Neutral Citation: 2002 ONFSCDRS 168

FSCO A01-000550

FINANCIAL SERVICES COMMISSION OF ONTARIO

BETWEEN:

PATRICIA HILL

Applicant

and

WAWANESA MUTUAL INSURANCE COMPANY

Insurer

DECISION ON A PRELIMINARY ISSUE

Before:

John Wilson

Heard:

September 25, 2002, at the offices of the Financial Services Commission of Ontario in Toronto.

Appearances:

Myron Sidenberg for Ms. Hill

Donald G. Cormack for Wawanesa Mutual Insurance Company

Issues:

The Applicant, Patricia Hill, was injured in a motor vehicle accident on January 13, 1995. She applied for and received statutory accident benefits from Wawanesa Mutual Insurance Company ("Wawanesa"), payable under the Schedule.¹ Having received income replacement benefits for 104 weeks, Ms. Hill was entitled to a Loss of Earning Capacity (LEC) benefit offer from her Insurer.

Wawanesa provided her with a Loss of Earning Capacity offer, pursuant to the Schedule, which was rejected by Ms. Hill The parties were unable to resolve their disputes through mediation, and Ms. Hill applied for arbitration at the Financial Services Commission of Ontario under the Insurance Act, R.S.O. 1990, c.I.8, as amended. An arbitration took place, on the issue of Ms. Hill's LEC dispute.

The arbitration commenced on May 10, 1999 but was adjourned to August 9, 1999, to allow counsel for Ms. Hill to provide particulars of a dispute concerning her pre-accident earning capacity. At the resumption on August 9, following discussions between counsel for the Insurer and the Applicant, the hearing proceeded on the basis that there was no dispute as to the pre-accident earning capacity.

The Insurer and the Applicant now disagree, however, as to the exact effect of, and the extent of the agreement to withdraw the issue of the Pre-Accident Earning Capacity (PEC) benefit from that hearing.

Ms. Hill has now, after the three-year mandatory review provided for in section 33 of the Schedule, once again challenged the PEC calculation of the Insurer.

The preliminary issues are:

1. Is Ms. Hill precluded from proceeding to arbitration because her application for arbitration was filed beyond the two-year limitation period set out in subsection 281(5) of the Act and subsection 72(1) of the Schedule?

2. Is Ms. Hill precluded from proceeding to arbitration on this matter due to her abandonment of the issue of quantum of the PEC at the previous arbitration hearing?

3. Was Ms. Hill precluded from proceeding to mediation, and, ultimately, arbitration, on the issues she raised, since the application exceeds the jurisdiction of the Commission?

The issues raised by the Insurer in this matter raise, in turn, further issues of the interpretation of the scope of the original agreement at the hearing of August 1999, whether the Insurer at any time waived any rights it may have had under that agreement, and whether the doctrine of issue estoppel prevents Ms. Hill from raising the PEC issue again. Also of importance, is a consideration of the scope of the three-year mandatory review pursuant to section 33 of the Schedule, and whether it permits a re-examination of the PEC issue.

Result:

1. Ms. Hill is not precluded from proceeding to arbitration on the PEC issue by reason of the expiry of the limitation period.

2. Ms. Hill is bound by her solicitor's agreement as to the quantum of the PEC, and is thereby precluded from raising this issue in a new arbitration.

3. The applications for mediation and arbitration are clearly within the jurisdiction of the Commission.

EVIDENCE AND ANALYSIS:

The loss of earning capacity benefit, which arises from Part VI of the Bill 164 Schedule, attempts to address, in long-term disability, the loss of an insured's capacity to earn employment income as a result of an accident.

As such it looks at both an insured pre-accident income, as evidence of his or her earning capacity, and the residual capacity of an individual to earn employment income at the two year mark, post-accident. Thus, a loss of earning capacity benefit is, essentially, a function of the interaction of these two measurements.

