Salva and Paramanantham v. Allstate Insurance Company of Canada, 2007 ONFSCDRS 142

Financial Services Commission des

Commission services financiers

of Ontario de l’Ontario

Neutral Citation: 2007 ONFSCDRS 142

FSCO A05-002958 and FSCO A06-000004

BETWEEN:

BIENNENIDA G. SALVA

and

NANTHAKUMAR PARAMANANTHAM

Applicants

and

ALLSTATE INSURANCE COMPANY OF CANADA

Insurer

DECISION ON EXPENSES

Before: Elizabeth Nastasi

Heard: Written submissions received by May 4, 2007

Appearances: David S. Wilson for Ms. Salva and Mr. Paramanantham

Grant R. Dow for Allstate Insurance Company of Canada

Background:

The Applicants, Biennenida G. Salva and Nanthakumar Paramanantham, were injured in a motor vehicle accident on March 6, 2005. The combined files were scheduled to go to arbitration for 8 days beginning January 8, 2007. A settlement discussion took place on January 5, 2007 and the parties advised that they had settled all claims in dispute in this arbitration proceeding for statutory accident benefits under the Schedule.¹

The issue of expenses was resolved as follows:

Expenses of the insureds to be paid by the insurer in an amount to be agreed upon or assessed, subject to the insurer paying only 85% of expert reports, as may be allowed.

The parties were unable to resolve the issue of expenses and requested an assessment pursuant to Rule 79 of the Dispute Resolution Practice Code, 4th Edition, as amended (the “Code”).

Issue:

What is the amount of expenses to which Ms. Salva and Mr. Paramanantham are entitled in respect of this arbitration proceeding?

Result:

Ms. Salva and Mr. Paramanantham are entitled to their expenses in the amount of $32,034.60 including GST.

EVIDENCE AND ANALYSIS:

A combined Bill of Costs for both insureds was forwarded to the Insurer in which a total of $32,034.60 for fees, disbursements and GST is being claimed. The fees claimed amount to $16,492.50 plus GST. Disbursements claimed amount to $14,552.55 inclusive of GST.

The fees are for services performed by solicitors David S. Wilson and Robert Zigler. The Insurer did not object to the hourly rate charged.² Both Mr. Wilson and Mr. Zigler have considerable experience in accident benefit matters and would ordinarily be entitled to reimbursement of expenses at FSCO at an hourly rate of $150.00. The total hours expended by both counsel was 109.95.

Three areas of dispute arose between the parties in respect of the assessment of costs in this case.

Time spent and legal fees claimed by Mr. Zigler;
Correspondence fees; and
Expert reports.

1. Legal Fees Claimed by Mr. Zigler

Mr. Wilson handled the matter from December 2005 to December 20, 2006. Mr. Zigler had sole responsibility for the file from December 21, 2006 to January 2, 2007. Mr. Wilson retained sole responsibility for the files again from January 3, 2007 to January 5, 2007 to conduct the settlement discussions. Mr. Zigler was the solicitor scheduled to represent the Applicants at the hearing as Mr. Wilson had a scheduling conflict.

The Insurer submits that the time spent by Mr. Zigler in becoming familiar with the file between December 21 and December 31, 2006 (totalling 17.7 hours) amounts to a duplication of time and that the fees claimed should be reduced by this amount ($150 x 17.7 hours = $2,655.00). In response, Mr. Wilson argues that there was no duplication of time spent and the work of Mr. Zigler was separate and distinct from the work performed by himself.

The arbitration dates were set by agreement at the pre-hearing on June 8, 2006. The pre-hearing letter does not make any reference to the fact that Mr. Wilson would not be the counsel appearing at the arbitration hearing. Presumably the scheduling conflict arose some time after the pre-hearing when the arbitration dates for these matters were set. The Insurer’s position is that Mr. Wilson’s scheduling conflict is an insufficient reason for awarding “additional fees”. Mr. Wilson advised that he had a trial scheduled at the same time and was therefore required to retain Mr. Zigler for the arbitration hearing.

