Financial Services Commission of Ontario

Commission des services financiers de l’Ontario

Neutral Citation: 2006 ONFSCDRS 66

FSCO A05-000501 and A05-000503

BETWEEN:

DANIJELA KRIVOSIJA and ALAELDIN KITTANEH Applicants

and

KINGSWAY GENERAL INSURANCE COMPANY Insurer

DECISION ON A PRELIMINARY ISSUE

Before: Judith Killoran

Heard: January 13 and April 21, 2006, by teleconference.

Appearances

Sharla Bandoquillo and Alon Rooz for Ms. Krivosija and Mr. Kittaneh Jennifer Burns for Kingsway General Insurance Company

Issues:

The Applicants, Danijela Krivosija and Alaeldin Kittaneh, were involved in a motor vehicle accident on April 16, 2003. They applied for and received statutory accident benefits from Kingsway General Insurance Company ("Kingsway"), payable under the Schedule.¹ The parties were unable to resolve their disputes through mediation, and the Applicants 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 discussion in this case was held on November 7, 2005, at 10:00 a.m., at the offices of the Financial Services Commission of Ontario. The issues in dispute were identified and agreed to as follows:

For Ms. Krivosija:

1. Is Ms. Krivosija entitled to receive a weekly income replacement benefit pursuant to section 4 of the Schedule? At the pre-hearing, Ms. Krivosija withdrew this claim.

2. Is Ms. Krivosija entitled to receive weekly caregiver benefits of $250 weekly from April 16, 2003 to June 10, 2003 totalling $1,750, pursuant to section 13 of the Schedule?

3. Is Ms. Krivosija entitled to receive a medical benefit of $465 for treatment at Bayview North Therapy claimed pursuant to section 14 of the Schedule?

4. Is Ms. Krivosija entitled to payment of $750 for housekeeping and home maintenance services to June 10, 2003, pursuant to section 22 of the Schedule?

5. Is Ms. Krivosija entitled to payment of $667.40 for the cost of examinations, pursuant to section 24 of the Schedule?

6. Is Kingsway liable to pay a special award pursuant to subsection 282(10) of the Insurance Act because it unreasonably withheld or delayed payments to Ms. Krivosija?

7. Is Kingsway liable to pay Ms. Krivosija's expenses in respect of the arbitration under section 282(11) of the Insurance Act?

8. Is Ms. Krivosija liable to pay Kingsway's expenses in respect of the arbitration under section 282(11) of the Insurance Act?

9. Is Ms. Krivosija entitled to interest for the overdue payment of benefits pursuant to section 46(2) of the Schedule?

For Mr. Kittaneh:

1. Is Mr. Kittaneh entitled to receive a weekly income replacement benefit of $320 from April 23, 2003 and ongoing, both pre and post-104 weeks, pursuant to sections 4 and 5 of the Schedule?

2. What is the amount of weekly income replacement benefit that Mr. Kittaneh is entitled to receive pursuant to section 6 of the Schedule?

3. Is Mr. Kittaneh entitled to receive a medical benefit of $242 for treatment at Bayview North Therapy, claimed pursuant to section 14 of the Schedule?

4. Is Mr. Kittaneh entitled to payments of $100 weekly totalling $3,450 for housekeeping and home maintenance services to March 31, 2004, pursuant to section 22 of the Schedule?

5. Is Mr. Kittaneh entitled to payment of $953.20 for the cost of examinations, pursuant to section 24 of the Schedule?

6. Is Kingsway liable to pay a special award pursuant to subsection 282(10) of the Insurance Act because it unreasonably withheld or delayed payments to Mr. Kittaneh?

7. Is Kingsway liable to pay Mr. Kittaneh's expenses in respect of the arbitration under section 282(11) of the Insurance Act?

8. Is Mr. Kittaneh liable to pay Kingsway's expenses in respect of the arbitration under section 282(11) of the Insurance Act?

9. Is Mr. Kittaneh entitled to interest for the overdue payment of benefits pursuant to section 46(2) of the Schedule?

Both parties made submissions requesting that Ms. Danijela Krivosija's and Mr. Alaeldin Kittaneh's files be combined and heard together. I found that in the interests of fairness and efficiency the two files should be combined as the two applicants were involved in the same accident, shared the same family physician and some of the same health care providers. Consequently, I ordered that the files be combined and heard together.

