Financial Services Commission

Commission des services financiers de l’Ontario

Neutral Citation: 2001 ONFSCDRS 148

Appeal P01-00023

OFFICE OF THE DIRECTOR OF ARBITRATIONS

ANNE ST. LOUIS

Appellant

and

ALLSTATE INSURANCE COMPANY OF CANADA

Respondent

Before:

Stewart M. McMahon, Director’s Delegate

Appearances:

Rod Hare and Mark Rowe (for Mrs. St. Louis)

Meredith Jackson Donohue (for Allstate)

APPEAL ORDER

Under section 283 of the Insurance Act, R.S.O. 1990, c.I.8, as amended, it is ordered that:

1. The appeal is allowed. The arbitrator’s ruling on the issue to be arbitrated, and her award of expenses in favour of Allstate, are rescinded.

2. The matter is remitted to the arbitrator for a determination of the following issue:

Is Mrs. Anne St. Louis entitled to payment of the Premium Fee Adjustments set out in Profile Evaluations’ invoice no. 75, dated September 28, 1999?

3. The remaining issues identified in the pre-hearing letter of November 10, 2000, namely Mrs. St. Louis’ claim for interest and a special award, and each party’s claim for arbitration expenses, are also remitted to the arbitrator.

4. The expenses of this appeal shall be awarded to the party awarded the expenses of the arbitration.

October 9, 2001

Stewart M. McMahon

Director’s Delegate

Date

REASONS FOR DECISION

I. NATURE OF THE APPEAL

Mrs. St. Louis appeals from an arbitration order dated May 11, 2001. The appeal is concerned with the proper scope of the issue to be arbitrated. The Insurer paid for an assessment and report conducted by Profile Evaluations (“Profile”), pursuant to s. 24 of the SABS-96¹, but refused to pay the “premium fee adjustment.” At the start of the arbitration hearing, the Appellant submitted that the issue should be restricted to the question of the reasonableness of the premium. The Insurer opposed this submission, suggesting that if the Appellant was seeking payment of any amount beyond what had already been paid, it must prove that the entire account, including the portion that had already been paid, was reasonable. The arbitrator accepted the Insurer’s submission and framed the issue as follows; “the issue in dispute for the purpose of the arbitration is the reasonableness of the assessments in their totality, pursuant to section 24 of the Schedule.”

This appeal is from a preliminary ruling made by the arbitrator during the course of a hearing. After the arbitrator gave her oral ruling and reasons, the Appellant asked her to adjourn the matter and put her reasons in writing. The arbitrator agreed, and Mrs. St. Louis filed a Notice of Appeal before the matter resumed.

Rule 46.2 of the Dispute Resolution Practice Code provides that “a party may not appeal a preliminary or interim order of an arbitrator until all of the issues in dispute in the arbitration have been finally decided, unless the Director orders otherwise.” In ordinary circumstances, I would have rejected the appeal as premature. However, the Insurer supported the Appellant’s submission that the appeal ought to be heard in advance of the resumption. Based upon this joint submission, I agreed to proceed with the appeal.

A hearing arbitrator must be given a significant degree of deference concerning control of the hearing process. This includes rulings concerning the nature of the questions to be resolved. However, the discretion is not unlimited. If the arbitrator frames an issue, that the conduct of one of the parties has put beyond dispute, then she exceeds her jurisdiction. Such an error is reviewable on appeal. For the reasons that follow, I conclude that the arbitrator exceeded her jurisdiction in this case.

II. BACKGROUND and IMPRESSIONS

At the time of the accident, Mrs. St. Louis lived in the St. Catharines area, and worked at Casino Niagara. Profile, a Toronto based assessment centre, was retained to conduct worksite and in-home assessments. Profile delivered its report and account to the Insurer. The pertinent portion of the account is reproduced below.

QTY

Services rendered

completion date

UNIT RATE

AMOUNT

1

Home assessment Premium Fee Adjustment Increased Travel Time and/or Administrative time.

09/27/1999

800.00

200.00

800.00

200.00

1

Worksite Assessment Premium Fee Adjustment Increased Travel Time and /or Administrative time

09/27/1999

900.00

200.00

900.00

200.00

Total Due

$2,100.00

Initially, the Insurer did not pay any of the account, prompting the Appellant to file an Application for Mediation. However, before the Application was processed, the Insurer delivered a cheque to Profile for $1,700. The Explanation of Benefits Payable by Insurance Company (“OCF-9”), reads in part:

Medical and Rehabilitation Expenses

Expense Details

Amount Claimed

Amount Payable

Home Assessment

$1,000

$800

Worksite Assessment

$1,100

$900

Reasons why assessments are not payable

Travel time not paid-as these assessments could have been conducted by local company and this expense is not reasonable

In my view, in light of the payment of the assessment fee proper, the reference to “reasonable” in the OCF-9 relates to the premium for travel time, rather than a generalized statement that the assessment fee was unreasonable.

