Randhawa v. Liberty Mutual Insurance Company, 2001 ONFSCDRS 54

Neutral Citation: 2001 ONFSCDRS 54

FSCO A98-000707

FINANCIAL SERVICES COMMISSION OF ONTARIO

BETWEEN:

HARBANS K. RANDHAWA

Applicant

and

LIBERTY MUTUAL INSURANCE COMPANY

Insurer

DECISION ON EXPENSES

Before:

K. Julaine Palmer

Heard:

February 16, 2001 in Toronto

Appearances:

Ted Charney for Mrs. Randhawa

J. Lynne Frank for Liberty Mutual Insurance Company

Issues:

Mrs. Randhawa was injured in a motor vehicle accident on November 30, 1996. In a decision dated September 27, 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:

1. Harbans K. Randhawa is not entitled to income replacement benefits after September 22, 1997.

2. The correct amount of Mrs. Randhawa's income replacement benefit is $346.45 per week. Liberty Mutual shall pay Harbans K. Randhawa the difference of $93.73 per week from December 7, 1996 to September 22, 1997, with interest from March 22, 1999.

3. Liberty Mutual is not entitled to a repayment of any benefits paid to Mrs. Randhawa.

4. Mrs. Randhawa is not entitled to a special award.

5. The issue of expenses has not yet been determined.

The issue in this further hearing is:

1. Is Mrs. Randhawa entitled to her expenses incurred in respect of this arbitration?

Result:

1. Mrs. Randhawa is entitled to one-half of her expenses of the arbitration.

EVIDENCE AND ANALYSIS:

Subsection 282(11) of the Insurance Act, R.S.O. 1990, c. I.8, as amended, permits an arbitrator to award the expenses of an arbitration proceeding to either the insured person or the Isurer. In this case Liberty Mutual is not asking that Mrs. Randhawa pay its expenses of the arbitration, but it submits I should not award Mrs. Randhawa her expenses of the proceeding. Subsection 282(11) reads as follows:

(11) 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. [Bill 59 s. 38(4)]

The "criteria prescribed by the regulations" are found in subsection 12(2) of Ontario Regulation 664, as amended by Ontario Regulation 464/96. The criteria also form part of the Dispute Resolution Practice Code-Third Edition at Rule 73.2. The six 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.

The hearing on February 16, 2001, combined a reopening of the hearing for submissions on expenses and an assessment of Mrs. Randhawa's expenses. In the normal course I would have decided the issue of expenses and left the parties to determine the amount payable, in the hope that they could agree. In this case the parties persuaded me to combine the decision and the assessment, even recognizing I could ultimately determine Mrs. Randhawa was not entitled to any expenses.

This decision is organized following the six criteria set out above.

Each Party's Degree of Success

I accept Mrs. Randhawa's submission that success in this arbitration was divided. Mrs. Randhawa was not successful in receiving ongoing income replacement benefits. This was the major issue in dispute. She was also not successful in her claim for a special award. She was, however, successful in correcting the amount of her income replacement benefit to take account of her second job on weekends, which according to her submissions, amounted to $5,656.90 inclusive of interest. She also was successful in resisting the Insurer's attempt to have her repay her benefits as a result of alleged wilful misrepresentation, as provided in paragraph 47(1)(a) of the Schedule.

Liberty Mutual submitted that Mrs. Randhawa was not successful because she lacked credibility and she had withheld pertinent information about her medical history from medical practitioners after the accident. In support of its contention that Mrs. Randhawa should accordingly be denied her expenses of the arbitration, Liberty Mutual referred to the arbitral and appeal decisions in Allison² Liberty Mutual submitted that for undeserving claims or undesirable behaviour the relatively mild deterrent of an Applicant paying her own arbitration expenses is justified. Liberty Mutual admitted there are many FSCO decisions where unsuccessful applicants receive their expenses, but submitted Mrs. Randhawa's deliberate withholding of information should not be condoned in this manner. Liberty Mutual submitted that the duty to act in good faith in matters of insurance contracts is a mutual obligation between both parties, not a one-sided obligation that only the Insurer should fulfill.

