Neutral Citation: 1999 ONFSCDRS 258

FSCO A95-000337

FINANCIAL SERVICES COMMISSION OF ONTARIO

BETWEEN:

BERYL WARD

Applicant

and

DOMINION OF CANADA GENERAL INSURANCE COMPANY

Insurer

and

DOUGLAS WARD

Applicant

and

DOMINION OF CANADA GENERAL INSURANCE COMPANY

Insurer

DECISION ON EXPENSES

Before:

Asfaw Seife

Heard:

September 27, 1999, by teleconference

Appearances:

Altor Shields for Mr. and Mrs. Ward

Joan Takahashi for Dominion of Canada General Insurance Company

Issues:

The Applicants, Mr. Douglas Ward and Mrs. Beryl Ward, were injured in a motor vehicle accident on July 13, 1991. In a decision dated June 25, 1999, I dealt with their claims for statutory accident benefits under the Schedule.¹

In my June 25, 1999 decision, I made the following orders:

1. Mrs. Ward's claim for weekly income benefits is dismissed.

2. Mr. Ward's claim for weekly income benefits is dismissed.

3. The correct amount of Mr. Ward's weekly income benefits is $216.47 per week from July 20, 1991 through to March 31, 1994, and $229.40 per week from April 1, 1994 through to July 29, 1994. Dominion shall pay Mr. Ward the shortfalls at the rate of $30.87 per week from July 20, 1991 to March 31, 1994, and at the rate of $43.80 for the period between April 1, 1994 and July 29, 1994, together with interest calculated in accordance with subsection 24(4) of the Schedule.

4. Mr. Ward is not entitled to a special award under section 282 (10) of the Insurance Act.

5. The issue of expenses is deferred.

The parties were unable to agree on the following issues, arising from the order:

1. Are the Applicants entitled to their arbitration expenses?

2. What is the date from which interest is to be calculated?

Result:

1. The Applicants are entitled to their arbitration expenses.

2. The date from which interest is to be calculated is June 14, 1997. Subsequent to the decision in this matter, Dominion paid Mr. Ward $7,670.75, representing payment of the shortfalls plus interest at two per cent per month for the period from June 14, 1997 to July 20, 1999. Accordingly, Dominion is not required to pay any further amounts to Mr. Ward in respect of interest on the shortfall payments.

EVIDENCE AND ANALYSIS:

Are the Applicants entitled to their arbitration expenses?

The Applicants seek an order for the payment of their arbitration expenses. There is no dispute between the parties that the amendments to the Insurance Act, R.S.O. 1990, c.I.8, do not apply to this case and that I have discretion to award or deny the Applicants' claims for expenses.

The criteria for the arbitrator's exercise of discretion in awarding an applicant's expenses were summarized by Arbitrator Manji in Mark and Dominion of Canada General Insurance Company² as follows:

In McCormick [and Economical Mutual Insurance Company³] Senior Arbitrator Naylor held that the discretion to award expenses should be exercised, having regard to the intent and purpose of the legislative scheme. She held that the arbitration process has been established under the Insurance Act in order to facilitate applicants' access to relatively inexpensive, speedy and informal adjudication of disputes regarding statutory accident benefits. The discretion to award expenses should be exercised in accordance with this objective, having regard to the individual circumstances of each case. Accordingly, it is appropriate to award an applicant his or her expenses, unless, in the circumstances of the particular case, it is determined that the Application for Arbitration was manifestly frivolous or vexatious, or the applicant's conduct unreasonably prolonged the proceedings.

The criteria suggested by Senior Arbitrator Naylor in McCormick for the exercise of the discretion to award expenses were approved by the Director of Arbitrations in the appeal decision, Calogero and The Co-operators General Insurance Company⁴. However, in Allison and Markel Insurance Company of Canada,⁵Director’s Delegate Naylor stated that arbitrators are not restricted in applying the criteria set out in McCormick, nor should the words used in the decision be subject to the same rigorous standard of interpretation as statutory language, which they are not. She pointed out that in Calogero, the Director did not state that the McCormick criteria should be treated as fixed rules, or that they are the only factors that may be considered. She noted that arbitrators have built on the criteria set out in McCormick and expenses have been denied, for example, where the claim is found to have been without merit, in the case of fraud or dishonesty or when documents have been fabricated.

I agree with the views of Director's Delegate Naylor in Allison and adopt them for the purposes of this case.

Dominion submits that the Applicants should not be awarded their expenses because their case is devoid of merit; they deliberately provided false or misleading information to their doctors and at the arbitration hearing; and they unreasonably prolonged the arbitration proceeding.

I do not agree with Dominion’s submissions. Although I did not find that the Applicants were entitled to further income replacement benefits, I made no adverse finding on their credibility. They testified in a truthful and straightforward fashion and their claims were supported by their treating physicians. I found nothing to suggest that they were dishonest in the presentation of their claims. They did not give false or misleading testimony during the arbitration hearing, nor did they provide false information to their doctors. They were unsuccessful because the evidence was insufficient to establish entitlement to weekly benefits under the stricter, post-156-week disability test. I note Mr. Ward was successful in respect of the dispute about the amount of his weekly income replacement benefits.

Dominion submits that the Applicants' conduct unreasonably prolonged the proceedings. There was some delay in the proceedings because of production undertakings that had not been met prior to the commencement of the hearing. However, I do not attribute the delays solely to the Applicants' conduct. I find both parties were equally responsible for the delays.

In the result, I find the Applicants are entitled to their arbitration expenses. If the parties do not agree as to the amount of the expenses, they may request an assessment of expenses by the Financial Services Commission of Ontario.

