Financial Services Commission of Ontario

Commission des services financiers de l’Ontario

Neutral Citation: 2003 ONFSCDRS 64

Appeal P01-00010

OFFICE OF THE DIRECTOR OF ARBITRATIONS

WAWANESA MUTUAL INSURANCE COMPANY

Appellant

and

DONATO D'ANGELO

Respondent

Before:

Nancy Makepeace

Representatives:

Donald G. Cormack for Wawanesa

Daniel F. Daly for Mr. D'Angelo

Hearing Date:

May 16, 2002

Written submissions completed on May 31, 2002

APPEAL ORDER

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

1. The appeal is dismissed and the arbitration order, dated January 5, 2001, is confirmed.

2. The parties shall bear their own appeal expenses.

April 23, 2003

Nancy Makepeace

Director's Delegate

Date

REASONS FOR DECISION

I. NATURE OF THE APPEAL

This appeal is about an arbitrator's powers on a representative's motion to withdraw as representative under Rule 9.5 of the Dispute Resolution Practice Code – Third Edition¹Mr. D'Angelo commenced an arbitration, represented by Mr. Roland Spiegel, a paralegal. The only issue in dispute was a claim for the cost of a functional assessment done by DEAHY Medical Assessments Inc. ("DEAHY"), a facility with which Mr. Spiegel is associated. This claim, for $1,230.50, was made under s. 24 of the SABS-1996,² which requires the insurer to pay "for all reasonable expenses incurred by or on behalf of an insured person for the purpose of this Regulation in obtaining and attending an examination or assessment or in obtaining a certificate, report or treatment plan."

Shortly before the scheduled arbitration hearing, Mr. Spiegel advised that Mr. D'Angelo had dismissed him. Arbitrator Renahan convened a hearing to decide the terms of his withdrawal. He made the following order:

Under section 282 of the Insurance Act, R.S.O. 1990, c.I.8, as amended, it is ordered that:

Mr. Spiegel may withdraw as Mr. D'Angelo's representative upon the following terms:

1. On or before February 15, 2001, Mr. D'Angelo shall advise Wawanesa and the Commission in writing that he wishes to withdraw his application for arbitration in accordance with Rule 67.1 of the Dispute Resolution Practice Code.

2. Each party shall bear its own expenses of the arbitration proceeding.

3. Mr. D'Angelo shall pay $3,000 to Wawanesa if he commences an arbitration after February 15, 2001 which includes a claim for the cost of examinations or assessments arising out of the motor vehicle accident of August 20, 1998. If Mr. D'Angelo makes such a claim, the hearing arbitrator may vary or rescind this order.

If Mr. D'Angelo does not withdraw his application for arbitration on or before February 15, 2001, Mr. D’Angelo shall pay Wawanesa its expenses of the arbitration proceeding to date, forthwith after assessment.

Wawanesa Mutual Insurance Company ("Wawanesa") submits that the Arbitrator exceeded his jurisdiction by allowing Mr. D’Angelo to withdraw the arbitration. Alternatively, Wawanesa contends the Arbitrator should have ordered Mr. Spiegel or Mr. D’Angelo to pay its arbitration expenses under s. 282(11) of the Insurance Act and an assessment under s. 282(11.2) of the Act.³

II. BACKGROUND

Mr. D’Angelo was involved in motor vehicle accidents on January 26, 1994, August 23, 1996 and August 20, 1998. Halifax is the first-party insurer with respect to the first two accidents, and Wawanesa the third. Mr. D’Angelo was working as a real estate broker at the time of the first accident. He testified that he was unable to return to full-time work afterwards, and stopped working entirely in about August 1995. He claimed accident benefits and commenced tort proceedings in relation to all three accidents. Mr. Daly, a lawyer, represented him in all these disputes. Mr. Spiegel represented him only with respect to the DEAHY assessment claim.

The DEAHY assessors concluded that Mr. D'Angelo could not return to his work as a real estate broker. Wawanesa refused to pay for the assessment, which it had neither requested or approved.⁴ Another reason for the refusal was that Mr. D'Angelo's ability to work as a real estate broker was irrelevant to his claim for non-earner benefits under s. 12 of the SABS-1996⁵ In fact, the assessment fee had previously been claimed in relation to Mr. D'Angelo's second accident. Wawanesa had refused the claim because it was not the responsible insurer. The claim was then refiled under the head of the third accident.

The scope of benefits available under s. 24 has been the subject of a number of arbitration and appeal decisions,⁶ and Mr. Spiegel's role and conduct has been an issue in several of them.⁷ This case is typical of the problems presented by arbitration proceedings that are commenced or controlled by assessment or treatment facilities, rather than the insured person.

The history of the proceeding is important for understanding the Arbitrator's order. Mr. D'Angelo applied for arbitration in August 1999, represented by Mr. Spiegel. At the initial pre-hearing in February 2000, which Mr. D'Angelo did not attend, Mr. Spiegel undertook to request from Mr. Daly the contents of Mr. D’Angelo's file relating to the previous accidents and "the decision and process of retaining DEAHY to conduct an assessment."⁸ Mr. Daly was listed as a potential witness on behalf of Mr. D'Angelo. Despite the narrow issue and the limited amount in dispute, a three-day hearing was scheduled for June 13-15, 2000.

On May 23, 2000, about three weeks before the scheduled hearing, Wawanesa's counsel asked for a resumption of the pre-hearing because Mr. Spiegel had not satisfied two of his three pre-hearing undertakings. Arbitrator Killoran convened a pre-hearing telephone conference between the representatives. She ordered Mr. Spiegel to produce the remaining items, including the information about the DEAHY referral, by the end of the following day, or provide written reasons for not doing so and a proposal for solving the problem. In response, Mr. Spiegel produced, amongst other things, the DEAHY referral form. Wawanesa took the position that this was insufficient. It requested an adjournment. Mr. Spiegel consented, and on June 8, 2000, Arbitrator Sone adjourned the hearing to October 10-12, 2000.

