Neutral Citation: 2003 ONFSCDRS 21

FSCO A01-001593

BETWEEN:

HAI HAN NGUYEN

Applicant

and

WAWANESA MUTUAL INSURANCE COMPANY

Insurer

DECISION ON A PRELIMINARY ISSUE

Before:

Judith Killoran

Heard:

January 7, 2003, at the offices of the Financial Services Commission of Ontario in Toronto.

Written submissions were received on February 3, 2003, and December 13 and November 29, 2002.

Appearances:

Karen Kwan Anderson for Mr. Nguyen

Darrell March for Wawanesa Mutual Insurance Company

The Applicant, Hai Han Nguyen, was injured in a motor vehicle accident on August 7, 2000. He applied for statutory accident benefits from Wawanesa Mutual Insurance Company ("Wawanesa"), payable under the Schedule.¹ The parties were unable to resolve their disputes through mediation, and Mr. Nguyen applied for arbitration at the Financial Services Commission of Ontario under the Insurance Act, R.S.O. 1990, c.I.8, as amended.

The preliminary issues are:

Has Mr. Nguyen's claim for accident benefits arising out of the motor vehicle accident of August 7, 2000 been settled on a full and final basis?
Is Wawanesa entitled to its expenses of arbitration?

Mr. Nguyen is precluded from proceeding to arbitration as his claim for accident benefits has been settled on a full and final basis.
Each party shall bear its own expenses.

On August 7, 2000, Mr. Nguyen was a passenger in his brother's vehicle in the State of New York. The vehicle was at a toll booth when it was rear-ended by another vehicle and pushed into the vehicle ahead. Mr. Nguyen alleged that he sustained soft tissue injuries as a result of the accident.

An application for accident benefits was submitted on behalf of Mr. Nguyen on August 23, 2000 by his solicitors, Pace Johnson,² to Wawanesa. The Underwriters Adjustment Bureau Ltd. represented Wawanesa in its negotiations with Mr. Nguyen's solicitors. On May 7, 2001, Pace Johnson sent a letter to the Underwriters Adjustment Bureau confirming the settlement of Mr. Nguyen's claim for a sum of money plus all outstanding medical and treatment expenses.³

On June 7, 2001, the Underwriters Adjustment Bureau confirmed that the settlement offer had been accepted by Mr. Nguyen. A full and final release was forwarded for Mr. Nguyen's signature, together with a disclosure statement.⁴ After reviewing the release, Mr. Nguyen reconsidered and did not sign the release. No settlement funds were forwarded.

Jurisdictional Issue

Mr. Nguyen applied for mediation in July 2001. At the mediation in November 2001, Wawanesa took the position that the settlement of June 2001 was full and final and no further benefits were payable. Mr. Nguyen applied for arbitration in January 2002. In its Response to the Application for Arbitration, Wawanesa did not raise the issue of the alleged settlement. This preliminary issue was raised again at the pre-hearing on August 13, 2002.

Mr. Nguyen submits that Wawanesa is estopped from relying upon the alleged settlement as it did not raise the preliminary issue in its Response to the Application for Arbitration. Wawanesa did not seek to amend its Response. Therefore, Mr. Nguyen submits that the arbitrator does not have jurisdiction to hear the preliminary issue. I disagree.

On October 31, 2001, prior to the mediation, Wawanesa informed the Applicant that he was not entitled to commence a mediation proceeding as a consequence of a settlement, which had not been rescinded in accordance with the legislation.⁵ This position was maintained by Wawanesa at the mediation. In its Response to the Application for Arbitration, although Wawanesa did not specifically refer to the settlement, Wawanesa denied "that the insured person is entitled to any benefits beyond those that it has already paid to him." At the pre-hearing discussion held on August 13, 2002, Wawanesa raised the following preliminary issue, which is contained in the pre-hearing letter: "Did the parties reach a binding agreement which settled Mr. Nguyen's entitlement to statutory accident benefits?" The parties agreed that this issue would be the subject of a one-day hearing on January 7, 2003 with the submission of document briefs by the parties on agreed upon dates prior to the hearing. This preliminary issue is within my jurisdiction as adequate notice has been given to the Applicant. Subsection 282(3) of the Insurance Act states that: "The arbitrator shall determine all issues in dispute, whether the issues are raised by the insured person or the insurer."

Settlement Regulation

In the alternative, Mr. Nguyen submits that the alleged settlement is not binding. There was no acceptance of the settlement by Mr. Nguyen as there was no signed release and no settlement funds were dispersed. Therefore, Mr. Nguyen submits that the 48-hour cooling off period does not apply as Mr. Nguyen did not forward to Wawanesa a signed release.

