Neutral Citation: 2002 ONFSCDRS 20 FSCO A01-000348

Between:

Tanya Povolotcaia Applicant

and

Royal & SunAlliance Insurance Company of Canada Insurer

Decision on a Preliminary Issue

Before: David J. Evans

Heard: November 29, 2001, at the offices of the Financial Services Commission of Ontario in Toronto.

Appearances: Robert Ipacs for Ms. Povolotcaia Peter Kazdan for Royal & SunAlliance Insurance Company of Canada

The Applicant, Tanya Povolotcaia, was injured in a motor vehicle accident on August 23, 1998. She applied for and received statutory accident benefits from Royal & SunAlliance Insurance Company of Canada (Royal), payable under the Schedule.¹ Ms. Povolotcaia subsequently signed a Full and Final Release on December 22, 1998, releasing Royal from any further claims. However, in December 2000 Universal Injury Rehabilitation Centre Inc. (Universal) in the name of Ms. Povolotcaia commenced mediation proceedings against Royal for payment of transportation costs of $330 and assessment expenses of $100. The parties were unable to resolve their disputes through mediation, and Ms. Povolotcaia, represented by Mr. Roman Volfson of Universal, applied for arbitration at the Financial Services Commission of Ontario under the Insurance Act, R.S.O. 1990, c.I.8, as amended.

A pre-hearing was held on July 13, 2001. In addition to the issues regarding the transportation and assessment expenses, the parties sought their expenses in respect of the arbitration pursuant to section 282(11) of the Insurance Act and Royal sought repayment of its assessment fee pursuant to subsection 282(11.2) of the Insurance Act.

The following preliminary issues were also identified at the pre-hearing:

Is Ms. Povolotcaia barred from proceeding to arbitration by the Full and Final Release executed on December 22, 1998?
Is the application for arbitration beyond the two-year limit?

The two-year limitation period is set out in subsection 281(5) of the Insurance Act and subsection 51(1) of the Schedule.

Ms. Povolotcaia is barred from proceeding to arbitration by the terms of the Full and Final Release signed December 22, 1998.
Ms. Povolotcaia is not liable to pay Royal an amount pursuant to subsection 282(11.2) of the Insurance Act.
Ms. Povolotcaia shall pay Royal's expenses in respect of the arbitration pursuant to section 282(11) of the Insurance Act.

Preliminary Matter:

The pre-hearing letter set out that Ms. Povolotcaia was required to provide signed confirmation that she authorized Mr. Volfson to proceed with this arbitration, that she understood her exposure to expenses and repayment of Royal's assessment fee, and that she would participate in the proceedings. Mr. Volfson was to forward the signed letter to Mr. Kazdan, counsel for Royal, and to the Commission by September 12, 2001, failing which the only issue would be Royal's claim for expenses and repayment of the assessment fee.

Mr. Kazdan for Royal did prepare an Acknowledgment confirming the matters set out in the pre-hearing letter for Ms. Povolotcaia to sign. It appears that Mr. Volfson did fax the Acknowledgment (albeit amended from the version prepared by Mr. Kazdan) to the Commission by September 10, 2001, but Universal used the wrong fax number when faxing the materials to Mr. Kazdan. There followed a number of letters from Mr. Kazdan to Mr. Volfson advising that since he had not received the materials he would be proceeding on the basis of Royal's claim for expenses and the assessment fee. Mr. Kazdan was eventually advised by the Commission that it had received the letter and confirmation.

At this hearing, Mr. Kazdan sought to proceed only on the issue of Royal's expenses and assessment fee. However, I ruled that there had been compliance, albeit imperfect, and ordered the hearing to proceed on the issues set out above.

Background:

Ms. Povolotcaia retained the services of Vadim Malyshev to represent her. The adjuster at Royal who initially dealt with the claim was Geoffrey Stubgen. The matter was settled at a settlement conference attended by Ted Koleff.

Testimony of Tanya Povolotcaia

Ms. Povolotcaia's testimony was translated from Russian.

Ms. Povolotcaia testified that in the accident of August 23, 1998, she injured her neck, back and shoulders. The day after the accident her father took her to the hospital, and they referred her for further treatment to Universal. Universal's driver took her to the treatment most of the time. The treatments ended after about a month.

Ms. Povolotcaia confirmed her signature on the Full and Final Release dated December 22, 1998. She was represented by Vadim Malyshev, paralegal. She understood from him that the insurance company was supposed to pay for all the expenses and that no unpaid costs should remain. She did not question the money she received from Royal, nor did Mr. Malyshev ever say that the amount was incorrect. She is not aware of Mr. Malyshev ever contacting Royal to complain of the amount.

