Neutral Citation: 2002 ONFSCDRS 160

FSCO A01-000805

FINANCIAL SERVICES COMMISSION OF ONTARIO

BETWEEN:

PHUONG THI KIM LY

Applicant

and

ROYAL & SUNALLIANCE INSURANCE COMPANY OF CANADA

Insurer

REASONS FOR DECISION

Before:

Joyce Miller

Heard:

August 19, 2002, at the offices of the Financial Services Commission of Ontario in Toronto.

Appearances:

Mrs. Ly did not appear.

Jamie Pollack for Royal & SunAlliance Insurance Company of Canada

Issues:

The Applicant, Phuong Thi Kim Ly, was injured in a motor vehicle accident on December 25, 2000. She applied for benefits from Royal & SunAlliance Insurance Company of Canada ("Royal"), payable under the Schedule¹ Royal denied her benefits. Mrs. Ly applied for mediation. The mediator's report of June 7, 2001 states that Royal paid Mrs. Ly benefits for caregiver, housekeeping, transportation, and the cost of examination and physiotherapy treatment. Mrs. Ly claimed ongoing benefits. This claim was denied. Mrs. Ly again applied for mediation. The parties were unable to resolve their disputes through mediation, and Mrs. Ly applied for arbitration at the Financial Services Commission of Ontario under the Insurance Act, R.S.O. 1990, c.I.8, as amended.

The issues in this hearing are:

Did Mrs. Ly sustain an impairment within the meaning of section 2 of the Schedule as a result of the accident?
Is Mrs. Ly entitled to receive weekly caregiver benefits pursuant to section 13 of the Schedule from May 27, 2001 in respect of her two children, Zdei Huyentonnu aged 9 and Danbao aged 13 months?
Is Mrs. Ly entitled to receive a medical benefit for services provided by DN Physiotherapy in the amount of $2,626.01 claimed pursuant to section 14 of the Schedule?
Is Mrs. Ly entitled to payments for housekeeping and home maintenance services, pursuant to section 22 of the Schedule, from March 3, 2001, in the amount of $100 per week?
Is Mrs. Ly entitled to payments for the cost of examinations, pursuant to section 24 of the Schedule, for an FAE performed by Rosemount Medical Assessment Centre and an assessment performed by Dr.Wu?
Is Royal liable to pay a special award pursuant to subsection 282(10) of the Insurance Act because it unreasonably withheld or delayed payments to Mrs. Ly?
Is Mrs. Ly liable to pay an amount to Royal that does not exceed the amount assessed against Royal in respect of the arbitration, pursuant to subsection 282(11.2) of the Insurance Act, because she commenced an arbitration that is frivolous, vexatious or an abuse of process?
Is Royal liable to pay Mrs. Ly's expenses in respect of the arbitration under section 282(11) of the Insurance Act?
Is Mrs. Ly liable to pay Royal's expenses in respect of the arbitration under section 282(11) of the Insurance Act?
Is Mrs. Ly entitled to interest for the overdue payment of benefits pursuant to section 46(2) of the Schedule?

Result:

The Application for Arbitration is dismissed.
Mrs. Ly shall pay Royal $4,070.03 for expenses of the arbitration proceeding pursuant to subsection 282(11) of the Insurance Act.
Mrs. Ly is not liable to pay Royal its assessment fee of $3,000 under subsection 282(11.2) of the Insurance Act.

Background

On the first day of the scheduled arbitration hearing, August 19, 2002, neither Mrs. Ly nor anyone representing her showed up for the proceeding. No message was left with either the Commission or Royal's counsel that she would not be attending. The Commission's records reveal the following:

A pre-hearing was held on October 17, 2001. Mrs. Ly attended and was represented by Mr. Pham, a paralegal. At the pre-hearing, an arbitration hearing date was set for March 4, 5, 6 and 7, 2002.
A pre-hearing letter was sent to Mrs. Ly on October 17, 2001. In the letter it stated:

Where notice of hearing has been sent to a party and a party does not attend, the arbitrator may proceed with the hearing in the party's absence or without the party's participation, as the case may be, and the party is not entitled to any further notice in the proceeding.²

