Neutral Citation: 2001 ONFSCDRS 44
FSCO A00-000148
FINANCIAL SERVICES COMMISSION OF ONTARIO
BETWEEN:
THE ESTATE OF EDNA SIMCOE
Applicant
and
CGU INSURANCE COMPANY OF CANADA
Insurer
DECISION ON EXPENSES
Before:
John Wilson
Heard:
By telephone conference call on December 22, 2000.
Appearances:
Stanley B. Pasternak for The Estate of Edna Simcoe
Deborah G. Neilson for CGU Insurance Company of Canada
Issues:
The Applicant, The Estate of Edna Simcoe, applied as representative of Ms. Edna Simcoe, who was injured in a motor vehicle accident on February 27, 1998. In a decision dated October 20, 2000, I dealt with her claims for statutory accident benefits under the Schedule.[1] I made the following orders, while reserving on the issue of expenses:
The settlement reached between the parties at mediation is valid and enforceable.
CGU is hereby ordered to pay to Mr. Pasternak, in trust, as solicitor representing the interests of the estate of Ms. Simcoe, $6,602.20, being the amount agreed to as a full and final settlement at mediation.
Mr. Pasternak shall retain the said funds in his trust account until such time as he is able to obtain a release from the authorized representative of the estate of Edna Simcoe for her claim against CGU, and has forwarded the release to CGU.
The parties shall have thirty days to agree on expenses, failing which they may apply to the Commission for an assessment.
The issue in this further hearing is:
- Is The Estate of Edna Simcoe entitled to its expenses incurred in respect of this arbitration hearing?
Result:
- The Estate of Edna Simcoe is entitled to its expenses incurred in respect of this hearing.
EVIDENCE AND ANALYSIS:
The fact situation underlying this claim shaped both the evolution of the dispute between the Insurer and the Applicant, and impeded the easy resolution of the matter.
As mentioned in my decision on the merits of the case, Ms. Simcoe had the misfortune to die some weeks after a settlement in her claim had been reached at mediation. Unfortunately, the settlement was not implemented prior to her death, primarily due to the default of CGU in failing to provide the necessary documentation to Ms. Simcoe in the time preceding her demise.
The apparent heir to Ms. Simcoe, and representative of her estate, her son, Ken Simcoe, became involved in pursuing Ms. Simcoe's claim against CGU. Then, on June 26, 2000, Mr. Simcoe himself met an unexpected and violent death.
As Justin O'Rourke, solicitor for the personal representative of Mr. Kenneth Simcoe, wrote to Mr. Pasternak on September 19, 2000 — "We are left with the task of trying to piece together the status of the Estate of Edna Simcoe, as well as the Estate of Kenneth Simcoe."
Even assuming that both sides had the best of intentions to end this claim, there were further complications. Notwithstanding the fact that there had been an enforceable settlement agreement, there was not necessarily anyone capable of enforcing it, or giving a release to the Insurer for the monies paid. To paraphrase Mr. O'Rourke, CGU and Mr. Pasternak were left trying to piece together Ms. Simcoe's settlement.
Mr. Pasternak proposed that the settlement funds be paid to him in trust, and held until such time as the estate could provide a release to CGU. The Insurer preferred to get the release first and then part with the funds. However, without the incentive of the settlement funds being available, it was not at all clear that someone was going to take on the expense and trouble of appointing a new representative for The Estate of Edna Simcoe.
The estate was caught in a quandary. Ms. Simcoe had not received the settlement funds due to the default of the Insurer. There may have been some consideration by the potential representatives for the estate, following the passing of Mr. Kenneth Simcoe, as to whether it was worthwhile to apply for administration of the estate. Given the fact that the Insurer questioned the validity of the settlement in its arbitration documents, and that there was no guarantee that funds would be paid, some reticence on the part of potential administrators would have been understandable.
Ultimately, no agreement was possible, and it was necessary to obtain an arbitrator's order to permit CGU to pay out the amount of the original settlement to Ms. Simcoe's estate. The order left costs to be assessed if they could not be agreed upon within thirty days. No agreement was reached, and the estate requested an assessment of expenses.