A reading of the decision of Arbitrator Leitch in this matter certainly creates an impression that an agreement of some sort which related to the PEC amount was reached between the parties at the hearing. On the first page of the decision (Hill and Wawanesa Mutual Insurance Company, FSCO A98-001113, November 29, 1999) Arbitrator Leitch stated clearly:

Though the parties agree on the determination of Ms. Hill's pre-accident earning capacity, they have been unable to resolve a dispute about the determination of her residual earning capacity.

A reading of the transcript of the proceedings on the days when the PEC issue was raised suggests that Arbitrator Leitch had solid reasons for believing that there was an agreement on the PEC amount. At the May hearing, Mr. Pace, co-counsel for Ms. Hill stated "We've just looked at it, the PEC is not correct." The arbitrator later responded:

Of course the ultimate issue is entitlement to LECB. It can't be determined without both a PEC and a REC, am I right? Do you agree with that... So if there's a a dispute about the PEC, you can't resolve the issue- even if you agree on the record - make a decision about the REC, it doesn't tell you what the figure is because you don't have a PEC.

The arbitrator then, after some discussion, adjourned the matter to August 10, 1999, to enable the potential issue of the PEC to be dealt with by the parties.

At the resumption of the hearing on August 10, the Applicant provided some supplementary calculations of the PEC, just prior to the commencement of the hearing. Counsel for the Insurer objected to dealing with the PEC issue, raising limitations, lack of mediation, lack of disclosure, and potential prejudice in support of its position.

The arbitrator gave counsel some time to discuss the disposition of the PEC issue in private. Upon re-convening he asked if there was any progress. Mr. Ipacs, counsel for Ms. Hill replied that Mr. Cormack, counsel for the Insurer would speak to the question. Mr. Cormack, in turn, stated:

What we have agreed on, subject to your views, is that we will proceed with the original arbitration as scheduled, which is on the issue of residual earning capacity only. And we will agree that the PEC is the number that was offered by Wawanesa. So there will be no dispute before you with regard to the PEC.

Mr. Ipacs stated that the number, which both agreed to was $259.25 gross. The arbitrator asked some clarifying questions, before asking: "and there is not going to be any other issue left outstanding?" Mr. Cormack responded:

That's right. That the applicant has agreed that the.. for the purposes of everything, that the PEC number is the two, fifty-nine twenty-nine. There's no longer an issue with regard to mediation or arbitration, anything of that. It's agreed that that's the number. There is no dispute about that number backwards, forwards or today.

The arbitrator thanked the parties and asked Mr. Ipacs if he was ready to proceed. He replied "Yes." The hearing then proceeded, based on the understanding that the PEC number was not in issue. Arbitrator Leitch issued a decision on November 29, 1999, which found that Ms. Hill had a residual earning capacity of zero.8

Ms. Hill has now applied for mediation and arbitration of a dispute with her Insurer, a dispute that centres on the calculation of her pre-accident income capacity. The Insurer has, in turn, filed a motion asking that Ms. Hill's application be dismissed on the basis of the previous agreement, as well as on the basis that it was time-barred.

The validity of the Agreement at the Hearing:

On the face of the transcript, there was some sort of agreement between the parties that the PEC number be fixed. Counsel for the Applicant accepts that there was an agreement but maintains that it was a procedural agreement only, to allow the arbitration to go ahead, and not a waiver of the Insured's right to challenge the PEC calculation. The Insurer, however, maintains that there was an agreement to accept the PEC calculation for all time. In the words of Mr. Cormack, at the August 1999 hearing, the Applicant, through counsel, agreed that:

for the purposes of everything, that the PEC number is the two, fifty-nine, twenty-nine. There's no longer an issue with regard to mediation or arbitration, any of that. It's agreed that that's the number. There is no dispute about that number backwards, forwards or today.

