Ms. G v. Pilot Insurance Company, 2006 ONFSCDRS 103

Financial Services Commission of Ontario

Commission des services financiers de l’Ontario

Neutral Citation: 2006 ONFSCDRS 103

FSCO A04-000446

BETWEEN:

Ms. G

Applicant

and

PILOT INSURANCE COMPANY

Insurer

DECISION ON EXPENSES AND A SPECIAL AWARD

Before:

Lawrence Blackman

Heard:

Hearing on December 13, 2005 at the Offices of the Financial Services Commission of Ontario in Toronto.

Written submissions were received by January 31, 2006.

Appearances:

M. Steven Rastin for Ms. G

William G. Scott for Pilot Insurance Company

Ms. G was injured in a motor vehicle accident on August 20, 1998. In my December 22, 2005 decision, I reserved on the issues of expenses and a special award, while issuing the following orders regarding Ms. G's motion for interim statutory accident benefits under the Schedule¹ (the order then being subject to the non-catastrophic monetary limits of $100,000):

Pilot shall pay Ms. G the sum of $31,738, representing fourteen months of benefits (November 1, 2004 to December 31, 2005 inclusive) at the monthly rate of $2,267, as opined as reasonable and necessary in the medical/rehabilitation Work Able DAC report dated March 11, 2005.
Pilot shall further pay Ms. G ongoing from January 2006, the monthly sum of $2,267 until:

(a) in accordance with the procedure set out in section 38 of the Schedule, a medical/rehabilitation DAC opines that a different amount, or no amount is reasonable or necessary; or,

(b) until such further or other order of an arbitrator.

interest is payable from March 11, 2005 on the November 2004 to March 2005 monthly amounts of $2,267. Interest is payable thereafter on each monthly amount of $2,267, from the first of each respective month. Interest is payable on all overdue amounts at the rate of two per cent per month, compounded monthly.

By decision dated March 16, 2006, I determined that Ms. G had suffered a catastrophic impairment as defined by paragraph 2(1)(f) of the Schedule.

The further issues now to be determined are:

Is either party entitled to its legal expenses incurred in respect of the December 13, 2005 interim motion, and if so, what is the appropriate quantum of those expenses?
Is Ms. G entitled to a special award pursuant to subsection 282(10) of the Insurance Act R.S.O. 1990, c.I.8., as amended ('Insurance Act") and if so, what is the quantum of such an award?

Ms. G is entitled to her legal expenses of the December 13, 2005 interim motion, fixed in the amount of $7,750.40, including GST.
Ms. G is entitled to a Special Award, fixed in the amount of $18,426.62.

Expenses

Stay

Pilot Insurance Company ("Pilot") submits that any expense order should be stayed pending the resolution of the appeal of my December 22, 2005 decision.

Subsection 283(6) of the Insurance Act states that an appeal does not stay an arbitrator's order, unless the Director decides otherwise. Hence, in Canadian Home Assurance Company and Scavuzzo (OIC P-000626, May 18, 1992) Director's Delegate Richardson concluded that:

. . . from the wording of section 283(6) of the Insurance Act, and from the fact that the provision departs from the situation normally applicable pending the disposition of an appeal, that the decision of an Arbitrator is intended to be binding pending an appeal. It is also clear that the person seeking a stay bears the burden of establishing why the situation should be otherwise.

In following the Scavuzzo decision, Director Sachs stated in Kahkesh and Lloyd's Non-Marine Underwriters (OIC P-000378, August 19, 1992) that the motion for a stay must rely on more than the submission that the Arbitrator's decision was wrong. In this case, Pilot seeks a stay solely on the ground that there is an appeal pending. Given the above case law, if I do have jurisdiction to stay my own order, I decline to do so.

Entitlement

Subsection 12(2) of Regulation 664, Amended to O. Reg. 548/05, reiterated in Rule 75.2 of the Dispute Resolution Practice Code (Fourth Edition, Updated - October 2003) (the "Code"), sets out the relevant criteria in determining arbitration expenses. I will address each criterion.

1. Each party's degree of success in the outcome of the proceeding

Ms. G was successful in her interim motion.

2. Any written offers to settle properly made

There were no offers to settle exchanged by the parties.

