Stella Owusu v. Non-Marine Underwriters, Mbrs. of Lloyd's, 2004 ONFSCDRS 26

Financial Services Commission of Ontario

Neutral Citation: 2004 ONFSCDRS 26 FSCO A02-000499

Between: Stella Owusu, Applicant and Non-Marine Underwriters, Mbrs. of Lloyd's, Insurer

Decision on Assessment of Expenses

Before: Joyce Miller Heard: Written submissions received by August 13, 2003

Appearances: Dan Luu for Mrs. Owusu R. Lee Akazaki for Non-Marine Underwriters, Mbrs. of Lloyd's

Issues:

Mrs. Owusu was injured in a motor vehicle accident on May 25, 2001. I dealt with her claims for statutory accident benefits under the Schedule¹ at an arbitration hearing on January 27, 28 and 29, 2003. In a decision dated April 2, 2003 I made the following orders:

1. Mrs. Owusu is not entitled to receive weekly caregiver benefits in the amount of $250 per week from May 26, 2001 to January 22, 2003 pursuant to section 13 of the Schedule.

2. Mrs. Owusu is liable to pay Lloyd's Underwriters' expenses in respect of the arbitration under section 282(11) of the Insurance Act.

The issue in this further hearing is:

1. What amount is Lloyd's Underwriters entitled for its expenses in this arbitration proceeding?

Result:

1. Lloyd's Underwriters is entitled to legal fees in the amount of $8,589.46, plus $601.26 GST; and disbursements in the amount of $1,461.09, plus $98.03 GST.

BACKGROUND

1. Expenses claimed by Lloyd's Underwriters

Lloyd's Underwriters claims the following expenses in this arbitration:

• legal fees for Mr. Akazaki for 92.7 hours at the rate of $150 per hour in the amount of $13,905.00, plus GST, and Mr. J.W. Wilson for 0.4 hours at the rate of $73.87 per hour, plus GST;
• disbursements in the amount of $1,461.09, plus GST;
• two expert reports by Dr. Barry Malcolm in the amounts of $1,123.50 and $481.50, and one expert report by Dr. Isabelle Cote in the amount of $1,500;
• surveillance expenses in the amount of $2,291.89;
• the expense of investigators on standby for the arbitration hearing in the amount of $1,669.20;
• Lloyd's Underwriters claims $500 for the expenses of this assessment hearing.

2. Mrs. Owusu's position on Lloyd's Underwriters' Claim for Expenses

Mrs. Owusu does not dispute the amount of hours for legal fees claimed by Lloyd's Underwriters, but disputes the hourly rate claimed for Mr. Akazaki. Mrs. Owusu does not dispute Lloyd's Underwriters' claim for disbursements, but disputes the expenses claimed for the experts' reports and the surveillance expenses.

The Law:

Subsection 282(11) of the Insurance Act provides that:

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 regulations.

Section 3 of the Expense Schedule² provides the following:

(3) The maximum amount that may be awarded for legal fees is the amount calculated using the hourly rates set out in the Dispute Resolution Practice Code published by the Ontario Insurance Commission or Financial Services Commission of Ontario, as it may be amended from time to time.

Rule 78.1 of the Dispute Resolution Practice Code (Fourth Ed., May 31, 2001) provides that:

The maximum amount that may be awarded to an insured person or an insurer for legal fees, is an amount calculated using:

(a) the hourly rates established under the Legal Aid Services Act, 1998 for professional services in civil matters before the Ontario Superior Court of Justice; or

(b) the hourly rate referred to in Rule 78.1(a) adjusted to include, where appropriate, the experience allowance established under the Legal Aid Services Act;

Where an adjudicator is satisfied that a higher amount for legal fees to an insured person is justified, an hourly rate of up to $150 may be awarded.

Sections 4 and 5 of the Expense Schedule provide that:

4. The amount of the following disbursements made by or on behalf of the insured person or the insurer may be awarded:

5. For long distance telephone, facsimile and other telecommunication charges.

6. For typing, printing and reproducing copies of documents.

7. For the delivery, by mail or courier, of items relating to the arbitration, appeal, variation or revocation hearing.

8. For other out-of pocket expenses incurred in furtherance of the arbitration, appeal, variation or revocation hearing.

9. Any applicable taxes paid in respect of the expenses referred to in this section.

10. (1) The amount of the following witness fees paid by or on behalf of the insured person or the insurer may be awarded:

11. For the attendance of witnesses, in accordance with subsection (2).

12. For the attendance of an expert witness who gives opinion evidence at the arbitration or hearing or whose attendance is necessary, in accordance with subsection (3).

