Neutral Citation: 2001 ONFSCDRS 153

FSCO A97–001864

BETWEEN:

SETH AMOA-WILLIAMS

and

AMA AMOA-WILLIAMS

Applicant

and

ALLSTATE INSURANCE COMPANY OF CANADA

Insurer

Assessment of Expenses

Before:

Susan Sapin

Heard:

Written submissions received dated December 27, 2000, and January 30 and May 30, 2001.

A telephone hearing was held on June 1, 2001.

Appearances:

Theodore P. Charney for Mr. and Mrs. Amoa-Williams

Ian D. Kirby for Allstate Insurance Company of Canada

The Applicants, Seth and Ama Amoa-Williams, were injured in a motor vehicle accident on January 18, 1997. In a decision dated June 5, 2000, I awarded the Applicants a total of $3,287.32 for chiropractic and rehabilitation expenses. In a further decision dated February 14, 2001, I awarded the Applicants their arbitration expenses. The Applicants presented Allstate with a bill for expenses in the amount of $50,791.66 for fees, disbursements and GST up to January 15, 2001. Allstate disputed this amount. The parties also disagree about when interest becomes payable on the $3,287.32 awarded, pursuant to section 46 of the Schedule.¹

The Applicants expenses of the arbitration hearing are assessed at $42,493.76 pursuant to section 46 of the Schedule.
Mr. Amoa-Williams is entitled is entitled to interest on $1,777.32 from the date of the arbitration award, June 5, 2000 until the amount is paid. Mrs. Amoa-Williams is entitled to interest on $1,510 from May 6, 1997 until the amount is paid.

Rules 76 and 77 of the Dispute Resolution Practice Code (Third Edition, April 15, 1997) (the "Code") set out the procedure and criteria for the assessment of arbitration expenses. The criteria for determining entitlement to and assessing expenses are set out in the "Expense Regulation."²Section F of the Code (the Schedule) specifies the types of fees and disbursements that I may award in accordance with subsection 282(11) of the Insurance Act:

3.(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.

Legal Fees

The Applicants broke down their claim for legal fees as follows:

Total Summary up to completion of Arbitration Hearing December 1, 1999

Robert Franklin

11.1 Hours @ $150.00 =

$ 1,665.00

Ted Charney, lawyer

171.90 Hours @ $150.00 =

25,785.00

N. Sarantopoulos, law clerk

113.50 Hours @ $45.00 =

5,107.50

Total Fees up to December 1, 1999

$32,557.50

Time Summary after Arbitration - December 2, 1999 to January 15, 2001

Ted Charney

27.10 Hours @ $150.00 =

$ 4,065.00

Nota Sarantopoulos

26.45 Hours @ $45.00 =

1,190.25

Total Fees from December 2, 1999 to January 15, 2001

$ 5,255.25

Grand Total Fees

$37,812.75

GST

2,646.90

Grand Total Fees + GST

$ 40,459.65

Allstate does not dispute the maximum hourly rate of $150 for experienced counsel permitted by Rule 76.1 of the Code nor the $45 hourly rate for a law clerk claimed by the Applicants. Allstate submits, however, that the hours claimed for Mr. Charney and for his law clerk, Nota Sarantopoulos, for preparation and for attendance at the arbitration hearing are excessive, and demonstrate a lack of efficiency.

Rather than a line-by-line analysis of dockets, arbitrators have preferred a "global" approach to assessing expenses, expressed through the somewhat approximate method of assigning a ratio of preparation time to hearing time, expressed either in terms of hours or days, in order to arrive at a reasonable assessment of expenses. Allstate acknowledges that arbitrators have found ratios of preparation time to hearing time ranging from 1:1 to 4:1 to be reasonable.³ What is reasonable in any given case may be determined with regard to the same criteria used to determine which party is entitled to its expenses, as set out in subsection 12(2) of the Expense Regulation:

Each party's degree of success in the outcome of the proceeding.
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....
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.
The degree of complexity, novelty or significance of the factual or legal issues raised in the proceeding.
Any written offers to settle...
Any other matter related to the proceeding that the arbitrator considers relevant to the issue of whether an award of expenses is justified.

