Allstate Insurance Company of Canada v. N.I., 2008 ONFSCDRS 39

Financial Services Commission of Ontario

Commission des services financiers de l’Ontario

Neutral Citation: 2008 ONFSCDRS 39

Appeal P07-00024

OFFICE OF THE DIRECTOR OF ARBITRATIONS

ALLSTATE INSURANCE COMPANY OF CANADA Appellant

and

N. I. Respondent

BEFORE: Delegate Lawrence Blackman

REPRESENTATIVES: Mr. Grant R. Dow for Allstate Insurance Company of Canada Mr. David S. Wilson for N.I.

HEARING DATE: Written submissions were received by February 15, 2008

APPEAL ORDER

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

1. The Appellant’s motion for a stay of the order of Arbitrator Leitch dated June 26, 2007 is dismissed.

March 7, 2008

Lawrence Blackman Director’s Delegate

Date

REASONS FOR DECISION

I. BACKGROUND AND SUBMISSIONS

The Respondent, N.I., claims accident benefits pursuant to the Schedule¹ against his first-party insurer, Allstate Insurance Company of Canada (“the Appellant”), arising from an April 8, 2002 motor vehicle accident. An eight-day arbitration hearing before Arbitrator Leitch (the “Arbitrator”) to determine N.I.’s specific entitlement to ongoing non-earner benefits (“NEBs”), housekeeping expenses and a special award concluded on April 13, 2007. On June 26, 2007, the Arbitrator issued his decision limiting the Respondent’s award to NEBs from October 8 to December 5, 2002, plus interest thereon from November 6, 2002.

Clause 12(7)(a) of the Schedule provides that the insurer is not required to pay NEBs for the first 26 weeks after the onset of the insured’s complete inability to carry on a normal life. October 8, 2002, the beginning of the period awarded, in addition to being 26 weeks after the accident herein, also followed the Respondent’s September 11, 2002 right shoulder surgery. December 5, 2002, the end of the entitlement period, was the date of an insurer’s in-home assessment.

On July 26, 2007, the Appellant filed a Notice of Appeal in which it submitted that the Arbitrator had erred in finding that the Appellant had conceded the Respondent’s entitlement to NEBs for the said period. The relief sought was that the Arbitrator’s reasons at pages 44 and 52 of his decision be amended. The Appellant did not seek in its Notice of Appeal a stay of the arbitration order.

By letter dated August 9, 2007, the Director requested clarification of the basis of the appeal, noting that the appeal must relate to an order, not merely to some aspect of the reasons provided.

The Appellant responded August 27, 2007, seeking to amend its Notice of Appeal by now requesting an order that the Respondent was not entitled to the NEBs granted. The Notice of Appeal was subsequently acknowledged by Delegate Makepeace on September 13, 2007.

By letter dated December 4, 2007, the Appellant filed with the Commission a transcript of the arbitration hearing for the final hearing day of April 13, 2007. In its covering letter, the Appellant sought to further amend its Notice of Appeal by requesting a stay of the Arbitrator’s order granting the Respondent NEBs from October 8 to December 5, 2002 (totalling $1,535.50) and pre-judgment interest.

The Appellant sought a stay of the June 26, 2007 order on the following grounds:

1. the arbitration order was based on what the Arbitrator found to be the Appellant’s concession in its closing submissions that the Respondent was entitled to NEBs for the period in question The Appellant submitted that it made no such concession, relying on the filed transcript; and,

2. the Appellant anticipated receiving its legal expenses of the arbitration in accordance with Rule 75 of the Dispute Resolution Practice Code (Fourth Edition, Updated – October 2003) (the “Code”) based on its degree of success, namely that some $50,000 in NEBs and housekeeping benefits, plus interest and a special award sought by the Respondent were not awarded. The Appellant stated that its Bill of Costs totalled $32,311.67 and that “[i]n the absence of an appeal by the insured of the Arbitration Order, it was reasonably anticipated that the insured would attempt to set off its responsibility to pay the insurer’s expenses against the award received.”

The Respondent submitted that a stay should not be granted for the following reasons:

1. the Appellant had not conducted itself properly, having not paid, amongst other benefits, the aforesaid NEBs. The Respondent argued that the Appellant should not have its inappropriate behaviour rewarded by a stay months after the arbitration order;

2. the usual practice of not staying an arbitration order is consistent with the concept of consumer protection in protecting the flow of urgently needed benefits; and,

3. the Appellant’s presumption that it would be awarded its legal expenses of the arbitration was inappropriate.

II. ANALYSIS

Subsection 25(1) of the Statutory Powers Procedure Act, R.S.O. 1990, c. S.22 provides that:

25(1) An appeal from a decision of a tribunal to a court or other appellate body operates as a stay in the matter unless,

(a) another Act or a regulation that applies to the proceeding expressly provides to the contrary; or

(b) the tribunal or the court or other appellate body orders otherwise. 1997, c. 23, s. 13 (21).

