Neutral Citation: 2001 ONFSCDRS 121
FSCO A00-000984
FINANCIAL SERVICES COMMISSION OF ONTARIO
BETWEEN:
MINDI SMITH
Applicant
and
CITADEL GENERAL ASSURANCE COMPANY
Insurer
DECISION ON EXPENSES
Before:
William J. Renahan
Heard:
Written submissions received by July 27, 2001.
Appearances:
Rod Hare for Ms. Smith
Jonathan B. Schrieder for Citadel General Assurance Company
Issues:
The Applicant, Mindi Smith, was injured in a motor vehicle accident on February 21, 2000. In a decision dated June 27, 2001, I dismissed her claims for statutory accident benefits under the Schedule1, while reserving on the issue of expenses:
The issue in this further hearing is:
- Is either party entitled to expenses incurred in respect of this arbitration hearing, and if so, in what amount?
Result:
- Citadel is entitled to expenses of the arbitration proceeding assessed in the amount of $2,461.99.
The procedure for the assessment of expenses is set out in Rule 79 of the Dispute Resolution Practice Code (Fourth Edition). The Rule contemplates a procedure for determining entitlement and another separate procedure for determining amount. The claim in this case was for $2,000 plus interest. In view of the small amount involved, I decided, pursuant to Rule 81 of the Dispute Resolution Practice Code, to waive the procedural requirements and deal with both issues of entitlement and amount at one time.
ANALYSIS:
Entitlement to expenses:
The criteria for determining entitlement to expenses of the arbitration proceeding are set out in subsection 12(2) of Ontario Regulation 664, R.R.O. 1990, as amended by Ontario Regulation 464/96 ("Expense Regulation"). I set out each criteria with my comments.
- Each party's degree of success in the outcome of the proceeding.
The hearing concerned Ms. Smith's claim under section 24 of the Schedule for the cost of an in-home assessment and a work-site assessment performed by Profile Evaluations. Ms. Smith's claim for the $2,000 cost failed. Citadel was completely successful.
- 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.
In an adversary process, the conduct of a person under examination is often the conduct of their representative. The conduct of Ms. Smith's counsel, Mr. Hare, tended to prolong and hinder the proceeding. He did not understand the scope of the hearing. He argued that Citadel was restricted in what defences it could raise. He did not understand that an insurer was not restricted even though he unsuccessfully raised the same argument in Aleman and State Farm Mutual Automobile Insurance Company (FSCO A00-000498, March 6, 2001). He confused the issues by referring to the assessments performed by Citadel as "section 24 assessments" when they were insurer examinations conducted under the authority of section 42 of the Schedule. This confusion led to attempts to introduce irrelevant evidence concerning conflict of interest.
At times, Mr. Hare attempted to justify his conduct by explaining that he was not a lawyer and that one of the goals of this system is to facilitate access to people who are not lawyers. Mr. Hare appeared as the representative of Ms. Smith. He did not appear as an unrepresented insured person. Although an arbitrator may in some circumstances assist an unrepresented insured, I do not believe an arbitrator has a duty to assist a representative present his case.
- 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.
Mr. Hare took the position that an insured has an absolute right to an independent assessment and that the insurer has to pay for it even if the report is never used. In my view, this argument had no merit. Mr. Hare presented his case with conviction and in good faith. I did not find that his position was manfiestly unfounded, frivolous, vexatious, fraudulent or an abuse of process.
- The degree of complexity, novelty or significance of the factual or legal issues raised in the proceeding.
Although other arbitrators have dealt with the test for entitlement to the cost of assessments under section 24 of the Schedule, we have applied slightly different standards. I believe the test I applied to determine whether an assessment was "for the purpose of this Regulation" broadened somewhat the test that other arbitrators have applied.
On the other hand, the arbitration dealt with Ms. Smith's entitlement to $2,000, a relatively small amount of money. Usually, a small claim does not justify the expenditure of significant resources, particularly when another arbitrator dealt with similar arguments in Aleman.
- If the insurer or the 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.
By letter dated March 29, 2001, Citadel offered to consent to a dismissal of the arbitration upon payment by Ms. Smith of expenses in the amount of $3,000. Although I dismissed the application for arbitration, I have not determined whether Citadel is entitled to expenses of the arbitration proceeding, and if so, the amount. At this point I cannot determine whether Ms. Smith would have benefited if she accepted the offer to settle. Therefore, the offer to settle has little meaning at this point and I attach little weight to it.