A Notice of Hearing was sent to Mrs. Ly on October 17, 2001. This notice stated:

You may attend this hearing in person and/or be represented. If you or your representative do not attend at the hearing, the arbitrator may dispose of the case in your absence and you will not be entitled to any further notice of the arbitration proceedings.³

On February 26, 2002 a settlement discussion, arranged by the Commission, took place by teleconference. Mrs. Ly and her representative, Mr. Pham, took part in this discussion with Mr. Pollack who represented Royal. The parties were unable to settle the case.
On February 26, 2002 Mrs. Ly signed an authorization for her representative wherein she stated that she was terminating her retainer with Mr. Pham. As well, the authorization stated: "... I specifically instruct you to take no further action on my behalf in connection with my claim except to request an adjournment so that I can retain other representation."
On February 28, 2002, Mr. Pham faxed a letter to the Commission requesting an adjournment of the hearing that was to commence on March 4, 2002 so that Mrs. Ly could retain other representation. Royal opposed this adjournment.
The adjournment was granted to allow Mrs. Ly sufficient time to retain a legal representative. In her letter of May 17, 2002, the Adjournment Arbitrator recorded the new agreed upon dates of August 19, 20, 21 and 22, 2002 and noted that these dates were peremptory to Mrs. Ly.
A Notice of Rescheduled Hearing was sent to Mrs. Ly on May 17, 2002. It contained the agreed upon hearing dates of August 19, 20, 21 and 22, 2002 with the same notice of the consequences of non-attendance as noted above.
There was no note in the file that Mrs. Ly had advised the Commission of any change in her address.

Based on the above information, I am satisfied that Mrs. Ly was provided with proper notice of the date of the hearing and that she had knowledge that a hearing was to take place commencing August 19, 2002. Accordingly, pursuant to the notice given to Mrs. Ly, I proceeded to dispose of the case in her absence.

Mr. Pollack, on behalf of Royal, submitted that I should dismiss the arbitration and award Royal its expenses for the hearing and the return of its assessment fee pursuant to subsections 282(11) and 282(11.2) of the Insurance Act.

Findings

The onus is on Mrs. Ly to prove her claim on a balance of probabilities. Mrs. Ly has not provided any evidence to support her claim. I therefore conclude that her claim must be dismissed.

EXPENSES

Royal submits it should be awarded its expenses for having prepared to defend a claim which Mrs. Ly had no intention to pursue to a hearing. Royal also submits that pursuant to subsection 282(11.2) of the Insurance Act it should be entitled to the return of its $3,000 assessment fee on the basis that Mrs. Ly's application for arbitration was frivolous and an abuse of process.

1. Royal's Expenses

Subsection 12(2) of Ontario Regulation 664, as amended, provides that an arbitrator may award expenses to an insurer or insured person based on, inter alia, a party's degree of success in the outcome of the proceeding, and conduct that tended to prolong, obstruct or hinder the proceeding, or was an abuse of process.

For the following reasons I find that Royal is entitled to its expenses.

Royal submits that Mrs. Ly never intended to proceed with the hearing if she could not settle her claim. As proof to support this position Royal presented extensive surveillance evidence in the form of video tape, photographs and an investigator's report to show that prior to and after her pre-hearing Mrs. Ly was working full days in a restaurant. Consequently, her claim for ongoing caregiver benefits and housekeeping was not well-founded.

The surveillance evidence shows that on September 17, 2001, a month prior to her pre-hearing, Mrs. Ly was observed working at a restaurant from approximately 10:00 a.m. to 6:00 p.m. She was observed "cutting and cleaning vegetables, washing cutlery, preparing food and serving customers. She was repeatedly observed turning her head in various directions and quickly bending forward at the knees and at the waist in order to pick up items from the ground."⁴

Similarly, on September 19, 2002, Mrs. Ly was observed working in the restaurant from approximately 9:45 a.m. until 7:00 p.m. She was observed performing a variety of duties including "taking orders, serving food, clearing tables, washing tables, preparing food in the kitchen, washing dishes, sweeping the floor and tending the cash."⁵

On Sunday, October 21, 2001, five days after she had attended her pre-hearing, Mrs. Ly was observed from approximately 9:40 a.m. until 7:00 p.m. working in the restaurant. She was observed engaged in various aspects of restaurant work, including "taking orders, serving food, cleaning tables and wiping tables."⁶ She was also observed mopping the kitchen floor.

