Financial Services Commission of Ontario

Commission des services financiers de l’Ontario

Neutral Citation: 2006 ONFSCDRS 47

FSCO A04-001050

BETWEEN:

ERICA PATRICIA LINDSAY

Applicant

and

ALLSTATE INSURANCE COMPANY OF CANADA

Insurer

DECISION ON A PRELIMINARY ISSUE

Before:

Robert A. Kominar

Heard:

By telephone conference call on January 13, 2006.

Appearances:

Erica Patricia Lindsay, self represented

Monique Rae Bennett for Allstate Insurance Company of Canada

Issues:

The Applicant, Erica Patricia Lindsay, was injured in motor vehicle accidents on July 23, 2001 and July 27, 2002. She applied for and received statutory accident benefits from Allstate Insurance Company of Canada ("Allstate"), payable under the Schedule. The parties were unable to resolve their various disputes through mediation, and Ms. Lindsay applied for arbitration at the Financial Services Commission of Ontario under the Insurance Act, R.S.O. 1990, c.I.8, as amended.

The preliminary issue to be determined is:

1. Is Ms. Lindsay precluded from proceeding to arbitration because she entered into a binding, full and final settlement of all accident benefit claims arising out of the automobile accidents which occurred on July 23, 2001 and July 27, 2002?

Result:

1. Ms. Lindsay is precluded from proceeding to arbitration because she entered into a binding, full and final settlement with Allstate, on September 27, 2005, of all her accident benefit claims arising out of these two accidents.

EVIDENCE AND ANALYSIS:

Ms. Lindsay was injured in automobile accidents on July 23, 2001 and July 27, 2002 and as a result claimed various statutory accident benefits from Allstate. The parties were unable to reach agreement on entitlement to certain benefits which Ms. Lindsay was claiming and Ms. Lindsay applied for mediation of the dispute at the Financial Services Commission of Ontario (the Commission). The Mediator involved issued her Report on February 17, 2004, detailing the issues remaining in dispute between the parties at the conclusion of the mediation. Ms. Lindsay then applied for arbitration at the Commission. Various pre-hearing proceedings were conducted between November 2004 and February 2005 and hearing dates were established, on the consent of both parties, for May 1, 2005 through June 2, 2005, in Windsor, Ontario. Later, due to Ms. Lindsay's unavailability on the scheduled dates, as well as Allstate's concerns about incomplete document production, the hearing was adjourned to August 8, 2005 through August 10, 2005.

Prior to the August hearing dates Ms. Lindsay contacted the Commission to request that settlement discussions be arranged, as provided for in the Dispute Resolution Practice Code, 4^th edition, under Rule 35. The parties agreed to hold settlement discussions on August 8, 2005, the date on which the arbitration was then scheduled to commence. Those settlement discussions were presided over by an arbitrator at the Commission, and Allstate's assumption, after the discussions ended, was that an agreement had been reached to resolve all of Ms. Lindsay's accident benefit claims on a full and final basis. Allstate therefore prepared the relevant releases as well as the requisite settlement disclosure notices to bring proper closure to the file. On August 10, 2005, Ms. Lindsay wrote to the Commission advising that she had decided not to accept the settlement offer made to her on August 8, 2005. As a result of her decision, new hearing dates in Windsor were scheduled, again on consent, for September 27, 2005 through September 29, 2005. Throughout the period of time following the pre-hearing Allstate had been attempting to motivate Ms. Lindsay to comply with various undertakings she had made regarding document production as well as specific production orders made by the pre-hearing arbitrator.

All of the above is recited as background to what transpired between the parties from September 27, 2005 and thereafter. That time period is the focus of this preliminary issue hearing.

On September 27, 2005, Arbitrator Rogers attended in Windsor to conduct the arbitration hearing. Consistent with the common practice of many, if not most, arbitrators at the Commission, he asked the parties at the beginning of the hearing whether they wanted an opportunity to discuss settlement one last time, prior to the hearing commencing. Despite the fact that they had been unable to resolve their differences up to that date, both parties agreed to take some time and once more attempt to negotiate a mutually acceptable resolution of the issues in dispute. At that point, Arbitrator Rogers appropriately withdrew and allowed the parties to talk about the matter privately.

