Farmers' Mutual Insurance Company v. Crossey, 2007 ONFSCDRS 178

Financial Services Commission of Ontario

Commission des services financiers de l’Ontario

Neutral Citation: 2007 ONFSCDRS 178

Appeal P05-00028

OFFICE OF THE DIRECTOR OF ARBITRATIONS

FARMERS' MUTUAL INSURANCE COMPANY

Appellant

Respondent by Cross-Appeal

and

SYLVIA CROSSEY

Respondent

Appellant by Cross-Appeal

BEFORE:

Nancy Makepeace

REPRESENTATIVES:

Aldo Picchetti for Farmers’ Mutual Insurance Company

David J. Gillespie for Mrs. Crossey

HEARING DATE:

September 17, 2007 by telephone conference

APPEAL EXPENSES ORDER

Under section 283 of the Insurance Act, R.S.O. 1990, c.I.8, as amended, it is ordered that:

1. The insurer shall pay Mrs. Crossey her appeal expenses in the amount of $7,500.

September 19, 2007

Nancy Makepeace Director’s Delegate

Date

REASONS FOR DECISION

I. NATURE OF THE APPEAL

In my decision of June 8, 2007, I dismissed the insurer’s appeal and Mrs. Crossey’s cross-appeal of the arbitrator’s order dated September 28, 2005, as well as Mrs. Crossey’s appeal of the arbitrator’s expenses order dated March 15, 2006. The parties disagreed about appeal expenses and requested a telephone conference to resolve the dispute. I gave an oral ruling, with reasons to follow.

II. APPEAL EXPENSES

The insurer submits no expenses order should be made because neither party succeeded on any of the issues raised in the appeal and cross-appeal. Mrs. Crossey submits she succeeded in resisting the insurer’s appeal on the main issue, her entitlement to income replacement benefits (“IRBs”).

The criteria for determining whether to award either party all or part of its expenses are each party’s degree of success in the outcome of the proceeding, any written offers to settle made in accordance with the regulation, whether novel issues were raised in the proceeding, the conduct of a party or representative that tended to prolong, obstruct or hinder the proceeding, whether any aspect of the proceeding was improper, vexatious or unnecessary, and whether the insured person failed to submit to a required insurer examination or failed to provide required material.¹

The only relevant criterion in this expenses dispute is each party’s degree of success in the outcome of the proceeding.

The insurer appealed on five issues: IRB entitlement, deduction of collateral benefits, medical benefits, interest, and special award. Mrs. Crossey appealed on the amount of IRBs, special award and arbitration expenses.

Though the insurer had legitimate concerns about Mrs. Crossey’s IRB claim, there was ample evidence to support the arbitrator’s findings of fact. I was not persuaded the arbitrator erred in concluding the accident materially contributed to Mrs. Crossey’s disabling impairments, despite her extended return to work before she stopped working.

The insurer also appealed the arbitrator’s collateral benefits finding. The parties agreed that Mrs. Crossey’s extended disability benefit from Clarica was deductible from her IRBs, but the insurer claimed it was entitled to continue deducting the same amount when the Clarica benefit was reduced after integration of Mrs. Crossey’s disability pension benefit. The arbitrator concluded the SABS provided no basis for the insurer’s position, and I agreed.

The insurer gave no specific grounds for appealing the medical benefits award, and I dismissed the appeal summarily. I found the arbitrator’s interest award to be consistent with well-established Commission authority that interest flows from entitlement, not proof, and accordingly confirmed it.

Mrs. Crossey appealed the arbitrator’s refusal to include her employer-paid benefits in calculating her IRBs. Though there is Commission authority that the value of employer-paid benefits can be included in gross income from employment, I concluded the arbitrator was well within his authority in finding Mrs. Crossey had not satisfied the burden of proving her entitlement.

Both parties appealed the arbitrator’s special award order, the insurer claiming no award should have been made, or alternatively the award should have been set at a lower amount, Mrs. Crossey claiming a higher award should have been made. I was satisfied the arbitrator’s analysis reflected an appropriate balancing of the relevant factors, and therefore dismissed both the appeal and the cross-appeal on this point.

Finally, Mrs. Crossey appealed the arbitration expenses order awarding legal fees at the rate of $120 an hour, rather than the $150 hourly rate she claimed, and for 42 hours rather the 56 hours claimed. I confirmed the arbitrator’s order.

The insurer submits each party should bear its own expenses given that neither succeeded on appeal. However, I am required to consider each party’s “degree of success in the outcome.” Mrs. Crossey’s entitlement to income replacement benefits was unquestionably the main issue in the arbitration and the insurer’s appeal. If the insurer had succeeded on this point, Mrs. Crossey’s cross-appeal would have been moot. It was also the issue that took up the most time on the appeal and required the greatest attention from Mrs. Crossey. For these reasons, Mrs. Crossey’s success on that issue bears the greatest weight in my decision to order the insurer to pay her appeal expenses. In addition, none of the insurer’s other appeal issues were of compelling strength.

I considered whether it would be appropriate to order the insurer to pay only a part of Mrs. Crossey’s appeal expenses because of the insurer’s success in resisting her cross-appeal. However, I have some doubt whether Mrs. Crossey would have appealed the arbitrator’s September 28, 2005 order if the insurer had not done so. And though I dismissed Mrs. Crossey’s appeal of the arbitrator’s March 15, 2006 expenses order, my reasons reflected some reservation about the order and my decision turned on the standard of review. In the circumstances, an order that the insurer pay Mrs. Crossey’s appeal expenses best reflects each party’s degree of success in the arbitration.

III. AMOUNT OF THE ORDER

Mrs. Crossey claims $7,500 representing legal fees of $150 per hour for 50 hours work. The insurer asks for detailed particulars of the amount claimed and particularly challenges the claim for 50 hours work, considering only 42 hours was awarded for a seven-day arbitration hearing followed by written submissions.

For the reasons suggested in my discussion of the arbitration expenses issue in the main decision, I find Mr. Gillespie is entitled to $150 per hour based on his accident benefits experience and expertise.

A party claiming expenses should be prepared to itemize the basis for the claim, including disbursements and the basis for the number of hours claimed, and an expenses claim for 50 hours work in relation to a half-day appeal will generally receive close scrutiny. However, Commission decisions have established that a line-by-line expenses assessment is not appropriate, but rather a reasonable estimate of expenses incurred. In this case, the appeal record and my reasons for decision provide an adequate basis for assessing Mrs. Crossey’s appeal expenses on a global basis, and I find a summary award is appropriate given the history and nature of the proceeding. In particular, I accept Mr. Gillespie’s submission that the insurer’s reliance on the 1,800-page arbitration transcript in support of what was essentially a fact-based appeal forced Mrs. Crossey to respond to detailed evidentiary submissions in response to the appeal. In the circumstances, I find a global award of $7,500 reasonable and appropriate.

September 19, 2007

Nancy Makepeace Director’s Delegate

Date

Footnotes

1. 1Ontario Regulation 664, R.R.O. 1990, made under the Insurance Act, as amended to Ontario Regulation 548/05 (the “expenses regulation”).