Neutral Citation: 2002 ONFSCDRS 100

FSCO A01-000988

FINANCIAL SERVICES COMMISSION OF ONTARIO

BETWEEN:

JENNIFER ROSE

Applicant

and

CGU INSURANCE COMPANY OF CANADA

Insurer

DECISION ON A PRELIMINARY ISSUE

Before:

Beth Allen

Heard:

March 14, 2002, at the offices of the Financial Services Commission of Ontario in Toronto.

Appearances:

David Longley for Ms. Rose

Claudia Storto for CGU Insurance Company of Canada

Issues:

The Applicant, Jennifer Rose, was injured in a motor vehicle accident on June 14, 1995. She applied for and received statutory accident benefits from CGU Insurance Company of Canada ("CGU"), payable under the Schedule.¹ The issues in dispute in the main proceeding are whether the Applicant is entitled to medical benefits for chiropractic treatment and massage, the cost of a medical report and her expenses of the arbitration. CGU requests its expenses of the arbitration and an award under subsection 282(11.2) of the Insurance Act, R.S.O. 1990, c.I.8, as amended.

In this hearing, I am asked to decide whether or not the Applicant is precluded from proceeding to arbitration by reason that a full and final settlement was reached after mediation and before she filed an application for arbitration.

The parties were unable to resolve this dispute through mediation, and the Applicant applied for arbitration at the Financial Services Commission of Ontario ("FSCO") under the Insurance Act.

The preliminary issues in this hearing are:

1. Is the Applicant precluded from proceeding to arbitration by reason that a full and final settlement was reached after mediation and before the Applicant filed an application for arbitration?

2. Are the Applicant and CGU respectively entitled to the expenses they incurred in respect of the arbitration hearing?

3. Is the Applicant required to pay CGU, pursuant to subsection 282(11.2) of the Insurance Act, an amount not exceeding the amount of CGU's assessment fee on the basis that she commenced an arbitration that was frivolous, vexatious or an abuse of process?

Result:

1. The Applicant is precluded from proceeding to arbitration by reason that the parties reached a full and final settlement of all issues after mediation and before the Applicant filed an application for arbitration.

2. The parties shall bear their own arbitration expenses.

3. The Applicant is not required to pay CGU an amount under subsection 282(11.2) of the Insurance Act.

EVIDENCE AND ANALYSIS

The parties proceeded by way of oral submissions. I heard no oral evidence.

Factual Background:

There is no dispute on the basic facts of the case.

The Applicant authorized an agent to represent her at mediation and arbitration. This is evidenced by three written authorizations signed by the Applicant and executed on September 5, 2000, January 30 and July 2, 2001, respectively, authorizing Mr. Jorge Pignalosa of Pignalosa & Associates to act as "[her] agent and to make binding decisions on [her] behalf in all matters connected with this arbitration." Days before this arbitration hearing, the Applicant retained Mr. David Longley to represent her at the hearing.

On December 7, 2000, the parties mediated the issues of the Applicant's entitlement to chiropractic and massage treatment from February 3, 1999 until and including June 26, 2000 and ongoing, as well as the cost of a chiropractic medical report. As I understand it, the cost of the medical report and treatment issues were partially resolved. Outstanding treatment expenses in the amount of $3,596 and ongoing treatment expenses remained in dispute. Following mediation, the parties continued their attempt to settle the remaining issues.

Also not in dispute is that the parties entered into settlement discussions on March 8, 2001 wherein an oral agreement was reached for a lump sum full and final settlement of the Applicant's past, present and future claims related to the June 14, 1995 accident. Mr. Pignalosa attended the discussion and agreed to the settlement on behalf of the Applicant.

Both parties evidenced the settlement in writing by letters to FSCO from CGU dated March 8, 2001, and from Pignalosa & Associates dated March 9, 2001.

The letter to FSCO from CGU states:

This matter was settled for a lump sum payment of X dollars in exchange for a full and final release of all SABS claims past, present and future as a result of an MVA on June 14, 1995.

The parties agreed, as a condition of settlement, the applicant will withdraw the Application for Arbitration before the deadline and that there will be no assessment against CGU in this matter.