3. Whether novel issues were raised in the proceeding

The parties agree that this motion raised novel issues. Pilot submits that it is a novel issue whether "nanny services" are potentially recoverable under the Schedule as a section 15 rehabilitation expense. Ms. G submits that it is a novel issue whether such services constitute a Section 13 weekly benefit.

What I found novel was the Insurer's implicit position that it was not bound by a "positive" opinion of a Designated Assessment Centre ("DAC") under paragraph 38(14)(a) of the Schedule, notwithstanding that to date the legislative imperative was thought to mandate that upon such an opinion being rendered, it was not the insured who must wait for an order for relief pending dispute resolution; rather, it was the insurer who must await, or seek, relief from payment.

Pilot argues that paying benefits in light of the "positive" DAC would be seen as an admission that such benefits were properly claimed as section 15 rehabilitation expenses and that it "would thereafter be estopped from arguing that such a benefit was not payable under section 15." No case law was provided in support of this argument, an argument which seems rather extraordinary given the specific safeguards of subsection 38(14) which explicitly states that such payments are subject "to the determination of a dispute relating to the expenses in accordance with sections 279 to 283 of the Insurance Act'"

4. 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

Both counsel were professional, prepared and thorough. Both counsel cooperated to stream line the motion and ensure that it proceeded in an efficient manner.

5. Whether any aspect of the proceeding was improper, vexatious or unnecessary

I find that Pilot's continued refusal to abide by the unambiguous provisions of subsection 38(14) of the Schedule necessitated the Applicant bringing this motion. Gonthier J., in Smith v. Co-operators General Insurance Co., 2002 SCC 30, [2002] 2 S.C.R. 129, states "that one of the main objectives of insurance law is consumer protection, particularly in the field of automobile." One of the cornerstones of that consumer protection in the Schedule is the "pay now, dispute later" provision. It was for Pilot to have paid the benefit and for Pilot to then have sought, in this existing proceeding, adjudicative relief from the statutory mandate.

Given the Applicant's success in this motion, a motion necessitated by Pilot's refusal to comply with subsection 38(14) of the Schedule, I find that Ms. G is entitled to her legal expenses of the December 13, 2005 interim motion.

Quantum

The Applicant's Bill of Costs totals $13,520.06. The fees claimed are $12,466.57, consisting of 23.5 hours for senior counsel at an hourly rate of $150 (plus four hours travelling time at $43 an hour), 44.9 hours at $110 an hour for junior counsel and 63.1 hours at $50 an hour for a law clerk. Disbursements are set at $1,053.49.

Pilot submits that the counsel and the law clerk fee should be assessed at $2,355.70. No submissions are provided regarding the claimed disbursements.

Hourly Rate

Pilot relies on Hernandez and Zurich Insurance Company (FSCO A96-001123, December 8, 2000) for the argument that there is no discretion under Regulation 664 for the Commission to award an amount higher than that allowed under the Legal Aid Services Act, 1998, O. Reg. 107/99.

It is correct that subsection 2(2) of the Schedule to Regulation 664 once restricted expenses to the amount allowed under the Legal Aid Services Act, 1998. However, O. Reg. 464/96 revoked subsection 2(2), and substituted in lieu the following under subsection 3(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.

I agree with Arbitrator Evans in Clipperton and Zurich North America Canada (FSCO A97-001771, June 25, 2002) that:

. . . the minimal Legal Aid hourly rate should be more the exception rather than the norm when setting the rate for an experienced counsel acting for an insured.

In this particular case, I am persuaded that the complexity of the issues, combined with Mr. Rastin's experience, advocacy, thorough preparation and his contribution to making the most efficient use of the actual motion hearing, entitle him to the maximum allowable hourly rate of $150.

The two junior counsel with Mr. Rastin's office, Ms. Chun and Ms. Wong, have experience which put them into the Tier Two Legal Aid experience rating, which allows $83.10 an hour. Junior counsel did most of the research for the December 13, 2005 motion. On the basis of the quality and helpfulness of written submissions and case law provided, I am persuaded that a higher hourly rate of $110 is warranted.

Ms. Tracy Romanowski, a law clerk, attended with Mr. Rastin throughout these proceedings. I found her to be a very capable professional. Pilot submits that Ms. Romanowski is restricted, as a law clerk, to the $23 an hour allowed under Schedule 3, Item 1, of O. Reg. 107/99, as amended, made under the Legal Aid Services Act, 1998.

