Neutral Citation: 2000 ONFSCDRS 78

FSCO A98-000429

BETWEEN:

KHOUCHABA KORKISS

Applicant

and

PROGRESSIVE CASUALTY INSURANCE COMPANY

Insurer

REASONS FOR DECISION

Before:

John Wilson

Heard:

October 5, 6 and 7, 1999, in London, Ontario.

Appearances:

Nicholas W. Fursman for Mr. Korkiss

Guy Farrell for Progressive Casualty Insurance Company

The Applicant, Khouchaba Korkiss, was injured in a motor vehicle accident on July 2, 1997. He applied for statutory accident benefits from Progressive Casualty Insurance Company ("Progressive"), payable under the Schedule.¹ Progressive refused to pay weekly income replacement benefits. The parties were unable to resolve their disputes through mediation, and Mr. Korkiss applied for arbitration at the Financial Services Commission of Ontario under the Insurance Act, R.S.O. 1990, c.I.8, as amended.

The issues in this hearing are:

(A) Was Mr. Korkiss involved in an accident within the meaning of section 4 of the Schedule?

(B) Was Mr. Korkiss employed by Huron Billiards prior to July 2, 1997?

What is the amount of the weekly income replacement benefit that Mr. Korkiss is entitled to receive pursuant to section 6 of the Schedule?
Is Mr. Korkiss entitled to receive a medical benefit for prescription, ambulance and taxi expenses claimed pursuant to section 14 of the Schedule?
Is Mr. Korkiss entitled to a special award pursuant to section 282 (10) of the Insurance Act?
Is Progressive liable to pay Mr. Korkiss' expenses in respect of the arbitration under section 282(11) of the Insurance Act?

Mr. Korkiss also claims interest on any amounts owing.

(A) Mr. Korkiss was involved in an accident within the meaning of section 4 of the Schedule.

(B) Mr. Korkiss was employed by Huron Billiards prior to July 2, 1997.

The amount of the income replacement benefit is $256.16.
Mr. Korkiss is entitled to receive medical benefits for prescription, ambulance and taxi expenses claimed pursuant to section 14 of the Schedule.
Mr. Korkiss is entitled to a special award in the amount of $15,000.
The issue of expenses has been deferred to a future date, if the parties are unable to agree on this matter.

Mr. Khouchaba Korkiss was an immigrant from Iraq who settled in London with his family. Prior to the time of the accident, on July 2, 1997, he alleges that he was employed at Huron Billiards, a pool hall in London. Progressive denies that Mr. Korkiss was employed prior to the accident.

Was there an "accident" ?

On the night of July 2, 1997, Mr. Korkiss was involved in a collision at the corner of McNay and Victoria streets in London. Mr. Korkiss and his wife and five children were in a station wagon that was stopped at the intersection when it was hit from behind by a stolen, black Pontiac Sunbird. Any occupants of the Pontiac fled the scene of the accident on foot. Mr. Korkiss and his family were taken by ambulance to hospital in London.

Progressive asserts that the "accident" was staged by Mr. Korkiss in co-operation with a young offender, who drove the vehicle that hit Mr. Korkiss' station wagon.

The investigating officer from the London police, Constable Brent Crowther, testified. He was dispatched to the accident scene at 10:20 p.m., and arrived there about 10 minutes later. He testified that the weather was poor, with very heavy rain and lightning. Upon arrival at the accident scene he found the two vehicles, and a group of bystanders. According to Constable Crowther the Pontiac Sunbird was still attached to the rear of the Korkiss station wagon. He concluded that there had been a substantial impact and that there was significant damage to the station wagon. There was no trace of the driver or occupant of the Pontiac Sunbird.