The letter from Pignalosa & Associates states in its relevant part:

This is further to the above-noted matter. Please be advised that this claim was settled yesterday, being March 8, 2001, for the lump sum of X dollars. therefore, we would like to withdraw our application for arbitration

FSCO responded by letter to Pignalosa & Associates dated March 16, 2001, acknowledging receipt of their March 9, 2001 letter and advising that in view of the fact that the matter was withdrawn on consent of the parties, it would close the file. The file was closed on March 16, 2001.

CGU prepared a written notice dated April 6, 2001 which was date-stamped by Mr. Pignalosa's office on April 11, 2001. This notice, among other things, confirms the settlement terms, advises that if the Applicant wishes to rescind the settlement, she has 48-hours within which to do this and states that signing the release and disclosure will result in the Applicant having no further claims for accident benefits arising from the June 13, 1995² accident. Enclosed with the notice was a disclosure statement and a release, as required by section 9.1 of Ontario Regulation 664 under the Insurance Act, 1990, c.I.8, as amended. The Applicant makes no allegation that the notice, disclosure statement or release fail to comply with the Settlement Regulation. Below, I reproduce the Settlement Regulation in its entirety:

9.1 (1) In this section, "settlement" means an agreement between an insurer and an insured person that finally disposes of a claim or dispute in respect of the insured person's entitlement to one or more benefits under the Statutory Accident Benefit Schedule.

(2) Before a settlement is entered into between an insurer and an insured person, the insurer shall give the insured person a written notice that contains the following:

1. A description of the benefits that may be available to the insured person under the Statutory Accident Benefits Schedule and any other benefits that may be available to the insured person under a contract of automobile insurance.

2. A description of the impact of the settlement on the benefits described under paragraph 1, including a statement of the restrictions contained in the settlement on the insured person's right to mediate, litigate, arbitrate, appeal or apply to vary an order as provided in sections 280 to 284 of the Act.

3. A statement that the insured person may rescind the settlement within two business days after the settlement is entered into by delivering a written notice to the insurer.

4. A statement that the tax implications of the settlement may be different from the tax implications of the benefits described under paragraph 1.

5. If the settlement provides for the payment of a lump sum in an amount offered by the insurer and, with respect to a benefit under the Statutory Accident Benefits Schedule that is not a lump sum benefit, the settlement contains a restriction on the insured person's right to mediate, litigate, appeal or apply to vary an order as provided in section 280 to 284 of the Act, a statement of the insurer's estimate of the commuted value of the benefit and an explanation of how the insurer determined the commuted value.

6. A statement advising the insured person to consider seeking independent legal, financial and medical advice before entering into the settlement.

(3) A settlement may be rescinded by the insured person, within two business days after the settlement is entered into, by delivering a written notice to the insurer.

(4) If the insurer did not comply with subsection (2), the insured person may rescind the settlement after the period mentioned in subsection (3) by delivering a written notice to the insurer.

(5) A restriction on an insured person's right to mediate, litigate, arbitrate, appeal or apply to vary an order as provided in sections 280 to 284 of the Act is not void under section 279(2) of the Act if,

1. the restriction is contained in a settlement; and

2. the insurer complied with subsection (2).

By letter dated May 7, 2001, Mr. Pignalosa indicated that he had met the Applicant two weeks previously about the settlement and requested that the Applicant contact him about her decision to sign the full and final release. It is not clear when, if at all, Mr. Pignalosa sent the settlement notice, disclosure statement and release to the Applicant for her signature. Also, I have no evidence that CGU sent the settlement funds to the Applicant. In a hand-written response dated May 13, 2001, the Applicant stated that she was dissatisfied with and would not accept the settlement with CGU.

By letter dated May 17, 2001, Mr. Pignalosa advised CGU that the Applicant will not accept the lump sum settlement offer and that the Applicant would be proceeding to arbitration.

