Financial Services Commission of Ontario
Commission des services financiers de l’Ontario
Neutral Citation: 2006 ONFSCDRS 43 FSCO A03-001643
BETWEEN:
SYLVIA CROSSEY Applicant
and
FARMERS' MUTUAL INSURANCE COMPANY Insurer
DECISION ON EXPENSES
Before: Richard Feldman Heard: January 19, 2006 by teleconference Appearances: David J. Gillespie for Mrs. Crossey James Leone for Farmers' Mutual Insurance Company
Issues:
The Applicant, Sylvia Crossey (formerly Ferguson), was injured in a motor vehicle accident on April 6, 1994. She applied for and received statutory accident benefits from Farmers' Mutual Insurance Company ("Farmers' "), payable under the Schedule.1 Ultimately, disputes arose concerning Mrs. Crossey's claim for statutory accident benefits. The parties were unable to resolve their disputes through mediation and Mrs. Crossey applied for arbitration at the Financial Services Commission of Ontario (the "Commission") under the Insurance Act, R.S.O. 1990, c.I.8, as amended.
An arbitration hearing of the issues in dispute was held before me over seven days in January and March 2005, after which I invited written submissions from the parties. Written submissions were received in July and August 2005. On September 28, 2005, I issued my decision. Initially the parties requested that I reserve my decision on the expenses of these proceedings. Subsequently, the parties advised me that they could not agree on the issue of expenses and requested a hearing of that issue pursuant to Rule 79 of the Dispute Resolution Practice Code, 4th Edition, as amended (the "Code"). Counsel have advised me that the order of September 28, 2005 is currently under appeal. Nevertheless, they agreed that I should proceed now to hear and determine the following issue:
- Is Mrs. Crossey entitled to receive her expenses with respect to her application for arbitration?
Result:
- Farmers' shall pay to Sylvia Crossey her expenses with respect to her application for arbitration in the amount of $29,704.60 (inclusive of G.S.T. and disbursements).
CRITERIA FOR AWARDING EXPENSES
Subsection 282(11) of the Insurance Act, R.S.O. 1990, c. I.8 (as amended), provides that:
The arbitrator may award, according to criteria prescribed by the regulations, to the insured person or the insurer, 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. 1996, c. 21, s. 38 (4).
Regulation 664, R.R.O. 1990, made under the Insurance Act, as amended to O.Reg. 275/03 reads as follows:
- (1) The expenses set out in the Schedule are prescribed for the purpose of subsection 282 (11) of the Act.
(2) 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.
(3) Upon the request of the insurer or the insured person, the arbitrator shall, for the purposes of awarding expenses, take into account all written offers to settle, if any,
(a) that were made after the conclusion of mediation and before the conclusion of the arbitration; and
(b) that were made in accordance with the rules of practice and procedure applicable to the proceeding.
(4) If the arbitrator is requested to take into account a written offer under subsection (3), the arbitrator shall have regard to the terms of the offer, the timing of the offer, the response to the offer and the result of the proceeding.
ANALYSIS OF ENTITLEMENT
1. Degree of Success
Mrs. Crossey applied for the following: income replacement benefits, the cost of chiropractic treatment and massage therapy, reimbursement for housekeeping and home maintenance services, a special award, interest and expenses. Farmers sought to have the application dismissed and an order that Mrs. Crossey pay to Farmers' the amount that was assessed against it in respect of the arbitration (the $3,000 filing fee) and its legal expenses of the proceeding.
Mrs. Crossey's claim for $2,600 for housekeeping and home maintenance benefits was denied. In all other respects, her application was successful. The only caveat to this statement is that Farmers was successful in its argument concerning the proper method of indexing the income replacement benefits to which Mrs. Crossey was entitled. This had the effect of reducing the overall amount awarded to the Applicant for income replacement benefits.
Farmers argues that, because (in its opinion) the success of the parties was mixed, each party should bear its/her own expenses. I do not agree. Although Mrs. Crossey did not "win" on every single issue, she was largely successful on this application – certainly much more successful than Farmers which took the position that Mrs. Crossey was not entitled to any benefits whatsoever. While I expressed in my decision that I appreciated why the Insurer chose to oppose this application, the Insurer was aware or ought to have been aware that one of the risks it ran in doing so was that it would be ordered to pay Mrs. Crossey’s expenses of the arbitration if she was successful. Given the nature of this case, Farmers could also reasonably predict that those expenses would be substantial.
Based upon the relative success of the parties, I find that Mrs. Crossey is entitled to her reasonable expenses of this proceeding.
2. Offers to Settle
The Applicant offered, on January 14, 2005, to settle this arbitration if Farmers' reinstated Mrs. Crossey's income replacement benefits in the amount of $719.58 per week less collateral benefits received from November 21, 2000 ongoing, together with interest pursuant to section 68 plus her expenses of the arbitration (as agreed or assessed). The payment of income replacement benefits was to continue pending the Insurer making a loss of earning capacity offer. Although this offer to settle was not included in the Applicants expense hearing brief, counsel for Farmers' did not object to my considering this offer to settle but did question the significance of this offer.
