Chandrakumaran Vellipuram v. State Farm Mutual Automobile Insurance Company, 2007 ONFSCDRS 66

Financial Services Commission of Ontario

Commission des services financiers de l’Ontario

Neutral Citation: 2007 ONFSCDRS 66

FSCO A05-002629

BETWEEN:

CHANDRAKUMARAN VELLIPURAM

Applicant

and

STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY

Insurer

DECISION ON EXPENSES

Before:

Lawrence Blackman

Heard:

Written submissions were received by February 26, 2007.

A telephone conference call was held March 28, 2007.

Appearances:

David S. Wilson for Mr. Vellipuram

Michael W. Smith for State Farm Mutual Automobile Insurance Company

The Applicant, Chandrakumaran Vellipuram, was injured in a motor vehicle accident on January 1, 2004. In a decision dated December 8, 2006, while reserving on the issue of expenses, I found the Applicant entitled, under the Schedule,¹ to payment of income replacement benefits of $337.25 per week ongoing from October 4, 2005.

The issue in this further hearing is:

Is Mr. Vellipuram entitled to his expenses incurred in respect of this arbitration proceeding and, if so, what is the quantum of those expenses?

Mr. Vellipuram is entitled to his expenses incurred in respect of this arbitration proceeding, fixed in the amount of $33,737.73, in addition to the sum of $1,653.60 ordered paid by Arbitrator Murray by decision dated January 23, 2007.²

Entitlement to Legal Expenses

The Insurer did not dispute the Applicant's entitlement to his legal expenses of this arbitration proceeding. Given the Applicant's success at arbitration and his counsel's significant contribution to an expeditious and cost efficient hearing, I am persuaded that the Applicant is entitled to his legal expenses of this arbitration proceeding.

Quantum of Legal Expenses

(a) Legal Fees - Hourly Rate

Mr. Vellipuram, in his Bill of Costs received February 12, 2007, sought a total of 122.2 hours of counsel time for preparation for and attendance at the arbitration hearing, plus .5 hours for preparation for the expense hearing. The 122.2 hours consisted of 56.5 hours for Mr. David S. Wilson, entirely for arbitration preparation, and 65.7 hours for Mr. Robert A. Zigler, the latter divided between 31 hours of hearing attendance and 34.7 hours of hearing preparation. The Applicant claimed an hourly rate of $150 for both counsel.

In oral submissions, the Applicant sought a further 1.5 hours for preparation for and participation at the expense hearing.

The Insurer had no objection to the hourly rate sought. Pursuant to Rule 78.1 of the Dispute Resolution Practice Code (Fourth Edition, Updated - October 2003), based on the experience and expertise of counsel, the Applicant's success in the outcome of the proceeding and the conduct of counsel in facilitating an expeditious hearing, I am satisfied the maximum hourly rate allowed an insured person under Rule 78, being $150 an hour, is more than justified.

(b) Legal Fees - Number of Hours

In its written submissions, State Farm conducted a line-by-line analysis of counsel time set out in the Applicant's Bill of Costs. One submission by the Insurer was that there was a duplication of time between Mr. Wilson (who attended the pre-arbitration discussion) and Mr. Zigler (who attended the arbitration hearing). State Farm also argued that time spent by counsel complying with undertakings was something to which a law clerk should attend.

State Farm also argued that conversations with clients were not assessable unless it was specifically indicated that they were for the purpose of the arbitration proceeding. In this regard, State Farm took objection to counsel's four-hour meeting with the Applicant on Sunday, August 13, 2006, the day before the start of the arbitration hearing.

State Farm further took issue with .2 hours attributed to 173 letters without further clarification.

In McLellan and Aviva Canada Inc. (FSCO A06-001262, February 12, 2007), I stated that:

The general arbitration approach towards assessing expenses is set out in Henri and Allstate Insurance Company of Canada (OIC A-007954, August 8, 1997). Then Arbitrator Makepeace held that "[a] line-by-line assessment of the expenses claimed is not appropriate. Rather, the Arbitrator should make a global assessment of reasonable expenses." Arbitration decisions have held, subject to special circumstances, that the appropriate approach is a ratio of preparation time (and other services provided before a hearing) to attendance at an arbitration hearing of between 4:1 and 1:1.