As pointed out by Arbitrator Renahan in Dobkina and Commercial Union Assurance Company, (FSCO A98-001232, October 31, 2000), however, "a criterion which may justify an award of expenses in favour of a party, may also justify a reduction in the amount of the assessment. For example, although the ultimate success of an applicant might justify an award of expenses in his or her favour, minimal success might justify a reduction in the amount of the assessment." Similarly, for reasons set out below, I find in this case that the fact that Target Rehabilitation and the Sheppard-Leslie Clinic were the real litigants in the arbitration proceeding justifies a reduction in the amount of the assessment, although I found this factor not to be relevant for the purpose of determining entitlement to expenses in my award dated February 14, 2001.

The Applicants claim that their expenses are reasonable in light of the above criteria and because counsel's preparation time to hearing time is well within the accepted ratio of 4:1. In determining the amount of expenses to award, I first considered the above criteria and the reasons that I awarded expenses to the Applicants as outlined in my previous award, to determine if an award of expenses based on the maximum ratio of preparation to hearing time of 4:1 was justified. I took into account that there were two separate applicants, each with separate claims to prove, as well as the fact that, although the Amoa-Williams' case was adjourned at the last minute due to Allstate's unsuccessful motion to combine applications, and rescheduled for a later date, Mr. Charney's dockets indicate that he did not duplicate any of his preparation.

The most important factor justifying a maximum ratio was the same one that most influenced my decision to award expenses to the Applicants in the first place, which was the fact that the issues at the hearing, the reasonableness and necessity of treatment and of the fees charged for chiropractic and rehabilitation services were significant and complex. The outcome was important not only to the parties and the treatment providers directly involved, but also to the nine remaining applicants, health professionals such as kinesiologists, chiropractors and physiotherapists, as well as to treatment providers and the insurance industry in general, a point Allstate conceded. Allstate's motion to combine applications was at least partly motivated by a desire for a degree of certainty respecting the reasonableness of rehabilitation services and fees charged. In that the Amoa-Williams decision specifically provided guidance on common issues to enable the participants to either resolve them or reconsider their positions in subsequent cases, Allstate's objectives were met to the extent possible under the existing no-fault arbitration system, which requires that each case be determined on its own facts. I was not persuaded by Allstate's argument that expenses should be reduced because Amoa-Williams did not turn out to be the "test case" it had hoped for. A brief search of the FSCO database revealed that, to date, of the eight remaining cases (one involving two applicants), five have settled, one has gone to a hearing and a decision is pending, and two are scheduled for hearing at FSCO in mid-October 2001 and late February 2002. It is therefore too early to tell whether the desired effect of promoting settlement of all cases was achieved.

For these reasons, I find that the maximum ratio of preparation time to hearing time of 4:1 is appropriate in this case. As noted below, Mr. Charney's time spent preparing and attending at the hearing was well within that ratio.

Despite this however, I find that certain factors justify a reduction in the amount of expenses that Allstate must pay. Firstly, the Applicants' success at arbitration was minimal. Although they were awarded chiropractic fees significantly higher than proposed by the Insurer, the fees were slightly less than what they were actually charged. The fees charged for rehabilitation services were found to be excessive. The Applicants recovered less than 25 per cent of the amounts claimed, in part because the fees charged by the service providers were found to be unreasonable, a key issue in dispute.