I note, again, that Rule 78 of the Code provides that the hourly rate for legal fees (the provision is not restricted to counsel fees) established under the Legal Aid Services Act, 1998 is subject to increase to an hourly rate of up to $150 an hour, where an adjudicator is satisfied that a higher amount is warranted. The $23 an hour for a law clerk is explicitly designated in the Legal Aid Services Act, 1998 as a fee "for lawyers provided services of law clerks, articled students and investigators."

Higher hourly rates for law clerks were awarded in Amoa-Williams and Allstate Insurance Company of Canada (FSCO A97-001864, October 24, 2001) by Arbitrator Sapin ($45 an hour) and in Clipperton and Zurich North America Canada (FSCO A97-001771, June 25, 2002) by Arbitrator Evans ($35 an hour). I am persuaded that these arbitrators had authority to make the orders they did. I am further persuaded that the services of Ms. Romanowski justify the $50 an hour claimed.

Number of Hours

Mr. Rastin claims twenty hours in addition to 3.5 hours of attendance at the arbitration hearing. He also claims 44.9 hours of preparation time by junior counsel, and 55.6 hours preparation by Ms. Romanowski (in addition to her 3.5 hours attending the motion). Four hours traveling time to the hearing is also claimed for both Mr. Rastin and Ms. Romanowski.

Pilot submits that preparation time by counsel for the motion should be limited to eight hours, in addition to four hours of attendance. The Insurer refers to Schedule 2 of Ontario Regulation 107/99, enacted under the Legal Aid Services Act, 1998, which limits to eight hours the total allowable hours for professional services for all preparation prior to the first hearing day before an administrative board or tribunal. Pilot further notes arbitral case law indicating that the time allowed under the Regulation can be used as a guide. Pilot does not, however, dispute the 59.1 hours claimed for Ms. Romanowski.

Henri and Allstate Insurance Company of Canada (OIC A-007954, August 8, 1997) held that in fixing arbitration expenses, a line-by-line assessment of expenses is not appropriate; rather the arbitrator should make a global assessment of reasonable expenses. Commission decisions have generally noted a range of one to four hours for hearing preparation to one hour of hearing attendance.

However, Arbitrator Palmer, in Argirovski and Allstate Insurance Company of Canada (FSCO A98-000816, December 7, 2000), held that:

The ratio of time spent in preparation to time spent in hearing has been used from time to time as a yardstick to determine the reasonableness of fees claimed. However, I find that this is a crude measure that does not take account of the fact that, in many cases, additional time spent in preparation is reflected in decreased time spent in a formal arbitration hearing. Efficient use of the Commission's time for hearings should be encouraged, not discouraged by setting inflexible ratios for preparation to hearing time.

Ms. G claims 3.5 hours of attendance at the December 13, 2005 motion by Mr. Rastin and Ms. Romanowski. Obviously, Mr. Rastin's 3.5 hours of attendance (at $150 an hour plus GST for a total of $561.75) is justified.

Without determining whether Ms. Romanowski's attendance was justified during the catastrophic impairment hearing, I find the December 2005 motion quite different. No oral evidence was called at the latter; hence, there was a questionable need for a note taker. This was not a situation of extensive documentation; only four exhibits were filed at the motion, which was arranged essentially to allow oral submissions elaborating upon the written materials filed. Although it may have been somewhat helpful to Mr. Rastin to have Ms. Romanowski present, I am not persuaded that Pilot should be required to pay for her attendance.

Regarding traveling time for counsel and his law clerk, as I am not persuaded as to the justification of Ms. Romanowski's attendance at the motion, I am not persuaded as to the justification of her traveling to Toronto. As for Mr. Rastin, having had the first six hearing days in Barrie, in hindsight, it may have been that the parties were seeking to accommodate myself by holding the motion in Toronto. I appreciate this concern. However, an applicant is entitled to have the hearing in or near his or her place of residence in Ontario, notwithstanding where the arbitrator may abide. Hence, the further expense hearing regarding my decision on catastrophic impairment will be held in Barrie. I decline to allow the traveling expense claim.

