Desmond Hughes v. Allstate Insurance Company of Canada, 2002 ONFSCDRS 53

Neutral Citation: 2002 ONFSCDRS 53

FSCO A99-000961

BETWEEN:

DESMOND HUGHES

Applicant

and

ALLSTATE INSURANCE COMPANY OF CANADA

Insurer

DECISION ON EXPENSES

Before:

Judith Killoran

Heard:

February 8, 2002, at the Offices of the Financial Services Commission of Ontario in Toronto.

Appearances:

Brian Sherman for Mr. Hughes

Ian D. Kirby for Allstate Insurance Company of Canada

The Applicant, Desmond Hughes, was injured in a motor vehicle accident on January 26, 1998. In a decision dated May 18, 2001, I dealt with his claims for Statutory Accident Benefits under the Schedule.¹ I made the following orders, while reserving on the issue of expenses:

Mr. Hughes is not entitled to receive a medical benefit for exercise therapy at Target Rehabilitation Centre, claimed pursuant to section 15 of the Schedule.
Allstate is not liable to pay a special award pursuant to subsection 282(10) of the Insurance Act.

The issues in this further hearing are:

Is Allstate entitled to its expenses incurred in respect of this arbitration hearing?
What is the amount of expenses to which Allstate is entitled?

Allstate is entitled to one-third of its assessed expenses of this arbitration hearing.
Mr. Hughes shall pay to Allstate $3,179.55 plus applicable GST in expenses.

Entitlement to Expenses

Allstate submitted that it had resolved, prior to the arbitration hearing, all of Mr. Hughes' claims save for an outstanding account at Target Rehabilitation Centre ("Target"). This claim was the subject of a four day hearing with a motion following the hearing. When I found that Mr. Hughes was not entitled to payment of his outstanding account at Target, I noted inconsistencies in his testimony which eroded his credibility as a patient and a witness.

Therefore, the Insurer sought payment of all its expenses. As well, Allstate claimed that the arbitration process was driven by Target and therefore, any expenses should be awarded against Target and not Mr. Hughes.

Mr. Hughes submitted that each party should bear its own expenses.

The parties agree, and I find, that the Dispute Resolution Practice Code (Third Edition, April 15, 1997) (the "Code") applies to this case.

Subsection 282(11) of the Insurance Act, R.S.O. 1990, c.I.8, provides that:

The arbitrator may award, according to criteria prescribed by the regulations, to the insured person or the insurer, all or part of such expenses incurred in respect of an arbitration proceeding as may be prescribed in the regulations, to the maximum set out in the regulations.

Although Allstate submitted that the expenses incurred in respect of this arbitration proceeding should be awarded against Target, I find that it is Mr. Hughes, and not Target, who was a party to this arbitration. No submissions were made in opposition to past arbitration decisions which have ruled that an arbitrator lacks jurisdiction to award expenses against a non-party. Therefore, any expenses awarded to Allstate are awarded against Mr. Hughes.

Subsection 12(2) of Ontario Regulation 664, as amended by Ontario Regulation 464/96, sets out the criteria to be considered in determining an award of expenses. These criteria are replicated in Rule 73.2 of the Code:

73.2 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;

(c) 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;

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

(e) at the request of either party, any written offer to settle made in accordance with Rules 74 and 75, having regard to the outcome of the proceeding;

(f) any other matter related to the proceeding that the adjudicator considers relevant to the issue of whether an award of expenses is justified.

Although Mr. Hughes was not successful with his claim, the degree of either party's success is not the only criterion on which I must base an award of expenses. For example, the Insurer submitted that I consider its Offer to Settle in connection with an award of expenses. The Insurer made an offer to Mr. Hughes on December 21, 2000. The offer of $3,000 was not for a full and final release but, merely to settle the issues which were raised in the Application for Arbitration.

With respect to Offers to Settle, the Code provides:

74.1 An adjudicator will consider an Offer to Settle in connection with an award of expenses provided that:

(a) it was made in writing, was served on the other parties and contains:

(i) the full terms of the Offer to Settle;

(ii) date when the Offer was served and the time period during which it remained open for acceptance;

AND

(b) the Offer was made after the conclusion of mediation and before the conclusion of the hearing, with particular consideration given to any Offer served after the conclusion of the pre-hearing discussion or preliminary conference, as the case may be, up to five days before the commencement of the hearing.

The Insurer filed on May 25, 2001, within five days of the release of the decision in this case, an Offer to Settle for consideration in connection with an award of expenses.

