Neutral Citation: 2000 ONFSCDRS 186

FSCO A99-000726

FINANCIAL SERVICES COMMISSION OF ONTARIO

BETWEEN:

DANIEL S. LOYA

Applicant

and

COSECO INSURANCE CO./HB GROUP/DIRECT PROTECT

Insurer

DECISION ON WITHDRAWAL OF THE ARBITRATION

Before:

Beth Allen

Heard:

By telephone conference call on August 7, 2000.

Appearances:

Edward Cottrill for Mr. Loya

Aldo Picchetti for Coseco Insurance Co./HB Group/Direct Protect

Issues:

The Applicant, Daniel S. Loya, was injured in a motor vehicle accident on June 24, 1997. He applied for and received statutory accident benefits from Coseco Insurance Co./HB Group/Direct Protect ("Coseco"), payable under the Schedule.¹ Coseco terminated weekly income replacement benefits on June 6, 1999. The Applicant also claims entitlement to benefits for physiotherapy and psychological treatment. The parties were unable to resolve their disputes through mediation, and Mr. Loya applied for arbitration at the Financial Services Commission of Ontario under the Insurance Act, R.S.O. 1990, c.I.8, as amended. By letter dated June 2, 2000, the Applicant requested to withdraw the arbitration pursuant to Rule 67 of the Dispute Resolution Practice Code² (the "Code") on the basis that he preferred to proceed by court action. The Insurer consented to the withdrawal on the condition that the Applicant pay its assessment fee and arbitration expenses to date.

The issue is:

1. Is the Applicant permitted to withdraw the Application for Arbitration?

2. Is the Applicant liable to pay the Insurer's expenses incurred in respect of the arbitration hearing pursuant to subsection 282(11) of the Act?

3. Is the Applicant liable to pay an amount up to the amount of the Insurer's assessment fee pursuant to subsection 282(11.2) of the Act?

Result:

1. Mr. Loya is permitted to withdraw the Application for Arbitration.

2. The Applicant is liable to pay $500 of the Insurer's expenses incurred in respect of the arbitration hearing.

3. The Applicant is not liable to pay any part of the Insurer's assessment fee.

EVIDENCE AND ANALYSIS:

Withdrawal of the Arbitration:

A pre-hearing discussion by teleconference was scheduled for this matter on September 7, 2000. On consent the parties requested that the time slot for the pre-hearing discussion be converted into a hearing into the Applicant's request to withdraw the arbitration. I acceded to this request and the hearing proceeded by teleconference. Mr. Cottrill attended on behalf of Mr. Loya and Mr. Picchetti on behalf of Coseco. Counsel proceeded by way of oral submissions. In support of his submissions, counsel for the Applicant filed a copy of a medical report by Dr. Khalil Asayesh dated September 11, 1996. Counsel for Coseco filed copies of eight pieces of correspondence from the Applicant to the Insurer.³

Rule 67 of the Code⁴ provides that a party can seek permission, either in writing or orally, to withdraw a dispute, and further provides that the Commission or an arbitrator will permit the withdrawal if the other party agrees. Where the other party does not consent to the withdrawal, an adjudicator has the discretion to allow the withdrawal on terms and conditions and to award expenses to either party as permitted by Rule 73⁵ of the Code.

Counsel for the Applicant argued that the Applicant should not be required to pay either the Insurer's filing fee or its other arbitration expenses and that it would be a breach of procedural fairness for the Applicant to be ordered to do so. According to this argument, the Applicant should not have to pay costs before the substantive issues are decided. Moreover, such an order, in the Applicant's view, would be unfair because the Applicant is impecunious, commenced the proceeding without legal representation and, due to his psychiatric problems, lacks an understanding of the arbitration process.

The Applicant's counsel submitted that the Applicant approached him about June 22, 1999 for legal representation on the tort matter in relation to his accident. He further submitted that the firm undertook to represent the Applicant in the court action, but because of concerns about expeditiousness and costs, the Applicant took his accident benefit matter to the Commission unrepresented. He attended two mediations on his own on November 18, 1998 and April 14, 1999. He applied for accident benefits by an Application for Arbitration undated, but date-stamped by the Commission on July 27, 1999. The Application indicates that the Applicant completed it himself.

Coseco consents to the withdrawal of the arbitration on the condition that the Applicant be required to pay the Insurer's $3,000 filing fee and its arbitration expenses up to the Applicant's written request to withdraw dated June 2, 2000.