In reply submissions, Mrs. Randhawa submitted that her dishonesty did not continue into the hearing, where she was frank about her past conduct, and apologized for it. She submitted that to penalize her by not awarding her expenses of the proceeding would be a disproportionate result.

Mrs. Randhawa's partial success in this arbitration was a factor in my decision to award her some expenses of rehabilitation.

Conduct prolong, obstruct, hinder

Mrs. Randhawa submitted that the conduct of both parties was reasonable and neither party tended to prolong, obstruct nor hinder the proceeding in any way. Mrs. Randhawa submitted that 61 letters were generated by the Applicant's counsel's firm to address the prehearing productions and the litigation law clerk devoted 60 hours to this aspect of the case.

Liberty Mutual submitted that non-fulfillment of undertakings regarding productions was a major issue in this arbitration. For example, the clinical notes of the family doctor for the pre-accident period were only received after Liberty Mutual summoned the doctor, on the first day of the hearing, and Mrs. Randhawa objected to producing those records. It was Mrs. Randhawa's position that production of Dr. K. S. Kular's notes for one year prior to the November 30, 1996-accident was sufficient. There were four prehearing conferences between the parties, mainly dealing with production issues.

Liberty Mutual submitted that at the initial prehearing on October 7, 1998 a hearing date of March 1, 2 and 3, 1999 was set. On January 19, 1999, Liberty Mutual wrote asking for a resumption of the prehearing because many productions were outstanding. From the law clerk's dockets, it is clear not much time was spent by the Applicant's law firm on production issues until January 22, 1999, five weeks before the hearing was scheduled to be held.

At the resumption of the prehearing on February 10, 1999, Liberty Mutual asked that the March hearing dates be adjourned because there was not enough time to secure the productions. On February 9, 1999, an OHIP summary was delivered with 46 doctors that Liberty Mutual submitted it had not heard about before. Liberty Mutual learned then also for the first time that Mrs. Randhawa was receiving WCB benefits.

The prehearing was resumed again on February 23, 1999, at which time the hearing was rescheduled to October 5, 6, and 7, 1999. On April 5, 1999, Mrs. Randhawa's counsel asked Liberty Mutual's counsel to forward "directions" for the productions she was requesting, which was done on April 22, 1999.

In May 1999, Liberty Mutual wrote asking to add the repayment claim to the issues in dispute, which was not agreed to by Mrs. Randhawa. Arbitrator Renahan ordered this issue to be added to the proceeding.

On September 7, 1999, Liberty Mutual issued 19 summonses since counsel had not received productions relating to their examinations. On September 23, 1999, Mrs. Randhawa forwarded some doctors' records and it was apparent some had been received as early as July 1999 and not forwarded until September 23.

The third prehearing was held on September 24, 1999, at which time the issue of repayment was formally added to the proceeding. On September 27 and 30, less than 10 days before the scheduled arbitration Mrs. Randhawa served reports from Drs. S.W. Wong and Kular, and a letter from an employer. Liberty Mutual submitted that there was no reason that Mrs. Randhawa could not have gotten this information earlier.

The October 1999 hearing dates were postponed because Mrs. Randhawa was in another motor vehicle accident just prior to the scheduled dates. The fourth prehearing was held on February 3, 2000, at which time Mrs. Randhawa was ordered to provide particulars of the special award claim, as had been requested by Liberty Mutual in a letter of April 10, 1999.

In reply submissions Mrs. Randhawa submitted that since 55 hours or more of a law clerk's time was spent attempting to respond to the Insurer's requests for productions, it does not behove the Insurer to now complain about the amount of time spent in this activity on the file. To detail the activity, such as the lengthy letter, dated February 1, 2000, addressed to the arbitrator conducting the fourth prehearing conference, took a great deal of time —more than five hours— in order to accurately set out the requests and attempts at compliance. Mrs. Randhawa submitted that in the end the prehearing arbitrator was satisfied and that is born out by his correspondence following the fourth prehearing and the two brief orders he made on the outstanding items in his letter of February 3, 2000.

Mrs. Randhawa submitted that her counsel's conduct was being put under a microscope by the Insurer, with questions about 0.2 and 0.3 hours in time in preparing the time dockets. Mrs. Randhawa submitted that the preparation of a case brief for the expenses hearing and written submissions shortened the amount of time required to make oral submissions to less than one hour for Mrs. Randhawa's submissions and thus was a benefit to the parties and the Commission.