Normally settlement discussions are private, "off the record", "without prejudice" matters, and what goes on within the context of those conversations between the parties are not revealed to third parties, let alone widely exposed in publicly accessible decisions such as this. However in this case it is necessary to make explicit what occurred during the settlement talks to support a reasoned decision as to whether or not they resulted in a legally binding settlement between the parties.

Ms. Lindsay and Allstate generally agree on the broad framework of what occurred leading up to and during the settlement discussions on September 27, 2005. In the few days prior to that date, as is quite common, the parties were in contact with each other, trying to ascertain whether they could somehow resolve their differences and thus avoid the time, costs and risks associated with going through with an arbitration hearing. I believe that I am entitled to take notice of the fact that these sorts of last-minute settlement explorations occur in virtually every litigated and arbitrated case.

As I understand the evidence of the parties, Ms. Bennett, on behalf of Allstate, made an offer to settle Ms. Lindsay's claims, on a full and final basis, which was higher than they had offered to her in the past. Ms. Lindsay considered the amount offered to her and responded that she was not prepared to accept it; however she did present Allstate with a monetary counter-offer. Thus the parties established what is often referred to in conflict resolution literature as a "bargaining range." Thereafter their discussions were focussed on narrowing the gap between the minimum Ms. Lindsay said she could accept to resolve the issues and the maximum Allstate said they were willing to pay to do the same. Both parties acknowledge that the rest of their settlement discussions unfolded within this framework of working toward identifying common ground. They were incrementally moving towards generating a dollar value for Ms. Lindsay's claims which they could both agree upon as a practical solution to the issues in lieu of conducting an arbitration hearing. In other words, they were doing what virtually all parties do as a hearing approaches.

The undisputed evidence before me is that Arbitrator Rogers, after dealing with a procedural issue relating to what portion of Ms. Lindsay's OHIP summary could be referred to during the arbitration hearing, left the parties to talk about settlement at approximately 10:30 a.m. Once again, I believe that it is reasonable for me to take notice of the fact that an arbitrator, in that circumstance, would at some point in time "check in" with the parties to determine whether the settlement discussions they were engaged in seemed to be productive, or whether he should terminate them and start the hearing.

Ms. Lindsay's evidence was that Arbitrator Rogers, at some point, knocked at the door and asked "if he was needed." Ms. Bennett's version of the facts is slightly different; that Arbitrator Rogers knocked at the door at some point and asked whether the parties needed more time to talk, or whether he should commence the hearing. I find, based on the what I have suggested is the common practice for an arbitrator in such circumstances, that Ms. Bennett's version of the facts is more plausible than Ms. Lindsay's. But I also find that Ms. Lindsay's version of the facts is actually consistent with Ms. Bennett's, as well as with my observations about standard arbitral practice. It may well be that Arbitrator Rogers asked if "he was needed" to commence the hearing. Whether he uttered those exact words or not is irrelevant in my view. I find that the parties were actively talking about settlement until approximately 11:30 a.m., when the hearing arbitrator inquired whether the hearing should start or whether it was useful for settlement talks to continue.

The reason that I have related this level of detail is that the uncontradicted evidence before me is that, as the parties were packing up their materials and moving back into the hearing room, significant communication was exchanged between them. Just as I noted above, that it is normal for parties to discuss possible settlement in the days immediately prior to a hearing commencing, it is also common for these explorations of settlement to continue beyond that, right up to the moments before the hearing commences.

Ms. Lindsay's evidence is that, during these minutes just prior to the hearing commencing, Ms. Belluz, Allstate's adjuster in attendance, asked her to consider whether she really wanted to go through with a hearing and whether she didn't believe that they had arrived at a good settlement number as a result of Ms. Lindsay's persistence and resolve to maintain her demands for so long? Ms. Belluz ultimately asked Ms. Lindsay what amount she would accept to resolve the matter. Both parties agree that Ms. Lindsay responded by proposing a dollar amount, slightly higher than Allstate's last offer. Ms. Belluz promptly decided to accept Ms. Lindsay's offer and thus the parties reached an agreement. Releases were executed, which the attending court reporter, Ms. Sharon Sharpe, witnessed. Ms. Bennett notes that these releases were actually the ones which had been prepared for the previous offer Allstate made to Ms. Lindsay, with the dollar amounts of the settlement changed and initialled to reflect the final agreement which the parties reached. A settlement disclosure notice, reflecting these new settlement terms, was also executed by the parties at the same time. It should be noted that I asked Ms. Lindsay about the signatures on the documents and she does not dispute that she signed any of the relevant documents involved in this matter.

