Linton Hutchinson v. Security National Insurance Co./Monnex Insurance Mgmt. Inc., 2007 ONFSCDRS 233

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

Neutral Citation: 2007 ONFSCDRS 233

FSCO A03-001712 and FSCO A05-000327

BETWEEN:

LINTON HUTCHINSON Applicant

and

SECURITY NATIONAL INSURANCE CO./ MONNEX INSURANCE MGMT. INC. Insurer

DECISION ON EXPENSES

Before: Richard Feldman

Heard: By written submissions filed by the parties and by telephone conference call on November 2, 2007.

Appearances: David S. Wilson for Mr. Hutchinson Donald Harvey for Security National Insurance Co./Monnex Insurance Mgmt. Inc.

Issues:

Linton Hutchinson, was injured in a motor vehicle accident on August 23, 2002. He applied for and received statutory accident benefits from Security National Insurance Co./Monnex Insurance Mgmt. Inc. (“Security National”), payable under the Schedule.¹ Disputes arose between the parties concerning Mr. Hutchinson’s entitlement to certain benefits. The parties were unable to resolve their disputes through mediation and, in December 2003, Mr. Hutchinson applied for arbitration at the Financial Services Commission of Ontario (File No. A03-001712) under the Insurance Act, R.S.O. 1990, c.I.8, as amended.

On July 19, 2004, the date upon which the hearing of that matter was to commence, the parties reached a settlement whereby they jointly requested that the Commission issue an order in accordance with the signed Consent of the parties, filed with the Commission. That consent order was issued by Arbitrator Renahan on August 19, 2004.

Amongst other terms to which the parties agreed, the order provided that:

The insurer shall pay ongoing income replacement benefits at a rate of $400.00 weekly from July 16, 2004.

On October 15, 2004, Security National ceased paying income replacement benefits to Mr. Hutchinson on the basis of new medical reports it obtained. Mr. Hutchinson challenged this decision by the Insurer and, in February 2005, commenced an application for arbitration of the dispute (File Number A05-000327). He also argued, through his counsel, that Security National had no right to terminate his income replacement benefits unless and until the order of August 19, 2004 was varied or revoked. Security National finally conceded this point and, on April 28, 2005, it paid the income replacement benefits that it had withheld for the period October 15, 2004 through April 29, 2005 (plus interest). On or about June 30, 2005, Security National paid the benefits that were owing for the period from April 30, 2005 through July 15, 2005 (plus interest). Thereafter, Security National continued to pay weekly income replacement benefits to Mr. Hutchinson of $400.00. Security National was not, at that point in time, conceding that Mr. Hutchinson was entitled to income replacement benefits due to his medical condition; rather, the Insurer reinstated payment of these benefits because it conceded that it was compelled by the terms of the order of August 19, 2004 to continue making such payments until such time as that order was varied or revoked by a subsequent order of the Commission.

On July 25, 2005, Security National filed an application in File Number A03-001712 to vary the Order of Arbitrator Renahan dated August 19, 2004 on the basis that the test for entitlement to Income Replacement Benefits changed at the 104-week post-accident anniversary (August 23, 2004) and that, based upon new medical information concerning his condition, Mr. Hutchinson no longer met the test for entitlement to such benefits. This, argued the Insurer, constituted a material change in the circumstances of the insured that, pursuant to section 284 of the Insurance Act and Rule 61.1 of the Dispute Resolution Practice Code (the “Code”) justified a variation of the Order dated August 19, 2004. Pursuant to subsection 284(2) of the Insurance Act² and Rule 63 of the Code, the Director of Arbitrations delegated the hearing of that application for variation/revocation to me, to be heard concurrently with the issues raised in File Number A05-000327.

These two applications were heard by me on June 19, 20 and 21, 2006 and on February 26, 2007. The hearing was originally expected by the parties to last approximately eight days but, on or about February 23, 2007, counsel for Security National advised counsel for Mr. Hutchinson that Security National was now willing to concede several key points, thereby reducing the total amount of time required for the hearing of these applications.³

In two separate decisions dated May 25, 2007, I denied the Insurer’s request to vary or revoke the consent order dated August 19, 2004 (in File No. A03-001712) and I ordered the Insurer (in File No. A05-000327) to pay to Mr. Hutchinson a special award in the amount of $6,000.00. At the request of the parties, I reserved on the issue of the expenses of these proceedings.

The issue in this further hearing is:

Is Mr. Hutchinson entitled to his expenses incurred in respect of these proceedings?

Result:

The Insurer shall pay to the Applicant his expenses in the amount of $42,456.87.

EVIDENCE AND ANALYSIS:

Entitlement to Legal Expenses

The Insurer does not dispute the Applicant’s entitlement to his legal expenses of these proceedings and, given the Applicant’s success at arbitration, I am satisfied that the Applicant is entitled to his legal expenses of these proceedings.

