Commission des services financiers de l’Ontario

Neutral Citation: 2006 ONFSCDRS 34

FSCO A04-002247

BETWEEN:

FRANK CARBONE

Applicant

and

STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY

Insurer

PRE-HEARING DECISION

Before:

Jeffrey Rogers

Heard:

February 2, 2006, at the offices of the Financial Services Commission of Ontario in Toronto.

Appearances:

Sergio Grillone, solicitor for Mr. Carbone

Jonathan B. Schrieder, solicitor for State Farm Mutual Automobile Insurance Company

Issues:

The Applicant, Frank Carbone, was injured in a motor vehicle accident on April 10, 2002. He 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 on September 5, 2003. The parties were unable to resolve their disputes through mediation, and Mr. Carbone 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 May 24, 2005. The pre-hearing arbitrator scheduled the hearing to start on February 20, 2006. By letter of January 18, 2006, State Farm requested a resumption of the pre-hearing. The pre-hearing was resumed on February 2, 2006.

The issues are:

Should the hearing be adjourned because Mr. Carbone has failed to produce the business records of Carbone Home Renovations that he agreed to produce at the pre-hearing?
Should the hearing be adjourned because Mr. Carbone has failed to produce business records relating to his post-accident income?
Should the hearing be adjourned because Mr. Carbone has failed to produce the clinical notes and records of Dr. Felcenbuch, that he agreed to produce at the pre-hearing, and because Dr. Felcenbuch is not available to testify on the dates scheduled for the hearing?
Should A.I.S. Investigation Services be ordered to produce to State Farm surveillance records produced for the related tort action or should the hearing be adjourned to allow State Farm to bring a motion for such an order?
Should the hearing be adjourned to allow State Farm to conduct a proposed further IME?

Result:

The hearing is adjourned to July 10, 11, 12 and 13, 2006.
Within 60 days of February 2, 2006, Mr. Carbone shall inform State Farm what business records of Carbone Home Renovations exist and shall produce to State Farm copies of any records in his possession or control.
Within 60 days of February 2, 2006, Mr. Carbone shall inform State Farm what business records of Carbone Home Renovations are no longer in his possession or control.
Mr. Carbone shall pay State Farm its expenses of the motion in the amount of $150.

EVIDENCE AND ANALYSIS:

Records Of Carbone Home Renovations

At the time of the accident, Mr. Carbone was self-employed, carrying on business as Carbone Home Renovations. State Farm paid weekly income replacement benefits of $312.44 until September 4, 2003, when benefits were terminated following an IME. Mr. Carbone's weekly entitlement was based upon an accounting report prepared for State Farm on July 16, 2002. The accountant's opinion was based on a draft copy of Mr. Carbone's 2001 tax return.

At the pre-hearing on May 24, 2005, Mr. Carbone agreed to produce the business records of Carbone Home Renovations. He has not produced them, despite several subsequent requests by State Farm. Although not prepared to admit that they definitely exist, counsel for Mr. Carbone admitted that records probably exist, but opposed producing them for three reasons. First, they may have been given to the accountant who prepared the report and he does not know whether the accountant returned them. Second, he does not know precisely what records State Farm is seeking because State Farm has not responded to his request to identify the documents it is seeking. Third, the records are not relevant since quantum is not an issue in this arbitration, because State Farm terminated benefits upon the strength of an IME and did not raise quantum at mediation or in its Response.

I do not accept Mr. Carbone's position. The arbitration process encourages parties to resolve production issues by agreement. In keeping with that approach, Rule 34 of the Dispute Resolution Practice Code (Fourth Edition Updated —October 2003) imposes the same consequences for breach of a production agreement and breach of an order.

If Mr. Carbone is no longer in possession of the documents he agreed to produce, he should have informed State Farm much earlier than January 30, 2006, when counsel first mentioned that the accountant may have them. State Farm would then have been able to investigate this allegation and consider its position. I note that it is not at all apparent from the accounting report that any documents were provided, except the tax return.

Mr. Carbone also could not retreat from his agreement by claiming that he does not know what he agreed to produce. If he has them, he should have produced documents that are clearly business records, such as his accounting books and ledgers, bank statements, cancelled cheques, bills, invoices and receipts. Only then could the onus have been reasonably placed upon State Farm to list anything further it wanted.

Absent extraordinary circumstances, Mr. Carbone is barred from now arguing that what he agreed to produce is not relevant. Any other approach would erode the confidence of parties engaged in the arbitration process and perhaps lead to production issues being resolved by order, rather than by agreement, as the vast majority now are.

In any event, I do not agree that the business records are not relevant. The pre-hearing report identifies the IRB issue as follows: "Is Mr. Carbone entitled to receive a weekly income replacement benefit...?". Although quantum is not separately identified the issue, as described, appears to encompass both entitlement and quantum. Even if it does not, quantum and entitlement are so closely linked that, once raised, disputes on both issues should be heard together unless procedural fairness requires otherwise. The approach Mr. Carbone suggests, creates potential for added delay and expense, contrary to the mandate of the Commission to resolve disputes quickly and with the least expense.

Since State Farm is entitled to production of the records, the hearing must be adjourned to allow for their production or clarification of Mr. Carbone's position on whether they exist and whether he retains control of them. The terms are set out in my order. Should Mr. Carbone fail to produce the records, State Farm's argument that they likely exist, and that an adverse inference should be drawn from failure to produce them, is not precluded.

The Other Issues

I gave the above ruling orally. The issue of post-accident business records was resolved upon assurance by counsel that no records exist. Counsel agreed to produce tax returns for 2002 to the present, within 60 days. State Farm decided not to pursue its request for production of the clinical notes and records of Dr. Felcenbuch, upon being advised that Mr. Carbone does not intend to rely on his opinion. Without conceding their admissibility at the hearing, counsel for Mr. Carbone did not oppose an order requiring A.I.S. Investigation Services to produce to State Farm the relevant surveillance records. However, I ruled that I would not make such an order because State Farm had not given A.I.S. Investigation Services notice, as required by Rule 67.4 of the Dispute Resolution Practice Code. Knowing that the hearing would be adjourned, counsel did not argue the issue of attendance at a further IME.

EXPENSES:

State Farm sought its expenses of the motion in the amount of $150, submitting that the motion was unnecessary because Mr. Carbone had breached a clear obligation to produce the disputed records and therefore should have agreed to the adjournment. Counsel for Mr. Carbone submitted that opposing the adjournment was reasonable because State Farm should have agreed to Mr. Carbone's request for payment of some benefits as a term of the adjournment, given the passage of time since the application was filed.

I accept State Farm's position. State Farm was not required to make concessions to Mr. Carbone in order to secure what he had agreed to produce. Mr. Carbone should either have clarified his position much earlier or agreed to the adjournment. The motion resulted entirely from his breach of his agreement and State Farm was successful in enforcing it. I find that State Farm is entitled to its expenses which I fix at $150.

February 28, 2006

Jeffrey Rogers Arbitrator

Date

Financial Services Commission of Ontario