Shortly thereafter, Mr. Spiegel advised Wawanesa that Mr. D'Angelo claimed privilege over documents in Mr. Daly's file. Wawanesa asked for particulars, and requested a further pre-hearing. This was convened by telephone conference on September 15, 2000. Arbitrator Killoran ordered Mr. Spiegel to produce the remaining documents requested by Wawanesa within seven days.

Six days later, on September 21, 2000, Mr. Spiegel wrote to the Commission stating that Mr. D’Angelo had dismissed him. The letter was copied to Mr. Cormack, but not to Mr. D’Angelo.

The Commission's process for removing a representative from the record is described in Rule 9.5 of the Dispute Resolution Practice Code:

9.5 A representative who wishes to withdraw from an adjudicative proceeding shall notify the Commission and the parties, in writing. Where the party represented consents to the withdrawal, the Registrar shall permit the withdrawal. Otherwise, an adjudicator may permit the representative to withdraw subject to such terms as the adjudicator considers appropriate.

In accordance with this rule, the Case Administrator wrote to Mr. Spiegel, asking for a copy of Mr. D’Angelo's dismissal letter. On the same day, Wawanesa's counsel asked the Commission to do three things: convene a further telephone conference, provide certified copies of Arbitrator Killoran's production orders, and state a contempt case to the Divisional Court under s. 13 of the Statutory Powers Procedure Act, regarding Mr. Spiegel's non-compliance with pre-hearing orders. Mr. Cormack's letter and the letter from the Case Administrator were copied to Mr. D’Angelo.

Arbitrator Renahan convened a telephone conference on September 28, 2000 to hear Mr. Spiegel's motion to withdraw as Mr. D’Angelo's representative. Mr. D’Angelo, then represented by Mr. Larry Levine, a lawyer with Goldentuler & Associates, stated that he had not dismissed Mr. Spiegel, and Mr. Cormack's letter was his first notice that Mr. Spiegel said he had. After he received the letter, he telephoned Mr. Spiegel, who told him that the Goldentuler firm was handling the matter. The Arbitrator concluded that Mr. D’Angelo did not consent to Mr. Spiegel's withdrawal. He stayed the main hearing, and scheduled a hearing to deal with the terms of Mr. Spiegel's withdrawal.

At that hearing, on December 19, 2001, Mr. D’Angelo testified, and Mr. Levine and Mr. Cormack gave their submissions about the appropriate terms. On January 5, 2001, Arbitrator Renahan gave the order set out at the beginning of my reasons. Mr. D'Angelo withdrew his application for arbitration on January 9, 2001, putting an end to the proceeding and depriving Wawanesa of its expenses and arbitration assessment.

III. ANALYSIS

Wawanesa submits that the Arbitrator should have dismissed the application and ordered Mr. D'Angelo or Mr. Spiegel to pay its arbitration costs, rather than allowing Mr. D'Angelo to withdraw the application without costs. It does not suggest the Arbitrator should have ordered DEAHY, a non-party, to pay its costs.⁹

A. Who was the real applicant?

In its main submission, Wawanesa disputes the Arbitrator's key finding, which was this:

I find that DEAHY is the real litigant in this arbitration and Mr. Spiegel represents DEAHY's interests. Mr. D’Angelo expressed no interest in collecting DEAHY's account. His interest is protecting himself against an award of expenses.¹⁰

Based on this finding, the Arbitrator concluded that Mr. Spiegel's motion to withdraw as representative was in fact a motion to withdraw the application for arbitration, and that Mr. D’Angelo should not bear the cost consequences of Mr. Spiegel's conduct.

Wawanesa contends that the Arbitrator erred in law by failing to rely on the authorizations executed by Mr. D’Angelo on December 16, 1998. There are three documents titled "authorization," all on DEAHY letterhead. The first is an "authorization to pay" in which Mr. D’Angelo authorizes Wawanesa to pay DEAHY directly for its services. It also includes the following, which pertains to Mr. D’Angelo's relationship with DEAHY:

I have agreed to pay, in a current manner, any balance of said professional services or charges over and above this insurance payment, if my case is settled full and final and DEAHY's outstanding charges are for professional services rendered that have not been paid in full. [emphasis in original]

The second authorization, subtitled "Exhibit II," "irrevocably" authorizes DEAHY:

to act as my general agent to institute and prosecute through to conclusion, including the absolute right to compromise and settle any claim I might have for the payment of medical and rehabilitation benefits provided by DEAHY . . . .

This authorization includes the right, to institute and settle the following proceedings in my name and on my behalf:

a) mediation proceedings under the Insurance Act,

b) arbitration proceedings and appeals under the Insurance Act, and

c) proceedings in a court of competent jurisdiction under s. 2821 [sic] of the Insurance Act.

In addition to the foregoing, DEAHY as my general agent, has authority to retain counsel on my behalf and instruct counsel with respect to the foregoing proceedings and to authorize counsel to commence the foregoing proceedings on my behalf, including the authority to commence proceedings as required by Rule 15.02 of the Rules of Civil Procedure.

I further authorize DEAHY to disclose to the insurer or its solicitor such clinical notes or records as are necessary to assist in the recovery of my claim for the payment of rehabilitation benefits.