Mr. Khouchaba Korkiss testified, as well. Mr. Korkiss does not read or write in English, and testified through an Arabic interpreter. He testified that on the night of July 2, 1997, he was driving with his wife and five children, the youngest of whom was only a few months old. They were returning from a visit, and had decided to visit yet another friend, Ramzi Korkiss. Having started off for home, Mr. Korkiss claimed that he was reminded by his wife of their intention to visit Ramzi. He changed direction and headed back towards Ramzi's apartment. When stopped at the intersection of McNay and Victoria, he was hit from behind by the black Sunbird.

Mr. Korkiss testified that his children were crying after the accident and that his wife was in shock and unable to get out of the car. Mr. Korkiss categorically denied that he had arranged to have an accident, and emphasized that his wife and children were with him in the car at the time.

Mr. Korkiss was interviewed through an interpreter by an insurance adjuster for Progressive. The copy of the statement produced by the Insurer shows that Mr. Korkiss was asked where he was going that evening. He replied through an interpreter that he had been visiting friends and was returning home.

The Insurer maintained that the presence of Mr. Korkiss' vehicle at the intersection of McNay and Victoria was inconsistent with this statement to the Insurer. As a result, the arbitrator was given a virtual tour of the streets of London, complete with maps, by both parties in an effort to put Mr. Korkiss's presence at the accident scene into some sort of context.

Throughout his testimony, Mr. Korkiss insisted that he was intending to visit his friend, Mr. Ramzi Korkiss, that evening, and that he had turned the car around to visit him, after his wife reminded him of that intention.

Mr. Ramzi Korkiss, testified that Mr. Khouchaba Korkiss had been en route to visit him at the time the accident occurred. This would have been consistent with the position of Mr. Khouchaba Korkiss' vehicle at the time of the accident. Ramzi Korkiss, however admitted that he had no personal knowledge of Khouchaba Korkiss' intentions that evening and that he did not receive a call from Khouchaba Korkiss. He testified that his wife might have spoken to Khouchaba Korkiss on the telephone.

I find that, notwithstanding his long involvement with the Applicant, Mr. Ramzi Korkiss is unable to provide direct information capable of confirming Khouchaba Korkiss' intentions on the evening of the accident.

Nevertheless, I accept the evidence of Mr. Khouchaba Korkiss and his wife that they were to stop at Mr. Ramzi Korkiss' apartment on the way home. Mr. Khouchaba Korkiss testified that he had turned around when he realized that he had gone too far from Ramzi's apartment. I accept that on the basis of the information presented at the hearing, this was the most reasonable explanation for the presence of Mr. Korkiss' vehicle at the accident site.

I also emphasize that the testimony of Constable Crowther of the London police was that it was a dark night with extremely heavy rain. Some confusion as to location and direction of travel could then be expected. I find that there is a plausible reason for Mr. Korkiss travelling in the direction he was at the time of the accident, and that there is no need for the Insurer to develop elaborate theories of accident causation to account for Mr. Korkiss' direction of travel.

The Insurer called several witnesses to substantiate its theory that Mr. Korkiss had arranged for a staged accident to take place on July 2, 1997. The common thread running through the testimony of all the witnesses was the involvement of one Jimmy O, (Mr. O) a young offender who was implicated in the theft and subsequent hit-and-run involving the Pontiac Sunbird.

Constable Dianne McGregor of the Exeter OPP detachment testified that she was involved in an investigation of a variety of incidents around the community of Huron Park, including the theft of the Pontiac Sunbird that subsequently collided with Mr. Korkiss' car in London. As part of this investigation she arrested and interrogated Mr. O.

She testified that Mr. O gave her an inculpating statement that connected him to a hit-and-run in London. His statement was transcribed and signed in the presence of Constable McGregor who testified that Mr. O indicated to her off the record that the London hit-and-run was an "insurance job." He ostensibly claimed to have been paid $250 to perform this" job." This crucial admission was not included, however, in Mr. O's signed statement.

At page one of the statement, Mr. O stated simply: "The day after that I had a little bit to drink. I thought I'd take the car for a ride. That's when I hit the station wagon..." He concluded: "I've cleared up everything," in response to the question of whether he had anything more to say.