Since the days of the first codification of Roman Law the doctrine of error in substantialibus has been used to void contracts where mistakes as to the quality and the existence of the subject matter. As Blackburn J. summarized in Kennedy v. Panama, etc. Royal Mail Co. (1867), L.R. 2 Q.B.580:

The principle is well illustrated in the civil law, as stated in the Digest, lib. 18, tit. 4. De Contrahenda Emptione, leges 9,10,11. There, after laying down the general rule, that where parties are not at one as to the subject of the contract there is no agreement, and that this applies where the parties have misapprehended each other as to the corpus, as where an absent slave was sold and the buyer thought he was buying Pamphilus and the vendor thought he was selling Stichus, and pronouncing the judgement in such a case there was no bargain because there was "error in corpore, the framers of the digest moot the point thus: Inde quaeritur, si in ipso corpore non erretur, sed in substantia error sit, ut, puta, si acetum pro vino veneat, aes pro auro, vel plumbum proargento vel quid aliud argento simile; an emptio et vendito sit"

Blackburn J. went on to conclude:

And, as we apprehend, the principle of our law is the same as that of the civil law; and the difficulty in every case is to determine whether the mistake or misapprehension is as to the substance of the whole consideration, going as it were, to the root of the matter, or only to some point, even though a material point, an error as to which does not affect the substance of the whole consideration.

If the parties were mistaken as to the terms of the agreement, then there may be grounds for the recision or rectification of the contract. Mistakes as to terms may be mutual or unilateral. As Thompson J. noted in McMaster University v. Wilchar Construction Ltd. et al. 1971 CanLII 594 (ON HCJ), [1971] 3 O.R. 801:

In mutual or common mistake the error or mistake in order to avoid the contract at law, must have been based either upon a fundamental mistaken assumption as to the subject-matter of the contract or upon a mistake relating to a fundamental term of the contract. There, the law applies the objective test as to the validity of the contract.

In this matter the disagreement was whether the agreement as to the PEC quantum was for all time or was merely a procedural agreement to facilitate the hearing. Clearly, counsel for the Applicant had, or now has, retrospectively, a firm belief that the more restrictive meaning was intended in the agreement.

This is not a situation where an offeree accepted an offer which he knows to be made by mistake. Both parties had canvassed the issue of a possibly different PEC, and the adjournment was granted to allow the Applicant to flesh out this issue, if so advised. Only after ample time for reflection did the Applicant concede the PEC issue at the resumption of the hearing. When the agreement was articulated, in the presence of the arbitrator, counsel for the Applicant made no objection to the wide ambit of the agreement, as described by Mr. Cormack.

Although there is a generalized onus on the Insurer in this motion, there is also an onus on a person, such as Ms. Hill, alleging that an agreement is not as it appears to be on its face . As Cheshire, Fifoot and Murchison note in Cheshire and Fifoot's Law of Contract, (8^th edition, Butterworth’s London, 1972) at p. 221:

It should also be emphasized that the burden of persuading the court to disturb what to outward appearances is a binding contract falls on the party who alleges the mistake. Moreover, the burden is not light, for the result of holding that there is no contract may seriously prejudice a third party who has in good faith made a bargain relating to the subject-matter of the apparent agreement.

Although it is possible that Mr. Ipacs, counsel for the Applicant, still contemplated a limited procedural agreement, that was not the impression that his assent, by words and conduct, gave. Any reasonable person hearing the words spoken by Mr. Cormack would have believed that the temporal reach of the agreement was both "backwards, forwards" and "today."

Counsel for the Applicant stretches credulity in asking this tribunal to accept that the agreement should be interpreted as a limited, procedural, agreement that preserved the Applicant’s right to challenge the PEC once again. I find that, based on the clear evidence of the transcript, Mr. Ipacs waived any future right to challenge the PEC calculation.

I further find that there are no grounds for setting aside or amending the agreement on the basis of a mistake. Any belief that the agreement had any effect other than that articulated by Mr. Cormack, could only be sustained by wilful blindness or wishful thinking.

I am buttressed in this finding by the fact that the results of the agreement were reflected, unconditionally, in the arbitrator’s decision. As the arbitrator pointed out, the PEC assessment is an issue in any consideration of a LEC benefit. It was clearly raised as an issue. It was resolved by withdrawing it as an issue.