I hereby acknowledge that this Authorization has been explained to my [sic] by C. Rawn and that I fully understand the meaning and purpose of this document.¹¹

The third authorization, subtitled "Exhibit III," is directed to the Ontario Insurance Commission (which was succeeded by the Financial Services Commission of Ontario on July 1, 1998), and states:

I authorize R. Spiegel, a representative of DEAHY MEDICAL ASSESSMENTS INC., to act as my agent and to make binding decisions on my behalf in all matters connected with this mediation.

Mr. D’Angelo testified that he read and signed all three documents, and Ms. Rawn, an employee of DEAHY, witnessed his signature. Wawanesa contends that the effect of the authorizations should have been clear to Mr. D’Angelo. The Insurer relies on Mr. D’Angelo's testimony that he has no difficulty understanding English, dealt with contracts and documents in his work as a real estate broker, and was represented by counsel (Mr. Daly) throughout the period at issue.

Indeed, there is evidence Mr. Daly originated the DEAHY referral. Mr. D’Angelo testified that he (Mr. D’Angelo) filled in the information on the DEAHY "Request for Multi-Disciplinary Assessment" form, apart from the date (November 18, 1998) and the check mark inside the "Functional Assessment" box. He testified that Dr. Farber signed the form, and he "guessed" the doctor checked off the FAE box and filled in the date. On December 3, 1998, Dr. Farber signed a "Consult Request" form on his own letterhead. The request was as follows:

• Functional Abilities Evaluation

• MVA - several - he will bring reports

• His lawyer Daly has suggested & I agree

Confronted with this in cross-examination, Mr. D'Angelo stated that “it could have been” Mr. Daly who initiated the referral.¹² The timing of Mr. Spiegel's abandonment of the proceeding is also suggestive. His letter to the Commission stating that Mr. D'Angelo had dismissed him came just before Arbitrator Killoran's deadline for producing documents relating to the source of the referral.

However, the authorization documents are seriously deficient, and I am not satisfied the Arbitrator erred in giving them little weight. They make no reference to the need for insurer approval for direct billing, and do not say what happens if the insurer refuses payment for services already rendered. They do not warn Mr. D'Angelo about the longstanding controversy about assessment facility claims. And they do not refer to arbitration costs. Before signing these documents, Mr. D'Angelo should have been advised, in writing, that he, not DEAHY or Mr. Spiegel, would be responsible for any arbitration costs orders. Mr. D'Angelo testified that he did not know who would pay any arbitration expenses but understood it would not be him.

More fundamentally, these documents purport to create an assignment in favour of DEAHY. Pursuant to s. 65(1) of the SABS-1996, the assignment of a benefit "is void." As Director Draper recently confirmed in Tanzos and State Farm Mutual Automobile Insurance Company,¹³ another case involving DEAHY's authorization forms, third-party assessment facilities do not have standing to commence mediation and arbitration proceedings at the Commission in their own names¹⁴ or in the name of an insured person:

Direct billing was introduced to streamline the payment of benefits. It allows insurers to deal directly with service providers for the convenience of everyone involved. However, direct billing is only about payment. It does not change the fundamental nature of the claims process. Claims are still made by the insured person, and any resulting dispute is between the insured person and the insurer, not between the service provider and the insurer. It follows that the dispute resolution process is for disputes between insured persons and insurers. It is not meant to serve the needs of creditors, including service providers, who want to collect their accounts. . . .

While insured persons cannot assign their benefits, or the right to pursue those benefits, they are free to retain someone to act on their behalf. This includes the right to retain a lawyer or non-lawyer, even if that person has some connection to a service provider whose bill is the subject of the dispute. The key is that the insured person must retain control over, and responsibility for, the proceedings. [footnotes omitted]

Finally, the DEAHY authorizations omit any clear statement about whose interests Mr. Spiegel represents. Exhibit III describes Mr. Spiegel both as a representative of DEAHY and as Mr. D'Angelo's agent "to make binding decisions on my behalf." What if the interests of DEAHY and Mr. D’Angelo conflict? The document does not answer this question.

The context would not have helped to clarify the purpose of these documents. They were put before Mr. D’Angelo when he attended DEAHY for his assessment. He testified that he did not meet Mr. Spiegel that day and, in fact, has never met him. He testified that he did not know how he came to be represented by Mr. Spiegel. Despite the acknowledgment paragraph in "Exhibit II," he testified that he received no explanation about what this document meant. "Exhibit III," the "retainer" document, authorizes Mr. Spiegel to act as Mr. D'Angelo's agent in all matters connected "with this mediation," without reference to any further legal proceedings. In any event, at that point, Mr. D’Angelo had no reason to believe there would be a dispute to be mediated, much less a need to commence arbitration or a lawsuit.

Because of concerns about the validity of such documents, arbitrators and appeals officers have begun to require additional signed authorizations directed specifically to the risks of a costs order and the fact that paralegals are not regulated. The leading decision, Glinka and Dufferin Mutual Insurance Company, (FSCO P96-00024, March 7, 2001), was released after Arbitrator Renahan's decision in this case. Absent Mr. D'Angelo's specific written acknowledgement of the risks of proceeding, I find that the Arbitrator did not err in giving the DEAHY authorizations little weight.

Apart from the authorization documents, Wawanesa relies on subsequent events which, it says, prove that Mr. D’Angelo was "the real litigant" in this matter. He was not questioned about the application for arbitration, which appears to bear his signature. At the very least, the Commission's documents notified Mr. D’Angelo about the main developments in the proceeding, and he admitted receiving the Notices of Pre-Hearing, Notices of Hearing and pre-hearing letters.