The criteria for an order of expenses are set out in Rule 73 of the Dispute Resolution Practice Code (3rd Ed., April 15, 1997), (the "Practice Code"). Rule 73.1 establishes the jurisdiction of an arbitrator to award expenses, while subsection 73.2 reflects the principles for an award, as set out in the Expense Regulation. Rule 73.2 reads as follows:
The adjudicator will consider the criteria referred to in the Expense Regulation found in Section F of the Code. These criteria are:
a) each party's degree of success in the outcome of the proceeding;
b) 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;
c) 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;
d) the degree of complexity, novelty or significance of the factual or legal issues raised in the proceeding;
e) at the request of either party, any written offer to settle made in accordance with Rules 74 and 75, having regard to the outcome of the proceeding;
f) any other matter related to the proceeding that the adjudicator considers relevant to the issue of whether an award of expenses is justified.
In looking at Rule 73.2 criteria, it is clear that the estate was successful in the hearing. Even though CGU may not have opposed the application at the hearing with any vigour, it was their refusal to recognize the validity of the settlement that made the hearing necessary. Indeed, I cannot emphasize enough that the hearing would not have been necessary had the Insurer fulfilled its original obligations arising from the settlement and provided the required documentation prior to Ms. Simcoe's death.
I emphasize that the Insurer took the position early on that the settlement was not enforceable. At page 8 of its Response to Arbitration, it stated: "Accordingly it is the insurer's submission that the agreement was frustrated by Mrs. Simcoe's death and that it has paid all benefits to which Mrs. Simcoe is entitled."
Clearly, the Insurer's early delay in conforming with its obligations under the settlement and its later insistence on a prior release as the sole ground for payment, made the hearing necessary. I find that these two factors alone bring the Insurer squarely within the ambit of the "(b)" criteria of Rule 73.2.
There is no evidence that either parties took positions that were frivolous, vexatious or an abuse of process. Indeed, I find that both parties were, at times, sincerely interested in finding a way to cut through the Gordian Knot created by this unusual fact situation.
The Insurer did, however, file a formal settlement offer under the terms of part "(f)" of Rule 73.2. Consequently, I am required to take this into consideration in the context of any order as to expenses.
CGU's offer, dated September 14, 2000, was for a payment of $6,602.00 inclusive of interest, payable once a copy of a certificate of appointment of an estate trustee is received and reviewed by the Insurer, and the estate provides a full and final settlement release to CGU. CGU also offered to pay $500 in total towards expenses, including disbursements.
Two observations are pertinent to this offer to settle. It is conditional upon the Insurer being satisfied with the appointment, and the provision of certain documents. It also provides for an unrealistic amount for legal expenses.
I note that the estate has claimed some $2,900.42 in legal expenses and disbursements. As well, my order of October 20, 2000 was unconditional. CGU was required to pay the outstanding amount forthwith, without a prior release, or proof appointment of an estate trustee. Granted, Mr. Pasternak had to retain the funds until such time as he obtained a release from an authorized representative of the estate.
The differences between my order and the offer may appear to be subtle, but I find that, in the circumstances, there were crucial differences. I find, therefore, that the offer to settle from CGU differed substantially from the final order, and should not be a consideration in my award of expenses.
Director's Delegate Draper, in the appeal of Gray and Zurich Insurance Company (FSCO P98-00047, June 11, 1999), examined the role of an arbitrator in awarding expenses subsequent to the implementation of subsection 282(11) of the Insurance Act and the Settlement Regulation.
Arbitrators now have an obligation to consider the legislated criteria, including the result, applying them to both parties. However, I agree with the arbitrator that the criteria do not reflect a move to the kind of results-based approach used by the courts. Success is only one criterion in an open-ended list and, therefore, must be weighed against the other relevant considerations. I also agree with the arbitrator 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.
After looking at the considerations raised by the Practice Code and the Settlement Regulation, I am inclined to find in favour of the estate in the matter of expenses. In taking a wider look at the matter, I also believe that the concerns articulated by the Director's Delegate in Gray (supra) lead me to the same conclusion.
