Svetlana Iankilevitch v. CGU Insurance Company of Canada, 2003 ONFSCDRS 41

Neutral Citation: 2003 ONFSCDRS 41

FSCO A01-000942

BETWEEN:

SVETLANA IANKILEVITCH

Applicant

and

CGU INSURANCE COMPANY OF CANADA

Insurer

REASONS FOR DECISION

Before: Eban Bayefsky

Heard: October 28, 2002, at the offices of the Financial Services Commission of Ontario in Toronto. October 30, 2002 and January 17, 2003 by telephone conference.

Appearances: Henry Goldentuler for Ms. Iankilevitch Kadey B.J. Schultz for CGU Insurance Company of Canada

Issues:

The Applicant, Svetlana Iankilevitch, was injured in a motor vehicle accident on November 16, 2000. She applied for and received statutory accident benefits from CGU Insurance Company of Canada ("CGU"), payable under the Schedule.¹ CGU denied Ms. Iankilevitch weekly income replacement benefits ("IRBs") on the basis of her failure to provide information reasonably required to assist the Insurer in determining the quantum of her benefits, pursuant to section 33 of the Schedule. The parties were unable to resolve their disputes through mediation, and Ms. Iankilevitch applied for arbitration at the Financial Services Commission of Ontario under the Insurance Act, R.S.O. 1990, c.I.8, as amended.

A preliminary issue hearing on the question of whether the Applicant was disentitled to benefits pursuant to section 33 was held on June 11 and July 24, 2002. I issued a decision on the preliminary issue on October 4, 2002. I ordered that the Applicant was disentitled to IRBs beyond $185 per week from August 20, 2001 to June 11, 2002. The Applicant filed an appeal of this decision. The Insurer filed a cross-appeal. In a preliminary consideration of the appeals, Director's Delegate McMahon rejected these appeals as premature and stated that the issues raised in the appeal could be pursued once the final arbitration order had been released. Delegate McMahon stated that I would be in the best position to assist the parties in framing the remaining issues in this case and, in particular, that I could tell the parties if the possibility of a further section 33(2) penalty was still a live issue. If it were, then I would be in the best position to weigh any additional evidence.

The matter resumed before me on October 28, 2002. At the commencement of the hearing, Mr. Goldentuler indicated that he sought to withdraw the issue of the Applicant's entitlement to medical benefits for treatment at Integrated Health Recovery (in the amount of $8,655). He also sought to respond to the Insurer's position that the Applicant continued to be in breach of section 33 subsequent to June 11, 2002. Finally, Mr. Goldentuler sought to introduce a report dated October 3, 2002 by Mr. Ian Wollach, an accountant with the firm of Rich Rotstein Limited.

By letter decision, dated October 30, 2002, I allowed the Applicant to withdraw the Integrated Health Recovery issue on the condition that she reimburse the Insurer its costs of preparing for the arbitration of this issue and that she pay the Insurer's assessment fee should she seek to recommence the arbitration on this matter.

Regarding the Insurer's position that the Applicant continued to be in breach of section 33, Mr. Goldentuler sought to revisit the whole issue of whether the Applicant had provided sufficient information under section 33 and whether the Applicant had had a reasonable explanation for failing to provide adequate disclosure by the time of the preliminary issue hearing. I found that a further penalty under section 33(2) was still an open question, but not for the purpose of conducting a reconsideration of my initial findings on the adequacy of the information provided by the Applicant as of the date of the preliminary issue hearing. I also found that it would be inappropriate to permit the Applicant to re-argue the question of whether she had properly responded to the Insurer's requests for information and/or whether she had had a reasonable explanation for not doing so. I found that any evidence in respect of the Applicant's efforts to provide the requested information should be restricted to the period after June 11, 2002.

Finally, the Insurer objected to the admission of Mr. Wollach's report and to Mr. Wollach testifying, on the basis that Mr. Goldentuler had not complied with the Commission's production and notice rules. I stated that I was concerned that Mr. Wollach's evidence would, in large measure, be directed to whether the information at the time of the preliminary issue hearing and, indeed, from the outset of the claim, was sufficient to enable the Insurer to calculate the Applicant's IRBs. I stated that I was not prepared to admit the report to the extent that it would be used as the basis of a further inquiry into the issues already addressed in my initial decision. I found the admission of Mr. Wollach's evidence to be premature.

The hearing was to resume in the afternoon on October 30, 2002, by teleconference. As a result of my decision on the issues raised on October 28, 2002, Mr. Goldentuler wrote the Commission indicating that he had "no other option but to withdraw our entire Arbitration and proceed in the venue where relief against forfeiture is available." Mr. Goldentuler sought an order allowing the Applicant to withdraw the arbitration without conditions.

The Applicant's request to withdraw was addressed in the telephone conference on October 30, 2002. On November 8, 2002, I issued an order allowing the withdrawal with a full decision to follow. A further telephone conference was held on January 17, 2003 to address the issue of expenses for the section 33 preliminary issue hearing.