In my view, the evidence left it open to the Arbitrator to find that Mr. D’Angelo commenced and pursued the arbitration knowingly. However, that was not how the Arbitrator saw the case. I did not have an opportunity to observe Mr. D’Angelo giving his testimony. The Arbitrator did, and he concluded that Mr. D’Angelo was "a trusting and dependent person," who did not have "too much knowledge of the status of [his] claims." I am not persuaded this finding, which turns on the Arbitrator's assessment of Mr. D'Angelo's credibility, amounts to an error of law.

Anyway, I am not persuaded the Arbitrator erred in his ultimate conclusion that Mr. D’Angelo should not be ordered to pay arbitration costs. Even if Mr. D'Angelo knowingly authorized the commencement of the arbitration, there was no evidence he colluded in the abusive way Mr. Spiegel pursued the matter. Mr. D'Angelo testified that he attended at DEAHY before the hearing to sign some authorizations for disclosure of medical documents, but was never consulted – by Mr. Spiegel or Mr. Daly – about Wawanesa's request for documents from Mr. Daly's file or about the privilege issue. I am not persuaded the Arbitrator erred in law by finding "very little fault on the part of Mr. D’Angelo."¹⁵ This was a crucial point, and supported the Arbitrator's finding that DEAHY was Mr. Spiegel's principal. I agree with the Arbitrator that Mr. D’Angelo had no interest in this proceeding. It was DEAHY, represented by Mr. Spiegel, that stood to win or lose.

Wawanesa contends, however, that it was entitled to rely on Mr. Spiegel's apparent authority as Mr. D'Angelo's representative, regardless of any cause of action Mr. D'Angelo may have as against Mr. Spiegel or DEAHY. There is a great deal of strength to this argument, but I am not persuaded the Arbitrator erred in law by making the order he did, for the following reasons.

B. Did the Arbitrator exceed his jurisdiction by allowing Mr. D’Angelo to withdraw the arbitration?

Wawanesa submits that the Arbitrator exceeded his jurisdiction by allowing Mr. D’Angelo to avoid costs by withdrawing his application for arbitration. It contends that Rule 9.5 of the Dispute Resolution Practice Code does not contemplate this remedy. In addition, it argues that Mr. D’Angelo did not move to withdraw his arbitration, and the Arbitrator did not give Wawanesa notice that he was considering such an order.

Rule 9.5 does not specify any particular remedy for the late withdrawal of a representative. It says, simply, "an adjudicator may permit the representative to withdraw subject to such terms as the adjudicator considers appropriate." Typically, the hearing will be adjourned to allow the insured person to retain new counsel, and costs thrown away may be awarded to the insurer, depending on the reason for the withdrawal, and its timing.

Wawanesa is correct to point out that withdrawing an application for arbitration is a quite separate procedure, governed by Rule 67 of the Code. Rule 67 allows a party to move to withdraw all or part of a dispute in writing, in advance of the hearing, or orally during a hearing or other proceeding. If the other parties agree, the party will be permitted to withdraw. If the motion is opposed, the adjudicator may "permit the withdrawal on such terms and conditions as the adjudicator considers appropriate," award expenses to either party, and award an amount to the insurer, up to the amount of the insurer's arbitration assessment fee, "if the adjudicator decides an abuse of process has occurred or the proceeding is frivolous or vexatious." This rule incorporates arbitral case-law.¹⁶ Where a withdrawal motion is contested, withdrawal is not as of right. The arbitrator will consider the timing of and reason for the motion in deciding whether the withdrawal would abuse the Commission's process and whether costs should be ordered.

The problem in this case is Mr. D’Angelo did not move to withdraw his application for arbitration. The Arbitrator's conclusion that the proceeding should not continue followed from his finding that DEAHY was the real litigant:

Mr. Spiegel, a representative of the real litigant, has withdrawn from the proceeding. I conclude that the real litigant, DEAHY, wishes to withdraw from this proceeding. . . I see no reason why this application should proceed and the parties incur additional expenses where the real litigant has withdrawn.¹⁷

It is difficult to argue with this reasoning. In effect, the Arbitrator deemed the arbitration abandoned, a finding that was within his authority,¹⁸ and supported by the facts. Once Mr. Spiegel was out of it, there was no "applicant" to pursue the claim. But to make sure Mr. D’Angelo did not re-apply through another representative, the Arbitrator put him to his choice: he could withdraw the proceeding, and avoid costs, or pay the costs requested by Wawanesa if he wished to pursue the matter with other counsel. This order was well within his authority to "make such orders or give such directions as he . . . considers proper to prevent an abuse of the process."¹⁹

I accept Wawanesa's submission that the Arbitrator should have given clear notice that he was considering this course of action. However, I am not persuaded Wawanesa was deprived of a fair hearing.

The Arbitrator appears not to have considered refusing Mr. Spiegel's application to withdraw as representative, probably because it was clear Mr. Spiegel had abandoned Mr. D’Angelo to his fate. Instead, what terms should be imposed was the only issue for consideration at the December 19, 2000 hearing. Mr. D’Angelo's testimony at that hearing was entirely occupied with the question whether he or DEAHY commenced and pursued the arbitration. Both lawyers submissions, which were also transcribed, dealt mainly with Wawanesa's request for costs.

As I read the transcript, both parties understood the matter might not proceed any further. During submissions, the Arbitrator stated, "the hearing was stayed pending this proceeding. It's [sic] still may be stayed, but, if it's not, if it goes ahead, we'll still have to pick a hearing date." He turned to Mr. Levine, who said "I would prefer it to remain stayed indefinitely pending your decision today. " A few minutes later, Mr. Levine restated his request, without the qualification, "pending your decision today." Asked for his views, Mr. Cormack stated, "if there is a decision that in some way compensates Wawanesa for what's taken place here, then, of course, we're always happy to have matters disposed of, and, if staying it virtually means it's going to be disposed of, then, fine. But if it is your ruling that you are not in a position to deal with the issue of expenses, etc., in a way that does assist Wawanesa, then it could be that we will have no alternative but to proceed."²⁰

It is understandable that Wawanesa is unhappy with the Arbitrator's ruling, but the Insurer should not have been surprised that his order put an end to the proceeding. The real issue was costs.

