Gloria Kovacs v. Canadian General Insurance Group, 2004 ONFSCDRS 66

Financial Services Commission of Ontario

Neutral Citation: 2004 ONFSCDRS 66

FSCO A01-001450

BETWEEN:

GLORIA KOVACS Applicant

and

CANADIAN GENERAL INSURANCE GROUP Insurer

DECISION ON A PRELIMINARY ISSUE

Before: Eban Bayefsky

Heard: April 2, 2004, at the offices of the Financial Services Commission of Ontario in Toronto.

Appearances: Robert Ipacs for Ms. Kovacs Claude Blouin for Canadian General Insurance Group

Issues:

The Applicant, Gloria Kovacs, was injured in a motor vehicle accident on August 7, 1993. She applied for and received statutory accident benefits from Canadian General Insurance Group ("Canadian General"), payable under the Schedule.¹ Canadian General terminated income replacement benefits and supplementary medical and rehabilitation benefits on November 6, 1997. The parties were unable to resolve their disputes through mediation, and Ms. Kovacs applied for arbitration at the Financial Services Commission of Ontario under the Insurance Act, R.S.O. 1990, c.I.8, as amended.

The preliminary issue is:

1. Is Ms. Kovacs precluded from proceeding to arbitration because she previously commenced a court action against the same Insurer and in relation to the same issues?

Result:

1. Ms. Kovacs' arbitration is stayed pending amendment of the Statement of Claim as against Canadian General and pending the outcome of Ms. Kovacs' court action.

EVIDENCE AND ANALYSIS:

The proceedings to date

On August 7, 1993, Ms. Kovacs was struck by a motor vehicle while crossing the street on her bicycle and was seriously injured. In July 1995, Ms. Kovacs commenced a civil suit against the driver of the motor vehicle for damages in the sum of $1,000,000. Ms. Kovacs' mother and father were also named as plaintiffs in the action and sought damages of $100,000 each pursuant to section 61 of the Family Law Act, R.S.O. 1990, c.F-3, as amended. The Statement of Claim stated that Ms. Kovacs suffered various physical, neurological and emotional injuries as a result of the accident and "has been, and will be put to expense for hospital and medical attention, medicines and otherwise." Further, Ms. Kovacs' parents claimed damages for the provision of "nursing, housekeeping or other services provided to [Ms. Kovacs]."

In March 1998, Ms. Kovacs commenced a civil suit against Canadian General Insurance Company, the insurer of the third party driver. Citing the relevant provisions of the Statutory Accident Benefits Schedule, Ms. Kovacs claimed weekly income benefits, "unspecified damages for supplementary medical and rehabilitation benefits incurred by the Plaintiff as a result of her accident related injuries," a "declaration that the Plaintiff is entitled to future supplementary medical and rehabilitation benefits for an indefinite duration due to her continued disability" and "aggravated and punitive damages, and damages for bad faith in the sum of $1,000,000.00." The Statement of Claim stated that Ms. Kovacs suffered various physical, neurological and emotional injuries as a result of the accident and "has incurred and continues to incur expenses for hospital and medical attention, rehabilitation, attendant care, medicines and otherwise."

The trial in these two actions (which have now been joined) is scheduled to commence on February 14, 2005. Discoveries have taken place in the third party action but not as against Canadian General. A pre-trial conference was scheduled for April 7, 2004 to address the relevant issues and to canvass the possibility of settlement.

On May 22, 2002, Ms. Kovacs filed an Application for Arbitration, in which she claimed from Canadian General supplementary medical and rehabilitation benefits in the amount of $60,121 and care benefits in the amount of $288,000. The Application for Arbitration stated that the injuries Ms. Kovacs suffered in the accident prevented her from performing housekeeping and home maintenance services and that she required someone to transport her to and from medical appointments. The Application also stated that the accident rendered Ms. Kovacs incapable of handling her own personal care and property and, therefore, required these services on an ongoing basis.

The Commission conducted a pre-hearing conference on July 23, 2002, at which point the following issues, among others, were identified for the arbitration:

• Did a condition that arose before or after the accident cause Ms. Kovacs' disability?
• Is Ms. Kovacs entitled to expenses for medication and housekeeping, claimed pursuant to paragraph 6(1)(f) of the Schedule? If so, in what amount?
• Is Ms. Kovacs entitled to receive care benefits, pursuant to section 7 of the Schedule? If so, in what amount?
• Is Canadian General, pursuant to subsection 282(10) of the Insurance Act, liable to pay a special award because it unreasonably withheld or delayed payments to Ms. Kovacs?

The Commission originally scheduled the arbitration for October 21-24, 2002, but adjourned the hearing on three occasions, each time at the request of Ms. Kovacs' mother for reasons related to the lack of representation.

