Financial Services Commission of Ontario Commission des services financiers de l’Ontario

Neutral Citation: 2007 ONFSCDRS 199

FSCO A06-000068

BETWEEN:

YVETTE ADASSA PATTERSON Applicant

and

STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY Insurer

Before: David Muir

Heard: September 21, 2007, by teleconference arranged by the Financial Services Commission of Ontario in Toronto.

Appearances: Esan Ince for Ms. Patterson Alexander Curry for State Farm Mutual Automobile Insurance Company

Issues:

The Applicant, Yvette Adassa Patterson, was injured in a motor vehicle accident on June 4, 2003. In a decision dated November 10, 2007, I dealt with her claims for Statutory Accident Benefits under the Schedule.¹

I made the following orders, while reserving on the issue of expenses:

Ms. Patterson is not entitled to further income replacement benefits.
State Farm Mutual Automobile Insurance Company (“State Farm”) shall pay to Ms. Patterson a housekeeping and home maintenance benefit of $15 per week from June 4, 2003 to November 2, 2003, together with interest as provided in section 46 of the Schedule?

Ms. Patterson took the position that the parties should bear their own expenses. State Farm sought this expense hearing to resolve the dispute.

The issue in this further hearing is:

Is State Farm entitled to an Order of expenses incurred in respect of this arbitration hearing?

Result:

The parties shall each bear their expenses of the arbitration.

EVIDENCE AND ANALYSIS

I heard submissions from counsel. As well, Ms. Patterson spoke briefly about her ongoing difficulties.

Based on the materials before me counsel for Ms. Patterson was provided with State Farm’s Bill of Costs on February 14, 2007 and asked for her position on same within 7 days, failing which an appointment would be sought before me. Apparently, there was no agreement and I was asked for this hearing on or about May 1, 2007. I refer the parties to Rule 79, which provides that the parties must seek a hearing within 30 days of the date the decision was released. I was not pointed to any reason for the lengthy delay in bringing this matter to a head.

Neither party raised this issue and accordingly I am reluctant to decide this question on that basis alone. However, given the significant delay from December 10, 2006 to May 1, 2007, the burden of explanation would be significant particularly for the party, in this case State Farm, seeking an Order.

The criterion that I am required to consider are contained in O. Reg. 664 and are set out below:

(1) The expenses set out in the Schedule are prescribed for the purpose of subsection 282 (11) of the Act. R.R.O. 1990, Reg. 664, s. 12.

(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.

A sixth factor related to an insured person’s failure to attend at an insurer’s assessment was raised by neither party and is not relevant to my determinations.

State Farm’s position relied heavily on the first of the enumerated criteria. The argument advanced assumed that this factor imports a “winner take all” approach to expenses at the Commission. In short, State Farm is of the view that as they were substantially, if not entirely, successful in the arbitration they ought to be awarded their expenses.

It was agreed that there was no offer to settle to consider. It is not clear that there were even settlement discussions in this case. There was no suggestion that there were particularly novel issues in this hearing nor did either party suggest that the other had done anything to unnecessarily lengthen the hearing or took a position that was improper, vexatious or unnecessary.

Counsel for Ms. Patterson conceded that they had failed to establish that Ms. Patterson’s difficulties were as a result of the accident and consequently were largely unsuccessful. However, it was submitted that she does not have the means to pay State Farm’s expenses and that a just result given the mixed outcome in the hearing would be for the parties to bear their own expenses.

I agree with Ms. Patterson that the parties ought to bear their own expenses in this case. I have considered the submissions of the parties and while it is clear that State Farm was, by the most obvious measure at least, considerably more successful than Ms. Patterson, that is not the end of the enquiry.

There is a simmering controversy in the arbitration decisions released since the most recent changes to the expenses regime. There is also no doubt that those changes have tilted the scheme away from the situation where insured persons were generally entitled to their expenses unless their case was patently lacking any merit at all. Accordingly, I think it plain that completely unsuccessful applicants are very much less likely to get their expenses paid than would have been the case under the prior expenses regime.

However, I note that the legislature has retained the language “each party’s degree of success” in the first factor relied upon by State Farm. It has also preserved the requirement that I consider whether any aspect of the proceeding was improper, vexatious or unnecessary. I agree with the Arbitrator in McLellan and Aviva Canada Inc. (FSCO A06-001263, February 12, 2007), that these terms have to be given meaning having regard to the overall purpose of the Statutory Accident Benefits scheme.

These are first party claims. The scheme has been held to be consumer protection legislation.²

I take it that the consumer to be protected in this context is the insured person seeking benefits, not the insurance premium payors or the public in general. The dispute resolution process was intended to provide an accessible alternative to the courts including the costs regime obtaining in that forum. It is plainly counter-intuitive in light of these facts, in my view, to interpret the expense regulation as a “winner take all” scheme.

Although there are some arbitration decisions that suggest otherwise, a review of the extant decisions suggests that in those cases where the outcome of the arbitration is mixed the most usual result is that the parties bear their own expenses.³ I also note that in an early appeal decision⁴ in applying the current expenses criteria, the Director of Appeals concluded that an unsuccessful party having raised a legitimate issue in respect of the hearing arbitrator’s decision ought to therefore be relieved of the obligation to pay the successful applicant’s expenses. I can think of no reason why similar considerations ought not to be at play when considering the relative success of the parties at an arbitration hearing.

The results of this arbitration were not favourable to Ms. Patterson. However, Ms. Patterson did raise a legitimate issue about the decision State Farm made to terminate her benefits. As I indicated in my reasons on the merits I gave little weight to the medical opinion relied upon by State Farm. Moreover, she was awarded some benefits. Her limited degree of success in relation to what she was seeking was not as a consequence of the medical opinions that State Farm had in its possession, but rather because of the difficulty she had in teasing out from the background of her pre-accident impairments those debilitating impairments arising from the accident. It remains that Ms. Patterson was found to be entitled to some benefits and was required to access the dispute resolution mechanism in order to obtain them.

In coming to these conclusions I did not consider Ms Patterson’s unsubstantiated submission that she would be unable to pay an expense award.

For these reasons, I decline to Order that Ms. Patterson pay any part of State Farm’s expenses. Ms. Patterson did not seek an Order that State Farm pay her expenses.

October 15, 2007

David Muir Arbitrator

Date