Subsection 283(6) of the Insurance Act, R.S.O. 1990, c. I.8 (as amended) expressly provides that an appeal does not stay the order of an arbitrator, unless the Director decides otherwise. As stated by Delegate McMahon in Guardian Insurance Company of Canada and Armstrong, (FSCO P00-00037, July 20, 2000), a stay from an order of an arbitrator at the Financial Services Commission of Ontario (“FSCO”) is the exception, rather than the rule.

As noted in prior cases, the stay as an exception on appeal also differs from the Ontario Rules of Civil Procedure, R.R.O. 1990, Regulation 194, which provide, at Rule 63.01(1), that the delivery of a notice of appeal from an interlocutory or final order stays, until the disposition of the appeal, any provision of the order for the payment of money, except a provision that awards support or enforces a support order.

Given that arbitration orders, in significant measure, reimburse expenditures arising from a motor vehicle accident or replace lost income, services or possessions, the same considerations regarding support orders exist, including the need for timely payment. Further, subsection 283(6) of the Insurance Act is consistent with subsection 283(1) (which limits appeals of the order of an arbitrator to a question of law), both provisions showing deference to arbitration decisions.

Delegate McMahon, in determining whether a stay should be granted in Armstrong, adopted Delegate Richardson’s criteria in Canadian Home Assurance Company and Scavuzzo

(OIC P-000626, May 18, 1992), namely:

1. the bona fides of the appeal;

2. the substance of the grounds for appeal; and,

3. the hardship to the respective parties if the stay is granted or refused.

Delegate Richardson had followed Re Great Northern Capital Corporation Ltd. et al. and City of Toronto et al. (1974), 1973 CanLII 762 (ON HCJ), 1 O.R. (2d) 160, which addressed whether a mandamus order that building permits should be issued, should be stayed. Under Rule 506 of the then Rules of Civil Procedure, an appeal did not stay a mandamus order, unless otherwise ordered by a judge, as specified.

Delegate McMahon further stated in Armstrong that:

The fact that a stay is the exception rather than the rule, suggests to me that the drafters of the legislation recognized that the insurer is in a much better position than the insured person to bear the risks inherent in not staying the arbitrator’s order.

To some extent, the request for a stay is the mirror image of subsection 282(11.1) of the Insurance Act which provides for payment of interim benefits prior to a full arbitration decision.

FSCO decisions, although perhaps not uniform regarding the precise onus on a party seeking interim benefits, generally accept that an interim award of benefits is an exceptional remedy, notwithstanding that subsection 282(11.1) is silent as to the necessary pre-requisite criteria. As stated by Arbitrator Renahan in Kulasekarampillai and State Farm Mutual Automobile Insurance Company, (FSCO A03-001063, January 21, 2004):

Arbitrators generally agree that they should make determinations on entitlement after a full hearing in which each side is given a fair opportunity to present their case.

This reflects, in large measure, the view that the arbitrator hearing an interim motion usually does not have the benefit of oral evidence and may not have all relevant documentation. Thus, there should be compelling reasons to allow an award prior to a full hearing which would include such procedural safeguards as cross-examination. Compelling reasons have usually included at least a prima facie case² if not a higher standard of proof than at an arbitration hearing,³

accompanied by extenuating circumstances such as hardship to the moving party.

Motions for stays are heard after a full hearing has been held. The appellate officer is at a distinct disadvantage when a stay is requested, usually having the benefit of neither full submissions on the merits of the appeal nor all the relevant supporting documentation such as transcripts.

Hence, to some extent, adjudicators hearing stay requests, as with those hearing requests for interim benefits, may see themselves as not unlike Plato’s fettered prisoners, straining in the dim light of their subterranean cave to discern truth from the shadows flickering on the wall before them. Thus, in appropriate circumstances, a conservative approach may be taken.

Delegate McMahon, in Armstrong, stated that stay decisions are not usually made public. The reason for this is unclear, especially in an open and transparent process where interim benefits decisions are usually put in decision format available to the public on the FSCO website.

I now turn to the pertinent considerations in the case before me.

1. The length of the proceeding

As a result of a dispute as to his entitlement to certain benefits claimed as a result of the April 8, 2002 accident, N.I. applied to FSCO for mediation. Mediation failed on September 15, 2004. N.I.’s Application for Arbitration was filed with FSCO on September 27, 2004.

The pre-hearing discussion herein was held May 30, 2005, some eight months after receipt of the Application for Arbitration. Pursuant to the Code, dates for holding a pre-hearing discussion are to be available within six to eight weeks of registration of a completed Application for Arbitration. The reason for the delay in holding a timely pre-hearing discussion is not clear.

