Neutral Citation: 1998 ONFSCDRS 89

FSCO A98-000635

FINANCIAL SERVICES COMMISSION OF ONTARIO

BETWEEN:

ADAM DINKHA

Applicant

and

GUARDIAN INSURANCE COMPANY OF CANADA

Insurer

DECISION

Issues:

The Applicant, Adam Dinkha, was injured in a motor vehicle accident on November 25, 1997. Shortly thereafter he applied for an income replacement benefit, and later for reimbursement for the cost of an in-home occupational therapy assessment. Guardian Insurance Company of Canada ("Guardian") denied both benefits. The parties were unable to resolve their disputes through mediation and Mr. Dinkha applied for arbitration under the Insurance Act, R.S.O. 1990, c. I.8, as amended.

Shortly after applying for arbitration, Mr. Phil Bouranov, an agent acting on behalf of Mr. Dinkha, wrote to the Financial Services Commission of Ontario,¹and the Insurer’s solicitors, advising that on the instruction of his client, the application for arbitration was being withdrawn.

The sole issue is:

1. What conditions, if any, ought to apply to the request for permission to withdraw?

Result:

1. Mr. Dinkha shall pay the Insurer expenses fixed at $600.32 plus GST.

Hearing:

Details of the hearing and the exhibits filed are listed in the Appendix to this decision.

Reasons:

Mr. Dinkha applied for arbitration on April 24, 1998, seeking income replacement benefits and reimbursement of an occupational therapist's report. The Insurer's response was filed approximately a month later on May 27, 1998. Shortly thereafter the Case Administrator at the Financial Services Commission of Ontario scheduled a pre-hearing discussion.

At the time, the Applicant was represented by Mr. Phil Bouranov, a paralegal with Personal Injury Consultants Agency.

On July 21, 1998, approximately a month after the pre-hearing was arranged, Mr. Bouranov wrote to the Financial Services Commission and the Insurer's Counsel, Mr. Harry Brown, to advise that on the instructions of his client, he was withdrawing the application for arbitration.²

Ten days later, on July 31, 1998, Mr. Bouranov again wrote to the Commission and Mr. Brown to advise that he was no longer representing Mr. Dinkha.

The Case Administrator, Ms. Roseanne McCarthy, wrote twice to Mr. Dinkha referring to the two letters from Mr. Bouranov. The first advised that Mr. Dinkha required the Insurer's consent to withdraw. The second asked that Mr. Dinkha confirm whether or not he was seeking to withdraw the application. Both letters advised that the pre-hearing had not been cancelled.

On August 12, 1998, Mr. Brown wrote to Mr. Bouranov requesting confirmation that his client had withdrawn his claim, prior to the termination of his retainer.

Neither Mr. Bouranov nor Mr. Dinkha replied to either the Commission’s or Mr. Brown’s correspondence.

Mr. Brown attended at the Commission’s offices on Thursday, September 24, 1998 for the pre-arbitration hearing. Mr. Dinkha failed to attend. During the pre-hearing, Mr. Brown indicated that in light of Mr. Dinkha's non-attendance, he presumed the matter had been withdrawn. Mr. Brown indicated he was not averse to the withdrawal, provided that his client was awarded its expenses.

In an effort to afford Mr. Dinkha a last opportunity to address the matter, I wrote to him on October 5, 1998 advising that I was going to conduct a brief hearing into what conditions if any, ought to apply to the withdrawal. The letter further advised that the conditions could include an award of expenses. I indicated that if Mr. Dinkha did not attend, the matter would be treated as withdrawn and I would consider the conditions in his absence. Finally, I indicated that if Mr. Dinkha attended, he could revoke his previous representative’s instruction to withdraw the matter. Mr. Dinkha failed to attend at the appointed time and place and I proceeded with this matter in his absence. In the absence of any reply from Mr. Dinkha, I infer that he did not intend to revoke the request for a withdrawal made by Mr. Bouranov. In light of Mr. Brown’s advice that he did not oppose the withdrawal, I granted it, and asked Mr. Brown to address the issue of conditions.

