Neutral Citation: 1999 ONFSCDRS 242
FSCO A99-000022
FINANCIAL SERVICES COMMISSION OF ONTARIO
BETWEEN:
GIUSEPPINA CORNIOLA
Applicant
and
ZURICH INSURANCE COMPANY
Insurer
DECISION ON A PRELIMINARY ISSUE
Before:
Donald Hale
Heard:
November 18, 1999, at the Offices of the Financial Services Commission of Ontario in Toronto.
Appearances:
Ted Charney for Mrs. Corniola
Guy Farrell for Zurich Insurance Company
Preliminary Issue:
The preliminary issue in this arbitration is whether a Release and Indemnity Agreement ("Agreement") executed by Ms. Corniola on December 20, 1998 has the effect of precluding her from proceeding to arbitration on the issue of her entitlement to payment of the medical/ rehabilitation benefits claimed in the Application for Arbitration.
Result:
Ms. Corniola is entitled to proceed to arbitration on the issue of her entitlement to payment of the medical/rehabilitation benefits claimed in the Application for Arbitration.
Background:
The Applicant, Giuseppina Corniola, was injured in a motor vehicle accident on March 8, 1997. She applied for and received statutory accident benefits from Zurich Insurance Company ("Zurich"), payable under the Schedule.1 Ms. Corniola received income replacement benefits up to November 16, 1997 at which time Zurich ceased making these payments. Ms. Corniola applied to the Financial Services Commission of Ontario ("the Commission") for mediation of her dispute with respect to her entitlement to payment of ongoing income replacement benefits, various medical expenses, housekeeping and home maintenance, and rehabilitation services provided by Target Rehabilitation and Sheppard Leslie Chiropractic Clinic ("the Clinics").
On December 3, 1998, a mediation meeting was held at the Commission's offices. Ms. Corniola attended, along with her counsel, Mr. Stephen Firestone. Mr. Ray Proctor represented Zurich. Mr. Firestone testified that as a result of his discussions with Mr. Proctor, an agreement was reached to resolve some, but not all, of the issues in dispute. Mr. Firestone indicated that the parties agreed to a settlement of all of Ms. Corniola's claims against Zurich upon payment of an agreed-upon sum, save and except those claims arising from the rehabilitation services provided by the Clinics. Mr. Firestone stated that he had some concerns about Ms. Corniola's potential liability should a claim be made against her by the Clinics for their fees. At the suggestion of Mr. Proctor, it was agreed that Zurich would indemnify Ms. Corniola should any such proceedings against her be brought by the Clinics. At the conclusion of the mediation, the parties concurred that Zurich would ask its solicitors to draft a Release and Indemnity Agreement incorporating the terms which had been arrived at.
Arguments and Analysis:
Admissibility of Extrinsic Evidence
Zurich argued that the Release and Indemnity Agreement is unambiguous and that I need not look behind it using extrinsic evidence to make a determination as to its meaning. It submits that on a plain reading of the Agreement, Ms. Corniola released Zurich from any and all claims except for those claims in respect of which an indemnity is herein given to Ms. Corniola in consideration of the payment of the agreed-upon sum. Zurich also submits that the second paragraph of the Agreement clearly demonstrates that Ms. Corniola agreed not to make any further claims under the policy or take any proceedings, including Mediation and Arbitration, against it. Zurich submits that the parol evidence rule must be strictly applied in these circumstances as the Agreement is unambiguous and need not be clarified through the admission of extrinsic evidence.
Ms. Corniola submits that the Agreement does not reflect the entire agreement reached by the parties at the mediation on December 3, 1998. She suggests that it is necessary to call additional evidence to demonstrate the entirety of the agreement in order to give some context to the words contained in the Agreement document.
I found that the Agreement is ambiguous in that paragraphs one and two are contradictory when considered only in the context in which they appear. Because of that inconsistency, it was necessary to hear additional evidence from Ms. Corniola as to the events surrounding the mediation and the documentation of the settlement which was reached on December 3, 1998. My authority for doing so is found in The Law of Contract in Canada (3d), G.H.L. Fridman, at pages 456-457 where the author discusses the exceptions to the parol evidence rule which allow for the introduction of extrinsic evidence in certain circumstances. He states that:
Parol extrinsic evidence may not be admitted where the effect of such evidence would be to contradict the written contract. It is otherwise where the purpose and result of allowing such evidence to be given would be to explain or interpret the true intentions of the parties, where such are not clear from the document.