Secondly, it is fairly obvious from the dockets provided that this was very much "Target's case." Work was done in March 1999 to prepare a chart of "all Target files" and "amounts claimed," as well as "co-ordinate client sign-up" and "which clients still need to be contacted." Target paid for Mr. Franklin's disbursements. There were many telephone calls and meetings, as well as much correspondence, with Dr. Shahidi and Mr. Brian Leila, Target's owner and manager, respectively. Apart from an April meeting with "Clients," the Amoa-Williams did not even meet counsel until just prior to the hearing originally scheduled for June 28, 1999. I find that Target's participation in the proceedings was influenced more by its direct financial interest in the case and a desire to establish higher fees for chiropractors and rehabilitation service providers than by its stated objective of providing treatment without guarantee of payment to injured persons who might not otherwise be able to afford it. Although the latter is a valid consideration, I find it was outweighed by the former. Consequently, much of the evidence eventually given by Dr. Shahidi and Mr. Leila at the hearing was self-serving, unhelpful and not particularly relevant to the issues in dispute nor to the Applicants' case. Neither the Applicants nor Allstate should have to pay for expenses resulting from Target's efforts to further its own objectives.

For these reasons, I have reduced the legal fees claimed on behalf of Mr. Charney for certain specific items (see below). In addition, I have reduced the fees claimed on behalf of Mr. Charney and his law clerk for four hours attendance at the hearing, and the proportionate preparation time for each. This amounts to a reduction of $2100 in Mr. Charney's fees [4 hrs. @ $150 + (4 x 2.5) hrs. @ $150 = $2,100] and a reduction of $630 in law clerk fees [4 hrs. @ $45 + (4 x 2.5) hrs. @ $45 = $630].

The amounts claimed and allowed, with specific reasons where applicable, follow.

Time invoiced by Robert Franklin - 11.1 hours @ $150 = $1,665 $1,665 allowed

Mr. Franklin spent 11.1 hours on this file between October 9, 1997 and April 27, 1999. The docket summary provided indicates his time was spent mostly on telephone calls, letters, attendance at the pre-hearing (two hours) and discussion or meetings with Mr. Charney. Regulation 107/99,⁴ as amended, sets out hourly rates and maximum hours allowed for instituting proceedings before administrative tribunals. In the absence of any submissions about whether the time spent by Mr. Franklin on the file was reasonable, I turn for assistance to Schedule 2 to the Legal Aid regulation, which allows a maximum of 6.5 hours for "preliminary interviews, advising and receiving instructions" to begin an action and prepare pleadings, 2 hours to prepare for a pre-trial conference, (arguably similar to a pre-hearing at FSCO), and no maximum for attendance at such.

Adding the two hours Mr. Franklin billed for his attendance at the pre-hearing, this amounts to a maximum of 10.5 hours, not far off the 11.1 hours billed by Mr. Franklin up to and including the pre-hearing. I find Mr. Franklin's hours to be reasonable, and, as I heard no argument that the $150 fee should not apply, I find that the Applicants are entitled to fees on behalf of Mr. Franklin as claimed.

Attendance at the hearing - Ted Charney

$6,750 allowed (45 hours @ $150, after reduction of 4 hours)

The hearing of this matter took place over seven days between November 22 and December 1, 2000. As Allstate pointed out, the actual number of hours spent before me at the hearing was 39.5, not including lunch hours or other breaks. Allstate claimed that the 10 hours a day Mr. Charney billed for preparation and attendance at the hearing (and the 8 hours a day billed for attendance by Mr. Charney's law clerk) was excessive.

For the most part, FSCO hearings are scheduled to begin at 10:00 a.m. and typically run until between 4 and 5 p.m., with breaks of various duration for lunch and other reasons. This amounts to a 7 hour day, including these breaks.

I am reluctant to impose upon myself or others the burden of keeping time at a hearing to the degree of accuracy normally reserved for sporting events. I am prepared, therefore, to allow 7 hours per day for attendance at the hearing, on the basis that "attendance" includes arriving early, leaving later than the finishing time, and working during breaks, including lunch. In my experience, the type of housekeeping and attention to detail that occur at these times, contributes to a more efficient hearing, particularly a hearing of several days spread out over an extended period. I agree with Arbitrator Killoran that it is appropriate to use the perspective of full hearing days as opposed to the actual time in the hearing, as it allows for, among other things, counsel's needs to consult with his client, clerk and witnesses during the course of the hearing.⁵

I found that a great deal of evidence was efficiently presented over the course of seven days, which was directly attributable to both counsel having used their time well while in attendance at FSCO for the hearing.