The Applicant's Bill of Costs includes post-hearing submissions which I requested. I allow the claimed 4.5 hours of Mr. Rastin ($722.25 including GST) and 7.3 hours ($390.55 including GST) for Ms. Romanowski. I exclude the 0.1 hour claimed for Ms. Romanowski that pertains to reviewing the Insurer's Notice of Appeal, as same is not relevant to this specific proceeding.

Concerning preparation time, Ms. G claims 107.1 hours, i.e. 16 hours for Mr. Rastin, 42.9 hours for junior counsel and 48.2 hours for Ms. Romanowski. This seems somewhat excessive for a 3.5 hour motion, no matter how efficient counsel may have been in shortening the motion itself. Pilot, however, in accepting the 59.1 hours for Ms. Romanowski (which, subtracting 10.9 hours for hearing attendance and post-hearing work, leaves 48.2 hours of preparation time), in addition to 8 hours for Mr. Rastin, appears to accept 56.2 hours preparation time for this motion.

There are difficulties with the time claimed for Ms. Romanowski. Considerable time is claimed (back to November 2004) for a period prior to the commencement of the motion, the Applicant's legal research by the junior lawyers beginning only in November 2005. I am not prepared to do a line-by-line analysis of Ms. Romanowski's hours as to which hours pertain to this motion and which hours pertain to dealing with Pilot's adjusting of this file.

In this case, given:

Pilot's failure to comply with the "pay now, dispute later" provisions of the Schedule required this motion to be brought;

the numerous legal issues raised by Pilot which needed to be addressed, including benefits election, alleged double recovery, causation, DAC jurisdiction and the interplay of sections 13 and 15;

the obvious thorough research and preparation done by the Applicant, including extensive written submissions and case briefs;

the Applicant's contribution to the ultimately extremely efficient use of the motion itself;

the importance to the Applicant of the result of whether nanny services were payable on an interim basis;

the Applicant's success in the motion;

as stated in Soobrian and Belair Insurance Company Inc. (FSCO A04-000422, February 7, 2006), that the Commission's mandate to encourage more expeditious, less lengthy and more cost effective proceedings should not penalize those parties who abide by the rules and/or seek relief from the improper conduct of the other party, by forcing such parties to bear an inordinate part of their own expenses which are found to be reasonable;

Pilot's implicit concession that 56.2 hours of preparation for the motion by someone was reasonable; and, that the usual preparation time to hearing time ratio would not, in this case, properly reflect the additional time spent in preparation which resulted in decreased time being required for the hearing of the motion itself.

I find 40 hours of preparation for this motion (which could have run a full day or more, but for the efforts of counsel) to be justified, divided between the remaining hours claimed for Mr. Rastin from October 2005, when initial preparation for this motion appears to have begun (i.e. 10.5 hours at $150 an hour plus GST, for a total of $1,685.25) and the junior counsel (29.5 hours at $110 an hour plus GST, for a total of $3,472.15).

The disbursements are not disputed, and I allow same other than for traveling expense from Barrie to Toronto, which leaves $918.45, inclusive of GST.

To summarize, I find the following expenses justified:

Mr. Rastin

Preparation subsequent to September 2005

$1,685.25

Attendance at motion

$ 561.75

Post-Hearing Submissions

$ 722.25

Junior Counsel re Preparation for Motion

$3,472.15

Ms. Romanowski re Post-Hearing Submissions

$ 390.55

Disbursements

$ 918.45

Total (including GST)

$7,750.40

Special Award

Ms. G's submissions

Ms. G submits that she is entitled to a special award, pursuant to subsection 282(10) of the Insurance Act. This provision provides that:

If the arbitrator finds that an insurer has unreasonably withheld or delayed payments, the arbitrator, in addition to awarding the benefits and interest to which an insured person is entitled under the Statutory Accident Benefits Schedule, shall award a lump sum of up to 50 per cent of the amount to which the person was entitled at the time of the award together with interest on all amounts then owing to the insured (including unpaid interest) at the rate of 2 per cent per month, compounded monthly, from the time the benefits first became payable under the Schedule.