Rule 75.2 of the Code specifies:

In connection with an award of expenses, the parties will not advise the adjudicator of an Offer to Settle or a Response to an Offer to Settle except as provided in this Rule:

(a) the adjudicator will deliver confirmation to the parties that all issues in dispute have been decided, except expenses;

(b) within 5 days of the delivery of such confirmation, either party will file any relevant Offer to Settle which was made in accordance with Rule 74.1, for consideration in connection with an award of expenses provided that:

(i) notice of intention to rely on an Offer to Settle is served on the other party along with a copy of the Offer; and

(ii) such notice and copy of the Offer are filed, together with Statement of Service in Form E.

I am prepared to consider the Offer to Settle contained in counsel's letter of May 25, 2001 in connection with this expense hearing. In fact, it is worthy of "particular consideration" as it was made after the conclusion of the pre-hearing, which was conducted on March 13, 2000, and more than five days before the beginning of the arbitration hearing on January 8, 2001. Taking into consideration the Offer to Settle together with the other criteria found in Subsection 12(2), I am prepared to award Allstate its expenses in this case. Not only was Mr. Hughes unsuccessful with his claim, but his testimony was one of the key factors for his lack of success.

I am mindful that another relevant consideration when awarding expenses is the issue of accessibility. The possibility of prohibitively large amounts of expenses being awarded against applicants could have the undesirable effect of deterring those with meritorious claims. This, in turn, could jeopardize reasonable accessibility to the dispute resolution system. Keeping in mind that Mr. Hughes is a man of very modest means and that I was not persuaded that his actions amounted to an abuse of process, I award to Allstate one-third of its expenses of the arbitration hearing.

Legal Fees:

Section 3 of Ontario Regulation 664, R.R.O. 1990, as amended, provides the following:

(1) The legal fees payable by the insured person or the insurer for the following matters may be awarded:

For all services performed before an arbitration, appeal, variation or revocation hearing.
For the preparation for an arbitration, appeal, variation or revocation hearing.
For attendance at an arbitration, appeal, variation or revocation hearing.
For services subsequent to an arbitration, appeal, variation or revocation hearing.

(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.

(3) The maximum amount that may be awarded for legal fees is the amount calculated using the hourly rates set out in the Dispute Resolution Practice Code published by the Ontario Insurance Commission (now the Financial Services Commission), as it may be amended from time to time.

Rule 76.1 of the Code provides that the maximum amount for legal fees is calculated using the hourly rates established under the Legal Aid Act for professional services in civil matters, adjusted to include any experience allowance. However, "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. "

In my opinion, Mr. Kirby, Allstate's counsel in this case, would certainly be entitled to the maximum amount of legal fees if the sole determinant were his experience and expertise. However, Mr. Kirby is counsel for the insurer and not the insured. Therefore, he is limited to receiving the maximum legal aid rate, which I have no hesitation in awarding him. According to the Regulation under the Legal Aid Services Act that rate is $67 per hour plus an experience allowance of 25 per cent which equals $83.75.

Mr. Kirby has claimed 50.5 hours in legal fees which I consider reasonable. I award $4,229.37 for his fees. The hours claimed for the assistance of associates also appear reasonable at a total of 20.10 hours. However, the hourly rate shall be reduced to $67 per hour for a total of $1,346.70. The total for legal fees is $5,576.07 plus GST.

Law Clerk Fee:

Allstate claims 12.9 hours at $45 per hour for the assistance of a law clerk in preparation for the arbitration.

The Dispute Resolution Expenses Schedule² does not specify fees for clerks. Section 3.1 deals with agent's fees and Rule 78.2 specifies:

The maximum amount that may be awarded to an insured person or an insurer for agent's fees is an amount calculated using the hourly rates established under the Legal Aid Services Act, 1998 for law clerks, articling students and investigators.

The rate is $23 and has been referred to in other arbitration cases as the "legal aid rate" for law clerks.³ As with Arbitrator Evans in Vogdanou, I have considered the legal aid rate for agents as a foundation for considering the rate applicable to law clerks. It is not plausible that a higher rate should apply to a law clerk than to an Applicant's representative, absent other factors.

The amount of 12.9 hours claimed for the law clerk appears reasonable. Therefore, I award $296.70 plus GST for the services of the law clerk.

Disbursements:

With respect to the disbursements, I do not allow the cost of the court reporter at $1,465.90 nor the cost of transcripts at $1,703.44. The court reporter is a discretionary expense and the transcripts were not required as the decision was not appealed. I have reduced Dr. Bereznick's account as he has billed at $250 per hour for 3 hours of preparation/travel time when the maximum hourly rate is $200 per hour. I have reduced his account from $1,356 to $1,206. Therefore, the amount of disbursements is reduced from $6,985.23 to $3,665.89.

Conclusion

The total of fees plus disbursements is $9,538.66. As explained previously, I am prepared to award to Allstate one-third of its assessable expenses. Therefore, Mr. Hughes shall pay to Allstate $3,179.55 plus applicable GST in expenses.

April 2, 2002

Judith Killoran Arbitrator

Date