Aviva Insurance Company of Canada v. Abrams, 2008 ONFSCDRS 151

Financial Services Commission of Ontario

Commission des services financiers de l’Ontario

Neutral Citation: 2008 ONFSCDRS 151

Appeals P08-00027 and P08-00028

OFFICE OF THE DIRECTOR OF ARBITRATIONS

AVIVA INSURANCE COMPANY OF CANADA (FORMERLY PILOT INSURANCE COMPANY)

Appellant

and

PATRICIA ABRAMS on behalf of COURTNEY and JOSHUA ABRAMS

Respondents

BEFORE:

Delegate Lawrence Blackman

REPRESENTATIVES:

Ms. Susan Bromley for Aviva Insurance Company of Canada (Formerly Pilot Insurance Company)

Mr. Chris Clifford for Patricia Abrams on behalf of Courtney and Joshua Abrams

HEARING DATE:

September 9, 2008

Written submissions were received by August 15, 2008

PRELIMINARY ISSUES ORDER

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

1. These two appeal proceedings are combined.

2. The appeals of the Arbitrator’s decision dated June 23, 2008 may proceed.

3. The Arbitrator’s June 23, 2008 orders regarding the interest awards to the Respondents and a special award hearing are stayed pursuant to subsection 282(6) of the Insurance Act, R.S.O. 1990, c. I.8 (as amended).

4. The requests for fresh evidence to be introduced in these appeal proceedings are denied.

1

5. The Appellant has thirty days from the date of receipt of this decision to serve on the Respondents and file with the Commission (with a Statement of Service in Form F) its written submissions. The Respondents have twenty days from the date of receipt of the Appellant’s written submissions to serve on the Appellant and file with the Commission (with a Statement of Service in Form F) their written submissions.

6. The issue of the legal expenses of this preliminary issue decision is deferred to the main appeal hearing, subject to any further or other order of an appellate officer.

September 18, 2008

Lawrence Blackman Director’s Delegate

Date

REASONS FOR DECISION

I. NATURE OF THE APPEALS

The late Carl Gibson was killed in a motor vehicle accident on October 15, 2003. Ms. Patricia Abrams subsequently applied to Aviva Insurance Company of Canada (Formerly Pilot Insurance Company) (the “Appellant”) for a spousal death benefit pursuant to the Schedule.¹ Ms. Abrams also applied for dependent death benefits for her children, Courtney Abrams and Joshua Abrams (the “Respondents”). The Appellant denied these claims.

The parties ultimately came before Arbitrator Ashby (the “Arbitrator”). The issues remaining in dispute, as set out in the Arbitrator’s June 23, 2008 decision, were whether Ms. Abrams and the Respondents were entitled to interest on the death benefits, whether the Respondents were entitled to a special award and the legal expenses of the arbitration proceeding.

The Arbitrator found that Patricia Abrams was not entitled to an award of interest, based on the exception set out in Bajic and Pafco Insurance Company Limited and Zurich Insurance Company, (FSCO P00-00050, June 5, 2001), as stated by the Arbitrator, that “interest does not accrue where the actions of the insured person prevents the insurer from determining entitlement.” In this case, Ms. Abrams had provided incorrect information as to how long she had cohabited with Mr. Gibson so as to meet the definition of spouse.

The Arbitrator held that the word “dependant” was not defined in either the Schedule or the Insurance Act. She found that the information received by the Appellant in February 2005 was sufficient to establish that the Respondents were dependants of the deceased at the time of his death and, as a result, the Respondents were entitled to interest pursuant to subsection 46(2) of the Schedule. The Arbitrator further found that there was a prima facie case that the Appellant may have unreasonably delayed payment of the dependent death benefits and that a further hearing in respect of a possible special award was to be convened before her.

The Arbitrator fixed the arbitration legal expenses at $8,915, payable by the Appellant.

Patricia Abrams does not appeal the Arbitrator’s decision that she was not entitled to payment of interest. The Appellant does not appeal the award of legal expenses. The Appellant does, however, submit that, amongst other things, the Arbitrator erred in law in determining that the Respondents were directly dependent upon the late Carl Gibson.

The parties agree that subsection 2(6) of the Schedule does in fact provide that:

For the purpose of this Regulation, a person is a dependant of another person if the person is principally dependent for financial support or care on the other person or the other person’s spouse. [emphasis added]

The parties further agree that:

(a) the Respondents were primarily dependant for financial support or care on Patricia Abrams;

(b) at the time of the accident, Patricia Abrams was the spouse of the late Carl Gibson as defined in subsection 2(1) of the Schedule;

(c) the Respondents were dependants of the late Carl Gibson, pursuant to subsection 2(6) of the Schedule, as they were primarily dependent on his spouse, Patricia Abrams;

(d) the Respondents were each entitled to payment of $10,000 as dependants pursuant to paragraph 25(2)(2) of the Schedule; and,

(e) the Appellant made payments of $10,000 to each of the Respondents pursuant to paragraph 25(2)(2) of the Schedule.

