Carla Young v. State Farm Mutual Automobile Insurance Company, 2006 ONFSCDRS 129

Financial Services Commission of Ontario

Commission des services financiers de l’Ontario

Neutral Citation: 2006 ONFSCDRS 129

FSCO A05-001665

BETWEEN:

CARLA YOUNG

Applicant

and

STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY

Insurer

DECISION ON EXPENSES

Before:

Jeffrey Rogers

Heard:

By telephone conference call on July 24, 2006.

Appearances:

Janice Zima, solicitor for Ms Young

Chet Wydrzynski, solicitor for State Farm Mutual Automobile Insurance Company

State Farm Mutual Automobile Insurance Company ("State Farm") seeks an order requiring Ms Young to pay its expenses of a motion she brought for an order removing its solicitors from the record, and a motion State Farm brought for an order quashing summonses Ms Young served in support of her motion.

Ms Young shall pay State Farm its expenses of the motions in the amount of $2,500, in any event of the cause.

Carla Young was injured in a motor vehicle accident on September 19, 2001. She applied for and received statutory accident benefits from State Farm Mutual Automobile Insurance Company ("State Farm"), payable under the Schedule.¹ State Farm terminated weekly income replacement benefits. Ms Young disagreed with the decision. The parties were unable to resolve their dispute through mediation, and Ms Young applied for arbitration at the Financial Services Commission of Ontario under the Insurance Act, R.S.O. 1990, c.I.8, as amended.

A pre-hearing was held on January 3, 2006. The hearing is scheduled to start on July 31, 2006. At State Farm's request, I resumed the pre-hearing on June 23, 2006 to address production issues. At the resumed pre-hearing, Ms Young's solicitor indicated that she had recently received correspondence that led her to believe that State Farm's solicitors had received confidential information from an investigator Ms Young had retained on a personal matter. The same investigator had also been retained by State Farm to conduct surveillance on Ms Young. Ms Young would therefore be seeking an order removing State Farm's solicitors from the record. Ms Young's solicitor submitted that the issue of removal of State Farm's solicitors should be resolved before the production issue.

I was satisfied that the issue of removing State Farm's solicitors should be resolved first, because the production issue involves a dispute between the solicitors over what they had agreed to produce and Ms Young's solicitor had advised that she possessed documentary evidence to support her position on removal.

The parties could not agree on a mutually convenient date before July 31, 2006, that would allow the motion for removal to be heard and not force an adjournment of the hearing. Ms Young was prepared to adjourn the hearing, State Farm was not. State Farm was prepared to seek a remedy from the hearing arbitrator on the production issue. I decided to leave the removal issue to the hearing arbitrator. By proceeding that way, the hearing would be adjourned if the motion for removal was successful, but the hearing would not be unnecessarily delayed if the motion was not successful.

Having already indicated an intention to bring the motion and that she was in possession of correspondence to support it, Ms Young's solicitor sought an order requiring State Farm to produce correspondence between its solicitors and the investigator and other documents that might be relevant to the motion. I denied the request. I ruled that, having raised the issue, Ms Young should be in a position to make a prima facie case, thus making it necessary for State Farm to produce the requested documents in rebuttal. I ordered Ms Young to produce the documentary evidence she intended to rely on, within 10 days.

Ms Young served her material on July 4, 2006. She sought an order removing State Farm's solicitors and sundry other relief. She alleged that the investigator and State Farm's solicitors were in a position of conflict of interest and had breached their obligations under the Personal Information and Protection of Electronic Documents Act by collecting, disclosing and using personal information without her knowledge and consent. She also alleged that the investigator had breached his obligations under the Private Investigators and Security Guards Act by divulging confidential information acquired by him as Ms Young's private investigator and that, as a result, State Farm intended to call the neighbour whose conduct had caused her to retain the investigator, as a witness in the arbitration.

The only evidence produced in support of these allegations was a letter dated June 14, 2005, prepared by the investigator on the direction of State Farm's solicitors. The letter was prepared immediately after the investigator informed State Farm's solicitors that, in preparing for the arbitration hearing, he discovered that he was in a position of conflict because he had accepted a retainer from Ms Young in May 2006, without realizing that he had conducted surveillance of her on State Farm's behalf in 2003. State Farm's solicitors promptly forwarded the letter to Ms Young's solicitors.

In support of the motion for removal, Ms Young served summonses on four members of the law firm representing State Farm, requiring them to attend to testify on the motion and to bring their complete file. The adjuster handling Ms Young's file was also summoned. State Farm moved to quash the summonses. Filed in support of the motion was a 65 paragraph affidavit of Robert Franklin, State Farm's solicitor who had discussed the issue of conflict with the investigator. In the affidavit, Mr. Franklin admits that the investigator had placed himself in a position of conflict of interest, but denies that he had disclosed any confidential information to State Farm's solicitors or that the solicitors were in a position of conflict of interest.