Mr. Brown indicated in his opening comments that, on behalf of the Insurer, he was seeking two conditions. The first was an award of expenses pursuant to Rule 67.3(b) of the Dispute Resolution Code. The second was an award equivalent to the Insurer's filing fee, pursuant to Rule 67.3(c), on the basis that the Applicant’s claim was an abuse of process or was frivolous or vexatious.

I recently dealt with the interpretation of Rule 67 in Richard and Lombard General Insurance Company (OIC A97-001526, April 29, 1998). In that decision, I considered the difference in the wording of Section 282(11.2) of the Insurance Act as compared to Rule 67.3(c). In brief, Section 282(11.2) of the Insurance Act empowers an arbitrator to order an amount equivalent to the filing fee in the event that the insured person "commences an arbitration that, in the opinion of the arbitrator, is frivolous, vexatious or an abuse of process." Rule 67.3 is more general, speaking simply of an abuse of process having occurred. Read literally Rule 67.3 would authorize an award if abuse occurred at any point after the application was filed.

Following the Appeal decision in Catlos and Jevco Insurance Company (P97-00013, September 26, 1997), I concluded that Rule 67.3 is subordinate to the provisions of the Insurance Act, and would have to be read down so as to be consistent with section 282(11.2). Based upon that reasoning, I stated that an award equal to the insurer’s filing fee could only be made in the event that I was satisfied that the commencement of the proceeding was in and of itself an abuse of process, or vexatious, or that the disputes advanced in the application for arbitration were frivolous. I adopt that same test for present purposes.

Mr. Brown did not suggest that the application was brought to vex the Insurer. However, he indicated that even on the scant information contained in the file, there was reason to believe that the claim was devoid of merit, and as such was frivolous. In this regard, Mr. Brown concentrated principally on the claim for an income replacement benefit. Mr. Brown tendered a series of letters which suggested that Mr. Dinkha or his counsel had resisted the Insurer’s attempts to arrange for an occupational therapist to conduct a job site analysis. Mr. Brown also tendered two surveillance reports, which at least suggested that Mr. Dinkha may have continued to work during the period for which he was claiming an income replacement benefit. Mr. Brown noted that it was shortly after he alerted Mr. Bouranov to the existence of the surveillance, that Mr. Bouranov advised that the matter was being withdrawn and removed himself as Mr. Dinkha’s representative.

Cases such as the present, where the Insurer has not had an opportunity to garner any medical evidence establishing that the claim is without merit, may be difficult and I accede to Mr. Brown’s submission that in such circumstances, it is appropriate to draw inferences from the Applicant’s conduct.

In this case, the Applicant’s conduct, when coupled with the surveillance evidence, and in the absence of any response from Mr. Dinkha, raises the suggestion that the claim for an income replacement benefit was indeed devoid of merit.

However, there is also a claim for reimbursement of the cost of an In-Home Occupational Therapy Assessment delivered to the Insurer shortly after the Insurer had requested a job site evaluation. No evidence was tendered by the Insurer to suggest that the claim for the reimbursement of the cost of this assessment was made in bad faith or was devoid of merit. In submissions, Mr. Brown suggested that the claim was really about income replacement benefits and that the claim for the cost of the assessment report was secondary. He submitted that at the very least, I ought to consider awarding a portion of the assessment. Mr. Brown may be correct in his assertion that the claim was principally one for an income replacement benefit. Nevertheless, the fact remains that the Insurer refused to pay the cost of the assessment report. The matter proceeded to mediation, and it was one of the two issues included in the application for arbitration. I can see nothing in the wording of the section or the Rule that suggests that the award may be made if a portion of the claim is frivolous. To the contrary, in my view, the section of the Act and the Rule are there to afford a measure of relief to insurers which are forced to respond (thereby incurring a filing fee) to applications that should never have been brought in the first place. In the absence of any evidence to suggest that the claim for the assessment report was frivolous, I can see no basis for an award equivalent to the Insurer’s filing fee.

The question of the Insurer's expenses awarded pursuant to Rule 67.3(d) is another matter. Rule 67.3(d) states that the arbitrator may "award expenses to either party" as permitted by Rule 73.

Rule 73.2 awards the arbitrator broad discretion to award expenses. Rule 73 (2), provides a number of criteria that may be considered, including:

(a) each party's degree of success in the outcome of the proceeding; and

(b) the conduct of either party that tended to shorten or facilitate the proceeding or to prolong, obstruct or hinder it.