I find, as well that there is no credible evidence that the Insurer, at any time, waived its reliance on this agreement, and, in effect, agreed to re-open the PEC issue.

Effect of a Solicitor's Agreement:

There is no evidence that Ms. Hill ever, personally, acknowledged that there was no dispute with regard to PEC. However, the Pace law firm represented Ms. Hill at the time in question. Indeed, Mr. Ipacs of the Pace law firm made the very agreement at issue in this hearing, presumably on behalf of Ms. Hill.

A solicitor acts not only as an advocate for a client, but also, in many ways as the agent for a client with regard to matters under his or her retainer. It is clear law that a solicitor, properly retained, may bind a client, or compromise proceedings, unless the client has limited the retainer, and the limitations in the retainer are known to the opposing side..

As Evans J.A. of the Ontario Court of Appeal noted in Scherer v. Paletta (1966), 1966 CanLII 286 (ON CA), 57 D.L.R. (2d) 532, at p. 534:

The authority of a solicitor arises from his retainer and as far as his client is concerned it is confined to transacting the business to which the retainer extends and is subject to the restriction set out in the retainer. The same situation, however, does not exist with respect to others with whom the solicitor may deal. The authority of a solicitor to compromise may be implied from a retainer to conduct litigation unless a limitation of authority is communicated to the opposite party.

The law of Agency, in this respect, has been consistent since the19th century. In Kirkstall Brewery Co. v. Furness Railway Co., (1874) L.R. 9 Q.B. 468, Cockburn C.J. stated:

Then, if Podmore was the agent of the defendants, and if it was within the scope of his duty and authority to do what the principal, if on the spot, would have done, what he says while he is so acting is equally admissible as if said by the principal himself.

As Evans J.A. further noted, somewhat more recently, in Scherer v. Paletta (supra):

A client having retained a solicitor in a particular manner, holds that solicitor out as his agent to conduct the matter in which the solicitor is retained. In general, the solicitor is the client’s authorized agent in all matters that may reasonably be expected to arise for decision in the particular proceedings for which he has been retained. Where a principal gives an agent general authority to conduct any business on his behalf, he is bound as regards third persons by every act done by the agent which is incidental to the ordinary course of such business or which falls within the apparent scope of the agent’s authority.

This approach is consistent with the statement of Sopinka, Lederman and Bryant in The Law of Evidence in Canada (Butterworth's Toronto 1992) at page 293 that "... if statements are made by a party in a representative capacity and were made in that connection, those statements are admissible against the party he or she represents."

Other than a bald assertion by Mr. Ipacs, in his affidavit that the "Applicant did not instruct me to abandon her PEC claim," there is no probative evidence that the Pace law firm’s retainer was limited in any way by Ms. Hill, nor any suggestion that the Insurer was aware of any relevant limitation on the authority of Mr. Ipacs to make concessions with regard to the PEC calculation.

I note, as well, the total absence of evidence from Ms. Hill in this matter. Given the interest Mr. Ipacs may well have in the outcome of this matter, his statement, without the corroboration of Ms. Hill or others, must be seen as potentially self-serving, and be given little weight.

Consequently, I find that any agreement, or concession on the PEC calculation that the Pace law firm may have made is binding on Ms. Hill, whatever her instructions to her lawyers may have been at the time.

Res Judicata and Estoppel

The Insurer alleges that, having agreed, at an arbitration, that the PEC calculation was not in issue, counsel for Ms. Hill is barred from raising it subsequently. As the Insurer pointed out, and, indeed, as the arbitrator noted on the transcript, the issue of an appropriate LECB cannot be decided without an exact figure for the PEC. Likewise, there can be no useful calculation of residual earning capacity without a determination of what exactly the pre-accident capacity of an insured would be.

Therefore, the arbitrator, in making a decision on residual earning capacity, might be seen to have dealt, as well, with the PEC, which is essential and necessary to any REC calculation.