13. For a report prepared by an expert, provided to the other parties to the arbitration or hearing and necessary for the conduct of the arbitration or hearing, in accordance with subsection (4).

(2) The maximum amount that may be awarded for the attendance of a witness is the amount of the attendance allowance for the witness that may be allowed under Rule 58.05 of the rules of court as a disbursement.

(3) The maximum amount that may be awarded for the attendance of an expert witness is $200 per hour of attendance, up to a maximum of $1,600 per day.

(4) The amount of the expenses paid by or on behalf of the insured person or the insurer to an expert witness for preparation for a hearing at which the witness testifies may be awarded, to a maximum of $500.

(5) The amount of the expenses paid by or on behalf of the insured person or the insurer to an expert for the preparation of a report may be awarded, to a maximum of $1,500.

ANALYSIS AND FINDINGS:

1. Legal Fees

Lloyd's Underwriters claims legal fees for the services of Mr. Akazaki, for a total of 92.7 hours at the rate of $150 an hour for a total of $13,905, plus GST, and for the services of Mr. J.W. Wilson for 0.4 hour at the legal aid rate of $73.87 an hour, plus GST.

Mrs. Owusu does not dispute the amount of hours claimed, however she disputes the amount of $150 an hour claimed by Lloyd's Underwriters for Mr. Akazaki's services. Mrs. Owusu submits that the increase in the hourly rate "is not justified nor reasonable given that [she and her counsel] were at all times cooperative with the Tribunal and accommodating to the respondent and its counsel and did not engage in conduct which is clearly unreasonable, frivolous or vexatious."

I agree with Mrs. Owusu that Lloyd's Underwriters is not entitled to claim $150 an hour for Mr. Akazaki's services, but not for the reasons she put forward.

The law is very clear - Rule 78.1 of the Dispute Resolution Practice Code only allows an arbitrator the discretion to award an hourly rate of up to $150 to an insured person. Pursuant to Rule 78.1 paragraphs (a) and (b), the hourly rates for the insurer are based on the Legal Aid Services Act, adjusted to include, where appropriate, the experience allowance established under the Legal Aid Services Act.

Accordingly, I find that Lloyd's Underwriters is entitled to legal fees for Mr. Akazaki based on his experience at the legal aid rate of $92.34 an hour for 92.7 hours for a total of $8,559.91, plus GST. As well, Lloyd's Underwriters is entitled to legal fees for Mr. Wilson at the legal aid rate of $73.87 an hour for 0.4 hour for a total of $29.55, plus GST.

2. Disbursements

Mrs. Owusu does not dispute the amount claimed by Lloyd's Underwriters for disbursements. Accordingly, I find that Lloyd's Underwriters is entitled to $1,461.09, plus GST, for disbursements.

3. Reports of Experts

Lloyd's Underwriters claims its expenses for two expert reports by Dr. Barry Malcolm in the amounts of $1,123.50 and $481.50 and one expert report by Dr. Isabelle Cote in the amount of $1,500.

Lloyd's Underwriters submits that the examinations by these doctors and their reports were obtained after Mrs. Owusu filed her application for arbitration on the advice of its counsel for the purpose of defending the arbitration. Therefore, Lloyd's Underwriters submits these expenses were incurred for the purpose of the arbitration hearing and as such are entitled to these expenses.

Mrs. Owusu disputes these expenses on the basis that these were insurer's medicals pursuant to subsection 42(1) of the Schedule and therefore Lloyd's Underwriters is not entitled to its expenses for these reports.

I agree with Mrs. Owusu submission. Although these reports were retained after Mrs. Owusu filed for arbitration, they were nevertheless obtained pursuant to subsection 42(1) of the Schedule.

Subsection 42(1) of the Schedule provides:

For the purpose of determining whether an insured person is entitled to a benefit, except a funeral or death benefit, an insurer may give the insured person notice requiring him or her to be examined by one or more persons specified by the insurer, each of whom is a member of a health profession or a person with expertise in vocational rehabilitation.

Subsection 42 is not a defence medical.³ Subsection 42(1) clearly states that the purpose of an insurer's medical is to determine "whether an insured person is entitled to a benefit." There is no provision in the regulations for an insurer to obtain its expenses for an insurer's medical either before or after an applicant applies for arbitration. The fact that Lloyd's Underwriters chose to use the insurer's medical reports to defend its case does not convert the insurer's medical report to the status of an expert's report prepared for arbitration.

