Jozsef Szabo v. CAA Insurance Company (Ontario), 2004 ONFSCDRS 98

Financial Services Commission of Ontario

Commission des services financiers de l’Ontario

Neutral Citation: 2004 ONFSCDRS 98 Appeal: P03-00015 OFFICE OF THE DIRECTOR OF ARBITRATIONS

JOZSEF SZABO Appellant

and

CAA INSURANCE COMPANY (ONTARIO) Respondent

Before: Nancy Makepeace

Representatives: Chris Nicolis for Mr. Szabo Jonathan S.D. Wakelin for CAA

Hearing Date: Written submissions completed on June 11, 2004

EXPENSES ORDER

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

1. The parties will bear their own appeal expenses.

June 21, 2004

Nancy Makepeace Director’s Delegate

Date

REASONS FOR DECISION

I. NATURE OF THE APPEAL

On March 31, 2004, I dismissed Mr. Szabo’s appeal from the Arbitrator’s decision, dated March 14, 2003. The Arbitrator found that Mr. Szabo was precluded from receiving income replacement benefits because he wilfully misrepresented material facts with respect to his application for accident benefits. Mr. Szabo told CAA that at the time of the accident he was unemployed and receiving workplace insurance benefits. In fact, he was working. CAA had not paid any benefits by the time Mr. Szabo corrected this misrepresentation, and refused to do so thereafter, relying on s. 48 of the SABS–1996.¹

Both parties claim their appeal expenses. Mr. Szabo seeks costs of $9,004.33, and CAA asks for its costs of $8,286.70. For the following reasons, I do not find it appropriate to make an expenses award in this case.

II. ANALYSIS

Section 282(11) of the Insurance Act gives adjudicators discretion to award expenses to either party “according to the criteria established in the regulations.” On October 1, 2003, six days before the appeal hearing, Ontario Regulation 275/03 amended the expenses criteria in Ontario Regulation 664. Director Draper summarized the changes in Howden and Pembridge Insurance Company (Pafco Ins. Co.), (FSCO P02-00031, May 17, 2004):

The parties agree that the new criteria are more restrictive. In particular, the list is now exhaustive, requiring the adjudicator to consider only the criteria listed in paragraphs 1 - 5. There is no longer a broad, “any other matter” criterion, as in paragraph 6 of the old subsection.

The Howden appeal was heard in July 2003, before the new criteria came into effect, and the appeal decision was released in November 2003, two months after the amendment. Ms. Howden submitted that her expenses claim was governed by the pre-amendment version of the regulation. Director Draper disagreed. He relied on the reasoning of the Ontario Court of Appeal in CBC Pension Plan, which held that the January 1, 2002 changes to the costs provisions under the Rules of Civil Procedure were procedural, and therefore applied retrospectively, despite the absence of any specific language to that effect in the amending provisions.² Director Draper could find no basis for adopting a different analysis in respect of the new FSCO expenses provisions. He concluded the changes were procedural, and therefore had retrospective effect.

Because Mr. Szabo’s Notice of Appeal was filed in April 2003, six months before the changes, and the parties filed their written appeal submissions in July and August, I gave the parties an opportunity to comment on Howden, which was issued after they filed their initial submissions on appeal expenses.

The parties agree that the new regulation applies to their expenses dispute.

On behalf of Mr. Szabo, Mr. Nicolis submits that the relevant criteria are each party’s degree of success, and whether novel issues were raised. Mr. Szabo’s appeal was unsuccessful, but he submits he raised a novel issue of general importance – the meaning of the phrase “terminate employment” in s. 48.

Mr. Wakelin, on behalf of CAA, disagrees that the issue was complex or novel. He argues it was of “routine complexity,” and had been dealt with previously in Jimcaale and TTC Insurance Company Limited, (FSCO A00-001311, February 27, 2002). He also relies on two other criteria – any conduct that obstructs or prolongs the hearing, and whether any aspect of the proceeding was improper, vexatious or unnecessary. Further, the Insurer asks me to consider the unrecoverable wasted costs incurred by CAA in adjusting Mr. Szabo’s “groundless NEB claim.”³

In CAA’s view, Mr. Szabo’s counsel prolonged the hearing by raising a new argument without notice at the appeal hearing: Mr. Szabo argued that his corrected application for accident benefits should be treated as a new application (this time for IRBs, rather than NEBs). I allowed him to raise the argument, but gave CAA an opportunity to make post-hearing written submissions. Mr. Wakelin argues this was a tactical decision that caused CAA to incur additional costs and delays. CAA also submits that this new argument was manifestly unfounded.

I do not find it appropriate to award Mr. Szabo any portion of his expenses. His appeal failed, and his counsel’s introduction of a new argument at the appeal hearing prolonged the appeal. However, he would have been entitled to raise that issue earlier, and the lack of notice was remedied by giving CAA an opportunity to file written submissions after the hearing. I do not accept that the new application argument was “improper, vexatious or unnecessary.” On the contrary, I found it raised a legitimate question about the application of s. 48.

This was the first appeal to consider the application of s. 48 where no benefits had been paid, or where the insured person’s misrepresentation would likely have reduced the amount or duration of benefits received.⁴ Although ultimately I endorsed CAA’s reading of s. 48, the outcome was not obvious, and required consideration of the legislative objective and context of s. 48. The Arbitrator’s reasons were concise, and did not address this point at any length. I find this was a novel issue of general importance, an appeal that deserved to be heard. For this reason, I do not find it appropriate to make an expenses award in CAA’s favour.

Given my finding that neither party is entitled to a costs award, I need not consider CAA’s comment that “it would seem reasonable” to stay the expenses decision pending the outcome of the judicial review application. Absent a stay order from the court, there is no reason not to reach a final disposition of the appeal issues. In any event, whatever the outcome of the judicial review proceeding, I am not satisfied a costs order would be appropriate because, in my view, the appeal raised a legitimate and novel issue of general importance, one that required careful consideration of the regulatory context of s. 48.

June 21, 2004

Nancy Makepeace Director’s Delegate

Date

Footnotes

1. 1The Statutory Accident Benefits Schedule C Accidents on or after November 1, 1996, Ontario Regulation 403/96, as amended.
2. 2Canadian Broadcasting Corp. Pension Plan (Trustee of) v. BF Realty Holdings Ltd., 2002 CanLII 15157 (ON CA), [2002] O.J. No. 4313.
3. 3Appeal decision, p. 7.
4. 4Jimcaale and TTC, an arbitration decision, applied s. 48 in a situation where benefits had been refused, but without any discussion of the phrase “terminate payment.”