C. Did the Arbitrator err in refusing to order Mr. Spiegel to pay Wawanesa's arbitration expenses or assessment?

Wawanesa submits that the Arbitrator erred in finding that he lacked authority to make a costs order against Mr. Spiegel. I find that he did not err.

Subsection 282(11.2) of the Act is as follows:

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. [emphasis added]

The italicized portion answers the first part of Wawanesa's argument. Assessment orders under s. 282(11.2) are available only against an insured person, not his or her representative. The authority to award expenses is set out in subsection 282(11) of the Insurance Act as follows:

The arbitrator may award, according to criteria prescribed by the regulations, to the insured person or the insurer, all or part of such expenses incurred in respect of an arbitration proceeding as may be prescribed in the regulations, to the maximum set out in the regulation.

It can be argued that while this section stipulates who may benefit from an expenses order – "the insured person or the insurer" – it does not define who may be ordered to pay. However, I agree with the Arbitrator that the criteria set out in the Expenses Regulation imply that only an insured person or an insurer may be ordered to pay. The prescribed criteria are as follows:

12. (1) The expenses set out in the Schedule are prescribed for the purpose of subsection 282(11) of the Act.

(2) An arbitrator may award expenses to an insurer or insured person under subsection 282 (11) of the Act if the arbitrator is satisfied that the award is justified, having regard to the following criteria:

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. If the insurer or the insured person requests, any written offers to settle made after the conclusion of mediation and before the conclusion of the arbitration in accordance with the rules of practice and procedure applicable to the proceeding, including the terms of the offers, the timing of the offers and the responses to the offers, having regard to the result of the proceeding.

6. Any other matter related to the proceeding that the arbitrator considers relevant to the issue of whether an award of expenses is justified.²¹

The Arbitrator noted that paragraphs 2 and 3 refer to "conduct of the insurer or the insured person" and "any position taken by the insurer or the insured person." In addition, paragraph 5 requires the arbitrator to consider offers to settle made in accordance with the rules, if "the insurer or the insured person" requests it. Paragraph 1 refers to "each party's degree of success." The regulation is concerned with the conduct and positions taken by the parties, not their representatives. More generally, the necessary parties to arbitration proceedings under the Act are the insured person or the insurer. I need not consider whether arbitrators have authority to add a representative as a party, for the purpose of making a costs order against him, since Arbitrator Renahan did not do so and was not asked to do so in this case.²²

Wawanesa contends that an arbitrator's power to make a costs order against a representative arises from Rule 63.5 of the Code:

An adjudicator may make such orders or give such directions as he or she considers proper to prevent an abuse of the process.

This reiterates the well-established common law principle, now codified in s. 23.1 and 25.0.1(a) of the SPPA, that tribunals have power to control their own processes. The rules set out in the Dispute Resolution Practice Code are made by the Director of Arbitrations under the authority of s. 21 of the [Insurance Act]²³ and s. 25.1 of the Statutory Powers Procedure Act.²⁴ However, these general principles do not suffice to grant additional costs powers beyond those specifically granted in s. 282(11), 282(11.1) and 282(11.2) of the Insurance Act. The power to award costs is one that must expressly be granted by statute.²⁵ Currently, only one Ontario tribunal – the Ontario Rental Housing Tribunal ("ORHT") – has express power to order costs against a representative. Subsection 190(2) of the Tenant Protection Act, 1997 authorizes the ORHT to order a party to pay another party's costs, and s. 190(3) authorizes an order that "a party or a paid agent or counsel to a party" pay the Tribunal's costs. Judges also derive their costs powers from statute, including powers to order costs against a solicitor.²⁶

At the Commission, the overwhelming arbitral consensus holds that express authority is required.²⁷ I agree with this view. I find that arbitrators and appeals officers do not have power to order a representative to pay a party's arbitration expenses, under s. 282(11) and 282(11.1) of the Act, or an insurer's assessment, under s. 282(11.2) of the Act. This principle should now be recognized as settled law.

D. Did the Arbitrator err in refusing to order Mr. D’Angelo to pay Wawanesa's arbitration expenses and assessment?

Wawanesa contends, in the alternative, that the Arbitrator should have ordered Mr. D’Angelo to pay. I am not satisfied he erred, with one exception. I agree with Wawanesa that the Arbitrator erred in relying on the Insurer's failure to request an exclusion order under s. 23(3) of the Statutory Powers Procedure Act:²⁸

If Wawanesa had asked for such an order earlier in this proceeding, an arbitrator may have excluded Mr. Spiegel from this proceeding and Wawanesa would have minimized its expenses.

The factors to be considered in excluding a representative were considered in Glinka and Dufferin Mutual and Dhawan and State Farm, decisions that were issued after Arbitrator Renahan's decision in this case.²⁹ Although I excluded Mr. Spiegel from the proceeding in Dhawan and State Farm, this is an extraordinary remedy that is not applied lightly, and I am not aware that it had ever been done at the time of Arbitrator Renahan's hearing in December 2000. It is not surprising, then, that Wawanesa did not make the request, and there is no indication on the record that Arbitrator Renahan or any other arbitrator involved in this matter suggested to Wawanesa that it could bring an exclusion motion.