Since this offer to settle is stated in terms of a gross amount (before deduction of collateral benefits) it is difficult to compare it to the income replacement benefits awarded. The Applicant has offered no calculations to demonstrate that the offer was a reasonable one to which the Insurer ought to have given careful consideration. I have had to do my own rough calculations based upon the accounting report by McCully & Associates Inc. dated July 22, 2005.2
According to my determinations (set out in the order of September 28, 2005) and the calculations of McCully & Associates, the total cost to Farmers' of my decision, if it had been given in January 2005, exclusive of expenses, would have been about $67,000.3 With the weekly income replacement benefit suggested by the Applicant in her offer, had the offer been accepted, the Insurer would have had to pay closer to $90,000 for the income replacement benefits and interest that would have been due up to January 2005. The amount of the weekly income replace benefits suggested in the offer is approximately $125 to $150 per week higher than the amount ultimately awarded. I therefore find that the Applicant’s offer of January 14, 2005 neither enhances her claim for expenses of this arbitration nor increases the amount of expenses to which she is otherwise entitled.
3. Novel Issues
Where an issue is novel and/or it is in the public interest that it be adjudicated, the party who brought forward the issue may be relieved from paying the other party’s expenses. On the other hand, a novel issue that is complex and requires more time for preparation for and attendance at a hearing may justify a larger than usual expense award.
There were two unique aspects to this case.
One was the length of time (six years) that elapsed between November 1994 when Mrs. Crossey returned to work for the first time after her accident and November 2000 when she again claimed that she was unable to work as a result of the impairments she sustained as a result of the April 1994 accident. The Applicant was ultimately able to overcome the difficulties inherent in such a case and to establish entitlement to most of the benefits claimed.
The other novel issue was how to interpret and apply the indexation provisions of Bill 164 to this particular case. On this point, I agreed with the interpretation urged by the Insurer. This issue, however, took up very little of the total hearing time.
On these two aspects of this case, the success of the parties was mixed and the novelty of the issues raised has no real impact on my decision with respect to the Applicant’s entitlement to her expenses.
4. Conduct of Parties and Their Representatives
With respect to the conduct of the arbitration proceedings, the parties themselves did nothing to prolong, obstruct or hinder the proceeding. Procedural arguments raised during the hearing and the manner in which documentary evidence was introduced by counsel did tend to prolong the proceedings but, in this case, I find that these issues are more relevant to the determination of an appropriate amount of expenses than to the issue of the Applicant's entitlement to expenses.
5. Improper, Vexatious or Unnecessary Aspect to Proceeding
The parties agreed that no aspect of the proceeding was improper, vexatious or unnecessary.
QUANTUM
Under the Schedule to the Expense Regulation, legal fees may be awarded for all services performed before an arbitration hearing, for preparation for the hearing, for attendance at the hearing and for services subsequent to the hearing. The number of hours for which legal fees may be awarded are to be determined by an arbitrator having regard to the five criteria set out in subsection 12(2) of the regulation.
In this case, Mrs. Crossey claims the following legal fees for the services of Mr. Gillespie:
| Description | Calculation | Amount |
|---|---|---|
| Attendance at 7 days of hearing | 56 hours @ $150/hr. | $ 8,400.00 |
| Preparation (4:1) | 224 hours @ $150/hr. | $33,600.00 |
| Total fees | $42,000.00 |
Mrs. Crossey is also claiming disbursements totalling $21,527.96 (inclusive of G.S.T.).
The Insurer takes the position that the fees claimed are excessive. With respect to the disbursements claimed, the Insurer argues that:
some of the disbursements claimed may relate to reports or documents which may also be used by the Applicant in relation to her tort action;
the costs associated with the report of Rich Rotstein (accountant) ought not to be allowed because the report was not accepted into evidence and contains errors; and
the other disbursements claimed should be restricted to the maximums permitted under the Expense Regulation.
Legal Fees
(a) Hourly Rate
Under Rule 78.1 of the Code, the maximum hourly rate that can be awarded for legal fees is the amount established under the Legal Aid Services Act, 1998. In the case of Mr. Gillespie, who was called to the Bar almost twenty-five years ago, the applicable Legal Aid rate would be $92.34 per hour for legal services provided by Mr. Gillespie. An arbitrator has the discretion, however, to award an hourly rate of up to $150.00 pursuant to Rule 78.1 of the Code where the arbitrator finds that a higher amount is justified. The exercise of such discretion is usually reserved for situations where there have been novel and complex issues which demanded excessive work and the attention of extremely seasoned counsel or where awarding the Legal Aid rate would have the result of the amount of expenses being unreasonably low. The maximum rate permitted by the Code is generally reserved for cases where the experience of senior counsel permitted a complex case to be presented in a manner that facilitated a full, fair and efficient hearing of the issues in dispute.