The matter eventually came on for hearing on November 3, 2003. At that time, Ms. Kovacs' parents attended, accompanied at their request by Mr. Sydney Lebowitz, counsel, to observe the proceedings. The Kovacs family was unrepresented at that point. The matter was adjourned briefly to allow Mr. Lebowitz time to review Ms. Kovacs' case to determine if he would represent them. I did not hear further from Mr. Lebowitz. However, on December 1, 2003, Mr. Robert Ipacs wrote to the Commission to advise that he had been retained to represent the Kovacs family in this matter. At my initiation, the hearing resumed on April 2, 2004 to address the status of this matter and to determine how to proceed.

At the resumption, Mr. Blouin brought a motion to have Ms. Kovacs' arbitration permanently stayed on the basis of the related and more comprehensive tort action Ms. Kovacs commenced prior to applying for arbitration in the present case. Mr. Blouin has throughout this matter maintained that the issues Ms. Kovacs is pursuing in her arbitration are more appropriately dealt with in the related civil suit.

The law

Section 281(1) the Act provides, in part, that if mediation fails, the insured person may bring a proceeding in a court of competent jurisdiction or may refer the issues in dispute to an arbitrator. Arbitration decisions² have established a number of principles governing the question of whether a person is precluded from proceeding before both a court and the Commission. As set out in the decision of King and Royal Insurance Company of Canada (FSCO A98-000234, March 24, 1999), the most basic of these principles is that an insured may not pursue a dispute in more than one forum, but is not required to pursue all of his or her disputes in only one forum. King summarizes the remaining principles as follows:

1. Does the arbitration involve issues substantially similar to those in the civil action?
2. How far along has the civil action proceeded (for example, have discoveries taken place on the issues before the court)?
3. Is the civil action broader in scope than the arbitration, both in terms of the issues involved and the relief sought?
4. Is there any serious impediment to having the issues in the arbitration dealt with in the court proceeding?
5. Would permitting the Applicant to proceed with the arbitration unduly duplicate proceedings, leading to greater costs and delays and raising the spectre of inconsistent results?

King was applied in the appeal decision of Mangat and Non-Marine Underwriters, Mbrs. of Lloyd's (FSCO P00-00020, August 1, 2000), in which then Director's Delegate Draper held that "an election to go to court does not necessarily govern all future claims," but "it is not enough...to simply ask whether the new claim involves a different benefit...[for] what is required is the kind of pragmatic balancing of interests seen in Gogna and King, and suggested in the recent appeal decision in Miller." Director's Delegate Draper further stated as follows:

The rule against multiple proceedings is one of the more basic common law principles. It is based on concerns that multiple proceedings will increase the cost and complexity of litigation, and lead to inconsistent results that undermine the credibility of the system.

The situation is fundamentally different if, as here, the insured person first elects to go to court. While a subsequent mediation may offer a further choice of forum, the insured person may not be allowed to proceed in arbitration if the claims could reasonably have been added to the court action, and allowing both proceedings to continue would result in both forums dealing with evidence or issues that substantially overlap.

In staying Mr. Mangat's arbitration, the Director's Delegate made the following findings:

• The same parties are involved in both proceedings, with Mr. Mangat having the chief burden of proof in both forums.
• The court action was started before this application for arbitration and is broader in scope.
• The court action includes a broad claim for supplementary medical and rehabilitation benefits that is broad enough to include the benefits claimed in the arbitration proceeding.
• The court action includes a claim for punitive damages based on Lloyd’s refusal to pay supplementary medical and rehabilitation benefits, likely resulting in the need for the same evidence in both forums.
• The court action includes a claim for ongoing weekly income benefits. As Lloyd’s is challenging the connection between the accident and Mr. Mangat’s ongoing problems, the same evidence will be required in both forums.
• There is no obvious impediment to Mr. Mangat adding the issues to the court action.
• The two proceedings will require substantially overlapping medical evidence, inflating the overall cost of litigation.
• The overlapping factual and legal issues create a real possibility of inconsistent findings. Alternatively, if issue estoppel is going to be used to preclude the parties from revisiting findings in the later proceeding, those findings are better made in the more comprehensive proceeding.

Findings

On the basis of the above principles, I find that Ms. Kovacs' arbitration ought to be stayed.

Ms. Kovacs commenced her tort actions well before she applied for arbitration. There is significant overlap between the two proceedings. Canadian General is a respondent in both proceedings. Both cases involve the fundamental question of causation, namely, whether the symptoms from which Ms. Kovacs now suffers arose as a result of the motor vehicle accident. A significant aspect of each proceeding is Ms. Kovacs' claim for supplementary medical and rehabilitation benefits. Specifically, she has sought coverage for housekeeping and medications, as well as for care benefits in both cases. She has also sought similar damages in both proceedings in respect of Canadian General's handling of her claim (i.e. aggravated and punitive damages, and damages for bad faith in the tort action, and a special award in the arbitration). In my view (and Mr. Ipacs acknowledged this point), these issues would require the calling of substantially similar evidence, unnecessarily duplicating proceedings, leading to greater costs and delays, and potentially leading to inconsistent results.