As Sopinka Lederman and Bryant note in The Law of Evidence in Canada, (supra) note at p. 1068:

The modern rule of estoppel by res judicata is grounded upon two broad principles of public policy: first, that the state has an interest that there should be an end to litigation (interest republica ut sit finis litum) and, secondly, that no individual should be sued for more than once for the same cause (nemo debet bis vexari pro una et eadem causa).

In Angle v. M.N.R. 1974 CanLII 168 (SCC), [1975] 2 S.C.R. 248, Dickson J. stated that it was not sufficient that a matter arise collaterally or incidentally from a previous decision, but that "(T)he question out of which estoppel is said to arise must have been "fundamental to the decision arrived at" in the earlier proceedings."

Both res judicata and issue estoppel are persuasive rules of evidence, not hard and fast rules of law. Consequently, there is some discretion in their application to the facts of a particular case.

Although a PEC calculation may be seen to be fundamental to the determination of a residual earning capacity, I have difficulty relying specifically on the principles of res judicata, or cause of action estoppel in dismissing the matter at hand.

Although the decision of Arbitrator Leitch incorporated the agreement on the PEC calculation, and might otherwise meet the basic requirements for issue estoppel outlined in Carl Zeiss Stiftung v. Rayner & Keeler Ltd. et al. (No. 2), [1967] 1 A.C. 853 ( H.L.), the issue of PEC. was not directly canvassed in evidence, nor in the arbitrator’s findings or Order. Nor am I confident that the mere mention of the resolution of the PEC number in a decision constitutes a finding on the PEC issue that was "fundamental to the decision arrived at" as defined in Angle v. M.N.R. (Supra).

The question of the consequences of a withdrawal of a claim at trial has been dealt with directly in the context of the court system. The old rule at both common law and equity was that parties were able to withdraw an issue and claim "nonsuit," and in the words of Halsbury L.C. in Fox v. Star Newspaper Company [1900] A.C. 19 "at his own election could lose his writ, as it was said, and at his election bring another action for the same cause."

Following the passage of the Judicature Acts in England and, subsequently, in Ontario, the system changed drastically. Chitty L.J. in the same matter at first instance [1898] 1 Q.B. 636, described the process.

The principle of the rule is plain. It is that after the proceedings have reached a certain stage the plaintiff, who has brought his adversary into court, shall not be able to escape by a side door and avoid the contest. He is then to be no longer dominus litis, and it is for the judge to say whether the action shall be discontinued or not and upon what terms.

Halsbury L.C., in the appeal (supra) summarized:

The substance is that when it comes into court, and when the plaintiff offers no support to his action, there must be a verdict for the defendant.

The procedural reforms, first introduced by the Judicature Act are now incorporated in the Ontario Rules of Practice . Rule 23 deals with discontinuance, and provides that, prior to the close of pleadings, a plaintiff may discontinue all or part of an action without prejudice to the right to bring a further action. As well, with the approval of a judge, or on consent of both parties, a party may discontinue after the close of pleadings.

The court Rules and most jurisprudence in this area draw specifically on the Judicature Act reforms, and its successor, the Courts of Justice Act. R.S.O. 1990 Chap. C.43 .

While there is some, limited, jurisprudence dealing with the effect of withdrawal outside of the context of the Judicature Act reforms( see Gibson v. North Easthope Township 21 O.A.R. 504, C.A.), this is not a subject that has been highly litigated.

Given the jurisprudence at the Commission holding that the court Rules have no bearing on matters before administrative tribunals (see Bittan and CGU Insurance Company (FSCO Appeal P01-00058, May 30, 2002), it is not at all clear, in the context of an arbitration at the Commission what the exact consequences of a withdrawal are, and whether a withdrawal at a hearing is a defence to a new action brought by the withdrawing party. Certainly, it is not dealt with in Rule 70 of the Commission's Practice Code, which references withdrawal.

