Zahir Rahic v. Allstate Insurance Company of Canada, 2002 ONFSCDRS 182

Neutral Citation: 2002 ONFSCDRS 182

FSCO A99-000277

FINANCIAL SERVICES COMMISSION OF ONTARIO

BETWEEN:

ZAHIR RAHIC

Applicant

and

ALLSTATE INSURANCE COMPANY OF CANADA

Insurer

DECISION ON EXPENSES

Before:

David J. Evans

Heard:

By telephone conference call on August 26, 2002.

Appearances:

Karl Arvai for Mr. Rahic

Todd J. McCarthy for Allstate Insurance Company of Canada

Issues:

The Applicant, Zahir Rahic, was injured in a motor vehicle accident on March 26, 1996. A four-day hearing was to start October 30, 2000, to deal with his claims for statutory accident benefits under the Schedule.¹ However, after about four hours of discussions on the first hearing day, the parties settled the matter, subject to expenses. They have not been able to agree on the amount of the expenses.

The issue in this further hearing is:

1. What is the amount of expenses to which Mr. Rahic is entitled in respect of the preparation for and attendance at the arbitration hearing?

Result:

1. Allstate shall pay Mr. Rahic $20,913.68 for his expenses of the arbitration.

EVIDENCE AND ANALYSIS:

Mr. Rahic is claiming expenses in respect of the arbitration for services rendered in respect of the arbitration by two different law firms.

Mr. Rahic was initially represented by Mr. Douglas Ferguson, who along with his articling student, prepared the file, attended the pre-hearing, and prepared for the hearing, which was originally scheduled to start on December 13, 1999.

By letter dated December 9, 1999, Mr. Karl Arvai requested an adjournment of the hearing on behalf of Mr. Rahic, as he had just been retained. An adjournment to May 2000 was granted by Arbitrator Killoran on condition that Mr. Rahic pay Allstate its costs for one day thrown away. The new hearing dates were in turn adjourned to October 2000 at Allstate's request.

Shortly before the hearing, counsel for Mr. Rahic delivered a number of medical reports that he had obtained. Based in part on these new reports, the parties settled, subject to expenses.

Mr. Arvai served a Schedule of Expenses totalling almost $33,000. This includes 13.9 hours at $100 an hour² for Mr. Ferguson and 27.1 hours for his articling student at $55 an hour plus disbursements of about $2,700 for the period before Mr. Rahic retained Mr. Arvai. Mr. Rahic claims 106.4 hours for Mr. Arvai's work at $150 an hour, and 21.9 hours for Mr. Arvai's assistant, Christos Nicolis, at $100 an hour. Thus, Mr. Rahic claims a total of 169.3 hours. The disbursements claimed by Mr. Arvai on Mr. Rahic's behalf total about $7,600.

Allstate disputes the total amount of hours claimed by Mr. Rahic and the hourly rates. It also disputes some individual disbursements. Both are determined by the Dispute Resolution Practice Code, Third Edition (DRPC).³

Total hours claimed and hourly rate:

The legal fees and disbursements that may be awarded are set out in the Dispute Resolution Expenses Schedule (DRES) to section 12 of the Expense Regulation.⁴ Subsection 12(2) of the Regulation sets out a number of criteria an arbitrator must consider in determining entitlement to expenses. Subsection 3(2) of the DRES requires me to consider those same criteria when determining the number of hours for which legal fees may be awarded.⁵

I will consider these criteria in turn.

Criterion 1: Each party's degree of success in the outcome of the proceeding.

Mr. Arvai submitted that on taking over the file, he found that the medical evidence was deficient, so he obtained new medical reports. The final settlement involved only a minor compromise on interest, bringing Mr. Rahic's benefits up to date at the time of the settlement for a total of $85,000 plus expenses. In addition, this was not a full and final settlement and Mr. Rahic continues to receive his benefits. Thus, Mr. Rahic achieved essentially 100 per cent of his goals in bringing the arbitration.

Criterion 2: 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.

Mr. Rahic submitted that this criterion applied equally to both parties, as each had changed its solicitor once, leading to two adjournments. As outlined earlier, the hearing scheduled to commence on December 13, 1999 was adjourned at Mr. Rahic's request to May 1 to 4, 2000. These new hearing dates were in turn adjourned to October 2000 at Allstate's request. Allstate's counsel, Ms. Joanna Chadwick, requested the adjournment by letter of April 12, 2000, because she was leaving her firm in May 2000 and, as "under no circumstance would [the hearing] be completed in four days," she was "very concerned about the arbitration starting, but then not being completed with the same lawyer."

However, Allstate submitted that in fact Mr. Rahic was penalized for one day thrown away of Allstate's expenses. Furthermore, it submitted that one reason the matter did not settle earlier was that the new medical reports were not delivered to Allstate until two weeks before the hearing.

