Financial Services Commission of Ontario

Commission des services financiers de l’Ontario

Neutral Citation: 2003 ONFSCDRS 14

Appeal P02-00037

OFFICE OF THE DIRECTOR OF ARBITRATIONS

NATIONAL FRONTIER INSURANCE COMPANY Appellant

and

FERNANDA PATO Respondent

Before: Stewart M. McMahon

Representatives: Joan Takahashi for National Frontier Chris Nicolis for Ms. Pato

Hearing Date: Monday, January 27, 2003, by telephone conference call

APPEAL ORDER

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

National Frontier Insurance Company’s appeal with respect to the arbitration order dated December 12, 2002, is rejected.
On the agreement of counsel, the expenses of this motion will be payable to the party awarded the expenses of the arbitration proceeding.

February 5, 2003

Stewart M. McMahon Director’s Delegate

Date

REASONS FOR DECISION

I. NATURE OF THE ISSUE

This decision concerns the scope of an insurer’s right to appeal from a preliminary decision relating to insurer examinations (IEs).

Ms. Pato was injured in a motor vehicle accident in May 1997. She applied for income replacement benefits pursuant to the SABS-1996.¹ National Frontier Insurance Company (“National Frontier”) accepted Ms. Pato’s claim and began to make payments. In July 1999, National Frontier arranged for two IEs. One was conducted by a physiatrist, the other by a psychiatrist. These assessors reported that Ms. Pato could return to alternate employment.

National Frontier terminated benefits in July 2000. After a failed mediation, Ms. Pato applied for arbitration in June 2002. Shortly thereafter, National Frontier arranged for two further IEs – one with an orthopaedic surgeon, the other with a neuropsychologist. Ms. Pato refused to attend, but advised that she would return to the doctors who had conducted the previous IEs. National Frontier insisted that she be examined by the assessors it had chosen, and brought a motion seeking an order staying the arbitration proceeding until Ms. Pato complied. The Arbitrator dismissed the motion. She found that National Frontier had not demonstrated that it reasonably required assessments by an orthopaedic surgeon or a neuropsychologist, but indicated that Ms. Pato should attend for follow-up examinations by the original IE doctors.

Rule 50.2 of the Dispute Resolution Practice Code states that a party may not appeal a preliminary or interim ruling until all of the issues in dispute have been decided. In addition, Rule 51.2 states that the Director of Arbitrations may reject an appeal if it is from a preliminary or interim order that does not finally decide the issues in dispute. However, Rule 50.2 also allows the Director to proceed with an appeal from a preliminary or interim order, when appropriate. National Frontier submits this is a proper case. Ms. Pato resists, arguing, in part, that it will inevitably result in an adjournment of the hearing, scheduled to start next month.

As a practical matter, decisions regarding whether to acknowledge the appeal, or reject it as premature, are generally released by way of a letter decision that is delivered to the parties only. The principles on which the Director and his delegates exercise their discretion have not been discussed in general terms for some time. Therefore, I have decided to release my reasons in decision format.

For the reasons that follow, I am not persuaded that the appeal should be allowed to go ahead at this juncture.

II. THE ARBITRATOR’S DECISION

The Arbitrator started her decision by stating that s. 42 of the SABS-1996 stipulates an insurer may require an examination “as often as is reasonably necessary.” However, she suggested that when the reasonableness of the examination is contested, the insurer must prove that the examination is reasonably necessary. She went on to state that the relevant factors include: the nature of the injuries, the history of any treatment or assessments, the relevance of the proposed examinations to the issues in dispute, the timing of the request, the possible prejudice to either side, and whether any new issues have been raised that require evaluation.

The Arbitrator commented on the fact that National Frontier had filed extensive materials, but noted that these materials did not address the question of why Ms. Pato’s agreement to return to the physiatrist was not acceptable, or why an assessment by an orthopaedic surgeon was reasonably necessary. She also noted that Ms. Pato had not been treated or assessed by an orthopaedic surgeon and that the evidence did not suggest there had been any material change in her condition that required this type of assessment.

The Arbitrator stated that the material contained even less rationale for the need for a neuropsychological examination. She considered the fact that a neuropsychological assessment had been undertaken at the behest of Ms. Pato’s counsel, but noted it had ruled out the possibility of a head injury. The Arbitrator did not make any explicit reference to the fact that the neuro-psychologist had found severe cognitive deficits that he attributed to her psychological condition. However, she appears to have dealt with this fact by ordering that the raw test scores be provided to National Frontier for review. It is too early to say what will come of this review.

III. SHOULD THE APPEAL BE ACKNOWLEDGED, OR REJECTED AS PREMATURE?

The discretion to proceed with an appeal from a preliminary or interim order should be exercised keeping in mind the overarching principles enunciated in Rule 1.1, which states: “These Rules should be broadly interpreted to produce the most just, quickest, and least expensive resolution of the dispute.” The rule limiting appeals from interim or preliminary rulings is designed to ensure that protracted disputes over procedural matters do not jeopardize a timely or affordable hearing of the substantive issues. However, in some cases it makes good sense to delay the main hearing to allow the appeal to proceed.

For example, if a successful appeal will dispose of all the remaining issues, proceeding with the appeal of an interim or preliminary decision may save the parties the time and expense involved in the main hearing. Based on this rationale, appeals relating to limitation periods, or whether the incident qualifies as a accident, have commonly been acknowledged. In contrast, appeals relating to issues that will not dispose of all the issues are acknowledged more sparingly. However, it may be appropriate to acknowledge appeals that raise novel legal issues, or seek to clarify a point on which there are competing arbitration decisions. In the same vein, appeals that raise questions of general importance are more likely to be acknowledged. Underlying all of these considerations are the merits of the appeal. The stronger the apparent merits, the greater the likelihood that the appeal will be acknowledged.