Constable Don Mackenzie of the London police also testified. He had been assigned to investigate the recovery of the stolen Pontiac Sunbird. He testified that he received a fax from Constable McGregor of the Exeter OPP, with Mr. O's statement and the incident report. The fax cover sheet refers only to a second person as "...your second suspect in the hit and run." There is no reference to any "insurance job."

Constable Mackenzie testified that he interviewed Mr. O outside a court room in London, on the occasion of another court appearance. He reported that Mr. O indicated that he had been paid $250 to participate in the motor vehicle accident, and that he was accompanied by another person. In cross-examination, Constable Mackenzie acknowledged that the interview with Mr. O took place on October 2, some four months after the accident. He indicated that he asked only seven questions, but did not ask for the identity or a description of the alleged payor of the funds to Mr. O.

Constable Mackenzie also testified that he had spoken with Mr. Adams, a former police officer in charge of the file for Progressive, and that Mr. Adams had advised him of Progressive's suspicions of a fraudulent accident. Notwithstanding this information from Progressive, and his interview with Mr. O, Constable Mackenzie confirmed that no charges were ever laid, and that, in his opinion, there was no realistic case to proceed.

Progressive filed a statement made to Mr. Adams by Mr. O on August 12, 1999. Mr. Adams interviewed Mr. O. in a youth detention facility in Ilderton, Ontario. Neither Mr. Adams, nor any other witness testified as to the validity of the statement or to the circumstances of the interview.

The statement presented by Progressive, if true, confirms that Mr. O took the stolen Pontiac to London, where he teamed up with D. O, his cousin, who was alleged to have talked to "... a guy I know as Johnny. I don't know his last name." "Johnny" is represented as being a part-time manager of Huron Billiards.

The statement goes on to elaborate on how "Johnny" offered D. O. an opportunity to make some money by staging an accident: "My cousin, D. O. came back to talk with me. He told me that we could make some money by running into another vehicle with the stolen car."

It continues to outline a scenario where "Johnny" allegedly led a caravan consisting of his own car, the station wagon, and the stolen Sunbird to an intersection. "At the intersection Johnny pulled off to the left and got out of his vehicle and waved us and the vehicle towards the stop sign."

All of this took place during what Constable Crowther described as an evening of torrential rains and thunderstorms.

At the hearing, Progressive was unable to identify "Johnny," or to substantiate his involvement in staging an accident. Mr. Mati, the manager of Huron Billiards, testified that he did not employ anyone known as "Johnny," and did not have any "part-time managers."

Mr. O was called to testify by the Insurer. He admitted to being in the stolen vehicle at the accident, but stated that he was alone and denied the sequence of events outlined in the statement produced by Mr. Adams.

Mr. O testified that his previous statement was not under oath, and he felt free to tell Mr. Adams what he wanted to hear. He implied that he was hoping for some sort of better treatment by "co-operating" and telling Mr. Adams what he wanted to hear. When pressed for details of any inducements, however, he was unable to give any.

Mr. O. maintained on the stand that he just happened to be involved in a traffic accident by chance and that he had not been paid to run into Mr. Korkiss, whom he did not know. By his own admission, he had been drinking heavily and had smoked several joints in the period before the accident. Given this and the torrential rain in London that evening, it is hardly surprising that he ran into another car.

The Insurer moved to have Mr. O. declared to be a hostile witness. Upon hearing submissions by both parties, the Insurer was permitted to challenge Mr. O with his previous statements.