- Any other matter related to the proceeding that the arbitrator considers relevant to the issue of whether an award of expenses is justified.
Before November 1, 1996, the principle that applicants with legitimate claims, conducted reasonably, could expect to recover their allowable expenses, win or lose, was adopted in numerous decisions2.
However, as noted by Director's Delegate Draper in Gray and Zurich Insurance Company (FSCO P98-00047, June 11, 1999), the rules for expenses changed with the Automobile Insurance and Rate Stability Act, S.O. 1996, c.21. Section 282(11) of the Insurance Act now allows expenses to be awarded to either the insured person or the insurer.
In considering the expense criteria, Director Draper agreed:
...that the criteria, specifically clause 6, leave room for concerns about the access to the dispute resolution system. One aspect of accessibility is that insured persons should have a reasonable opportunity to raise novel issues of interpretation, particularly those of general importance.
Ms. Smith expressed no concern that she owed Profile $2,000 for the two assessments it performed and she had little input into the decision to undergo the Profile assessments. I found that Profile was the entity which stood to win or lose in the proceeding. Ms. Smith was merely the nominal applicant. Profile Evaluations is in business to provide evaluations and collect its accounts either from its clients or from insurance companies. One aspect of accessibility is the right of a service provider to commence an arbitration in the name of and with the cooperation of an insured person. I see nothing wrong with a service provider using this forum to collect its account. The accessibility of this process to organizations that provide medical or rehabilitation assistance may result in injured insured persons receiving services they might not otherwise receive.
Another aspect of accessibility is that insured persons should have some confidence that an arbitrator will probably order their insurer to pay a portion of their legal expenses if they lose a claim which raises novel issues of interpretation or otherwise has merit. I need not decide whether this aspect of accessibility applies to a service provider who uses this forum to collect an account because this application for arbitration had little merit and did not raise novel issues of interpretation.
Another factor I consider is that I do not have authority to award expenses against Profile Evaluations and any award of expenses I might make in favour of Citadel is against the nominal applicant, Ms. Smith. Ms. Smith expressed little interest in Profile's account. She had little control or input into the presentation of her application for arbitration. This factor, by itself, tends to militate against ordering her to pay expenses.
Having regard to these criteria, I find that Citadel is entitled to recover from Ms. Smith its expenses of the arbitration proceeding.
Amount of expenses:
Section 3 of the Expense Regulation sets out those legal fees which I may award:
(1) The legal fees payable by the insured person or the insurer for the following matters may be awarded:
For all services performed before an arbitration, appeal, variation or revocation hearing.
For the preparation for an arbitration, appeal, variation or revocation hearing.
For attendance at an arbitration, appeal, variation or revocation hearing.
For services subsequent to an arbitration, appeal, variation or revocation hearing.
(2) The number of hours for which legal fees may be awarded shall be determined by the arbitrator, having regard to the criteria set out in subsection 12 (2) of this Regulation.
Mr. Schrieder's claim for expenses was not broken down along the lines of subsection 3(1) of the Expense Regulation. Neither Ms. Smith or Mr. Hare submitted particulars of their expenses. Mr. Schrieder submitted a "Bill of Costs" which appears to be computerized docket entries. On the basis of those entries he claims legal fees of 21.2 hours at Mr. Heckel's legal aid rate of $83.75 per hour; 47.2 hours at Mr. Schrieder's legal aid rate of $67.00 per hour and one hour at the legal aid rate for clerks at $23.00 per hour for a total legal fee of $4,960.90. I consider legal fees under the headings set out in the Expense Regulation.
Services performed before the arbitration:
The Application for Arbitration was filed on September 18, 2000. Citadel's r ecoverable arbitration expenses begin with preparation of the response, including any interviews required for that specific purpose. Citadel's response was faxed on November 8, 2000. The proposition that the Legal Aid Tariff is one relevant consideration and can be used as a guide to determine what a solicitor charges a client of modest means was accepted by me in Kasap and Allstate Insurance Company of Canada, OIC A-012020, January 15, 1997 letter decision. This proposition was not disturbed on appeal.3 For preliminary interviews, advising and receiving instructions for the commencement or defence of a civil proceeding before a quasi-judicial commission, the 2000-2001 Legal Aid Tariff allows a maximum of 2.5 hours. Before November 8, 2000, Mr. Heckel docketed 1.3 hours. I find this reasonable in this case and allow 1.3 hours for services performed before the arbitration.
