Financial Services Commission of Ontario

Commission des services financiers de l’Ontario

Neutral Citation: 2003 ONFSCDRS 131 Appeal P03-00029

OFFICE OF THE DIRECTOR OF ARBITRATIONS

GUARANTEE COMPANY OF NORTH AMERICA Appellant

and

DAVID PINHASOV Respondent

Before: Nancy Makepeace

Representatives: Gregory Van Berkel for Guarantee Jadranka Cavrak for Mr. Pinhasov

Hearing Date: By written submissions

APPEAL ORDER

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

1. Guarantee’s appeal of the arbitration order, dated June 23, 2003, is rejected, pursuant to Rule 51.2(c) of the Dispute Resolution Practice Code.

2. The arbitration hearing, scheduled for September 22-25, 2003, may proceed.

September 4, 2003

Nancy Makepeace Director’s Delegate

REASONS FOR DECISION

I. NATURE OF THE APPEAL

Guarantee appeals from the arbitration order, dated June 23, 2003, dismissing its motion for a stay of proceedings. The appeal concerns the choice of forum where the insured person elects arbitration and the insurer commences a civil proceeding about essentially the same issues.¹

II. BACKGROUND

On September 6, 2002, Guarantee commenced a civil proceeding by filing a Statement of Claim, seeking: (a) a declaration that the correct amount of Mr. Pinhasov’s income replacement benefits (“IRBs”), under the SABS–1994,² is $2.90 per week, less post-accident income, not the $339.05 per week it had paid between January 11, 1996 and December 17, 1997 and October 25, 2001 and February 27, 2002; (b) repayment of the overpaid benefits; (c) interest on the overpayment; and (d) costs on a substantial indemnity basis.³ The civil proceeding followed, by one day, Mr. Pinhasov’s Application for Arbitration, dated September 5, 2002, in which he claimed: reinstatement of his IRBs at $339.05 per week, less post-accident income, on an ongoing basis and payment of the overdue amount, with interest. However, as the application was filed by regular mail,⁴ it was not filed until after Guarantee’s civil proceeding was initiated.⁵

Despite the fact that Guarantee commenced its civil proceeding before Mr. Pinhasov commenced his arbitration, the Arbitrator dismissed the stay motion. Guarantee alleges he erred in law by failing to consider all the appropriate criteria, applied the criteria improperly, and failed to consider the legal effect of s. 282(1) of the Insurance Act with respect to the limitations on an insurer’s choice of forum for resolving accident benefits disputes.

Because of the imminence of the arbitration hearing on the remaining issues, this matter was dealt with summarily based on the parties’ written submissions (Guarantee’s Notice of Appeal, dated July 24, 2003, and the letter from Mr. Pinhasov’s counsel, dated August 5, 2003). Although appeal orders are often released in letter format, this appeal raised issues of general application that are more appropriately dealt with in a formal decision.

III. ANALYSIS

Rule 50.2 of the Dispute Resolution Practice Code states:

A party may not appeal a preliminary or interim order of an arbitrator until all of the issues in dispute in the arbitration have been finally decided, unless the Director orders otherwise.

Accordingly, Rule 51.2(c) states, “An appeal may be rejected if . . . it is from a preliminary or interim order that does not finally decide the issues in dispute.”

Guarantee does not suggest that the arbitration order, dated June 23, 2003, is a final decision. It is titled, “Decision on a Motion,” and decides only that Guarantee’s civil proceeding does not preclude Mr. Pinhasov from continuing the arbitration with respect to the amount of income replacement benefits. Accordingly, Rule 51.2(c) applies.

