Maria del Rocio Cruz v. Royal & SunAlliance Insurance Company of Canada, 2001 ONFSCDRS 134

Neutral Citation: 2001 ONFSCDRS 134

FSCO A00-001179

BETWEEN:

MARIA DEL ROCIO CRUZ

Applicant

and

ROYAL & SUNALLIANCE INSURANCE COMPANY OF CANADA

Insurer

DECISION ON EXPENSES

Before:

Lawrence Blackman

Heard:

Written submissions were received on August 28 and 30, 2001. Hearing held and oral decision rendered August 31, 2001, at the Offices of the Financial Services Commission of Ontario in Toronto.

Appearances:

Sam C. Pitaro for Ms. Cruz

Christopher J. Schnarr for Royal & SunAlliance Insurance Company of Canada

Issues:

The Applicant, Ms. Maria del Rocio Cruz, was injured in a motor vehicle accident in Quebec on August 28, 1999. A preliminary issue arbitration hearing was held on May 7 and 9, 2001 to determine whether Ms. Cruz was an insured person as defined in section 2 of the Bill 59 Schedule.¹ In a decision dated June 13, 2001, I found that Ms. Cruz was not an insured person as defined. The question of the expenses of the arbitration proceeding was left to the parties to resolve, failing which an expense hearing would be arranged. The parties did not resolve this issue.

Accordingly, the issues in this further hearing are:

Is Ms. Cruz entitled to her expenses incurred in respect of this arbitration proceeding?
If Ms. Cruz is entitled to her expenses, what is the quantum of those expenses?

Result:

Ms. Cruz is entitled to her expenses incurred in respect of this arbitration proceeding.
Ms. Cruz's expenses are fixed in the amount of $9,197.93.

EVIDENCE AND ANALYSIS:

Entitlement to Expenses

Subsection 12(2) of Ontario Regulation 664, R.R.O. 1990, as amended by Ontario Regulation 464/96 (the "Expense Regulation"), sets out the criteria to be considered in determining an award of expenses under the Insurance Act, R.S.O. 1990, c. I.8 (the "Insurance Act) in an arbitration proceeding. The separate criteria, with my findings, are as follows:

each party's degree of success in the outcome of the proceeding.

Royal was successful in the preliminary issue hearing. The decision that Ms. Cruz is not an insured person under the Bill 59 Schedule results in her entire application for benefits failing.

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.

Both parties worked cooperatively in moving efficiently and expeditiously through the two-day hearing. As I noted in my June 13, 2001 decision, seven witnesses were heard, including three witnesses (one participating by teleconference from Mexico City) who required an interpreter.

I found the hearing to be a model for how this system should function. Both counsel were well prepared, gave helpful opening statements which provided a context for the evidence to be received, focused the witnesses on relevant areas of inquiry, submitted very useful final submissions with supporting case law and very ably represented their respective clients while maintaining professional courtesy throughout the hearing.

The Insurer states that they attempted to have this matter proceed by agreed statement of facts. The Insurer's draft was entered as an exhibit. The Insurer submits that "the insured's desire to give viva voce evidence at the preliminary hearing only lengthened the hearing by addressing issues which were found by the hearing arbitrator to lack credibility or which were 'inconceivable.' "

I concur that an agreed statement of facts can greatly expedite and reduce the expenses of an oral hearing, which are primary goals of this system. In this case, however, the draft statement would have been insufficient for me to come to an informed decision.

The draft statement highlighted the Insurer’s understanding of the Applicant's intended length of stay in Ontario. Although this is a significant fact, it is not the only criterion referred to in the extensive case brief. The draft statement did not make note of the Applicant’s schooling, transportation and homestay arrangements, the items she brought to Toronto, the details of her entry, etc. I found the viva voce evidence, specifically that of the Applicant and her brother, Mr. Elias Cruz, in this regard to be not merely helpful, but also necessary in reaching my decision.

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.