The fact that this case was thoroughly prepared by both sides was a factor in my decision to grant Mrs. Randhawa a partial award of expenses.

Manifestly unfounded positions, fraud, abuse of process

Liberty Mutual acknowledged it did not meet the burden of proof with respect to a finding of fraud. However, Liberty Mutual submitted that Mrs. Randhawa was found to have misrepresented her medical history and should not be rewarded for this behaviour by an award of expenses against the Insurer. Mrs. Randhawa submitted that her issues raised difficult questions of causation. However, she also submitted that Liberty Mutual pursued unfounded allegations of fraud and claimed repayment of the entire amount paid to her.

I address this factor further below.

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

Liberty Mutual submitted that besides the Applicant, only one family member and one employer testified. There were no novel or significantly important issues. Liberty Mutual submitted that the hours claimed in this arbitration are excessive —298 hours are claimed before the arbitration hearing. Liberty Mutual pointed out several instances of alleged duplication between the Applicant's counsel and his law clerk, including the law clerk's attendance at the February 3, 2000 prehearing conference, and other meetings on April 24 and May 4, 2000, plus time spent reviewing outstanding productions on February 22, 1999.

Contrary to the role of the clerk in the Oppedisano case,³ which appeared important, Liberty Mutual submitted that the attendance of the clerk at the first day of the hearing of this matter did not add anything to the proceeding.

In addition, Liberty Mutual submitted that the hourly rate that should be allowed, if any, for expenses should not be the $150 for counsel, but the Legal Aid rate of $83.75 for lawyers with 10 years of experience for Mr. Charney, $23 for Ms. Sarantopoulos, the law clerk, and $75.38 for Mr. Macklin, another lawyer in Mr. Charney's law office. The law clerk in Oppedisano had 20 years' experience and his time was allowed at $45 per hour. In this case Liberty Mutual submitted that Ms. Sarantopoulos has less than 10 years' experience, did not also act as an interpreter, and there is no justification for increasing anyone's rate.

Mrs. Randhawa agreed that while the arbitration was not overly complicated, the issues were important, consisting of a claim for ongoing income benefits after two years and a claim by the Insurer for repayment of all benefits on the grounds of fraud. Mrs. Randhawa submitted that the law clerk in her counsel's office spent considerable time in identifying and narrowing the medical practitioners involved in Mrs. Randhawa's treatment since the early 1980s. At one point, some 42 doctors were mentioned on the OHIP summary and in the Workers' Compensation briefs.

Mrs. Randhawa submitted that her counsel spent 120.8 hours in total time, consisting of 48.5 hours during the five days of hearing and 72.3 hours in preparation time (both for the arbitration and the four prehearings). Of this preparation time, approximately 20 hours was spent preparing for the hearing in October 1999 that did not proceed because Mrs. Randhawa was involved in another accident. The arbitration hearing lasted four full days with final submissions occupying approximately five hours on the fifth day. Counsel for Mrs. Randhawa submitted that a ratio of less than 3:1 for his time is well within the accepted ratios. Counsel submitted that Mrs. Randhawa should be awarded a counsel fee of $150 per hour and $45 per hour for his law clerk. In this regard, he cited the decisions in Tustin, Oppedisano, and Olszynko.⁴

Offers to settle - if insurer or insured person requests

Liberty Mutual has not asked that its offer to settle of February 17, 1999 be considered, because that was before it was revealed Mrs. Randhawa had a second job. Even so, although it was four months after the first prehearing, it was still on the table, and Liberty Mutual submitted it was "in the ball park" of the ultimate award to Mrs. Randhawa.

An offer to settle from Mrs. Randhawa was served a few days before the hearing. Neither party relied on it under the provisions of Rule 75 of the Dispute Resolution Practice Code.

Any other matter

Mrs. Randhawa raised the claim by Liberty Mutual for repayment of the entire amount paid to her on the basis of fraud as worthy of consideration under this heading. She submitted that Insurer's counsel's answers to questions raised by the arbitrator at the hearing about the repayment implied that the Insurer claimed fraud because it could not claim repayment on the grounds of mistake, because the one-year limitation period for doing so had expired. Mrs. Randhawa submitted that if the Insurer advanced allegations of fraud when it knew or ought to have known there was insufficient basis for the allegations, such conduct cannot be condoned, "especially in a first party relationship where claimants are injured and vulnerable to threats of repayment and allegations of fraud."