In a telephone conversation with the Senior Arbitrator on May 24, 2001, Mr. Pignalosa, on behalf of the Applicant, requested that the file be re-opened because the Applicant did not accept the settlement. By letter to Mr. Pignalosa dated May 28, 2001, the Senior Arbitrator advised of the potential expense implications to the Applicant of re-opening the arbitration and indicated that FSCO would consider the request to re-open on condition that Mr. Pignalosa furnish updated proof of binding authority signed by the Applicant, subsequent to the date of the May 28, 2001 letter. I find the July 1, 2001 authorization noted above meets this condition.

The Applicant then filed an application for arbitration dated July 24, 2001 renewing her claim for outstanding and ongoing treatment expenses. Together with a filing fee of $3,000, CGU filed a response dated October 26, 2001 wherein, among other things, it asserted that a full and final settlement of the issues in arbitration had been reached.

Parties' Arguments:

CGU argues that the Applicant is barred from proceeding to arbitration in relation to the June 14, 1995 accident because a full and final settlement of the Applicant's past, present and future medical claims had been reached by the parties before the Applicant applied for arbitration. CGU submits that an oral agreement was reached on March 8, 2001 wherein, through her authorized agent, the Applicant agreed to a lump sum settlement of her past, present and future medical claims. CGU argues that a binding agreement was arrived at on or about April 11, 2001 when Mr. Pignalosa received the notice, disclosure statement and release and that, with the 48-hour "cooling off" period, the Applicant had until April 13, 2001 to rescind the agreement in writing. As well, CGU pointed out that the Applicant does not allege that CGU failed to comply with the Settlement Regulation or that the oral agreement was not intended to effect a full and final settlement.

According to CGU, Mr. Pignalosa was legally bound as the Applicant's agent to explain to her the consequences of not complying with the requirements of the Settlement Regulation when rejecting the settlement. CGU submits that it completed its obligation under the Regulation when it provided the notice, disclosure statement and release. It was, in CGU's view, Mr. Pignalosa's responsibility to pass those documents on to the Applicant in a timely fashion.

Mr. Longley, on behalf of the Applicant, agrees that an oral agreement was reached between the parties on March 8, 2001 and that Mr. Pignalosa had legal authority to bind the Applicant. However, Mr. Longley pointed out that CGU's delay in sending out the settlement notice, disclosure statement and release contributed to a breakdown in the settlement.

If I find there is a binding full and final agreement, Mr. Longley argues in the alternative that CGU should be ordered to comply with the agreement and pay the Applicant the full lump sum settlement amount in accordance with the agreement; and that CGU should be ordered to pay interest at two percent compounded monthly for the period from March 8, 2001 until the agreement is satisfied.

Reasons for Decision:

The first question I must address is whether the delay in CGU forwarding the notice, disclosure statement and release affected the binding nature of the agreement.

In arriving at my decision, I adopted the approach of the Ontario Superior Court of Justice in the Birjasingh³ decision. The Court found, and it is not in dispute in the case before me, that a solicitor, as an agent of his client, is assumed to have the authority to act on his client's behalf to effect a compromise of his client's claims and further held that the communication of a matter to a solicitor is in effect communication of that matter to the client. The same principle applies to the relationship between a non-lawyer agent and his client. The Insurance Act and Regulations and the Dispute Resolution Practice Code⁴ permit agents and other non-lawyer representatives who hold themselves out as representing insured persons, the same rights and privileges accorded lawyers and the same obligations to honour agreements entered into on behalf of their clients.⁵

The Birjasingh case also dealt with the question of delay between the oral agreement between the parties and the forwarding of the settlement documents by the insurer to the insured person.

In Birjasingh, counsel for the insured and insurer engaged in settlement discussions in October 1998 where they arrived at a lump sum, full and final settlement of the insured's claims. Two months later, on December 11, 1998, the insurer's counsel sent to the insured's counsel the notice, disclosure statement and release required by the Settlement Regulation. About one month later, on January 12, 1999, the insured's counsel met with the insured but did not discuss the settlement or present the notice, disclosure statement or release documents to the insured. In that meeting, the insured advised that she was not prepared to settle her claims. Some four months later, on April 14, 1999, the insured's counsel advised the insurer that the insured was not prepared to fully and finally settle her claims.

The Court found that the agreement took effect December 11, 1998 and that, in consideration of the 48-hour "cooling off" period, the applicant had until December 13, 1998 to rescind the agreement in writing in accordance with the Settlement Regulation.