I do not find any position taken by either side to be "manifestly unfounded, frivolous, vexatious, fraudulent or an abuse of process." I used the word "inconceivable" only regarding the very discrete factual issue as to when Ms. Cruz became aware of the student authorization requirement. That I ultimately accepted only part of the Applicant’s evidence does not detract from my finding that her application was brought in good faith on a bona fide issue which had not previously been adjudicated.

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

The Insurer submits that the issue in dispute in this proceeding was neither complex, novel or legally significant. I disagree.

The parties agreed that no decision had ever been issued by the Commission or any other body on this preliminary issue.

Considering the increasing relative ease of national and international travel and relocation, questions of jurisdiction have become ever more significant. The Insurer’s extensive brief detracts from its argument that this was a simple, straightforward case.

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.

I was not advised of any written offer to settle having been made in this case.

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

The Automobile Insurance and Rate Stability Act, S.O. 1996, c.21, amended subsection 282(11) of the Insurance Act, allowing expenses to be awarded to either the insured person or the insurer.

Notwithstanding this change, Director's Delegate Draper stated in Gray and Zurich Insurance Company (FSCO P98-00047, June 11, 1999) 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.

Conclusion

This proceeding was expeditiously and efficiently advanced. The Application for Arbitration was received November 14, 2000, the pre-hearing discussion held February 14, 2001, the preliminary issue hearing completed May 9, 2001 following a very efficient and focused two days of evidence and submissions which allowed the decision to be rendered June 13, 2001.

I find that this application was brought in good faith on a novel and significant issue of interpretation, significant both to the parties involved and to the public. It is specifically in such cases that Director's Delegate Draper stated that access to justice must especially be a concern.

I find that these factors outweigh the factor of the Insurer’s ultimate success.

Accordingly, I find that the Applicant is entitled to her expenses of this arbitration proceeding.

Amount of expenses

Section F of the Dispute Resolution Practice Code, Third Edition, April 15, 1997 (the "Expense Schedule”), sets out the expenses which may be awarded in accordance with subsection 282(11) of the Insurance Act The Applicant provided the Insurer with a bill of costs totalling $10,734.31 for fees and disbursements, inclusive of G.S.T.

The following items were in dispute:

1. Pre-arbitration expenses

During submissions, the Applicant reduced her claim by $59.80 for work done by a law clerk (2.6 hours @ $23 per hour) and $361.82 (4.8 hours @ $75.38 per hour) for work done by counsel, up to and including mediation.

Subsection 282(11) of the Insurance Act states that:

The arbitrator may award, according to 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.

[emphasis added]

Section 3 of the Expense Schedule allows legal fees to be awarded for services performed before or in preparation for an arbitration hearing

A line of cases follows Ajzensztadt et. al and CAA Insurance Company (Ontario) et. al (OIC A-000185, February 6, 1992) for the proposition that legal expenses incurred prior to the Application for Arbitration are not recoverable. That case, however, involved a claim for payment of legal fees pursuant to paragraph 6(1)(f) of the Bill 68 Schedule,² not a claim pursuant to subsection 282(11) of the Insurance Act.

A further line of cases begins with the letter decision of Morin and Lumbermens Mutual Casualty Company (OIC A-001311, September 12, 1994), which held that "the appropriate starting point for arbitration expenses is the preparation of the Application for Appointment of an Arbitrator, including any interview required for that specific purpose."

There has, however, been a consistent trend in the Commission to encourage earlier preparation and production exchange. The present Dispute Resolution Practice Code, Fourth Edition, May 31, 2001, reiterates the need for early production exchange well before the pre-hearing in addition to the new requirement that in the Application for Arbitration, the parties must list both the key documents in their possession and set out the key documents each side intends to obtain from the other side.