The June 13, 2005 pre-hearing letter set hearing dates of February 6 to 9, 2006, some eight months later. The Code also provides that dates for an oral hearing will be available within four to six months from the conclusion of the pre-hearing discussion. Again, it is unclear why a timely hearing date was not set.

The arbitration hearing commenced in February 2006, resumed in September 2006, and finished in April 2007. By letter dated May 18, 2007, the Arbitrator allowed the parties a further opportunity to provide submissions on a specific point of law following certain decisions coming to his attention. The arbitration decision was released June 26, 2007.

While the Commission received the Notice of Appeal on July 26, 2007, it was only by letter dated December 4, 2007 that the Appellant sought to stay the arbitration order of five months previous, the order for payment covering a period ending some five years before. By letter dated January 11, 2008, given the Appellant’s requests to amend the initial Notice of Appeal, I exercised my discretion pursuant to Rule 81 of the Code to allow the Respondent until February 4, 2008 to serve and file his late Response to Appeal and written submissions regarding the appeal and the request for a stay.

I further allowed the Appellant until February 19, 2008 to serve and file its reply submissions regarding the stay request, specifically noting the Respondent’s submission that the Appellant was in breach of the Arbitrator’s June 26, 2007 order.

The Schedule, as stated, largely pertains to reimbursing monetary losses and paying incurred expenses arising from a motor vehicle accident. A major goal of this alternative dispute system, within a first-party scheme of compensation, is to provide a simplified, expeditious and inexpensive means of resolving disputes. For perhaps various reasons, that has not happened in this case. The parties were in arbitration for nearly three years. An eight-day arbitration hearing has been held, followed by a 58-page decision awarding limited benefits. In these circumstances especially, there should be strong convincing circumstances warranting a stay.

2. The Bona Fides of the Appeal - Non-Compliance with the Arbitrator’s June 26, 2007 Order

As noted above, the Appellant was given an opportunity to reply specifically to the Respondent’s

submission that the Appellant was in breach of the Arbitrator’s June 26, 2007 order until it sought a stay of the said order more than five months later.

Rule 52 of the Code provides that an appeal must be served and filed within thirty days of the date of the arbitration order. The Notice of Appeal form provides a box one ticks off as to whether or not a stay is being sought. In its Notice of Appeal, the Appellant ticked off the box that a stay was not being sought. The Appellant did not provide any submissions in its February 14, 2008 reply letter regarding its failure to comply with the arbitration order during the period it was not seeking a stay, other than to say that the arbitration could “be described as incomplete” as arbitration legal expenses remained outstanding.

In my view, this is not a reasonable explanation for non-compliance with an arbitration order.

The Appellant had included in earlier filed material its July 6, 2007 letter to the Arbitrator which sought “clarification of the misstatement” in his decision that a concession had been made, while stating that it was not seeking a change to the decision or the order. By letter dated July 24, 2007, the Arbitrator indicated he could not accede to the request as it did not reflect his understanding of the position taken by the Appellant.

Given the Appellant’s July 6, 2007 letter stating it was not seeking to amend the arbitration order and, further, given the Appellant’s initial Notice of Appeal which did not seek to rescind the arbitration order, there is a question whether this appeal is less about the ultimate award and more about the precise basis for same. The Appellant’s failure to provide a legitimate rationale for its delay in complying with the Arbitration order leads to a question of whether the request for a stay is, in some measure, an endeavour to regularize what might be a prior self-help measure.

3. The Substance of the Grounds for the Appeal

The Appellant acknowledges that a party to an arbitration can appeal an order of an arbitrator only on a question of law, as set out in Rule 50.1 of the Code, which echoes subsection 283(1) of the Insurance Act. The Appellant submits that the “only finding of fact that can be characterized as an error in law is one made in the complete absence of supporting evidence,” citing (I think somewhat narrowly) Delegate McMahon in Lombardi and State Farm Automobile Insurance Company, (FSCO P01-00022, February 26 2003) and Delegate Evans in Kingsway General Insurance Company and Pereira, (FSCO P05-00031, December 20, 2006).

The Appellant submits that the Arbitrator’s finding of fact entitling the Respondent to the NEBs awarded is set out at page 42 of his reasons, namely that the Appellant conceded same in its closing arguments. The Appellant submits that the transcript of Victory Verbatim Reporting Services for April 13, 2007 supports its position that it did not concede the Respondent’s entitlement for any period of time. Implicitly, the Appellant’s argument is that any discrepancy between the Arbitrator’s reasons and the transcript must be resolved in favour of the latter.