For preparation for the hearing:
In The Law of Costs4 the author states at paragraph 705.7:
It has been said that only in exceptional cases should the amount allowed for preparation exceed the counsel fee at trial.5
In a simple case with no unusual fact situations or difficult points of law, one and one-half days of preparation for each day of trial was considered reasonable.6
These quotations appear to be contradictory but still provide a very rough guideline.
Arbitrators have generally allowed one to four hours of preparation time for each hour of reasonable attendance time at the hearing. I prefer to follow this global approach. Factors which effect the ratio of preparation time to hearing time would include those identified in the Expense Regulation. For example, the efficient use of hearing time to deal with complex and significant issues would tend to warrant a ratio of four hours preparation time to one hour of hearing time.
Having regard to the criteria I considered under the Expense Regulation in determining entitlement to expenses, I find that a ratio of one hour preparation time to one hour of hearing is appropriate.
Mr. Schrieder's dockets indicate that the two days of attendance at the hearing amounted to 15.4 hours. Mr. Hare did not dispute this amount and it accords with my recollection. I therefore allow 15.4 hours for preparation for the hearing.
Attendance at the hearing:
I allow 15.4 hours for attendance.
Hourly rate:
Under Rule 78 of the Dispute Resolution Practice Code (Fourth Edition), the maximum amount that may be awarded for legal fees is the hourly rate established under the Legal Aid Services Act, 1998 for professional services in civil matters before the Ontario Superior Court of Justice. If satisfied that a higher rate is justified, the arbitrator may award up to $150 per hour. The maximum rate for Mr. Heckel's services is $83.75 per hour. The maximum rate for Mr. Schrieder's services is $67.00 per hour. Having regard to the criteria under the Expense Regulation I find that $67.00 per hour for each counsel is appropriate.
Total counsel fee:
Total counsel fee for 32.1 hours at $67.00 per hour is $2,150.70 plus 7 percent GST amounts to $2,301.25.
Disbursements:
Mr. Schrieder claimed the following disbursements:
- Telex/Fax Machine Usage
$ 3.00
- Photocopying
35.00
- Postage
6.22
- Network Court Reporting
428.00
- Summons to Witnesses
106.00
- Hart Process Serving
366.60
- Notice of Motion
110.00
Total disbursements:
$1,054.82
Allowable disbursements are set out in the Expense Regulation. Items 1, 2 and 3 are allowed under section 4 of the Regulation. Item 4, the services of a court reporter, are not authorized under the Regulation. Item 5, summons to witnesses, is allowed under paragraph 5(1)1. It is not clear to me that $366.60 for process serving is reasonable. The witnesses, Rod Hare and Sue-Anne Lee, testified at the hearing for the Applicant. I expect that they would have agreed to accept service of the summons to witnesses. Therefore, I am not satisfied that the process serving fee is reasonable and I do not allow it. I received no explanation of what item 7, Notice of Motion, was for. I therefore do not allow it.
Total allowable disbursements are $150.22 plus 7 percent GST is $160.74.
August 16, 2001
William J. Renahan Arbitrator
Date
Neutral Citation: 2001 ONFSCDRS 121
FSCO A00-000984
FINANCIAL SERVICES COMMISSION OF ONTARIO
BETWEEN:
MINDI SMITH
Applicant
and
CITADEL GENERAL ASSURANCE COMPANY
Insurer
ARBITRATION ORDER
Under section 282 of the Insurance Act, R.S.O. 1990, c.I.8, as amended, it is ordered that:
- Mindi Smith shall pay Citadel General Assurance Company's expenses of the arbitration proceeding assessed at $2,461.99.
August 16, 2001
William J. Renahan Arbitrator
Date
Footnotes
- The 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.
- Director's Delegate Naylor in Allison and Markel Insurance Company of Canada (OIC P-001231, August 21, 1996)
- (OIC P96-00071, March 13, 1998)
- Mark M. Orkin, 1995 Canada Law Book Inc. Aurora, Ontario.
- Canadian Express Ltd. v. Blair (1992), 1992 CanLII 7665 (ON CTGD), 91 D.L.R. (4th) 559 (Ont. Ct. (Gen. Div.)).
- Hiscox v. A.E. LePage Real Estate Services Ltd. (1987), 3 A.C.W.S. (3d) 3 (Ont. Assessment Officer).