Neutral Citation: 1999 ONFSCDRS 140

FSCO A98-000531

BETWEEN:

GODFREY IMALELE

Applicant

and

ZURICH INSURANCE COMPANY

Insurer

REASONS FOR DECISION

Before:

Donald Hale

Heard:

June 28, 1999, at the Offices of the Financial Services Commission of Ontario in Toronto.

Appearances:

Mr. Imalele did not appear and no one appeared on his behalf

Darrell P. March for Zurich Insurance Company

The Applicant, Godfrey Imalele, was allegedly injured in a motor vehicle accident on September 8, 1996. He applied for and received statutory accident benefits from Zurich Insurance Company ("Zurich"), payable under the Schedule.¹ Zurich terminated weekly income replacement benefits on October 23, 1997. The parties were unable to resolve their disputes through mediation, and Mr. Imalele applied for arbitration at the Financial Services Commission of Ontario under the Insurance Act, R.S.O. 1990, c.I.8, as amended.

The issues in this hearing are:

Is Mr. Imalele entitled to weekly income replacement benefits from October 23, 1997?
Is Mr. Imalele entitled to payment for physiotherapy treatments he received from Pro-Med Rehabilitation Centre and the Pain Relief and Health Consultation Centre?
Is Zurich entitled to repayment of $457.86 for income replacement benefits paid between September 15 and October 23, 1997 and $1,440 for physiotherapy treatments, pursuant to section 47(1)(a) of the Schedule?
Is Zurich entitled to repayment of their assessment fee under section 282(11.2) of the Insurance Act?
Is Mr. Imalele entitled to interest on any amount owing?
Is Zurich liable to pay Mr. Imalele's expenses in respect of the arbitration?
Is Mr. Imalele liable to pay Zurich's expenses in respect of the arbitration?

Mr. Imalele is not entitled to weekly income replacement benefits.
Mr. Imalele is not entitled to be paid for the medical/rehabilitation treatments he received at Pro-Med Rehabilitation Centre and the Pain Relief and Health Consultation Centre.
Zurich is entitled to repayment of income replacement benefits in the amount of $457.86 paid between September 15 and October 23, 1997 and $1,440 for physiotherapy treatments.
Zurich is not entitled to repayment of its assessment under section 282(11.2) of the Insurance Act.
Mr. Imalele is not entitled to interest or to his expenses in respect of the arbitration.
Zurich is entitled to its expenses with respect to the arbitration which I fix in the amount of $500.

1. History of the Proceedings:

Mr. Imalele was allegedly injured in a motor vehicle accident on September 8, 1996. In a statement provided to an investigator retained by Zurich on September 30, 1996, Mr. Imalele indicated that, while waiting at a stop light, the car immediately ahead of the rental vehicle which he was operating reversed, colliding with the front of his car. He stated that he got out of the car and exchanged information with the driver of the other vehicle. He then proceeded one block further and returned the car to the rental agency.

Following the impact, Mr. Imalele stated that his body was pushed forward and then back, and that he struck his right knee on the bottom of the steering wheel. He also indicated that there were a few scratches on the car's front bumper. However, the branch manager of the rental car agency, Mr. Andrew McEwan, observed no damage to the vehicle whatsoever when he inspected the car minutes after the accident occurred. Mr. McEwan provided a statement to the Insurer describing his conversation with Mr. Imalele immediately following the accident and also forwarded a copy of a damage control report form which was completed by Mr. McEwan and signed by Mr. Imalele. The report clearly stated that no damage to the rental car was observed and that no one was injured as a result of any collision.

Mr. Imalele applied for and received weekly income replacement benefits in the amount of $82.18 per week for the period September 15 to October 23, 1997, for a total of $457.86. In addition, Zurich provided the funding necessary for Mr. Imalele to attend 15 physiotherapy sessions, as it was required to do under section 38(16)1 of the Schedule, at a cost of $1,440.

Following certain investigations by the Insurer and an Insurer's Medical Examination on October 8, 1997, Zurich stopped paying benefits on October 23, 1997. Mr. Imalele then applied for mediation of his dispute with Zurich, claiming that he was entitled to ongoing income replacement benefits and the cost of physiotherapy treatments. According to the Report of the Mediator dated February 17, 1998, the dispute was not resolved. Mr. Imalele then applied for arbitration.