Ms. G submits that Pilot has unreasonably withheld or delayed payment of nanny care expenses based on the following arguments:

the circumstances regarding the DAC assessment in question, i.e. that Pilot delayed setting up a DAC assessment (Ms. G making five requests for the assessment subsequent to submitting the treatment plan for nanny services on November 2, 2004); that Pilot insisted on an unnecessary form being completed; that Pilot approved a faulty DAC assessment plan which included a neurological assessment, delaying the assessment for up to two months; and that the DAC report was 13 days late, not being delivered until March 16, 2005. I note that certain of these alleged delays would be attributable to the DAC itself, an independent entity not subject to the control of either party; that Pilot required "intrusive and humiliating [DAC] assessments" and then changed the basis of its denial. That it "initially sought to force [the Applicant] to undergo a DAC assessment in an attempt to bolster its position, and when that strategy failed, it then denied first and looked for any possible rationale to justify its position later;"

that Pilot's reasons for denying benefits were "false and absurd;"

that Pilot filed a second application for mediation regarding nanny services when that issue had already been mediated. No evidence is presented that this, by itself, delayed the payment of benefits, as FSCO simply closed its second mediation file; Pilot's refusal or delay for more than ten months to confirm what portion of the $100,000 non-catastrophic cap remained available for medical and rehabilitation services. Having first requested this information on November 15, 2004, after eight further requests, only on October 3, 2005 was Ms. G provided with a computer payment summary showing $28,154.96 remaining within the non-catastrophic limits; and, Pilot's breach of subsection 38(14) of the Schedule which requires payment of a disputed expense subject to determination of the dispute in accordance with the provisions of the Insurance Act. Ms. G submits that Pilot's failure to comply with the "pay pending dispute resolution" provision merits, by itself a special award.

Ms. G submits that the special award should be at the upper end of the spectrum for the following reasons:

the importance of the withheld benefits; that she had gone without nanny services since the birth of her daughter on April 20, 2004; that her daughter has been exposed to the risk of harm since that time, given her physical impairments in carrying the baby;

that Pilot has failed to comply with important obligations under the Schedule; and, the need for deterrence; that Pilot, while advertising itself to the public as a "safe harbour," misused its power dominance, taking advantage of a vulnerable insured who relied on the Insurer's assistance.

Ms. G submits that the maximum special award available is $21,034.

Pilot's submissions

Pilot argues that a special award is not warranted in the unique circumstances of this case. It formulates the issue in this motion as whether childcare expenses are payable under the Schedule as a section 15 rehabilitation expense, or whether section 13 is the exclusive source of recovery for such services. Pilot submits that this is a novel issue not previously determined in any Commission decision.

Pilot submits that there is no evidence of bad faith on its part. It maintains that it acted, at all times, in good faith towards Ms. G regarding her claim for what it terms rehabilitation expenses. Pilot argues that it did not act unreasonably in light of the unique factual circumstances of this case and the conflicting eligibility requirements of sections 13 and 15 of the Schedule.

Pilot argues the following additional considerations should also be taken into account regarding the quantum of any special award:

the relatively moderate size of the December 22, 2005 award ($31,738 subject, at that point, to the $28,119.85 remaining under the non-catastrophic limits) and the relatively short period the benefits claim was outstanding (less than fourteen months);

the Insurer's right to request a medical/rehabilitation DAC;

there being no evidence that Pilot's delay in communicating the monetary amount left within the non-catastrophic limits was a tactic to avoid payment of the claim;

there being no evidence that the failure to pay the rehabilitation expenses subjected Ms. G's daughter to actual harm or the risk of harm;

Pilot's failure to pay the rehabilitation expense did not deprive Ms. G of actual childcare services, as same were provided by family members who can be paid or otherwise compensated retroactively;

if Pilot had paid the benefit, Ms. G would have argued that was an admission by the Insurer that the expense was payable and Pilot would be estopped from arguing otherwise;

the high rate of interest under section 46 of the Schedule as a mitigating factor;

and, the special award should be proportional both to the unique factual situations of this case and to similar cases.

Pilot submits that the maximum special award payable is $15,957.32 if one looks at the monies left within the $100,000 non-catastrophic medical/rehabilitation cap (i.e. $28,119.85), or $16,498.38 if one looks at all monies payable as of the date of the December 22, 2005 decision. Pilot submits that if a special award is granted, the maximum amount should not be awarded.