Mr. Gillespie submits that he is entitled to $150.00 per hour because this case was complex, lasted seven days, raised novel issues, involved a large amount of medical evidence and required greater than usual preparation, because his considerable experience allowed him to handle the matter efficiently and because the usual rates will not adequately compensate the Applicant for her actual legal expenses.
Mr. Leone, on behalf of the Insurer, submits that, if Mrs. Crossey is awarded any of her expenses, the hourly rate for Mr. Gillespie’s services should be restricted to the Legal Aid rate as Mr. Gillespie’s conduct tended to prolong the proceedings. In particular, it is submitted that Mr. Gillespie wasted time by unnecessary arguments over procedural issues, by not having witnesses attend on time, by not preparing the witnesses in advance and then delaying the proceedings in order to do so and by insisting on reading into the record excerpts from hundreds of documents.
With respect to procedural "wrangling", both sides forcefully advanced procedural arguments and must both take some share of the blame for any delay caused as a result of my having to deal with such matters. Given the number of substantive issues raised and the number of witnesses called, however, I do not find that the procedural matters unduly lengthened the proceedings as a whole. The fact that some witnesses were not available on a particular day is not uncommon and, to the extent possible, parties and the Commission typically try to accommodate the schedules of medical experts and other witnesses. I do not find that there was any substantial delay of the proceedings as a result of any failure of Mr. Gillespie to have witnesses ready and available.
Mr. Gillespie’s experience permitted him to present a complicated case in a manner that made the issues clear and, ultimately, that resulted in the Applicant’s success. The organization and presentation of the documentary evidence, however, fell short of the level one would have expected from senior counsel. The failure of Mr. Gillespie to have all of the documentation properly organized and to have each page numbered so that the documents could be easily located during the hearing did result in both delay and frustration and his insistence on reading large portions of those documents into the record also tended to unnecessarily prolong the proceedings. Although I did advise counsel for both sides at the commencement of the hearing that I expected them to point out to me during the course of the hearing which of the large number of documents filed were of particular importance, I did not expect counsel to actually read to me excerpts from a large number of those documents. Consequently, I do not find an hourly rate of $150 to be appropriate. On the other hand, given the complexity of the issues involved, the usual Legal Aid rate is also not appropriate. In all of the circumstances, I find an hourly rate of $120 to be reasonable.
(b) Attendance Time
Mr. Gillespie is seeking compensation for 56 hours of attendance at the seven days of hearing. Mr. Leone suggests that a more appropriate amount of time would be 42 hours. The actual time spent was probably closer to 49 hours. In all of the circumstances of this case, and taking into account the time that was spent by Mr. Gillespie reading into the record excerpts from virtually every document filed, I find that the appropriate amount of time to permit for attendance at the seven days of hearing is 42 hours.
(c) Preparation Time
With respect to the amount of time spent on a file, arbitrators do not conduct a line-by-line analysis of dockets in order to determine what is reasonable in any given case. Rather, in addition to the criteria noted above, arbitrators have preferred a "global" approach to assessing expenses, assigning a ratio of preparation time to hearing time. Arbitrators have found to be reasonable ratios of preparation time to hearing time ranging from 1:1 to 4:1, with the lower ranges reserved for less complex cases.4 Mr. Gillespie is requesting preparation time at a ratio of 4:1 (i.e. four times the time spent at the hearing).
Mr. Leone urges that I adopt the approach taken in Carr and Lombard.5 Mr. Leone submits that in the Carr case the arbitrator permitted one hour of preparation time for every three hours of arbitration attendance. In fact, Arbitrator Sapin allowed 37 hours of preparation time for 18.5 hours of hearing time, or a ratio of 2:1 (slightly less than the ratio of about 2.5:1 requested by counsel in that case).
Mr. Gillespie’s time dockets disclose only about 30 hours over and above the time spent in the hearing. He advised me during this expense hearing that the time dockets he filed do not accurately reflect the time he actually spent in preparation for the hearing and, given the nature of this case, I am inclined to accept this submission. Nevertheless, in the absence of any evidence as to the actual time spent, I find the ratio claimed by the Applicant to be excessively high. In all the circumstances of this case, I find that an appropriate ratio of preparation time to hearing time is 2:1. I will therefore allow a total of 126 hours combined preparation and hearing time for counsel. At $120 per hour, this amounts to total counsel fees of $15,120.00 plus G.S.T., for a total of $16,178.40.
