Financial Services Commission

Commission des services financiers de l’Ontario

Neutral Citation: 2000 ONFSCDRS 142

Appeal P00-00014

Appellant

and

Respondent

Before:

David R. Draper, Director's Delegate

Counsel:

Derek Greenside (for Royal Insurance)

David S. Wilson (for Cislyn May Reid)

Under section 283 of the Insurance Act, R.S.O. 1990, c.I.8, as amended, it is ordered that:

The appeal is allowed and paragraphs 1 and 2 of the arbitration order dated January 19, 2000 are revoked and replaced with the following order:
Cislyn May Reid’s application for arbitration is stayed pending the outcome of her court action, subject to a right to withdraw her arbitration application, without penalty, within 30 days of this decision.
No interim benefits are payable.
The parties will bear their own appeal expenses.

August 1, 2000

David R. Draper Director’s Delegate

Date

This appeal arises out of two preliminary motions heard in December 1999. In its motion, Royal & SunAlliance Insurance Company of Canada (“Royal”) asked the arbitrator to dismiss Ms. Reid’s arbitration and order her to pay its assessment of $3,000. The basis of its argument was that she had already elected to go to court, making the arbitration duplicitous. In response, Ms. Reid argued that the two proceedings involved distinct claims and, therefore, she was entitled to proceed with the arbitration. In her motion, Ms. Reid asked the arbitrator to order Royal to pay interim benefits and a special award. Specifically, she argued that her claims for chiropractic and dental expenses were “pay pending dispute” items under the SABS-1990.¹

During the motions, two procedural issues arose. Royal asked for an adjournment to obtain and review certain clinical notes and records. The arbitrator denied this request, holding that the information was not reasonably necessary for the motion. In turn, Ms. Reid objected to some of the medical reports presented by Royal. She argued they were defence medicals obtained in the court action and, therefore, the “deemed undertaking” rule in Rule 30.1 of the Rules of Civil Procedure prevented their use in another proceeding. The arbitrator held that he did not have to apply the undertaking rule if the interests of justice outweighed any prejudice that would be suffered by Ms. Reid. Balancing the interests involved, he allowed Royal to rely on the disputed reports.

On January 19, 2000, the arbitrator released his decision, ordering as follows:

Royal’s motion is dismissed.
Royal shall pay Ms. Reid, on an interim basis, $2,145.33 towards Dr. Goldberg’s account and $1,153.60 for Dr. Goldstein’s account, together with interest on these sums at the rate of two per cent per month from thirty days after the accounts were received by Royal.
Royal shall serve and file any submissions regarding a special award by January 26, 2000. Ms. Reid shall serve and file any reply by January 31, 2000.
Royal shall pay Ms. Reid her legal fees for both motions, in accordance with Rule 73 of the Dispute Resolution Practice Code.

After receiving written submissions, the arbitrator dealt with the special award. In a letter dated July 10, 2000, he held that this issue should be deferred to the arbitration hearing, allowing it to be decided after a full hearing on the merits. Ms. Reid did not appeal from this order.

Royal challenges most aspects of the arbitrator’s order. It claims he erred in law in refusing to grant the adjournment, allowing the arbitration to proceed, refusing to order Ms. Reid to repay its assessment of $3,000, and in ordering the payment of interim benefits, interest and arbitration expenses.

Acceptance of the appeal / Stay

Royal’s appeal raised two preliminary issues. First, because it was from a preliminary order, leave was required.² Second, Royal asked that the interim benefits order be stayed. Rather than dealing with these issues immediately, I decided the better course was to wait for the special award decision as it might raise additional appeal issues. However, one month later, I received a fax from Royal’s lawyer advising that Mr. Wilson, Ms. Reid’s lawyer, was threatening to enforce the arbitration order. Consequently, I notified counsel that I would be dealing with the preliminary issues early the following week.

On May 9, 2000, I accepted the appeal and ordered a stay of the arbitration order pending the outcome of the appeal or a subsequent order. Two days later, I received a fax from Mr. Wilson objecting to the process and asking that I, or preferably someone else, reconsider the preliminary appeal issues. While I was not persuaded there was any reason I could not continue as the Director’s Delegate, I agreed to revisit the preliminary issues after receiving Ms. Reid’s Response to Appeal.

After reviewing Ms. Reid’s Response to Appeal, I confirmed my decision that there was sufficient strength to the appeal that it should be allowed to proceed. Further, given the relatively short time until the appeal hearing, I left the stay in place.

Ability of counsel to argue the appeal

At the start of the appeal hearing, Mr. Wilson expressed concerns about Mr. Greenside’s participation in the appeal. He argued that because Mr. Greenside swore two affidavits used on the motions, he should not be appearing as counsel on the appeal. I did not accept this argument. Appeals are limited to questions of law and, therefore, Mr. Greenside’s role on appeal was to make legal submissions, not defend a particular version of the facts.