The Commission has an obligation to conduct arbitrations efficiently and speedily. For this reason, the adjournment policy is quite restrictive stating that adjournments shall be granted only sparingly and in specific circumstances. If Mr. Wilson had not arranged for Mr. Zigler to conduct the hearing, an adjournment request would have been required and if granted, would have caused additional time and costs to both parties. In this case, I find that retaining alternate counsel was reasonable and in keeping with the overall principle of arbitration being a timely and cost effective dispute resolution process.

I do not accept the Insurer’s position that the alleged duplication amounted to 17.7 hours. A review of the Bill of Costs reveals that on December 21, 2006 there is a note with respect to a “preliminary review of the file” – this amounted to 4 hours. Following this review, the remainder of the time spent appears to be for services that would have been required by any counsel preparing for a hearing (i.e., meeting with clients, legal research, etc). I am not persuaded that there was any significant duplication of time in this case. If Mr. Wilson had retained the file and taken it to a hearing, the same type of preparation and time would have been required.

Mr. Wilson submits that given there are two insureds and that 8 days of hearing were scheduled, approximately 45 to 50 hours of hearing time would have been required. The amount of preparation time being claimed was slightly more than 2 hours for each anticipated hour of hearing. Arbitration decisions have routinely held that subject to special circumstances, when assessing the amount of time spent preparing for a hearing, the appropriate approach is a ratio of preparation time to attendance at an arbitration hearing of between 4:1 and 1:1.

The issues as set out in my pre-hearing letter dated June 12, 2006 were the same for each applicant: income replacement benefits, housekeeping expenses and a claim for a special award. Although the issues appear to be relatively straightforward, it is likely that the hearing would have lasted the full 8 days as each Applicant required their own language interpreter.³ However, in terms of preparation and legal research, given that the issues for the claimants were identical some overlap in general case law research was likely.

I find that the hours sought by Mr. Wilson and Mr. Zigler fall within the general ratio and are reasonable given the issues in this case.

2. Correspondence Fee

Mr. Wilson is claiming 28.4 hours for correspondence amounting to 142 letters sent and received at .2 (or 12 minutes) per letter. This represents 37.5% of the total time claimed. Mr. Wilson submitted that the time expended to prepare and review correspondence is not normally individually docketed for administration purposes.

The Insurer disputes both the inclusion and the quantum of 28.4 hours for correspondence as it is time that was not docketed or rather placed in a “bulk docket” on January 19, 2007 – the date that the Insured’s Bill of Costs was prepared and delivered. There is no detail or summary provided for this claim with respect to dates, time spent or content.

Mr. Wilson submits that to remedy the Insurer’s concerns and provide details for each of the 142 letters, would be an extremely time consuming task. This approach is not in keeping with the accepted approach to expenses which is to examine and determine overall reasonableness giving consideration to the ratio being claimed. Further, Mr. Wilson asserts that all correspondence relates directly to the arbitration claim and not to the mediation or any possible tort claim.

On the issue of quantum, I agree with the approach taken by Arbitrator Sapin in Kulasekarampillai and State Farm Mutual Automobile Insurance Company.⁴ The Insurer in Kulasekarampillai challenged the claim of charging .2 hours per letter. Arbitrator Sapin stated:

… I do not find it unreasonable to use an average of .1 or .2 for letters. And it is not the practice of FSCO arbitrators to engage in an item by item analysis in order to determine whether work was billed at a reasonable hourly rate.

The overriding consideration in fixing arbitration expenses is reasonableness. Rather than a line by line review of expenses claimed, arbitrators have preferred a global assessment of expenses as being more appropriate.⁵ In assessing the overall nature of Ms. Salva’s and Mr. Paramanantham’s cases, I find that in general the amount of expenses being claimed is reasonable and find that .2 is a reasonable average to attach to correspondence.

The Insurer referred me to the case of Boniface and Liberty Mutual Insurance Company⁶ where the arbitrator found that the amount claimed for correspondence was excessive and reduced the claim from 24.2 hours to 12 hours as reasonable in that case. Again, examining the cases before me in their entirety and considering that there are two applicants, I find that 28.4 hours or 14.2 hours per insured is reasonable.