The parties agree that the applicable settlement regulation is s. 9.1(1) and (2) of Regulation 664,⁶as amended by Ontario Regulation 780/93 of the Insurance Act. It states the following:

9.- (1) In this section, "settlement" means an agreement between an insurer and an insured person that finally disposes of a claim or dispute in respect of the insured person's entitlement to one or more benefits under the Statutory Accident Benefits Schedule.

(2) Before a settlement is entered into between an insurer and an insured person, the insurer shall give the insured person a written notice that contains the following:

A description of the benefits that may be available to the insured person under the Statutory Accident Benefits Schedule and any other benefits that may be available to the insured person under a contract of automobile insurance.
A description of the impact of the settlement on the benefits described under paragraph 1, including a statement of the restrictions contained in the settlement on the insured person's right to mediate, litigate, arbitrate, appeal or apply to vary an order as provided in sections 280 to 284 of the Act.
A statement that the insured person may rescind the settlement within two business days after the settlement is entered into by delivering a written notice to the insurer.
A statement that the tax implications of the settlement may be different from the tax implications of the benefits described under paragraph 1.
If the settlement provides for the payment of a lump sum in an amount offered by the insurer and, with respect to a benefit under the Statutory Accident Benefits Schedule that is not a lump sum benefit, the settlement contains a restriction on the insured person's right to mediate, litigate, arbitrate, appeal or apply to vary an order as provided in sections 280 to 284 of the Act, a statement of the insurer's estimate of the commuted value of the benefit and an explanation of how the insurer determined the commuted value.
A statement advising the insured person to consider seeking independent legal, financial and medical advice before entering into the settlement.

(3) A settlement may be rescinded by the insured person, within two business days after the settlement is entered into, by delivering a written notice to the insurer.

(4) If the insurer did not comply with subsection (2), the insured person may rescind the settlement after the period mentioned in subsection (3) by delivering a written notice to the insurer.

(5) A restriction on an insured person's right to mediate, litigate, arbitrate, appeal or apply to vary an order as provided in sections 280 to 284 of the Act is not void under subsection 279(2) of the Act if,

(a) the restriction is contained in a settlement; and

(b) the insurer complied with subsection (2)

ANALYSIS AND CONCLUSION

The Applicant relied on Turner and Economical Mutual Insurance Company,⁷ where Economical alleged that Ms. Turner had entered into a binding agreement after counsel for the parties agreed to a full and final settlement. Turner reconsidered after reviewing the release with counsel. She did not sign the release and did not forward a written rescission of the settlement. No settlement funds were transferred. Economical did not attempt to rely on the alleged settlement in its subsequent dealings with Turner and paid a number of outstanding claims after the alleged settlement. The arbitrator found that there had not been a settlement as a written release, assuming proper disclosure, indicates when an agreement can be considered binding.

The Applicant also relies on Soordhar and Citadel General Assurance Company,⁸ where Ms. Soordhar did not sign the release, provided written confirmation of rescission of the settlement, and returned the settlement funds. Arbitrator McMahon found that the insurer's delivery of a disclosure notice is a pre-condition to entering into a settlement. The 48-hour cooling off period begins only when the insured accepts the settlement proposal. The arbitrator found that the parties did not enter into a binding settlement and Soordhar was allowed to continue with the arbitration.

Wawanesa relies on the decision in Birjasingh v. Coseco Insurance Co. 1999 CanLII 14888 (ON SC), [1999] O.J. No. 4546, where counsel for the defendants sent a release and the notice required by the settlement regulation to counsel for the plaintiff on or around December 11, 1998. On January 12, 1999, counsel for the plaintiff met with Ms. Birjasingh. Plaintiff's counsel did not advise her of the settlement or of the receipt of the release and the written notice. Ms. Birjasingh advised her counsel that she was not prepared to effect a full and final settlement of her accident benefit claims. The plaintiff had been advised that day by her doctor that she might require further surgery for her back injuries. These concerns were not relayed to the defendant's counsel. The judge ruled that a solicitor has the authority to effect a settlement of litigation and such a settlement is binding on the client even in situations where counsel does not have instructions to effect the settlement. The judge applied this principle to the settlement regulation which he said did not change the assumption that if something is communicated to a solicitor, it will be passed on to the client. He concluded that the "cooling off period had commenced when the insurer forwarded settlement documents. The insured had not rescinded the settlement within the cooling off period so the settlement was valid.

Wawanesa relies on the ruling in Birjasingh to submit that Mr. Nguyen settled his claim against Wawanesa when the appropriate settlement documents were forwarded to him pursuant to subsection 9.1(2) of the Ontario regulation. Wawanesa submits that as Mr. Nguyen did not forward a response rescinding the offer within the statutory 48 hour period, the settlement was valid and should not be rescinded.