Mr. O clearly tailored his stories to fit his circumstances and was not a consistent or reliable historian at any time in this matter. As early as his involvement with the Exeter OPP, Mr. O demonstrated his tendency to embellish his stories. At the end of his statement to PC McGregor, he penned a few extra lines: "I don't know why I did these stupid crimes probably because at the time it seemed fun. When I sit alone here in this jail cell I think about the crimes and it confuses me why I would do so many dumb things. I am so sure that I will never do them again... "

PC McGregor testified that Mr. O was well known to the detachment. Mr. O's OPP file included the Crown brief synopsis. At page 10 of the file, the writer noted:

The accused then provided inculpatory statement and was very co-operative and polite with police, appearing to be remorseful for his crime spree. The accused was held for a bail hearing in Goderich on 07 Jul 97 at 2:00 p.m. and was subsequently released by a Justice of the Peace for a first appearance on 08 Aug 97.

Mr. O. impressed me as clever and intelligent, carefully weighing each evasive answer to questions put to him on the stand. I have no doubt, as well, that Mr. O crafted his answers on his first interrogation with an eye to his upcoming bail hearing, and to what he perceived his interrogators wanted to hear.

Whether or not he was actually offered any inducement, I find that he perceived it to his advantage to be self-serving and co-operative and to give answers that satisfied the questioner without any necessity to conform to objective reality. For Mr. O, the truth consistently took a back seat to expediency. I find that any information concerning the motor vehicle accident that traced its origins to Mr. O is so unreliable as to be valueless.

The other evidence offered to support the Insurer's theory consisted of little more than unsupported supposition and guilt by association.

Police witnesses identified Huron Billiards as a hang-out for car thieves and a place where stolen goods might be disposed of. Even if that characterization is true, it does not necessarily follow that Mr. Korkiss would risk the welfare of his wife and children in an arranged car accident, just because he worked in such an environment.

Collateral Evidence:

The Insurer also raised the post-accident conduct of Mr. Khouchaba Korkiss, suggesting that he had a propensity to engage in fraudulent conduct, and therefore, cast into doubt his testimony that he was legitimately employed by Huron Billiards. The Insurer tendered evidence of questionable credit applications, and an apparently falsified letter confirming employment that Mr. Korkiss was alleged to have submitted to credit-granting agencies after the accident.

There was no evidence tendered, however, to show any nexus between these subsequent actions and his pre-accident conduct, nor the existence of any system or modus operandi. It has been accepted in Ontario since Hickey v. Fitzgerald (1877) 41 U.C.Q.B. 303, that evidence of the propensity of a person to behave in a particular manner is not admissible as proof of such conduct.

As such, the alleged post-accident fraudulent behaviour is irrelevant to the issue of whether Mr. Korkiss staged the accident of July 2, 1997, or to the issue of his pre-accident employment. I will however accept that such evidence may be relevant to the credibility of Mr. Korkiss's testimony at the hearing, and will consider it for that limited purpose only.

Credibility:

Based on the evidence submitted by Progressive, it would be hard to characterize Mr. Korkiss, in the period following the accident, as an upstanding member of his community. He testified that he lived separately from his family for their own safety, after the accident. He was unemployed. The Insurer alleges that at this time he engaged in fraudulent misrepresentation to obtain money for his own use. He was also suffering from severe psychological problems and was a patient at the London Psychiatric Hospital. I note that the Insurer has accepted for the purposes of this hearing that Mr. Korkiss did suffer from a serious psychological impairment in the period following the accident.

Given the range of psychological, economic and family stresses affecting Mr. Korkiss in the period after the accident, however, I cannot accept that any post-accident conduct necessarily impugns the credibility of his testimony concerning the accident itself and his pre-accident employment situation.

During the hearing I found that Mr. Korkiss was a credible, if unsophisticated, witness to matters relating directly to the motor vehicle accident. His testimony was consistent with and corroborated by that of other witnesses. I find that Mr. Korkiss is capable of giving credible testimony about the circumstances of the motor vehicle accident, and his pre-accident employment.

Mr. Korkiss' Employment:

Mr. Korkiss testified that he was employed as a general helper at Huron Billiards in London. As part of his accident claim, he submitted an Employer's Confirmation of Income, signed by Mr. Saad Mati, who indicated that he was the owner of Huron Billiards. Mr. Korkiss' job description was listed as "bartending-cleaning service." Mr. Korkiss subsequently produced a T4 from Huron billiards and his own income tax return, all showing employment income and the appropriate deductions made.