I also accept that lawyers will spend additional time on a hearing day on the type of preparation that is no different than time spent preparing to litigate the case on non-hearing days. I find that this type of preparation, carried out on a hearing day when facts and issues are fresh, is time particularly well spent and also contributes to an efficient hearing.

I would therefore allow seven hours per day for seven days of hearing, for a total of 49 hours of attendance, or "hearing time" less four hours as explained above. I would allocate the additional time claimed by Mr. Charney on hearing days (usually three hours per day) as part of the total time spent in preparation, discussed below.

Preparation time for Mr. Charney

$16,620 allowed (110.8 hours @ $150, after reduction of 10 hours)

Mr. Charney's dockets reveal that his preparation time up to and including the last day of hearing was spent as follows:

June 2 - June 24, 1999⁶

37.3 hours

July 11 - November 20, 1999

41.5 hours

November 22 (first day of hearing) -

December 1, 1999 (last day of hearing)

42.0 hours

Total preparation time

120.8 hours

Mr. Charney conducted the Applicants case in an exemplary and efficient manner, which was to the benefit of all concerned, his clients, the Insurer and myself alike.

Based on my findings, the ratio of preparation time to hearing time for Mr. Charney is 120.8 : 49 hours, or just under 2.5 : 1. Mr. Charney's docketed time is well within the accepted ratios for senior counsel in a complex case.⁷ He is entitled to his fees as claimed up to December 1, 1999, less ten hours as explained above.

Fees related to Allstate's motion to combine applications, heard July 12, 1999 $540 allowed

Mr. Charney's dockets indicate that he billed 2.1 hours preparation for this motion and 1.5 hours to argue it, at $150 per hour, which amounts to $540. I find this to be reasonable. He indicated that the dockets do not reflect a further 20 hours of work related to the motion. Allstate argued that the amount billed should be divided by the total number of cases included in the motion (9). Both these submissions have merit. As they almost balance each other out, I am not prepared to alter the amount that Mr. Charney has billed for this work.

Fees for clerk - $5,107.50 claimed

$4,297.50 allowed

The Applicants claim 113.5 hours at $45 per hour, or $5,107.50, on behalf of Ms. Nota Sarantopoulos, Mr. Charney's law clerk, for 81.5 hours preparation and 32 hours (four days) attendance at the hearing. Allstate did not dispute the hourly rate. It is evident from the dockets that, in preparing for the hearing, Ms. Sarantopoulos worked independently with minimal supervision, and, if the detailed dockets she prepared for the file are any indication, her work is organised, thorough and detailed. I have no doubt that Ms. Sarantopoulos' efforts enabled Mr. Charney to concentrate on those aspects of the case requiring his legal skills, and contributed to the efficient presentation of evidence at the hearing. At the hearing, Ms. Sarantopoulos took notes, organised documents and coordinated the attendance of six expert witnesses. I find that, in this particular case, the use of a law clerk to assist in preparation for arbitration and to attend the hearing was an effective allocation of financial resources. I allow four days' attendance at the hearing at seven hours per day, and reduce it as for Mr. Charney by four hours only for the reasons set out previously, for a total of 24 hours attendance @ $45, or fees of $1,080.