Without conducting a line-by-line review of the Applicant's Bill of Costs, regarding the Insurer's general concerns, I am first of the view that having counsel take direct responsibility for ensuring that pre-hearing undertakings and orders are met is refreshing and should be encouraged, not penalized. Likewise, it would certainly be part of best practices to maintain communication with one's client, and to properly and thoroughly prepare an applicant for an arbitration hearing, when the applicant is almost invariably a crucial, if not the crucial witness at a hearing.

Regarding the hours sought for correspondence, I agree with Arbitrator Sapin in Kulasekarampillai and State Farm Mutual Automobile Insurance Company (FSCO A03-001063, May 11, 2005) that:

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.

Mr. Wilson advised State Farm at the pre-hearing discussion that he would not be able to take the arbitration hearing and that arrangements would be made for another counsel to attend at the hearing. I am not persuaded that there was duplication of significance in this case; if Mr. Wilson had taken the matter to hearing, he still would have had to have thoroughly reviewed the file closer to the start of hearing date and prepare his witnesses, as well as prepare cross-examination of the Insurer's witnesses, his opening statement and closing submissions.

In this particular case, 31 hours of counsel time was expended at the arbitration hearing. Preparation time prior to the hearing was 91.2 hours.³ This represents a ratio of preparation to hearing time of less than 3:1. I am persuaded that this expenditure of preparation time was a significant factor for both the Applicant's success in this matter and the parties being able to complete a hearing addressing both pre and post 104-week income replacement entitlement expeditiously, notwithstanding the need for an interpreter. I find the hours sought are well within the general ratio and that they are reasonable.

Accordingly, I find that the Applicant is entitled to 124.2 hours at $150 an hour, which totals $18,630, plus GST of $1,117.80, for a total of $19,747.80. This is in addition to the legal fees allowed by Arbitrator Murray, by decision issued January 23, 2007.

(c) Legal Disbursements

The Applicant claimed $19,771.93 for disbursements. The Applicant indicated that none of the expenses of the medical reports had been recovered from the tort defendant or insurer, the latter proceeding being in its early stages.

State Farm withdrew its objection to the interpretation accounts for attendances with medical experts and counsel. The Applicant had the assistance of an interpreter at the arbitration hearing. Subsection 4(4) of Section F of the Dispute Resolution Practice Code provides that a party may be awarded out-of-pocket expenses in furtherance of the arbitration hearing. I am persuaded that these expenditures were in furtherance of the arbitration hearing, that they reasonably facilitated the preparation of expert reports entered into evidence and the providing of the Applicant's oral evidence at the arbitration hearing. I allow these expenses.

State Farm also objected to the disbursement expenses for courier and fax costs of $156.07, which it submitted were office expenses, and parking and mileage costs of $82.05. Subsections 4(1) and (3) of Section F specifically allow, respectively, for facsimile and courier expenses, and I allow same. Mileage and parking expenses are covered by section 6, and again, are allowed.

The disbursement account of Dr. J. Garber's report was $7,387, including GST. Paragraph 5(5) of the Code limits the amount of the expenses paid by or on behalf of an insured person or an insurer to an expert for preparation of a report to $1,500. Accordingly, Dr. Garber's account is reduced to $1,500, plus GST (at the then applicable 7% rate) of $105, for a total of $1,605.

Subtracting the excess claim for Dr. Garber, the Applicant's disbursements are allowed in the amount of $13,989.93.

(d) Result

Accordingly, I allow legal fees of $19,747.80 and disbursements of $13,989.93, for a total of $33,737.73, in addition to the sum of $1,653.60 ordered paid by Arbitrator Murray, by decision dated January 23, 2007.

March 30, 2007

Lawrence Blackman Arbitrator

Date