The parties agreed to the hearing of a preliminary issue, to be conducted by teleconference before me on January 13, 2006. The preliminary issue hearing was resumed for further submissions before me on April 21, 2006.

The preliminary issue is:

1. Are the Applicants entitled to proceed to arbitration with section 14 claims for medical benefits at Bayview North Therapy ("Bayview") and section 24 claims for examinations at the Canadian Institute of Health Recovery ("CIHR") provided on or before December 18, 2003?

Result:

1. The Applicants may not proceed to arbitration with their section 14 claims for medical benefits at Bayview and their section 24 claims for examinations at CIHR provided on or before December 18, 2003.

EVIDENCE:

The issue before me was a dispute as to the Applicants' entitlement to medical benefits for the cost of treatment provided by Bayview and for the cost of examinations provided by CIHR. Prior to the mediation at FSCO, Kingsway settled the accounts of Bayview and CIHR with payments made directly to both service providers.

The terms of Kingsway's settlement with Bayview are set out in Kingsway's letter dated December 22, 2003.² The letter states that Bayview has accepted Kingsway's offer of $5,756.00 for Danijela Krivosija and $4,534.76 for Alaeldin Kittaneh, in full and final settlement for all outstanding treatment provided to each applicant to date. The letter also states: "Furthermore, you have agreed you will not be pursuing any monies from these 3 claimants [a third claimant is the subject of the settlement] directly."

A representative of Bayview signed the letter and faxed it back to confirm agreement.³Consequently, Kingsway issued cheques to Bayview.⁴

The terms of Kingsway's settlement with CIHR are set out in Kingsway's letter dated December 18, 2003.⁵ The letter states that CIHR has accepted Kingsway's offer of $6,550.00 in full and final settlement for all outstanding accounts pertaining to three claimants, two of which are Ms. Danijela Krivosija and Mr. Alaeldin Kittaneh. The letter also states: "Furthermore, you have agreed you will not be pursuing any monies from the above captioned claimants directly."

A letter also dated December 22, 2003 from Kingsway confirms receipt of CIHR's release and states that Kingsway has split the "full settlement" between the three claimants so that Danijela Krivosija has been allocated $2,350.00 and Alaeldin Kittaneh has been allocated $2,200.00 for payment of their section 24 expenses.

A representative of CIHR signed Kingsway's letter dated December 18, 2003 and faxed it back.⁶Consequently, Kingsway issued cheques dated December 29, 2003 to CIHR.⁷

According to Kingsway's records, the cheques relating to the settlements with Bayview and CIHR with respect to Ms. Krivosija's and Mr. Kittaneh's accounts have been cashed.

At the mediation held at FSCO on or about December 23, 2003, Kingsway advised the Applicants' representative that the accounts of Bayview and CIHR had been settled. Kingsway provided the Applicants and their counsel with a copy of the letter from Kingsway to Bayview dated December 22, 2003.⁸ Subsequently, Kingsway's position was set out in the Response by Insurer to an Application for Arbitration. It was reiterated at the pre-hearing conducted on November 7, 2005.

Kingsway also provided copies of the letters from Kingsway to CIHR dated December 18, 2003 and December 22, 2003.⁹ The issue of the allegedly outstanding account of CIHR was added as an issue to the arbitration and Kingsway's representative advised Applicants' counsel of Kingsway's position during the pre-hearing conducted on November 7, 2005.

ANALYSIS

Subsection 14(2) of the Schedule states: "The medical benefit shall pay for all reasonable and necessary expenses incurred by or on behalf of the insured person as a result of the accident for, ..."

Subsection 44(2) of the Schedule states:

Despite subsection (1),

(a) an insurer may arrange to be invoiced directly and to pay directly for goods and services provided in respect of an insured person;

Kingsway interprets subsection 44(2) of the Schedule to mean that insurers may deal directly with service providers for settlement purposes.