The parties’ wishes and intentions are also important. When counsel are considering the pros and cons of setting up a preliminary issue hearing (and before there is a winner and a loser), they should think about the possibility of an appeal, and discuss whether it should be argued before the main arbitration hearing. Any agreement can be recorded in the pre-hearing letter.

Finally, preliminary or interim issue hearings are not generally argued on as complete an evidentiary record as a full hearing, and they demand a quick answer from the arbitrator. Consequently, these decisions will not generally be as fulsome as a decision after a full hearing. An appellate review of these decisions must recognize this reality.

In this case, the Arbitrator was given extensive written materials and counsel had an opportunity to make oral submissions. The Arbitrator’s reasons are lengthy and detailed. If anything, they are more fulsome than the parties could have expected. It is a decision that turned on the facts of the case, and I would be very slow to interfere with it, unless there was a clear error of law.

National Frontier has not persuaded me that the appeal is likely to succeed, and therefore, I am not prepared to acknowledge the appeal at this time. Given that I have decided not to proceed with the appeal, I will limit my comments on its merits. However, a few paragraphs are necessary to explain my conclusions.

National Frontier approached its right to select its IE assessors in very absolute terms. It relied heavily on the statement in Scott and Toronto Transit Commission, (OIC A-001116, September 4, 1992) that an arbitrator should not “second guess” the actions or motives of the company. This was an early decision that has been subject to considerable comment in the ensuing years. While the idea that the insurer must be given some latitude has stood the test of time, the suggestion that their decisions should not be scrutinized has routinely been rejected. The appeal decisions in Prudential of America General Insurance Company (Canada) and Chafe-Moote, (FSCO P99-00044, September 8, 2000), and Allstate Insurance Company of Canada and Sellathamby, (FSCO P02-0009, December, 17, 2002), represent recent attempts to put the Scott decision in perspective.

National Frontier argued before the Arbitrator, and me, that it had a virtually unfettered right to choose the IE assessors, and that it need only show that the speciality of the assessor was rational in light of the insured person’s condition and the issues in dispute. It argued that the identity and speciality of the prior IE assessors were completely irrelevant. The Arbitrator rejected this absolutist approach, just as she rejected Ms. Pato’s submission that the Insurer’s only option was to ask her to return to the initial assessors. The Arbitrator stated that in light of Ms. Pato’s willingness to re-attend before the original IE assessors, National Frontier had to explain why it reasonably required her to attend before someone else. To my mind this represents a reasonable balancing of the parties’ rights and interests. The Arbitrator found, on the evidence before her, that National Frontier had failed in this regard. Different arbitrators may have come to another conclusion, particularly with respect to the neuropsychological assessment, but that is not a valid reason for disturbing the Arbitrator’s decision. On this basis, I am not prepared to proceed with the appeal at this juncture. However, before concluding, I must touch briefly on one other point.

Following the motion before the Arbitrator, Ms. Pato’s counsel delivered numerous medical records, some of which were in his possession prior to the motion. National Frontier sought leave to introduce these documents as part of the record before me. These documents included a referral note by Ms. Pato’s family doctor to an orthopaedic surgeon. National Frontier argued that this document undermined the Arbitrator’s finding that Ms. Pato had not been assessed or treated by an orthopaedic surgeon. In addition, National Frontier was concerned that some of the “new” records could be used to argue that Ms. Pato’s condition was worsening. It argued that this added strength to its argument that it should be allowed to have a fresh set of assessors explore the reasons for the change. Ms. Pato’s counsel resisted National Frontier’s request to introduce the documents, arguing, in part, that it had not shown due diligence in demanding these records in advance of the motion. I dismissed this submission out of hand during the hearing. National Frontier had demanded these records many months before the motion, and these should have been handed over by Ms. Pato’s counsel in a timely fashion. I admitted the medical records, but also admitted evidence that Ms. Pato did not attend the orthopaedic assessment on the advice of her counsel.

I am not convinced that this new evidence would likely have changed the Arbitrator’s conclusions. It is true that the family doctor thought it advisable to have Ms. Pato assessed by an orthopaedic surgeon, but ultimately no examination was undertaken. The Arbitrator was heavily influenced by the fact that Ms. Pato would be relying on the evidence of physiatrists, not orthopaedic surgeons. Given that Ms. Pato did not attend the orthopaedic exam, this fact has not changed. With respect to the balance of the clinical records, the Arbitrator considered, but rejected, National Frontier’s argument that it should be entitled to a new set of assessors to examine the change in Ms. Pato’s condition. She found that while there may have been changes in the degree of her impairments, the nature of her complaints had not changed significantly, and hence did not justify National Frontier’s claim that it needed a fresh set of assessors. The “new” records do not undermine this finding or conclusion.

IV. CONCLUSION

The Arbitrator’s decision was largely fact-based. It did not raise any novel questions of law, or principle. Nor am I convinced that there is sufficient merit to the appeal to justify departing from the usual rule that appeals from preliminary or interim orders should not proceed until all of the issues in dispute have been decided.

V. EXPENSES

On the agreement of counsel, the legal expenses associated with this motion will be payable to the party awarded the expenses of the arbitration.