Wawanesa was far from passive in its response to this application. Mr. Cormack persisted in reasonable production requests on his client's behalf, and when Mr. Spiegel did not comply with Arbitrator Killoran's orders, he asked the Commission to state a case for contempt. Apart from this, I am not persuaded that the availability of some other remedy deprives a party of expenses to which it is otherwise entitled under the regulation. If this had been the Arbitrator's only reason for denying Wawanesa its arbitration expenses, I would be inclined to revoke the order.

Conversely, I am not persuaded by Wawanesa's submission that Mr. D’Angelo should have been ordered to pay its arbitration expenses because he could seek a remedy in another forum, by suing DEAHY and Mr. Spiegel. The purpose of the expenses regulation is to allocate arbitration expenses so as to further the goals of the dispute resolution system. One of those goals, reflected in the Dispute Resolution Practice Code, is the quickest, most just and most cost-effective resolution of accident benefits disputes. That goal is best achieved if the participants in the system find appropriate remedies within the system. I interpret the Expenses Regulation in light of that underlying objective.

Wawanesa submits that the Arbitrator failed to consider the Expense Regulation's prescribed criteria and failed to give any legal justification for refusing the Insurer its arbitration expenses. Although the Arbitrator did not review the criteria in an express systematic way, I am satisfied he considered the pertinent points. As there was no indication of an offer to settle (paragraph 5), and the matter did not proceed to a decision on the merits of the claim (paragraphs 1 and 4), the main criteria were paragraphs 2 (conduct) and 3 (positions taken by the parties). The Arbitrator was harshly and appropriately critical of Mr. Spiegel's conduct:

DEAHY, through Mr. Spiegel, has commenced an arbitration and then abandoned it, leaving Mr. D’Angelo exposed to an award of expenses. Mr. Spiegel also misrepresented to the Commission that Mr. D’Angelo had dismissed him. He misrepresented to Mr. D’Angelo that his file was transferred to a lawyer. He failed to advise Mr. D’Angelo that his hearing had been adjourned. He failed to follow the proper procedure for withdrawing as a representative. He failed to appear at this proceeding.

He concluded, "In these circumstances, Mr. Spiegel should pay Wawanesa's expenses."³⁰Wawanesa relies on that "should," arguing that this statement is inconsistent with the Arbitrator's ultimate conclusion. Reading that statement in context, I think the Arbitrator meant to make a moral statement, not a legal one. He concluded, correctly, that he lacked authority to order costs against Mr. Spiegel.

Wawanesa also relies on the Arbitrator's statement that because the regulation refers only to conduct or positions taken by "the insurer or the insured person," and does not refer to representatives, therefore "the conduct or position of the representative is that of the party he or she represents . . ." Wawanesa argues that this conclusion is inconsistent with the Arbitrator's ultimate decision not to order Mr. D’Angelo to pay its expenses. However, the Arbitrator found that Mr. Spiegel represented DEAHY, not Mr. D’Angelo. Similarly, with respect to paragraph 3, the Arbitrator found "that an abusive arbitration has been commenced by virtue of the real litigant's withdrawal on the eve of the hearing. Mr. D’Angelo did not cause the withdrawal."³¹There is no error in either conclusion.

Finally, Wawanesa submits that the Arbitrator erred in refusing to order expenses against Mr. D’Angelo because it would be "unfair" to do so. (The Arbitrator also found it "unfair" that Wawanesa incurred unnecessary expenses.) In my view, fairness is the overarching ideal to which the specific expenses criteria are aimed, and guides all the rest, without needing express reference. In this case, what the Arbitrator likely meant by fairness was that neither Mr. D’Angelo nor Wawanesa should have to pay for this arbitration because neither was responsible for it. Mr. Spiegel was responsible, but unfortunately, he is beyond the range of arbitral authority to award costs. The Arbitrator's refusal to make a costs order as between the two faultless parties was within his authority.

Instead, the Arbitrator found that "the fair way" to deal with Wawanesa's request for an assessment order was to prevent Mr. D’Angelo from being a party to this kind of application again. This was not a novel order. Although an insured person's withdrawal motion may be refused if he has been awarded interim benefits, commenced a frivolous or vexatious proceeding, or intends to bring a related application at another time or in another forum, it is more common for the motion to be allowed without costs, on condition that the insured person may not commence another arbitration on the same issues, or can only do so upon the payment of costs.³² This encourages the withdrawal of unmeritorious applications without forcing the insurer through an unnecessary hearing, while, at the same time, discouraging the tactical use of withdrawal applications and promoting finality in the dispute resolution process. In this case, the Arbitrator's order ensured that Mr. D'Angelo could not re-apply for arbitration after retaining a new representative. Although Wawanesa incurred costs it could not recover, it was also saved the additional expense of a three-day hearing over a $1,200 claim. Considering the circumstances, I find that Arbitrator Renahan's order was the most sensible one he could have made.

E. The Role of Treatment and Assessment Facilities, and their Representatives, in the Dispute Resolution Process

I would like to conclude with a comment about the broader systemic issues raised by this proceeding.

Despite his criticism of Mr. Spiegel's conduct of this proceeding, the Arbitrator began his analysis by stating that he did not disapprove of facility-driven arbitration proceedings:

So long as an insured person understands the procedures and risk, and wishes to co-operate with the service provider, I see nothing wrong in a service provider using this forum to collect an account for reasonable and necessary services. The expectation that it can claim its account in a cost-effective and expeditious manner before a tribunal that has expertise in the area, may result in an injured insured receiving necessary treatment or other services he or she would not otherwise receive.³³

I agree with Arbitrator Renahan on the importance of fast and cost-effective adjustment of treatment claims. I do not agree that allowing facilities to pursue claims with only the nominal involvement of the insured person is an effective or appropriate way to achieve this objective. I note, in passing, that DEAHY did not treat Mr. D’Angelo, and there is no evidence that he claimed treatment as a result of the assessment. Further, the evidence of the purpose for the assessment was, to put it generously, thin. I stated my view in Tesfai and Allstate: "While s. 24 extends beyond [the listed services], there can be little doubt that its drafters did not contemplate stand-alone assessments initiated by the assessment-provider without reference to treatment needs or claims for other benefits."³⁴ That appears to be what happened in this case.