The Applicants submit that any agreements between an insurer and third parties that dispose of the applicant's claim for statutory accident benefits without the consent of the insured or the insured's representatives do not constitute a full and final settlement of statutory accident benefits claims. They argue that binding applicants to such an agreement is prejudicial as it estops them from taking such issues to arbitration.

I do not accept that there is any prejudice to the Applicants in the circumstances before me. I agree with Kingsway's argument that the Applicants must incur an expense in order for it to be compensable. As advised by Kingsway at the mediation, in the Response by Insurer and at the pre-hearing discussion, the Applicants had no legal obligation to make payments to the service providers. The agreements arrived at between Kingsway and the service providers were provided to the Applicants' representative and were within the spirit of the Schedule. I find that the agreements protect the interests of the insured while shortening the length and cost of the proceedings at FSCO.

The Applicants argue that subsection 44(2) does not expand the right of insurers to include agreements with third party service providers regarding the full and final payment of benefits. In the alternative, the Applicants submit that the agreements made between Kingsway and the two service providers constituted partial payment of their accounts and not a full and final settlement. Therefore, the Applicants may pursue Kingsway for the payment of the outstanding accounts.

I have been provided with no evidence that the agreements made between Kingsway and the two service providers constitute partial payment of their accounts. A plain reading of the releases signed by the respective service providers makes it clear that the agreements are for a full and final settlement of their accounts.

The Applicants submit that the combined operation of subsection 14(2) of the Schedule and subsection 282(10) of the Insurance Act requires Kingsway to pay all reasonable and necessary expenses incurred by the Applicants in a timely manner. This duty prohibits insurers from withholding payments unreasonably and settling the claim directly with the service provider only after dispute resolution proceedings have been commenced. This is not relevant to the issue before me. Rather, it is more appropriately addressed by the hearing arbitrator in the context of the special award and interest claims filed by the Applicants.

CONCLUSION

Kingsway negotiated directly with Bayview and CIHR in good faith and with the understanding that the payments to Bayview and CIHR would constitute full and final settlement of their outstanding accounts. The terms of the negotiated settlements specifically state that neither Bayview nor CIHR will seek any payment from the Applicants. This clause contributes to the finality of the settlement and protects the interests of the Applicants.

I find that Kingsway could reasonably expect that the accounts of Bayview and CIHR had been settled. I also find that there were no further reasonable and necessary expenses incurred by or on behalf of the insured persons in relation to the services provided by Bayview or CIHR. Their respective accounts were settled on a full and final basis.

To the extent that any payment from the Applicants has been sought by Bayview or CIHR, it is in contravention of the settlement agreement with Kingsway. The evidence before me is by way of letters dated October 26, 2005 and November 6, 2005 from CIHR and a fax dated November 4, 2005 from Bayview to the Applicants' representatives for payment of the outstanding amount of their accounts.¹⁰ The letters were written after an almost two-year gap. The letters from CIHR state: "I look forward to working closely with you in this matter and would appreciate your cooperation with recovering outstanding amount for services provided by CIHR Inc." I am not persuaded by the evidence before me that payment is being sought from the Applicants.

In any case, I find that Kingsway secured a release of the right to any further monies from the Applicants from both Bayview and CIHR.

Consequently, I find that the Applicants' claims for payment of a medical benefit in relation to Bayview's account and payment of a section 24 benefit in relation to CIHR's account shall not proceed to arbitration.

EXPENSES:

I heard submissions from the parties with respect to entitlement and quantum relating to expenses. Kingsway submitted that the law firm of Mazin & Rooz should be found liable for expenses pursuant to subsection 282(11.2) of the Insurance Act.

Subsection 282(11.2) states:

An arbitrator may make an order requiring a person representing an insured person or an insurer for compensation in an arbitration proceeding to personally pay all or part of any expenses awarded against a party if the arbitrator is satisfied that,

(a) in respect of a representative of an insured person, the representative commenced or conducted the proceeding without authority from the insured person or did not advise the insured person that he or she could be liable to pay all or part of the expenses of the proceeding;

(b) in respect of a representative of an insured person, the representative caused expenses to be incurred without reasonable cause by advancing a frivolous or vexatious claim on behalf of the insured person; or

(c) the representative caused expenses to be incurred without reasonable cause or to be wasted by unreasonable delay or other default.