Mr. Saad Mati testified at the hearing. Mr. Mati stated that he was also known by his nickname of "Nabil." He confirmed that he was the proprietor of Huron Billiards, and was in charge of day-to-day operations. He identified and confirmed photocopies of the payroll records of Huron Billiards which listed Mr. Korkiss as an employee. Mr. Mati further testified that he hired Mr. Korkiss, who was a fellow member of the Assyrian community and needed work.

Zabet Ishak, the wife of Khouchaba Korkiss, testified that she was aware that her husband was working at "Billiards" although she did not know the exact name. Ms. Ishak, who does not read or write English had little contact with the world outside of her family and community. She never visited her husband's place of employment. She was, however, convinced that her husband had a job at the place called "Billiards" and worked there some two months.

To rebut this evidence, the Insurer relies on the general unsavoury reputation of Huron Billiards, and its supposed links to the underworld. We are asked to infer that a place where criminal activity was rampant would be inclined to lend its name to a false declaration of employment.

Presumably the proprietor of Huron Billiards would not only have to write a false confirming letter, but also generate all the necessary supporting documentation from cancelled cheques, to To's and payroll deductions. Even if the proprietors of Huron Billiards were implicated in the activities ascribed to the billiard parlour by police, which was denied by Mr. Mati, it would seem odd that they would risk the future of their own business by providing documentation in their own name to Mr. Korkiss, rather than that of some fictitious third party.

Without some concrete evidence on the part of the Insurer, its allegations concerning the bona fides of Mr. Korkiss' employment remain no more than speculation on its part. They produced no witnesses to suggest that Mr. Korkiss was not employed and none to suggest that any subsequent representations about employment were linked in any way to Huron Billiards, or formed part of some general fraudulent scheme.

Mr. Korkiss produced several witnesses, and, in addition, he produced considerable evidence, including tax documentation and payroll information to support his claim to be employed. The Insurer, on the other hand, called no witnesses on this issue and relied on unsupported speculation to impeach Mr. Korkiss' evidence.

I find, that whatever his post-accident situation, the evidence before me at the hearing demonstrated that Mr. Korkiss was an employee of Huron Billiards prior to the accident.

I have found that there was an "accident" pursuant to the Schedule. Progressive has admitted that Mr. Korkiss has suffered, and continues to suffer a disability arising from the circumstances of the "accident." I have found that Mr. Korkiss was "employed" prior to the accident. Without the existence of some exception that would relieve the contractual and statutory obligation of Progressive to pay benefits to Mr. Korkiss, it would be obliged to do so.

Fraud:

Progressive alleges that Mr. Korkiss staged the motor vehicle accident to defraud the Insurer. Fraud on the Insurer would vitiate Progressive’s obligation to pay benefits.

An allegation of fraud is a serious matter. Although the fraud must be proven, on the balance of probabilities, the evidence of such a fraud must be examined rigorously. I have already found that Progressive has produced no convincing evidence that Mr. Korkiss arranged for an "accident." In fact, the only evidence linking Mr. Korkiss to an arranged accident is the alleged off-the-record confession of a young offender who demonstrated at the hearing his ability to change his story as the circumstances dictated.

The Insurer has presented no other evidence of a fraud against the Insured. Consequently, I find that Mr. Korkiss did not fraudulently create the evidence of an accident, nor stage an accident to permit the payment of accident benefits.

Entitlement to weekly income replacement benefits:

Section 4 of the Schedule provides that :

The Insurer shall pay an insured person who sustains an impairment as a result of an accident an income replacement benefit if the insured person meets any of the following qualifications:

1.—the insured person was employed at the time of the accident, and as a result of and within 104 weeks after the accident, suffers a substantial inability to perform the essential tasks of that employment.

