Donna C. Hart v. Allstate Insurance Company of Canada, 2006 ONFSCDRS 207

Financial Services Commission of Ontario

Commission des services financiers de l’Ontario

Neutral Citation: 2006 ONFSCDRS 207

FSCO A98-000988

BETWEEN:

DONNA C. HART

Applicant

and

ALLSTATE INSURANCE COMPANY OF CANADA

Insurer

DECISION ON QUANTUM OF EXPENSES

Before:

Eban Bayefsky

Heard:

By written submissions, completed June 23, 2006.

Appearances:

Mrs. Hart made no submissions Meredith J. Donohue for Allstate Insurance Company of Canada

The Applicant, Donna C. Hart, was injured in a motor vehicle accident on August 16, 1995. In a decision dated September 23, 2005, I dealt with her claims for statutory accident benefits under the Schedule.¹ I made the following orders, while reserving on the issue of expenses:

Mrs. Hart does not have a reasonable excuse for failing to comply with the time limit for submitting an application for other disability benefits.
Mrs. Hart is not entitled to other disability benefits.

In a decision dated April 3, 2006, I made the following order on the issue of the parties' substantive entitlement to expenses:

Mrs. Hart shall pay to Allstate its reasonable expenses of the arbitration, as agreed or as determined by me in accordance with the procedure set out in the body of this decision.

In the decision, I stated that the parties were to "provide their submissions, if any, by the following dates: Allstate's submissions by April 24, 2006; Mrs. Hart's submissions by May 15, 2006; Allstate's reply by May 29, 2006."

As a result of difficulties Allstate experienced in serving Mrs. Hart with its submissions, I extended the date by which Mrs. Hart was to provide her submissions, if any, to June 9, 2006, and stated that Allstate would then have until June 23, 2006 to provide its reply, if any. I did not receive anything further from either Mrs. Hart or Allstate. I am satisfied that Mrs. Hart was duly served with Allstate's submissions, as well as my initial expense decision of April 3, 2006 and my letter of May 29, 2006 extending the dates for her submissions.

The issue in this further hearing is:

What is the amount that Mrs. Hart shall pay to Allstate for its reasonable expenses of the arbitration?

Mrs. Hart shall pay to Allstate arbitration expenses in the amount of $9,063.10.

The Applicable Law

Pursuant to section 282(11) of the Insurance Act, an arbitrator "may award, according to criteria prescribed by the regulations...all or part of such expenses incurred in respect of an arbitration proceeding as may be prescribed in the regulations, to the maximum set out in the regulations."

Under section 3(1) of the Schedule to Ontario Regulation 664, R.R.O. 1990, as amended, legal fees may be awarded for "all services performed before an arbitration," "the preparation of an arbitration," "attendance at an arbitration" and "services subsequent to an arbitration." Pursuant to section 3(2) of the Expense Schedule, the "number of hours for which legal fees may be awarded shall be determined...having regard to the criteria set out in subsection 12(2)" of the Expense Regulation, namely, the parties' respective success in the proceeding, any written offers to settle, whether novel issues were raised, the parties' conduct in the proceeding and the propriety of the proceeding. Under section 3(3) of the Expense Schedule, 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."

Pursuant to Rule 78.1 of the Dispute Resolution Practice Code, the maximum amount that may be awarded for legal fees is an amount calculated using legal aid rates for civil matters before the Ontario Superior Court of Justice or the legal aid rate adjusted to include, where appropriate, the prescribed experience allowance. Rule 78.1 also states that "where an adjudicator is satisfied that a higher amount for legal fees to an insured person is justified, an hourly rate of up to $150 may be awarded."

