Neutral Citation: 1998 ONFSCDRS 91

FSCO A96-001142

FINANCIAL SERVICES COMMISSION OF ONTARIO

BETWEEN:

GARFIELD FOLKES

Applicant

and

SECURITY INSURANCE COMPANY OF HARTFORD

Insurer

EXPENSE ASSESSMENT

Issues:

The Applicant, Garfield Folkes, was injured in a motor vehicle accident on November 14, 1993. He applied for and received statutory accident benefits from Security Insurance Company of Hartford ("Security"), payable under the Schedule.¹ Security terminated weekly income benefits on April 29, 1996. The parties were unable to resolve their disputes through mediation, and on July 6, 1996, Mr. Folkes applied for arbitration at the Financial Services Commission of Ontario²under the Insurance Act, R.S.O. 1990, c. I.8, as amended.

At a pre-hearing on September 11, 1996, the issues identified for arbitration were the amount of Mr. Folkes' weekly income benefit as defined in subsection 12(4) of the Schedule, medical and rehabilitation expenses claimed under subsection 6(1) of the Schedule, a special award, interest on outstanding amounts and expenses of the arbitration proceeding. An arbitration hearing was scheduled for December 18 and 19, 1996.

On December 16, 1996, the parties settled their disputes. The terms of the settlement were confirmed by Mr. Folkes' counsel, Mr. Alan A. Rachlin to Security's counsel, Mr. Jeffrey Freedlander, by a letter dated December 23, 1996.

Subsequent to the settlement, the parties failed to agree on the appropriate amount of expenses payable by Security in accordance with the terms of the settlement. The parties requested an assessment of expenses by an arbitrator.

The issues in this expense assessment are:

1. What is the amount of expenses for legal fees to which Mr. Folkes is entitled?

2. What is the amount of expenses for disbursements to which Mr. Folkes is entitled?

3. Is Mr. Folkes entitled to interest on any expenses owing?

4. Is Mr. Folkes entitled to a special award pursuant to subsection 282(11) of the Insurance Act?

5. Is Mr. Folkes entitled to expenses for this expense assessment?

Result:

1. Mr. Folkes is entitled to $634.46 inclusive of GST for legal fees.

2. Mr. Folkes is entitled to $1,134.48 plus GST where applicable for disbursement expenses.

3. Mr. Folkes is not entitled to interest on his expenses.

4. Mr. Folkes is not entitled to a special award.

5. Mr. Folkes is entitled to his expenses for the expense assessment.

Hearing:

The expense assessment was held on July 17, 1998, by telephone conference call before me, Joyce Miller, Arbitrator. In addition, the parties provided written submissions and supporting documentation by August 11, 1998.

Present at the Hearing:

Mr. Folkes' Representative:

Alan L. Rachlin Barrister and Solicitor

Security's Representative:

Jeffrey Freedlander Barrister and Solicitor

The Law:

Under subsection 282(11)³ of the Insurance Act, an arbitrator may award to an insured person expenses incurred in respect of an arbitration proceeding, subject to the Expenses Schedule.

Section 2 of the Expenses Schedule⁴ deals with awards with respect to legal fees and provides as follows:

(1) The legal fees payable by the insured person for the following matters may be awarded:

1. For all services performed before the hearing;

2. For the preparation for an arbitration, an appeal or a variation hearing;

3. For attendance at an arbitration, an appeal or a variation hearing.

(2) The maximum amount that may be awarded for legal fees is the amount calculated using the hourly rates established under the Legal Aid Act for professional services in civil matters before the Ontario Court (General Division).

(3) For the purposes of subsection (2), the hourly rate may be adjusted to include, in appropriate circumstances the experience allowance established under the Legal Aid Act for more experienced solicitors.

In the decision of Henri and Allstate, (OIC A-007954, August 8, 1997), Arbitrator Nancy Makepeace outlined a number of general principles that have emerged from the arbitration decisions with regard to the assessment of an applicant's arbitration expenses. These principles include the following:

• The overriding consideration in fixing arbitration expenses is reasonableness.

• A line-by-line assessment of the expenses claimed is not appropriate. Rather, the arbitrator should make a global assessment of reasonable expenses.

• Subsection 2(2) of the Schedule mandates that the hourly rate to be paid is the rate set out in the Legal Aid tariff.

Evidence and Findings:

1. Legal Fees

Mr. Folkes claims legal fee expenses for his counsel, Mr. Alan L. Rachlin, for 8.85 hours; consultation by Senior Counsel, Mr. T.H. Rachlin, Q.C., for 1.5 for hours; and the services of law clerks, for 1.4 hours. As well, Mr. Folkes claims a higher hourly rate for his counsel under the Legal Aid Tariff experience allowance.

(a) Legal Fees for Mr. Alan L. Rachlin

(i) Hours

Security disputes the 8.85 hours claimed for Mr. Rachlin's legal fees. Security submitted that Mr. Folkes should be bound by a letter dated December 23, 1996 from Mr. Rachlin to Mr. Freedlander. In this letter Mr. Rachlin stated:

Since we began drafting the Application for Arbitration, I have spent 3.7 hours working on the file.....