More to the point, the SABS-1996 uses other means to minimize treatment delays and disputes. It allows insurers to arrange direct billing, requires pre-approval of most treatment, prescribes a time-sensitive process for adjustment of medical and rehabilitation benefit claims, and requires an insurer to pay for treatment recommended by a Designated Assessment Centre ("DAC") pending resolution of the dispute.³⁵ Nothing in the SABS or the Act suggests the drafters contemplated treatment or assessment facilities claiming benefits in the facility's name or in the name of the insured person. In fact, as stated above, s. 65 of the SABS-1996 voids any assignment of benefits, and the Insurance Act specifically gives insured persons the exclusive right to commence arbitration proceedings.

The problems created by self-referrals are compounded when the facility pursues mediation and arbitration without the insured person's active involvement and instruction throughout the process.³⁶ Allowing DEAHY to pursue its claim in Mr. D’Angelo's name did not advance his interests, but instead jeopardized them. Mr. D’Angelo was not the only injured party. Wawanesa has no remedy, at least in this forum, against the real applicant or its representative. That is unfair to Wawanesa, and contrary to the public policy objectives underlying the allocation of litigation costs.

Unmeritorious s. 24 claims brought by assessment facilities in the name of insured persons have presented a serious systemic problem for the dispute resolution system. They result in prolonged hearings and multiple proceedings, using up scarce adjudicative resources that are intended to be used for the benefit of insured persons and insurers. The Commission has adopted various case management and adjudicative tools, but legislative change is required. The current no-assignment and direct billing provisions of the SABS have been less effective than was hoped in ensuring that the accident benefit scheme works to the benefit of insured persons, not private health facilities. In addition, FSCO adjudicators do not have power to order a representative to pay an insurer's costs or deny him an audience in future proceedings. As a result, abusive assessment claims have diverted costly resources from the important goals Ontario's accident benefit scheme was created to achieve.

IV. EXPENSES

Neither party requested appeal expenses, and in any event, I would not have found it appropriate to make an order.

April 23, 2003

Nancy Makepeace

Director's Delegate

Date

Subsection 280(1) of the Act allows "the insured person or the insurer" to commence mediation proceedings, and if mediation fails, "the insured person" may commence arbitration proceedings pursuant to s. 281(1).