Given the new short publicly announced time line of six to eight weeks between registration of a completed Application for Arbitration and the arbitration pre-hearing discussion (and short time lines between the pre-hearing and the hearing date), it is implicit that for there to be meaningful use of the pre-hearing discussion and expeditious movement through the arbitration system, preparation in relation to the arbitration (such as obtaining necessary documents from third parties including clinical notes and records, OHIP summaries, filed income tax returns, etc.) and necessary document exchange must start well in advance of the filing of the Application for Arbitration, indeed, perhaps well in advance of the mediation being held, in anticipation that same may fail to resolve the issues in dispute. Requiring early preparation and production yet not allowing compensation for such legal services, would appear to be counter-productive and contrary to the intent of the Dispute Resolution Practice Code and the Insurance Act

2. The services of a law clerk

The parties dispute 17.5 hours (at $23 an hour = $430.68, including G.S.T.) billed for a law clerk to attend the arbitration hearing. The Insurer submits that the law clerk’s attendance at the hearing was not required.

Section 3 of the Expense Schedule allows legal fees to be awarded for attendance at an arbitration hearing. Arbitrators have held that services rendered by law clerks and articling students are potentially compensable in addition to the hours billed by lawyers.³ The question is whether the services rendered by law clerks and articling students are reasonable.⁴

The Applicant submits that the law clerk was necessary to take notes and help with the overall organization of the testimony given, to assist this matter moving expeditiously. The Applicant submits that Royal’s adjuster assisted taking notes through the hearing. The Applicant also notes that "[w]ithin minutes of the conclusion of the last witness' testimony, closing submissions were given."

I am persuaded that the presence of the law clerk assisted the Applicant in moving quickly through the proceeding and avoided the parties having to return a third day for submissions, which would have resulted in further hours being expended at a higher hourly rate.

Accordingly, I find the $430.68 claimed in this regard to be reasonable.

3. Airline tickets

The Applicant claims the sum of $2,985.79 for three airline tickets for Ms. Rocio Cruz, her mother, Mrs. Cruz and her brother, Mr. Elias Cruz, to travel to the hearing from Mexico City.

The Insurer submits that only the airline ticket for the Applicant should be payable, as the other two individuals "were not reasonably required to give evidence at the arbitration hearing."

As stated above, I found the evidence of Mr. Elias Cruz necessary to come to an informed decision, and hence, find his transportation expense reasonable.

Mrs. Cruz did not testify. The Applicant submits that Mrs. Cruz accompanied her daughter to Toronto to provide support necessitated by her daughter’s "substantial physical injuries and emotional distress." The Applicant further submits, without any supporting affidavit or other evidence, that Mr. Elias Cruz was not able to arrive in Toronto until the night before the hearing and that it was necessary for the Applicant to attend earlier, accompanied by her mother, to prepare for the arbitration hearing.

Leaving aside the question of whether the expense of an attendant is compensable under the Expense Schedule, I have no evidence of the medical reasonableness of an attendant and I have only a bare submission as to why Mr. Cruz could not travel with his sister. Mere observation on my part over the course of two days did not indicate any reason why Mrs. Cruz’s presence was reasonably necessary, other than for moral support, which could apply to any applicant.

Accordingly, I do not find the airline expense of Mrs. Cruz to be payable. The Applicant’s account is reduced by $995.26, being one-third of the airline ticket expense claimed.

4. Other Disbursements

The parties resolved the issue of the Applicant’s hotel expense.

The parties disputed the Applicant’s claim for $60.00 for six telephone cards and $59.50 for TTC token receipts.

Paragraph 6(2)(c) of the Expense Schedule sets out the maximum amount of travelling expenses that may be awarded for a person, where the arbitration takes place 300 or more kilometres from the person’s residence. The paragraph specifies the maximum as the lesser of the amount incurred by the person or a return economy airfair plus return trips (at 30 cents a kilometre) to the two airports. The provision does not allow for additional daily transportation expenses to and from the hearing.

As the Applicant could not point to any other provision which would allow for recovery of the TTC token receipts or the six telephone cards, I decline to award these expenses.

Conclusion

The Applicant's account of $10,734.31 is, therefore, reduced by the following amounts:

law clerk's preparation $

59.80

lawyer's preparation

361.82

Mrs. Cruz's airline ticket

995.26

telephone cards

60.00

TTC token receipts

59.50

$ 1,536.38

Accordingly, Ms. Cruz is entitled to her expenses fixed at $9,197.93.

September 14, 2001

Lawrence Blackman Arbitrator

Date