It was appropriate for this matter to proceed to arbitration, given the wariness of the Insurer in accepting the settlement or paying out its proceeds. Essentially, the estate was forced to arbitration if it wished to have the settlement enforced. I find, therefore, that it is entitled to its reasonable expenses in this matter.
CGU also disputes the quantum of the estate's claim for expenses. As mentioned, Mr. Pasternak has billed a total of $2,664.30 in legal fees plus $236.12 in disbursements. He has included with his Bill of Costs a detailed breakdown of expenses, as well as copies of the original dockets.
CGU challenges the time docketed, and the amounts billed by Mr. Pasternak.
Rule 76 of the Practice Code sets out the normal tariff range for expense claims. Essentially, it is based on a Legal Aid tariff with the usual adjustment for experience ratings. Mr. Pasternak claimed a counsel rate of $150 per hour, somewhat higher than legal aid allows. However, Rule 76.1 of the Practice Code allows that "... where an adjudicator is satisfied that a higher amount for legal fees to an insured person is justified, an hourly rate of up to $150 may be awarded."
Mr. Pasternak was called to the Ontario Bar in 1977, and enjoys some reputation as a counsel. I find that Mr. Pasternak is a senior counsel and is entitled to bill at the enhanced rate allowed by the rule.
Given the position taken by the Insurer at the pre-hearing that there was no enforceable settlement, and that the Commission had no jurisdiction to hear the matter, the use of experienced counsel would have been justified. Notwithstanding the fact that the actual hearing ended up taking little time, the estate had to be prepared to argue matters of jurisdiction, as well as the particulars of the alleged settlement.
I find that Mr. Pasternak is an experienced counsel, entitled to the $150 per hour rate, and that the estate was justified in using such counsel by the potential complexity of the matter.
I note, as well, Mr. Pasternak's comments that his normal client fee is well in excess of the Commission's enhanced rate, and emphasize that this is not the equivalent to an award of costs on a solicitor/client basis.
As noted, Mr. Pasternak has submitted his detailed dockets in this matter. I do not, however intend to review them on a line by line basis, as this is not the general practice on an expense assessment at the Commission. The disbursements at $236.12 are relatively modest, and clearly related to this case. Likewise, 16.6 hours of time billed for legal services is conservative, given the difficulty in obtaining a resolution of this matter
Mr. Pasternak also indicated that he would be billing a further $195 for the expense hearing. Although Ms. Neilson has argued that subsection 77.1(f) of the Practice Code implies that no expenses may be claimed for an expense hearing, this argument runs contrary to the plain meaning of the provision. The effect of the subsection is that the Commission may not charge a fee for the assessment. It does not speak at all to the expenses of a party that may be assessed. I find that the estate may claim its expenses for the expense hearing.
I reiterate that the original failure of the Insurer to carry out its responsibilities with regard to the settlement necessitated the hearing, and its rigidity in dealing with the estate, in turn, necessitated the expense hearing. It would be unjust to reward the Insurer by refusing the estate its expenses for this very necessary application.
Although some arbitrators have used a multiplier of the hearing time as a yardstick to set expenses in some cases, it would be totally inappropriate to use such an approach in this matter given the unique twists and turns of the case. Rather, I find that the total of $3,108.07, including disbursements and GST, claimed by the Applicant, is appropriate, given the efforts necessary to enforce the earlier settlement, and is allowable under the practice of the Commission. CGU is hereby ordered to pay the amount of $3,108.07, as expenses, to Mr. Pasternak, in trust, as solicitor for the estate in this matter.
March 21, 2001
John Wilson
Arbitrator
Date
Neutral Citation: 2001 ONFSCDRS 44
FSCO A00-000148
FINANCIAL SERVICES COMMISSION OF ONTARIO
BETWEEN:
THE ESTATE OF EDNA SIMCOE
Applicant
and
CGU INSURANCE COMPANY OF CANADA
Insurer
ARBITRATION ORDER
Under section 282 of the Insurance Act, R.S.O. 1990, c.I.8, as amended, it is ordered that:
- CGU Insurance Company of Canada pay forthwith, to Mr. Stanley Pasternak, in trust for The Estate of Edna Simcoe, $3,108.07 as expenses in this matter
March 21, 2001
John Wilson
Arbitrator
Date
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.