The issues in this hearing are:

On what conditions, if any, is Ms. Iankilevitch entitled to withdraw her arbitration?
Is either party entitled to their expenses of the preliminary issue hearing?

Result:

Ms. Iankilevitch is entitled to withdraw her arbitration on the following conditions: that she pay the Insurer its reasonable expenses of preparing for and attending at the hearing on October 28, 2002; that she pay the Insurer its assessment fee should she attempt to recommence her arbitration on any of the outstanding issues; and that any interest on any outstanding income replacement benefits be suspended as of October 28, 2002.
The parties shall bear their own expenses of the first day of the preliminary hearing. Ms. Iankilevitch shall pay the Insurer its reasonable expenses of preparing for and attending at the second day of the preliminary hearing (as related to the Applicant's anticipated testimony), including one-half hour of its accountant's time to attend and assist on the second day.

EVIDENCE AND ANALYSIS:

The Withdrawal

The main arbitration hearing in this matter was to deal with the issues of the quantum of IRBs, the Integrated Health Recovery account, a special award, interest and expenses. The Integrated Health Recovery issue has now been withdrawn, on certain conditions, as set out above. By virtue of my preliminary issue decision, the Applicant has been denied IRBs beyond $185 per week from August 20, 2001 to June 11, 2002. By virtue of my supplementary decision of October 30, 2002, the issue of a further penalty under section 33(2) remained an open question.

The Applicant sought to withdraw her arbitration in order to pursue an application for relief of forfeiture in the courts. The Applicant also indicated that she wished to pursue her appeal of my preliminary issue decision before the Commission. The Applicant submitted that, if possible, her preference was to proceed simultaneously with her appeal and her court application. The Insurer only objected to the withdrawal of the arbitration to the extent that it would prevent it from pursuing its cross-appeal of my preliminary issue decision.

I have allowed the Applicant's request to withdraw her arbitration. The Insurer successfully invoked section 33, disentitling the Applicant to income replacement benefits beyond a certain level. The Applicant concluded that she must challenge this result, preferably both through her appeal at the Commission and through an application in court. Had the arbitration proceeded, the issue of the Applicant's compliance with section 33 would have continued to be an issue. I see no useful purpose in forcing the Applicant to proceed with her arbitration, given my direct ruling on her breach of section 33. While the Applicant had the option of calling new evidence concerning her compliance with section 33 beyond June 11, 2002, the Applicant continued to dispute my conclusion that a breach of section 33 disentitled her to benefits during the earlier period. I also indicated in my supplementary decision of October 30, 2002 that I would not engage in a reconsideration of the rulings I had made on the meaning and effect of section 33. In my view, I have directly and finally determined the Applicant's entitlement to certain benefits during the August 2001 to June 2002 period, pursuant to section 33. Given this, I find that the Applicant is not required to proceed to call evidence on her subsequent compliance with section 33 or, if possible, on her substantive entitlement to a particular level of benefits.

The Insurer only objected to a withdrawal to the extent that it would preclude it from pursuing its cross-appeal. I am unable to say with certainty how the withdrawal might affect the pending appeals. I am also unable to say whether, based on my preliminary decision, a termination of the appeals would leave the Insurer no option but to pay the Applicant certain benefits. However, I am not prepared to order the Applicant to proceed with her arbitration simply on the possibility that a withdrawal would terminate the appeals. In any event, I have finally determined the Applicant's entitlement to benefits beyond a certain level during a particular period of time. If the arbitration proceeded, it would address the Applicant's subsequent compliance with section 33. It would not affect my previous interpretation of section 33 or my finding that the Applicant was disentitled to benefits during the earlier period. Therefore, even if a withdrawal of the arbitration might end the Insurer's cross-appeal, I am not prepared to force the Applicant to proceed where it would have no effect on my ruling concerning the impact of section 33 during the August 2001 to June 2002 period.

I find that the Applicant is entitled to withdraw her arbitration despite her apparent intention to seek relief from my preliminary decision in court. In my view, the particular manner in which the Applicant seeks to challenge my decision is not relevant to her request to withdraw. As noted, the Insurer only objected to the withdrawal to the extent that it affected its cross-appeal. The Insurer did not dispute the Applicant's entitlement to seek relief in court. I am not prepared to require the Applicant to proceed with her arbitration simply on the basis that she intends to respond to my decision in court, as well as at the Commission.

Conditions for the Withdrawal

The Applicant submitted that she should be allowed to withdraw her arbitration without conditions. The Insurer submitted that any withdrawal should only be permitted on the grounds that the Applicant pay the Insurer's expenses of the arbitration (to be payable before any appeal or court application proceeds) and that any interest on outstanding IRBs cease as of October 28, 2002.

I find that the Applicant is entitled to withdraw her arbitration on the condition that she pay the Insurer its reasonable expenses of preparing for and attending at the hearing on October 28, 2002, and that she pay the Insurer's assessment fee should she seek to recommence the arbitration on any of the issues of the quantum of IRBs, a special award, interest or expenses.