I reduce Ms. Sarantopoulos' preparation time of 81.5 by ten hours, to reflect the 2.5 : 1 ratio of preparation time to hearing time as for Mr. Charney. Total fees allowed for Ms. Sarantopoulos' preparation time therefore are 71.5 hours @ $45, or $3,217.50. This brings the total fees allowed for Ms. Sarantopoulos' preparation and attendance at the hearing to $4,297.50

Fees for time spent by Mr. Charney and Ms. Sarantopoulos after arbitration - December 2, 1999 to January 15, 2001 - $2,790 allowed

The Applicants claim expenses for this period as follows:

Ted Charney

27.10 hours @ $150

$4,065.00

Nota Sarantopoulos

26.45 hours @ $ 45

$1,190.25

Total

$5,255.25

The dockets indicate Mr. Charney spent 22 hours reviewing and discussing the arbitration award with Target Rehabilitation and "the clinics," but not the Applicants. I am not convinced that this time was spent on behalf of the Applicants, and find that it is not a cost for which either they or Allstate should have to pay. I have no authority to require Target to pay for this use of Mr. Charney’s time, but clearly the principals at Target, and no one else, are responsible to Mr. Charney for this particular item.

The rest of the time billed by Mr. Charney relates directly to preparation for the November 4, 2000, expense hearing (21.15 hours), and work done afterwards in response to submissions made by Allstate (3.5 hours). I note the dockets do not appear to include time spent by Mr. Charney in the November 4, teleconference hearing itself (one hour) nor time spent preparing and arguing the June 1, 2001 assessment hearing (two hours).

I would not categorize the expense issue in this case as straightforward, and, taking into account that arguments were also made with respect to the issue of interest, I find that a ratio of preparation time to hearing time of 4 : 1 is reasonable. The amount allowed for Mr. Charney, therefore, is 12 hours preparation time for 3 hours of hearing time, or 15 hours @ $150, for a total of $2,250.

I allow 12 hours of preparation time for Ms. Sarantopoulos, at her rate of $45 per hour, which amounts to $540.

Conclusion:

Total fees allowed

$32,662.50

GST

$ 2,230.00

TOTAL fees and GST

$34,892.50

DISBURSEMENTS

Total claimed -

$10,332.01 (GST included)

Total allowed -

8,701.26 (GST included)

A complete list of the disbursements claimed by the Applicants is appended to this decision. I will deal here only with items disputed by Allstate, which relate mostly to expenses claimed on behalf of expert witnesses for reports, preparation and attendance at the hearing.

Subsections 5(3) and 5(4) of the Dispute Resolution Expenses Schedule set out what may be awarded:

5(3) The maximum amount that may be awarded for the attendance of an expert witness is $200 per hour of attendance, up to a maximum of $1600 per day.

(4) The amount of the expenses paid by or on behalf of the insured person of the insurer to an expert witness for preparation for a hearing at which the witness testifies may be awarded, to a maximum of $500.

(5) The amount of the expenses paid by or on behalf of the insured person or the insurer to an expert for the preparation of a report may be awarded, to a maximum of $1,500.

Report and file review of Dr. Roshan Ahmad, treating chiropractor - $950 claimed $500 allowed

Dr. Ahmad invoiced $500 to review Mr. Amoa-Williams' files and $450 for her 3-page medical legal report. The Applicants claim the amount is justified as it obviated the need for Dr. Ahmad to testify, a cost savings, and it is well within the legislated maximum. These are valid points.

However, in this particular case, I found Dr. Ahmad’s report to be misleading and self-serving. Assuming Dr. Ahmad used the 1997 Ontario Chiropractic Association Fee Guideline that provides for a fee of $250 per hour for "other professional services," this would amount to two hours to review the patient files. Having had to review those files myself in the course of the hearing, I find this to be excessive. I allow a total of $500 for the file review and preparation of the report, combined.

Preparation and expert witness testimony of Dr. Rocco Guerriero, chiropractor $2,125 claimed

$1,400 allowed

Dr. Guerriero’s invoice indicates he billed his services for preparation and attendance as an expert witness at the arbitration hearing on two days, November 25 and 29, 2000 at $250 per hour.

