Elcka Lave v. Zurich Insurance Company, 2000 ONFSCDRS 220

FINANCIAL SERVICES COMMISSION OF ONTARIO

Neutral Citation: 2000 ONFSCDRS 220

FSCO A98-001214

BETWEEN:

ELCKA LAVE Applicant

and

ZURICH INSURANCE COMPANY Insurer

DECISION ON EXPENSES

Before: Susan Sapin

Heard: By telephone conference call on September 8, 2000.

Appearances: Josep Lave for Mrs. Lave Claudia Storto for Zurich Insurance Company

Issues:

The Applicant, Elcka Lave, was injured in a motor vehicle accident on September 10, 1996. In a decision dated June 26, 2000, I dealt with her claims for statutory accident benefits under the Schedule¹ I made the following findings:

1. Mrs. Lave is not entitled to receive a weekly income replacement benefit.

2. Mrs. Lave is not entitled to receive a non-earner benefit after March 9, 1997.

3. Mrs. Lave is entitled to housekeeping expenses of $720.

4. Mrs. Lave's claim was an abuse of process pursuant to section 282(11) of the Insurance Act.

I ordered Zurich to pay housekeeping expenses of $720 and reserved on the issue of the expenses of the arbitration proceeding. Prior to considering an award against Mrs. Lave pursuant to the Insurer's claim for the return of its assessment under section 282(11.2) of the Insurance Act, R.S.O. 1990, c.I.8, as amended. I invited the parties to make submissions on this issue and the issue of expenses.

The issues in this further hearing, therefore, are:

1. Is either party entitled to its expenses incurred in respect of this arbitration hearing?

2. If so, what amount of expenses must be paid?

3. Pursuant to section 282(11.2) of the Insurance Act, is Mrs. Lave required to repay to the Insurer all or part of the $3,000 assessment it was required to pay to arbitrate her claim?

Result:

1. Mrs. Lave is not entitled to her expenses of the arbitration.

2. The Insurer is entitled to a portion of its arbitration expenses in the amount of $2,000.

3. Mrs. Lave is required to repay to the Insurer $1,000 towards its assessment.

EVIDENCE AND ANALYSIS:

1. Expenses:

Both parties seek their expenses of the hearing.

Section 282(11) of the Insurance Act allows expenses to be awarded to either the insured person or the insurer:

282.- (11) The arbitrator may award, according to the 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.

The criteria for awarding expenses are found in subsection 12(2) of O.Reg. 664/96, which states as follows:²

12.—(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:

1. Each party's degree of success in the outcome of the proceeding.

2. 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.

3. 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.

4. The degree of complexity, novelty or significance of the factual or legal issues raised in the proceeding.

5. If the insurer or 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.

6. Any other matter related to the proceeding that the arbitrator considers relevant to the issue of whether an award of expenses is justified.

Arbitrators must consider these legislated criteria and apply them to both parties. The general principle is to balance the applicant's need for access to relatively inexpensive, speedy and informal adjudication of disputes regarding statutory accident benefits with a "relatively mild deterrent to undeserving claims or undesirable behaviour."³

Criterion 5 (offers to settle) is not relevant in this particular case. Neither is criterion 4, as Mrs. Lave did not raise novel or significant factual or legal issues.

Mrs. Lave's expenses:

In exercising my discretion to deny Mrs. Lave her arbitration expenses, I considered the following factors. Firstly, Mrs. Lave was completely unsuccessful in her claim for weekly income replacement benefits, for the simple reason that she produced no evidence in support of this claim, despite repeated, detailed requests for such from the Insurer and its accountant, and despite a pre-hearing order of Arbitrator Allen identifying the relevant information and requiring that it be produced. Given Mrs. Lave's conduct, discussed below, the fact that she was successful in her claim for housekeeping benefits, a very small part of the claim, is not sufficient reason to award her her arbitration expenses, or to deny the Insurer its expenses of the arbitration.