Ms. Kovacs' civil suit is clearly broader in scope than the arbitration, involving claims for significantly larger sums of money, and seeking weekly income benefits, general damages (at least as against the third party driver), unspecified damages for supplementary medical and rehabilitation benefits and a declaration of entitlement to future medical and rehabilitation benefits for an indefinite period.

While discoveries have only taken place in the action against the driver, pre-trial proceedings have occurred in respect of both defendants. I agree with Mr. Blouin that discoveries in the action against Canadian General may not be productive given Ms. Kovacs' medical condition. Mr. Blouin further submitted, and I agree, that the current arbitration, assuming it could proceed, would likely be a lengthy and involved matter. Mr. Ipacs acknowledged that the full arbitration process would likely "run up against" the court case, currently scheduled to commence in February 2005.

Regarding the logistics of joining the arbitration and court proceedings, Mr. Blouin indicated that Canadian General would consent to an amendment to the relevant Statement of Claim to permit the arbitration issues to be added to the civil suit. Mr. Ipacs stated that it would be a simple matter to shift the arbitration issues to the court action. I, therefore, find that there is no particular impediment to having the issues in the arbitration added to, and dealt with in, the court proceeding.

Finally, I agree with the comment in Mangat that "if issue estoppel is going to be used to preclude the parties from revisiting findings in the later proceeding, those findings are better made in the more comprehensive proceeding."

I, therefore, find that Ms. Kovacs' arbitration ought to be stayed and that she proceed to amend her Statement of Claim as against Canadian General to include the issues she is currently pursuing in the arbitration. Canadian General sought a permanent stay of Ms. Kovacs' arbitration. The caselaw is somewhat at odds on the proper disposition of an arbitration when it is found that a related court action should take precedence.³ The remedies range from a stay pending amendment of the relevant Statement of Claim, to a stay pending the outcome of the related court action with a right to withdraw the arbitration, to a dismissal of the arbitration. In the present case, the Kovacs family has already indicated that they do not wish to withdraw the application for arbitration. As in Mangat, I am not inclined to dismiss the matter outright, nor does Canadian General seek such an order. In my view, the appropriate disposition is a combination of the other approaches, namely, to order the arbitration stayed pending the amendment of the relevant Statement of Claim (to include the issues currently at play in the arbitration) and pending the outcome of the related tort action.

EXPENSES:

If required, the parties may now make submissions on the issue of expenses.

May 4, 2004

Eban Bayefsky Arbitrator

Neutral Citation: 2004 ONFSCDRS 66

FSCO A01-001450

FINANCIAL SERVICES COMMISSION OF ONTARIO

BETWEEN:

GLORIA KOVACS Applicant

and

CANADIAN GENERAL INSURANCE GROUP Insurer

ARBITRATION ORDER

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

1. Ms. Kovacs' arbitration is stayed pending amendment of the Statement of Claim as against Canadian General and pending the outcome of Ms. Kovacs' court action.

May 4, 2004

Eban Bayefsky Arbitrator

Footnotes

1. 1The Statutory Accident Benefits Schedule — Accidents Before January 1, 1994, Regulation 672 of R.R.O. 1990, as amended by Ontario Regulations 660/93 and 779/93.
2. 2In particular, Barrow and Guardian Insurance Company of Canada (OIC A-006082, December 23, 1993), Bapoo and Co-Operators General Insurance Company (OIC A-006212, October 3, 1994), Oliveira and Markel Insurance Co. of Canada (OIC A-006434, February 9, 1995), Barrett and Economical Mutual Insurance Company (OIC A-951153, September 21, 1995), Tombolini and Jevco Insurance Company (OIC A96-000142, September 24, 1996), Harris and Royal Insurance Company (OIC A95-000267, January 23, 1997), Scott and (Ontario) Motor Vehicle Accident Claims Fund (OIC A96-001515, February 28, 1997) and Andreeski and Pilot Insurance Company (OIC A96-000714, March 26, 1997). See, more recently, Miller and Allstate Insurance Company of Canada (FSCO P99-00026, June 12, 2000), Reid and Royal & SunAlliance Insurance Company of Canada (FSCO P00-00014, August 1, 2000) and Sunderani and State Farm Mutual Automobile Insurance Company (FSCO A99-000724, August 31, 2000).
3. 3See, for example, the decisions of Miller, Mangat and Sunderani, supra, footnote 2.