Dr. Guerriero testified on November 29 only, for three and a half hours. I accept the Applicants' submission that the fact that Dr. Guerriero made himself available to testify on both days meant that he put aside other professional commitments in order to be at the disposal of the parties. I find that this flexibility on the part of expert witnesses greatly contributes to the efficient conduct of a hearing and avoids unnecessary delay. Nevertheless, however unwilling I may be to subject witnesses who so make themselves available to a financial penalty, the Schedule does not specifically provide for losses incurred by expert witnesses who must cancel other commitments to attend an arbitration hearing.

Subsection 5(3) provides that the maximum that may be awarded for the attendance of an expert witness is $200 per hour of attendance, up to a maximum of $1,600 per day. The wording of this section is sufficiently broad to allow for time spent by an expert witness waiting to testify, or, conceivably, time an expert spends in attendance even if he or she does not eventually testify.

Arbitrators have in the past awarded amounts for waiting time in such circumstances.⁸ The overriding criterion, of course, is whether such an expense is reasonable in any given circumstance. In this case, I find that Dr. Guerriero is entitled to $200 per hour for the three and a half hours he spent testifying at the hearing ($700). Provided he actually attended at the hearing on November 25, I find it would be reasonable to compensate him for the equivalent of an hour spent waiting, or $200. Dr. Guerriero is entitled to $500 for his time spent preparing for the hearing in accordance with subsection 5(4). The total allowed is $1,400.

$655.75 claimed for Dr. Carlan Stants, chiropractor, for preparation for arbitration; $400 allowed for attendance

The Applicants chose not to call Dr. Stants to testify and relied on his report instead, after several expert witnesses had already testified. This decision shortened the hearing, and respects the FSCO presumption against calling a witness where a report is available. This accords with the objective of arbitration, which is intended to provide a streamlined, cost-effective alternative to the Courts. Subsection 5(4) specifically provides for expenses for preparation time only for witnesses who testify. I have no discretion to modify this provision and cannot award the amount claimed. However, as Dr. Stants did attend at FSCO on one day, I find that subsection 5(3) entitles him, in principle, to compensation for some of his time spent waiting to testify, for the same reasons outlined above. In the circumstances I find that two hours at the maximum rate of $200 per hour is reasonable.

Invoice of Dr. Corrado Morana, General Practitioner employed by Target - $2,300 $1,000 awarded

Dr. Morana's invoice reads as follows:

Preparation and cancellation of office

for hearing scheduled June 29, 1999, (cancelled)

$800

Preparation for hearing Nov. 23, 1999 (6 hours)

$500

Attendance for hearing Nov. 23, 1999

$1000

I award the maximum of $500 for preparation for the hearing as provided by subsection 5(4) of the Schedule. In my view, the wording is clear that this is a one-time amount, and does not take into account that preparation may have been necessary on more than one day for the same testimony. Although this may seem unfair in the case of a professional whose time is very valuable, I have no authority to amend the Schedule to award more than it provides for.

With respect to the claim for "cancellation of office," as discussed above, the Schedule does not specifically provide for losses incurred by expert witnesses who must cancel other commitments to attend an arbitration hearing.

Dr. Morana testified for one and a half hours on November 23, 1999. Under subsection 5(3) of the Schedule, the maximum that may be awarded for the attendance of an expert witness is $200 per hour of attendance, up to a maximum of $1,600 per day. Given the fact that Dr. Morana was ready to attend on two separate days, I find that he is entitled to the maximum rate of $200 per hour for the hour and a half that he testified, and am prepared to allow a further amount to account for time he no doubt spent waiting on the same day. I find a total of $500 to be reasonable under the circumstances. As the hearing scheduled for June 29, 1999 was adjourned in advance and Dr. Morana did not actually attend at FSCO on that day, I do not allow expenses for attendance for that occasion. The total awarded for Dr. Morana is $1,000.

In conclusion, the amount claimed for disbursements for expert witnesses, $9,023.24, has been reduced by $2,730.75, to $6,292.49.