Ms. Povolotcaia testified that she has not paid and Universal has never asked her to pay the transportation and assessment costs. Mr. Volfson telephoned her, said Royal owed him money, and asked her if she would authorize him to be her representative. She agreed. She did not remember exactly when he became her representative but it was around the time she signed an "Authorization & Direction" dated December 1, 2000, authorizing Mr. Volfson to represent her at the Commission.

Testimony of Vadim Malyshev

Mr. Malyshev testified that he has been a paralegal since January 1997. At the time he represented Ms. Povolotcaia he worked at the Pignalosa/I.M.C. & Associates firm running about 350 files in a year. He could barely recall working on Ms. Povolotcaia's file.

Ms. Povolotcaia's file resolved as one of 10 or 15 that were settled in a settlement conference Royal arranged at the end of November or start of December 1998. Mr. Malyshev did not attend the conference but sent Ms. Mina Cartini, who took his files to the settlement conference. Following their normal practice, he instructed her to settle for X amount of dollars, but to make sure that all outstanding accounts were covered.

Mr. Malyshev testified that Ms. Cartini returned to their office with his list of files annotated with the amounts of the settlements written in hand near each last name. The practice was to advise the clients by telephone of the settlement figure and ask them to come to the office to execute the release. He believes it most likely that he told Ms. Povolotcaia of the settlement figure. She attended at the office, and Mr. Malyshev believes that he explained the meaning of the release to her and the protection it gave her against any future claims as it was more convenient for Ms. Povolotcaia to talk with him in Russian instead of talking with Ms. Cartini in English. He would give a general idea to the claimant and then leave it for her to sign in front of Ms. Cartini.

Mr. Malyshev did not have his file with him. He believed he had not looked at it since early 1999. After he learned the day before this hearing that he was to be called to testify, he spent some time trying to remember the file. Seeing the release then helped his memory. He believed that in light of the handwritten portion of the release referring to "outstanding treatment to December 5, 1998" (see below) that the conference took place around then.

Mr. Malyshev believes that Mr. Ted Koleff was one of the claim managers at Royal that he dealt with, but he did not meet with Mr. Koleff to settle the claim.

Testimony of Geoffrey Thomas Stubgen

Mr. Stubgen testified that he was an accident benefits claims adjuster at Royal from September 1997 to October 2000. He was assigned Ms. Povolotcaia's accident benefits claim file in September 1998. He received Ms. Povolotcaia's Application for Accident Benefits from Vadim Malyshev of Pignalosa/I.M.C. & Associates in early October 1998.

Mr. Stubgen's first involvement with Universal was in mid October 1998, when he received the treatment plan and two invoices from Universal. Universal had claimed a total of $1,850, of which he paid $1,420. On the first invoice dated September 17, 1998, he put his initials and wrote "$1420," the date payment was issued of November 5 ("5/11"), and Royal's code for the therapy payment. He denied the $180 transportation fee and $100 of the initial assessment fee on the first invoice, and the $150 transportation fee on the second invoice.

Mr. Stubgen sent a letter approving the treatment in the treatment plan and issued payment for the invoices along with an Explanation of Benefits Payable. In Part 5 of the Explanation, under "Reasons why expenses are not payable," he wrote:

A reasonable fee has been authorized for assessment, form completion and treatment. No payment will be authorized for transportation pending submission of receipts and a disability certificate completed by your [doctor].

Mr. Stubgen never did receive a disability certificate. A settlement conference was then scheduled, at which Ted Koleff participated. Mr. Stubgen explained that Royal sent more senior accident benefit staff such as Mr. Koleff to handle settlement negotiations at settlement conferences. Funds of $3,000 were issued at the end of December 1998, and he believes that Mr. Malyshev then picked up the cheque.

Mr. Stubgen closed the file in January 1999.² He did not hear from either Mr. Malyshev or Ms. Povolotcaia again. In April 2000 he received a telephone call from Universal regarding the outstanding balance of about $400. He asked for the invoice to review and made a file note. He did not receive the invoice. He made another note on August 21, 2000, when he received a call "from Roman at Universal," that being Roman Volfson. Again he asked for the complete billing record but did not receive it. At no point during those contacts in 2000 did anyone at Universal say they were representing Ms. Povolotcaia in this claim.

Mr. Stubgen was pointed to the release. Line 3 reads as follows, with the handwritten portion appearing in italics: "IN CONSIDERATION of the payment of $3000.00 plus outstanding treatment to December 5, 1998." Mr. Stubgen testified that he believed Mr. Koleff wrote the terms based on the fact that he was the one who agreed to the settlement and put the computer note in the file regarding settlement.

Testimony of Ted Koleff

Mr. Koleff testified by telephone from Calgary.

Mr. Koleff testified that he is currently Royal's claims manager for Western Canada and that he was an assistant manager at Royal in Ontario from 1997 to 2000. As part of his duties, he participated in the settlement conference involving Ms. Povolotcaia. He made a single computer file note³ around the time of the settlement conference on December 8, 1998, which appears as part of Royal's claims notes.