The Appellant continued with the mediation in an attempt to collect the unpaid portion of the account. The Insurer’s letter to the mediator makes it abundantly clear that the Insurer was not taking issue with the assessment account per se, but did intend to challenge the reasonableness of a premium for travel time. The letter, which attached a copy of the OCF-9, and advised that a cheque for $1,700 had already been delivered, reads in part:²

Our position remains that it is neither reasonable nor necessary for a firm to travel from Toronto to the Niagara area to provide services that are readily available locally. We would have gladly provided the insurer, her legal representative and treating physician with a list of occupational therapists who work in the Niagara region whose fees are approximately the same as Profile Evaluations without the additional cost of increased travel time...

Our insured’s legal representative...has consistently chosen to bring firms in from outside the area without consulting with the insurer when we could very easily have agreed upon a local firm to provide the service.

We would ask that his mediation continues but fails, and proceeds to arbitration so that this issue can be resolved once and for all by an arbitrator.

The report of the mediator reads in part:

Mrs. St. Louis claims that Allstate should pay the following:

1. Profile Evaluations invoice 75 dated September 28, 1999

(a) “Home Assessment” ($800.00);

(b) “Worksite Assessment” ($900.00);

(c) “Premium Fee Adjustment

Increased Travel Time and /or Administrative Time” ($200.00 plus $200.00): and

2. Interest.

Allstate will pay, if Allstate has not already paid, $1,700.00.

Mrs. St. Louis claims that Allstate should pay the following:

1. $400.00; and

2. Interest

Allstate disputes these claims.

It would appear that the arbitrator was influenced by her belief that the payment of the $1,700 was made as part of the mediation process. However, as set out above, the Insurer made the payment before it entered into the mediation process.

From a review of these documents, it is apparent to me that the Insurer made a deliberate decision not to challenge the reasonableness of the assessment and report, so that it could focus on the issue that really mattered to it, namely the reasonableness of retaining an out-of-town firm which would charge a premium for travel.

After mediation, the Appellant filed an Application for Arbitration. The Insurer succinctly stated its position in the Response to an Application for Arbitration as follows:

Insurer denies expense is reasonable and necessary. Increased travel time and/or administration time, not reasonable expense.

I recognize that the explanation for the denial is broken by a period, but given the Insurer’s stated intention to challenge the travel time, I read the denial that the “expense” was reasonable, as a reference to the travel time. I am fortified in this belief by the Insurer’s statement that the amount in dispute was the premium fee, rather than the entire account.

Thereafter, the matter proceeded to a pre-hearing where the issues to be arbitrated were defined. In my experience, the issues to be arbitrated are generally defined by the parties themselves, without the need for an order from the pre-hearing arbitrator. In the absence of some notation in the pre-hearing letter, I presume there was no disagreement over the scope of the issue. The pre-hearing letter records the issue as follows:

Is Mrs. St. Louis entitled to the sum of $400 for the unpaid portion of two reports (a “Home Assessment” and a “Worksite Assessment”) of Profile Evaluations, pursuant to section 24 of the Schedule?

I must respectfully disagree with the hearing arbitrator’s conclusion that it is apparent from this letter that the Insurer was taking the position that it was disputing the reasonableness of both assessments in their entirety. The framing of the issue suggests to me, that at least at this juncture, the Insurer was continuing to pursue its strategy of conceding the accounts proper, but challenging the “premium fee adjustment.” Ultimately, I do not think very much turns on this matter, as the timing of the Insurer’s notice that it was challenging the reasonableness of the entire account is not the determinative factor.

The parties were left to work out the productions necessary to deal with the issues. The pre-hearing letter contains a standard paragraph noting that the parties had agreed to file a list of agreed productions. However, the parties were unable to reach an agreement on the productions, prompting a resumption of the pre-hearing. During the resumption, the Appellant agreed to produce the following: time dockets for the assessments, details of the travel time, particulars of any component of the premium not attributable to travel time, and a copy of the assessor’s resume. When the arbitrator received a letter from Profile that he interpreted as an attempt to resile from the agreement (Profile was objecting to the request for time dockets, taking the position that it was unrelated to the issue of the premium fee), he ordered the Appellant to produce the dockets. The pre-hearing arbitrator noted in part:

The Applicant claims, pursuant to section 24 of the Schedule, the cost of assessments. Expenses are payable if, amongst other things, they are reasonable. Reasonableness may entail, amongst other considerations, the amount of time that went into preparing the assessments. Accordingly, I find the requested documents relevant.

The pre-hearing arbitrator’s ruling must be seen in the context of an attempt to resile from an agreement. However, in fairness, the language suggests that he envisaged a wider framing of the issue than depicted in his initial pre-hearing letter. I accept the submission, that by this stage, the Insurer’s counsel made clear her intention to challenge the reasonableness of the entire account.