Arbitrator Rogers was then advised by the parties that the matter had been settled and the arbitration was concluded on the basis of that advice. However, problems arose almost immediately afterwards.

Ms. Bennett advises that while she was still in Windsor her office received a telephone call from Ms. Lindsay indicating that she wanted Allstate to add interest onto the amount which the parties had agreed upon. Ms. Bennett responded to Ms. Lindsay that the figure Allstate agreed to pay was "all inclusive" and that no further amounts for interest would be added to top it up. Apparently Ms. Lindsay was not pleased with this information and on September 28, 2005, she wrote to the case administrator at the Commission, and to Ms. Bennett, advising that she was "refusing the offer at this time."

Most often, when a settlement is resiled from within the time frame provided for second thought in the Settlement Regulation, that is the end of the matter as the right to do so within the prescribed time frame is absolute. However, in this case, Ms. Lindsay proceeded to telephone Ms. Bennett's office again, approximately one hour after the recantation of the settlement was received; this time to advise that she had again reconsidered and that she had decided to proceed with the settlement agreement after all. Ms. Lindsay asked Ms. Bennett what she needed to do to finalize the settlement which the parties had reached. Ms. Bennett advised her that it was necessary that she confirm her intentions in writing. Following up on this discussion Ms. Lindsay faxed a letter, again to the case administrator at FSCO and to Ms. Bennett, on September 28, 2005, stating:

Please be advised that I am withdrawing my previous letter of refusal dated Sept. 28/2005.

I have decided to accept the offer that was offered to me on September 27, 2005 at 4510 Rhodes Drive, Unit #610, Windsor, Ontario, N8W 5K5.

I understand that the cooling off period will be 11:30 on Sept.29, 2005.

Once again, Allstate proceeded on the assumption that the matter had been resolved and made arrangements to issue settlement proceeds to Ms. Lindsay.

However, Ms. Lindsay faxed a hand-written note to Ms. Bennett, on October 2, 2005. In that facsimile transmission Ms. Lindsay obliquely demands that Allstate "re-open" her claim. She further advises Ms. Bennett of various courses of action she planned to take if her demands were not met, including recourse options directed at Ms. Bennett personally. In response to this communication Ms. Bennett wrote to Ms. Lindsay on October 4, 2005 stating that the cooling off period in this matter had expired and that Ms. Lindsay would be receiving the settlement funds shortly to conclude the matter. I am advised by Ms. Bennett that the settlement funds were remitted to Ms. Lindsay by registered mail, but were ultimately returned by the post office as unclaimed.

The law governing this matter is straight forward. Accident benefit insurance law has a strong consumer protection aspect to it, as confirmed by the Supreme Court of Canada in Smith v. Co-operators General Insurance Co. 2002 SCC 30, [2002] 2 S.C.R. 129. Consistent with that overall framework, the Ontario government included a "cooling off" period that applies to all settlements that parties reach which finally settle accident benefit claims.

Section 9.1(4) of the Settlement Regulation reads:

The insured person may rescind the settlement within two business days after the later of the day the insured person signs the disclosure notice and the day the insured person signs the release.

The evidence before me is that the parties reached a full and final settlement of all accident benefit claims on September 27, 2005, which was a Tuesday. Although on September 28, 2005 Ms. Lindsay communicated in writing that she wished to rescind that settlement, she also, within approximately one hour, recanted her rescission in writing, stating that she was withdrawing her earlier notice and confirming what the time frame for "cooling off" was.

There is, in my view, no ambiguity arising out of the two communications Ms. Lindsay sent to Allstate regarding the September 27^th settlement. She explicitly withdrew her earlier communication in her second fax on September 28, 2005, leaving the second fax as the only document which spoke to her intentions regarding the settlement. Had Ms. Lindsay not explicitly revoked her earlier rescission then the situation might, arguably, be ambiguous. But that is not the case here. Any potential ambiguities about Ms. Lindsay's intentions were unequivocally removed by her own clear words.

There was no further written or oral communication between the parties until Ms. Lindsay faxed Ms. Bennett’s office on the evening of Sunday, October 2, 2005, after the cooling off period had expired.

