Neutral Citation: 2007 ONFSCDRS 242

FSCO A05-001642

BETWEEN:

AHASANUL MAZUMDER Applicant

and

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

DECISION ON EXPENSES

Before: David Muir

Heard: Written submissions received by November 30, 2007 and a telephone conference call on November 16, 23 and 30, 2007.

Appearances: Donna Bruce for Mr. Mazumder Cameron Stark for Security National Insurance Co./Monnex Insurance Mgmt. Inc.

Issues:

The Applicant, Ahasanul Mazumder, was injured in a motor vehicle accident on December 1, 2003. In a decision dated June 8, 2007, I dealt with his claims for statutory accident benefits under the Schedule.¹ I made the following order, while reserving on the issue of expenses:

The Application for arbitration is dismissed.

The issue in this further hearing is:

Is either party entitled to their expenses incurred in respect of this arbitration hearing?

Result:

Security National is entitled to its expenses in the amount of $ 2,785.41.

ANALYSIS:

After reviewing the written submissions of the parties and hearing their supplemental oral submissions, I find that Security National Insurance Co./Monnex Insurance Mgmt. Inc. (“Security National”) is entitled to its reasonable expenses of the arbitration.

The criteria that I am now required to consider are contained in the Expense Regulation² under the Insurance Act³ and are set out below:

12(1) The expenses set out in the Schedule are prescribed for the purpose of subsection 282(11) of the Act.

(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 not raised by the parties and is not relevant to my determinations.

It is important to recall that the expenses regime applicable to these claims has evolved over time. Prior to November 1996, arbitration expenses could be awarded to the Applicant only, and not to the Insurer. Expenses were normally awarded to the Applicant despite the outcome of the arbitration, unless the claim was fraudulent or frivolous or the Applicant engaged in some other conduct which merited intervention on expenses.

Amendments to the Regulation in November 1996 allowed arbitrators to award expenses to insurers as well as to Applicants. Criteria for determining entitlement to an Expense Order were included in the Regulation. These criteria were with one important exception similar to the existing ones. The changes were recognized as having signaled a legislative intent to move the expenses regime further along a continuum to a more results oriented approach. Despite the changes, unsuccessful Applicants continued to be awarded their expenses despite losing on the merits of their claim unless it was found manifestly unfounded or borderline fraudulent.

As noted, the Regulation was amended again in 2003. Amongst the first decisions to consider the current expenses regime was an appeal decision in Pembridge Insurance Company and Howden.⁴ The appeal was argued prior to the change in the Regulation, but the decision was released some two months after the changes were effective.

After describing the legislative history of the expenses rules as discussed earlier, the Director made the following concluding remarks on the effect of the changes:

The new criteria, introduced on October 1, 2003, continue the move toward a more results-based approach to expenses. The list of criteria have been changed to some extent, but more significantly, the criteria are now the only factors that can be considered and there is no longer a broad, “any other matter” criterion.

There is no doubt that the new expense regulation has 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 unsuccessful applicants are much less likely to get all or indeed, any, of their expenses paid than would have been the case under previous expenses regimes. Further, given the clear legislative signal evidenced by the most recent changes, it is my view that where an applicant brings no case at all, it will be an unusual situation where the insurer will not be entitled to at least some of its expenses. Whether that result is appropriate in a statutory first-party system is a good question, however the legislative intent of the new scheme is unavoidable.

Other than submitting that the Application for Arbitration was not unnecessary and vexatious, Mr. Mazumder had little to say in support of his claim to expenses.

I do not entirely agree. The arbitration was perhaps not vexatious, but it would be hard to say that it was necessary. Mr. Mazumder brought no case at all and I found almost entirely, on the basis of his own evidence,that he was not entitled to an income replacement benefit. Further, Mr. Mazumder lead almost no evidence in support of his housekeeping and medical benefits claims although they were maintained through to the close of the hearing.

Accordingly, I find that Mr. Mazumder is not entitled to his expenses and as a consequence of the utter lack of merit in his case, Security National is entitled to its expenses.

Mr. Mazumder did raise a number of issues in respect of the quantum of expenses claimed by Security National. In particular, it was submitted that expenses incurred prior to the application for arbitration are not compensable. Additionally, it was submitted that the arbitration assessment fee is not compensable under the Expense Regulation. Without accepting Mr. Mazumder’s submission on the recovery of pre-arbitration expense, Security National subsequently dropped its claim to a significant disbursement, being an accountant’s report.

Mr. Mazumder also submitted the hours claimed in preparing for the arbitration (50.5) are excessive given the issues in dispute and the brevity of the hearing in the end. Security National responded that while the hearing was brief there remained significant issues in dispute and more significantly, that I ought to consider the protracted efforts Security National was required to take in order to deal with production issues.

As regards legal fees, while I accept Mr. Mazumder’s submission to some degree, in the end Security National was required to absorb not insignificant expenses in dealing with production issues caused entirely by Mr. Mazumder’s ongoing failure to make agreed productions. Mr. Mazumder also submitted that as the hearing was only 4 hours, long Security National should only be entitled to 4 hours of preparation. I do not agree. There is a de minimus element to this assessment and while the hearing was very brief I note that it was originally scheduled for four days and that until very late in the day it was contemplated that there would be medical evidence called.

In light of the nature of the issues in dispute and considering as well the conduct of Mr. Mazumder that tended to protract the process, I consider that Security National is entitled to fees in the amount of $2,500, plus GST of $150.

As for its disbursements, as I indicated at the oral hearing expenses incurred prior to the Application for Arbitration are generally not compensable. Neither is the arbitration assessment, except as noted above. The expense of a court reporter is entirely unnecessary to the effective presentation of an arbitration and ought to be borne by the party requesting the service. I find therefore that Security National is entitled to the only remaining expense of obtaining production of Dr. Thenganatt’s clinical notes and records in the amount of $135.41.

December 5, 2007

David Muir Arbitrator

Date

Financial Services Commission of Ontario