Neutral Citation: 2004 ONFSCDRS 68 FSCO A02-000311

BETWEEN:

VINH THANH DU Applicant

and

ALLSTATE INSURANCE COMPANY OF CANADA Insurer

DECISION ON EXPENSES

Before: Beth Allen

Heard: January 9, 2004, by teleconference arranged by the Financial Services Commission of Ontario in Toronto.

Appearances: Christopher A. Caston for Mr. Du Ian D. Kirby for Allstate Insurance Company of Canada

The Applicant, Vinh Thanh Du, was injured in a motor vehicle accident on March 7, 2001. He applied for accident benefits under the Schedule¹ Allstate Insurance Company of Canada ("Allstate") denied his claim for income replacement benefits.

The parties were unable to resolve their disputes through mediation, and the Applicant applied for arbitration at the Financial Services Commission of Ontario under the Insurance Act, R.S.O. 1990, c.I.8, as amended. An arbitration hearing was held in January 2003 at which the Applicant's claims for income replacement benefits and a special award were dismissed.

The parties now seek a decision as to their entitlement to, and an assessment of, the amount of their respective arbitration expenses under subsection 282(11) of the Insurance Act.

The issues in dispute in this hearing are:

Is the Applicant liable to pay Allstate its arbitration expenses pursuant to subsection 282(11) of the Insurance Act?
Is Allstate liable to pay the Applicant its arbitration expenses pursuant to subsection 282(11) of the Insurance Act?

The Applicant is liable to pay Allstate's arbitration expenses which I fix in the amount of $1,000.
Allstate is not liable to pay the Applicant's arbitration expenses.

Expenses:

Entitlement

Subsection 282(11) of the Insurance Act gives arbitrators the discretion to award expenses to parties to an arbitration hearing. The parties bring their claims for expenses under Regulation 664² of the Insurance Act. Regulation 664 was amended by Regulation 275/03 effective July 19, 2003.

The predecessor version of Regulation 664 required consideration of the following criteria: (a) each party's degree of success in the outcome of the proceeding; (b) conduct of the insurer or insured person that tended to shorten or facilitate the proceeding or that tended to prolong, obstruct or hinder the proceeding... ; (c) 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; (d) the degree of complexity, novelty or significance of the factual or legal issues raised in the proceeding; (e) whether the insurer or the insured made any written offers to settle after the conclusion of mediation and before the conclusion of the arbitration; and (f) any other matter related to the proceeding that the adjudicator considers relevant to the issue of whether an award of expenses is justified.

The new version of Regulation 664 requires an arbitrator to apply the following criteria: (a) each party's degree of success in the outcome of the proceeding; (b) any written offers to settle made in accordance with Rule 76; (c) whether novel issues are raised in the proceeding; (d) the conduct of a party or a party's representative that tended to prolong, obstruct or hinder the proceeding, including a failure to comply with undertakings and orders; and (e) whether any aspect of the proceeding was improper, vexatious or unnecessary.

These criteria which are set out in section 12 of Regulation 664, are repeated in Rules 75 and 76 of the amended Dispute Resolution Practice Code.³ Rule 76.1 of the Code provides that an adjudicator will consider an offer to settle in connection with an award of expenses provided that it was made in writing, was served on the other parties and contains: the full terms of the Offer to Settle; the date when the offer was served and the time period during which it remained open for acceptance.

The major difference between the predecessor version of Regulation 664 and the current version is the existence of the last criterion or the basket clause in the predecessor version. In the circumstances of the case before me, I find the only relevant criteria are (a), (b) and (d), and for this reason, I need not consider the issue of the temporal effect of the legislative change on the parties' expense claims.

I apply criterion (a) of Rule 75 in Allstate's favour since Allstate was clearly successful in the outcome of the hearing. In arriving at my decision, I took into consideration that substantial pre-accident medical documentation by several of the Applicant's pre-accident health practitioners reveal that the Applicant was not forthcoming in the hearing about his pre-accident health.