Although Mr. Arvai had obtained most of the reports earlier in the year, such as the reports of Dr. R. Schnurr, Dr. E. Newell and Dr. J. Sweeney, all dated in April 2000, the reports were not provided to Allstate until early October 2000 .

Criterion 3: 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.

Mr. Arvai submitted that Allstate, in accepting the Applicant's offer and reinstating benefits, essentially admitted that it knew or should have known that Mr. Rahic was entitled to benefits. He also submitted that he had to put a great deal of effort into the file in addressing the negative reports that Allstate had to support its position.

Criterion 4: The degree of complexity, novelty or significance of the factual or legal issues raised in the proceeding.

Mr. Arvai submitted that the matter was complicated. There were a number of briefs and documents with a great disparity between the parties as to entitlement. He also had to deal with the effects of two subsequent accidents and with the pre-accident injuries that Mr. Rahic had sustained.

Criterion 5: 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.

Mr. Arvai submitted that in December 1999, Allstate offered to settle for $50,000 all inclusive on a full and final basis. On October 25, 2000 it only increased the offer by adding disbursements. The final settlement was clearly more advantageous to Mr. Rahic, as it was for almost 75 per cent more and included a reinstatement of ongoing benefits.

Criterion 6: Any other matter related to the proceeding that the arbitrator considers relevant to the issue of whether an award of expenses is justified.

Mr. Arvai submitted that the hearing would probably have taken six to eight days, as he had at least nine witnesses to call, and Allstate planned on calling eight of its own.

Mr. Arvai submitted that the total of almost 170 hours claimed is not out of proportion.

However, Allstate submitted that a number of hours were in effect thrown away. For instance, the initial preparation of the file by Mr. Ferguson's student was all redone by Mr. Arvai's assistant, Mr. Nicolis.

I find that only a minimal amount of time should be allotted for the work done by Mr. Ferguson and his student because this time was essentially thrown away when Mr. Rahic retained Mr. Arvai. I do not see why the Insurer should be responsible for that portion. Mr. Ferguson's hours total about 14. I subtract 8 hours in order to set off the time thrown away by Allstate's counsel, Ms. Chadwick, as ordered in the initial adjournment. Accordingly, I allow 6 hours for the preparation by Mr. Ferguson, and nothing for the student's preparation.

I find that the work done by Mr. Arvai and Mr. Nicolis warrants a reasonable amount for their preparation because of the good result they obtained for Mr. Rahic. However, I am concerned that the new medical reports were delivered so late to Allstate. I find that if they had been delivered earlier, the matter would likely have settled earlier, and less preparation time would have been required: Mr. Arvai's hours claimed include a great number over the week or two before the hearing. I find that the late delivery vitiates Mr. Rahic's argument that Allstate had taken an unreasonable stance: its expert opinions were not countered until those reports arrived.

I find it appropriate in these circumstances to apply a relatively modest ratio of preparation time to hearing time of 2.5, based on a four-day hearing. Although the parties anticipated extra hearing day, these would have taken place several months later, and the preparation for them would not yet have taken place at the time of settlement. I apportion the ratio between the two counsel as follows: Allowing a total of 32 hours for the hearing, I apply a ratio of 2 for preparation for Mr. Arvai, for a total of 64 hours. In addition, he spent four hours on the hearing day. Accordingly, I allow a total of 68 hours for Mr. Arvai. As for Mr. Nicolis, I apply the ratio of .5, for a total of 16 hours, which is close to the approximately 20 hours claimed for his time.

Hourly Rate:

Paragraphs (a) and (b) of Rule 76.1 of the Dispute Resolution Practice Code provide that the maximum amount I may award Mr. Rahic for legal fees should be calculated using "the hourly rates established under the Legal Aid Act⁶ for professional services in civil matters before the Ontario Court (General Division)"⁷ as adjusted for an experience allowance. However, Rule 76.1 further provides that "where an adjudicator is satisfied that a higher amount for legal fees to an insured person is justified, an hourly rate of up to $150 may be awarded."

Allstate submitted that all counsel should only be paid at the Legal Aid rate. Both Mr. Arvai and Mr. Ferguson are experienced counsel who would be entitled to the experience allowance, for an hourly rate of $83.75. As I stated in the Clipperton expense decision,⁸ there has been a general tendency to allow increased hourly rates for experienced counsel, and I do not find support in recent cases for the principle that only very rarely should a representative receive the highest rate. I find that the minimal Legal Aid hourly rate should be more the exception rather than the norm when setting the rate for an experienced counsel acting for an insured.

