Ingrid Burke v. Allstate Insurance Company of Canada, 2003 ONFSCDRS 121

Financial Services Commission of Ontario

Neutral Citation: 2003 ONFSCDRS 121

FSCO A01-000969

Between:

Ingrid Burke Applicant

and

Allstate Insurance Company of Canada Insurer

Decision on Expenses

Before: David Muir

Heard: Written Submissions were received from Allstate Insurance Company of Canada on June 6, 2003.

Appearances: No one for Ms. Burke William M. Sproull for Allstate Insurance Company of Canada

Issues:

The Applicant, Ingrid Burke, was injured in a motor vehicle accident on November 3, 1999. She applied for and received statutory accident benefits from Allstate Insurance Company of Canada ("Allstate"), payable under the Schedule.¹

The parties were unable to resolve their disputes through mediation, and Ms. Burke applied for arbitration at the Financial Services Commission of Ontario under the Insurance Act, R.S.O. 1990, c.I.8, as amended.

Issues:

1. Is either party entitled to their reasonable expenses of the arbitration? Allstate seeks its expenses from Mr. Volfson or alternatively, from Ms. Burke.

2. Is Allstate entitled to an order that Ms. Burke pay it $3,000 pursuant to section 282(11.2) of the Insurance Act, because she commenced an arbitration that was frivolous, vexatious or an abuse of process.

Result:

1. Allstate is entitled to be paid its reasonable expenses of the arbitration by Ms. Burke, in the amount of $6,965.21.

2. Ms. Burke shall pay Allstate $3,000.00 pursuant to section 282(11.2) of the Insurance Act, because she commenced an arbitration that was frivolous, vexatious or an abuse of process.

Background:

When this arbitration was commenced Allstate raised a preliminary issue to the effect that Ms. Burke was prevented from proceeding to mediation and hence could not commence an arbitration, pursuant to section 50 of the Schedule, because she failed to attend an insurer's examination, and for failing to return an OCF-14 required to schedule a medical and rehabilitation Designated Assessment Centre ("DAC") assessment.

The preliminary issue was scheduled for hearing on October 9, 2002. The circumstances surrounding the preliminary issue hearing are set out in my decision dated November 8, 2002. Suffice it to note here that neither Ms. Burke or her representative were in attendance at the hearing and it proceeded in their absence.

In the course of considering the preliminary issue raised by Allstate, I concluded that I was required to consider the contention of Allstate that Ms. Burke had not authorized the arbitration proceeding. In addition to the limited submissions made by Allstate on this point at the hearing, there was further material in the record of the proceedings that gave rise to a real question about who the applicant was in this matter.² Given the possibility that the arbitration had been commenced without Ms. Burke's knowledge or consent, I ordered the parties to appear and respond to this question. Mr. Volfson was made a party to the proceeding, for the purpose of responding to the allegation that Ms. Burke had not authorized the arbitration.

In a subsequent decision dated March 24, 2003, I found that Ms. Burke had authorized the arbitration by signing an application for arbitration and an authorization form indicating that Mr. Volfson was her representative. In the same decision, I found that Ms. Burke was prevented from proceeding to arbitration based on one of the arguments brought by Allstate - because she had failed to return an OCF-14 reasonably required to schedule a medical and rehabilitation DAC assessment . In addition, I allowed Mr. Volfson's motion made in October 2002 to withdraw as Ms. Burke's representative without conditions.

Analysis:

Allstate seeks its expenses against either Ms. Burke or Mr. Volfson, her former representative. If the award of expenses is made against Ms. Burke, Allstate also seeks an order pursuant to section 282(11.2) of the Insurance Act requiring Ms. Burke to pay to it $3,000 because she commenced an arbitration that was frivolous, vexatious or an abuse of process. Ms. Burke did not respond to the Notice of Expense Hearing sent to her at her last known address, nor did Mr. Volfson although also put on notice of Allstate's position with respect to his liability for its expenses.

In order for there to be an expense award made against Mr. Volfson, he must be a party to the proceeding.³ Allstate argues that Mr. Volfson is a party because he was made a party by my order or, alternatively, he is a party to this proceeding because he commenced the arbitration process, initially without authorization.

I find that I cannot make an award of expenses against Mr. Volfson in respect of the merits of the arbitration because he was not a party to the proceeding. Mr. Volfson was made a party to the proceeding to respond to the suggestion that Ms. Burke had not authorized the arbitration and that by inference he was the true applicant. My findings that Ms. Burke had authorized the arbitration is determinative of this argument.

Despite my conclusion that Ms. Burke authorized the arbitration, Allstate argues that Mr. Volfson is a party to the proceeding because he commenced the arbitration, initially without authorization. The evidence does not establish that the arbitration was commenced without any authorization at all. It may be that Mr. Volfson purported to commence the arbitration, initially without written authorization. The evidence, such as it is, might support that conclusion. However, Ms. Burke, by her subsequent conduct, adopted the actions of Mr. Volfson with or without her initial authorization, written or otherwise. I made this finding, noted above, on the basis of the uncontradicted evidence that Ms. Burke attended at Mr. Volfson's office before the second pre-hearing conference on May 30, 2002 and signed an application for arbitration.

Allstate further argues that Mr. Volfson can be made a party because he was directing the litigation and, as such, this case is similar to other cases where arbitrators have considered adding representatives as parties.⁴

I do not agree.