I do not accept that a new cooling off period started with what might be characterized as Ms. Lindsay's "re-acceptance" of the settlement terms. The Settlement Regulation clearly speaks of the cooling off period commencing at the time the releases and disclosure notices are "signed by the insured person" That happened on September 27, 2005 in this case, with the two documents being signed virtually simultaneously by Ms. Lindsay. I find that there was no "re-acceptance", whatever that may mean, of the settlement in this case. Ms. Lindsay, during the period wherein she had the right to rescind "the" settlement she entered into with Allstate, ultimately advised the Insurer that her final decision was to confirm the agreement they had reached. Ms. Lindsay had the right, within the cooling off period, to reconsider her decision in any way she wished to. I find that she also had the right to vacillate during that time period. Her statutory obligation was to confirm in writing, within that time period, her intention to resile from the settlement if that was her decision. The default position is that, unless Ms. Lindsay communicated an intention not to proceed with the agreement during the two business days after signing the settlement documents, she is deemed to have confirmed the settlement.

Only one hour elapsed between Ms. Lindsay’s purported withdrawal from the settlement and her subsequent reaffirmation of it. The purpose of cooling off periods in consumer protection legislation is to prevent people from entering into contracts with a temporal Sword of Damocles dangling over their heads. They allow consumers to enter into contracts which they believe to be desirable; but also allow them a limited period of time for "second thought." It is not uncommon in negotiation for offers to be open "for a limited time only." Cooling off periods allow one to take advantage of the potential of such offers, yet also to go away, obtain advice, and reflect on whether they really are good deals or not. Negotiations do in fact often take place within constraining time frames. This is especially true of negotiations conducted within the context of a trial or arbitration hearing. At some point in time the hearing will start if the parties cannot reach an agreement. Although parties are still free to negotiate with each other during a hearing, the reality is that the dynamic often changes once the hearing commences. Settlement on the threshold of the arbitration room door is not uncommon.

Ms. Lindsay understands the workings of the cooling off period provided for in the Schedule. In fact, she explicitly indicated that she was aware of her rights in her letter to Ms. Bennett advising that she wanted to confirm the settlement. Ms. Lindsay had also recanted from an earlier settlement proposal, giving rise to the September arbitration dates, reflecting that she understood how to exercise her options. Despite a long history of communication between the parties and the case administrator in this matter, Ms. Lindsay chose not to communicate anything about an intention to "re-withdraw" her acceptance of the settlement until October 2, 2005. This was a choice that she made and that she must live with.

Given that Ms. Lindsay is self-represented, and given that it was important to provide her with full access to justice and an opportunity to voice her concerns about the situation, I asked her to explain to me what her concerns were with the settlement, given that she was not disputing the dates on which events described above took place. Objectively, it is clear from the evidence that Ms. Lindsay did not communicate any new intention regarding the settlement to Allstate after September 28, 2005 until October 2, 2005; and in fact, on that date, it is not completely clear from her correspondence what her intentions were, other than that she wanted to "re-open" her case. She did not explicitly state that she was withdrawing her earlier ratification of the settlement, despite the fact that she saw fit to make such intentions clear to Allstate in prior circumstances. Without going into detail of the correspondence sent on October 2, 2005 to Ms. Bennett, I find that it did not clearly advise Allstate that the agreement was off. But based on my finding that the cooling off period had already expired, this is in reality a moot point.

Ms. Lindsay’s response to my inquiry was that once she reached her car, after she had signed the settlement documents, she realized that interest was not specifically addressed in the settlement. She further told me that various people, whom she declined to identify, had advised her that there was something like a standard dollar amount which all accident claims should settle for, notwithstanding the nature of the injuries an applicant may have suffered in an accident. She further explained to me that she had consulted legal counsel about this matter in the past but that she could not find anyone to take her case on. I inquired whether she contacted a lawyer regarding the settlement she negotiated with Allstate on September 27, 2005 and she advised me that she did not make any attempt to contact a lawyer or to obtain legal advice about it. Rather, she chose to speak to family members or acquaintances, whom she declined to identify, who apparently told her that she ought to consider accepting the settlement. It should be noted that the prescribed form for the settlement disclosure notice clearly advises people to consider seeking legal advice before entering into settlements. Ms. Lindsay, I find, chose not to do that, as was her right.