The Insurer conceded at the hearing that Mr. Korkiss suffered an impairment due to the accident, and that the impairment disabled him from performing the essential tasks of his employment. I have found that Mr. Korkiss was legitimately employed prior to the accident, and that an accident indeed occurred. Therefore, I find that Mr. Korkiss is entitled to an income replacement pursuant to section 4 of the Schedule.

Exclusion of Liability for Income Replacement Benefits:

Progressive advanced other reasons for non-payment of Mr. Korkiss' benefits during the claims period. Mr. Korkiss filed a copy of a letter, dated October 7, 1997, written by Jennifer Culham of Progressive Casualty in which Progressive advised that it reserved all rights under the policy of Insurance issued to Mr. Korkiss. The letter also stated: "We particularly call to your attention, Part IX "EXCLUSIONS," Section 30 of the Statutory Accident Benefits Schedule."

Section 30 of the Schedule deals with a range of exclusions which may release the Insurer from the obligation to pay income replacement benefits. Most deal with the operation of a vehicle while impaired, or without the owner's permission, or without insurance. Section 30(4) (a) however, provides that an Insurer is not required to pay an income replacement benefit if: "at the time of the accident, the person was engaged in, or was an occupant of, an automobile that was being used in connection with, an act for which the person is charged with a criminal offence.. "

The Schedule goes on to outline a scheme under which the insurer shall hold in trust any amounts payable under an income replacement benefit until the charges are disposed of. Section 30(4)(d) then provides that the amounts: "...shall be paid to the person entitled to the payment, if the person is not found guilty of the offence or an included offence."

Constable Mackenzie, who investigated the alleged insurance fraud on behalf of the London Police testified that no charges were ever laid arising out of the incident. Although he was provided with information by Mr. Adams of Progressive Casualty, he testified that there was no basis for a case to proceed.

On November 12, 1997, Progressive also wrote to Mr. Korkiss, stating that it relied upon section 48 of the Schedule for its refusal to pay benefits. Section 48 permits the termination of payment of benefits if an applicant has materially misrepresented material facts on an application for benefits. I find no evidence that a misrepresentation occurred.

The onus is on Progressive to demonstrate that it is entitled to rely on any exclusions to its obligation to pay benefits. The evidence before me at this hearing was that Mr. Korkiss was never charged, let alone convicted of an offence relating to his use of the motor vehicle. Furthermore, there is no evidence that Progressive took any steps to retain Mr. Korkiss' benefits in trust, as required by the section. I also found that there was no evidence of misrepresentation. Consequently, I find that Progressive has no grounds to withhold payment of the income replacement benefits to Mr. Korkiss.

Duration of the Income Replacement Benefit:

The Insurer has conceded at the hearing that Mr. Korkiss is and continues to be disabled as a result of the accident. I find therefore that, while his disability continues, Mr. Korkiss is entitled to an income replacement benefit on an ongoing basis.

Amount of the Income Replacement Benefit:

Mr. Korkiss has filed his income tax returns, his T4, the employment records of Huron Billiards, and called his employer, Mr. Mati to testify. I accept that Mr. Korkiss is entitled to an income replacement benefit pursuant to section 4 of the Schedule based upon his gross weekly income from the Huron Billiards of $360 per week calculated in accordance with section 61 of the Schedule. I find that the net amount of this benefit is $256.16 per week.

Other Benefits:

Progressive conceded that Mr. Korkiss was disabled as a result of the collision. I have found that the collision was an "accident." Consequently, Progressive is obliged to pay those expenses claimed for prescriptions, ambulance, and taxi expenses that were reasonable and necessary for the treatment of the accident-related disabilities.

Special Award:

Mr. Korkiss' claim against Progressive includes a special award pursuant to section 282 (10) of the Insurance Act.