The Court noted that there is nothing in the Settlement Regulation that requires the written notice to be signed or otherwise acknowledged by the insured. The Court accordingly held the fact that "[t]he refusal of the resiling party to sign the release cannot be relied upon as invalidating the settlement." The Court attributed no legal consequence to the insurer's delay in sending the notice, disclosure statement and release to the insured's counsel.

In the case before me, I find that the Applicant sought to rescind the settlement agreement by her letter to her agent dated May 13, 2001, conveyed by her agent to CGU by letter dated May 17, 2001, over one month beyond the 48-hour "cooling off" period allowed under the legislation. The rescission requirements of subsection 9.1(3) of the Settlement Regulation require written notice of rescission be delivered to the insurer within two business days of the settlement having been entered into. I find that on March 8, 2001, CGU made an oral offer in the amount of X dollars to the Applicant which was accepted by the Applicant through her agent. At this point an oral agreement was reached between the parties to settle the Applicant's medical benefit claims which was confirmed in writing in accordance with the subsection 9.1(3) notice requirements as of the day Mr. Pignalosa received the notice from CGU, namely, on April 11, 2001.

Accordingly, I find that the 48-hour "cooling off" period began to run from that date and the Applicant had until April 13, 2001 to rescind the agreement. I find therefore that the Applicant cannot resile from the agreement after the "cooling off" period because she subsequently disagrees with the settlement amount arrived at between CGU and the agent she retained to represent her. Like the Court in Birjasingh, I find that the delay in CGU forwarding the settlement documents has not affected the binding nature of the settlement agreement.

I next have to determine whether I have the jurisdiction as an arbitrator to order CGU to pay the Applicant the full lump sum settlement amount.

This issue was dealt with by a Director's Delegate in the Branchaud⁶ matter.

The scope of an arbitrator's jurisdiction is determined by statute. It is common ground that arbitrators exercising statutory powers under the dispute resolution provisions of the Insurance Act only have the powers that are conferred upon them either expressly by the legislation or by necessary implication. The parties to an arbitration cannot confer jurisdiction on an arbitrator that he or she does not otherwise have.

The Director's Delegate in Branchaud determined "that arbitrators have the jurisdiction to review settlements between insurance companies and consumers and to intervene in the event of misleading or unfair conduct." However, she found, and I agree, that arbitrators lack the jurisdiction "to grant a remedy outside the parameters of his or her statutory authority." She further held that "[arbitrators] have no jurisdiction, for example, to order specific performance or issue a declaration confirming or setting aside a contract. If that is what the parties want, they must pursue their remedy in court" where judges have the inherent jurisdiction to order equitable remedies.

I therefore find that I have no jurisdiction to grant the remedy requested by the Applicant - an order for CGU to specifically perform its obligation under the agreement to pay the Applicant the lump sum. However, having said this, there is nothing preventing CGU from paying the Applicant the agreed upon lump sum in accordance with the agreement. As I deal with below under expenses, CGU submits that it is prepared to do this on condition.

Since I have not ordered CGU to make the payment under the settlement agreement, I need not determine the interest issue.

I find the parties reached a binding settlement of the Applicant's past, present and future accident benefit claims and accordingly the Applicant is precluded from proceeding to arbitration in respect of the June 14, 1995 accident.

EXPENSES:

Mr. Longley, on behalf of the Applicant, asserts that each party should bear its own arbitration expenses. CGU requests that the Applicant pay its arbitration expenses as well as an amount under subsection 282(11.2) of the Insurance Act on the basis that the Applicant commenced an arbitration that is frivolous, vexatious and an abuse of process.

As an arbitrator I have the discretionary authority under subsection 282(11) of the Insurance Act to award an insured person or an insurer such arbitration expenses as are prescribed in the Regulations. Subsection 282(11.2) of the Insurance Act also allows an arbitrator the discretion to order the Applicant to pay an amount no higher than the amount of the insurer's $3,000 assessment fee (arbitration filing fee) if I find that the Applicant commenced an arbitration that was frivolous, vexatious or an abuse of process.

