Neutral Citation: 2000 ONFSCDRS 161

FSCO A99-000724

BETWEEN:

SALIM SUNDERANI

Applicant

and

STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY

Insurer

DECISION ON A PRELIMINARY ISSUE

Before:

K. Julaine Palmer

Heard:

July 31, 2000, at the Financial Services Commission of Ontario, Toronto.

Appearances:

Roland Spiegel for Mr. Sunderani, who was not present.

Paul J. Lo Presti for State Farm Mutual Automobile Insurance Company.

Salim Sunderani was injured in a motor vehicle accident on February 19, 1996. He received statutory accident benefits from State Farm Mutual Automobile Insurance Company ("State Farm"), payable under the Schedule.¹ This dispute relates to the outstanding balance of the cost of an assessment by Deahy Medical Assessments Inc. The parties were unable to resolve their dispute through mediation, and Mr. Sunderani applied for arbitration at the Financial Services Commission of Ontario under the Insurance Act, R.S.O. 1990, c.I.8, as amended.

The preliminary issues are:

Does Mr. Spiegel have the authority to represent Mr. Sunderani in the arbitration proceeding?
Pursuant to subsection 281(1) of the Insurance Act, is Mr. Sunderani precluded from referring to arbitration the dispute about his entitlement to the outstanding balance of the cost of an assessment by Deahy Medical Assessments Inc., because he commenced a court action with respect to the same issue?

Mr. Spiegel has the authority to represent Mr. Sunderani in the arbitration proceeding.
Mr. Sunderani's application for arbitration is stayed pending the amendment of the statement of claim in his court action.

1. Authority to represent Mr. Sunderani:

Mr. Sunderani was not present at the preliminary issue hearing. Mr. Spiegel advised that he believed his client was on vacation. In any event, Mr. Sunderani was notified by the Commission of the date of the preliminary issue hearing by a notice mailed to his home on April 5, 2000. That notice advised:

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

The notice set out the two questions, identified above as the issues in dispute, including the question of Mr. Spiegel's authority to represent Mr. Sunderani.

At the preliminary issue hearing, Mr. Spiegel asked to have recorded as an exhibit the original Application for Arbitration registered by the Commission on July 28, 1999. That application was signed by Salim Sunderani and Roland Spiegel, ADR Specialist. The application claims $1,046.50 under subsection 57(1) of the Schedule, as the outstanding cost of a Functional Abilities Evaluation ("FAE"), conducted by Deahy Medical Assessments Inc.("Deahy"). Mr. Spiegel filed a copy of an agreement signed by Mr. Sunderani on October 1, 1998, authorizing State Farm to pay directly to Deahy "the medical expenses I incurred to me allowable and payable to me (sic)" and requesting State Farm to authorize Deahy to bill it directly.

Another document, also dated October 1, 1998, was filed. This document, also signed by Mr. Sunderani, was entitled an "Authorization." It is directed to State Farm and purportedly authorizes Deahy irrevocably to act as Mr. Sunderani's

general agent to institute and prosecute through to conclusion, including the absolute right to compromise and settle any claim I might have for the payment of medical and rehabilitation benefits provided by Deahy pursuant to the provisions of the Statutory Accident Benefits Schedule against my insurer, State Farm under Policy Number 60 1575 970 for or in connection with injuries sustained by me in the motor vehicle collision which occurred on Feb 19, 1996.

The Authorization goes on to include the right to institute mediation proceedings, arbitration proceedings and appeals, and court proceedings. The Authorization purports to give Deahy the power to retain and instruct counsel on Mr. Sunderani's behalf.

Exhibit 11 is a copy of a further Authorization directed to The Ontario Insurance Commission, Dispute Resolution Group, authorizing Mr. Spiegel, "a representative of Deahy Medical Assessments Inc.," to act as Mr. Sunderani's agent and to make binding decisions on his behalf in all matters connected with the mediation.² That Authorization was also dated October 1, 1998.

On March 8, 1999 Mediator Shari Stein of the Commission wrote to Mr. Sunderani and Mr. Spiegel, with a copy of the letter to State Farm. Her letter concerned the combining of mediation applications, as provided by section 15 of the Dispute Resolution Practice Code. Mediator Stein indicated that, at Mr. Sunderani and Mr. Spiegel's request, and with State Farm's agreement, the issue that was the subject of mediation file M98-009407, was to be added to "your up-coming mediation scheduled for April 16, 1999." Mediator Stein then closed that file.