Section 282 (10) provides that:

If the arbitrator finds that an insurer has unreasonably withheld or delayed payments, the arbitrator, in addition to awarding the benefits and interest to which an insured person is entitled under the Statutory Accident Benefits Schedule, shall award a lump sum of up to 50 per cent of the amount of which the person was entitled at the time of the award together with interest on all amounts then owing to the insured (including unpaid interest) at the rate of 2 per cent per month, compounded monthly, from the time the benefits first became payable under the Schedule.

To date, Progressive has made no payments at all to Mr. Korkiss. I have found that Mr. Korkiss is entitled to Statutory Accident Benefits, comprising income replacement benefits, and medical benefits, arising from the accident. If I find that Progressive "unreasonably withheld or delayed" the payments of these benefits, then Mr. Korkiss is entitled to a special award against Progressive. My only discretion would be determination of the amount.

I find that Progressive has unreasonably withheld Mr. Korkiss' benefits.

Throughout the claims process, Progressive has been consistent in its characterization of Mr. Korkiss' accident benefit claim as a fraudulent exercise. On the basis of evidence obtained from police sources shortly after the accident, it formed the belief that Mr. Korkiss had staged the accident with the assistance of a young offender. It maintained this belief even after its principal witness changed his story on the stand, as demonstrated by its motion to re-open this case to present further evidence subsequent to the hearing.

Progressive initially advised Mr. Korkiss on October 24, 1997 that it believed that the accident had been staged and that it relied upon section 30 of the Schedule in its refusal to pay benefits. As noted previously, Mr. Korkiss was never charged with a criminal offence arising from or involving the operation of a motor vehicle. No evidence was presented that Progressive ever took steps to comply with the mandatory set-aside provisions of section 30, even though it specifically stated that it relied on this section in its refusal to pay benefits.

Since it neither set aside funds in trust, nor mentioned this section again, it may be reasonably assumed that Progressive changed its position and placed its reliance on the fraud alleged to have been perpetrated by Mr. Korkiss. If that is the case, then the reference to section 30 raises concerns about the handling of this matter by the Insurer.

The Insurer also raised section 48 of the Schedule, and its allegation of fraud as justification for its refusal to accept Mr. Korkiss' claim. Although Progressive never made payments to Mr. Korkiss that could be "stopped" pursuant to section 48, it may be useful to examine the reasonableness of the Insurer's reliance on the allegation of fraud to avoid payment of Mr. Korkiss' claim.

When Mr. Korkiss first filed his claim for accident benefits with Progressive, the Insurer was in possession of information alleging that the accident was staged. This evidence originated with the OPP detachment in Exeter, and arose from the interview of the young offender who was the driver of the hit-and-run vehicle.

I have already noted the lack of references to an "insurance job" in the statement taken by the OPP and in any contemporaneous documents communicated by the police, as well as the written representation that the matters referred to formed a complete summary of the crimes admitted by the young offender. This discrepancy should have been apparent to Progressive when it obtained a copy of the statement of Mr. O.

Progressive should have soon realized that the issue was not as cut and dried as they had earlier believed. As the months progressed, Mr. Korkiss was not charged by the police for his supposed involvement in "staging" an accident. Indeed, by October, Constable Mackenzie testified that there was no realistic case to proceed.

Admittedly, the level of proof required for criminal procedures is higher than for civil matters, and an inability to achieve a conviction in a criminal case does not necessarily mean that a civil court would not find evidence for a finding of fraud.

Progressive, however, should have taken pause for reflection in October when it became apparent that no criminal charges would be forthcoming. Progressive did state in correspondence that it was in touch with the police concerning the matter, so it must have been aware of the weakness of its case against Mr. Korkiss.

Even at this point, it might possibly have been reasonable for Progressive to delay paying benefits. It could have been allowed time to interview the informant and clarify the facts upon which it intended to rely. The evidence is that it did not do so. Instead, it merely reiterated and reframed its objections to paying Mr. Korkiss. It appeared to be satisfied with the quality of the evidence it had against Mr. Korkiss, and appeared to be content to proceed on that basis. The October 24 letter from Progressive clearly states:

Mr. Adams (the former police officer who worked for Progressive) has been in contact with the London police in regards to the question of this accident being a "staged" accident. It is his opinion at this time this is not a questionable staged accident but a "definite" staged accident.