Decision Regarding a Special Award

Liberty Mutual Insurance Company and Persofsky et al. (FSCO P00-00041, January 31, 2003) sets out an approach to special awards. I will follow the suggested methodology, modified, as follows:

Determine, with reasons, whether the insurer has unreasonably withheld or delayed payments.

Determining entitlement to a special award is the cardinal requirement of the provision (in accordance with the legislative objective of consumer protection), the balance of the provision merely provides a formula for calculating the maximum award. If the insurer is found to have unreasonably withheld or delayed payments, a special award is mandatory.

Determine the total amount which the insured was entitled at the time of the award, including unpaid interest.
Determine additional interest at 2 per cent per month, compounded monthly from the time benefits first became payable under the Schedule.

This additional interest calculation (mandated by the Insurance Act, not by the Schedule) is applied against both the principal of the benefits owing and the applicable interest under the Schedule (i.e. interest is applied against interest).

Add the total amounts arrived at in Steps 2 and 3.

The total is $36,853.24.

Take 50% of the amount determined in Step 4.

50% is $18,426.62.

Determine, with reasons, what lump sum, up to the maximum determined in Step 5, is appropriate in the circumstances of the case.

1. Has Pilot unreasonably withheld or delayed payments?

I find that Pilot has unreasonably withheld payment of monthly payments of $2,267 for nanny services up to the $28,119.85 available under the non-catastrophic cap which was still in effect as of the date of my December 22, 2005 decision.

As stated in my December 22, 2005 decision, these benefits began to accrue November 1, 2004 and should have been paid by Pilot upon receipt of the Work Able Centres Inc. medical and rehabilitation DAC report dated March 11, 2005.

Work Able concluded that the treatment plan was reasonable and necessary and that a childcare provider, as outlined in the treatment plan, be provided for a six to twelve month duration. Dr. P. Comper of that clinic, in his summary, stated that the provision of this service should be reviewed no later than one year from the date of his February 17, 2005 assessment.

Subsection 268(8) of the Insurance Act states that:

Where the Statutory Accident Benefits Schedule provides that the insurer will pay a particular statutory accident benefit pending resolution of any dispute between the insurer and an insured, the insurer shall pay the benefit until the dispute is resolved.

Subsection 38(14) of the Schedule states that:

if a report from the designated assessment centre states that, in the opinion of the person or persons who conducted the assessment, an expense is reasonable and necessary for the insured person's treatment or rehabilitation, the insurer shall pay for the expense.

I find that it was unreasonable for Pilot, having referred the Applicant to a DAC to assess a treatment plan it initially accepted as a medical/rehabilitation expense, to then fail to abide by the positive DAC opinion.

Pilot was legislatively mandated to pay the benefit pursuant to the DAC opinion. Pilot's option, if it continued to dispute Ms. G's entitlement to the benefits in question, was limited to seeking, through dispute resolution relief from the obligatory effect of the positive DAC opinion.

I find that it was also incumbent on Pilot, in accordance with Dr. Comper's specific caveat, to arrange a further DAC assessment to review Ms. G's needs at some time prior to a year from the date of the report.

Pilot did not pay the benefit in accordance with these provisions. Pilot gave a number of reasons for not doing so, from the reasonableness and the necessity of the treatment, to causation, to (on further reflection by Pilot) the DAC not having the jurisdiction to conduct the assessment which Pilot had referred to its attention. Each of those reasons was ultimately found not to be justified.

However, that is not the point in this discussion. The fundamental point is that in applying its own self-help remedy of not paying the benefits opined by the DAC to be reasonable and necessary, Pilot failed to respect the Schedule. That was unreasonable.

2. What is the amount to which Ms. G was entitled at the time of the award, including unpaid interest?

In my December 22, 2005 decision, I awarded the Applicant $31,738, representing fourteen months of benefits (November 1, 2004 to December 31, 2005 inclusive) at the monthly rate of $2,267, as opined as reasonable and necessary in the March 11, 2005 medical/rehabilitation Work Able DAC report. I further ordered payment of the monthly sum of $2,267 until a contrary opinion of a DAC or until any further or other order of an arbitrator.

However, I stated in my decision that this sum was then subject to the non-catastrophic monetary limits of $100,000. That sum was $28,154.96. Hence, I find incorrect the Applicant's submissions that the amount outstanding as of the date of my decision was $31,738.38.