The parties agree that the issue of the Respondent’s dependency directly on the deceased was not before the Arbitrator. The Respondents concede that they could not establish dependency directly on the deceased.

II. ISSUES

The initiating documents in these appeals raised several preliminary issues. By letter dated August 27, 2008, I confirmed these issues as follows:

1. Should these two appeal proceedings be combined or otherwise consolidated pursuant to the principles set out in Rule 30 of the Dispute Resolution Practice Code (Fourth Edition, Updated – October 2003) (the “Code”)?

2. Are these appeals of a preliminary or interim order of an arbitrator as contemplated by Rule 50.2 of the Code and if so, should the appeal be rejected until all of the issues in dispute in the arbitration have been finally decided?

3. Should the Arbitrator’s Order of June 23, 2008 be stayed pursuant to subsection 282(6) of the Insurance Act, R.S.O. 1990, c. I.8 (as amended)?

4. Should fresh evidence be allowed to be introduced in these appeal proceedings?

III. COMBINING THE PROCEEDINGS

Rule 30 of the Code addresses combining arbitration applications. There is no similar provision regarding appeals. Rule 1.2 of the Code provides that where something is not specifically provided for in the Rules, the practice may be decided by referring to similar Rules in the Code.

I am persuaded that the criteria of Rule 30 should apply to this case.

These two appeals arise out of the same arbitration decision. They raise common questions of fact and law. The same counsel are involved. I am persuaded that combining these proceedings will result in the most just, quickest and least expensive means to deal with these appeals. Accordingly, on the consent of both parties, these proceedings are combined.

IV. LEAVE TO APPEAL

Rule 50.2 of the Code provides that a party may not appeal a preliminary or interim order of an arbitrator until all of the issues in dispute in the arbitration have been finally decided, unless the Director, or by virtue of subsection 6(4) of the Insurance Act, R.S.O. 1990, c. I. 8, as amended, the Director’s Delegate, orders otherwise.

The Respondents submit that as the question of a special award is still outstanding, all of the issues in dispute in arbitrations have not been finally decided and, hence, the appeals should be presently rejected. The Appellant submits that the Arbitrator’s orders dispose of the issue of interest and, therefore, are final decisions which do not require leave to appeal.

In the alternative, if leave to appeal is found to be required, the Appellant submits that leave

should be granted for any one of the following reasons:

(a) There is a strong argument on the key issue of dependency if not a prima facie case for a successful appeal;

(b) The decision is of significant importance, the Arbitrator having adopted a new interpretation of dependency;

(c) The approach taken by the Arbitrator is inconsistent with the definition of “dependant” in the Schedule and all past cases that have applied that definition; and,

(d) Granting leave to hear the appeal is the most efficient manner of proceeding. Otherwise, the parties will be forced to incur unnecessary legal expenses on the special award issue, should the interest award be rescinded.

I find that all of the issues in dispute in the arbitration proceedings have not been finally decided and, hence, the criteria set out in Allstate Insurance Company of Canada and Tesfay, (FSCO P99-00023, June 21, 1999) regarding Rule 50.2 of the Code are applicable. Delegate Makepeace held that these “include the apparent strength of the appeal, the importance or novelty of the issue raised, and whether rejecting the appeal or hearing it will provide the quickest, most just, and most expeditious way of disposing of the issues between the parties.”

Special awards are predicated, pursuant to subsection 282(10) of the Insurance Act, on payments being unreasonably withheld or delayed. The parties agree that dependency is defined in the Schedule and that the issue of the Respondents’ direct dependency on the deceased was not before the Arbitrator. Given these agreements, the consequent apparent strength of the appeal and the importance of the issue raised, I am persuaded that in terms of expeditiousness, justice and cost effectiveness, it is preferable that these appeals be determined prior to a potentially unnecessary special award hearing being held.

V. STAY

The Appellant, citing Allstate Insurance Company of Canada and N.I., (FSCO P07-00024, March 7, 2008), submits that the criteria to be considered whether to grant a stay are:

(a) the bona fides of the appeal;

(b) the substance of the grounds for appeal; and,

(c) the hardship to the respective parties if the stay is granted or refused.

The Appellant seeks a stay of the interest awards and the special award hearing. It does not seek a stay of the Arbitrator’s award of legal expenses. The Appellant submits that it is advancing these appeals in the interests of justice and not for tactical reasons. It argues that the Arbitrator’s error in finding that “dependant” was not defined in the Schedule establishes a prima facie basis for the appeals. Further, it submits that the Arbitrator found that the Respondents were directly dependent upon the deceased notwithstanding that neither party sought such a finding.

The Appellant concedes that it faces little hardship if a stay is not granted, other than the possibility that any amounts paid might not be recoverable. The hardship would be on the Respondents who would may to repay these amounts. As well, there is potential hardship in wasted time and expense in proceeding to a hearing on a special award if there is no basis for the interest awards.