The Rule gives the Director or Delegate discretion to acknowledge a preliminary issue appeal, where it is appropriate to do so, depending on a number of factors, including the apparent strength of the appeal, the nature of the issues on appeal, any agreement between the parties about the availability of a preliminary issue appeal, and the balance of prejudice and convenience between the parties. An appeal of a preliminary order may be acknowledged if a successful appeal would preclude any further arbitration proceedings, the appeal appears likely to succeed, the appeal raises an important or novel question of law that should be heard expeditiously, or procedural irregularities call for appellate intervention. Finally, the exercise of discretion requires a pragmatic balancing of interests, the goal being “the most just, quickest and least expensive resolution of the dispute.”⁶

The first of these factors applies here: if Guarantee succeeds in its appeal, the arbitration is brought to an end. However, based on the limited submissions considered in this preliminary appeal, it is not clear to me that the appeal is likely to succeed. Guarantee claims that the Arbitrator erred in law by failing to consider all the pertinent legal criteria, but does not identify any specific omission. The Arbitrator considered the following criteria:

1. Are the issues and relief sought similar?
2. How far along are the actions?
3. What are the impediments to dealing with the issues in court and arbitration?
4. Would duplicate proceedings raise the spectre of inconsistent results, create delay or raise costs?

This is a restatement of the criteria approved in King and Royal Insurance Company of Canada,⁷ and, more recently, in Mangat and Non-Marine Underwriters, Mbrs of Lloyd’s. In the latter decision, Director Draper stated that the criteria set out in the previous cases, including King and Royal,

must be applied against the backdrop of the insured person’s right to choose arbitration. Where the insured person elects to pursue statutory accident benefits through arbitration, that choice should be respected to the greatest extent possible. Judges and arbitrators should be slow to force an unwilling insured person into court.⁸ If the insurer wants to raise its own issues, it should add them to the arbitration proceeding as now allowed by s. 282(3).⁹

Applying these criteria, the Arbitrator in the decision below found that the two proceedings concerned essentially the same issue, namely the proper amount of Mr. Pinhasov’s income replacement benefits. In addition, Mr. Pinhasov also claims a special award in the arbitration proceeding, making it broader in scope than the court proceeding. He also found that the arbitration proceeding is further advanced, and that Mr. Pinhasov would face additional expense and delay if forced to defend Guarantee’s civil action and proceed in arbitration for a special award, a result which would frustrate the goals of avoiding multiple proceedings and providing speedy access to justice. Finally, the Arbitrator made the following comments about the choice of forum:

An insured person’s right to elect either Court or FSCO for determination of accident benefits claims is enshrined in sections 279 and 281 of the Insurance Act. Nowhere in the pertinent sections of this Act does the Legislature give the insurer the right to direct the process and essentially compel the insured person to accept the insurer’s choice of forum.

I emphatically reject Guarantee’s argument that its court filing two business days before the arbitration registered automatically gives the Insurer the choice of forum. In my view, this ignores the other recognized criteria and would create an unhealthy incentive to race for the filing clerk that would undermine the insured person’s choice under the legislation.

The Arbitrator’s conclusion is also supported by consideration of the events leading up to the two proceedings. In early 2002, Guarantee reduced Mr. Pinhasov’s IRBs overpaid. It was Mr. Pinhasov who applied for mediation in March 2002, seeking reinstatement of benefits at the higher rate and interest on overdue benefits. According to the Report of Mediator, dated July 17, 2002 (corrected on August 23, 2002 on another point), the parties agreed that Guarantee’s claim for a repayment, plus interest on overpaid benefits, “would be addressed in this mediation,” although it was not included in Mr. Pinhasov’s application for mediation. Clearly, both issues were in dispute at that time. In this context, and considering Mr. Pinhasov’s previous arbitration and appeal decisions, I accept Mr. Pinhasov’s claim that he displayed an intention to elect arbitration, as allowed by s. 282(1) of the Insurance Act.

Acknowledging the appeal and staying the arbitration in favour of a lengthier and more expensive court proceeding would work significant prejudice on Mr. Pinhasov, in my view, particularly as he claims a special award, which is only available in an arbitration. On the other hand, I am not persuaded Guarantee is prejudiced by rejecting the appeal. The arbitration hearing, scheduled to begin in less than three weeks’ time, can dispose of all the issues raised by both parties. Considering the balancing of factors, I am persuaded that rejecting Guarantee’s appeal of the arbitration order, and permitting the arbitration to proceed, is more likely to avoid a multiplicity of proceedings and produce “the most just, quickest and least expensive resolution of the dispute.”