At a pre-hearing discussion held on September 15, 1998, Mr. Imalele was in attendance and was represented by an agent, Mr. Jorge Barroilhet, President of J. H. Barroilhet & Associates. The pre-hearing arbitrator ordered Mr. Imalele to produce to Zurich his medical records dating back to June 24, 1995. Mr. March, Zurich's counsel, advised that to date these productions have not been forthcoming. The pre-hearing letter dated September 15, 1998, a copy of which was sent to Mr. Imalele, care of Mr. Barroilhet, confirmed the discussions at the pre-hearing, including the production orders and confirmed that the arbitration hearing was scheduled for June 28 and 29, 1999.

On September 17, 1998, the Commission sent a Notice of Hearing to Mr. Imalele, care of Mr. Barroilhet, and to Mr. Barroilhet personally, informing them that the arbitration hearing was scheduled to take place on June 28 and 29, 1999, beginning at 10:00 a.m. at the Commission. The Notice of Hearing included the following paragraph, in compliance with subsection 6(3) of the Statutory Powers Procedure Act, R.S.O. 1990, Chap. S.22, as amended:

You may attend this hearing in person and/or be represented. If you or your representative do not attend at the hearing, the arbitrator may dispose of the case in your absence and you will not be entitled to any further notice of the arbitration proceedings.

Neither Mr. Imalele nor Mr. Barroilhet attended the hearing at the appointed time and place. Mr. March advised that he had been in touch with Mr. Barroilhet late the previous week with respect to settlement discussions. Mr. March indicated that Mr. Barroilhet was aware of the upcoming hearing, but had not yet served him with the required productions. Mr. Barroilhet did not advise Mr. March whether he would be attending on behalf of Mr. Imalele at the hearing on June 28 and 29, 1999 and their discussions revolved solely around the question of the payment of Mr. Barroilhet's fees.

Section 7 of the Statutory Powers Procedure Act gives me the authority to proceed with a hearing in a party's absence, where I am satisfied that proper notice of the hearing has been given to the party. In this case, I was satisfied that proper notice was given to Mr. Imalele, through his agent, Mr. Barroilhet. I have no reason to believe that Mr. Imalele did not receive the Notice of Hearing. In addition, there was no reason to believe that he did not receive both the pre-hearing letter and the Notice of Hearing from the Commission dated September 17, 1998. I received no explanation for his absence. After waiting one hour, I proceeded with the hearing.

2. Mr. Imalele's Entitlement to Benefits:

The onus is on Mr. Imalele to prove his claim for benefits. Since he did not appear at the hearing, I have not been provided with any evidence to support his position that he is entitled to ongoing benefits. Zurich has provided me with its Arbitration Brief, which I have marked as exhibit 1. This document contains all of the medical reports, surveillance information, witness statements, pleadings, applications and explanation of benefits and correspondence which were compiled in the course of Zurich's processing of this claim. As the evidence contained therein is uncontradicted, I rely on its contents in determining the issues described above.

Concerning Mr. Imalele's claim for income replacement benefits, Mr. March referred me to a letter dated October 6, 1997 to Mr. Imalele from a representative of his former employer, Ontario Hydro. This letter indicates that Mr. Imalele was employed as a construction labourer at the Pickeri ng nuclear generating plant from September 17 to 26, 1997, when he was also collecting weekly income replacement benefits from Zurich.

Mr. Imalele was examined on October 8, 1997 by Dr. Michael Hall, an orthopaedic specialist retained by Zurich. Dr. Hall indicated that Mr. Imalele reported pain in his right knee immediately following the accident and said that he had pain the next day all over his body. On the date of the examination, Mr. Imalele continued to report pain in his back, neck and right knee and claimed that he was taking physiotherapy four or five times per week. Dr. Hall observed what he described as "gross inconsistencies" in Mr. Imalele's demeanor, specifically, in the movements he was observed to make spontaneously and those he would make in response to a direct request. Dr. Hall concluded that Mr. Imalele's behaviour is "strongly suggestive of conscious misrepresentation" and that "I do not believe in fact that he sustained any injury of consequence."