While the Respondents concede that they could not establish their dependency directly on the deceased, they argue that the Arbitrator’s finding that they were dependants was correct as they were dependants of the deceased’s spouse at the time of the accident and the exception in Bajic does not apply. They also argue that there has been emotional and financial hardship to their family for over four years and, further, that it is premature to consider the merits of a special award, as that has not yet been heard.

Paraphrasing Paragraph 64 of the Principles of Civility for Advocates issued by the Advocates Society, adjudicators are entitled to expect that counsel will assist them in doing justice in a case. I appreciate the agreements and concessions forthcoming from the parties. Based on same, I am persuaded that the appeals are bona fide and that there is substance to the grounds for appeal.

The Appellant does not seek a stay of nor does it appeal the Arbitrator’s award of legal expenses. I am advised that no steps have yet been taken to arrange a special award hearing. As stated, in terms of expeditiousness and cost effectiveness, in this case it makes little sense to have these

matters proceed to a special award hearing without first determining these appeals.

The awards sought to be stayed are not reimbursement of out-of-pocket expenses or required for the maintenance of services and/or the provision of one’s livelihood. Further, there is the significant question of how the exception in Bajic applies to the surviving spouse, Patricia Abrams (a finding which is not appealed), but does not apply to the Respondents, whose status as dependants is agreed to rest on their mother’s status as spouse. I do not see that this question is answered, or addressed, in the Arbitrator’s decision.

Given these circumstances, I am persuaded to exercise my discretion pursuant to subsection 283(6) of the Insurance Act to stay the interest awards and the contemplated special award hearing until these appeal proceedings are completed.

VI. FRESH EVIDENCE

The Appellant seeks to have the affidavit of Michelle Large, a law clerk with the office of counsel for the Respondents, sworn August 9, 2007, introduced into evidence. In that affidavit, Ms. Large states that counsel for the Respondents advised her that despite considerable effort, he and the Abrams family had been unable to establish sufficient evidence that the Respondents were principally dependent for financial support or care on the deceased, Carl Gibson, and that the Respondents’ entitlement to death benefits rested entirely on Patricia Abrams being recognized as the spouse of the deceased.

Citing Budd and Personal Insurance Company of Canada, (FSCO P99-00032, January 8, 2000), the Appellant submits that the following considerations regarding fresh evidence in these appeals are relevant:

1. Although the affidavit could have been entered at the arbitration hearing, both parties agreed that the Respondents were not advancing that they were directly dependent on the deceased. Hence, there was no need for the affidavit to have been filed;

2. The evidence is credible, being a sworn statement setting out concessions made by the Respondents;

3. The evidence is relevant, as it directly contradicts the Arbitrator’s findings; and,

4. Had the affidavit been before the Arbitrator, she would not have made her orders.

The Respondents submit that the evidence contained in the affidavit is not relevant as the Appellant accepted Patricia Abrams as the spouse of the deceased at the time of the accident and that the Respondents were dependants of the deceased. Further, the Arbitrator’s conclusions that the Appellant had received sufficient information in the February 2005 applications for death benefits to establish dependency and in additional statements received on December 1, 2006 are findings of fact. Findings of fact are not appealable.

If this additional evidence is allowed, the Respondents ask that they be allowed to introduce fresh evidence to respond to the issue of their direct dependency on the deceased. In the alternative, the Respondents submit that the Arbitrator be allowed to expand on and clarify her reasons.

Rule 65.5 of the Code provides that an adjudicator may, at any time, correct a typographical error, error of calculation, technical error or similar error made in his or her decision or order. Rule 65.6 of the Code provides that an adjudicator may at any time clarify a decision or order that contains a misstatement, ambiguity or other similar error. I do not see that either of the parties has written to the Arbitrator in this regard. Rather, this matter is now before me as an appeal on a question of law. It is appropriate that it now continue as such.

Given the Respondents’ concession in these appeals that they could not establish dependency directly on the deceased and that the issue of dependency was not before the Arbitrator, there appears to be no need for Ms. Large’s affidavit. Further, I am not persuaded that it would be appropriate, after the Arbitrator has rendered her decision, to allow the Respondents to now file evidence to support that decision on an issue it concedes was not before her. Accordingly, the requests to allow fresh evidence in these appeal proceedings are denied.

VII. NEXT STEPS

Pursuant to Rules 54 and 81 of the Code, the Appellant has thirty days from the date of receipt of

this decision to serve on the Respondents and file with the Commission (with a Statement of Service in Form F) its written submissions. The Respondents have twenty days from the date of receipt of the Appellant’s written submissions to serve on the Appellant and file with the Commission (with a Statement of Service in Form F) their written submissions.

VIII. EXPENSES

The issue of the legal expenses of this preliminary issue decision is deferred to the main appeal hearing, subject to any further or other order of an appellate officer.

September 18, 2008

Lawrence Blackman Director’s Delegate

Date

Footnotes

1. 1The Statutory Accident Benefits Schedule - Accidents on or after November 1, 1996, Ontario Regulation 403/96, as amended.