It has been suggested that the parol evidence rule is intended to avoid injustice. Hence the existence of some exceptions to the rule: (a) to explain incomplete documents; (b) to prove that a condition precedent has been unfulfilled; and (c) to assist in ascertaining the intentions of the parties. In all those situations, the implication may be drawn, injustice would be perpetrated if the written document were accepted as the sole source of the contractual obligations of the parties. To judge by the situations in which parol evidence has been freely admitted by courts, despite the fact that the contract was in writing, the contrary argument can be made that the parol evidence rule is the potential cause of injustice, hence the need to qualify its rigidity in appropriate circumstances.
In my view, in the present case it was necessary to look behind the words contained in the Agreement so as to ascertain the intentions of the parties to it. In order to completely understand the terms agreed to by Zurich and Ms. Corniola in the Agreement, I needed to hear evidence as to the circumstances surrounding its negotiation and execution. Accordingly, I heard additional evidence on behalf of Ms. Corniola from Mr. Firestone and was referred to a number of documents which favour Ms. Corniola's interpretation of the Agreement. I note that Zurich did not call Mr. Proctor to testify on its behalf with respect to his understanding of the circumstances surrounding the creation of the Agreement, nor did it tender documents in support of its interpretation of the Agreement.
Is Ms. Corniola precluded from proceeding to Arbitration?
Zurich submits that, based on the language contained in the Agreement, Ms. Corniola relinquished her rights to pursue any claims against it, save and except the right to require Zurich to indemnify her should an action be brought against her by the Clinics to recover their accounts. However, unless and until the Clinics do so, the Agreement absolves Zurich of any responsibility to do anything further. Essentially, the onus is on the Clinics; if they choose to attempt to collect their accounts from Ms. Corniola, Zurich will step into her shoes and defend the action. Zurich argues that Ms. Corniola has no ability to pursue an arbitration for the Clinics' accounts against it due to the operation of the release portion of the Agreement.
Ms. Corniola's interpretation of the Agreement is, not surprisingly, somewhat different. She takes the position that, throughout the negotiation of the settlement at the mediation and thereafter, it was understood that Zurich would receive a release from her of her claims, save and except those relating to the Clinics' accounts. Ms. Corniola argues that this understanding is reflected in the language used in paragraph one of the first page of the Agreement where her release of any and all claims is qualified by the use of the phrase "except for those claims in respect of which an indemnity is hereby given to the Releasor." Those claims for which the indemnity has been given relate, of course, to the Clinics' accounts. Mr. Firestone testified that when read in conjunction with the indemnity portion of the Agreement, the Release section is not contradictory but rather, is in accordance with it.
I heard uncontroverted evidence from Mr. Firestone with respect to the circumstances surrounding the negotiation and settlement of the issues in dispute at the mediation meeting on December 3, 1998, which was corroborated by his letters to Mr. Proctor and Mr. Fleury written on the same day. I find that Mr. Proctor and Mr. Firestone clearly understood on December 3, 1998 that the issue of Ms. Corniola's entitlement to medical/rehabilitation benefits in the amount of the Clinics' accounts had not been resolved by the lump sum payment negotiated. It is clear from the evidence of Mr. Firestone and the accompanying correspondence generated by him that the parties agreed that the settlement would address only those aspects of the claim which did not include the Clinics' accounts. As a result, I find that the language in the Agreement should be interpreted in the manner suggested by Ms. Corniola since it is most consistent with the facts, and particularly, the actions of the parties themselves.
Accordingly, I find that the contents of the Agreement do not preclude Ms. Corniola from proceeding to arbitration on the issue of her entitlement to medical/rehabilitation benefits from Zurich in the amount of the Clinics' accounts. The arbitration hearing scheduled for January 31 and February 1, 2000 may, therefore, proceed as scheduled.
EXPENSES:
I exercise my discretion to award Ms. Corniola her expenses incurred in this preliminary issue hearing.
December 15, 1999
Donald Hale
Arbitrator
Date
Neutral Citation: 1999 ONFSCDRS 242
FSCO A99-000022
FINANCIAL SERVICES COMMISSION OF ONTARIO
BETWEEN:
GIUSEPPINA CORNIOLA
Applicant
and
ZURICH INSURANCE COMPANY
Insurer
ARBITRATION ORDER
Under section 282 of the Insurance Act, R.S.O. 1990, c.I.8, as amended, it is ordered that:
- Ms. Corniola is entitled to proceed to arbitration on the issue of her entitlement to payment of the medical/rehabilitation benefits claimed in the Application for Arbitration.
December 15, 1999
Donald Hale
Arbitrator
Date
Footnotes
- The Statutory Accident Benefits Schedule — Accidents on or after November 1, 1996, Ontario Regulation 403/96, as amended by Ontario Regulations 462/96, 505/96, 551/96 and 303/98.