New Evidence

Royal presented a number of documents not before the arbitrator. Although I accepted the documents accompanying the Notice of Appeal as admissible on the stay issue, I was not persuaded they should be accepted as new evidence in the appeal. As with the documents submitted with Royal’s written submissions, most of them could have been filed at the arbitration. The only new evidence accepted in the appeal was the Report of Mediator dated March 1, 1995, and the pleadings in the various related court actions. In addition, the parties agreed to a statement about the status of the court actions that is set out later in the decision.

III. ANALYSIS

As the parties are aware, this appeal was argued shortly after another appeal raising the issue of multiple proceedings — Mangat and Non-Marine Underwriters, Mbrs. of Lloyd’s, (FSCO P00-00020, July 31, 2000). The two decisions are being released simultaneously. In Mangat, I analysed the legislation, including the legislative history, and accepted an approach suggested by Director’s Delegate Naylor in her obiter comments in Miller and Allstate Insurance Company of Canada, (FSCO A98-000708, April 29, 1999). Without repeating the full analysis here, I agreed that an insured person who has already elected to go to court on accident benefits does not have an absolute right to take later claims to arbitration, even if they involve different benefits. Instead, a pragmatic balancing is required, as seen in the decisions in Citadel General Assurance Company v. Gogna, [1992] O.J. 1996 and King and Royal Insurance Company of Canada, (FSCO A98-000234, March 24, 1999), and suggested in Miller.

In Mangat, I held that the arbitrator erred in simply asking whether the two proceedings involved distinct benefits. While the arbitrator’s analysis in this case goes further, purportedly applying the criteria set out in King, I conclude that it also focusses too narrowly on the type of benefits being claimed. The arbitrator gave little consideration to the overlapping nature of the proceedings and, in my view, overemphasized the need to deal with “pay pending dispute” claims in the dispute resolution process. If anything, the factors in this case weigh more heavily in favour of the court proceeding than in Mangat.

A detailed review of the background, while complicated, is essential. Ms. Reid was involved in an automobile accident on April 26, 1993. As a result, Royal paid her weekly income benefits under the SABS-1990. One year later, on April 20, 1994, she was involved in a second automobile accident. By this time, the legislation had changed. As a result, her accident benefits for the second accident are determined under the SABS-1994.³ However, Royal is not the insurer responsible for paying accident benefits with respect to this accident. Because Ms. Reid was no longer insured, the company insuring the other vehicle, Guarantee Company of North America (“Guarantee”), is the priority insurer.

Despite the second accident, Royal continued paying weekly income benefits for another seven months — until early November 1994.⁴ In January 1995, Ms. Reid issued a Statement of Claim against the other driver involved in the first accident. This is a claim for damages, with no claim against either insurer for accident benefits. She also applied for mediation, challenging Royal’s decision to terminate her weekly income benefits. Although the mediation failed, Ms. Reid did not proceed immediately to either court or arbitration on the weekly benefits issue. Instead, her next step was to issue a Statement of Claim against the other driver involved in the second accident. Again, this is a tort action not involving any claim for accident benefits.

In September 1996, Ms. Reid brought a court action against Guarantee based on its automobile policy and Canada Life based on a group accident and sickness policy. The claim against Guarantee is for accident benefits arising out of the second accident. More specifically, Ms. Reid seeks a declaration that she is entitled to ongoing income replacement benefits from April 5, 1996, a declaration that she is entitled to supplementary medical and rehabilitation benefits, and punitive damages of $500,000. In her Statement of Claim, she states as follows:

As a result of the collision of April 20, 1994 [the second accident], the Plaintiff suffered injuries to her head, neck, jaw, back, arms, and legs resulting in severe and lasting headaches, jaw dysfunction, tinnitus, depression, serious cognitive deficits, impairment of the upper extremities and impairment of her spinal column and lower extremities.
The Plaintiff has submitted to the defendants various expenses incurred by her for supplementary medical and rehabilitation arising from the said motor vehicle collision . . . The defendant has refused to pay such expenses.

Guarantee defended the action, counterclaimed for the full amount of the benefits it paid to Ms. Reid, and cross-claimed against Canada Life. In addition, Guarantee issued a Third Party Claim against Royal, claiming that any further entitlement to accident benefits arises from the first accident, not the second. In response to the third party action, Royal raised a limitation defence. It claims that on January 17, 1995, it refused to pay any further benefits and, therefore, any action for accident benefits is beyond the two-year time limit in s.281(5) of the Insurance Act. In the alternative, Royal takes the position that Ms. Reid is not entitled to any further benefits, but if she is, her problems are attributable to the second accident, not the first.