Accordingly, I find that Lloyd's Underwriters is not entitled to its expenses for the reports of Dr. Malcolm and Dr. Cote.

4. Surveillance Expenses

Lloyd's Underwriters claims its expenses in the amount of $2,291.89 for surveillance conducted by Burl-Oak Investigative Services Inc. Lloyd's Underwriters submits that the surveillance was commenced after Mrs. Owusu filed for arbitration on the advice of its counsel.

Mrs. Owusu disputes this expense on the basis "... that this expense is part of the adjusting cost borne by the Insurance Company and not that of the Applicant's responsibility as it was not requisitioned for the purpose of this arbitration proceeding."

I agree with Mrs. Owusu that Lloyd's Underwriters is not entitled to its expenses for surveillance. Again, it is a matter of jurisdiction. There is no statutory basis for awarding Lloyd's Underwriters its expenses for surveillance. The regulations make no provision for such an expense.

Accordingly, Lloyd's Underwriters is not entitled to its expenses for surveillance.

5. Expenses for Surveillance Investigators on Standby for Arbitration

Lloyd's Underwriters claims expenses in the amount of $1,669.20 for investigators who were on standby for the arbitration.

Mrs. Owusu disputes this claim. She submits that this claim is "unreasonable, frivolous and exaggerated." She further submits that none of the three investigators appeared as a witness at the arbitration hearing.

I agree with Mrs. Owusu that Lloyd's Underwriters is not entitled this expense, but not for the reasons she claims. Once more, it is a matter of jurisdiction. There is no statutory basis on which I can award such an expense. The expenses for witnesses as outlined in section 5 of the regulation make no provision for such a category as a standby for arbitration.

Accordingly, Lloyd's Underwriters is not entitled to its expenses for investigators who were on standby for the arbitration hearing.

6. Assessment Expenses

Lloyd's Underwriters claims $500 in expenses for this assessment hearing. I did not receive any submissions from the parties on this issue.

An arbitrator has the discretion to award expenses for an assessment hearing.⁴However, in this case I decline to award Lloyd's Underwriters' claim for its expenses as it was unsuccessful on all the expense items in dispute.

Accordingly, I find that Lloyd's Underwriters is not entitled to its claim of $500 for its expenses in this assessment hearing.

CONCLUSION

Accordingly, for all of the above reasons, I find that Lloyd's Underwriters is entitled to legal fees in the amount of $8,589.46 plus $601.26 GST; and disbursements in the amount of $1,461.09, plus $98.03 GST.

February 27, 2004

Joyce Miller Arbitrator

Neutral Citation: 2004 ONFSCDRS 26 FSCO A02-000499

FINANCIAL SERVICES COMMISSION OF ONTARIO

BETWEEN: STELLA OWUSU Applicant and NON-MARINE UNDERWRITERS, MBRS. OF LLOYD'S Insurer

ARBITRATION ORDER

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

1. Mrs. Owusu shall pay Lloyd's Underwriters legal fees in the amount of $8,589.46 plus $601.26 GST; and disbursements in the amount of $1,461.09 plus $98.03 GST.

February 27, 2004

Joyce Miller Arbitrator

The question of whether or not an insurer's assessment is reasonably required, particularly when an arbitration hearing looms, is a troubled one. As has been remarked on more than one occasion, the Schedule does not provide the insurer with a right to a so-called defence medical examination. The Schedule does provide insurer assessments for the purpose of determining whether or not an insured person is entitled to a benefit under the Schedule. This precise and demarcated entitlement has been expanded to include assessments where, in the arbitrator's view an assessment is required in the interests of fairness between the parties in litigation.

Footnotes

1. 1The Statutory Accident Benefits Schedule —Accidents on or after November 1, 1996, Ontario Regulation 403/96, as amended by Ontario Regulations 462/96, 505/96, 551/96, 303/98, 114/00 and 482/01.
2. 2Ontario Regulation 664, R.R.O. 1990, as amended by Ontario Regulation 464/96 made under the Insurance Act
3. 3See Wilkerson and Allianz Insurance Company of Canada (FSCO A03-000753, January 31, 2004) where Arbitrator Muir held:
4. 4See Folkes and Security Insurance Company of Hartford (FSCO A96-001142, November 30, 1998)