SUMMARY OF EXPENSES CLAIMED AND AWARDED

Amounts claimed

Amounts awarded

Legal fees to 01/12/99:

counsel (2)

$27,450.00

$25,575.00

law clerk

$ 5,107.50

$ 4,297.50

$32,557.50

$29,872.50

Legal fees to 15/01/01:

counsel

$ 4,065.00

$ 2,250.00

law clerk

$ 1,190.25

$ 540.00

$ 5,255.25

$ 2,790.00

subtotal

$37,812.75

$32,662.50

GST

2,646.90

2,230.00

Total Fees & GST

$40,459.65

$34,892.50

Disbursements:

expert witnesses

$ 9,023.24

$ 6,292.49

other (GST incl.)

$ 1,308.77

Total disbursements

$10,332.01

$ 7,601.26

TOTAL EXPENSES

$50,791.66

$42,493.76

INTEREST ON MEDICAL BENEFIT:

The interest payable on the capital amount that an arbitrator might ultimately find was owing to the service providers was identified as an issue in dispute between the parties from the time the Application for Arbitration was filed. This issue was not argued at the conclusion of the arbitration hearing, as Allstate took the position that there were no amounts outstanding at that time. I have been asked to address it now.

Allstate submits that it has paid interest on the capital amount of $3,287.32 awarded to the Applicants from the date of the arbitration award, in accordance with the decision of Arbitrator Joachim in Glinka and Dufferin Mutual Insurance Company (FSCO A99-000849, November 21, 2000), and asks for a determination that this is correct.

Section 46 of the Schedule provides as follows:

(1) An amount payable in respect of a benefit is overdue if the insurer fails to pay the benefit within the time required under this part.

(2) If payment of a benefit under this Regulation is overdue, the insurer shall pay interest on the overdue amount for each day the amount is overdue from the date the amount became overdue at the rate of 2 per cent per month compounded monthly.

"This Part" refers to Part X of the Schedule entitled "Procedures for Claiming Benefits." It includes section 38, which sets out the procedure for claiming medical and rehabilitation benefits. Where medical benefits are disputed, "the insurer shall require the insured person to be assessed by a designated assessment centre in accordance with section 43."⁹

Subsection 38(14) further provides that,

38(14) Subject to the determination of a dispute relating to the expense in accordance with section 279 to 283 of the Insurance Act,

(b) if a report from the designated assessment centre does not state that...an expense is reasonable and necessary for the insured person’s treatment or rehabilitation, the insurer is not required to pay for the expense.

Arbitrator Joachim concluded, on a straight reading of the plain language of the relevant sections of the Schedule, that where a medical rehabilitation DAC assessment ("DAC assessment") did not find benefits to be reasonable or necessary, the benefits were not payable or due (or, presumably, "overdue") until the matter was determined by an arbitrator. Interest, therefore, was not payable until after the arbitration award.¹⁰ Her conclusion implies that an insurer may rely on a DAC assessment in its favour pending the outcome of the dispute resolution process without fear that it may have to pay interest should an arbitrator subsequently disagree with the DAC assessment.

I disagree with this conclusion, which runs contrary to the general principles expressed by other arbitrators on the question of when interest is payable. It is clear from previous arbitration and appeal decisions that have considered the meaning of "overdue" that the question of when benefit payments become due or overdue is a question of fact in each case, to be ultimately determined by an arbitrator.¹¹ Although these decisions deal with the interest payable on overdue medical and rehabilitation benefit payments under the two previous statutory schemes, the principles apply no less to the current Schedule.