On July 19, 2006, Ms Young's solicitors wrote to State Farm's solicitors indicating that, after reviewing Mr. Franklin's affidavit and the supporting materials, they were prepared to withdraw the motion for removal, without costs. They indicated that they would therefore not require any members of the law firm to attend. They also indicated that the adjuster was summoned to compel her attendance for the hearing and not the motion. On July 20, 2006, State Farm's solicitors responded that they were not prepared to agree that the motion be withdrawn, without costs.

Entitlement

The criteria to be considered by an arbitrator in awarding expenses are prescribed by section 12(2) of O. Reg. 664, which provides as follows :

An arbitrator shall, under subsection 282(11) of the Act, consider only the following criteria for the purposes of awarding all or part of the expenses incurred in respect of an arbitration proceeding:

Each party's degree of success in the outcome of the proceeding.
Any written offers to settle made in accordance with subsection (3).
Whether novel issues are raised in the proceeding.
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.
Whether any aspect of the proceeding was improper, vexatious or unnecessary.

Applying the above criteria, the result of the motions can only be viewed as complete success for State Farm. There were no written offers to settle and no novel issues raised. Although not stated in those terms, State Farm's position is that Ms Young's conduct or the conduct of her representative tended to prolong, obstruct or hinder the proceedings and the motions were unnecessary. Ms Young submitted that, because of the nature of the information contained in the letter forwarded by State Farm's solicitors, the only reasonable course of action was to bring the motion for removal. She submitted that her reasonable concerns about breach of her rights were only satisfied upon receipt of new information contained in Mr. Franklin's affidavit.

As noted above, the only evidence Ms Young produced in support of her position was the letter provided to her solicitors by State Farm's solicitors. That letter informs her that the investigator had placed himself in a position of conflict of interest but it does not reference any confidential information that Ms Young may have provided and it does not indicate that any confidences were divulged to any member of the law firm representing State Farm. The letter indicates the times and places that the investigator had been in contact with Ms Young, but it gives no details on the nature of the retainer. The letter indicates that, upon realizing that he was in a position of conflict, the investigator called the office of the solicitors for State Farm, spoke to a law clerk "about what happened" and advised that he would be having no further contact with Ms Young. The letter goes on to state that the clerk referred the matter to Robert Franklin who shortly contacted the investigator and was briefed "on the events that had taken place with Carla Young" and agreed that the investigator should have no further contact with Ms Young.

I find that the letter should have assured Ms Young that, having become aware of the conflict, the investigator was attuned to his obligation to protect her confidences. Having the letter prepared and promptly sent to her solicitors should have assured Ms Young that State Farm's solicitors would honour their ethical obligations to her. Instead, it had the opposite effect. Ms Young launched the motion, based on wide-ranging, unproven and unfounded allegations, disclosing details of the contact she had with the investigator and the nature of the retainer.

Ms Young compounded the problem by summoning the law clerk the investigator had spoken to, Mr. Franklin, and two other lawyers at the firm representing State Farm. Ms Young has produced no evidence that the two other lawyers summoned had ever had any contact with the investigator. The prospect of having to produce a substantial part of their firm for the hearing, along with their entire file, left State Farm's solicitors little alternative but to move to quash the summonses.

I find that even if Ms Young was entitled to legitimate concern about what the investigator had divulged to the law clerk and to Mr. Franklin, she should have sought clarification and then decided upon a remedy, rather than launch a speculative motion. The 65 paragraph affidavit filed in response does not provide new information as claimed. It largely points out information in the history of the proceedings, inconsistent with the position Ms Young was taking, of which Ms Young should already have been aware.

As for her immediate remedy, I find that Ms Young was never in a position to reasonably do anything other than what she finally decided: to challenge the use of the investigator's evidence at the arbitration hearing. One of the consequences of bringing the motion is that resolution of the production issue for which the pre-hearing was resumed was delayed and this issue could not be adjudicated before the date set for the hearing.

I find that Ms Young's motion was unnecessary and it tended to prolong, obstruct or hinder the proceedings. Based on that finding and State Farm's complete success, I find that State Farm is entitled to its expenses.

Quantum

State Farm's solicitors claim to have spent a total of 58.6 hours working on the motions. This is the equivalent of about 1.5 full-time working weeks. Ms Young's solicitor indicated that she was not surprised at the time claimed. Although Ms Young's motion and her service of summonses on members of the law firm representing State Farm raised serious allegations and presented a logistic quagmire that required a quick and comprehensive response, I find the time claimed to be excessive. I find that an award of $2,500 reasonably reflects the work involved on the motions and I fix expenses at that amount.

July 28, 2006

Jeffrey Rogers Arbitrator

Date