Analysis

In this arbitration Liberty Mutual claimed repayment of Mrs. Randhawa's benefits because it submitted a fraud had been committed by Dr. Kular and Mrs. Randhawa in wilfully concealing her pre-accident medical history from Liberty Mutual. Mrs. Randhawa submitted that she had no option to withdraw her application once this counterclaim was advanced, in order to avoid an order of repayment.

I set out my reasons in the original decision, at page 25 and following, for rejecting the Insurer's claim of fraud. Ultimately at the hearing, in its closing submissions, Liberty Mutual did admit that Mrs. Randhawa was injured in the accident and was entitled to IRBs until August 20, 1997. In the matter of expenses of the hearing, the failed allegation of fraud forms a large part of my reasoning for awarding Mrs. Randhawa any expenses at all. However, no one should construe this partial award to condone the actions of applicants who choose to conceal a significant past medical history.

I allow Mrs. Randhawa one-half of her expenses of the arbitration.

Fees

Mrs. Randhawa submitted that her counsel's time on this arbitration should be assessed at the maximum amount available under Rule 76 of the Dispute Resolution Practice Code that is $150 per hour. Liberty Mutual submitted that $150 per hour for counsel has been awarded where an applicant was successful or the other side agreed the rate was appropriate. Liberty Mutual submitted that if I was inclined to award Mrs. Randhawa any expenses, she should not be rewarded for her lack of credibility with any more than the Legal Aid rate plus experience allowance for Mr. Charney, so $83.75 his time, $23 for the time of Ms. Sarantopoulos, the law clerk, and $75.38 for the time of the other lawyer, Mr. Macklin.

I am not satisfied that a "higher amount for legal fees to an insured person is justified" in this instance and award Mrs. Randhawa her fee expenses at the legal aid rates adjusted by the experience allowance for lawyers.

At the same time, I am not prepared to embark on a line-by-line assessment of the activities of Mr. Charney and his law clerk in the preparation for this hearing. I accept Mrs. Randhawa's submission that obtaining the productions for this arbitration was time-consuming. It is certainly less costly for Ms. Sarantopoulos to perform this work than to pay a lawyer to act as a clerk. Ms. Sarantopoulos also attended at Mrs. Randhawa's workplace to obtain photographs and this helped in my understanding of Mrs. Randhawa's essential tasks. Liberty Mutual complained about 0.3 hours billed by the law clerk on July 13, 1999 and 0.2 hours on August 4, 1999, for which it says it has already paid as a result of a prior agreement. Liberty Mutual complains about "unnecessary duplication" in the services of Mr. Charney and Ms. Sarantopoulos on five occasions from February 22, 1999 to May 4, 2000, and particularly about paying for Ms. Sarantopoulos' attendance at those meetings. I accept that the clerk's attendance for meetings largely involving the productions which she was in the midst of securing would have been useful. I also accept that her participation in a settlement conference meeting would have added to its efficiency. A reasonable amount of overlap in a claim is acceptable. However, Liberty Mutual should not have to pay twice for 0.5 hours in the summer of 1999.

In the result. I allow 120.8 hours for Mr. Charney, 2.2 hours for Mr. Macklin, and 165.9 hours for Ms. Sarantopoulos at their various Legal Aid rates.

Submissions regarding disbursements

Liberty Mutual agreed to pay $650 for the report of Dr. Wong dated December 17, 1997 and $1,016.50 for his report of September 27, 1999, so these items were not in dispute. Liberty Mutual also agreed to pay $427.50 for outpoured printing and photographs, $67.16 for couriers, $78.76 for service of a summons to witness and $14.79 for postage. Liberty Mutual contended that it had already paid for reports and records from Dr. Kular, numbers 2, 4, and 5 on the list of disbursements. If these payments had not been made, Liberty Mutual was content to make them.

Mrs. Randhawa indicated I should treat these items as resolved, unless I received further correspondence concerning them, which I have not.

