Zenaida Osorio v. Allstate Insurance Company of Canada, 1999 ONFSCDRS 104

FINANCIAL SERVICES COMMISSION OF ONTARIO

Neutral Citation: 1999 ONFSCDRS 104

FSCO A98-000731

BETWEEN:

ZENAIDA OSORIO Applicant

and

ALLSTATE INSURANCE COMPANY OF CANADA Insurer

DECISION ON A PRELIMINARY ISSUE

Before: K. Julaine Palmer

Heard: May 27, 1999, in Hamilton

Appearances: Lou A. Ferro (not present) for Mrs. Osorio (not present) Rita L. Urbonavicius for Allstate Insurance Company of Canada

Issues:

Zenaida Osorio was injured in a motor vehicle accident on February 23, 1994. She received some statutory accident benefits from Allstate Insurance Company of Canada ("Allstate"), payable under the Schedule,¹ but Allstate refused to pay an account for case management services. The parties were unable to resolve their disputes through mediation, and Mrs. Osorio applied for arbitration under the Insurance Act, R.S.O. 1990, c.I.8, as amended. The preliminary issues in this case are:

1. Is Mrs. Osorio precluded from proceeding to arbitration because the claim which she seeks to have arbitrated has already been advanced in court as a claim for medical and rehabilitation benefits?

2. Is Mrs. Osorio liable to pay Allstate an award in respect of its assessment because she commenced an arbitration which is an abuse of process under subsection 282(11.2) of the Insurance Act?

3. Is Mrs. Osorio liable to pay Allstate its expenses in respect of the arbitration under subsection 282(11) of the Insurance Act?

Result:

1. Mrs. Osorio may not proceed to arbitration. This arbitration is dismissed.

2. Mrs. Osorio must pay Allstate $3,000 in respect of its assessment, because she commenced an arbitration which is an abuse of process.

3. Mrs. Osorio must pay Allstate its expenses in respect of the arbitration, under subsection 282(11) of the Insurance Act, fixed at $510.

EVIDENCE AND ANALYSIS:

Background:

At a pre-hearing discussion of this case in November 1998, the parties agreed to a two-step process for this arbitration. First, the preliminary issues, as set out above, were to be heard on May 27, 1999. Secondly, the substantive issues were to be heard in September 1999. The prehearing arbitrator confirmed these arrangements in a letter dated December 22, 1998.

The case administrator sent the parties a Notice of Hearing of Preliminary Issue on January 13, 1999. The exact location of the hearing was not given in that notice. The case administrator notified the parties of the precise location for the hearing by a further Notice dated May 13, 1999. For Mrs. Osorio's convenience, the hearing was scheduled to take place in Hamilton. I am satisfied that she and her lawyer had notice of the preliminary issue hearing. After waiting more than 15 minutes after the scheduled starting time for the hearing, I proceeded with the hearing on May 27, 1999 in the absence of Mrs. Osorio and her representative.²

This arbitration is about services provided by a case manager. Under subsection 40(8) of the Schedule, an insurer is not liable to pay such an expense pending the resolution of a dispute, unless it agreed to the appointment of the case manager before the expense was incurred. In this case, Allstate did not agree. According to a statement of Rehabilitation Mangement Inc. ("RMI") dated November 13, 1996, on June 26, 1996, RMI billed Mr. Ferro $1,261.94. He applied for mediation on Mrs. Osorio's behalf on October 18, 1996. The mediator reported on February 11, 1997 that the parties were unable to resolve this dispute. On February 11, 1998 Mr. Ferro issued a Statement of Claim on Mrs. Osorio's behalf in the Ontario Court (General Division) against "Allstate Insurance" and others, claiming medical and rehabilitation benefits and other relief arising from the accident of February 23, 1994.³

On February 24, 1998, Mr. Ferro again applied for mediation on Mrs. Osorio's behalf. That mediation claimed rehabilitation benefits of $2,385.98, including the $1,261.94 claimed previously. On May 5, 1998 the mediator reported that these claims also remained unresolved, although a procedural agreement was reached to add this issue to the issues set for a private mediation to be held in July 1998.

On May 19, 1998, the Commission received this Application for Arbitration, dated May 5, 1998. Allstate's Response was received on July 3, 1998.

