Neutral Citation: 2001 ONFSCDRS 62
FSCO A99-001169
FINANCIAL SERVICES COMMISSION OF ONTARIO
BETWEEN:
BRIAN K. MCCALLUM
Applicant
and
ECONOMICAL MUTUAL INSURANCE COMPANY
Insurer
DECISION ON EXPENSES
Before:
K. Julaine Palmer
Heard:
March 2, 2001 by teleconference
EVIDENCE AND ANALYSIS:
The parties to this arbitration could not agree on the issue of the payment of the expenses of the arbitration proceeding.
A mediation was held in this proceeding in June 1999. Later it became apparent that the parties differed as to what precisely had been agreed at the mediation. After an exchange of letters and telephone calls the Applicant concluded he should file for arbitration, as he felt the Insurer was not honouring its agreement. The application for arbitration for a claim of approximately $650 was filed in December 1999. Since February 21, 2000 (informally) and from September 5, 2000 (formally through an Offer to Settle) the Applicant has sought the consent of the Insurer to withdraw from the arbitration with each side bearing its own costs. However, Economical refused, because it had been required to pay an assessment fee of $3,000 to the Commission to participate in the arbitration. Economical believed it had acted in conformity with the mediator's report and wanted the Applicant to repay the assessment fee in order to withdraw from the arbitration.
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 insurer. Mr. McCallum asks that Economical be ordered to pay his expenses of the arbitration. At the same time Economical asks not only that Mr. McCallum pay some of its expenses of the arbitration, but more importantly submits I should also order him to pay the Insurer's assessment, as permitted in certain circumstances, by subsection 282 (11.2). Subsections 282(11) and (11.2) read 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.
(11.2) If an insured person commences an arbitration that, in the opinion of the arbitrator, is frivolous, vexatious or an abuse of process, the arbitrator may award an amount to be paid by the insured person to the insurer that does not exceed the amount assessed against the insurer in respect of the arbitration under section 14.
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:
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, including failure to comply with undertakings or orders.
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.
If the insurer or the insured person requests, any written offers to settle made after the conclusion of mediation and before the conclusion of the arbitration in accordance with the rules of practice and procedure applicable to the proceeding, including the terms of the offers, the timing of the offers and the responses to the offers, having regard to the result of the proceeding.
Any other matter related to the proceeding that the arbitrator considers relevant to the issue of whether an award of expenses is justified.
Applicant's Submissions
The Applicant submits that he was left in the unenviable position of having launched an application for arbitration with respect to monies he felt were owing to his fiancée, only to shortly thereafter find their engagement broken and his former fiancée no longer wishing to pursue the matter. Thereafter he tried, unsuccessfully, to convince Economical to allow him to withdraw the arbitration on a "without costs" basis. At the pre-hearing teleconference he again suggested he withdraw the arbitration. The overture was again rejected. The Insurer also refused to allow the arbitration to proceed by way of written hearing, as provided in Rule 34 of the Dispute Resolution Practice Code ("the Code ") when both parties consent, since it wished to be free to cross-examine the Applicant's witnesses.
Under the terms of Rule 67 of the Code, at all times the Applicant had the opportunity to withdraw from the arbitration. If the insurer disagreed with the withdrawal, an arbitrator would permit the withdrawal on "such terms and conditions as the adjudicator considers appropriate and could award expenses to either party, including awarding to the insurer up to the amount of its assessment if the arbitrator decided an abuse of process had occurred or that the proceeding was frivolous or vexatious. Rule 67 reads as follows:
67.1 A party may seek permission to withdraw all or part of a dispute:
(a) in writing by serving on the parties a request to withdraw and by filing the request to withdraw together with a Statement of Service in FORM E; OR
(b) orally during a neutral evaluation, pre-hearing discussion, a preliminary conference or at a hearing.
67.2 The Commission or an adjudicator, as the case may be, will permit a party to withdraw if the other parties agree.
67.3 Where a party does not agree to the withdrawal, an adjudicator may:
(a) permit the withdrawal on such terms and conditions as the adjudicator considers appropriate;
(b) award expenses to either party as permitted by Rules 73 and following, and the Expense Regulation under Section F of the Code;
(c) award an amount to the insurer, up to the amount the insurer is required to pay to participate in the hearing, if the adjudicator decides an abuse of process has occurred or the proceeding is frivolous or vexatious.
The Applicant decided to proceed with the arbitration hearing, in the absence of any agreement with the Insurer about terminating the process on a cost-free basis.
Insurer's Submissions
Economical complains that this application for arbitration was "frivolous, vexatious and an abuse of process." It seeks to recover its arbitration expenses under subsection 282(11) of the Act and also its assessment fee of $3,000 under subsection 282(11.2). Economical submits that the application for arbitration was filed even though the mediation did not fail and that the claimant had more reasonable options to resolve the dispute with respect to "time frame," such as applying for another mediation or seeking clarification of the mediator's report, under section 23 of the Code. Economical also objects to the application's recharacterization of these expenses as attendant care benefits rather than visitors' expenses or supplementary medical or rehabilitation expenses.
Conclusion
I reject the Insurer's position that an applicant should not file for arbitration on a claim of $600, since it has to pay $3,000 as an assessment for the arbitration. I agree with the Applicant's position that this would leave applicants with small claims without a remedy.
Both parties to this arbitration have incurred costs that, in my view, could have been avoided with more sincere informal attempts to settle the issues in dispute about the exact agreement reached at mediation. It would have been helpful if the parties who actually negotiated the agreement at mediation were the parties who drafted the subsequent correspondence. In my view, some of the miscommunication here stems from the fact that other persons than those actually present at the mediation meeting subsequently were involved with the post-mediation administrative issues.
That being said, applicants with unresolved issues after mediation must have the opportunity to pursue arbitration to bring a resolution to an ongoing dispute. In my view, the Application for Arbitration in this matter was not brought frivolously, that is relating "to a claim which is trivial or inconsequential."1 I do not believe either that it was a vexatious application, that is "that it was designed primarily to inconvenience the Insurer and cause it to go to unnecessary expense." Neither do I believe that the proceeding was an abuse of process, or evidencing "conduct on the part of the Applicant which demonstrates a wilful disregard for the arbitration process." However, I do find that both parties to the proceeding were well aware that after Mr. McCallum filed for arbitration Economical would be assessed the normal $3,000 insurer's assessment fee unless the matter was resolved within a few days of the application arriving at FSCO.
The Applicant's solicitor presented a draft solicitor and client account of some $4,428.73 in this matter. The Insurer's solicitor presented a draft solicitor and client account of $3,567.96.
In hindsight, the Applicant's solicitor might have been well advised to bring a motion under Rule 67 to withdraw the application for arbitration, once Mr. McCallum's fiancée indicated she had no interest in pursuing the claim and the Insurer would not agree without payment of its $3,000 assessment. However, I acknowledge that hindsight is always 20:20. In my view, at this stage of the proceeding, bearing in mind the requisite criteria and the history of this case, the most fair, acceptable, and satisfactory resolution of the expenses of this proceeding is for each party to bear his or its own expenses.
April 20, 2001
K. Julaine Palmer
Arbitrator
Date
Neutral Citation: 2001 ONFSCDRS 62
FSCO A99-001169
FINANCIAL SERVICES COMMISSION OF ONTARIO
BETWEEN:
BRIAN K. MCCALLUM
Applicant
and
ECONOMICAL 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:
- Each party to this proceeding shall bear its own expenses.
April 20, 2001
K. Julaine Palmer
Arbitrator
Date