Financial Services Commission of Ontario

Commission des services financiers de l’Ontario

Neutral Citation: 2004 ONFSCDRS 161 Appeal: P04-00020

OFFICE OF THE DIRECTOR OF ARBITRATIONS

MARINA BERSHTEYN Insured Person

and

ROLAND SPIEGEL Appellant

and

ALLSTATE INSURANCE COMPANY OF CANADA Respondent

Before: David R. Draper

Representatives:

Marina Bershteyn did not participate
Roland Spiegel on his own behalf
Richard F.L. Rose for Allstate

Hearing Date: October 25, 2004, with written submissions to November 3, 2004

APPEAL ORDER

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

The appeal is dismissed and the arbitration order, dated May 28, 2004, is confirmed.
Roland Spiegel shall pay Allstate Insurance Company of Canada's appeal expenses, fixed at $750, all inclusive.

November 4, 2004

David R. Draper Director of Arbitrations

Date

REASONS FOR DECISION

I. NATURE OF THE APPEAL

In a decision dated May 28, 2004, the Arbitrator rejected Marina Bershteyn's claim for reimbursement of a disability certificate and ordered expenses in favour of Allstate Insurance Company of Canada ("Allstate") to be paid personally by Ms. Bershteyn's representative, Roland Spiegel.¹ Mr. Spiegel appeals from this order. For reasons that follow, the appeal is dismissed.

II. BACKGROUND

Ms. Bershteyn applied for arbitration in June 2001. The only issue in dispute was Allstate's refusal to pay for a disability certificate completed by Dr. Liane D. Nakamura — a claim for $83.87. Before any pre-hearing took place, Mr. Spiegel sent the Commission notice that he was withdrawing all of his clients' arbitrations, including Ms. Bershteyn's, "without any penalty," due to concerns about "the unresolved issue of FSCO's Arbitrators' 'institutional bias and/or reasonable apprehension of bias'." This was in reference to a motion brought by the insurer in another proceeding: Persofsky and Liberty Mutual Insurance Company, (FSCO P00-00041, January 31, 2003).

Allstate objected to a withdrawal without penalty. It argued that the arbitration was frivolous, vexatious and an abuse of process, and, therefore, it should be allowed to recover its expenses, including the $3,000 assessment. Allstate also suggested that consideration be given to ordering Mr. Spiegel to pay these amounts personally.

Before Ms. Bershteyn's withdrawal request was addressed by an arbitrator, Mr. Spiegel applied for intervenor status in Persofsky. I rejected this application in a decision dated November 21, 2001.²

Mr. Spiegel also pursued his bias arguments in a number of appeals and bias applications, including a bias application brought on behalf of Ms. Bershteyn. I dealt with these matters in three decisions dated July 29, 2002, rejecting the bias arguments.³

The withdrawal issue finally went before an arbitrator in November 2002. In a decision dated December 31, 2002, the Arbitrator ordered as follows: "Ms. Bersteyn may withdraw her application for arbitration on the condition that she pay Allstate $1,151.44, under subsection 282(11) of the Insurance Act, as expenses, and $3,000 under subsection 282(11.2) of the Act, representing the amount assessed against the Insurer."

This order was interpreted as conditional, giving Ms. Bershteyn a choice — withdraw and pay the amounts ordered, or proceed to arbitration. She decided to proceed with the arbitration. At a pre-hearing held in July 2003, Allstate undertook to provide copies of its document briefs, current resumes for both adjusters involved with the file, and all file notes to the date of the mediation. The pre-hearing Arbitrator denied additional production requests made by Mr. Spiegel, including Allstate's internal guidelines and information about its promotional business/commercial campaigns, on the basis that they were not relevant to the issues in dispute.

Prior to the arbitration hearing, Mr. Spiegel brought a motion for "judicial estoppel," seeking to limit the scope of Allstate's arguments. The Senior Arbitrator declined to schedule a motion on the basis that the arguments could be presented at the hearing. Not content with this ruling, Mr. Spiegel repeated his request. The Senior Arbitrator advised, once again, that the proper time for argument was at the upcoming hearing. Mr. Spiegel then asked for a long list of additional productions, including items addressed at the pre-hearing. Two days later, he asked that the hearing be adjourned, in part based on his "judicial estoppel" argument. The adjournment request was denied.