Pilot, with the assistance of Mr. D.M. Edwards of Soberman LLP, calculated interest at $4,876.90. The Applicant's submissions regarding interest, being based on an incorrect principal amount, are not helpful. I calculate unpaid interest under the Schedule to the date of my December 22, 2005 award as $4,163.02. Hence, I find that the total amount to which Ms. G was entitled at the time of the award was $32,282.87.

3. What is the additional interest at 2 per cent per month, compounded monthly from the time benefits first became payable under the Schedule?

Ms. G's interest calculations are based on the wrong principal amount. The Insurer overlooked providing this further interest calculation. I calculate the additional interest under subsection 282(10) of the Insurance Act up to my December 22, 2005 award as $4,570.37.

4. Add the total amounts arrived at in Steps 2 and 3.

The total is $36,853.24.

5. Take 50% of the amount determined in Step 4.

50% is $18,426.62.

6. What lump sum, up to the maximum determined in Step 5, is appropriate in the circumstances of the case?

Persofsky and other cases provide various criteria as possibly relevant in determining the appropriate special award payable. I find the following considerations applicable:

The blameworthiness of the insurer's conduct

Pilot, as it submitted, had the right to require Ms. G's attendance at a medical/rehabilitation DAC. Having exercised that right, Pilot was obliged to adhere to the mandatory "pay now, dispute later" consequences of a positive DAC opinion. In not meeting it obligations, it failed to comply with a fundamental, long-standing insurer duty under the Schedule, a responsibility which is one of the foundations of the consumer protection legislation of the DAC system.

The amount of the outstanding benefits and the duration they were outstanding

The monetary value of the delayed benefits was significant. The delay was significant. The benefits immediately payable as of the March 11, 2005 medical/rehabilitation DAC report were $11,335. The benefits accrued over the next nine months at the monthly rate of $2,267 exhausting the $28,119.85 remaining under the non-catastrophic limits by the time of my December 22, 2005 decision.

Whether there are other factors that increase the gravity of the insurer's conduct

Section 32 of the Schedule, amongst other things, requires the insurer to promptly provide its insured with a written explanation of the benefits available under the Schedule and information to assist one in applying for benefits. Such information and assistance would include confirmation as to the benefits still available under the non-catastrophic limits.

One reason given by Pilot (starting on November 9, 2004, and continuing as late as November 3, 2005) for denying the nanny care claim, was that Ms. G had not sustained a catastrophic impairment. As stated in my December 22, 2005 decision, the apparent significance of this explanation was that Ms. G had reached the $100,000 monetary limit for medical, rehabilitation and attendant care expenses and, hence, no further monies were available.

It took Pilot eleven months and repeated requests from its own insured before it advised that $28,119.85 remained under the non-catastrophic limits. That is not prompt. On its face, without further explanation, it is not reasonable.

Pilot submits that there is no evidence that its delay in communicating was a tactic to avoid payment of the claim. No one was called to testify on behalf of Pilot. No explanation was given for an eleven month delay in providing routinely requested information, more likely than not with modern technology, available at the press of a computer key. In the absence of such evidence, gross adjusting negligence or incompetence are equally plausible explanations. However, the case law is clear. A special award does not require malicious intent. The criterion is unreasonableness. It is unreasonable to explicitly or implicitly give a false explanation for denying benefits, and it is further unreasonable to delay in providing clarifying information. A further argument provided for Pilot's refusal to pay the benefits in question was that had it paid the benefit, Ms. G would argue that was an admission by the Insurer that the expense was payable and Pilot would be estopped from arguing otherwise, notwithstanding the express provisions of the Insurance Act and the Schedule. No case law was provided in support of what appears to be an assertion without merit.

The vulnerability of the insured person

Ms. G is a vulnerable person. She has significant physical injuries. Pilot knows and accepts that she has significant injuries. I found Ms. G to be catastrophically impaired. A component of this impairment was psychological. My March 16, 2006 decision noted, amongst other concerns, Ms. G's depression, anxiety, hopelessness, guilt and feelings of estrangement. Ms. G had a young child. The DAC opined that she needed assistance for that child. That assistance was not forthcoming.