3. Expert Reports

The Insurer raised concerns with the accounts of Mr. Atila Balaban, B.Sc., M.Sc. and Ms. Sophie Bielawski, Occupational Therapist. Mr. Balaban conducted Functional Capacity Evaluations for both Applicants in January 2006 and November 2006. The fee charged was $1,200.00 for each assessment. Ms. Bielawski conducted an In-Home Assessment for both Applicants on January 24, 2006. The reports were dated March 24, 2006. The total invoice submitted was $1,468.00 for each applicant plus GST.

The Insurer’s position is that the amount charged by Mr. Balaban and Ms. Bielawski are in excess of what it understands “the market rate” to be. Further, the accounts lack any detail as to the work conducted, amount of time spent and hourly rate charged.⁷

With respect to Mr. Balaban’s reports, the Insurer submits that Functional Ability Examinations are within the skill and expertise of Kinesiologists and the FSCO Professional Services Guideline, Superintendent’s Bulletin of June 2006 (the “Guideline”) which sets out a maximum hourly rate for non-catastrophic impairments for Kinesiologists at $51.47 per hour. The Insurer submits that these accounts should be reduced to 10 hours (at $51.47 per hour) or $514.70 and then reduced to 85% as agreed by the parties.

Mr. Wilson asserts that the Insurer has not provided any evidence of what “market rate” refers to. In his reply submissions, Mr. Wilson included a letter from Mr. Balaban confirming that he spent 14.5 hours on evaluation, document review, data analysis and notes and report writing.⁸ Mr. Wilson submits that Mr. Balaban is not a Kinesiologist and that, in any event, the rates set out in the Guideline do not apply to the preparation of reports used in arbitration proceedings by insured persons.

The Insurer submits that the Guideline should also be applied to the accounts of Ms. Bielawski. Ms. Bielawski charged $120.00 per hour on both invoices where she conducted an In-Home Assessment for each insured. The maximum Guideline rate for Occupational Therapists is $88.23 per hour. In addition, the Insurer submits that the accounts are identical indicating that the total time spent on January 24, 2006 was 24.2 hours. Further, the travel time appears to be duplicated as well. The Insurer submits that Ms. Bielawski’s account should be reduced to 8 hours at $88.23 per hour or $705.84 and then reduced to 85% as agreed by the parties.

In his reply submissions, Mr. Wilson clarified Ms. Bielawski’s accounts. Ms. Bielawski’s invoice was $1,468.00 for each applicant – her total travel time was 2.2 hours so she divided the time as 1.1 hour for each Applicant.⁹ In an e-mail to Mr. Wilson, Ms. Bielawski noted that the longer than normal travel time was on account of bad weather and traffic conditions in January on the day of the assessment. Ms. Bielawski also clarified that the date of the report should have been noted as March 24, 2006 not January 24, 2006 which was the date of the assessments.

Subsection 5(1)(5) of the Code, provides that the maximum amount that may be awarded to an expert for the preparation of a report is $1,500.00. The section does not restrict an applicant to one report per expert and experts may be paid for more than one report, including an “update.”¹⁰ Subsection 5(5) does not make reference to maximum hourly rates or the Guideline. The Guideline sets out the maximum fees applicable to specific benefits and clauses under the Schedule.¹¹ The assessment of expenses and expert reports are not referenced in the Guideline.

The Guideline rates are applied most commonly to reports generated pursuant to subsection 24(1) of the Schedule. These reports are typically created as a result of an assessment conducted. The primary purpose of such reports is to determine the applicant’s physical condition and entitlement to further benefits.

Medical-Legal reports in contrast tend to be different in nature and quality to the above types of assessments and serve a different purpose. A fulsome, well-crafted expert report assists the arbitrator in understanding the case and can often be filed instead of having to call the expert as a witness. The Commission encourages the practice of filing expert reports as it assists in promoting a more efficient, cost effective system.

An overly restrictive approach to awarding expenses to parties for expert reports should be discouraged as it may have the effect of deterring parties from producing comprehensive reports that will assist in reducing overall hearing time and costs.

Although in some cases the Guideline may be of assistance in determining what a “reasonable” amount would be for the preparation of an expert report, I am not restricted by the Guideline hourly rates in making this determination. In this case, I find that the amounts charged for the reports in question are reasonable and are within the maximum set out by subsection 5(5) of the Code.

July 30, 2007

Elizabeth Nastasi

Arbitrator

Date