That is not to say that the principles of public policy identified by Sopinka et al. (supra) cannot be addressed in reviewing this matter. In Heyl et al. v. Lac Minerals 50 O.R. (2d.) 535, White J. refers to a theory that "is akin to estoppel, in the circumstances where a person having a choice between two courses of conduct, chooses one from which that person ought not to be allowed to resile." He also characterized this as a "theory that a person may not approbate and reprobate."

In the past arbitration, Ms. Hill made a specific decision not to proceed to challenge the PEC amount, as was her right under the legislative scheme incorporated into her contract of insurance. By permitting her counsel to settle the PEC issue at the hearing, Ms. Hill, in effect, led the Insurer to believe that she would not be challenging the PEC number "backwards, forwards or today."

In the words of Lord Cairns in Hughes v. Metropolitan Railway Co. (1877), 2 App. Cas. 439:

to suppose the strict rights arising under the contract will not be enforced, or will be kept in suspense, or held in abeyance, the person who otherwise might have enforced these rights will not be allowed to enforce them where it would be inequitable having regard to the dealings which have thus taken place between the parties.

This approach, indeed, would be consistent with the decision of Hagarty C.J.O. in Gibson v. North Easthope (supra) where he found "that the plaintiff is by his acts and acquiescence precluded from obtaining the relief claimed." Osler J.A., although differing on the issue of the right of withdrawal, agreed with the Chief Justice on the issue of estoppel.

This alone, it appears to me, must preclude the plaintiff; who is the only person objecting to the drain, from maintaining this action, for his consent was directly calculated to induce the council to suppose that their jurisdiction was not contested, and that there was nothing to prevent them from going on with the works, as they at once proceeded to do.

Osler J.A. continued:

I am of the opinion that he cannot now be heard to impeach the by-law upon any ground which was open to him, four years before he brought this action, on the motion of which he gave notice and which he afterwards expressly abandoned.

I accept that White J."s theory "akin to estoppel" should apply to the facts of this case and find that, given Ms. Hill's agreement, through counsel, that there was no issue of PEC, "backwards, forwards or today," it would be inequitable to allow her to proceed to arbitration on that issue now.

Limitations:

Although the Insurer raised limitations as an issue, I will comment on it only briefly, since I have already found that Ms. Hill is bound by her counsel's agreement as to the PEC amount and may not, in any case, proceed with her request to arbitrate the PEC issue.

Other than a basic chronology of the dates of the various applications for mediation and arbitration, there was little evidence before me as to what constituted a "refusal to pay" as contemplated in section 72 of the Schedule, so as to set in motion the time limits set out in that section.

The onus is on an insurer who intends to rely on limitations, to demonstrate that an insured is clearly barred from proceeding due to the passage of time. Given the approach taken to limitations by the Supreme Court of Canada in Smith v. Cooperators General Insurance Company (2002 SCC 30, 2002 S.C.C., 30), taken together with jurisprudence at the Commission, the onus on an insurer in such a case is considerable.

I find that, given the sparse evidence in this matter, the Insurer has not met its onus of proving that Ms. Hill was barred from proceeding on the PEC issue due to the passage of time.

Three-Year Review:

Subsection 33(1)(a) of the Schedule provides:

The insurer shall review the amount of the weekly loss of earning capacity benefit, (a) three years after the loss of earning capacity benefits are first paid to a person;

Ms. Hill submits that this review permits her to re-open the question of pre-accident earning capacity, three years post-accident. While subsection 33(1) merely sets out the time frame for review, the balance of the section fleshes out and colours its interpretation.

Subsections 33(2)(a) and (b) clarify the areas that are subject to the three-year review.

(a) if the insurer believes that there has been no material change in the ability of the person to earn the amount that is being used for the purpose of determining the person’s residual earning capacity, offer to continue to pay the person a weekly loss of earning capacity benefit in the same amount as the person's current benefit ; or

(b) in any case, offer to pay the person a weekly loss of earning capacity benefit in an amount determined under section 28 based on the insurer's estimate of the person’s current residual earning capacity determined in accordance with section 30 and specified in the offer. ( emphasis added)

The focus in this review is on factors that change and evolve in the three-year period following the payment of a Loss of Earning Capacity Benefit. The arbitrator found that Ms. Hill had no residual capacity. The Insurer’s position at the three-year mark is that she still has no capacity.