In July 1998, nearly two years after her Statement of Claim against Guarantee was issued, Ms. Reid started a court action against Royal. By this time, she had been seeing Dr. M. Goldstein, her chiropractor, for over a year. In her Statement of Claim, she refers to a mediation on June 23, 1998, although I do not find the Report of Mediator in the material before me. In this court action, Ms. Reid asks for a declaration that she continues to be disabled and is entitled to ongoing weekly income benefits from May 3, 1993. Anticipating Royal’s defence, she argues that her action is not time-barred, setting out a number of alternative arguments.

In its defence, Royal raises the limitation defence, but also challenges Ms. Reid’s entitlement to further accident benefits arising from the first accident. As one of its arguments, Royal contends, as it does in its defence to Guarantee’s third party claim, that if Ms. Reid has any ongoing medical problems, they are attributable to the second accident, not the first.

In the spring and summer of 1999, Ms. Reid submitted invoices for chiropractic and dental treatment to Royal. The chiropractic treatments were administered by Dr. Goldstein from December 1997 to March 1999, with his accounts totalling $1,153.60. The dental treatments were done later. Dr. Y.K. Goldberg treated her in 1999, with billings totalling $1,148.64.⁵ Although Ms. Reid’s court action against Guarantee mentions neck, back and jaw injuries, she did not pursue any of these expenses with Guarantee.

When Royal denied her claims, Ms. Reid applied for mediation. The Report of Mediator, dated September 13, 1999, indicates that the disputes were not settled. One week later, on September 21, 1999, Ms. Reid obtained a Master’s order allowing her to amend her Statement of Claim against Royal to include a claim for damages for bad faith in the sum of $100,000. In support of this claim, Ms. Reid makes allegations about Royal’s failure to pay weekly income benefits and supplementary medical and rehabilitation benefits. She specifically claims that Royal refused or neglected to acknowledge or honour her claims for the chiropractic and dental treatment raised in the mediation, and that it knew, or ought to have known, that its refusal to pay for appropriate medical treatment would exacerbate her problems.

Within two weeks of amending her Statement of Claim, Ms. Reid applied for arbitration claiming the chiropractic and dental expenses, plus interest and legal expenses. She also asked that Royal be ordered to pay a special award on the basis that it unreasonably withheld these benefits.

By the time the interim motions were heard in December 1999, the court had ordered Ms. Reid to attend defence medical examinations relating to her chiropractic and dental claims.⁶ In my view, this suggests that the court viewed her action somewhat more broadly than she did. In addition, all of the court actions were consolidated. Counsel agreed to the following statement about the status of the court actions:

At the time of the interim motion before Arbitrator Blackman, the actions had been ordered to be tried together and were all case managed. A case conference had been scheduled for June 20, 2000, at which time it was to be determined whether the actions would be referred to a trial scheduling court for the setting of a date. A referral to a trial scheduling court could only be made once all interlocutory proceedings have been completed.

Ms. Reid contends that the court and arbitration proceedings are not duplicitous because she is not asking for an order for payment of the chiropractic and dental invoices in the court action. Her position is set out in her written appeal submissions, as follows:

It is submitted that the issues in the arbitration proceeding and the ongoing court proceeding are neither “identical” nor “substantially similar.” The thrust of the court proceeding with respect to the allegations pertaining to the chiropractic and dental invoices is that the insurer was bound to respond to claims made by the insured in a timely and appropriate manner. It is also alleged that such items are “pay pending dispute items.” The allegations relate essentially to the refusal of the insurer to either acknowledge or to honour the said claim, resulting in the insured being required to commence appropriate proceedings before FSCO [Financial Services Commission of Ontario]. For purposes of clarification, it has never been the position of the insured that the propriety or reasonableness of the chiropractic and dental invoices would be determined by both forums. Rather, it was anticipated that the reasonableness or otherwise of said invoices would be determined solely at an arbitration proceeding. In the event the proceeding was successful, the action for bad faith could properly be based upon the refusal of the insurer to either acknowledge or honour the said claim. In the event the position of the insured was not upheld at arbitration, the claim for damages for bad faith against the insurer (with respect to the issue of the chiropractic and dental invoices) would necessarily be limited to the failure of the insurer to acknowledge the said claim. This would be due to the fact that any order made by FSCO would clearly be res judicata as between the parties, as all of the criteria for such a consequence would clearly have been made out.

With respect, I find this argument wholly unconvincing. The fine distinctions, while perhaps logically plausible, are not workable. The court’s assessment of damages is unlikely to stop at the consequences of Royal’s failure to respond to Ms. Reid’s claims. It will undoubtedly have to consider whether the benefits should have been paid. This is evidenced by the court’s willingness to order defence medicals on her chiropractic and dental claims. Even in her amended Statement of Claim, Ms. Reid alleges that Royal knew, or ought to have known, that its “refusal to pay for appropriate medical treatment” would exacerbate her medical problems.