Regarding criterion (b), Allstate filed a formal Offer to Settle with the Commission dated October 11, 2002 under Rule 76 to settle the issues in dispute, which the Applicant did not accept. As it turns out, the offer was more generous to the Applicant than the outcome of the hearing and, as such, I also decide criterion (b) in Allstate's favour.

Both parties agree with respect to criterion (c), that the issues in dispute were not novel.

Concerning the issue of delay under criterion (d), Allstate pointed out that the conduct of the Applicant's case caused a delay in the proceedings. The hearing was scheduled for January 20, 21 and 22, 2003. The Applicant's previous counsel, Ms. Pamela Blaikie, indicated on Monday, January 20, the first day of the hearing, that she intended to call Dr. Ogilvie-Harris on Tuesday. On Tuesday, the Applicant's counsel stated that Dr. Ogilvie-Harris had a scheduling conflict and was not available to testify because he was conducting a medical assessment that day. Dr. Ogilvie-Harris was then scheduled to appear, and did appear to testify, on Friday, January 24, 2003. The Applicant finished his case by about 2 p.m. on Tuesday and the proceeding, up to the participation of Dr. Ogilvie-Harris, lasted until the early afternoon on Wednesday. I find there were hours of delay as a result of Dr. Ogilvie-Harris not attending as scheduled and a necessity for the parties and the arbitrator to adjust their own schedules for the unexpected attendance on Friday. Furthermore, I find that the explanation for Dr. Ogilvie-Harris's non-attendance is not a reasonable excuse for delay and cannot exempt the Applicant from unfavourable consideration on the expense issue. I therefore find that the conduct of the Applicant's case unreasonably delayed and prolonged the proceedings

I do not find that criterion (e) applies to this case. Although the Applicant was not successful, no part of his case was improper, vexatious or unnecessary.

The Applicant filed a Bill of Expenses recording total legal fees of $4,960.38, including G.S.T. and total disbursements of $13,671.56 including GST. I point out that Allstate's counsel submitted, and I agree, that some $5,671 of this amount are either expenses for medical legal reports, more appropriately the subject matter of section 24 claims, or they are associated with the Applicant's previous accident.

In any event, an application of the Rules 75 and 76 criteria has led to an unfavourable result for the Applicant. Pursuant to subsection 282(11) of the Insurance Act, I therefore deny the Applicant his arbitration expenses. I also order the Applicant to pay a portion of Allstate's arbitration expenses as determined below.

Quantum

Allstate filed a Bill of Expenses recording legal fees in the amount of $7,113.48 including G.S.T. The Applicant's counsel did not dispute the hourly rate of $83.75 charged by Allstate's counsel for his services, or the $67.00 per hour and $40.00 per hour rates charged respectively for the services of Allstate's counsel's associate and law clerk. Nor does the Applicant's counsel contest the 1 to 1.5 ratio between preparation time and hearing attendance.

The Applicant's counsel submitted, however, that he has some difficulty with Allstate's block fee approach to billing because the bill for legal fees is not sufficiently particular as to distinguish amongst the services and tasks undertaken by Allstate's principal counsel, his associate and law clerk.

Allstate's counsel responded that his associate, who is billed at a lower rate, performed the greater part of the tasks at the front end of the arbitration file. Allstate's counsel submitted that after he does a brief scan of the issues, his associate handles the file. He explained that his firm has a practice of pushing front-end work like the preparation of the documentation in the file and the witness list to the less skilled personnel. Allstate's counsel further submitted that he would interview witnesses and prepare for and attend the pre-hearing discussion and arbitration hearing. He explained that the law clerk prepares the arbitration briefs and he bills for this work in accordance with the law clerk rate.

Allstate's counsel billed for total disbursements of $1,532.71, including G.S.T. The Applicant's counsel stated that he has no dispute with the amount of the disbursements.

Although Allstate's counsel might have provided a somewhat more detailed breakdown of the bill for legal services, I find the bill was otherwise reasonable.

Taking into consideration that I denied the Applicant his legal expenses, I order the Applicant to pay a total fixed amount of $1,000 towards Allstate's fees and disbursements.

May 6, 2004

Beth Allen Arbitrator

Date

ARBITRATION ORDER