On November 10, 1997, Mr. Imalele attended at a Designated Assessment Centre for a multi-disciplinary medical and rehabilitation assessment by Dr. Jack Mayer, a neurosurgeon. Dr. Mayer reports that Mr. Imalele showed pain-focused behaviour and demonstrated many inconsistencies "indicating that there is magnification and exaggeration on his part." In a letter dated December 15, 1997, Dr. Mayer concludes by stating that, "In all probability Mr. Godfrey Imalele did not sustain any injuries at all as a result of the accident that occurred on September 8, 1997... "

In Hersi and American Home Assurance Company,² Arbitrator Manji made the following findings with respect to a similar situation in which an Applicant had failed to attend a scheduled hearing to adduce evidence in support of his claims:

The sections in the Schedule that deal with an insured person's entitlement to income replacement and supplementary medical and rehabilitation benefits require that in order to qualify for these benefits, the insured person must establish, inter alia, that he or she has sustained an impairment as a result of the accident. In this case, the only evidence adduced at the hearing in respect of Mr. Hersi's injuries and any impairment that he may be suffering as a result indicates that the impairment is not a result of the accident. In the absence of contradictory evidence from Mr. Hersi, I am unable to conclude that he is entitled to any income replacement benefits and expenses for treatment he received from Dixon Rehabilitation Clinic.

In the present circumstances, I also find that I have not been provided with sufficient evidence to establish that the impairment about which Mr. Imalele complains was sustained as a result of the accident. The only available medical evidence indicates that no such impairment was sustained and that Mr. Imalele is exaggerating or misrepresenting his symptoms. Again, I rely on the fact that Mr. Imalele was employed for the period from September 17 to 26, 1997 as a construction labourer, which is a physically-demanding job.

As all of the evidence tendered points to the fact that Mr. Imalele did not sustain any injury or that he was exaggerating his symptoms, I find that he is not entitled to any income replacement benefits or expenses for the treatments which he may have taken at Pro-Med or the Pain Relief and Health Consultation Centre. As no amounts are overdue, no interest is, therefore, payable.

3. Repayment of Benefits:

Zurich submits that I ought to make an order for the repayment of the income replacement and medical/rehabilitation benefits paid to Mr. Imalele, pursuant to section 47(1)(a) of the Schedule. This section states:

A person shall repay to the insurer, any benefit under this Regulation that is paid to the person as a result of an error on the part of the insurer, the injured person or any other person, or as a result of wilful misrepresentation or fraud;

In my view, the payments made to Mr. Imalele by Zurich were made as a result of Mr. Imalele's wilful misrepresentation of his medical condition. The evidence clearly indicates that if Mr. Imalele sustained any injury at all as a result of the accident, it was exaggerated and magnified.

I am particularly troubled by the uncontroverted evidence demonstrating that Mr. Imalele was employed as a construction labourer for at least part of the time when he was collecting income replacement benefits from Zurich. I find that if that information had been made available to Zurich, those benefits would have been suspended immediately.

I find, accordingly, that Zurich is entitled to repayment of the amounts which it paid for income replacement benefits and medical/rehabilitation treatments in the amounts of $457.86 and $1,440 respectively.

EXPENSES and ASSESSMENT AWARD:

In his Application for Arbitration, Mr. Imalele seeks an award of the expenses he has incurred in respect of this hearing. Under subsection 282(11) of the Act, I have the discretion to award Mr. Imalele his expenses in respect of the arbitration, as prescribed in Ontario Regulation 664. I agree with Arbitrator Seife's view in Polus and Royal Insurance Company,³ that the arbitrator's discretion is exercised taking into account the individual circumstances of each case and having regard to the intent and purpose of the dispute resolution scheme of the Insurance Act. I also agree with Arbitrator Seife that the dispute resolution scheme is designed to facilitate the applicant's access to relatively inexpensive, speedy and informal adjudication of disputes and that the abuse of this process seriously undermines its effectiveness and must be discouraged. As Arbitrator Seife did in Polus, I find that, in this case, the Applicant used the arbitration system to advance claims which were untenable. His failure to pursue his claims has caused both Zurich and the Commission to expend needless time and resources on this arbitration procedure. I therefore decline to exercise my discretion to award Mr. Imalele his expenses. In my view, Mr. Imalele's conduct in this case entitles Zurich to an award of its expenses.