Less than one week before the hearing, Mr. Spiegel asked for more productions. More specifically, he asked Allstate to provide an Affidavit of Documents with four detailed appendices, a statement from the company, and a certificate from Allstate's lawyer. The following paragraph, describing the contents of the first appendix, illustrates the nature of Mr. Spiegel's request:

In Schedule "A," by consecutively numbered document, every document and every dated log or computer entry in Allstate's possession, power or control which was created or came into existence during Allstate's entire period of Ms. Marina Bersteyn's claims handling process. Each item shall have sufficient particulars to identify the document, including, but not necessarily limited to, the type and function of the document, its date, and the role and status of the receiver and sender (or creator) of the document. Allstate shall further provide sworn confirmation that every document listed therein has been provided to Ms. Marina Bersteyn or shall forthwith provide to Ms. Bersteyn any document so listed which has not been provided, together with an explanation as to why the document had not yet been served.

Mr. Spiegel also continued to ask that the pre-hearing be resumed. He was advised, yet again, that he should make his arguments to the hearing arbitrator.

The arbitration hearing went ahead on January 7 and 8, 2004. Three witnesses were called, all by Mr. Spiegel: the two Allstate adjusters involved with the file and the principal of Support Paralegal Services. Ms. Bershteyn did not participate.

The Arbitrator issued his decision on May 28, 2004. He found that the disability certificate was not connected to any claim for benefits and, therefore, could not be viewed as a reasonable expense under s. 24(1) of the SABS-1996. In addition, he made strong findings about the document itself, set out below:

As noted earlier, the Insurer wrote requesting an original copy of the document. This was never produced. Mr. Gold [an Allstate adjuster] wrote to request an explanation of why the document did not conform to a normal form and structure, but received no response. Mr. Gold's uncontradicted evidence at this hearing, indeed, was that the document had been "cut and pasted" and manipulated for some purpose- most likely deception. As a document it could serve no useful purpose since it was incomplete and lacking in critical components. [p. 10]

The Arbitrator then dealt with expenses. He found that the arbitration was an abuse of process and, as a result, had no trouble concluding that Allstate should recover its expenses. The only question was whether Ms. Bershteyn or Mr. Spiegel should be responsible for paying them. The Arbitrator found that Mr. Spiegel was, to a large degree, the controlling mind behind the litigation, and that there was evidence that Ms. Bershteyn may not have signed certain documents issued in her name. He found that Mr. Spiegel "pursued a claim for payment of a patently useless and incomplete disability certificate without regard to expense" and "that, given the absence of any evidence of instructions to delay and obfuscate from his client, he embarked on this frolic on his own, and should be held accountable." [p. 16]

The Arbitrator's order states as follows:

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

Ms. Bershteyn is not entitled to reimbursement for the disability certificate.

Allstate is entitled to its expenses against the nominal applicant, Ms. Bershteyn which shall be payable by Mr. Spiegel.

Ms. Bershteyn is not entitled to her expenses in this matter.

The Arbitrator did not set the amount of Allstate's arbitration expenses. A hearing is scheduled on November 19, 2004, to decide that issue.

Mr. Spiegel initially filed an appeal in his own name, challenging all aspects of the Arbitrator's order. I ruled that he was not entitled to do so because the claim for the disability certificate was Ms. Bershteyn's, not his. Ms. Bershteyn and Mr. Spiegel were invited to file a fresh appeal or appeals, clarifying who was appealing and on what issues.

Mr. Spiegel filed a second appeal in his own name, limiting the scope of the appeal to the "[a]rbitrator's decision with respect to cost to be paid by the Representative (Roland Spiegel) be rescinded." Despite this, he included submissions that covered the whole history of the matter, arguing that the previous orders involved errors of law. In his written submissions, filed later, Mr. Spiegel went even further, seeking to appeal my bias order and the initial arbitration order dealing with the withdrawal.

Allstate did not contest Mr. Spiegel's right to appeal the Arbitrator's order that he pay the expenses personally, but argued that the appeal should be restricted to that issue. I agreed and made a ruling to that effect at the appeal hearing. Nevertheless, Mr. Spiegel continued to make wide-ranging submissions.

III. ANALYSIS

This claim has occupied an astonishing amount of time and expense. Mr. Spiegel points his finger at everyone else, accusing Allstate of bad faith and describing the dispute resolution process as prejudiced, biased, and a miscarriage of justice. There is overwhelming evidence, however, to support the Arbitrator's conclusion that "there was never any reasonable hope of success for this arbitration." [p. 13]

As the Arbitrator correctly states, the SABS-1996⁴ does not provide funding for examinations that have no connection to any claim or matter in dispute between an insured and an insurer. On the contrary, disability certificates have a specific role in the SABS-1996. According to s. 34(1), if the insured person claims an income replacement, non-earner or caregiver benefit, or a benefit under section 20 [lost educational expenses] or 22 [housekeeping and home maintenance], the insurer can require the insured person to provide a disability certificate — a form approved by the Superintendent under s. 69. If the insurer decides that it wants a disability certificate, it must pay the reasonable fees charged by the health practitioner who completes it. [s. 24(1)] The insurer then must decide whether to pay the claim, with the rules for payment and refusal set out, for the most part, in sections 35 and 37.

