Financial Services Commission of Ontario

Commission des services financiers de l’Ontario

Neutral Citation: 2006 ONFSCDRS 18

Appeal P03-00038

OFFICE OF THE DIRECTOR OF ARBITRATIONS

JOSEPHINE ABOUFARAH Appellant

and

ALLSTATE INSURANCE COMPANY OF CANADA Respondent

Before: David Evans

Representatives: Humberto Geovo for Ms. Aboufarah Ryan M. Naimark for Allstate Insurance Company of Canada

Hearing Date: November 18, 2005 by teleconference

APPEAL EXPENSES DECISION

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

1. Ms. Aboufarah shall pay to Allstate Insurance Company of Canada its expenses in the amount of $2,000.

February 1, 2006

David Evans Director’s Delegate

Date

REASONS FOR DECISION

I. NATURE OF THE APPEAL

Allstate seeks its expenses arising out of my appeal decision dated May 5, 2005.

II. BACKGROUND

The appeal involved the rules governing settlements reached before March 1, 2002. In a preliminary issue decision, the arbitrator found that Ms. Aboufarah's paralegal representative entered into a binding settlement on her behalf, precluding her from arbitration. I affirmed the decision of the arbitrator, who has since awarded Allstate arbitration expenses of $1,500.¹

III. ANALYSIS

The criteria for awarding expenses are set out in Ontario Regulation 664:

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

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

14. Any written offers to settle made in accordance with subsection (3).

15. Whether novel issues are raised in the proceeding.

16. 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.

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

Ms. Aboufarah agrees that Allstate is entitled to expenses in light of its success in this matter, but disputes the nearly $7,000 Allstate claims, almost all of which is for counsel fee at $150 an hour. That hourly rate may only be awarded where "an adjudicator is satisfied that a higher amount for legal fees to an insured person is justified [Rule 78.2 of the Dispute Resolution Practice Code, Fourth Edition: emphasis added]." Rule 78.2(a) limits legal fees to an insurer to the hourly rates established under the Legal Aid Services Act, 1998 for professional services in civil matters before the Ontario Superior Court of Justice, adjusted to include, where appropriate, the experience allowance [R. 78.2(b)]. Based on Mr. Naimark's 1998 year of call, his hourly rate is $83.10. The maximum counsel fee including GST is $3,770.08.

Allstate submits that, while initially meritorious, the appeal no longer raised a novel issue, and its continuance was frivolous and vexatious once the Director issued his decision in Nguyen and Wawanesa Mutual Insurance Company (FSCO Appeal P03-00009, January 26, 2004). Nguyen also considered the effect of a paralegal entering into a settlement, and the Director commented favourably on the arbitrator's decision in this case. Allstate further submits that Ms. Aboufarah unnecessarily prolonged the hearing, as it made her a time-limited offer to withdraw without costs after Nguyen was issued, and it also had to respond to additional appeal grounds.²

While the issue was no longer novel, I do not agree that it was necessarily frivolous and vexatious to continue with the appeal, despite Nguyen. As the Director's Delegate, I have the same authority as the Director under s. 283(1) and s. 6(4) of the Act, and I am not bound by decisions of the Director. I could have reached a different conclusion had Ms. Aboufarah not failed to present new or more compelling arguments to counteract Nguyen.

In Ms. Aboufarah's favour, she did not prolong the hearing itself, which proceeded with dispatch. Furthermore, although Allstate provided an offer that met the criteria of Rule 76.1, it expired long before the start of the hearing; I accord it relatively little weight. In conclusion, I find that, based on the nature and complexity of the appeal, Allstate is entitled to an award of appeal expenses in the amount of $2,000.

February 1, 2006

David Evans Director’s Delegate

Date

Footnotes

1. 1Aboufarah and Allstate Insurance Company of Canada, (FSCO A02-001076, December 15, 2005)
2. 2I rejected these additional grounds in my letter of February 24, 2004. I found that Ms. Aboufarah raised grounds that either had no legal basis or should have been raised at the arbitration.