Quantum of Legal Expenses

(a) Legal Fees – Hourly Rate

Mr. Wilson argued that since Mr. Hutchison was completely successful on these matters, Mr. Hutchinson should be awarded all of Mr. Wilson’s time, at the rate of $150 per hour. Mr. Harvey advised me that the Insurer is not objecting to the hourly rate sought. Pursuant to Rule 78.1 of the Code, based upon the experience and expertise of Mr. Wilson, the Applicant’s success in the outcome of these proceedings and the conduct of Mr. Wilson in facilitating an expeditious hearing, I am satisfied that the maximum hourly rate allowed an insured person under Rule 78 (i.e., $150 per hour) is appropriate in this case.

(b) Legal Fees – Number of Hours

In his Bill of Costs, as modified by oral submissions made to me on November 2, 2007, Mr. Wilson is seeking compensation on behalf of the Applicant for the following legal services:

Description

Number of Hours

Preparation for Hearing

91.0

Attendance at Hearing

38.0

334 pieces of correspondence (@ 0.2 hrs./letter)

66.8

Preparation and attendance on expense hearing

1.5

TOTAL

197.3

The Insurer takes issue with the total number of hours claimed for preparing for the hearing of these matters and with the 0.2 hours per item attributed by Mr. Wilson to 334 pieces of correspondence. Mr. Harvey suggested that 0.1 hours per letter and a grand total of about 118 hours would both be more reasonable.

For the reasons that follow, I find that the total number of hours claimed on behalf of the Applicant is reasonable.

First, although Mr. Harvey, on behalf of the Insurer, suggested that the time spent by Mr. Wilson in preparing for the hearing of this matter was excessive, I note that Mr. Harvey was unwilling or unable to disclose the number of hours he and his colleagues have spent representing the Insurer with respect to these proceedings. The Ontario Divisional Court has held that, in civil proceedings, an attack on the quantum of costs based on excess in circumstances where the court does not have before it the bills of all counsel “is no more than an attack in the air” and that a reasonable inference that can be drawn from the failure of counsel for one party to disclose his or her Bill of Costs is that he or she likely spent at least much time on the matter as that being claimed by the other party.⁴ Although it is possible for counsel for both parties to have docketed excessive hours, I find it inappropriate in this case for Mr. Harvey to seek to attack the reasonableness of Mr. Wilson’s dockets, without being prepared to make similar disclosure himself.

Second, this was a complex situation involving the Insurer’s request to have an order varied or revoked and an application by Mr. Hutchinson for post-104-week income replacement benefits and a special award. Both counsel agree that if the hearing of these two cases had proceeded to conclusion on all issues, the hearing would likely have taken at least 55 hours to complete over a two-week period. Mr. Wilson spent a total of about 158 hours preparing for these proceedings (which includes all time attributed by Mr. Wilson to dealing with correspondence). Ultimately, the hearing was truncated somewhat when the Insurer conceded that Mr. Hutchinson qualified for post 104-week income replacement benefits. This concession, however, was only made by the Insurer shortly before the second week of the hearing, after Mr. Wilson had done all of his preparation. In a case such as this, a ratio of three hours of preparation to every one hour of hearing time (or anticipated hearing time) is reasonable and well within the usual range permitted by the Commission. Even if I only considered the time actually spent in hearing (38 hours), 158 hours of preparation time would be equivalent to a ratio of 4:1 (preparation time to hearing time). This is at the upper end of what is usually permitted in cases before the Commission but would certainly be warranted in this case where, ultimately, Mr. Hutchinson was completely successful and the Insurer’s conduct was found to have been unreasonable and deserving of the imposition of a special award.

Finally, the Commission does not engage in a line-by-line analysis of a party’s expenses and it has been previously held that using an average of 0.2 hours per letter is reasonable.⁵

I therefore conclude that it is appropriate to order that the Insurer compensate Mr. Hutchinson for 197.3 hours of legal services.

For the foregoing reasons, I find that Mr. Hutchinson is entitled to legal fees of $29,595.00 ($150/hr. x 197.3 hrs.) + $1,775.70 in G.S.T. (total fees of $31,370.70).

(d) Disbursements

The Applicant is claiming total disbursements of $11,086.17 (inclusive of GST). The details are set out in the Bill of Costs filed by Mr. Wilson. Having read the Bill of Costs and having heard the submissions of Mr. Wilson, Mr. Harvey advised me that the Insurer does not oppose an order that the Insurer pay the disbursements, as claimed by Mr. Hutchinson. Mr. Hutchinson’s disbursements are allowed in the amount of $11,086.17 (inclusive of G.S.T.).

(e) Conclusion

Accordingly, pursuant to subsection 282(11) of the Insurance Act, I find that Mr. Hutchinson is entitled to his expenses with respect to these proceedings in the amount of $42,456.87 (inclusive of G.S.T.).

November 26, 2007

Richard Feldman Arbitrator

Date