This is not to say that every counsel is automatically entitled to $150 per hour. A range is still appropriate depending on the circumstances, and sometimes counsel will only be entitled to the minimal rate. For instance, a fee of only $110 was allowed where much of the evidence was irrelevant and unhelpful and counsel was disruptive.⁹

I find that the reasons favouring the highest $150 rate for Mr. Arvai also suggest why no higher rate should be granted for Mr. Ferguson's work. I find that Allstate was prepared to offer more to Mr. Rahic because Mr. Arvai obtained medical reports that addressed the concerns raised by Allstate's reports, that strengthened Mr. Rahic's position, and that identified new bases for his disability. As set out above, Mr. Arvai also submitted that this was not a simple case, as Mr. Rahic had suffered pre-accident injuries and had also been in two subsequent accidents. Mr. Arvai also prepared and was ready to call a number of witnesses. The strikingly different hearing preparation times between Mr. Arvai and Mr. Ferguson also suggest Mr. Arvai's assiduousness. I find that Mr. Arvai's preparation and diligence in pursuing the rights of his client entitle him to the maximum rate of $150 per hour. Conversely, I find nothing in the file to warrant a higher rate for Mr. Ferguson's work. The hourly rate for Mr. Ferguson is therefore $83.75.

Mr. Nicolis was called to the Bar relatively recently. The Legal Aid rate for him is $67. However, Mr. Arvai submitted that the work Mr. Nicolis performed should be remunerated at a $100 per hour rate. Mr. Arvai submitted that Mr. Nicolis had ongoing contact with the doctors. He also had to deal with the extensive surveillance, which included several meetings with the client and his family. Mr. Nicolis also entirely reorganized the medical briefs that had been received from Mr. Ferguson's office. Therefore, Mr. Arvai sought the $100 rate because of the significance of the work Mr. Nicolis performed.

I find that in the circumstances of this case the $100 rate for Mr. Nicolis is appropriate because of the significance of his assistance to Mr. Arvai in preparing the case.

Accordingly, I award the following fees for the work performed by counsel:

Counsel

Hours

Rate

Total

Mr. Ferguson

6

$83.75

$502.50

Mr. Nicolis

16

$100

$1,600.00

Mr. Arvai

68

$150

$10,200.00

Subtotal

$12,302.50

GST at 7%

$861.18

Total

$13,163.68

Disbursements:

Mr. Rahic claims $2,752.10 for disbursements (including GST) from Mr. Ferguson's office.¹⁰However, Mr. Arvai indicated during the hearing that he has none of the bills or invoices from Mr. Ferguson's office. Considering this lack of documentation and what seem to be very high amounts for photocopying and courier expenses, I find a reasonable amount for the disbursements to be $2,250 (including GST).

Mr. Rahic claims $7,620.07 for disbursements (including GST) from Mr. Arvai's office. However, almost $2,000 of this was not a proper claim, as it represented a witness preparation meeting with Dr. Merskey on the eve of the hearing, but Dr. Merskey was not called at the hearing. Witness preparation is only payable to a maximum of $500, and the witness must testify: DRES 5(4). I also note that if the reports had been delivered earlier, this intensive eve-of-hearing preparation would likely have been unnecessary. I allow $5,500 for disbursements (including GST) incurred by Mr. Arvai on Mr. Rahic's behalf.

Accordingly, I allow a total of $7,750 for disbursements.

November 15, 2002

David J. Evans Arbitrator

Date

Neutral Citation: 2002 ONFSCDRS 182

FSCO A99-000277

FINANCIAL SERVICES COMMISSION OF ONTARIO

BETWEEN:

ZAHIR RAHIC

Applicant

and

ALLSTATE 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. Allstate Insurance Company of Canada shall pay Mr. Rahic $20,913.68 for his expenses of the arbitration.

November 15, 2002

David J. Evans 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. 2Although $150 is claimed on page 1 of the Schedule of Expenses, the calculations are at $100 an hour.
3. 3The Third Edition of the DRPC applies to this hearing: see Rule 1.6(b) of the Fourth Edition, which came into effect on May 31, 2001.
4. 4O. Reg. 664, as amended by O.R. 464/96.
5. 5DRES 3(2): The number of hours for which legal fees may be awarded shall be determined by the arbitrator, having regard to the criteria set out in subsection 12 (2) of this Regulation.
6. 6Now the Legal Aid Services Act, 1998, S.O. 1998, c. 26
7. 7The names of the Ontario Court (General Division) and Ontario Court (Provincial Division) changed effective April 19, 1999. These changes were made under Part IV of the Courts Improvement Act, 1996, which was proclaimed on that date.The Ontario Court (General Division) has been renamed the Superior Court of Justice.
8. 8Clipperton and Zurich North America Canada (FSCO A97-001771, June 25, 2002)
9. 9Carr and Lombard General Insurance Company of Canada (FSCO A00-000441, April 12, 2002)
10. 10A letter dated August 21, 2002 from Mr. Arvai indicates that a number of disbursements incurred at Mr. Ferguson's office were omitted from the schedule of expenses, but in fact they are all listed on page 4 of the schedule.