At first glance, section 33 might appear to offer a" foot in the door" towards a mandatory review of the PEC. While subsection 33(4) provides that an offer made pursuant to the three-year review "shall be made in writing and shall include the particulars set out in clauses 21(5)(b) to (d)," including residual earning capacity, the provision only requires that the particulars be set out in any offer.

It is clearly meant, in the context of the review, to provide some transparency to the final number. If the insurer is offering a different REC, following the review, it is critical for any insured to know the origin of the different numbers, in order to avail himself or herself of the right to challenge the insurer’s REC number.

Provided, however, that the original calculation was done in conformity with section 30, there would be nothing more, PEC-related, required of an insurer upon review. I emphasize, that in this matter, I have no evidence that the original PEC calculation was not in accordance with section 30, nor that it was not fairly based on the information provided to the Insurer by the Insured.

Given the presumption of regularity (omnia praesumuntur rite et solemniter esse acta donec probetur in contrarium - all things are presumed to have been rightly and duly performed until it is proved to the contrary), an applicant must do more than merely allege that the PEC is wrongly calculated. He or she must provide evidence, sufficient to dispel the presumption, that the PEC calculation was not done in accordance with section 30. I find that Ms. Hill has not met that onus.

It is important to note that the PEC calculation is not necessarily a strictly mathematical calculation. Section 29 has some 6 different subsections, dealing with different groups of applicants, all employing different mixes of objective and subjective considerations in the calculation of a PEC. Thus, an agreement as to a criterion such as employment status can have wide ramifications for the calculation process.

As well, there can be the risk of significant prejudice if a PEC becomes an issue some years after the accident. Patently, all evidence relating to the PEC derives from the pre-accident period. If pre-accident capacity is not an active issue early on, or if an insurer is lulled into complacency with regard to the PEC, the opportunity is lost to fully investigate and compile evidence relative to the PEC, before memories weaken, or documents are lost or destroyed.

Subsection 33(b) also provides for a similar review at the eight-year mark. If the three-year mark is, of necessity at least five years removed from the accident, then with regard to a review of matters over a decade previous, an eight-year review of a PEC would require the compiling of evidence that could only, charitably, be described as "stale-dated." This stands in contrast to the residual earning capacity issue, which, by its very nature, focusses on the present. Consequently, for practical, as well as fairness reasons, it is difficult to conceive that the legislature intended the mandatory review to automatically re-open the PEC calculation in every case.

While it is clear that an insurer is required to look to changes in the ability of a person to work, it is not clear that the insurer must, automatically, consider anything related to pre-accident earning capacity, other than identifying the PEC number used in the review. In this case the PEC calculation is identified as being the same amount agreed to by counsel and used at the arbitration hearing before Arbitrator Leitch.

If, in this matter, there is a suggestion that the PEC amount might now be calculated differently, then the comments of Mr. Pace at the opening of the original arbitration suggest that such information was available to him at the time of the original hearing. Likewise, when Mr. Ipacs conceded the PEC amount at the hearing resumption, it is evident that he did so notwithstanding any information he may have had of a possible, alternative, PEC calculation. I have no evidence before me that there is any new information concerning the PEC that was not reasonably available to Ms. Hill at the time that the PEC figure was agreed upon.

Consequently it is hard to see how circumstances surrounding the PEC could have changed in any way over the three-year period prior to the review.

Mr. Sidenberg, for Ms. Hill, provided an arbitration case, that he submits, stands for the proposition that Ms. Hill’s PEC calculation may be re-opened.

In York and Zurich Insurance Company (FSCO A00-000126 July 30, 2001), Arbitrator Makepeace found that the Applicant was not barred from arbitrating his PEC calculation by a limitations period. In her decision, the arbitrator canvassed thoroughly the process of arriving at LECB levels, but her decision, in fact, turned on the application of subsection 72(1) of the Schedule to Mr. York’s PEC application.