Accordingly, the appeal is rejected and the arbitration hearing may proceed, as scheduled.

IV. EXPENSES

As the parties did not make submissions on the expenses of this preliminary appeal motion, that issue is deferred. The parties may contact me if they are unable to agree.

September 4, 2003

Nancy Makepeace Director’s Delegate

1. Does the arbitration involve issues substantially similar to those in the civil action?
2. How far along has the civil action proceeded (for example, have discoveries taken place on the issues before the court)?
3. Is the civil action broader in scope than the arbitration, both in terms of the issues involved and the relief sought?
4. Is there any serious impediment to having the issues in the arbitration dealt with in the court proceeding?
5. Would permitting the Application to proceed with the arbitration unduly duplicate proceedings, leading to greater costs and delays and raising the spectre of inconsistent results? [(FSCO A98-000234, March 24, 1999) at pp. 4-5]

Further, the Arbitration under the Insurance Act is an elective process and in the present case it was selected by Jimmy Lee prior to the commencement of this action by the Respondent. Even if this court had jurisdiction to stay the Arbitration, in my view it would be manifestly unfair for the Respondent, in these circumstances by its own action, to be able to deprive Jimmy Lee of the arbitration procees which he had already chosen. (At para. 10)

Footnotes

1. 1A previous arbitration decision (FSCO A99-000522, October 25, 2001) ordered Guarantee to pay IRBs from December 17, 1997 and ongoing, plus interest, until the Insurer complied with the loss of earning capacity benefits provisions of the SABS, dismissed Mr. Pinhasov’s claim for a special award, and deferred the issue of arbitration expenses. The IRB rate was not in issue in that decision, which concerned causation. I dismissed Guarantee’s appeal and confirmed the arbitration decision (FSCO P01-00054, September 4, 2002). The proceedings at issue in this appeal were initiated in the few days following the release of the appeal decision.
2. 2The Statutory Accident Benefits Schedule — Accidents after December 31, 1993 and before November 1, 1996, Ontario Regulation 776/93, as amended.
3. 3Arbitration Exhibit 2, Tab 1 (Statement of Claim) and Tab 2 (memo to courier re issuing Statement of Claim).
4. 4Arbitration Exhibit 1, Tab 6, Supplemental Affidavit of Ms. Cavrak.
5. 5Rule 7.3(b) of the Dispute Resolution Practice Code incorporates a five-day “mailbox rule” for regular, registered or certified mail. FSCO registered the application and copied it to Guarantee on September 17, 2002. Ms. Cavrak stated, in her affidavit, that her office received Guarantee’s Statement of Claim “well after” the Application for Arbitration was filed, and filed a Statement of Defence on September 30, 2002. (Arbitration Exhibit 1, Tab 1).
6. 6Rule 1.1 of the Code. Recent appeal decisions setting out the criteria for rejecting or acknowledging an appeal include Gurevich and. Royal and SunAlliance Insurance Company of Canada, (FSCO P02-00011, September 18, 2002), Pato and National Frontier Insurance Company, (FSCO P02-00037, February 5, 2003), and Bolger and CGU Insurance Company of Canada, (FSCO P03-00018, May 29, 2003), another choice of forum decision.
7. 7In King and Royal, the Arbitrator considered the same factors, expressed as five criteria:
8. 8I am aware of a recent decision taking this approach: Dominion of Canada Insurance Co. v. Lee, [1998] O.J. No. 4202. [footnote in original] In Dominion v. Lee, a judge dismissed the insurer’s motion for a court order staying the insured person’s application for arbitration on the basis that it was not authorized by the Courts of Justice Act, which applies only to court proceedings, not arbitrations, and for the following reason:
9. 9(FSCO P00-00020, August 1, 2000), at p. 15.