Subsection 282(11) of the Insurance Act was amended in November 1996 to allow an arbitrator to award expenses to either the insured person or the insurer. Mr. Imalele's Application for Arbitration was filed after the amendment came into effect, and therefore, it applies. Ontario Regulation 664, as amended⁴ sets out the criteria under which an award of expenses can be made. In particular, it allows an award of expenses where "...the proceeding or any position taken by (a party) during the proceeding was manifestly unfounded, frivolous, vexatious, fraudulent or an abuse of process."

In the present circumstances, I find that by proceeding with the application in the absence of any objective evidence of impairment and in not attending at the hearing, Mr. Imalele has taken a position which is manifestly unfounded, as contemplated by the subsection. Accordingly, I find that Zurich is entitled to an award of its expenses. However, as the hearing in this matter did not proceed, since the Insurer's evidence was admitted by way of the submission of its Arbitration Brief, I fix the expenses payable by Mr. Imalele to Zurich at $500.

Zurich has also asked that I make a determination under section 282(11.2) of the Insurance Act that this is a proper case for an award against Mr. Imalele of the amount it was assessed in respect of the arbitration under section 14 of the Insurance Act. This section states that:

If an injured 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.

In the appeal decision, Allison and Markel Insurance Company of Canada,⁵ Director's Delegate Susan Naylor made the following comments with respect to an application for an award under section 282(11.2). She held that:

It is open to an arbitrator to disallow expenses but to refuse to make an order against the insured person under section 282(11.2). While the factors to be considered in each may overlap, the nature of the two awards is different. An expenses award is principally intended to reimburse an insured, to the extent allowed, for the cost of bringing a legitimate application forward and conducting the case in a reasonable fashion. In contrast, an order against an insured person under section 282(11.2) is more in the nature of a penalty. It can only be made if the arbitrator finds that the application for arbitration was frivolous, vexatious or an abuse of process and in no other circumstances. The discretion of the arbitrator is limited to determining whether an amount should be levied in these specific circumstances, and, if so, how much.

In my discussion above with respect to an award of expenses against Mr. Imalele in favour of Zurich, I found that the position taken by Mr. Imalele was manifestly unfounded, though not that it was frivolous, vexatious or an abuse of process. Bearing in mind the principles enunciated by Director's Delegate Naylor in Allison, I have made the following findings with respect to the Insurer's argument that Mr. Imalele's application for arbitration was frivolous, vexatious or an abuse of process; thereby warranting an award against the Applicant in the amount of the Insurer's assessment.

In my view, in order for a proceeding to be found frivolous, it must relate to a claim which is trivial or inconsequential. Mr. Imalele's claim in this matter cannot be so described as it related to substantial ongoing income replacement benefits and medical/rehabilitation expenses. Similarly, in order for me to make a finding that the application is vexatious, I must determine that it was designed primarily to inconvenience the Insurer and cause it to go to unnecessary expense. I cannot agree that this was the Applicant's motivation in applying for arbitration in the present circumstances. In order for me to find a proceeding to be an abuse of process, I must have evidence of a course of conduct on the part of the Applicant which demonstrates a wilful disregard for the arbitration process. I find that I have not been provided with sufficient evidence to make a finding that Mr. Imalele's conduct amounted to an abuse of process. The claim may have been without merit, but I cannot infer from the evidence provided to me that Mr. Imalele wilfully disregarded the procedures laid down by the Commission in the course of his conduct of the arbitration proceeding. Accordingly, I cannot agree with the submissions of the Insurer that this is an appropriate case to make an award in favour of Zurich against Mr. Imalele in the amount of the insurer's assessment under section 14.

July 19, 1999

Donald Hale Arbitrator

Date