My preliminary issue decision of October 4, 2002 directly addressed section 33 of the Schedule and its application to the present case. I did not accept the Applicant's interpretation of section 33. I found that the Applicant failed to provide reasonably required information and a reasonable explanation for failing to do so. I found that the Applicant sought to thwart, not to facilitate, the Insurer's assessment of her IRBs. The Applicant sought to revisit these very issues at the October 28, 2002 hearing. I find that, by seeking to re-open the questions that were addressed and determined in the preliminary issue hearing, the Applicant improperly sought to circumvent my initial rulings on these matters, thereby hindering the process and putting the Insurer to unnecessary expense. On October 30, 2002, the Applicant indicated that she had considered withdrawing her arbitration following my preliminary issue decision, but instead decided to appeal the decision. I find that the Applicant improperly sought to challenge my initial rulings, despite having already filed an appeal on these matters. I rejected the Applicant's attempt to proceed in this manner. In these circumstances, I find that the Applicant should, as a condition of withdrawing her arbitration, pay the Insurer its reasonable expenses of preparing for and attending at the hearing on October 28, 2002.

The Applicant has now indicated that she wishes to proceed with her appeal and an application for relief in court. By letter dated October 29, 2002 (received by fax on November 8, 2002), the Applicant indicated that she undertook not to pursue any claims at the Commission. In these circumstances, I find that the Applicant ought to pay the Insurer its assessment fee should she attempt to recommence her arbitration on any of the outstanding issues. I agree with the Insurer that any interest on any outstanding income replacement benefits should be suspended as of the first day of the main hearing, October 28, 2002. I see no basis for making a specific order that this amount be payable prior to any appeal or court application proceeding.

Expenses of the Preliminary Issue Hearing

Both parties sought their expenses of the preliminary issue hearing. Having regard to the criteria set out in the Expense Regulation, Regulation 664, R.R.O. 1990, as amended, I find that the parties should bear their own expenses of the first day of the preliminary hearing, but that the Applicant should pay the Insurer its reasonable expenses of preparing for and attending at the second day of the preliminary hearing (as related to the Applicant's anticipated testimony).

The Insurer was largely successful at the preliminary issue hearing. However, while I found against the Applicant on many points (for example, that she sought to thwart the Insurer's assessment of her income replacement benefits), I do not find that this should be interpreted as the Applicant having engaged in conduct that tended to hinder or prolong the proceeding for the purposes of an award of expenses. I have already addressed the Applicant's conduct by denying her certain benefits. The Applicant should not be penalized twice for the same conduct. This conduct may have hindered and delayed the Insurer's assessment of her claim, but it did not hinder or prolong the preliminary issue hearing itself. The Insurer submitted that the Applicant's cross-examination of its accountant, Mr. Pellegrini, was discourteous and unnecessarily long. I see no basis for this assertion. I found against the Applicant on the substantive aspects of the preliminary issue, but I do not find that her position was manifestly unfounded, frivolous, vexatious, fraudulent or an abuse of process. The case raised novel issues of some legal and factual complexity. My decision departed somewhat from the appeal decision in Kassa and Economical Mutual Insurance Company (FSCO P00-00053, July 26, 2001), upon which the Applicant felt she was entitled to rely. In all of the circumstances, I am not prepared to order either party to pay the other its expenses of the first day of the preliminary hearing. Each party will bear their own expenses of the first day.

The second day of the preliminary issue hearing is a different matter. As set out in my preliminary decision, the preliminary hearing began on June 11, 2002 and was resumed on July 24, 2002, with the expectation that the Applicant would testify in response to Mr. Pellegrini's evidence. However, at the resumption, Mr. Goldentuler advised that the Applicant would not be testifying. I heard nothing as to why this decision could not have been made earlier. I accept Ms. Schultz's submission that she had expected to cross-examine the Applicant on the second day of the preliminary hearing and had prepared accordingly. While the second day of the preliminary hearing proceeded with final submissions, I find that the Applicant's conduct put the Insurer to unnecessary expense. I, therefore, order the Applicant to pay the Insurer's reasonable expenses of preparing for and attending at the second day of the preliminary issue hearing, as related to the Applicant's anticipated testimony.

Ms. Schultz sought an order for the expenses of Mr. Pellegrini's assistance and attendance at the second day of the preliminary issue hearing. Section 5(1)2 of the Schedule to the Expense Regulation states that an award of expenses can be made for the attendance of an expert witness "whose attendance is necessary." I find that Mr. Pellegrini's attendance on the second day of the preliminary hearing was necessary to advise Ms. Schultz regarding the Applicant's anticipated evidence. However, I find that these expenses are only payable for the first half-hour of the second day of the hearing, which was approximately the time it took for Mr. Goldentuler to advise of his decision not to call the Applicant and for Ms. Schultz to determine how she ought to proceed in the face of this new advice.

March 19, 2003

Eban Bayefsky Arbitrator

Date