Arbitrators have established a rule of thumb in determining the amount of legal work to be compensated for an arbitration proceeding, namely, a ratio of between one and four hours of preparation time for every hour of hearing time.² Pursuant to section 3(2)5 and Items 1.1 of Part I and 24.2 of Part IV of the Table to Schedule 2 of Ontario Regulation 107/99, as amended, under the Legal Aid Services Act, 1998, the base rates of $67, $70.35 and $73.87 per hour (for services performed under a certificate issued before August 1, 2002, between August 1, 2002 and April 1, 2003 and after April 1, 2003, respectively), can be increased by the "experience allowance" of 25 per cent if counsel has practiced litigation for at least ten years, including at least four years of civil litigation. The maximum hourly rates that could be awarded are, therefore, $83.75, $87.94 and $92.34, respectively.

Allstate's Submissions

Allstate submitted that a ratio of 4:1 should be applied in respect of the allowable hours of preparation time, essentially on the basis of the reasons set out in my initial decision on expenses, but also given that Mrs. Hart was uncooperative in various phases of the proceeding, requiring Allstate to take a number of additional steps to ensure that the hearing ran smoothly. Allstate submitted that the maximum hourly rate of $150 should be applied in respect of their lead counsel's fees, given her long and extensive experience in civil litigation, and that an hourly rate of $73.87 should be allowed for their junior counsel, who was called to the Bar in July 2003. Finally, Allstate sought its disbursements as set out in its Bill of Costs and in accordance with the Expense Regulation.

Allstate's Bill of Costs set out counsel's hours and disbursements in respect of proceedings relevant to the issue of expenses, namely, the January 2001 pre-hearing conference, the June 2001 preliminary issue hearing, the December 2003 pre-hearing resumption, the May 2004 motion hearing, the September 2004 hearing and the December 2005 expenses hearing.

Findings

Allstate sought its lead counsel's fees at a rate of $150 per hour and its junior counsel's fees at $73.87 per hour. As set out in section 3(3) of the Expense Schedule, 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." Pursuant to Rule 78.1 of the Dispute Resolution Practice Code, an adjudicator can award an hourly rate of up to $150 for legal fees "to an insured person." In the appeal decision of Aboufarah and Allstate Insurance Company of Canada, (FSCO Appeal P03-00038, February 1, 2006), where the Insurer sought its counsel fees at $150 per hour, Director's Delegate Evans interpreted these provisions to mean that the Insurer was only entitled to its legal fees at the base rate of $73.87 per hour adjusted according to the experience allowance set out in the Legal Aid Service Act regulation. In these circumstances, and pursuant to the "experience allowance" provisions set out above, I find that Allstate would only be entitled to its legal fees at the base rate of $73.87 per hour adjusted by 25 per cent for its lead counsel, resulting in a maximum hourly rate of $92.34. Allstate's junior counsel was only called to the Bar in 2003 and, therefore, would not qualify for an adjusted rate.

The proceedings relevant to the issue of expenses took place in January 2001, June 2001, December 2003, May 2004, September 2004 and December 2005. As noted above, the base rates that could be charged under the Legal Aid Regulation varied from $67 per hour for services performed under a certificate issued before August 1, 2002, to $70.35 per hour for services performed under a certificate issued between August 1, 2002 and April 1, 2003, to $73.87 per hour for services performed under a certificate issued after April 1, 2003. Allstate's Bill of Costs indicates that only one hour of work was done on this file between August 2002 and April 2003, and only 6.6 hours for the December 2003 pre-hearing resumption during the same time period. I will, therefore, consider Allstate's claim for its lead counsel's legal fees at the adjusted hourly rate of $83.75 for the work done in relation to the 2001 proceedings and at the adjusted rate of $92.34 per hour for the work done in respect of the December 2003 and subsequent proceedings.

Allstate sought a total of $1,680 in respect of its preparation for and attendance at the January 2001 pre-hearing conference. I see nothing to suggest that Mrs. Hart did not properly participate in this proceeding and, in any event, it was scheduled on the direction of Director's Delegate Naylor in her November 2000 variation/revocation decision. Therefore, while Mrs. Hart was ultimately unsuccessful in this matter, I see no basis upon which to order her to pay Allstate's expenses of the January 2001 pre-hearing conference.