Profile answered its undertakings by providing details of the travel time. It also advised for the first time that the “administrative time” component of the premium fee adjustment related to time delays associated with security measures at the casino.

As noted above, the scope of the issue to be arbitrated was raised at the commencement of the hearing. The arbitrator accepted the Insurer’s submissions, and framed the issue as follows; “the issue in dispute for the purpose of the arbitration is the reasonableness of the assessments in their totality, pursuant to section 24 of the Schedule.”

III. ANALYSIS

The arbitrator may have been influenced by the way the Appellant framed its objection to the Insurer’s submission that Mrs. St. Louis was obliged to prove the reasonableness of the entire account. The Appellant argued at the arbitration that the Insurer was estopped from relying upon any defence not raised at the mediation. This is similar to the argument raised unsuccessfully by Profile in a number of recent arbitration cases. In Aleman and State Farm Mutual Insurance Company (FSCO P01-00014, September 21, 2001), I dismissed Profile’s appeal on this question. I stated that an insurer could not be restricted at an arbitration hearing to arguing the reasons for denying the claim set out in its first response to an application for benefits.

However, this case is not analogous to the situation in Aleman. This is not a case where the insurer is seeking to expand upon the initial reasons for denying a benefit, as its understanding of the claim, or the information available to it, develops. The Insurer made a tactical decision at the outset. It is apparent from the tenor of the adjuster’s letter to the mediator, that the Insurer was upset at a particular counsel’s habit of retaining out-of-town assessment centres, and that it intended to use this case to bring the issue to a head. It decided to pay the assessment fee per se, so that it could focus exclusively on the premium, which it thought was derived entirely of additional travel costs.

Notwithstanding that Profile organized the account to treat the travel cost as a separate “premium fee adjustment,” the Insurer submitted on appeal that it is inappropriate to split the account, and that it should be dealt with as a global demand for a set fee, inclusive of the premium. The Insurer argues that it follows that once the Appellant sought payment of an additional amount beyond what the Insurer had already paid, it was obliged to prove the reasonableness of the entire account. The Insurer advised that it intended to take the position that the assessment itself was unreasonable, and hence no premium could be owing in any event. In the alternative, it intended to argue that considering the value of the assessment, it had overpaid, and this should be taken into account in considering any travel premium. In ordinary circumstances, there is considerable merit to treating the reasonableness of the account, including any demand for a premium, as a single issue. However, in this case, the Insurer for its own reasons, treated the individual components of the account as divisible, choosing to challenge only the “premium fee adjustment.” Nothing in the documentation suggests that the payment that accompanied the OCF-9 was made without prejudice to the Insurer’s right to argue that the assessment was unreasonable. In fact, as noted by the arbitrator, the Insurer indicated it was not seeking a re-payment of the monies it had already paid.

In my view, the Insurer’s actions put the reasonableness of the assessments per se, beyond dispute. That being the case, the Insurer was not in a position to oppose payment of the premium on the basis that the assessments themselves were unreasonable, or that it had overpaid. It follows that the arbitrator exceeded her jurisdiction by framing the issue in such a way that it put the Appellant to the proof of the reasonableness of the assessments per se.

The proper question to be addressed at the arbitration is whether or not the premium account is payable. That question depends principally on whether or not it was reasonable to retain an out-of-town assessment centre rather than a local firm. The reasonableness of bringing in an out-of-town assessor will turn on such factors as the nature of the substantive claims that are being considered, the experience and expertise of the out-of-town assessor, and the availability of suitable assessors within the community. In my view, the types of productions asked for by the Insurer may be germane to such an inquiry. The nature of the assessment, and the amount of time spent, may very well assist the arbitrator in determining if it was reasonable to retain Profile to conduct these assessments.

Finally, I think that pragmatism must play a role in the arbitration The Insurer decided to narrow the dispute, so that it could focus on the issue that really mattered to it, namely the reasonableness of using out-of-town assessment centres. This is an issue that can be arbitrated in a relatively straightforward manner. Having chosen to proceed in this manner, it would be inappropriate to now allow the Insurer to widen the dispute to encompass the reasonableness of the entire account.

IV. EXPENSES

Although I decided to deal with this appeal in advance of the continuation of the hearing, the issue dealt with is inextricably linked to the arbitration process. In these circumstances, I think that the party that is ultimately awarded the expenses of the arbitration process, should also be awarded the expenses of the appeal process. In the event that neither party is awarded expenses at the arbitration level, each party shall bear their own expenses related to this appeal proceeding.

October 9, 2001

Stewart M. McMahon

Director’s Delegate

Date

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. 2Arguably, this letter, which forms part of the mediation file should not have been put in front of the arbitrator, but it was, and the Insurer did not object to my reviewing the letter in the context of the appeal.