The mediation scheduled for April 16, 1999 was file number M99-000727, in which Mr. Sunderani was represented by Thomson, Rogers. The issues in dispute included income replacement benefits, many supplementary medical benefits, and the Deahy assessment expenses, in the amount of $3,424.00. In her Report of Mediator dated April 16, 1999, Mediator Stein listed a legal assistant at Thomson, Rogers as Mr. Sunderani's representative. She reported that the Deahy assessment expenses were still in dispute.

As I indicated above, the Application for Arbitration in this matter was registered by the Commission on July 28, 1999. That document was signed by Salim Sunderani and Roland Spiegel, ADR Specialist. The application claims $1,046.50 under subsection 57(1) of the Schedule, as the outstanding cost of a Functional Abilities Evaluation, conducted by Deahy.

Mr. Spiegel appeared at the Commission for a pre-hearing conference in this matter on April 3, 2000. Mr. Sunderani did not attend on that occasion either, but the Commission sent him a copy of the prehearing arbitrator's letter. The Commission also sent Mr. Sunderani a copy of a letter on July 26, 2000 denying State Farm's request for an adjournment of this preliminary issue hearing.

State Farm filed no contradictory material nor did it call any witnesses on this issue. The Commission file contains no notes of any telephone conversations with Mr. Sunderani nor any correspondence from him. Mr. Lo Presti submitted that section 90 of the Schedule prohibits an assignment of benefits under the Schedule. He submitted that in signing the various documents with Deahy, Mr. Sunderani has assigned his rights to benefits from State Farm to Deahy. He submitted that Deahy is one source to which Mr. Sunderani went to confirm his alleged disability and Deahy is trying to obtain benefits that accrue to Mr. Sunderani, through him indirectly, in a manner it could not do directly.

Arbitrator Allen thoroughly canvassed the statute, case law and rationale for allowing agents or solicitors to represent Applicants before the Commission on cases involving unpaid accounts by treatment or service providers in her preliminary issue decision in Pereira.³ I do not find that Mr. Sunderani assigned his benefits under the Schedule to Deahy in the documents he signed. I find that the agreement Mr. Sunderani signed on October 1, 1998 was in the nature of a document contemplated by subparagraph 69(1)(b) of the Schedule authorizing an expense to be directly billed to an insurer.

Based on the documents filed by Mr. Spiegel at this hearing on a preliminary issue, including the original Application for Arbitration, and the letters and notices in the Commission file, copies of which were sent to Mr. Sunderani, I find that Mr. Spiegel has authority to represent Mr. Sunderani in this arbitration.

2. Is Mr. Sunderani precluded from referring to arbitration the dispute about his entitlement to the outstanding balance of the cost of an assessment by Deahy Medical Assessments Inc., because he commenced a court action with respect to the same issue?

The Law:

Subsection 281(1) of the Insurance Act provides that after mediation has failed, an insured person may bring a proceeding in court, refer the issues in dispute to an arbitrator at the Commission, or agree with the insurer to submit any issue in dispute to a private arbitrator. Nothing explicitly set out in the Act requires an insured person, who mediates several issues together, to choose the same forum to go forward with all the disputes or to proceed with them at the same hearing. However, many court and arbitration cases have held that the statutory scheme "precludes an insured from travelling down both paths of arbitration and litigation" in respect of essentially the same claims or issues.⁴

As Director's Delegate Naylor put it, in the Miller appeal decision:

I agree that the statutory scheme does not require an insured to choose a single forum in which to bring all disputes, present and future, with his or her insurer. However, it prevents a party from bringing the same claims or issues in the two forums.

In the Miller appeal case, Director's Delegate Naylor made it clear that she was not dealing with "a case which involves a discrete, distinct dispute that can reasonably be dealt with separately from the remainder of the claims being litigated." Mrs. Miller's claim involved a claim for payment of rehabilitation assessments evaluating her functional capacity and vocational aptitudes and options. The Director's Delegate suggested that the claim for income replacement benefits based on disability was intertwined with the assessments and that the timing of the assessments reinforced the relationship. The Director's Delegate also stated that "to the extent the arbitrator's order suggests that Mrs. Miller would be free to bring separate proceedings in relation to the March of Dimes expenses than the rest of her claims, I respectfully disagree."⁵

In this case, Mr. Sunderani, through a law firm, brought a court proceeding on June 21, 1999. The court action claims declaratory relief under Parts II, IV, VII, VIII, X, and XIII of the Schedule, plus interest, costs and punitive damages. Mr. Sunderani also commenced this arbitration on July 28, 1999 through another representative. In this arbitration Mr. Sunderani claims $1,046.50 as the cost of an examination under subsection 57(1) of the Schedule. Subsection 57(1) of the Schedule is found in Part XIII. Thus, the claims in the court action and the arbitration could conceivably overlap. However, the court action mentions specifically only housekeeping and home maintenance expenses, as provided in section 55 of the Schedule.