Allstate sought fees of $2,850 in respect of the June 2001 preliminary issue hearing. The Arbitrator presiding at that proceeding reserved the issue of expenses to the hearing Arbitrator. The preliminary issue Arbitrator denied Allstate's request for a stay of the arbitration pending Mrs. Hart's attendance at two insurer medical examinations, as well as Allstate's request for Mrs. Hart to pay $2,217.50 in "no show" fees. Based on a review of the preliminary issue decision, and in light of Allstate's lack of success on the motion, I see no basis to award Allstate its expenses of this proceeding.

Allstate sought a total of $2,384.25 in legal fees in respect of the December 2003 pre-hearing resumption, consisting of 12.3 hours at $150 per hour for lead counsel and 7.3 hours at $73.87 per hour for junior counsel. Both counsel attended the resumption. While the pre-hearing letter does not indicate that Allstate sought its expenses of the pre-hearing resumption, as noted in my first expenses decision, the resumption was directly relevant to my finding that Mrs. Hart's conduct had tended to prolong, obstruct and hinder the proceeding and that, therefore, Allstate should be entitled to its expenses of the arbitration. Specifically, I found that the pre-hearing resumption was required as a result of Mrs. Hart's unwarranted refusal to permit Dr. Hart to release his records, despite her previous written authorization to allow him to do so; Mrs. Hart only re-signed the authorization after being shown Dr. Hart's letter to the effect that she had verbally instructed him to disregard her previous written authorization. I, therefore, find that Allstate is entitled to its expenses of the pre-hearing resumption. However, I am only prepared to allow the 4.7 hours of preparation and attendance noted in the Bill of Costs as being specifically related to the pre-hearing resumption, and only for lead counsel (as I see no reason that junior counsel was required to attend at the pre-hearing resumption). Allstate is, therefore, entitled to expenses for the pre-hearing resumption of $434 (4.7 hours at a rate of $92.34 per hour).

Allstate sought a total of $14,998.64 in legal fees in respect of the May 2004 motion, consisting of 47.1 hours at $150 per hour for lead counsel and 107.4 hours at $73.87 per hour for junior counsel. On May 31, 2004 (one of the days on which the hearing was to commence), Mrs. Hart brought a motion to adjourn the hearing on the basis that Dr. Black, her family physician, was out of the country and on the basis that Dr. Black's testimony was necessary to her case. Allstate consented to the adjournment, on the basis that they needed time to transcribe Dr. Black's clinical notes and required Dr. Black's presence at the hearing in order to properly cross-examine Mrs. Hart. The motion Arbitrator adjourned the hearing to September 27-30, 2004, deferring the issue of expenses of the motion to the hearing Arbitrator. The Bill of Costs suggests that much of the activity on the file prior to the motion was in preparation for the full hearing that was to take place from May 31 to June 3, 2004. I also note that, from approximately May 18, 2004 (well before Allstate had begun to prepare in earnest for the hearing), Allstate was aware of the fact that Dr. Black would not be at the hearing and ultimately consented to the adjournment for its own reasons (as set out above). I also see no indication that Allstate consented to the adjournment on the condition that it receive its costs of the motion and/or the hearing. Therefore, while Mrs. Hart made very little use of Dr. Black when he did attend at the September 2004 hearing, I am not satisfied that Allstate is entitled to its expenses of the May 2004 motion.