The harm or potential harm directed at the insured person and/or other individuals

Pilot submits that there is no evidence that Ms. G's daughter was subjected to actual harm or the risk of harm. I have no evidence of actual harm having occurred. However, Dr. Comper of the DAC clinic clearly states in his report that the nanny services were "reasonable and necessary to ensure the safe care of the child." His report was clear that he was not referring to Ms. G's physical restrictions.

In addition, Dr. Comper testified that the assistance was reasonable on the basis of how Ms. G's mood was affecting her ability to interact "appropriately" with the energy and volatility of a two-year old, "where there was some concern on her part expressed for acting out towards the child." Dr. Comper's diplomatic choice of words does not justify Pilot turning a blind eye to a considered expert neutral opinion as to the potential harm to the young child. Although I am not persuaded that the criterion of harm is limited exclusively to harm to the Applicant, based on the evidence before me, I find that had the doctor's concerns come to pass and there had been harm to the child, it is more likely than not there would have been ensuing psychological harm to the Applicant.

Whether there are mitigating factors such as the failure of the insured to meet their obligations, which delayed or made more difficult the processing of the claim

Pilot submits that there is a mitigating factor in that the Applicant was able to look to her relatives to assist in the care of her daughter. It may be that a special award should be greater if an applicant has no alternative resources and does without treatment or rehabilitation, to his or her detriment. It is questionable that a special award should be reduced because an applicant is able to draw on other interim resources to obtain what an insurer has unreasonably failed to provide.

The advantage wrongfully gained by the insurer from its misconduct and whether there is a need for deterrence

The advantage to an insurer in delaying benefits, is delaying benefits. One takes judicial notice that a significant portion of an insurer's profit is from the investment of the significant monies to which it is entrusted. If money is the advantage to be gained, the imposition of a monetary award can be an effective deterrent.

In this case, based on the evidence and the submissions before me, I have little, if any, confidence that Pilot, if it even now had the opportunity to go back in time to when the DAC report was released, would make any meaningful change in its adjusting approach to the issue of "pay now, dispute later." Accordingly, I am persuaded that a significant award is called for to deter, in the future, any similar disrespect for the Schedule.

Whether any other penalties or sanctions have been or likely will be imposed on the insurer due to its misconduct, such as punitive, exemplary or aggravated damages, or investigation or prosecution by the Superintendent

Pilot submits that the high rate of interest under section 46 of the Schedule is a mitigating factor. The Ontario Court of Appeal in Attavar v. Allstate Insurance Company of Canada, 63 O.R. (3d) 1999, in addressing the question of interest under The Statutory Accident Benefits Schedule — Accidents after December 31, 1993 and before November 1, 1996, upheld the principle that notwithstanding that the applicable interest rate was above the bank rate, the provision was not punitive but, rather, was compensatory and meant to encourage insurers to pay accident benefits promptly.

I am not persuaded that the mandatory rate of interest under the Schedule is a mitigating factor. As others have stated, interest is a remedy that applies to delay, not to unreasonable delay. I have no evidence of other penalty or sanction already imposed or which is being pursued against this Insurer in this case.

The special award should be proportional both to the unique factual situations of this case and to similar cases

In Michalski and Wawanesa Mutual Insurance Company (FSCO A03-001363, December 13, 2005), Arbitrator Alves held that an insurer's failure to comply with important obligations under the Schedule warrant a special award at the high end of the scale. She notes the decision of Henderson and Lombard General Insurance Company of Canada (FSCO A97-001019, March 31, 2000) (upheld on appeal) where Arbitrator Sampliner made a special award of $65,000, which was approximately 40% on a percentage basis, where the insurer failed, in amongst other things, in its duty to evaluate and respond to claims.

There is case law² to the effect that the maximum special award of 50% should be reserved for cases of flagrant misconduct or bad faith. I think this is a case of flagrant misconduct in the face of an explicit statutory duty. However, it must be remembered that a special award is ultimately not a percentage, but an absolute number in dollars and cents. Fundamentally, what is pertinent is not the percentage; it is monetary amount.

Considering the unique factors in this specific case, and that substantive, if not far larger sums have been awarded in cases of breach of insurer duty, I am persuaded that a special award of $18,426.62 is warranted, which represents the maximum award available herein.

June 21, 2006

Lawrence Blackman Arbitrator

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