Counsel for Coseco submitted that applicants, and not insurers, control the commencement of the arbitration process. According to this view, once an applicant applies for arbitration, the insurer must respond, pay the appropriate filing fee and incur expenses in relation to the arbitration. Counsel for Coseco further argued that for the Commission to permit applicants, with impunity, to start and simply withdraw from a process which results in expenses to the insurer, amounts to allowing applicants to use the arbitration process as a weapon to unfairly exact certain advantages from the process. This, counsel for Coseco submitted, would result in applicants making a mockery of and abusing the arbitration process.

withdraw their arbitration. Rule 67 of the Code grants arbitrators the discretion to allow a withdrawal with conditions. After considering the circumstances of this case, I exercise my discretion to permit the Applicant to withdraw the arbitration with the condition that he pay an amount of Coseco's arbitration expenses. However, I do not order the Applicant to pay any part of Coseco's assessment fee. I will first deal with Coseco's request for its expenses.

Subsection 282(11) of the Act allows an arbitrator to award expenses to either the insured person or the insurer. Rule 73 of the Code enumerates the criteria to be considered in an award of expenses. These criteria include: the parties' degree of success or failure in the outcome; the conduct of the parties that tended to shorten or prolong the proceeding; whether a position taken by either party was manifestly unfounded, frivolous, vexatious, fraudulent or an abuse of process; the complexity or novelty of the case; the circumstances around settlement; and any other matter the arbitrator considers relevant. Some of these factors are relevant to hearings that have actually commenced or completed and do not apply to this case.

The question whether the Applicant's conduct in requesting a withdrawal amounted to an abuse of process, as alleged by Coseco, is relevant to the expense issue in this case. However, for reasons discussed below, I do not find that the Applicant's request to withdraw the arbitration is an abuse of process. I received no evidence or submissions that the commencement of the arbitration was frivolous or vexatious. I find, in any event, that the Application for Arbitration, on its face raises bona fide and justiciable issues. Counsel for the Applicant also filed no evidence to support his submission that the Applicant is impecunious.

I considered the Applicant's counsel's submission that the Applicant did not understand the arbitration process. The Applicant filed the letter from Dr. Asayesh, a psychiatrist, dated September 11, 1996 (about nine months before the accident) in support of this submission. I find that this letter does not support the Applicant on this point. Dr. Asayesh comes to no definite diagnosis of the Applicant's psychiatric condition. He speaks of the Applicant having paranoid and suspicious thoughts, but indicates that the Applicant is "well oriented", "of at least average intelligence with reasonable cognitive function" and has sound judgment. I conclude from this that the Applicant's psychological problems would not likely prevent him from understanding the process. This finding is fortified by the Applicant's correspondence to the Insurer and by his educational background. While I find the Applicant's preference for court understandable in the circumstances, I find his correspondence is very articulate and reflects an exceptional understanding of his relationship with the Insurer and the dispute resolution process up to this point. It was revealed at the hearing that the Applicant is currently attending Loyola University in Quebec studying architecture and Dr. Asayesh's letter indicates that the Applicant attended post-secondary education both in France and at the University of Toronto.

The Applicant's counsel also submitted that it would be procedurally unfair for me to decide the expense issue when the merits have not been decided. I actually do not understand this submission since it was the Applicant who has requested that the Commission not decide the merits and has opted instead to proceed before the court. My order granting the withdrawal is by its nature a final order. The Act and Code authorize arbitrators to decide expenses on final as well as interim bases and accordingly I am within my authority to order expenses.

I also considered Coseco's concern about its expenses wasted by the Applicant's decision to change processes. Like the Arbitrator in the Richard⁶ case, I find the Applicant must recognize that there is a cost attached to his decision to change processes and that those costs ought to be borne by the party that seeks the change. Coseco incurred expenses responding to the Applicant's claim in the expectation that the matter would proceed to arbitration and I find that the Applicant should bear some responsibility for this. Accordingly, the Applicant must defray some of the costs occasioned by his change of mind. Counsel for Coseco did not quantify its expenses. I therefore fix the amount payable by the Applicant at $500.

I will next deal with the matter of Coseco's claim for its $3,000 assessment fee. Subsection 282(11.2) of the Act provides that an arbitrator may order an award of up to the amount of an insurer's assessment fee if the insured person's claim is found to be manifestly unfounded, frivolous, vexatious or an abuse of process. I have already found that the Applicant's claims are not frivolous or vexatious and for the same reasons, I also find they are not manifestly unfounded.