Wawanesa also relies on Dhawan v. State Farm Mutual Automobile Insurance Company⁹ where the arbitrator found there was a valid binding settlement precluding Mr. Dhawan from proceeding to arbitration in circumstances where the applicant's representative did not respond to the settlement documentation forwarded to him.

Mr. Nguyen submits that Birjasingh has no binding effect upon a FSCO arbitrator. He relies on the decision in King and Wawanesa Mutual Insurance Company¹⁰ where the arbitrator concluded that he was not bound by a first level court decision. Also, FSCO decisions prior to Birjasingh have held that the cooling off period begins from the date the insured executes a settlement release.

Mr. Nguyen distinguishes Dhawan on the grounds that Mr. Dhawan attempted to rescind the settlement one week after the cooling off period had elapsed. In this case, Mr. Nguyen did not rescind because the settlement release was never signed and returned to Wawanesa. Mr. Nguyen submits that Wawanesa has misinterpreted the arbitrator's decision in Dhawan which did not hold that the trigger for the cooling off period was the act of the insurer of forwarding the settlement documentation to the insured's legal representative. Rather, the arbitrator paraphrased the settlement regulation which "informs the Applicant of his right to rescind the settlement agreement in writing within two business days after the settlement was entered into and informs him of his right to rescind the settlement after the "cooling off period if the insurer fails to comply with subsection (2)".¹¹ Mr. Nguyen asserts that the issue in this case is not about the cooling off period but about whether he accepted the settlement, which he denies. Mr. Nguyen submits that he did not sign a settlement release, the Insurer did not forward settlement funds, and therefore there was no settlement.

I find the reasoning in Birjasingh most persuasive. More specifically, I concur with Justice Nordheimer's ruling that: "The refusal of the resiling party to sign the release cannot be relied upon as invalidating the settlement. If the settlement is found to be enforceable, then the court merely orders that the release be signed as part of the relief granted." I find that the settlement in this case is enforceable. First, there was an oral agreement on May 7, 2001. That oral agreement was committed to writing on the same day in a letter from Wawanesa to Mr. Nguyen's counsel.

Wawanesa complied with the requirements of the Settlement Regulation by forwarding disclosure and a release on June 7, 2001. Mr. Nguyen had the option of delivering written notice to Wawanesa of his intention to rescind the settlement within two business days after receipt of the settlement documents. He did not do so. I do not accept Mr. Nguyen's argument that it was not necessary to forward notice of an intention to rescind the agreement as there was no agreement because no release was signed. An agreement between the parties had been concluded to which a signed release was not a prerequisite.

EXPENSES:

Wawanesa has applied for an award under subsection 282 (11.2) of the Insurance Act. This section provides that if an insured person commences an arbitration that, in the opinion of the Arbitrator, is frivolous, vexatious or an abuse of process, the Arbitrator may award an amount to be paid by the insured person to the insurer that does not exceed the amount assessed against the insurer in respect of the arbitration under section 14 of the Insurance Act.

The submissions made by Wawanesa did not persuade me that from the outset this proceeding was frivolous, vexatious or an abuse of process. Mr. Nguyen could reasonably have believed that he was entitled to some statutory accident benefits. I find that Wawanesa is not entitled to an award under subsection 282 (11.2) of the Insurance Act

Wawanesa argued that it is entitled to its expenses, as did Mr. Nguyen. Wawanesa based its submissions on the authority of arbitrators under the Insurance Act, the Expense Regulation,¹²and Rule 75 of the Dispute Resolution Practice Code¹³ (the "Code").

Subsection 282(11) of the Insurance Act authorizes arbitrators to award arbitration expenses to the parties in accordance with the criteria prescribed in section 12 of the Expense Regulation, which contains essentially the same wording as Rule 75 of the Code. The criteria include: each party's degree of success; the conduct of either party which tended to shorten or facilitate the proceeding or that tended to prolong, obstruct or hinder the proceeding; whether the proceeding or any position taken by the insurer or the insured was manifestly unfounded, frivolous, vexatious, fraudulent or an abuse of process; the degree of complexity, novelty or significance of the factual or legal issues, any written offers to settle and any other matter related to the proceeding that the arbitrator considers relevant to the issue of whether an award of expenses is justified.

Although Wawanesa was successful in the outcome, I do not believe that Mr. Nguyen's position was manifestly unfounded or an abuse of process. I also do not believe that Mr. Nguyen's conduct tended to prolong, obstruct or hinder the proceeding. The issue was of some significance and complexity. I am not persuaded that either party should bear the other's expenses of this preliminary issue hearing. Each party shall bear its own expenses.

February 19, 2003

Judith Killoran Arbitrator

Date