In this case, there was no reason for Ms. Bershteyn to obtain or file the disability certificate. As the Arbitrator notes, she did not miss any work and, consequently, it is difficult to see what claim she might have that would fit within s. 34(1). Mr. Spiegel's continuing inability or unwillingness to understand this point is seen in the following excerpt from his appeal submissions:

Arbitrator Wilson erred in law by failing to recognize (on the evidence) that in fact the said Disability Certificate was in full compliance with s. 24(1) of the Regulation, as it was in fact "for the purpose of the Regulation" (as previously provide, which was in order to confirm Ms. Bershteyn's prevailing impairments to substantiate her entitlement to Medical and Rehabilitation Benefits, that she was receiving at the time).

There are at least two problems with the argument. First, the claims process for medical and rehabilitation benefits, which is set out in s. 38 of the SABS-1996, does not involve disability certificates. Second, it is absurd to suggest that the insurer should pay for an assessment obtained at the insured person's initiative to evaluate a claim for benefits "that she was receiving at the time."

From the outset of this claim, Mr. Spiegel attempted to control the process in a manner inconsistent with the legislation and unlikely to foster a productive first-party relationship. His initial "Letter of Introduction" to Allstate sets the tone:

Please be advised that we have been retained by the above named with respect to his/her claims for damages arising out of the above mentioned motor vehicle accident.

As per our client instruction and direction any and all previous authorizations and directions provided to you and your company by our client, are herein revoked.

Your further instructed and directed to forward all communications with respect to our client's claims for accident benefits, including but not limited to benefits for loss of income to SUPPORT Paralegal Consulting Inc., inclusive of the copies of independent medical examination reports, rehabilitation reports, and all other matters.

You are further instructed to direct and forward any and all requests for information from any of our client's service providers, attending health practitioners, and/or place of employment, to our office only (via correspondence). All reasonably necessary and relevant requests for information would be provided to you promptly upon a prior secured commitment of funds for handling and other disbursement costs.

Please be advised that we are referring our client to an In-home assessments, and/or Job Site Analysis, and subsequently also to all other relevant, and reasonably necessary Comprehensive Multi-Disciplinary Assessments and Examinations, pursuant to Section 24.1 of the Regulation. Please postpone all scheduled and further referral/s to any and all insurer examinations pending further notice, in order to avoid any and all duplication of services, and causing inconvenience to our client/s. We'll subsequently, promptly upon completion provide you with all the assessments and examinations reports. Please note, however, that our client will subsequently submit and make himself/herself reasonably available for all other follow-up appropriate and relevant requests for further reasonably necessary Assessments and Examinations.

Purpose of the referrals:

To determine pre-existing medical conditions (pre-MVA).

To determine pre and post activities of daily living and work demands, as well as determine the needs and requirements for intervention and assistance.

To determine diagnosis, differential diagnosis, and prognosis, as well as obtain a current functional ability/capacity evaluation, whole body cumulative impairment rating and other diagnostics.

To determine the short/long term needs and requirements for medical and rehabilitation intervention.

To determine needs and requirements for further investigations (assessments and examinations/diagnostics).

To determine the needs and requirements for chronic pain management for supportive maintenance intervention/services.

To determine the feasibility for a potential 'full and final' settlement with the insurance company.

Please be advised that we will not tolerate any form of harassment, and/or inconvenience to our client/s.

Please be advised that failure to follow and adhere to the above noted directions as well as, unreasonably withholding of timely access to medical interventions/services, and/or unreasonably withholding payments of benefits and other incurred expenses, would be considered to be an act in bad faith. Please take notice, that the insurer's representative personally, and the insurance company will be held responsible and liable for their actions in tort.

Please be also advised that you personally, and your company are placed under a direct 'notice/order', to refrain/cease from any acts in 'bad faith' to wards our client.⁵

Included with this letter was a statutory declaration from Ms. Bershteyn, sworn by Mr. Spiegel. Mr. Spiegel acknowledges, however, that he had no legal authority to swear documents.

In my view, the Arbitrator's strongest finding — that Mr. Spiegel was on a frolic of his own — is amply supported by the evidence. Indeed, it is difficult to imagine a much clearer case for placing responsibility on the representative for expenses incurred by the other party. However, there are two issues that must be considered.

A. Retrospectivity

Subsection 282(11.2), which gives arbitrators the authority to order a representative to pay expenses personally, did not come into effect until October 1, 2003. Mr. Spiegel submits that the Arbitrator erred in applying it retrospectively.