As in Mangat, I believe the arbitrator approached the issue too narrowly, failing to give sufficient attention to the overlapping nature of the proceedings. This is seen in his characterization of the arbitration as involving “relatively straightforward issues.”⁷ While the claims are small and discrete, they raise many of the same issues being contested in the consolidated court action. Particularly important is the causation question. The result, as Royal contends, is that a substantial amount of evidence will need to be presented in both proceedings.

Beyond the cost of presenting the same evidence twice, the overlapping factual questions raise concerns about inconsistent results. Ms. Reid submits that this problem can be avoided by applying principles of res judicata or issue estoppel. In my view, however, this approach is of little assistance. The suggestion is that Ms. Reid’s entitlement to chiropractic and dental expenses, including questions of causation, be determined in an arbitration hearing limited to these issues and involving only two of the five parties from the court action, with the results being determinative in the court action, at least as between Ms. Reid and Royal. To put it colloquially, this is the tail wagging the dog. The court actions were started first, are much broader in scope and, presumably, were consolidated to avoid the same problems that would be created by allowing the arbitration to proceed.

The arbitrator was clearly influenced by the “pay pending dispute” nature of Ms. Reid’s claims. At page 9 of the decision, he states that requiring Ms. Reid to add the claims to her court action would impede her right to an expeditious and inexpensive resolution of these discrete “pay pending dispute” issues. While I agree that the “pay pending dispute” provisions must be taken seriously, I am not persuaded that protection can only be found in arbitration. The courts can also make interim orders. Although Ms. Reid argues that the courts generally do not order the interim payment of money, it is not clear to me that the usual rules would apply. The court would be applying the same “pay pending dispute” provisions as the arbitrator and, therefore, I see no reason that the approach would be significantly different.

Finally, I acknowledge the decision of Bellamy J. in Simpson v. Trafalgar Insurance Company of Canada,⁸ a decision that suggests some acceptance that related, but distinct claims can be litigated in different forums. The problem is that the brief endorsement makes it difficult to determine precisely what was in issue. It appears that the insurer asked that certain claims, including a claim for punitive damages, be dismissed on the basis that they duplicated claims already decided in arbitration. Justice Bellamy found that allowing the insurer’s motion would cause a “great injustice,” stating as follows:

The claims and remedies claimed in the arbitration and in this action are different. In particular, the Special Award has nothing to do with the conduct of the insurer except with respect to only one matter and that is the termination of weekly benefits in October 1997. Specifically, the allegations in subparagraph 18(a) to (d) and (i) to (p) and (r) are completely distinct from the issues that were determined by the arbitrator. While the other subparagraphs - that is (e) to (h) and (q) are tangentially related, they deal with a claim for damages that could not have been made in the proceedings before the Financial Services Commission.

Even assuming this is the proper approach, the facts are distinguishable. There is no suggestion that the Simpson case involved more than one accident, or the kind of causation questions pivotal in both the court action and arbitration in this case. As I said in Mangat, I accept that there may be cases where the issues may be sufficiently distinct, or the timing so problematic, that it would be unnecessary or unreasonable to insist that they be brought in one forum. In my opinion, however, this is not such a case:

With respect to both accidents, Ms. Reid initially elected to pursue accident benefits in court, not arbitration.
Ms. Reid has the chief burden of proof in both forums.
Ms. Reid’s court action against Royal is broader than her arbitration application. When the consolidated court action is considered, it is far broader, involving five parties and multiple issues.
Following mediation of the chiropractic and dental expenses, there was nothing to prevent Ms. Reid from adding those issues to her court action along with her claim for punitive damages.
The court action and the arbitration both involve significant disability and causation questions, likely requiring the same evidence in both forums.
The overlapping factual and legal issues create a real possibility of inconsistent findings. Alternatively, if issue estoppel is going to be used to preclude the parties from revisiting findings in the later proceeding, those findings are better made in the more comprehensive proceeding.
The “pay pending dispute” issue can be addressed through interim motions in either forum.

For these reasons, Royal’s appeal is allowed. Having reached this conclusion, the interim benefits order also falls. Therefore, I find it unnecessary to deal with the other issues raised in this appeal.

IV. APPEAL EXPENSES

Ms. Reid’s actions must be evaluated in light of the jurisprudence at the time. As there was considerable support in the arbitration decisions for splitting claims between court and arbitration, it would be unfair to criticize her to any significant degree. However, I am not persuaded that Royal should be obliged to pay her expenses, as it did at arbitration. In the circumstances, I conclude that the parties should bear their own appeal costs.