I note, as well, significant factual distinctions between York and the present case. In York, the Insurer argued that the applicant implicitly accepted the PEC component of its offer. In the present case, counsel for Ms. Hill explicitly agreed, on the record, that the PEC had a certain value. Consequently, I feel that the York decision has limited applicability to the special facts of this case. In any event, it does not stand for the proposition that the issue of PEC is automatically re-opened upon the three-year review.

There may well be, in some cases, unforseen circumstances which would possibly justify the re-examination of a PEC, but in this matter, I find nothing to suggest that there are any such circumstances .

It should be remembered that Ms. Hill's case is based on an unusual circumstance. It is rare that counsel will withdraw and settle an issue for all time, and then attempt to re-open, as it were, by the back door. While Ms. Hill has the right to have her Insurer review her loss of earning capacity benefit, a PEC reconsideration will not necessarily form part of that review.

Even if the mandatory review proceedings at the three-year mark actually contemplate a re-examination of pre-accident earning capacity, I find that Ms. Hill is estopped by her counsel's agreement from presenting any other figure or challenging the PEC.

Although subsection 279(2) of the Insurance Act forbids any agreement opting out of a party's right to mediate, litigate, appeal or vary an order, I find that the agreement does not constitute such opting out, since it deals only with a discreet component of Ms. Hill's claim. She has not released her right to mediate, arbitrate or appeal any order. Indeed she has been able to mediate and arbitrate this very issue, albeit, with an adverse finding.

Nor is the agreement caught by the Settlement Regulation which refers to:

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 Benefits Schedule.

Ms. Hill's dispute, with respect to entitlement to a LEC benefit, was neither disposed of by agreement, nor settled. It went to a full arbitration, and a decision was delivered by an arbitrator, disposing of the claim.

Indeed, if every time, in the course of an arbitration a fact was conceded, or a procedural agreement put into effect, parties had to invoke the Settlement Regulation, then the arbitration process would become interminably long and break down in chaos. The regulation was intended to deal with the ultimate disposition of a claim, and not the multitude of concessions and agreements that are necessary to keep a hearing timely and focussed.

While there is some sympathy for the dilemma of an applicant who may remain forever subject to an arbitrary calculation of her PEC, with a potentially lower benefit than had this issue been pursued at the hearing, I find that section 33 of the Schedule does not give her an open door to re-examine the agreed PEC calculation.

Jurisdiction:

Subsection 280(1) of the Insurance Act provides for the referral to mediation of "any matter in dispute of the insured person's entitlement to no-fault benefits or in respect of the amount of no-fault benefits to which the insured person is entitled. Subsection 281(1) provides for the commencement of court or arbitration proceedings once a mediation has failed. Subsection 279 (4) provides that an arbitrator shall "determine issues before them by order."

In this matter, it is evident that the outcome could have a direct effect on the quantum of Ms. Hill's benefits. She proceeded to arbitration, having met the pre-requisite of a failed mediation on the issue. I have no hesitation, therefore, in finding that this dispute is properly before me as an arbitrator, and that I am obliged to determine the issues in the matter before me.

While there may be elements in this dispute that might have been resolved prior to arbitration by a reading of the transcript, such considerations do not deprive the Commission of jurisdiction. Rather, they may be, properly, taken into account in any expense award that may be made following this proceeding.

EXPENSES:

I make no order at this time with regard to expenses in this preliminary issue hearing. If the parties are unable to agree upon expenses, they may speak to this issue at a later date.

October 25, 2002

John Wilson Arbitrator

Date

Neutral Citation: 2002 ONFSCDRS 168

FSCO A01-000550

FINANCIAL SERVICES COMMISSION OF ONTARIO

BETWEEN:

PATRICIA HILL

Applicant

and

WAWANESA 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. Ms. Hill is barred from proceeding to arbitration by reason of her solicitor's agreement resolving the PEC issue.

October 25, 2002

John Wilson 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.