Again, on October 25, 2001, Mrs. Ly was observed from approximately 9:40 a.m. until 6:50 p.m. working in the restaurant. She was observed "to take orders, serve food, clear tables of dirty dishes, wash tables, re-arrange chairs and on one occasions, (sic) lifting a chair and carrying it to another table. The chair subsequently toppled over and Mrs. Ly bent down from the waist and raised the chair and placed it under a table." Mrs. Ly was also observed performing various kitchen duties from food preparation, to clean up. At closing time, she was observed sweeping the floor of the restaurant.⁷

I have viewed the video tape and photographs of Mrs. Ly working and would agree with the investigator's observation that Mrs. Ly carried out her duties with "a full range of movement including bending from the knees, bending forward from the waist, turning her head from side to side and a full range of motion about the arms and shoulders." In carrying out her duties, Mrs. Ly did not show any outward signs of discomfort, nor did she have any visible health aids.⁸

It is clear from the surveillance evidence that at the time Mrs. Ly attended the pre-hearing she was not substantially disabled from performing her duties as a caregiver nor was she in need of housekeeping services. Nevertheless, she made an ongoing claim for these benefits. When her case did not settle, Mrs. Ly abandoned her claim. From this I conclude it is more likely than not that Mrs. Ly had no intention of proceeding to a hearing if she could not settle her claim.

For these reasons I find that Mrs. Ly's abandonment of her claim, without notice, or compliance with the Commission's Dispute Resolution Practice Code, was an abuse of process. Accordingly, I find that Mrs. Ly must pay Royal's reasonable expenses in this hearing which are fixed in the amount of $4,070.03.⁹

2. Assessment Fee

Royal submits that Mrs. Ly commenced an application for arbitration that was frivolous and an abuse of process. Royal submits that Mrs. Ly never intended to proceed with this arbitration if she could not settle her claim. Royal claims that this case is similar to the case of Hoang and Kingsway¹⁰ where the applicant abandoned his claim after the hearing had been adjourned three times and settlement talks failed. The arbitrator in that case awarded Kingsway its assessment fee.

Subsection 282(11.2) of the Insurance Act provides that "[i]f 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." [emphasis added]

Arbitrator McMahon, in the case of Richard and Lombard,¹¹ made the following finding which I agree with:

...the intent of the drafters of section 282(11.2) was to afford a measure of relief to insurers which were forced to respond to applications for arbitration that should not have been launched, in the first place. The insurer is only entitled to relief under this section if it is called upon to respond to, and pay a filing fee in respect of, cases that are so devoid of merit as to be frivolous, or were launched to vex the insurer, or are in and of themselves, an abuse of the process. The insertion of the word "commences" focus the inquiry on the state of affairs as they existed at the time the action was launched, and not on later procedural steps,

[emphasis added]

Earlier cases which awarded insurers an amount equivalent to the filing fee, on the basis that the withdrawal was an "abuse of process" within the meaning of section 282(11.2), did not have the luxury of the present general expenses provisions found in Rule 73. To my mind it is preferable to deal with cases such as the present, under Rule 73, and to reserve section 282(11.2) for the extreme cases it was designed to redress.

In the case of Nguyen and Scottish & York¹² Arbitrator Leitch made the following comments with which I agree:

The distinction drawn by Arbitrator McMahon in Richard and Lombard seems sensible to me. It tends to reduce the potential for section 282(11.2) of the Insurance Act to overlap with the Expense Regulation. In my view, the former is intended to return to the insurer the filing fee which it should not have been required to pay because the application for arbitration should not have been filed in the first place. The latter is intended to indemnify either party (including an insurer) for arbitration expenses (but not the insurer's filing fee¹³) incurred due to the other party's insistence on continuing with the proceeding or any position taken by the other party during the course of the proceeding.