Ms. Lindsay stated that her real concern here is that she believes she was "coerced" in some way into accepting this settlement and that that is the real basis for her wanting to resile from it. When I asked her to explain what she meant by being "coerced," she said that she was "crying" while she was signing the documents. I was curious about this, and so I asked her to confirm that tears were running down her cheeks while she was executing the documents. She candidly told me that she did not mean this literally, but rather that she was "crying on the inside," "crying in my fibres." The evidence of Ms. Belluz was that the settlement negotiations were actually very civilized and that both sides were calm and reasonable throughout. She told me that she had complimented Ms. Lindsay on her resolve in advancing her claims, especially without a legal representative. She stated that there was no evidence suggesting that Ms. Lindsay was feeling coerced into anything. In fact, the uncontradicted evidence before me is that Ms. Lindsay is the party who made the last settlement offer, which Allstate accepted. Contrasted with Ms. Lindsay’s description of her distress, both parties told me that Ms. Belluz stated that it was she, not Ms. Lindsay, who may have to account for the amount she was willing to pay to bring the matter to an amicable resolution. I find that Ms. Belluz's evidence is more plausible than Ms. Lindsay's. There is no evidence before me that Ms. Lindsay indicated in any observable manner to the Insurer that she felt coerced into settling. If that was in fact the case, she certainly could have proceeded with the hearing, rather than confirming to arbitrator Rogers that the matter had settled. I also find that Ms. Lindsay likely would have indicated such concerns in her written correspondence to Ms. Bennett on September 28, 2005 if that was a real issue. The history of correspondence in this file leaves no doubt that Ms. Lindsay is quite willing and able to speak her mind on issues of concern to her.

I acknowledge that Ms. Lindsay was asked by Ms. Belluz what her final settlement dollar amount was, but I have no reason to believe that simply asking such a question of someone who had, by choice, been personally involved in ongoing negotiations with the Insurer for months could plausibly be viewed as "coercion" in the mind of any reasonable person. Rather, I find that it is a normal part of the negotiation process within the context of an arbitration hearing or trial.

Ms. Lindsay knows how to play the negotiating game, and frankly, it is abundantly clear to me that she is actually rather adept at it. I find that the most plausible explanation for what happened in this case is that Ms. Lindsay, buoyed by her successes in eliciting higher monetary offers from Allstate throughout the dispute resolution process, risked that she could repeat that phenomenon one more time by challenging the September 27, 2005 settlement. Ms. Lindsay, to put it bluntly, is a gambler, and I find that her decision to "roll the dice" one more time was too late here.

During the preliminary hearing Ms. Lindsay made numerous references to what amount to claims for damages for pain and suffering. I asked her whether she had obtained legal advice about the difference between accident benefit claims and tort claims, and she told me clearly that a lawyer had explained all of this to her and that she understood it. Thus, I find that Ms. Lindsay appreciated the difference between accident benefit claims and tort claims and that she was not in any way confused about this distinction at the time she settled her accident benefits claims with Allstate.

Ms. Lindsay also told me that the settlement amount she agreed to on September 27, 2005 was, at the end of the day, "not what she wanted." She had no specific reason which she could articulate as to why "what she wanted" was the "right" number in any objective sense, other than that anonymous others had told her she should hold out for it. But this reticence on Ms. Lindsay’s part to proceed with the settlement is all the more puzzling given that the dollar amount the parties settled on was, in fact, the last offer Ms. Lindsay put on the table. It was not a "take it or leave it" offer intimidatingly made by Allstate just as the parties were about to start an arbitration hearing. One has to wonder why Ms. Lindsay would table such an offer, unless she realized that she was approaching the limits of the bargaining range wherein there would likely be no more movement on Allstate’s part. As I noted above, Ms. Lindsay’s last offer was marginally higher than the last offer Allstate had just made to her and, at this stage of the negotiation process, this is what one would normally expect to see, as both parties concede that the bargaining range by that point had narrowed considerably from when they started talking.

Ms. Lindsay would like to portray the events here as an example of a domineering insurance company callously resisting paying the legitimate claims of a deserving claimant. In fact, I find that there is no reason to believe that such a scenario accurately describes the interaction between these parties during their negotiations. Despite the fact that Ms. Lindsay was unrepresented during this negotiation, she clearly was well prepared for and actively engaged in the process of asserting her accident benefits claims.