Allstate sought a total of $9,147.92 in legal fees in respect of the September 2004 hearing, consisting of 37.2 hours at $150 per hour for lead counsel and 48.3 hours at $73.87 per hour for junior counsel. The hearing was for three days and the Bill of Costs indicates attendance at the hearing of 29 hours (including some additional work over the course of the hearing) for each of Allstate's counsel. Lead counsel's preparation time was 8.2 hours. Junior counsel's preparation time was 19.3 hours. While I would be prepared to apply a ratio of preparation time to hearing time of more than 1:1 in this case (but likely not the 4:1 ratio requested), in my view, this would only be appropriate if the preparation time, in fact, exceeded the attendance time. This is not the case here. I, therefore, find that Allstate is entitled to expenses for lead counsel's actual preparation and attendance time in respect of the September 2004 hearing. I see no basis for awarding expenses in respect of junior counsel's attendance at the hearing, but find that Allstate should receive expenses for the preparation time of junior counsel (both before and during the hearing) to the same extent as that of lead counsel. Allstate is, therefore, entitled to expenses for the September 2004 hearing of $4,668.68 (37.2 hours of attendance and preparation at $92.34 per hour and 16.7 hours of preparation at $73.87 per hour).

Allstate sought a total of $1,857.15 in legal fees for the expense hearing of December 2005, consisting of 4.6 hours at $150 per hour for lead counsel and 15.8 hours at $73.87 per hour for junior counsel. The expense hearing lasted approximately two hours. Allstate likely inadvertently neglected to claim the attendance time of lead counsel. I will include this item in calculating Allstate's expenses for this hearing. Junior counsel did not attend the expense hearing. Lead counsel's preparation time was slightly over one hour. Junior counsel's preparation was slightly over five hours. Again, while I would be prepared to apply a ratio of greater than 1:1, I find that this would be inappropriate since lead counsel's attendance exceeded her preparation time. However, given that Allstate was entirely successful in the expenses hearing, that Mrs. Hart continued to maintain that she had not received key documents (as set out in my first expenses decision and which required further steps to be taken following the expense hearing) and that Mrs. Hart failed to respond in any fashion to the further issue of the quantum of expenses, I am prepared to award Allstate the full amount of pre- and post-expense hearing time for lead counsel, as well as the pre- and post-expense hearing time of junior counsel to the same extent as lead counsel. Allstate is, therefore, entitled to expenses for the December 2005 expense hearing of $949.25 (6.6 hours of attendance and preparation at $92.34 per hour and 4.6 hours of preparation at $73.87 per hour).

Allstate claimed a total of $6,363.73 for various disbursements and GST. I am prepared to acknowledge all of the disbursements with the following qualifications. Pursuant to section 4 of the Expense Schedule, disbursements may be awarded for, among other things, phone, fax, photocopying and courier charges, as well "other out-of-pocket expenses incurred in the furtherance of the arbitration...." Allstate chose on their own to have the proceedings recorded, and the transcript, if there was one, was not used at any time during the arbitration. In my view, therefore, the charge for the reporting service should not be considered an out-of-pocket expense within the meaning of section 4.

Pursuant to sections 5(2) of the Expense Schedule, witness fees may be awarded in accordance with Rule 58.05 of the "rules of court." Tariff A, Item 21, allows disbursements for attendance fees of $50. Dr. Black (Mrs. Hart's family physician) testified for approximately two hours and was not qualified as an expert. The maximum allowable for his attendance would, therefore, be $50.

Finally, Allstate's Bill of Costs does not specify the dates on which, or the specific proceedings in respect of which, the disbursements were incurred. I will, therefore, allow the disbursements in accordance with my findings on Allstate's entitlement to expenses for the different proceedings. That is, I will award disbursements in proportion to the proceedings in respect of which I awarded Allstate its expenses. Of the eight days on which various proceedings were conducted, I awarded expenses in respect of five days, or 62.5 per cent. I will, therefore, award Allstate 62.5 per cent of its allowable disbursements (which is $4,545.16) for a total of $2,840.73. GST on this amount is $170.44. Allstate is entitled to disbursements and GST of $3,011.17.

Allstate is, therefore, entitled to total expenses of $9,063.10.

December 29, 2006

Eban Bayefsky Arbitrator

Date