In his decision, Arbitrator Leitch also comments on a decision by Arbitrator Seife wherein Arbitrator Seife expresses a contrary view in the case of Dhami and State Farm.¹⁴ In that case, Arbitrator Seife wrote that subsection 282(11.2) of the Insurance Act:

...does not restrict the focus of the inquiry to the commencement of the arbitration application ... subsequent steps in the arbitration process could also be considered in deciding whether the applicant "commenced" an arbitration proceeding that is frivolous, vexatious or an abuse of process.¹⁵

I agree with the following comments by Arbitrator Leitch regarding the interpretation of subsection 282(11.2) of the Insurance Act in Dhami and State Farm :

However, with respect, this interpretation of the section appears to ignore its opening words and to increase, unnecessarily, the potential for overlap with the Expense Regulation. I consider two examples. In the first, an applicant files an arbitration which should never have been filed, and then takes manifestly unfounded, frivolous, vexatious or fraudulent positions which abuse the arbitration process. In my opinion, such an applicant should be exposed to the risk of an award under section 282(11.2) of the Insurance Act and adverse consequences under the Expense Regulation. In the second example, the application for arbitration was not fraudulent or manifestly unfounded when filed, but the applicant later abuses the arbitration process by taking manifestly unfounded, frivolous, vexatious or fraudulent positions. In my opinion, such an applicant should only be exposed to the risk of suffering adverse consequences under the Expense Regulation.

The key in the Richard and Lombard case and which was followed in Nguyen and Scottish & York is that in considering whether an applicant should pay the insurer its assessment fee, an arbitrator must look at what the circumstances were at the time the application for arbitration was filed as opposed to what followed later on in the process.

For the following reasons I find that Royal has not provided sufficient evidence to prove on a balance of probabilities that at the time Mrs. Ly applied for arbitration her claim was devoid of any merit such that it was frivolous and an abuse of process. I find that the facts in the present case can be distinguished from the Hoang case.

In the Hoang case, the Insurer never paid the Applicant any benefits. There were three adjournments in that case caused by the Applicant. It was at the fourth arbitration hearing date, which was peremptory to the Applicant, that the Applicant abandoned his case without notice to the insurer after the case did not settle. In that case, Arbitrator Renahan was satisfied with the evidence presented, that from the beginning the Applicant's claim for benefits was without merit and accordingly awarded the insurer the return of its assessment fee of $3,000.

In the present case, although Royal initially did not pay Mrs. Ly's claim for benefits, it paid most of her claim, including caregiver benefits, at the first mediation.¹⁶

Shortly after the mediation, Mrs. Ly filed for arbitration in respect of the amounts still owing. In her application Mrs. Ly did not claim for caregiver benefits. Her application for arbitration, dated June 12, 2001, less than a week after the mediator's report, was received by the Commission on June 18, 2001.

The fact that approximately a week before Mrs. Ly applied for arbitration the Insurer paid most of her claims leads me to the conclusion that the Insurer had no cause to believe that Mrs. Ly's claim was without any merit. I have received no evidence from Royal that at the time Mrs. Ly filed for arbitration her application was frivolous and an abuse of the process.

In this case, Mrs. Ly did not claim caregiver benefits when she applied for arbitration. However, approximated two weeks prior to the pre-hearing she mediated the issue of caregiver benefits¹⁷ at a time in which the surveillance evidence confirms that she was working in a restaurant. Clearly, Mrs. Ly was abusing the system, after she had applied for arbitration, when she knowingly claimed caregiver benefits at a time she was working.

Although there is surveillance evidence to show that at the time of the pre-hearing Mrs. Ly was apparently dishonest in her claim for ongoing caregiver benefits, in my view this situation falls into Arbitrator Leitch's second example in Nguyen. Namely, where there is evidence that not at the time of but after the filing of the application for arbitration the applicant is found to have abused the arbitration process, then in that case the applicant should be liable only for the insurer's expenses and not the insurer's assessment fee.

Accordingly, for these reasons I find that Royal is not entitled to the return of its assessment fee.

October 9, 2002

Joyce Miller Arbitrator

Date