Ms. Lindsay stated that she felt she had to "compromise" to reach this settlement, because she did not receive everything she was asking for; more exactly, she stated that she did not think she was getting what other people told her they got in auto accident benefits. She did not believe that this was fair. Setting aside for the moment that it is not particularly reasonable to gauge what a fair settlement is by what someone else received for their claims unless the facts were relevantly and substantially the same; this is also the nature of settlement negotiations in such contexts.

Within the context of an imminent arbitration hearing, settlement normally takes on an inherently practical and pragmatic focus. Parties need to make informed decisions about the risks involved in putting their cases in the hands of an arbitrator. They also must weigh the inevitable costs associated with having the opportunity to present the case. Not only are there personal costs for each side, but also a risk that, should they lose, they may be required to pay some significant portion of the other side’s legal expenses. There is also the stress, uncertainty and time involved in committing to a multiple-day arbitration hearing. The reality is that there is no abstract formula for calculating whether to settle or not. Each party must look at the particular situation and contextualize it within the "bigger picture" they work within. Does this involve "compromise?" More often than not the uncertainties of the situation suggest that it does. But compromise, based on an informed assessment of the strengths and weaknesses of each side’s case, is often a reasonable and prudent course of action. In a settlement you may not "win" as much as you would like to or believe that you are entitled to, but you also retain control over the proverbial risk of "losing your shirt."

During the preliminary hearing, Ms. Lindsay did not offer any explanation of why she did not, once again, write to Ms. Bennett to revoke her settlement after September 28, 2005, and before September 29, 2005, if her intention was not to honour it. This is particularly salient since she confirmed in writing that she knew that the cooling off period ended on September 29, 2005. In the absence of any explanation for this inaction, and in the face of the fact that she had resiled from settlements in the past and so knew how the process worked, I am compelled to draw the inference that, as of the end of the business day on September 29, 2005 Ms. Lindsay intended to accept the deal, as she had communicated in writing to Ms. Bennett.

If Ms. Lindsay changed her mind once again after the cooling off period expired then, in my view that is too little, too late. Although cooling off periods are created to allow the consumer time for second thought, it is also important to understand that there is a reason that they are not open ended. Finality and bringing closure to disputes are also values that permeate the negotiated settlement process. It is important to be fair to insured persons, but it is also important to be fair to insurers. They must be able to conduct business on the assumption that, if they do what is required of them in the Schedule, they will be able to close their files and pay claims without worrying that people will continually be coming back demanding reconsideration.

As a result, I find that Ms. Lindsay and Allstate entered into a binding, full and final settlement, of all accident benefits claims arising out of the automobile accidents occurring on July 23, 2001 and July 27, 2002. Therefore Ms, Lindsay is precluded from proceeding to arbitration on any claims arising out of those accidents.

EXPENSES:

As Ms. Lindsay was unsuccessful in advancing her claim that the issues in this arbitration had not been settled, I exercise my discretion to award Allstate its expenses incurred in this Preliminary Issue hearing. If the parties cannot agree on the quantum of those expenses within 30 days, an expense hearing may be arranged through the case administrator and I shall assess them.

March 27, 2006

Robert A. Kominar Arbitrator

Date

Financial Services Commission of Ontario

Commission des services financiers de l’Ontario

Neutral Citation: 2006 ONFSCDRS 47

FSCO A04-001050

BETWEEN:

ERICA PATRICIA LINDSAY

Applicant

and

ALLSTATE INSURANCE COMPANY OF CANADA

Insurer

ARBITRATION ORDER

Under section 282 of the Insurance Act, R.S.O. 1990, c.I.8, as amended, it is ordered that:

1. Ms. Lindsay entered into a binding full and final settlement with Allstate of all claims arising out of accidents which occurred on July 22, 2001 and July 27, 2002. As a result Ms. Lindsay is precluded from proceeding to arbitration on any issues arising out of those accidents.

2. Allstate is entitled to its expenses on the preliminary hearing. If the parties cannot reach an agreement on the amount of those expenses within 30 days of the date of this decision, either party may request that the case administrator arrange an expense hearing and I shall assess expenses.

March 27, 2006

Robert A. Kominar Arbitrator

Date