Unlike the cases relied on by Allstate, I have very little evidence of the respective roles that Ms. Burke and Mr. Volfson played in the process. In particular, there is no direct evidence that Ms. Burke was not in control of the process. Ms. Burke, although given every opportunity to do so, declined to attend at a hearing and give evidence. Although Allstate's suspicions are not without merit, a suspicion is not enough. In the absence of any other evidence about who was in control of the litigation, I cannot but conclude that Ms. Burke was directing the process. I find that Ms. Burke is, therefore, responsible for whatever expense consequences flow from the outcome of this proceeding.

Allstate submits that it is entitled to its reasonable expenses of this arbitration and that Ms. Burke is not.

I agree.

An arbitrator is entitled to award expenses according to the criteria established in section 12(2) of Regulation 664, reproduced in Rule 75 of the Dispute Resolution Practice Code ("PracticeCode"), and set out here:

12(2) The adjudicator will consider the criteria referred to in the Expense Regulation found in Section F of the Code. These criteria are:

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

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;

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. at the request of either party, any written offer to settle made in accordance with Rules 76 and 77, having regard to the outcome of the proceeding;

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

Ms. Burke was completely unsuccessful in this arbitration. Morever, after appearing at a pre-hearing, she declined to sign a Glinka authorization⁵ and then failed to appear at the hearing on two separate occasions. She has also declined to respond to Allstate's motion for its expenses. Her failure to appear at either of the days of hearing, after having withdrawn her grant of authority to her representative, tended to prolong an otherwise straightforward matter. In considering Allstate's entitlement to its expenses I have also taken into account the need to ensure to fairness to both parties and the need to facilitate access to justice for applicants. However, when Ms. Burke, after having commenced this proceeding, effectively withdrew without formally doing so, fairness requires that Allstate be insulated to some degree from the expense of bringing the arbitration to a conclusion. Therefore, having regards to factors 1, 2, 3, 4 and 6 set out above, I find that Allstate is entitled to its reasonable expenses of this arbitration and that Ms. Burke is not.

The quantum of expenses sought by Allstate are not unreasonable in most respects. However, the hours billed by counsel may be somewhat excessive - for example, in respect of the first day of the preliminary hearing, counsel has billed approximately 15 hours preparation for what became a partial day of hearing. Even had Ms. Burke defended the preliminary issue, it remained a straightforward matter. In the result, I would discount the hours claimed by Allstate by 10% and, accordingly, it is entitled to counsel fees of $6,113.75 (73 hrs x $83.75) plus GST on fees of $427.67.

Allstate also seeks reimbursement for disbursements of $979.64, including the costs of a court reporter in the amounts of $224.70 and $353.64 totalling $578.34. I find that Allstate is not entitled to the cost of having a court reporter at the hearing. The retaining of a court reporter by a party is a discretionary expense unrelated to the effective conduct of an arbitration. Accordingly, Allstate is entitled to be reimbursed for disbursements in the amount of $401.30 plus GST of $22.49.

Allstate also seeks an order pursuant to section 282(11.2) of the Insurance Act, that Ms. Burke pay it $3,000 because Ms. Burke commenced an arbitration that was frivolous, vexatious or an abuse of process.

To be successful Allstate must establish that, from the outset, the application for arbitration was frivolous, vexatious or an abuse of process. I find that in failing to authorize her representative to continue to represent her as she had undertaken to do at the pre-hearing - thereby making it impossible for Mr. Volfson to continue to represent her - and then failing to appear at the hearing on two separate occasions, the reasonable inference is that the application for arbitration was frivolous if not vexatious and an abuse of process.

Accordingly, I find that Allstate is entitled to an order pursuant to section 282(11.2) of the Insurance Act. The language of the section contemplates an order in an amount up to $3,000. In the circumstances, I find that Allstate is entitled to an order in that amount.

August 7, 2003

David Muir Arbitrator

Date

Neutral Citation: 2003 ONFSCDRS 121

FSCO A01-000969

Financial Services Commission of Ontario

Between:

Ingrid Burke 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. Ms. Burke shall pay Allstate its reasonable expenses of the arbitration in the amount of $6,965.21.

2. Ms. Burke shall pay to Allstate $3,000 pursuant to section 282(11.2) of the Insurance Act because she commenced an arbitration that was frivolous.

August 7, 2003

David Muir Arbitrator

Date

Footnotes

1. 1The Statutory Accident Benefits Schedule —Accidents on or after November 1, 1996, Ontario Regulation 403/96, as amended by Ontario Regulations 462/96, 505/96, 551/96, 303/98, 114/00 and 482/01.
2. 2These issues are canvassed in more detail at pages 6 and 7 of my November 8, 2002 decision.
3. 3See for example the appeal decision Tanzos and State Farm Mutual Automobile Insurance Company (FSCO P01-00017, October 22, 2002)
4. 4See for example Gurevich and Royal & SunAlliance Insurance Company of Canada (FSCO A01-00011, September 18, 2002) appeal of preliminary order rejected as premature) or Volfson and Shuster and Royal & SunAlliance Insurance Company of Canada (FSCO A01-000440, September 13, 2002) under appeal.
5. 5Glinka and Pufferin Mutual Insurance Company'appeal (FSCO P01-0000, March 7, 2001)