Neutral Citation: 1997 ONICDRG 28

OIC A96-000183

ONTARIO INSURANCE COMMISSION

BETWEEN:

BRIAN A. CATLOS

Applicant

and

JEVCO INSURANCE COMPANY

Insurer

DECISION

Issues:

The Applicant, Brian A. Catlos, was injured in a motor vehicle accident on July 5, 1994. He applied for and received statutory accident benefits from Jevco Insurance Company ("Jevco"), payable under the Schedule.¹ Weekly income replacement benefits were terminated by Jevco on February 20, 1995. The parties were unable to resolve their disputes through mediation, and Mr. Catlos applied for arbitration under the Insurance Act, R.S.O. 1990, c.I.8, as amended. On September 12, 1996, approximately one month before the hearing on the merits of this case, Mr. Catlos indicated he wished to withdraw his application for arbitration. Jevco objected to this and a hearing was held on January 24, 1997 to determine whether Mr. Catlos was entitled to withdraw his application and, if so, on what terms.

The issues in this hearing are:

1. Is Mr. Catlos entitled to withdraw his application for arbitration?

2. If the answer to the first issue is "yes," what, if any, conditions apply to the withdrawal?

3. Is Mr. Catlos entitled to his expenses incurred in the hearing of the withdrawal application?

Result:

1. Mr. Catlos is entitled to withdraw his application for arbitration.

2. Mr. Catlos may not re-apply for arbitration on the issues in this case.

3. Mr. Catlos is not entitled to his expenses in respect of the withdrawal proceedings.

Hearing:

The hearing was held at the offices of the Ontario Insurance Commission in North York, Ontario, on January 24, 1997. The matter proceeded by way of submissions from counsel, on the basis of the correspondence and materials in the Commission's file. In addition, counsel for Jevco filed two letters from Mr. Catlos to Jevco, dated January 3, 1996 and February 1, 1996, respectively. No witnesses testified. Additional written submissions were received on February 5 and 6, 1997.

Present at the Hearing:

Mr. Catlos's

Darrell March

Representative:

Barrister and Solicitor

Jevco's

Jennifer Ipp

Representative:

Barrister and Solicitor

Evidence:

This matter was mediated on January 5, 1996. The Application for Arbitration was filed on January 29, 1996. The Response to an Application for Arbitration was filed February 26, 1996. A pre-hearing conference was held before me on June 25, 1996. Mr. Catlos attended, but was not represented by counsel. Mr. John McNeil, barrister and solicitor, appeared on behalf of Jevco. A pre-hearing letter was sent July 22, 1996, setting out, among other things, the issues in the case, the documents to be exchanged and the witnesses to be called at the hearing. The hearing had been set for October 15, 16 and 17, 1996. The pre-hearing letter also confirmed Mr. Catlos' intention of retaining counsel for the purposes of the arbitration. Mr. Catlos was to advise Mr. McNeil and the Commission as soon as he had retained counsel.

On September 12, 1996, Mr. Brian Noel, barrister and solicitor, faxed a letter to the Commission, with a copy to Mr. McNeil, indicating that his firm had been retained by Mr. Catlos and that they had been instructed by Mr. Catlos to withdraw the application for arbitration. Mr. Noel also asked that the hearing scheduled for October 15, 16 and 17, 1996 be cancelled. A Statement of Service was subsequently filed with the Commission on September 23, 1996. Another letter dated September 12, 1996 was sent to Mr. McNeil by Mr. Noel confirming the instructions to withdraw the application for arbitration, and indicating instructions to "proceed to litigate this matter with the Jevco Insurance Company." On September 19, 1996, Mr. McNeil wrote the Commission confirming Mr. Catlos' request to withdraw and his intention to proceed in court. Mr. McNeil stated:

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 hearing did not take place in October as scheduled. Mr. McNeil wrote the Commission on October 22, 1996 stating: "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."

Law and Submissions:

Rule 66.3 of the Commission's Practice Code and sections 282(11.2) and 282(11) of the Insurance Act are relevant to the issues in this case:

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.

282(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.

282(11) 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.

Jevco objects to the withdrawal of this matter (despite Mr. McNeil's letter of September 12, 1996). It submits that it has been put to considerable time and expense in preparing for the arbitration and would, accordingly, be prejudiced if the matter were permitted to be withdrawn on what was, in effect, the eve of the hearing. It submits that Mr. Catlos is a sophisticated individual who understood the process and intended, from the beginning, to retain counsel for the arbitration. In this regard, Jevco referred to a detailed letter written by Mr. Catlos in January 1996 indicating that he would be assisted by a lawyer. Jevco submitted that Mr. Catlos should not now be permitted to withdraw the arbitration only to commence an action in court, putting the Insurer to additional time and expense.

