Neutral Citation: 2002 ONFSCDRS 61

FSCO A00-000543

FINANCIAL SERVICES COMMISSION OF ONTARIO

BETWEEN:

ANDREW L. LUKACHKO

Applicant

and

ALLIANZ INSURANCE COMPANY OF CANADA

Insurer

DECISION ON EXPENSES

Before:

David Muir

Heard:

Written submissions received by February 22, 2002 and a hearing on March 22, 2002, at the Offices of the Financial Services Commission of Ontario in Toronto.

Appearances:

Mr. Lukachko

Andrew T. Graham for Allianz Insurance Company of Canada

Issues:

The Applicant, Andrew L. Lukachko, was injured in a motor vehicle accident on December 7, 1998. In a decision dated November 30, 2001, I dealt with his claims for statutory accident benefits under the Schedule.¹ I made the following determinations, while leaving it to the parties to resolve the issue of expenses:

Mr. Lukachko is not entitled to a weekly income replacement benefit pursuant to section 4 of the Schedule.
Mr. Lukachko is entitled to payments for housekeeping and home maintenance services pursuant to section 22 of the Schedule in the amount of $4,451.
Mr. Lukachko is not entitled to the principal amount of the cost of an examination by Dr. Charendoff, pursuant to section 24 of the Schedule.
Mr. Lukachko is entitled to interest on unpaid amounts found to be owing to him calculated pursuant to subsection 46(2) of the Schedule. In addition, Mr. Lukachko is entitled to interest on the principal amount of the Dr. Charendoffs account.

The issues in this further hearing are:

Is Mr. Lukachko entitled to his expenses incurred in respect of these arbitration proceedings?
Is Allianz entitled to its reasonable expenses incurred in respect of these arbitration proceedings?
What is the amount of interest that Mr. Lukachko is entitled to pursuant to my order dated November 30, 2001?

Result:

Mr. Lukachko is not entitled to his expenses of the arbitration hearing.
Allianz is entitled to its reasonable expenses of the arbitration hearing in the amount of $5,296.00.
Mr. Lukachko is entitled to interest on amounts found to be owing to him in the amount of $2,763.96.

Entitlement to Expenses:

The Insurance Act in section 282(11) provides for the awarding of expenses to the parties:

(11) 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.

Regulation 664, as amended by Ontario Regulation 464/96, provides the criteria that an arbitrator may consider in determining a party's entitlement to expenses. The Regulation provides:

(2) An arbitrator may award expenses to an insurer or insured person under subsection 282 (11) of the Act if the arbitrator is satisfied that the award is justified, having regard to the following criteria:
Each party's degree of success in the outcome of the proceeding.
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.
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.
The degree of complexity, novelty or significance of the factual or legal issues raised in the proceeding.
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.
Any other matter related to the proceeding that the arbitrator considers relevant to the issue of whether an award of expenses is justified.

In addition to these enumerated criteria, arbitrators consider the need to ensure that insured persons are able to access the dispute resolution system.

Each party claims its expenses of the arbitration.

For the reasons set out below I find that Allianz is entitled to recover some amount of its expenses and Mr. Lukachko is not.

Mr. Lukachko had only limited success in the arbitration. His claim for income replacement benefits failed completely and Mr. Lukachko was only partly successful in his claim for housekeeping and home maintenance expenses. Mr. Lukachko also asserted a claim to Dr. Charendorffs account despite its being paid by Allianz prior to the arbitration and was unsuccessful in that claim although he was found to be entitled to interest on the principal amount.

Allianz submits that the claim for income replacement benefits was manifestly unfounded in that Mr. Lukachko was never able to point to any income from employment in the period prior to the accident. I do not agree. Mr. Lukachko's claim in this regard was unfounded in the sense that his claim was not compensable under the Schedule, however I am not prepared to find that it was manifestly unfounded in the sense that the Practice Code provides. Mr. Lukachko's position that the labour he contributed to increase the value of his property with a view to potential future revenue and/or capital gains has some intuitive appeal, although such labour is not compensable under the Schedule.