Liberty Mutual disputed paying $1,000 to Dr. Wong, who did not testify at the hearing. Dr. Wong had billed Mrs. Randhawa $500 for "time to prepare for case" and $500 for "time for loss of income for Tuesday and Thursday afternoon." Mrs. Randhawa submitted that she had not called Dr. Wong to the hearing in the end as a result of the evidence at the hearing and in an effort to more efficiently use the Commission's process, but Dr. Wong had cancelled two afternoons of work to be available if he were called. The Insurer did not ultimately require Dr. Wong for cross-examination either.

Liberty Mutual submitted that the Schedule F to the Dispute Resolution Practice Code, the Expense Regulation, at subparagraph 5(4) allows expenses for preparation of an expert witness for a hearing "at which the witness testifies" to $500. However, since Dr. Wong did not testify, he is not entitled to be paid, according to the Schedule. I agree with this submission. I would not have agreed, however, that an Insurer could escape payment if it had required an expert's attendance for cross-examination and then decided at the last minute not to cross-examine the expert. No one submitted that this was the scenario in the case of Dr. Wong.

The maximum Dr. Kular can be paid for his attendance at the hearing under subparagraph 5(3) of Schedule F to the Code is $200 per hour, to a maximum four hours, or $800. Dr. Kular has invoiced Mrs. Randhawa for $1,000 for four hours. I allow this claim at $800.

The claim for photocopies is $504.39, with no allowance for $18.99 and $21.40 paid by Liberty Mutual near the beginning of the claim. Liberty Mutual did not dispute the rate charged for photocopies of $0.25 per page. Mrs. Randhawa submitted that no photocopies for any tort claim were charged to the Insurer, since the total photocopying charges on her account exceeded $1,000 and no photocopying charges whatsoever on this file were levied after the preparation of an Affidavit of Documents in the tort file. I allow $450 for photocopies.

In summary then, I allow:

Mr. Charney 120.8 hours @ $83.75

$10,117.00

Mr. Macklin 2.2 hours @ $75.38

165.84

Ms. Sarantopoulos 165.9 hours @ $23

3,815.70

Total Fees:

14,098.54

GST on fees: (7%)

986.90

$15,085.44

Disbursements for Reports and Records

Dr. Wong, December 17, 1997

not disputed

650.00

Dr. Wong, September 27, 1999

not disputed

1,016.50

Dr. Wong, May 11, 2000

disputed

0

Dr. Kular, May 11, 2000

disputed

800.00

Ron Smith, June 5, 2000

not disputed

294.25

Sub-total:

$2,760.75

Other Disbursements:

Photocopies

disputed

450.00

Printers, couriers, service, postage

not disputed

588.21

Sub-total:

1,038.21

GST on other disbursements: (7%)

72.67

Grand Total disbursements allowed at:

$3,871.56

Total fees, disbursements, and GST allowed at:

$22,828,36

Award of expenses (one-half of the above):

$11,414.28

April 10, 2001

K. Julaine Palmer Arbitrator

Date

Neutral Citation: 2001 ONFSCDRS 54

FSCO A98-000707

FINANCIAL SERVICES COMMISSION OF ONTARIO

BETWEEN:

HARBANS K. RANDHAWA

Applicant

and

LIBERTY MUTUAL INSURANCE COMPANY

Insurer

ARBITRATION ORDER

Under section 282 of the Insurance Act, R.S.O. 1990, c.I.8, as amended, it is ordered that:

1. Liberty Mutual Insurance Company shall pay Harbans Kaur Randhawa one-half of her assessed expenses of the arbitration ($22,828.36) in the amount of $11,414.28.

April 10, 2001

K. Julaine Palmer Arbitrator

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. 2Allison and Markel Insurance Company ofCanada, (FSCO P-001231, August 21, 1996)
3. 3Oppedisano and Zurich Insurance Company, (FSCO A99-001137, February 11, 2000)
4. 4Tustin and Canadian General Insurance Group, (FSCO A97-001209, February 21, 2000), Oppedisano and Zurich Insurance Company, (FSCO A99-001137, February 11, 2000), and Olszynko and Dominion ofCanada General Insurance Company, (FSCO A97-0001495, August 27, 1999).