Submissions:

Mr. Spiegel argued that Mr. Sunderani has incurred a discrete pecuniary loss for the functional abilities evaluation, which is not part of any claim for medical or rehabilitation benefits. Mr. Spiegel further submitted that the insured person has the right to the cheapest, fastest way of dealing with a dispute and should not have to wait and deal with a lengthy process. He submitted that the cost of the FAE will not be part of the court case, because the court claim is general and only disputes not resolved up to court will enter the court proceeding.⁶

Mr. Lo Presti submitted that assessments under section 57 are designed to determine an insured person’s entitlement to a benefit, like subsection 36(1) services and that, as such, their reasonableness as an expense is inextricably intertwined with the broader issues in dispute between the parties in the court action. Mr. Lo Presti submitted that the Statement of Claim is sufficiently broad to subsume the assessment costs that are the subject of the arbitration. Mr. Lo Presti advised that the Statement of Defence has been filed in the court action and Mr. Sunderani’s examination for discovery has been partly concluded.

Mr. Lo Presti submitted several cases for my consideration, including the Supreme Court of Canada decision in Cahoon v. Franks, 1967 CanLII 77 (SCC), [1967] S.C.R. 455, Citadel General Assurance Company v. Gogna, [1992] O.J. 1996, a decision of Mme Justice E. Macdonald, and my own decision in Osorio and Allstate Insurance Company of Canada (FSCO A98-000731, June 9, 1999).

Analysis:

Although I agree with Mr. Spiegel that an insured person should be able to choose the cheapest and fastest way of dealing with a dispute with his Insurer and should not have to wait until the end of a lengthy court process to deal with a single issue, I cannot agree that the cost of the functional abilities evaluation ("FAE") in this case is a discrete issue, for the following reasons.

The larger issues between Mr. Sunderani and State Farm involve his pre-accident health, his injuries in two motor vehicle accidents in February 1996 and January 1997, as well as the causes and effects of two falls, in June 1997 and January 1998, in which he sustained a fractured right femur and fractured left tibia, respectively. The FAE took place on October 1, 1998 after all these incidents. Allowing Mr. Sunderani to proceed to arbitration on the reasonableness of the FAE would likely lead to undue duplication of evidence in the court case and would entail a real risk of inconsistent findings, since the Insurer takes the position that the FAE relates to the results of the falls in 1997 and 1998 and not the injuries received in the motor vehicle accidents.

The civil action under discussion here was commenced in June 1999, before the arbitration proceeding in July 1999. The issues in the court proceeding are broader in scope than the issue in the arbitration. The burden of proof is on Mr. Sunderani in both the arbitration and in court. No serious impediment to having the issue in this arbitration dealt with in the court proceeding has been raised, other than the delay that will likely be involved. Implicit in State Farm's submissions here is its acquiescence to facilitate any amendment of the Statement of Claim that might be required. Permitting Mr. Sunderani to proceed with this arbitration would violate the fundamental principle that "multiplicity of proceedings is to be avoided, wherever possible."⁷

Finally, I note that Director’s Delegate Draper has recently released two appeal decisions that address, in great detail, the issue of concurrent court proceedings and arbitrations. Those decisions, both dated August 1, 2000, are Non-Marine Underwriters, Members of Lloyd's and Mangat, (FSCO P00-00020) and Royal & SunAlliance Insurance Company of Canada and Reid, (FSCO P-00014). The Director's Delegate calls for a "pragmatic balancing" of interests. In the Mangat appeal decision, the Director’s Delegate found the arbitrator’s approach too narrow in concluding that Mr. Mangat was entitled to proceed with his arbitration. He held the arbitrator committed an error of law that justified interfering with her decision, because she failed to adequately consider "the overlapping factual questions central to both proceedings." The Director's Delegate also suggested that the language of section 281 of the Act obliges an insured person to elect either court or arbitration for all "the issues in dispute" in one mediation. Since all the claims in Mr. Sunderani’s case were mediated together, adopting this view would require him to proceed only in one forum without further deliberation. These comments by Director’s Delegate Draper, although persuasive, are obiter dicta, or an opinion unnecessary to the decision and not binding, because the Mangat case dealt with claims mediated at different times, over several years.

I find Mr. Sunderani’s application for arbitration should be stayed pending the amendment of the statement of claim in his court action to include a claim for payment of the FAE in question.

EXPENSES:

The parties may contact the case administrator for a resumption of the preliminary issue hearing for submissions on expenses, if they are unable to resolve this issue themselves. If Mr. Sunderani moves to withdraw his application for arbitration, we will deal with that motion at the same time.

August 31, 2000

K. Julaine Palmer Arbitrator

Date