The question must then be asked whether Progressive had any other evidence to implicate Mr. Korkiss in an insurance fraud.

Neither Mr. Adams, nor any other representative of Progressive testified at the hearing. The documents filed as part of Progressive's document brief, and the adjournment application of August 1999 suggest that the supposed culprit whom Progressive alleged had carried out the hit-and-run accident at the behest of Mr. Korkiss, was not even interviewed by Progressive until August 1999.

Progressive also filed the reports of investigators looking into Mr. Korkiss' claim. The reports, Tabs 18A & B and 20A of Exhibit 1 deal with generalized surveillance of Mr. Korkiss, and do not provide any information about his links with any persons staging accidents, or his involvement in any insurance fraud. I find that Progressive did not take timely and reasonable steps to investigate its claim of fraud.

I have already remarked on the lack of any reference to the "insurance job" in any documents filed as part of this arbitration, including the statement given by Mr. O. Even if I were to accept that Mr. O verbally implicated Mr. Korkiss in a statement that is not reflected in any of the contemporaneous written documentation, I find that it would have been unreasonable to rely upon his word, especially in the absence of credible, corroborating information.

Mr. O, at the time that he allegedly made the verbal admission, as well as the time when he produced the August 1999 statement for Progressive was in custody. As Mr. Justice Kaufman noted in The Commission on Proceedings Involving Guy Paul Morin at page 602:

In-custody informers are almost invariably motivated by self-interest. They often have little or no respect for the truth or their testimonial oath or affirmation. Accordingly, they may lie or tell the truth, depending only upon where their perceived self-interest lies.

Mr. O, with his lengthy involvement with the police, had every interest at the time of his arrest in placating the authorities, by appearing to be as co-operative as possible, if he wished to be successful at his bail hearing, and to avoid being charged with all the potential offences. There is every reason to apply Mr. Justice Kaufman's criticisms to any evidence obtained from Mr. O.

Progressive made an allegation of fraud. The allegations may have had a certain ring of truth about them. Progressive's investigations might well have revealed aspects of Mr. Korkiss' life that did not make him a very sympathetic Applicant.

Whatever Progressive's opinion might have been of his character, however, Mr. Korkiss had a right to receive payment of any statutory accident benefits to which he was entitled. If there was no credible proof of a "staged accident," then Mr. Korkiss' claim for statutory accident benefits should have been paid.

I find that Progressive demonstrated an intention to withhold benefits from Mr. Korkiss, even when it had no credible evidence left to support such an action. It must now accept the consequences of its decisions.

I find that Mr. Korkiss has made out a case for the imposition of a Special Award.

Amount of the Special Award:

Mr. Korkiss developed a severe psychiatric condition, acknowledged by the Insurer, following the accident. This not only disabled him, but affected his family, and may have led to its ultimate breakup. Throughout this period he received no medical or rehabilitation assistance, or income replacement benefits from Progressive. The Insurer failed to follow the pay-pending requirements of the Schedule. It failed to set aside monies as required by section 30, even though it purported to rely upon the section for the stoppage of benefits.

I find that Progressive should pay to Mr. Korkiss a special award in the amount of $15,000, inclusive of interest, which is about 50 percent of the outstanding income replacement benefits at the time of the arbitration.

This amount reflects my understanding of the serious nature of Progressive's conduct in its dealings with Mr. Korkiss, and the serious consequences to Mr. Korkiss of the Insurer's actions.

EXPENSES

The issue of expenses was not dealt with at the hearing. If the parties are unable to agree on this matter, the parties may speak to me on this issue.

April 27, 2000

John Wilson Arbitrator

Date