Mr. Lukachko's conduct prolonged this proceeding to some degree. Despite the fact that at least one arbitrator had ruled that a dispute about the treatment plan could not be added to arbitration because it had not been mediated, Mr. Lukachko continued to seek its addition necessitating further argument and a preliminary issue decision.

Mr. Lukachko also prolonged the proceeding by writing many letters, a number of which were not essential to the arbitration process but nonetheless often required a response from counsel for Allianz. Mr. Lukachko also alleged some impropriety on counsel's part on several occasions, both in writing and during the arbitration hearing. The suggestions that Mr. Graham had conducted himself improperly were, on each occasion, without foundation, distracted the parties from the real issues in dispute and tended to lengthen the proceedings.

Allianz relied upon repeated offers by it to settle its disputes with Mr. Lukachko. Allianz did not comply with the strict terms of the Dispute Resolution Practice Code in placing the fact of these settlements before me. However there is no dispute that on several occasions Allianz made offers to settle all or part of the disputes between the parties. In each case the offers to settle, whether accepted or not, were made in advance of scheduled arbitration dates and in general conformity with the provisions of Rule 75.1 of the Practice Code. It appears that three offers to settle all or part of the issues in dispute were accepted and then rescinded by Mr. Lukachko. On other occasions, offers were made but not accepted.

Although at times seeking a Full and Final Release of all claims from Mr. Lukachko, Allianz was also prepared at various times to settle only the claims in dispute in the arbitration. Where an offer to settle a claim in the arbitration was made, it was invariably for an amount significantly in excess of the amounts to which I ultimately found Mr. Lukachko entitled.

I find that Allianz is entitled to its expenses from April 9, 2001. I have rejected the Allianz submission that it ought to be entitled to its expenses from December 16, 2000 - on or about the time that the first settlement of the parties' disputes was made, but then rescinded. The December 2000 offer to settle was for a Full and Final Release. At that point Mr. Lukachko's positions were still in flux - he was in the process of substituting a claim for non-earner benefits with a claim for income replacement benefits. The question of the addition of a treatment plan issue to the arbitration had not yet been considered by an arbitrator.

However, from April 2001 onwards, Allianz made repeated offers to settle either on a full and final basis or in respect of all or some of the issues for resolution in the arbitration. The offers to settle only the issues in the arbitration were all reasonable. The issues between the parties in the arbitration were well defined at this stage. As of April 2001, Mr. Lukachko should have been in a position to make informed decisions about his prospects for success in respect of these claims and the need for compromise on his part. Once Mr. Lukachko's claim for income replacement benefits was added to the issues to be dealt with in the arbitration in early August 2001, Allianz offered to settle that issue as well on reasonable terms. He ultimately chose not to settle any of the claims which went to arbitration and, as indicated, had only limited success in respect of any of them.

In not awarding Allianz its expenses from December 2000 I have also considered the need to ensure insured persons access to the dispute resolution system. However, even weighing that factor, I find that Allianz is entitled to its expenses from April 2001.

Quantum of Expenses:

Allianz provided a detailed accounting of the time spent on this matter up to and including the arbitration hearings in August and September 2001. The amount of time seems reasonable, for while the issues in this case are not complicated, the conduct of the case by Mr. Lukachko tended to lengthen the proceedings. Allianz did not seek expenses for any work performed on the file by law students in Mr. Graham's office.

The insurer is entitled to the maximum legal aid rate for Mr. Graham's time.

I find that Allianz is entitled to its reasonable expenses in the amount of $5,296.00

Interest

There is no substantial dispute with respect to interest. Allianz provided the basis for its calculation of interest payable. In the end Mr. Lukachko made no substantive submission with respect to the calculation by Allianz. Interest was calculated in the manner most favourable to Mr. Lukachko in any circumstance where there was a potential for dispute and I accept Allianz' position. Accordingly Mr. Lukachko is entitled to interest in the amount of $2,763.96.

May 8, 2002

David Muir Arbitrator

Date