The hearing took place in January 2004, after the new expense provision was in place. Mr. Spiegel represented Ms. Bershteyn at that hearing, calling three witnesses over two days on a claim for $83.87 that had no chance of success. In my view, the Arbitrator's findings support an order against Mr. Spiegel based only on his post-October 2003 conduct. For this reason alone, I would deny the appeal based on the retrospectivity argument.

Determining the reach of new legislation can be difficult. Recently, I considered amendments to Ontario Regulation 664 which changed the criteria for awarding expenses. In Howden and Pembridge Insurance Company (Pafco Ins. Co.), (FSCO P02-00031, May 17, 2004), the appeal was argued before the criteria were amended, but the decision was issued after the amendment was in effect. Relying on a number of court decisions, particularly the decision of the Court of Appeal in Canadian Broadcasting Corporation Corp. Pension Plan (Trustee of) v. BF Realty Holdings Ltd. 2002 CanLII 15157 (ON CA), [2002] O.J. No. 4313, I concluded that legislation dealing with expenses is procedural and, absent transitional provisions to the contrary, applies to any determination of expenses after it comes into effect.

Mr. Spiegel argues that the new expenses provision in s. 282(11.2) of the Insurance Act is substantive, not procedural. In his submission, the subsection affects liability, which is a matter of substance. Further, he claims the new provision fundamentally alters the relationship between a representative and his or her client in a manner that drastically curtails access to the dispute resolution process.

For reasons set out in Howden, I read the court decisions as broadly treating expense provisions as procedural. Subsection 282(11.2) clearly deals with arbitration expenses. It does not affect entitlement to accident benefits, the substantive issue heard by arbitrators. In my opinion, therefore, the provision is procedural, and was introduced without any transitional provision limiting its application to actions taken after its enactment. As Allstate points out, the flip-side is that the old s. 282(11.2), which allowed arbitrators to order insured persons to pay an amount up to the amount of the insurer's assessment if they commenced an arbitration that was frivolous, vexatious or an abuse of process, is no longer available for orders made after October 1, 2003.

Finally, s. 282(11.4) requires that the representative be given a reasonable opportunity to make representations before he or she can be ordered to pay expenses personally. This procedural protection was respected in this case.

For these reasons, I conclude that the Arbitrator did not err in applying s. 282(11.2) of the Insurance Act retrospectively.

B. Representative

Mr. Spiegel submits that Ms. Bershteyn "was de facto represented by Support Paralegal Consulting Inc.," and that he was "the agent and was employed by Support Paralegal Consulting Inc., in the capacity of REHABILITATION SPECIALIST/CASE MANAGER, and CLAIMS ANALYST/ADR SPECIALIST, and was never the proprietor of Support Paralegal Consulting Inc." Therefore, he submits, if Ms. Bershteyn's representative is to bear responsibility for Allstate's arbitration expenses, it should be Support Paralegal, not him.

I reject this argument. Subsection 282(11.2) of the Insurance Act gives arbitrators the authority to order a representative to pay costs personally in certain circumstances. It is the actions of the representative that are determinative. Mr. Spiegel represented Ms. Bershteyn throughout these proceedings. He must take responsibility for his actions as a representative. The details of his relationship with Support Paralegal are irrelevant to the determination under s. 282(11.2).

There is also a factual question. The Commission received a letter from a lawyer who states that he represents "Support Paralegal Counselling."⁶ He claims that Support Paralegal "at all material times was the representative of Ms. Bershteyn," that Mr. Spiegel was never employed by Support Paralegal, and that Mr. Spiegel was retained on an agency basis to represent Ms. Bershteyn at the mediation only.

While this letter raises matters of concern, they need not be determined in this appeal. Mr. Spiegel put himself forward as Ms. Bershteyn's representative throughout these proceedings. The details of his relationship with Support Paralegal, whatever they may have been, do not provide him with grounds for appeal.

For these reasons, the appeal is dismissed.

IV. APPEAL EXPENSES

The criteria for awarding expenses are found in R.R.O. 1990, Regulation 664. Given the novelty of the issues involved, I would not characterize the appeal as frivolous, vexatious or an abuse of process. However, it was unsuccessful and, to some extent, Mr. Spiegel delayed the proceedings by making submissions well beyond the appropriate scope of the appeal. Therefore, I conclude that Allstate should recover its reasonable appeal expenses from the appellant, Mr. Spiegel.

Mr. Rose indicated that he spent approximately eight hours in preparation for the appeal and three hours at the hearing. This strikes me as on the high side, but given the length of Mr. Spiegel's submissions, not excessively so. Using the legal aid rate, with an experience increase for Mr. Rose, expenses will be fixed at $750, all inclusive.