidence is clear that Ms. Vieira retained Mr. Spector to represent her in all of her statutory accident benefit claims, not just for weekly income replacement benefits. This is endorsed by the conduct of Ms. Vieira and Mr. Spector.

I do not find it is reasonable to expect Zurich to remind Mr. Spector about the status of the International's account during settlement negotiations. Both Zurich and Mr. Spector knew that Ms. Vieira mediated this issue and knew that mediation had failed. If Mr. Spector felt that status of International's account was a determining factor in the settlement, it was his responsibility, as Ms. Vieira's agent, and not Zurich's, to ascertain the facts prior to recommending the settlement on a full and final basis.

In any case, I do not find Mr. Spector's testimony that he thought International's account had been settled at mediation relevant in determining whether the release was freely entered into by Ms.Vieira. There is no question that Ms.Vieira herself knew that International's account was not resolved when she signed the release. In spite of this, she decided to settle on a full and final basis.

Having regard to all of the evidence, I find the release in question was an agreement freely entered into by competent parties. The terms of the agreement specifically preclude Ms. Vieira from commencing arbitration proceedings against Zurich in respect of any benefits, including rehabilitation benefits, past, present or future, arising from the accident. I therefore find that Ms. Vieira is precluded from commencing an arbitration proceeding in respect of the International account.

Arbitration Expenses and Order Against Ms. Vieira:

As an arbitrator, I have the discretionary authority under section 282(11) of the Insurance Act to award or deny an insured person his/her expenses incurred in the arbitration. Further, if I find the insured person commenced an arbitration that is frivolous, vexatious or an abuse of process, section 282(11.2) of the Act gives me the authority to order the insured person to pay the insurer the assessment fee it was required to pay in respect of the arbitration.

On behalf of the Zurich, Mr. Picchetti urged me to deny Ms. Vieira her expenses, and to award the insurer its assessment fee of $2,000.00.

I have found Ms. Vieira's application for arbitration entirely without merit. It is clear to me that the application was an attempt to utilize the arbitration process to revive a dispute which had been settled by the parties. By agreeing to the filing of the arbitration under her name, Ms. Vieira has dragged the Insurer into an arbitration to defend a claim which was finally disposed of by the agreement of both parties. I find this conduct an abuse of process.

Accordingly, I exercise my discretion to deny Ms. Vieira her arbitration expenses, and to award Zurich its assessment fee of $2,000.00.

Order:

1. The parties have entered into an agreement that finally disposed of Ms. Vieira's claim to the cost of rehabilitation services provided to her by International. Ms. Vieira is therefore precluded from commencing arbitration proceedings in respect of this claim.

2. Ms. Vieira is not entitled to her expenses, incurred in respect of this arbitration.

3. Ms. Vieira must pay Zurich the assessment fee of $2,000.00 it paid in respect of this arbitration.

Asfaw Seife

Arbitrator

Date

SCHEDULE A

Exhibits:

Exhibit 1

Insurer's Document Brief - 9 tabs

Exhibit 2

Fax cover page and confirmation of transmittal

Exhibit 3

Authorization dated November 2, 1994

Exhibit 4

Undated Retainer

Exhibit 5

International's invoices

Exhibit 6

Authorization dated August 29, 1995

Footnotes

1. 1The Schedule is Ontario Regulation 776/93, as amended by Ontario Regulation 635/94.
2. 2May 28, 1992, OIC A-000596
3. 3June 22, 1994, OIC P-002705