Secondly, in my decision I found that Mrs. Lave's claim for income replacement benefits amounted to an abuse of process for several reasons. These were essentially the conscious decision on the part of Mrs. Lave and her representative, Mr. Lave, to ignore the Insurer's repeated legitimate requests for documentation to support the claim; the wilful ignoring of Arbitrator Allen's order; the refusal to comply at any time with the disclosure requirements of the Commission; and the outright refusal to answer the Insurer's questions relevant to the issues in dispute at the hearing.

Thirdly, I find that the Applicant's conduct prolonged and hindered the arbitration proceeding. The ongoing lack of information prevented the Insurer from promptly adjusting its file, considering an early resolution, or properly preparing its case for arbitration. The last-minute tendering of confusing and irrelevant evidence required review by the Insurer's accountant, and, at my request, required his attendance at the hearing to explain the evidence for the benefit of both parties and myself.

Finally, the refusal to answer questions, properly put at the hearing, was simply unacceptable.

For these reasons, I find that Mrs. Lave is not entitled to her arbitration expenses.

The Insurer's expenses:

In consideration of Mrs. Lave's conduct as outlined, I award the Insurer a portion of its expenses of the arbitration. Although I acknowledge the Insurer's submission that the abuse of process by the Applicant in this case was egregious, and that such behaviour should not go undeterred, I am awarding only a portion of expenses, rather than the full amount, keeping in mind the overriding purpose of the dispute resolution process as expressed by Arbitrator Alves:

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. 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 the amount of the hourly rate for legal fees to counsel for the insured person only, to $150 per hour. For these reasons, I conclude that the statutory scheme continues to be one "designed to facilitate applicants' access to a speedy adjudication of disputes.⁴

I also consider, as a mitigating factor in awarding costs against her, the fact that Mrs. Lave was not represented by legal counsel. Although it does not excuse her conduct, the lack of competent legal representation may have contributed to the unacceptable manner in which her claim was conducted.

2. Amount of expenses:

The Insurer submitted a detailed Bill of Costs of $4,043.32, including GST, for legal fees at the Legal Aid Tariff Rate of $67 per hour; and disbursements of $3,456.10, including GST of $226.10, for a total of $7,499.42. This amount does not include the Insurer's arbitration filing fee of $3,000.

Considering all of the factors outlined above, I fix Mrs. Lave's liability for the Insurer's expenses at $2,000.

3. Return of the Insurer's assessment:

Subsection 282(11.2) of the Insurance Act provides as follows:

282.—(11.2) If an insured person commences an arbitration that, in the opinion of the arbitrator, is frivolous, vexatious or an abuse of process, the arbitrator may award an amount to be paid by the insured person to the insurer that does not exceed the amount assessed against the insurer in respect of the arbitration under section 14. 1993, c.10, s.33.

Mrs. Lave's claims for income replacement and housekeeping benefits are bona fide, justiciable issues and I do not consider them to be frivolous or vexatious. However, as discussed above, I did find Mrs. Lave's conduct in pursuing her claims to amount to an abuse of process. For this reason, I impose an award of $1,000 on Mrs. Lave for this conduct.

December 8, 2000

Susan Sapin Arbitrator

Date

Neutral Citation: 2000 ONFSCDRS 220

FSCO A98-001214

FINANCIAL SERVICES COMMISSION OF ONTARIO

BETWEEN:

ELCKA LAVE

Applicant

and

ZURICH 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. Mrs. Lave shall pay to Zurich Insurance Company its arbitration expenses in the amount of $2,000.

2. Mrs. Lave shall repay to Zurich Insurance Company $1,000 of the assessment it was required to pay to arbitrate her claim.

December 8, 2000

Susan Sapin Arbitrator

Date

Footnotes

1. 1The Statutory Accident Benefits Schedule —Accidents after December 31, 1993 and before November 1, 1996, Ontario Regulation 776/93, as amended by Ontario Regulations 635/94, 781/94, 463/96 and 304/98.
2. 2These criteria are incorporated into the Dispute Resolution Practice Code — Third Edition (Rule 73.2 and section F).
3. 3Gray and Zurich Insurance Company (FSCO A97-001660, January 29, 1999), upheld on appeal (FSCO P98-00047, June 11, 1999).
4. 4Gray op.cit., p.7