Counsel for Mr. Catlos, Mr. March, advised that his firm was first contacted by Mr. Catlos on August 8, 1996. Their first meeting was on September 12, 1996, and the firm was retained the same day. Upon the advice of counsel, Mr. Catlos instructed the firm to withdraw the arbitration and proceed to court. These instructions were immediately communicated to Jevco, Mr. McNeil and the Commission, a full month before the arbitration hearing was to take place. It was submitted that the Insurer had had the benefit of the pre-hearing conference, where Mr. Catlos was not represented, and that it would, in fact, be Mr. Catlos who was prejudiced if he were not permitted to proceed to court. It was, therefore, submitted that there had been no abuse of process and that Jevco should have conceded the withdrawal (as they appeared to have done in Mr. McNeil's letter of September 12, 1996).

Analysis:

I do not interpret Mr. McNeil's correspondence to the Commission to be an admission by Jevco that the withdrawal should automatically be granted. In my view, Jevco was free to challenge the withdrawal, and to make submissions regarding any conditions to be imposed on Mr. Catlos.

I agree with Mr. March's submission that Rule 66.3 of the Practice Code only permits an applicant to be ordered to pay the insurer where the withdrawal is found to be an abuse of process. The broad authority granted by Rule 66.3(a) would not permit such an order, given the specificity of Rule 66.3(b) on the matter. This is consistent with section 282(11.2) of the Insurance Act which only permits such an order if the arbitration is found to be frivolous, vexatious or an abuse of process. In addition, 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.

Prior to the pre-hearing, Mr. Catlos had not formally retained counsel in this arbitration, although he may have had some informal assistance in this regard. I have no information about the nature or extent of the earlier lawyer's participation. Nothing suggests that Mr. Catlos intended, from the beginning, to retain counsel for the arbitration. The pre-hearing conference raised difficult questions concerning the issues in the case, and, at that point, it appeared advisable for Mr. Catlos to retain counsel. Although Mr. Catlos did not do this until September 12, 1996, a full month remained before the hearing was to take place. No adjournments were requested, and the only dispute arising from the pre-hearing production orders concerned Mr. Catlos' subsequent, but honest, attempt to restrict Jevco's access to a limited number of medical records.

Even if Mr. Catlos had initially intended to retain counsel, I find that this was for the purposes of proceeding to the hearing. Once counsel was retained, Mr. Catlos received advice concerning the appropriateness of proceeding to arbitration and decided instead to pursue the matter in court. He immediately conveyed his intention to the parties. Nothing suggests that his decision to proceed in court was made for improper purposes. I do not find that Mr. Catlos attempted to delay the hearing or to avoid his disclosure obligations.

I further find that Mr. Catlos' application was not frivolous or vexatious. This case raised legitimate issues for determination. Although it may have been advisable for Mr. Catlos to have retained counsel earlier in the process, I do not believe that he pursued his application to this point in order to harass Jevco. Mr. Catlos' general level of competence does not, in my view, imply that he should have understood the subtleties of the arbitration process or the relative merits of proceeding in court as opposed to arbitration. The fact that counsel was not retained until relatively late in the process does not, in itself, establish that the process has been abused, particularly in light of the complexity of the issues identified at the pre-hearing, as well as the fact that no production issues or adjournment requests delayed the commencement of the hearing.

Even if I were to find that Mr. Catlos was not sufficiently diligent in canvassing his options prior to commencing the arbitration, this, in my view, does not amount to an abuse of process. He began the process in good faith and intended to proceed to arbitration on legitimate issues. He conscientiously participated in the pre-hearing conference. He indicated his intention of retaining counsel at that point for the purposes of the hearing. He did not seek to thwart the process or to harass Jevco. His decision to withdraw the arbitration was also made in good faith upon the advice of counsel. Jevco may have incurred expenses in the process, but not as a result of improper or contemptuous behaviour on the part of Mr. Catlos.

I am, therefore, prepared to allow Mr. Catlos to withdraw his application for arbitration, without requiring him to pay an amount to Jevco pursuant to the Practice Code or the Insurance Act. However, now that Mr. Catlos has fully canvassed the matter with counsel and has indicated his intention to proceed in court, it is reasonable that he should not be permitted to re-apply for arbitration on the issues in this case.

I am further not prepared to award Mr. Catlos his expenses of the withdrawal proceedings. Jevco was entirely within its rights to challenge the withdrawal application. In my view, an applicant should not be permitted to withdraw an arbitration and obtain the expenses of any challenge to that, particularly where, as here, the insurer raised legitimate issues for determination. These proceedings do not warrant the exercise of my discretion pursuant to section 282(11) of the Insurance Act to award Mr. Catlos his expenses.

Order:

1. Mr. Catlos is entitled to withdraw his application for arbitration, and the matter is hereby withdrawn.

2. Mr. Catlos may not re-apply for arbitration on the issues in this case.

3. Mr. Catlos is not entitled to his expenses in respect of the withdrawal proceedings.

February 7, 1997

Eban Bayefsky

Arbitrator

Date

Footnotes

1. 1The Statutory Accident Benefits Schedule — Accidents after December 31, 1993, and before November 1, 1996, called "the Schedule" in this decision. The Schedule is Ontario Regulation 776/93, as amended by Ontario Regulation 635/94.