Footnotes

1. 1The Dispute Resolution Practice Code - Fourth Edition (May 31, 2001), does not apply to this matter because the pre-hearing was held before that Code took effect: Rule 1.6 of Code (4th).
2. 2The Statutory Accident Benefits Schedule — Accidents on or after November 1, 1996, Ontario Regulation 403/96, as amended.
3. 3For ease of reference, I will refer to Wawanesa's request for arbitration expenses and an assessment as a request for "costs."
4. 4Appeal record, Tab 6, Explanation of Benefits, February 19, 1999.
5. 5Paragraph 4.2.ii of the SABS-1996 allows an insured person who was not employed at the time of the accident to claim income replacement benefits if he was employed for 26 weeks of the 52 weeks before the accident. Mr. D'Angelo had not worked since August 1995.
6. 6The leading cases are Tsimidis and Liberty Mutual Insurance Company, (FSCO P99-00013, August 28, 2000); M.P. and Halifax Insurance Company, (FSCO P00-00049, May 16, 2001); Aleman and State Farm Mutual Automobile Insurance Company, (FSCO P01-00014, September 21, 2001); Tesfai and Allstate Insurance Company of Canada, (FSCO P00-00048, December 21, 2001) and Smith and Citadel General Insurance Company, (FSCO P01-00034, August 20, 2002).
7. 7See Sunderani and State Farm Mutual Automobile Insurance Company, (FSCO A99-000724, August 31, 2000); Docoute and Zurich Insurance Company, (FSCO A00-000027, September 19, 2001), confirmed, (FSCO P01-00036, July 29, 2002); Bersteyn and Allstate Insurance Company of Canada, (FSCO P01-00049, July 29, 2002); Sverdlik and Lombard General Insurance Company of Canada, (FSCO P01-00050, July 29, 2002); Dhawan and State Farm Mutual Automobile Insurance Company, (FSCO P01-00025, February 1, 2002) and (FSCO P01-00025, May 16, 2002).
8. 8Letter of February 4, 2000
9. 9Arbitrator Wilson added a representative as a party and ordered him to pay the Insurer's arbitration expenses in Hare in the name of Piotto and Kingsway General Insurance Company, (FSCO A00-001061, March 22, 2002, September 30, 2002 and November 29, 2002), appeal settled. Arbitrator Alves did the same thing in Volfson and Shuster and Royal & SunAlliance Insurance Company of Canada, (FSCO A01-000440, September 13, 2002), under appeal. Arbitrator Wilson identified the representatives as "potential parties," who could be held liable for costs, in Gurevich and Royal & SunAlliance Insurance Company of Canada, (FSCO A01-000936, April 29, 2002) appeal of preliminary order rejected as premature, (FSCO P02-00011, September 18, 2002). In this case, Wawanesa did not ask Arbitrator Renahan to add DEAHY or Mr. Spiegel as parties, and he did not do so.
10. 10Arbitration decision, p. 7.
11. 11The underlined names are hand-printed over the blanks in the DEAHY forms.
12. 12Arbitration transcript, p. 39.
13. 13(FSCO P01-00017, October 22, 2002).
14. 14Adusei and Royal Insurance Company of Canada, (OIC A-004404, March 3, 1994).
15. 15This finding distinguishes this case from the two decisions on which Wawanesa relies, Dhami and State Farm Mutual Automobile Insurance Company, (FSCO A99-001175, November 21, 2000) and Ratnam and Allstate Insurance Company of Canada, (FSCO A99-000790, December 13, 2001), in which Arbitrators Seife and Renahan (respectively) dismissed the application and ordered the insured person to pay the insurer's arbitration expenses and filing fee. The Arbitrators were critical of the insured person's conduct in both cases.
16. 16The leading cases are Chapman and Allstate Insurance Company of Canada and Willington Insurance Company, (OIC P-001897 and P-001898, October 6, 1994) and Catlos and Jevco Insurance Company, (FSCO P97-00013, September 26, 1997).
17. 17Arbitration decision, p. 7.
18. 18"An application may be "constructively" withdrawn when the applicant has abandoned the claim through lack of due diligence or interest in pursuing his/her application." Quattrocchi and State Farm Mutual Automobile Insurance Company, (OIC A-006854, June 11, 1996).
19. 19Dispute Resolution Practice Code, Rule 63.5; Statutory Powers Procedure Act, s. 23(1).
20. 20Pp. 66-67.
21. 21Excerpt from Regulation 664, R.R.O. 1990, as amended by Ontario Regulation 464/96 made under the Insurance Act.
22. 22See footnote 9, above.
23. 23"Subject to the regulations made under paragraph 25 of subsection 121(1), the Director may make rules for the practice and procedure to be observed in . . . proceedings under this Act before the Director or an arbitrator. " Paragraph 25 grants power to make regulations prescribing rules of procedure and setting time limits for various proceedings. A separate paragraph - paragraph 26 - gives regulation-making authority concerning expenses.
24. 24"A tribunal may make rules governing the practice and procedure before it."
25. 25For example, see Re National Energy Board Act (Can.), 1986 CanLII 4033 (FCA), [1986] 3 F.C. 275 (F.C.A.), Re Pamour Inc., [1993] OEAB No. 40; Persaud and Society of Management Accountants of Ontario (1997), 1997 CanLII 17789 (ON CTGDDC), 144 D.L.R. (4th), 375 (Ont. Div.Ct.). See also Chokan v. Cameron, (1992) 3 Admin. L.R. (2d) 223. On an appeal from a Review Board decision refusing to stay the re-certification of Mr. Chokan as an involuntary patient under the Mental Health Act, a judge of the General Division held that s. 23(1) of the SPPA "was never intended to bestow upon tribunals substantive jurisdiction not otherwise available to the tribunal in its enabling legislation." Appeal quashed as moot because the appellant had died: [1997] O.J. No. 148 (Ont.C.A.). On the adjectival powers of tribunals generally, see Prassad v. Canada (Minister of Employment and Immigration), 1989 CanLII 131 (SCC), [1989] 1 S.C.R. 560 (S.C.C.).
26. 26Rules 15.02 and 57.07 of the Rules of Civil Procedure and s. 131 of the Courts of Justice Act.
27. 27Arbitration decisions include: Tallis and Royal Insurance Company of Canada, (OIC A-007109, May 1, 1995); Cook and State Farm Mutual Automobile Insurance Company, (OIC A96-001284, March 20, 1998); Armstrong and Personal Insurance Company, (FSCO A97-001844, May 14, 1999); Lopez and Commercial Union Assurance Company, (FSCO A98-001223, April 13, 1999); Farella and Security National Insurance Company, (OIC A98-001162, June 25, 1999); Dhawan and State Farm Mutual Automobile Insurance Company, (FSCO A00-00031 April 20, 2001), confirmed, (FSCO P01-00025, May 16, 2002); Docoute and Zurich Insurance Company, (FSCO A00-00027, September 19, 2001), confirmed (FSCO P01-00036, July 29, 2002); Gik and Zurich Insurance Company, (FSCO A00-001144, October 4, 2001), Jelisic and Guarantee Company of North America, (FSCO A98-000029, October 21, 1999). The matter has been briefly considered in three appeal decisions: Sabti and AXA Insurance (Canada), (FSCO P00-00015, February 5, 2001), confirming (FSCO A98-001267, November 10, 1999); Gurevich and Royal & SunAlliance Insurance Company of Canada, (FSCO P02-00011, September 18, 2002) and Tanzos and State Farm Mutual Automobile Insurance Company, (FSCO P01-00017, October 22, 2002).
28. 28"A tribunal may exclude from a hearing anyone, other than a barrister and solicitor qualified to practise in Ontario, appearing as an agent on behalf of a party or as an adviser to a witness if it finds that such person is not competent properly to represent or to advise the party or witness or does not understand and comply at the hearing with the duties and responsibilities of an advocate or adviser."
29. 29Glinka and Pufferin Mutual Insurance Company, (FSCO P96-00024, March 7, 2001); Dhawan and State Farm Mutual Automobile Insurance Company, (FSCO P01-00025, February 1, 2002) and (FSCO P01-00025, May 16, 2002).
30. 30Arbitration decision, pp. 7-8.
31. 31Arbitration decision, p. 10.
32. 32Bilusack and Co-operators General Insurance Company, (OIC A-006369, February 13, 1996).
33. 33Arbitration decision, p. 7.
34. 34At p. 14.
35. 35Subsection 44(2) (direct billing) and s. 38 (procedures for claiming medical and rehabilitation benefits).
36. 36See also my comments on facility-driven claims in Smith and Citadel General Insurance Company, (FSCO P01-00034, August 20, 2002).