Disbursements
The types and maximum amounts of disbursements that can be awarded are also set out in the Schedule to the Expense Regulation. For example, the maximum amount that may be awarded for the services of an expert is: $500 for preparation for a hearing at which the expert witness testifies; $200 per hour of attendance (up to a maximum of $1,600 per day) for attendance at the hearing; and, $1,500 for preparation of a report.
In this case, Mrs. Crossey claims $21,527.96 in disbursements, as detailed in the Bill of Costs of Mr. Gillespie. In a number of instances, the amounts claimed in the material filed by the Applicant exceed the maximums permitted under the Expense Regulation. Where the Applicant has claimed more than the maximum amount permitted under the Regulation, I have restricted the Applicant’s claim to the maximum or such lesser amount as I deem to be reasonable in all of the circumstances.
In the case of the accountant’s report, I have not allowed the expense claimed for preparation of the original report as that report related to the issue of loss of earning capacity and not to the calculation of income replacement benefits; that report was also not admitted into evidence. Nevertheless, I have allowed the cost of Ms. Garfinkle’s attendance before me (and preparation time) and of the cost of the preparation of supplementary material produced in response to my request for post-hearing submissions with respect to the calculation of income replacement benefits and interest owing thereon.
With respect to the issue of whether some of the disbursements relate to documents that may also be of use to the Applicant in her tort action, although raised as a question in the material filed on behalf of the Insurer, this issue was not argued before me and there is no evidence upon which I can determine the extent to which a particular document may be used by the Applicant in other proceedings. In any event, I have only permitted those expenses I find to be reasonable in relation to this arbitration proceeding.
I therefore permit the disbursements set out below:
| Item | Amount |
|---|---|
| Arbitration Filing Fee | 100.00 |
| Report of Dr. Barry Malcolm (Sept. 30, 2004) | 1,500.00 |
| Report of Dr. Rod (Nov. 22, 2004) | 1,500.00 |
| Preparation of Dr. Rod | 500.00 |
| Attendance of Dr. Rod at hearing | 800.00 |
| Preparation of Arlene Garfinkle | 500.00 |
| Attendance of Arlene Garfinkle at hearing | 400.00 |
| Report of Rich Rotstein Limited (invoice July 6, 2005) | 1,310.75 |
| OHIP summary | 60.00 |
| Report of Rehabilitation Management Inc. (Oct. 13, 2004) | 1,500.00 |
| Preparation and attendance of Sue Wilkinson | 624.88 |
| Records from General Motors | 75.00 |
| Witness fees and service of summons | 978.49 |
| Photocopies* | 2,737.50 |
| Fax (including long distance)* | 470.33 |
| Postage* | 6.49 |
| Long Distance telephone calls* | 50.00 |
| Courier* | 172.20 |
| TOTAL | $13,285.64 |
| GST on disbursements of $3,436.52 (*) | 240.56 |
| TOTAL DISBURSEMENTS AND G.S.T. | $13,526.20 |
Total Permitted Fees and Disbursements
| Item | Amount |
|---|---|
| Total fees allowed: | $ 15,120.00 |
| Total disbursements allowed (including G.S.T.) | $ 13,526.20 |
| Total fees and disbursements allowed: | $ 28,646.20 |
| G.S.T. on fees: | $ 1,058.40 |
| TOTAL FEES, DISBURSEMENTS AND G.S.T. | $ 29,704.60 |
Accordingly, pursuant to subsection 282(11) of the Insurance Act, I find that Mrs. Crossey is entitled to her expenses with respect to her application for arbitration in the amount of $29,704.60 (inclusive of G.S.T. and disbursements).
March 15, 2006
Richard Feldman Arbitrator
Financial Services Commission of Ontario
Commission des services financiers de l’Ontario
Neutral Citation: 2006 ONFSCDRS 43 FSCO A03-001643
BETWEEN:
SYLVIA CROSSEY Applicant
and
FARMERS' MUTUAL INSURANCE COMPANY Insurer
ARBITRATION ORDER
Under section 282 of the Insurance Act, R.S.O. 1990, c.I.8, as amended, it is ordered that:
- Farmers' shall pay to Sylvia Crossey her expenses with respect to her application for arbitration in the amount of $29,704.60 (inclusive of G.S.T. and disbursements).
March 15, 2006
Richard Feldman Arbitrator
Footnotes
- The Statutory Accident Benefits Schedule — Accidents after December 31, 1993 and before November 1, 1996, Ontario Regulation 776/93, as amended (referred to herein as either the "Schedule" or "Bill 164").
- filed by the Insurer in its post-hearing submissions and again during this Expense Hearing.
- About $53,000 for income replacement benefits and interest owing thereon, about $4,000 for the cost of treatment and interest owing thereon and $10,000 for the special award.
- Carr and Lombard General Insurance Co. of Canada (FSCO A00-000441, April 12, 2002) at p. 6.
- Carr and Lombard General Insurance Co. of Canada (FSCO A00-000441, April 12, 2002)