Rule 75 of the Code sets out the criteria an arbitrator may consider when determining whether an award of expenses to a party is justified. Among these factors are: each party's success in the outcome of the proceeding; the conduct of the insurer or the insured person that tended to shorten or prolong the proceeding; whether the proceeding or a position taken by the insurer or insured person during the proceeding was manifestly unfounded, frivolous, vexatious or an abuse of process; and any other matter related to the proceeding that the arbitrator considers relevant to whether an award of expenses is justified.

Mr. Longley did not file a bill of expenses or state an amount of expenses incurred by the Applicant. He submits, however, that in determining expenses, I should take into consideration CGU's one-month delay in providing Mr. Pignalosa with the settlement notice, disclosure statement and release documents.

CGU submitted a bill of expenses containing legal/paralegal expenses of $1,864.69 (lawyer fees for 24.5 hours @ $67/hour and paralegal fees for 4.4 hours @ $23/hour) and disbursements of $88.28 to a total of $1,952 plus any subsequent arbitration expenses incurred. CGU also requests an amount no greater than its $3,000 filing fee pursuant to subsection 282(11.2) of the Insurance Act.

At the close of its submission on expenses, CGU asserted that if I find there was a binding settlement, CGU would be prepared to pay the balance of the lump sum settlement amount less the amount of its arbitration expenses.

After considering the submissions on expenses, I order the parties to pay their own expenses for the following reasons. Neither party received an entirely favourable outcome on the issues raised. While the Applicant did not succeed on the central preliminary issues of whether a binding settlement ultimately existed and whether I could order specific performance, some relatively novel considerations went into arriving at a decision. Few arbitration and appeal decisions have dealt with the issue of specific performance in relation to settlement agreements under the current statutory accident benefits scheme. For this reason, I find that the Applicant's claims were not frivolous, vexatious or an abuse of process. She was partially successful in that she succeeded in avoiding an order for CGU's expenses to be deducted from the lump sum settlement amount. I also took into account the delays by both parties in the settlement process. CGU delayed in forwarding to the Applicant the settlement notice, disclosure statement and release documents and the Applicant delayed beyond the "cooling off period" in her attempt to rescind the agreement.

CGU shall therefore not deduct any amount for expenses from the settlement amount.

June 26, 2002

Beth Allen Arbitrator

Date

Neutral Citation: 2002 ONFSCDRS 100

FSCO A01-000988

FINANCIAL SERVICES COMMISSION OF ONTARIO

BETWEEN:

JENNIFER ROSE

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:

1. Ms. Rose is not permitted to proceed to arbitration. Her statutory accident benefit claims against CGU Group Canada Ltd. were fully and finally settled before the arbitration hearing date.

2. The parties shall pay their own expenses incurred in relation to the arbitration hearing. CGU Group Canada Ltd. shall therefore not deduct any amount from the settlement amount for expenses.

June 26, 2002

Beth Allen Arbitrator

Date

Footnotes

1. 1The Statutory Accident Benefits Schedule —Accidents after December 31, 1993 and before November 1, 1996, Ontario Regulation 776/93, as amended by Ontario Regulations 635/94, 781/94, 463/96 and 304/98.
2. 2I take the reference to the accident date as "June 13, 1995" to be a typographical error which should have read June 14, 1995. There is no evidence of another accident.
3. 3Birjasingh v. Coseco 1999 CanLII 14888 (ON SC), [1999] O.J. No. 4546, Court File No. 98-CV-139813, Ontario Superior Court of Justice.
4. 4Dispute Resolution Practice Code (fourth edition, May 31, 2001).
5. 5Dhawan and State Farm Mutual Automobile Insurance Company, (FSCO A00-000031, April 20, 2001). The two appeal decisions (FSCO P00-000031, February 1, 2002 and May 16, 2002) did not consider the merits of the appeal. The Director's Delegate ejected the Appellant's agent from the proceeding because of his conduct and ordered that the Appellant be availed the opportunity to retain a new representative and advance his appeal at a later date.
6. 6Branchaud and Co-operators General Insurance Company (OIC P96-00048, May 2, 1997).