Security takes the position that the phrase "in respect of an arbitration proceeding" in subsection 282(11) of the Insurance Act refers to those expenses which commenced with the application for arbitration and ended with the termination of the arbitration, either by settlement (as in this case) or by a ruling following a hearing and any subsequent appeals. Security submitted that Mr. Folkes should only be paid for 3.7 hours for Mr. Rachlin's legal services.

I have reviewed the computer printout dockets and I disagree with Security's submissions. Taking into consideration the principles articulated in Henri and Allstate, for the following reasons, I find that Mr. Folkes' claim for Mr. Rachlin's legal services of 8.85 hours for the preparation and settlement of the arbitration hearing is reasonable.

First, in a letter from Mr. Rachlin, dated July 3, 1997 to Security's counsel, Mr. Freedlander, Mr. Rachlin noted that he had made an error when he had calculated 3.7 hours. After reviewing the dockets I find that Mr. Rachlin erred in his calculation. The dockets clearly show that from the filing of the arbitration until the case settled Mr. Rachlin had in fact spent 5.7 hours on the arbitration file.

Second, I disagree with Security's submission that payment for the legal services of Mr. Rachlin should be restricted to the period commencing with the filing of an application for arbitration up until the case is concluded. In my view, this is too narrow a reading of the phrase "expenses in respect of an arbitration proceeding" in subsection 282(11) of the Insurance Act.

In my view, it is reasonable to conclude that when a client comes to see a lawyer regarding a dispute with his or her insurer that some thought and preparation is required before proceeding to file an application for arbitration. I, therefore, find it reasonable to include in the expenses of an arbitration proceeding the time spent by counsel in preparing his case (such as gathering information and documentation) prior to filing an application for arbitration. Similarly, I find it reasonable to include as part of the expenses of arbitration, after a settlement is achieved, the time spent by a counsel in finalizing the details of the settlement.

Accordingly, I find that Mr. Folkes' claim for Mr. Rachlin's legal services of 8.85 hours incurred in respect of this arbitration proceeding is reasonable.

(ii) Hourly Rate

Security submitted that Mr. A. Rachlin was not entitled to the experience allowance since he did not have the requisite 10 years of experience required to be eligible for this allowance. I agree.

I find that on the day that Mr. Folkes filed his Application for Arbitration, July 10, 1996, the jurisdictional limit on the hourly rate of a lawyer's fees was the Legal Aid Tariff rate of $67 an hour for a lawyer with less then 10 years of experience. At the time of the settlement, on December 23, 1996, Mr. Rachlin did not have the requisite 10 years that would entitle him to an "experience allowance.⁵ I have no discretion to depart from the rate of $67.⁶

Accordingly, I find that Mr. Folkes is entitled to $634.46⁷ for the legal services of Mr. Rachlin in this arbitration.

(b) Legal Fees for Mr. T.H. Rachlin, Q.C. and Law Clerks

I deny the legal fees claimed for the services of Mr. T.H. Rachlin Q.C. and the law clerks. I was not given sufficient evidence to support this claim and I was unable to determine from the dockets whether this claim for legal fees could be attributed to the arbitration proceeding.

2. Expenses for Disbursements

Mr. Folkes claims expenses for five medical reports and a resumé from Dr. M. Fehlings; one medical report from Dr. F. Chin; and for long distance telephone, courier and photocopying charges.

Security disputed the expenses regarding Dr. Fehlings' medical reports on the basis that they were related to a tort action arising out of the same accident.

I have reviewed the computer printout dockets, as well as the supporting documentation, including the medical brief prepared for arbitration. I find that one can reasonably conclude that the reports prepared by Dr. Fehlings are expenses incurred for the purposes of this arbitration proceeding. Security did not present any probative evidence to support its position that these reports were prepared for the related tort action. Accordingly, I find that Mr. Folkes is entitled to his expenses for the five medical reports prepared by Dr. Fehlings.

I also find that Mr. Folkes is entitled to $50 for Dr. Fehlings' resume, as well as, to $50 for a medical report by Dr. F. Chin as being reasonable expenses of this arbitration.

Security also disputed the amounts claimed by Mr. Folkes regarding expenses of $19.92 for long distance telephone charges and courier charges of $83.55 as not all being attributable to expenses for arbitration.

I have reviewed the computer printout dockets and have concluded that the long distance charges of $18.31 and courier charges of $83.55 are reasonable expenses of this arbitration. I also allow as reasonable expenses of this arbitration $100 filing fee for arbitration, as well as photocopying charges of $53.12.