Mr. Koleff translated the note as reading:

Met with claimant's representative at settlement conference. They presented $1,200 in housekeeping. We settled for $3,000 full and final (plus the balance of the approved treatment plan if billed by the clinic).

The settlement conference came about because Royal would have written to Ms. Povolotcaia's representative advising him of the day set for settlement conferences. The representative was interested, and Mr. Koleff would have met with the representative on the designated day. Ms. Povolotcaia was not there at that meeting. Mr. Koleff recalled meeting to discuss a number of files and believed he negotiated at the meeting with Mr. Malyshev.

Mr. Koleff testified that in his mind the note does not indicate that he agreed to pay the transportation or the assessment fees. If he had been presented with those claims, he would have referred to them in the note and would have made reference to them in any release regarding the settlement.

Mr. Koleff was referred to the handwriting at the top of the release. He testified that the handwritten portion was probably written by an assistant at Royal. Royal's process after a settlement is to send the form to one of a team of assistants to commute the values and complete and send the form to the claimant. He would have instructed the assistant on what to write, although he had no actual recollection of doing that on this file.

Findings:

Ms. Povolotcaia submitted that the ambiguity regarding who attended at the settlement conference (Mr. Koleff and Mr. Stubgen thought that Mr. Malyshev attended, but he testified that he did not) and who filled in the handwritten portion of the release referred to above meant that there was not a meeting of the minds. Ms. Povolotcaia submitted that therefore the claim was settled pursuant to the release but the "outstanding treatment" included the transportation and assessments.

Royal in turn relied on the "parol evidence rule," and particularly this aspect: Extrinsic evidence such as presented by Ms. Povolotcaia cannot be led to vary the terms of a written agreement such as the release, but can only be led to show there was no agreement at all.⁴ However, Royal also relied on extrinsic evidence, such as the invoices and the Explanation of Benefits Payable to interpret the meaning of "treatment."

Royal also provided materials indicating that, although the House of Lords has stated that extrinsic evidence is not admissible for the construction of a written contract,⁵ that rule is not usually followed in Canada. To similar effect is the following passage from The Law of Contract in Canada (3d), by G.H.L. Fridman:

Parol extrinsic evidence may not be admitted where the effect of such evidence would be to contradict the written contract. It is otherwise where the purpose and result of allowing such evidence to be given would be to explain or interpret the true intentions of the parties, where such are not clear from the document.⁶

Furthermore, the parol evidence rule is not necessarily strictly applied at the Commission.⁷ However, I find that Ms. Povolotcaia's submissions even in the absence of the rule do not greatly assist her. I find it clear that Ms. Povolotcaia does not wish to have the settlement set aside. I referred above to the amended Acknowledgment signed by Ms. Povolotcaia and faxed to the Commission by Mr. Volfson. Significantly, the following paragraph was struck out by Ms. Povolotcaia:

If my settlement with Royal & SunAlliance is set aside I may be required to pay settlement funds of $3,000.00 plus treatment to December 5, 1998, to Royal & SunAlliance.

Therefore, the extrinsic evidence she called is relevant only in relation to the interpretation of the word "treatment," but by her very own submission she submitted that evidence to show there was no meeting of the minds on that interpretation.

On the other hand, I find there is extrinsic evidence showing that the parties settled on the basis that the extra assessment cost and the transportation costs were excluded. The written materials exchanged between the parties draw a clear distinction among terms. The invoices prepared by Universal refer separately to "Initial Asses[ment]," "Treatment," and "Transportation." That distinction was maintained by Mr. Stubgen in the Explanation of Benefits Payable. Mr. Koleff's note refers only to the "approved treatment plan," and the amounts Ms. Povolotcaia now seeks were not approved by Royal. Mr. Koleff specifically testified that if he had he had been presented with those claims, he would have referred to them in the note and would have made reference to them in any release regarding the settlement. Mr. Koleff was the only person who attended at the settlement conference who testified; Ms. Cartini was not called. I find that the burden is on Ms. Povolotcaia to prove that the release should be interpreted in the way she seeks. I find that she has not met that burden. I accept the evidence of Royal that the settlement excludes the assessment fee and the transportation costs. I find that Ms. Povolotcaia is precluded from proceeding to arbitration by the terms of the Full and Final Release signed December 22, 1998.

In light of this finding, it is not strictly necessary for me to consider the limitation issue.

