Financial Services Commission

Commission des services financiers de l’Ontario

Neutral Citation: 2002 ONFSCDRS 74

Appeal P01-00025

OFFICE OF THE DIRECTOR OF ARBITRATIONS

OM DHAWAN

Appellant

and

STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY

Respondent

Before:

Nancy Makepeace, Director's Delegate

Representatives:

No one participated on behalf of Mr. Dhawan Ian D. Kirby (for State Farm)

APPEAL ORDER

Under section 283 of the Insurance Act, R.S.O. 1990, c.I.8, as amended, it is ordered that:

1. Mr. Dhawan's appeal is dismissed, and the arbitrator's order, dated April 20, 2001, is confirmed.

2. Mr. Dhawan shall pay State Farm's appeal expenses in the amount of $1,507.50.

May 16, 2002

Nancy Makepeace Director's Delegate

Date

REASONS FOR DECISION

I. THE ISSUES

In my previous decision, dated February 1, 2002, I made the following order:

1. Mr. Spiegel is excluded from this proceeding pursuant to s.23(3) of the Statutory Powers Procedure Act.

2. Mr. Dhawan has 30 days from the date of this decision to notify the Commission and State Farm whether he intends to proceed with the appeal. If he does not give notice as to his intentions, the appeal will be deemed to have been abandoned, and I will dispose of the matter forthwith. Whether or not Mr. Dhawan gives notice that he intends to proceed with the appeal, I intend to dispose of the issue of appeal expenses, including expenses of the bias motion, forthwith after expiry of the 30-day notice period.

At the conclusion of my reasons, I indicated that I was inclined to order Mr. Dhawan to pay State Farm's appeal expenses, whether or not he proceeded with the appeal. I invited him to show cause why I should not do so within the 30 days allotted.

II. REASONS AND CONCLUSION

My decision of February 1, 2002 was delivered to both parties and their representatives by courier and regular mail. In a March 25, 2002 letter, State Farm's representative moved for an order that the appeal be deemed abandoned and appeal expenses awarded to State Farm. The letter was copied to Mr. Dhawan and, "as a matter of courtesy," to Mr. Spiegel. State Farm's representative stated that he has not received any communication from Mr. Dhawan since my February decision. Neither Mr. Dhawan nor Mr. Spiegel has contacted the Commission. I conclude that Mr. Dhawan has abandoned the appeal. Accordingly, the appeal is dismissed and the arbitrator's order is confirmed.

Subsection 282(11) of the Insurance Act authorizes me to award appeal expenses to Mr. Dhawan or State Farm, according to criteria prescribed by the regulation:¹

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:

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

2. Conduct of the insurer or 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.

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.

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

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.

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

Two factors strongly favour an expenses order in State Farm's favour. First, the bias motion brought on Mr. Dhawan's behalf was poorly supported in law and lacked any evidentiary foundation. No bias concerns were raised before the arbitrator. Rather, this was one of a number of bias motions commenced by Mr. Spiegel in response to Director Draper's first order in Persofsky and Liberty Mutual Insurnace Company.² A bias allegation is a serious matter that relates to the integrity of the adjudication process. It significantly expands the issues in dispute, imposing greater costs and delays on both parties. Although there is no impropriety in raising a legitimate issue of systemic or institutional bias, this should not be done lightly or frivolously. Mr. Spiegel's bias arguments stood little chance of success and served only to obstruct the hearing of Mr. Dhawan's appeal.

Several elements of the motion were manifestly unfounded. For example, Mr. Spiegel's submissions with respect to the Charter of Rights and Freedoms showed no appreciation of the issues raised in Charter litigation. The suggestion of a "reverse bias" intended to counter the insurer's allegations in Persofsky and Liberty Mutual was merely speculative and had little merit on its face. His demand that FSCO seek out material facts to support his motion reflected a misunderstanding of the powers and mandate of FSCO adjudicators. The most serious defect in the motion pertained to remedy. Mr. Spiegel persisted in his request for appointment of "a proper body" appointed under the Arbitration Act, 1991 long after I denied the motion.³ He refused to accept my dismissal of his motion for a stay or adjournment pending the outcome of an arbitration under the Arbitration Act, 1991 or an unspecified future court proceeding. Mr. Spiegel's refusal to proceed with the bias motion or to withdraw it reflected a fundamentally flawed understanding of legal process, and ultimately necessitated his exclusion from the proceeding under s.23(3) of the Statutory Powers Procedure Act.

The second criterion – conduct of the parties – is also important. Mr. Spiegel's conduct of the bias motion was obstructive and dilatory. In response to my rulings, he repeated his submissions and challenged my authority and impartiality. His manner was angry and accusatory. Mr. Spiegel did not show the civility and competence expected of representatives appearing before the Financial Services Commission of Ontario.

Mr. Spiegel's conduct of this appeal warrants an order that he pay State Farm's appeal expenses personally. However, having heard no submissions on point, I am not persuaded to depart from the prevailing FSCO case law holding that the power to award expenses applies only to the parties to the proceeding, not their representatives. I take some comfort in the authorization Mr. Dhawan signed in December 2001, which included an acknowledgement that he could be ordered to pay State Farm's appeal expenses. I am further reassured by Mr. Dhawan's silence in response to my earlier decision, which invited him to show cause why I should not make an expenses order against him. In the result, I am satisfied that fairness requires Mr. Dhawan to pay State Farm's appeal expenses.

State Farm claims Mr. Kirby's legal fees for 18 hours. I accept this as a reasonable estimate. Apart from the need to review and respond to Mr. Spiegel's numerous lengthy written submissions, this appeal involved two hearings – a motion hearing on November 28, 2001, that lasted 22 hours, and a telephone conference, on January 17, 2002, that lasted 1¼ hours. The Dispute Resolution Practice Code - Fourth Edition (May 31, 2001) authorizes an award for an insurer's legal fees at the Legal Aid rate, including an experience allowance. Mr. Kirby is entitled to the maximum Legal Aid rate of $83.75 per hour. Accordingly, State Farm is entitled to be reimbursed for its legal fees in the amount of $1,507.50.

State Farm requests reimbursement for its $500 appeal filing fee. This is not an expense of the appeal, but an assessment under ss.282(11.2) of the Act. It is available where the insured person "commences an arbitration that, in the opinion of the [adjudicator], is frivolous, vexatious or an abuse of process." My expenses award is related to the bias motion. I am not in a good position to assess the merits of the appeal because it was abandoned. It follows that I have no basis for finding that Mr. Dhawan commenced an appeal that was frivolous, vexatious or an abuse of process.

May 16, 2002

Nancy Makepeace Director's Delegate

Date

Footnotes

1. 1Subsection 12(2) of Ontario Regulation 664, as amended by Ontario Regulation 464/96 made under the Act.
2. 2(FSCO P00-00041, July 3, 2001).
3. 3I dismissed the motion in my letters of November 22 and December 10, 2001, and January 4, 2002, as well as my decision of February 1, 2002. It was previously rejected by Arbitrator Allen in Docoute and Zurich Insurance Company, (FSCO A00-000446, September 19, 2001), under appeal. Director Draper stated that he was unclear whether he had authority to make such an order, and in any event declined to do so, in Persofsky and Liberty Mutual, note 2 above; and Tanzos and State Farm Mutual Automobile Insurance Company, (FSCO P01-00011, November 21, 2001), appeal pending.