Section 282(11.3) of the Insurance Act states: "Clause (11.2)(a) does not apply to a barrister and solicitor acting in the usual course of the practice of law." Clauses 11.2(b) and (c) are applicable to barristers and solicitors. Section 282 (11.4) requires that the representative be granted the opportunity to make representations to the arbitrator.

Kingsway relies on the Volfson¹¹ case where the court found that Mr. Volfson had abused the Commission's process by proceeding to arbitration when he knew that no money was owed to the service providers. Kingsway submits that the Applicants' representatives, in the case before me, abused the dispute resolution process given that they had the opportunity at many stages of the process to withdraw the claims, yet continued while knowing that no further money was owed to the service providers.

Kingsway also relies on the Al-Hajam¹² case where the arbitrator discussed the traditional concerns about awarding costs against a solicitor. It argues that none of these concerns characterize this case. Rather, it claims that the arbitration system and the administration of justice would be brought into disrepute if the conduct of the Applicants' representatives were left unchecked. According to Kingsway, these claims ought not to have been brought and constitute an abuse of the Commission's process.

Mazin & Rooz submits that costs should only be awarded against a law firm in unique circumstances. I agree with its submissions that the Volfson decision can be distinguished on several grounds. In Volfson, the claim was settled on a full and final basis by the applicant, not the service providers. Also, the authorizations relied on by Mr. Volfson were forged; that is, the Application for Arbitration was not authorized by the insured. Additionally, Mr. Volfson knew that there had been full payment but pursued further payment.

In Al-Hajam, the lawyer's conduct included, among other things, failure to comply with the Commission's orders and his own undertakings; failure to appear at the arbitration hearing until contacted by the Commission; failure to appear at the beginning of the rescheduled hearing; and failure to contact his client for instructions.

The conduct of Mazin & Roos does not resemble the conduct of the lawyer in Al-Hajam or the representative in Volfson. The claims advanced by Mazin & Roos in this preliminary issue hearing have not been successful. In fact, I find that they have very little merit. However, I do not find that advancing these claims was frivolous, vexatious or an abuse of process. The issues determined in this decision have arisen in the context of a number of pre-hearing discussions. To date, there has not been a decision released which deals with these issues.

I exercise my discretion, having regard to the expense criteria set out in section 12 of Ontario Regulation 664, as amended, to have each party bear its own expenses with respect to this proceeding.

May 5, 2006

Judith Killoran Arbitrator

Date

Financial Services Commission of Ontario

Commission des services financiers de l’Ontario

Neutral Citation: 2006 ONFSCDRS 66

FSCO A05-000501 and A05-000503

BETWEEN:

DANIJELA KRIVOSIJA and ALAELDIN KITTANEH Applicants

and

KINGSWAY GENERAL 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:

1. Danijela Krivosija and Alaeldin Kittaneh may not proceed to arbitration with their section 14 claims for medical benefits at Bayview North Therapy and their section 24 claims for examinations at Canadian Institute of Health Recovery provided on or before December 18, 2003.

May 5, 2006

Judith Killoran Arbitrator

Date

Footnotes

1. 1The Statutory Accident Benefits Schedule —Accidents on or after November 1, 1996, Ontario Regulation 403/96, as amended.
2. 2Exhibit 1, Tab 2 to Kingsway's submissions
3. 3Exhibit 2 to Kingsway's submissions
4. 4Exhibit 3 to Kingsway's submissions
5. 5Exhibit 4 to Kingsway's submissions
6. 6Exhibit 5 to Kingsway's submissions
7. 7Exhibit 6 to Kingsway's submissions
8. 8Exhibit 7 to Kingsway's submissions
9. 9Ibid
10. 10Exhibits 6, 7 and 8 of the Applicants' submissions
11. 11Royal & SunAlliance Insurance Co. of Canada v. Volfson, 2005 CanLII 38902 (ON SCDC), [2005] O.J. No. 4523 (Ont. S.C.J. Div. Ct.), para.18
12. 12Al-Hajam and Allstate Insurance Company of Canada (FSCO A03-001830, April 21, 2005)