Allstate submitted that the Application for Arbitration was, from the outset, an abuse of process that had caused unwarranted expense and duplication of effort. Allstate submitted that Mr. Ferro was the lawyer for applicants in at least two other arbitration cases with similar issues.⁴

Findings:

Mrs. Osorio's Statement of Claim began a court action that demonstrated her choice to pursue Allstate in court, rather than through arbitration.⁵ In considering whether the arbitration should proceed, I am guided by the considerations expressed by Madam Justice E. Macdonald in the Citadel General Assurance Company v. Gogna case,⁶ as cited in my decision in Tombolini and Jevco Insurance Company.⁷ In the Gogna case, Madam Justice Macdonald considered which action began first, which party has the chief burden of proof, and which action is the most comprehensive in scope. In this case, the court action was begun first and Mrs. Osorio has the burden of proof both in court and at arbitration. From a review of the Statement of Claim, I find the court action is more comprehensive than this arbitration. I find that the court action includes claims for medical and rehabilitation benefits which would include the benefits which are the subject of this arbitration. In accordance with the above considerations, I dismiss this arbitration.

Allstate asks for an order that Mrs. Osorio pay the $3,000 assessment the company paid to participate in this arbitration,⁸ because she commenced an arbitration that is an abuse of process under subsection 282(11.2) of the Insurance Act. Mrs. Osorio was warned about this possibility in the prehearing arbitrator's letter dated December 22, 1998. I find that Mrs. Osorio commenced an arbitration that was frivolous, vexatious, and an abuse of process from the outset. Despite Allstate's objections which were drawn to her attention early in the process, she persisted with the arbitration yet did not appear at the hearing, despite proper notice, nor did she or her representative notify Allstate or the Commission that she would not attend. Therefore, I order Mrs. Osorio to pay Allstate's assessment of $3,000.

Allstate also asks for its arbitration expenses in respect of the arbitration, under subsection 282(11) of the Insurance Act. Mrs. Osorio was also advised of this possibility in the prehearing arbitrator's letter. I also award Allstate its expenses of the arbitration, under subsection 282(11) of the Act and section 73 of the Code, because I am satisfied that such an award is justified by Allstate's success in this proceeding and because of Mrs. Osorio's manifestly unfounded position.

Allstate's representative requested $1,000 for its expenses. Few details of Allstate's expenses were provided to me. One Allstate claims consultant attended at the hearing and also participated in the earlier prehearing discussion. No witness fees or expert fees would appear to have been incurred. At the prehearing teleconference a more senior counsel represented Allstate; he is entitled to a higher fee due to the provisions recognizing experience. I award Allstate $510 for its expenses of the arbitration, based on approximately two hours of senior counsel time and five hours of junior counsel time, following the provisions of the Schedule-Dispute Resolution Expenses to Ontario Regulation 664, R.R.O. 1990, as amended.

June 9, 1999

K. Julaine Palmer Arbitrator

ARBITRATION ORDER

Under section 282 of the Insurance Act, R.S.O. 1990, c.I.8, as amended, it is ordered that:

1. For written reasons delivered, this arbitration is dismissed.

2. Mrs. Osorio must pay Allstate $3,000 in respect of its assessment.

3. Mrs. Osorio must pay Allstate its expenses in respect of the arbitration, fixed at $510.

June 9, 1999

K. Julaine Palmer Arbitrator

Footnotes

1. 1The Statutory Accident Benefits Schedule —Accidents after December 31, 1993 and before November 1, 1996, Ontario Regulation 776/93, as amended by Ontario Regulations 635/94, 781/94 and 463/96.
2. 2As permitted by section 34.5 of the Dispute Resolution Practice Code, and section 7 of the Statutory Powers Procedure Act, R.S.O. 1990, c. S.22, as amended.
3. 3Court File No: 3603/98 issued at Hamilton on February 11, 1998.
4. 4Gawronski and Allstate Insurance Company of Canada, (OIC A-97-000417, December 23, 1997), upheld on appeal (OIC P98-00004, May 13, 1998); Miller and Allstate Insurance Company of Canada (FSCO A98-000708, April 29, 1999).
5. 5See section 281(1) of the Insurance Act.
6. 6Citadel General Assurance Company v. Gogna, [1992] O.J. No. 1996. Justice Macdonald wrote: "It is fundamental that multiplicity of proceedings is to be avoided, wherever possible. I am guided by the considerations set out in Victoria Property and Investment Co. (Canada) Ltd. et al. v. Vatznau Management Ltd. et al., (1978), 1978 CanLII 1286 (ON HCJ), 8 C.P.C. 38, at p. 41: (1) which action began first; (2) who has the chief burden of proof; (3) which is the most comprehensive in scope."
7. 7Tombolini and Jevco Insurance Company, (OIC A96-000142, September 24, 1996).
8. 8The assessment is established under section 14 of the Insurance Act and set out in section D of the Dispute Resolution Practice Code—Third Edition (April 15, 1997).