Interest:

In paragraph 3 of my order, I found that Mr. Ward was entitled to the payment of shortfalls in his weekly income replacement benefits, together with interest calculated in accordance with subsection 24(4) of the Schedule. This provision requires the insurer to "pay interest on overdue payments from the date they become overdue at the rate of two per cent per month." The parties did not agree on the date when the payments became overdue.

Subsections 24 (2) and (3) of the Schedule state as follows:

(2) Amounts payable under Part IV are overdue if not mailed or otherwise delivered by the insurer within ten days after it has received a completed application for statutory accident benefits or if the insurer fails to make a payment required by subsection (3).

(3) Payments under Part IV and V shall be mailed or otherwise delivered at least once every second week while the insurer remains liable to the insured person.

The issue is therefore when the payments in paragraph 3 of my order became "payable."

I found in my decision that Dominion initially paid Mr. Ward weekly benefits of $185 per week under section 13(3) of the Schedule, on the basis that his Application for Accident Benefits indicated he was not employed at the time of the accident. I found he was paid at this level, without protest, until the termination of his benefits in July 1994. I found it was not until August 1994 that Dominion first received information from Mr. Ward’s lawyer indicating that he was employed at the time of the accident and that his benefits should have been calculated under section 12 of the Schedule. The lawyer enclosed Mr. Ward's 1991 income tax return. The calculation based on the income figure from the tax return did not generate a benefit level more than the minimum of $185.60 per week under subsection 12(4) of the Schedule and Dominion promptly paid the difference of sixty cents per week. I found subsequently Dominion received more information about Mr. Ward's employment income in August 1995, almost one year after the termination of his benefits and retained Hyrcko & Associates, chartered accountants, to calculate Mr. Ward’s weekly income benefit.

I found that Hyrcko & Associates spent considerable time attempting to obtain financial information and supporting documentation from Mr. Ward and that it was finally able to determine the level of his benefits based on information available to it.

At the arbitration hearing, Mr. Ward did not dispute Hyrcko & Associates calculation; however, Dominion felt the calculations were not reliable because Mr. Ward failed to provide adequate financial documentation of his earnings. I ordered Dominion to pay Mr. Ward's benefits according to the calculations of its accountants, as I did not hear evidence to suggest the accountants calculations were wrong. While Mr. Ward’s delay in providing accurate information was not a relevant consideration in determining the correct amount of his benefits, as I stated in the decision, it is relevant for the purposes of determining the date when such benefits became overdue.

Mr. Ward argues that the amounts were payable and due on a bi-weekly basis from the time of the accident. In the alternative, Mr. Ward submits that the payments were due at the latest in August 1995 when Dominion was in possession of all the information required to recalculate his benefits.

Dominion submits that the amounts only became overdue on the date of the arbitration order, when the proper rate of Mr. Ward's income replacement benefits was decided. In the alternative, Dominion contends that "the earliest date by which any payments became overdue was 30 days after the date that Ms. Hrycko's [Dominion's Accountant] report was finally completed. Dominion has paid Mr. Ward the shortfalls, plus interest at two per cent per month, from June 14, 1997 onwards. It submits that no further interest is payable.

Dominion submits that the discrepancies in the calculation of Mr. Ward's benefits resulted from his own failure to provide proper information on a timely basis and submits that it should not be penalized for his failure to co-operate.

Subsections 24 (2), (3) and (4) of the Schedule are meant to encourage prompt payment of accident benefits. However, an insurer cannot be held liable to pay interest for periods when it is impossible for it to determine the correct amount of benefits.⁶

In this case, I find that it was impossible for Dominion to determine the correct amount of income replacement benefits payable to Mr. Ward prior to the involvement of its accountants. However, once the accountants came into the picture, they obtained further information and were able to determine the amounts payable to him, despite their lingering concerns about the dearth of certain financial documents. I find that Dominion was in a position to determine the correct amount of Mr. Ward's income replacement benefits once it received the accounting report on May 14, 1997.

Dominion did not pay Mr. Ward's benefits in accordance with the accountants' report. Instead, it chose to withhold the payments, pending resolution of the dispute at the arbitration hearing. At the arbitration hearing, Dominion stated that it was concerned about the adequacy of information its accountants received from Mr. Ward; however, it did not question their calculations.

In the circumstances, I find the payments in question were payable and due as of June 14, 1997, 30 days after the date of the report. Subsequent to my order, Dominion paid Mr. Ward $7,670.75, representing payment of the shortfalls plus interest at two per cent per month for the period from June 14, 1997 to July 20, 1999. Accordingly, Dominion is not required to pay any further amounts to Mr. Ward in respect of interest on the shortfall payments.

December 24, 1999

Asfaw Seife Arbitrator

Date

Neutral Citation: 1999 ONFSCDRS 258

FSCO A95-000337

FINANCIAL SERVICES COMMISSION OF ONTARIO

BETWEEN:

BERYL WARD

Applicant

and

DOMINION OF CANADA GENERAL INSURANCE COMPANY

Insurer

and

DOUGLAS WARD

Applicant

and

DOMINION OF CANADA GENERAL 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:

1. Dominion shall pay Mr. Ward and Mrs. Ward their arbitration expenses. If the parties disagree about the amount of expenses, they may request an assessment of expenses by the Commission.

December 24, 1999

Asfaw Seife Arbitrator

Date

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. 2(FSCO A96-000341, June 30, 1999)
3. 3(OIC A-000139, October 2, 1991)
4. 4(OIC P-000251, February 13, 1992)
5. 5(OIC P-001231, August 21, 1996)
6. 6Economical Mutual Insurance Company and Dennis Trendle (OIC P96-000009, July 11, 1996).