However, if I am incorrect and the parol evidence rule prevents an interpretation of the release other than based on its ordinary meaning, I find that the ordinary meaning of the word "treatment" is also not helpful to Ms. Povolotcaia. She provided no submissions on the ordinary meaning. Royal did provide several dictionary definitions. The Collins Dictionary of the English Language, Second Edition, defines "treatment" in relation to medical topics as "the application of medicines, surgery, psychotherapy, etc., to a patient or to a disease or symptom." The Encarta World English Dictionary - North American Edition⁸ in relation to medical topics defines it either as the provision of medical care, meaning "the application of medical care to cure disease, heal injuries or ease symptoms," or medical care itself, meaning "a particular remedy, procedure, or technique for curing or alleviating a disease, injury, or condition." However, the definition from Black's Law Dictionary (6th Ed.) reads: "A broad term covering all the steps taken to effect a cure of an injury or disease; including examination and diagnosis as well as application of remedies."

I find that the ordinary meaning of "treatment" excludes transportation, and accordingly I find that the phrase "outstanding treatments" in the release did not include the outstanding transportation expense. I find that Ms. Povolotcaia is also barred from proceeding to arbitration on the outstanding transportation expense by the ordinary meaning of the terms in the Full and Final Release signed December 22, 1998.

I further find that Ms. Povolotcaia is precluded from proceeding to arbitration on the outstanding assessment expense because of the lapse of time.

Subsection 51(1) of the Schedule provides as follows:

(1) A mediation proceeding or evaluation under section 280 or 280.1 of the Insurance Act or a court proceeding or arbitration under clause 281 (1) (a) or (b) of the Act in respect of a benefit under this Regulation shall be commenced within two years after the insurer's refusal to pay the amount claimed.

I find that the refusal to pay for the full amount of the assessment was clearly set out in Royal's Explanation of Benefits Payable dated October 21, 1998. Ms. Povolotcaia did not commence her mediation proceedings until December 2000. I find that these proceedings for the outstanding assessment fee were initiated out of time.

EXPENSES:

Both sides seek their expenses. In addition, Royal seeks the return of its assessment fee.

I will deal first with the assessment fee. Subsection 282(11.2) of the Insurance Act provides as follows:

If an insured person commences an arbitration that, in the opinion of the arbitrator, is frivolous, vexatious or an abuse of process, the arbitrator may award an amount to be paid by the insured person to the insurer that does not exceed the amount assessed against the insurer in respect of the arbitration under section 14.

Recent case law at the Commission suggests that this subsection applies to the commencement of an arbitration, not later steps such as withdrawing,⁹ failing to appear, or presenting "any claim that is ultimately found by an arbitrator to have been simply without merit."¹⁰ Royal submitted that it is always an abuse of process when an insurer has to respond to a settled matter. I would not put the matter so strongly. I was required to interpret the settlement and consider the surrounding circumstances. Although Ms. Povolotcaia's case suffered from a poor legal theory (which I mean as no reflection on Mr. Ipacs, who was hired the day before the hearing), I am not prepared to find that its commencement was frivolous, vexatious or an abuse of process.

The criteria for expenses are set out in Rule 75.2 of the Dispute Resolution Practice Code—Fourth Edition, in force since May 31, 2001.¹¹ I consider the following three criteria from that Rule most relevant:

75.2 The adjudicator will consider the criteria referred to in the Expense Regulation found in Section F of the Code. These criteria are:

(a) each party's degree of success in the outcome of the proceeding;

(b) 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;

(d) the degree of complexity, novelty or significance of the factual or legal issues raised in the proceeding

Regarding success, Ms. Povolotcaia was unsuccessful.

Regarding the parties' conduct, I note that although Mr. Volfson did fax the Acknowledgment to the Commission, he was subsequently very unresponsive to the correspondence from Royal. I find that his conduct did hinder the proceeding since Royal prepared for the hearing as if it only had to seek its expenses and return of assessment, and we had to spend time at the hearing dealing with this issue.

The proceeding did require an interpretation of the release and in particular of the term "treatment." Both sides called evidence and made submissions on this point.

On balance, Ms. Povolotcaia sought to re-open a matter that had been settled for two years. She failed to meet the burden of imposing her interpretation of the release and failed to call the most relevant witness for her case, Ms. Cartini. In addition, at least part of the claim was past the limitation period. The Commission and Royal were put to considerable time and expense for a weak case with a value of less than $500. In all these circumstances, I find that Ms. Povolotcaia should pay Royal's expenses.

January 25, 2002

David J. Evans Arbitrator

Date

Neutral Citation: 2002 ONFSCDRS 20 FSCO A01-000348

FINANCIAL SERVICES COMMISSION OF ONTARIO

BETWEEN:

TANYA POVOLOTCAIA Applicant

and

ROYAL & SUNALLIANCE 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:

Ms. Povolotcaia is barred from proceeding to arbitration by the terms of the Full and Final Release signed December 22, 1998.
Ms. Povolotcaia is not liable to pay Royal an amount pursuant to subsection 282(11.2) of the Insurance Act.
Ms. Povolotcaia shall pay Royal's expenses in respect of the arbitration pursuant to section 282(11) of the Insurance Act.