Neutral Citation: 1999 ONFSCDRS 99

FSCO A97-000755

FINANCIAL SERVICES COMMISSION OF ONTARIO

BETWEEN:

ROBERTO PINTUCCI

Applicant

and

JEVCO INSURANCE COMPANY

Insurer

DECISION ON EXPENSES

Before:

K. Julaine Palmer

Heard:

By telephone conference call on May 20, 1999.

Appearances:

Ian A. Little for Mr. Pintucci

Chris Blom for Jevco Insurance Company

Issues:

Roberto Pintucci was injured in a motor vehicle accident on October 23, 1994. In a decision dated January 7, 1999, I dealt with his claims for statutory accident benefits under the Schedule.¹ I made the following orders, while reserving on the issue of expenses:

Mr. Pintucci is not entitled to weekly income replacement benefits from May 17, 1996 to July 28, 1997.
Jevco shall pay Mr. Pintucci $4,344.98 for acupuncture and massage therapy and $5,790 for chiropractic treatment. Jevco must pay interest on these amounts, pursuant to section 68 of the Schedule.
Jevco is not required to pay a further $428.00 for the examination and report dated September 21, 1996 by Dr. S. Bergman. Jevco is not required to pay $400.00 for an A.D.I.O. imaging report.

The issue in this further hearing is:

Is either party entitled to its expenses incurred in respect of this arbitration proceeding?

Result:

Jevco shall pay Mr. Pintucci his expenses of the arbitration proceeding.
Jevco shall bear its own expenses of the arbitration proceeding.

EVIDENCE AND ANALYSIS:

Mr. Pintucci submits that Jevco should pay his expenses of the arbitration. Jevco says, at worst, it should only pay half of Mr. Pintucci's expenses, because he was unsuccessful in proving his entitlement to income replacement benefits, being the most significant part of his claim. Since Mr. Pintucci filed his application for arbitration on April 17, 1997, the governing legislation on expenses is subsection 282(11) of the Insurance Act, R.S.O. 1990, c. I. 8, as amended by subsection 38(4) of the Automobile Insurance and Rate Stability Act, S.O. 1996, c.21, which came into force on November 1, 1996. Subsection 282(11), as amended, provides:

The arbitrator may award, according to criteria prescribed by the regulations, to the insured person or the insurer, all or part of such expenses incurred in respect of an arbitration proceeding as may be prescribed in the regulations, to the maximum set out in the regulations.

[emphasis added]

Subsection 12(2) of Ontario Regulation 464/96, which also came into force on November 1, 1996, provides criteria for the awarding of expenses:²

An arbitrator may award expenses to an insurer or insured person under subsection 282 (11) of the Act if the arbitrator is satisfied that the award is justified, having regard to the following criteria:

Each party's degree of success in the outcome of the proceeding.
Conduct of the insurer or the insured person that tended to shorten or facilitate the proceeding or that tended to prolong, obstruct or hinder the proceeding, including failure to comply with undertakings or orders.
Whether the proceeding or any position taken by the insurer or the insured person during the proceeding was manifestly unfounded, frivolous, vexatious, fraudulent or an abuse of process.
The degree of complexity, novelty or significance of the factual or legal issues raised in the proceeding.
If the insurer or the insured person requests, any written offers to settle made after the conclusion of mediation and before the conclusion of the arbitration in accordance with the rules of practice and procedure applicable to the proceeding, including the terms of the offers, the timing of the offers and the responses to the offers, having regard to the result of the proceeding.
Any other matter related to the proceeding that the arbitrator considers relevant to the issue of whether an award of expenses is justified.

Prior to the amendment to subsection 282(11) of the Act, an arbitrator had power to grant expenses only to an insured person, not to an insurer, and the criteria which guided an arbitrator in the exercise of her discretion were those developed in arbitration decisions.

In a recent decision on expenses, Arbitrator Alves discussed her views on how the 1996 amendments impacted on the arbitrator's discretion to award expenses. She wrote:

Despite the modifications in the 1993 and 1996 schemes, several key features introduced in the 1990 scheme have been preserved. The scheme continues to provide statutory accident benefits as part of every policy of automobile insurance. Under this scheme, insurers and insured persons are considered to be in a first party relationship, since either the applicant, or someone else has paid for this coverage on his or her behalf.

The scheme provides for mandatory mediation of disputes relating to statutory accident benefits, where the parties, with the assistance of a neutral third party, can resolve many of their disputes concerning entitlement to and the amount of statutory accident benefits. Mediation can be initiated by either the insurer or the insured person. However, under the Act, only the insured person may apply for arbitration at the Financial Services Commission.³

The Legislature has addressed the differing abilities of the parties to bear the cost of the disbursements and legal fees in order to participate in an arbitration at the Commission. Currently, insured persons pay a filing fee of $100 to commence an arbitration, while insurers pay $3,000 to participate in an arbitration.⁴ While arbitrators now have the power to award legal fees in respect of the arbitration to either party at the Legal Aid rate, the arbitrator also has a discretion to increase to $150 per hour.⁵ For these reasons, I conclude that the statutory scheme continues to be one "designed to facilitate applicants' access to a speedy adjudication of disputes."⁶

I find that with one exception, the criteria specified in the Expenses Regulation have been identified and considered by arbitrators in making expenses awards in relation to applicants prior to November 1, 1996, when the expenses Regulation came into force.⁷ Indeed, prior to the granting of the power to award expenses in favour of insurers, there have been cases in which applicants have engaged in egregious conduct, and arbitrators have stated that they would have awarded expenses against an applicant if they had the power to do so.⁸

In my view, except for the additional criteria of Offers to Settle, the criteria contained in the Regulation codify existing arbitration case law with respect to applicants, and make those criteria applicable to both applicants and insurers, having regard to the intent and purpose of the overall statutory scheme.⁹

I agree with Arbitrator Alves' comments. In this case, no party asked me to consider an Offer to Settle, so I do not have to consider the impact of any offer on the issue of expenses.

Jevco argues that because Mr. Pintucci was unsuccessful with respect to the income replacement benefit portion of his claim, valued at approximately $30,000, without interest, but successful on the medical expense portion worth approximately $10,100, without interest, Mr. Pintucci should receive no more than half his costs. Jevco submits that if medical expenses had been the only issue, Dr. Tepperman's testimony would not have been needed. Mr. Pintucci, however, says that the reason Jevco did not pay the benefits sought, and the reason for Dr. Tepperman's testimony, was the causation issue, which impacted on both the weekly benefit and medical claims.

I agree with Mr. Pintucci that Jevco's main concern here was the cause of Mr. Pintucci's condition. I agree that proof of causation was important to both the income replacement benefit and the medical and rehabilitation claims and that Dr. Tepperman's expertise was necessary on both issues. I concur with the parties' agreed submission that no conduct by either side during the course of the arbitration tended to prolong, obstruct or hinder the proceeding, and neither was any position taken by the insurer or the insured person during the proceeding that was manifestly unfounded, frivolous, vexatious, fraudulent or an abuse of process.

The factor most relevant to the expenses issue is Jevco's procedurally defective adjustment of this claim, specifically the medical and rehabilitation benefit issues. These deficiencies were explored at length in the decision dated January 7, 1999. It is a matter of some significance to more than just these parties.

Taking all the foregoing into account, a full award of expenses to Mr. Pintucci is justified, despite his lack of complete success in the proceeding. Jevco should bear its own expenses.

June 2, 1999

K. Julaine Palmer Arbitrator

Date