I looked at Coseco's claim that the Applicant's conduct in withdrawing the arbitration is an abuse of process. In Catlos and Jevco⁷ (confirmed on appeal), the Arbitrator held, and I agree, that a finding that an applicant has abused the Commission's process should not be made lightly; and that more must be shown than that an insurer has incurred expenses in the course of the proceeding. On appeal, the Director's Delegate agreed that a decision to withdraw an application in favour of pursuing the same claim in court in itself does not constitute an abuse of process. He held that pursuing a matter for an improper purpose, or conduct that is contemptuous of the arbitration process would constitute an abuse of process. The Arbitrators in the Richard and Thambirajah⁸ cases applied the ruling in the Catlos case, holding that a decision to withdraw an arbitration and proceed by court action by itself is not an abuse of process.

I applied these cases in arriving at my decision. I took into account that, although the Applicant had legal representation for the related tort action, this was not the case for the process leading up to arbitration. His counsel submitted that the Applicant commenced the arbitration of his accident benefits claims on his own to avoid the expense and delay often involved with a court action, which is a common basis for an insured person to choose the arbitration process. However, the Applicant changed his mind and withdrew the arbitration, deciding rather to join his accident benefits case with his tort action where he is legally represented. I find that while this conduct clearly reflects uncertainty and indecision on the Applicant's part, in keeping with Catlos, I do not find that it amounts to an abuse of the Commission's process.

Therefore, I find that the Applicant is not liable to pay any part of Coseco's $3,000 assessment fee.

October 2, 2000

Beth Allen

Arbitrator

Date

Neutral Citation: 2000 ONFSCDRS 186

FSCO A99-000726

FINANCIAL SERVICES COMMISSION OF ONTARIO

BETWEEN:

DANIEL S. LOYA

Applicant

and

COSECO INSURANCE CO./HB GROUP/DIRECT PROTECT

Insurer

ARBITRATION ORDER

Under section 282 of the Insurance Act, R.S.O. 1990, c.I.8, as amended, it is ordered that:

1. Mr. Loya is permitted to withdraw the arbitration.

2. The Applicant is liable to pay $500 of the Insurer's arbitration expenses.

3. The Applicant is not liable to pay any part of the Insurer's assessment fee.

October 2, 2000

Beth Allen

Arbitrator

Date

SCHEDULE

SECTION 67 - WITHDRAWAL

67.1 A party may seek permission to withdraw all or part of a dispute:

(a) in writing by serving on the parties a request to withdraw and by filing the request to withdraw together with a Statement of Service in FORM E; OR

(b) orally during a neutral evaluation, pre-hearing discussion, a preliminary conference or at a hearing.

67.2 The Commission or an adjudicator, as the case may be, will permit a party to withdraw if the other parties agree.

67.3 Where a party does not agree to the withdrawal, an adjudicator may:

(a) permit the withdrawal on such terms and conditions as the adjudicator considers appropriate;

(b) award expenses to either party as permitted by Rules 73 and following, and the Expense Regulation under Section F of the Code;

(c) award an amount to the insurer, up to the amount the insurer is required to pay to participate in the hearing, if the adjudicator decides an abuse of process has occurred or the proceeding is frivolous or vexatious.

SECTION 73 - AWARD OF EXPENSES

73.1 An adjudicator may award expenses to a party if the adjudicator is satisfied that the award is justified having regard to the criteria set out in Rule 73.2. The items and amounts which may be awarded are found in Rule 76 and the Schedule to the Expense Regulation found in Section F of the Code.

73.2 The adjudicator will consider the criteria referred to in the Expense Regulation found in Section F of the Code. These criteria are:

(a) each party's degree of success in the outcome of the proceeding;

(b) 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;

(c) 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;

(d) the degree of complexity, novelty or significance of the factual or legal issues raised in the proceeding;

(e) at the request of either party, any written offer to settle made in accordance with Rules 74 and 75, having regard to the outcome of the proceeding;

(f) any other matter related to the proceeding that the adjudicator considers relevant to the issue of whether an award of expenses is justified.

Footnotes

1. 1The 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.
2. 2Dispute Resolution Practice Code, (3rd edition April 15, 1997).
3. 3These are dated October 9, October 14, November 6, December 9, and two letters dated December 30, 1998; January 29 and March 2, 1999.
4. 4Rule 67 of the Code is set out in its entirety on the Schedule appended to this decision.
5. 5Rule 73 of the Code is set out in its entirety on the Schedule appended to this decision.
6. 6Richard and Lombard General Insurance Company of Canada (OIC A97-001526, April 29, 1998)
7. 7Catlos and Jevco Insurance Company (OIC A-000183 February 7, 1997), confirmed on appeal (OIC P97-00013, September 26, 1997)
8. 8Thambirajah and Zurich Insurance Company (OIC A91-001863, April 24, 1998)