In the instant case, the Insurer was not ordered to pay anything towards the Applicant’s claims. Accordingly, it can be said that the Insurer was successful.

With regard to the second criteria, Arbitrator Bayefsky noted in Jambor and Dominion of Canada General Insurance Company, (OIC A96-001938, February 25, 1998) that the Applicant's early withdrawal of the claim was conduct that tended to shorten or facilitate the proceeding. Largely on that basis, Arbitrator Bayefsky rejected the Insurer's request for an award of expenses.

In this case, the early withdrawal by the Applicant, as in Jambor and Dominion, had the effect of shortening the proceeding. However, Mr. Dinkha’s failure to respond to letters from the Commission and Mr. Brown, asking that he confirm his intentions, and his failure to attend at the pre-hearing, or to otherwise discuss with the Insurer what, if any, conditions ought to apply to the withdrawal, had the effect of lengthening the proceeding.

On balance, in my view, the Insurer ought to be entitled to its expenses incurred with respect to the preparation for, and attendance at the pre-hearing and the hearing into the withdrawal.

Mr. Brown tendered copies of his accounts for the period commencing May 27, 1998 and ending October 7, 1998. The accounts include the initial review and preparation of the file, and the preparation for, and attendance at the pre-hearing, but unfortunately they do not include the preparation for or attendance at the hearing into the withdrawal. From the accounts, it would appear that Mr. Brown spent five hours preparing for and attending at the pre-arbitration hearing. The attendance on October 16, 1998 for the hearing into the withdrawal lasted approximately an hour and a half and I expect that Mr. Brown would have spent an equivalent period of time preparing his witness and organizing the various documents that were tendered into evidence.

In all these circumstances, I award the Insurer its expenses fixed at eight hours at the applicable legal aid rate of $75.04 per hour.

Order:

1. Mr. Adam Dinkha shall pay to Guardian Insurance Company of Canada its expenses fixed at $600.32 plus GST.

November 27, 1998

Stewart McMahon

Arbitrator

Date

APPENDIX

Hearing:

The hearing was held on Friday, October 16, 1998 at the Financial Services Commission. The Applicant was not present, the Insurer’s counsel was Mr. Harry Brown of Iacono Brown and the Insurer’s Representative was Mr. Tommy Jakob.

Exhibits:

Exhibit 1

Letter from Ms. Marita McKendry to Mr. P. Bouranov

Exhibit 2

In-Home Occupational Therapy Report provided by Applicant's representative

Exhibit 3

Letter dated April 8, 1998 from Dr. J.A. Nathanson to Mr. T. Jakob

Exhibit 4

Letter dated April 13, 1998 from Mr. T. Jakob to Mr. P. Bouranov.

Exhibit 5

Letter dated April 30, 1998 from Dr. J.A. Nathanson to Mr. T. Jakob

Exhibit 6a

Letter dated May 5, 1998 from Ms. Marita McKendry to Canadian Supplies & Consulting

Exhibit 6b

Surveillance report dated January 12, 1998

Exhibit 7

Surveillance report dated June 30, 1998

Exhibit 8

Letter dated July 31, 1998 from Mr. P. Bouranov to the Insurer's Counsel, the Insurer and the Ontario Insurance Commission

Exhibit 9

Letter dated July 31, 1998 from Mr. P. Bouranov to the Insurer’s Counsel, the Insurer and the Ontario Insurance Commission

Exhibit 10

Letter dated August 12, 1998 from Mr. H. Brown to Mr. P. Bouranov

Exhibit 11

Letter dated August 27, 1998 from Mr. H. Brown to Mr. Jakob enclosing accounts

Exhibit 12

Letter dated May 27, 1998 from Mr. H. Brown to Mr. P. Bouranov

Footnotes

1. 1Effective July 1, 1998, the Ontario Insurance Commission was changed to the Financial Services Commission of Ontario, pursuant to the Financial Services Commission of Ontario Act, S.O. 1997, c.28.
2. 2There is no absolute right to withdraw. Rule 67 provides that a party may seek permission to withdraw. In the event the other party does not agree the matter is within the discretion of an arbitrator.