Under the SABS-1994¹², the provisions respecting the role of a DAC assessment are similar to those in the current Schedule: an insurer does not have to pay for medical rehabilitation benefits if a DAC says the expense is not reasonable.¹³ The wording of section 68 of the SABS-1994 is identical to section 46 of the current Schedule, as set out above. In Bajic and Pafco and Zurich Insurance Company Limited (P00-00050, June 5, 2001), decided under the SABS-1994, Director's Delegate Draper rejected the insurer's argument that benefits were not "overdue" and interest was not payable until the dispute resolution process was completed:

In my opinion, Pafco's interpretation goes too far. It suggests that interest rate is only payable if the insurer fails in its duties — a test similar to s.282(10) of the Insurance Act for special awards. While "overdue" must be given meaning, I find no indication that the legislative intention is to relieve insurers from paying interest whenever the insured person's entitlement is questionable. On the contrary, the high rate of interest imposed by s.68 is clearly meant to encourage insurers to pay benefits in a timely fashion.

Pafco's interpretation would be far more attractive if the legislation included an option to order interest at a lower rate. However, it does not. Pafco suggests this is an oversight, but I find no basis for this assertion. As Director's Delegate Naylor stated in Sebastian and Canadian Surety Company, (FSCO P96-00032, July 28, 1998), the interest provisions are remedial, not punitive. They are "designed not only to compensate applicants for the value of money withheld but to further the system’s fundamental goal of ensuring prompt payment of benefits for an injured person's medical and vocational rehabilitation, their care or their day-to-day financial support."¹⁴ I agree with this analysis, although as I held in Trendle and Economical Mutual Insurance Company, (OIC P96-000009, July 11, 1996), there are limits. If the insured person acts in a manner that effectively prevents the insurer from assessing his or her entitlement, interest may not run."

I note that, in Sebastian, Director's Delegate Naylor went on to say, "... it is the insurer, not the insured, who must bear the consequences of a decision not to pay benefits that are found later to be owing." I find this general principle applies equally where an insurer relies on a DAC opinion that medical rehabilitation benefits are not reasonable or necessary and stops paying benefits as a result.

There may be circumstances, of course, where this general principle would not apply, and an arbitrator may conclude that payments are owing but are not "overdue," in which case interest on overdue payments would run from the date of the arbitrator's award. In Trendle, for example, the hearing arbitrator found that it was impossible for the insurer to determine the correct amount of weekly income benefits payable to the applicant without several days of hearing and the careful testimony and documentation of many witnesses. Consequently, on appeal, the Director's Delegate was not prepared in the circumstances to treat the payments as overdue until finally determined through the dispute resolution process, including the appeal.

As there are no circumstances in the case of Mrs. Amoa-Williams that would justify a departure from the general principles stated above, I find that interest is payable on the amount of rehabilitation expenses awarded¹⁵ to her from 14 days after the medical rehabilitation DAC assessment report dated April 22, 1997.

Mr. Amoa-Williams' situation is slightly different. He did not attend a scheduled DAC assessment, advising the insurer that he was "better" and that he had terminated treatment. Subsection 38(12)(a) of the Schedule provides that the insurer shall require the insured person to be assessed if it refuses to pay for medical and rehabilitation benefits. A DAC assessment is a mandatory first step in the dispute resolution scheme set out in the Schedule. In fact, an insurer may suspend benefits where an insured person does not make him or herself reasonably available to attend a properly scheduled assessment.¹⁶ In addition, subsection 50(c) provides that an insured person shall not proceed to the next step, mediation, unless he has made himself reasonably available for an assessment. These provisions underline the importance of the DAC process. Mr. Amoa-Williams' non-attendance at the DAC assessment was not an issue at the arbitration hearing, and I refer to these sections only to make the point that his non-attendance undermined Allstate's efforts to comply with its obligations under the Schedule. The situation is similar to that in Trendle, in that Mr. Amoa-Williams' action prevented Allstate from assessing his entitlement. Consequently, I find that interest should not run until the question of whether he was entitled to medical and rehabilitation payments was finally determined at arbitration.

In Mr. Amoa-Williams' case, therefore, the payments became "overdue" as of June 5, 2000, the date of the award, and he is entitled to interest from that date until the payments were made.

October 24, 2001

Susan Sapin Arbitrator

Date