In summary, I find the disbursements payable by Security are as follows:

Five medical reports of Dr. Fehlings

$779.50

Medical report of Dr. F. Chin

50.00

Resumé of Dr. Fehlings

50.00

Long distance telephone charges

18.31

Courier charges

83.55

Arbitration filing fee

100.00

Photocopy charges

53.12

Total disbursements payable

$1,134.48 plus GST where applicable

3. Interest on Expenses

Mr. Folkes claims interest on his expenses. Security submitted that I have no authority to order interest on expenses and referred me to the case of Henri and Allstate.

In the case of Henri and Allstate, Arbitrator Makepeace stated:

The Applicant relied on section 24(4) of the SABS, which states that the insurer "will pay interest on overdue payments from the date they become overdue at the rate of 2 percent per month." Subsections 24(1) and (2) say when "amounts payable under Parts II, III, IV and V become overdue." Parts II-V of the SABS describe the benefits available to insured persons, without reference to arbitration expenses. As nothing in the SABS deals with arbitration expenses, I find that the "payments" in subsection 24(4) refers to payments of benefits, not arbitration expenses. An arbitrator's jurisdiction to award expenses is found in section 282(11) of the Insurance Act, which says nothing about interest on expenses.

Arbitrator Makepeace then concluded that she had no jurisdiction to order interest to be paid on the Applicant's arbitration expenses. I agree with the reasoning of Arbitrator Makepeace. Accordingly, I find that no interest is payable on the arbitration expenses in the present case.

4. Is Mr. Folkes entitled to a special award in the form of interest pursuant to section 282(10) of the Insurance Act?

Mr. Folkes submitted that a special award should be made against Security for its delay in making an effort to resolve the outstanding issue of expenses of arbitration.

Security submitted that I do not have the jurisdiction to make a special award. I agree.

In my view, the same reasoning that was used in the Henri and Allstate decision to disallow interest on an expense assessment applies to this particular issue. Succinctly, the word "payments" that appear in subsection 282 (10) of the Insurance Act refers to payments of benefits, not to arbitration expenses. Accordingly, I find I have no jurisdiction to order a special award.

5. Is Mr. Folkes entitled to his expenses for this expense assessment?

Mr. Folkes claims his expenses incurred in respect of this expense assessment. Security submitted that I have no jurisdiction to award expenses for an assessment hearing and referred me to the case of Milevski and State Farm (OIC A-01292, February 7, 1997) where Arbitrator Beth Allen stated:

In my opinion, the assessment hearing is a new proceeding, separate and distinct from the arbitration proceeding. The Expenses Schedule in section 2(2) specifically provides that expenses may be awarded for preparation and attendance at an arbitration and appeal or variation hearing. There is no provision for expenses for an assessment hearing.

With respect, I disagree with Arbitrator Allen's conclusion. In my opinion, an expense assessment, which decides the specific amount of an expense award, is not a separate and distinct proceeding from an arbitration hearing, but rather it forms an integral part in the process of resolving the issues in dispute at arbitration.

In this case, Mr. Folkes' claim for expenses was one of the issues of arbitration. The case settled two days before the arbitration hearing. The parties in their minutes of settlement agreed that Security would pay "... Mr. Folkes' costs of the arbitration as agreed upon or assessed." The parties were not able to agree on the amount of the expenses and therefore requested an assessment.

The fact that an expense assessment may take place after the substantive issues at arbitration have settled does not, in my view, take away from the fact that expenses still remains an issue when the parties cannot agree on an appropriate amount for expenses.

I find that the amount claimed by Mr. Folkes for his expenses for arbitration was reasonable and not substantially different than the amount that has been assessed. Accordingly, pursuant to subsection 282(11) of the Insurance Act I exercise my discretion to award Mr. Folkes his reasonable expenses incurred for this expense assessment.

Order:

1. Security shall pay Mr. Folkes $634.46 inclusive of GSTfor legal fees.

2. Security shall pay Mr. Folkes $1,134.48, plus GST where applicable, for disbursement expenses.

3. Security shall pay Mr. Folkes his expenses incurred in respect of the expense assessment.

November 30, 1998

Joyce Miller Arbitrator

Date

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.

Footnotes

1. 1The Statutory Accident Benefits Schedule — Accidents On or Between June 22, 1990 and December 31, 1993, Regulation 672 of R.R.O. 1990, as amended by Ontario Regulations 660/93 and 779/93.
2. 2Effective 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.
3. 3Subsection 282(11) provides:
4. 4Ontario Regulation 664, R.R.O. 1990, as amended by Ontario Regulation 464/96 made under the Insurance Act).
5. 5Mr. Rachlin was called to the Bar in March 1987.
6. 6See Pinto and General Accident, (OIC A96-001246, April 10, 1997), Grewal and State Farm, (OIC A-004598, May 13, 1997), Molina and Pafco Insurance, (OIC A96-000804), Beros and Allstate Insurance (OIC A96-001606, December 16, 1997), Salvaggio and Simcoe & Erie, (OIC A96-000978, October 15, 1997) and McConachie and Gan Canada Insurance (OIC A96-000241, December 18, 1997).
7. 78.85 hours x $67 = $592.95 + $41.50GST = $634.46