By letter dated January 18, 2008 I wrote the parties, specifically asking that they address in their written submissions the status of the transcript or transcripts which they may wish me to consider. In my correspondence, I noted subsection 22(3) of the Insurance Act, which states that:

The evidence and proceedings in any matter before a person referred to in subsection (1) may be reported by a stenographer who has taken an oath before the person to report the evidence and proceedings faithfully.

The person referred to in subsection (1) is the Director and any arbitrator.

The Appellant replied that it retained stenographers for the arbitration hearing in accordance with Rule 74 of the Code, that the stenographers were under a professional and legal obligation to the tribunal and that the transcripts must be used fairly. While it was counsel’s recollection that an oath was not administered to the stenographers, it submitted that no issue or concern was raised by the parties or by the Arbitrator about the stenographer’s duties and obligations, that the stenographer had certified the transcript ordered as being a true and accurate transcription of the proceedings held April 13, 2007 and that the recording for that day remained available.

Rule 74.1 of the Code mirrors subsection 22(3) of the Insurance Act, stating that:

A hearing may be recorded by a court reporter who has taken an oath or affirmation to report the evidence and proceedings faithfully . . .

Rule 74.1 also confirms that FSCO does not provide reporting services for a hearing and that parties who want a record of the proceedings must make their own arrangements for the attendance of a reporting service and must pay for this service.

The Respondent submits that subsection 22(3) of the Insurance Act “has somehow been regularly ignored or overlooked by Arbitrators. Accordingly, the insured accepts that the status of the transcripts should not be affected by the apparent failure of the Arbitrator to administer the oath.” However, the Respondent has a different interpretation of the meaning of Allstate’s submissions as transcribed, submitting that the Arbitrator could properly have drawn the inference that a concession had been made.

I have a different view regarding the practice of swearing in stenographers at FSCO. In AXA Insurance Company and Kernaghan, (FSCO P07-00018, January 25, 2008), as an appellate officer, I noted that the arbitrator had sworn in the stenographer in accordance with subsection 22(3) of the Insurance Act, and I went on to consider the testimony set out in the transcript. In Cortez and Wawanesa Mutual Insurance Company, (FSCO A02-001632, May 4, 2007), as an arbitrator, I allowed the stenographer to be sworn in only on the conditions that I would have authority over the stenographer and that either party could order a copy of the transcript. As those terms were not acceptable to the party retaining the stenographer, I held that:

What Wawanesa is proposing in this case is that the role of their stenographer is akin to a junior lawyer, student-at-law or law clerk taking notes, albeit extremely professionally, purely for the benefit of one counsel and that counsel's client. Such a role is an honourable one, and I have no hesitation in allowing Mr. Toman or some other like individual into the hearing room to perform that task. He shall sit beside counsel as part of Wawanesa's legal team. He will not be sworn in. His notes will not be producible. His notes form no part of the record nor do they have any official or formal status. They are purely Wawanesa's property and purely for Wawanesa's benefit. They may be as partial and incomplete as Wawanesa feels is appropriate, highlighting whatever aspects of the evidence Wawanesa feels is helpful to its cause. To avoid any misunderstanding as to the status of the stenographer, the proceeding may not be taped, as is usual with a stenographer who has been sworn. Rather, a lap top or a writing utensil may be used. The stenographer shall be subject to my authority similar to any other legal representative or their assistant.

There is an important purpose behind subsection 22(3) of the Insurance Act and Rule 74 of the Code. While a cost efficient system of court reporting may have been created, the arbitrator’s administration of the oath to the stenographer is still mandatory to signify and confirm that the stenographer has ceased to be an employee of any one party and the stenographer’s sole responsibility is now to the tribunal as an independent, qualified professional.

I do not know why the Arbitrator did not administer an oath to the stenographer in this case. There is, however, no indication that either counsel requested that the oath be administered or that there any was any unreasonable refusal by the Arbitrator to do so. I am not persuaded that the consent of the parties elevates a stenographer to an official status absent the arbitrator’s administration of the oath, the arbitrator having the statutory duty to control the proceedings under the Statutory Powers Procedure Act.

Hence, in the absence of an official transcript, any discrepancy between an arbitrator’s reasons and a transcript is not automatically resolved in favour of the latter.

This, however, is but the first concern.

If indeed there is a finding that the Arbitrator erred in law in that he misconstrued the Appellant’s submissions and that there was no concession as found, what is the appropriate remedy? Should the award simply be rescinded? Or, should the matter go back to the Arbitrator to determine entitlement for the period in question on the basis of the evidence received? Or, in the further alternative, should there be a new hearing on the period in question?

The Respondent, in his written submissions, stated that “a review of the evidence before the Arbitrator with respect to the medical condition of the insured and his alleged impairments during the relevant period of time would warrant the conclusion that even apart from the position of the insurer, the insured was entitled to a non-earner benefit.”

One remedy that is not available to me, as an appellate officer, is to review the transcripts and the exhibits and to make findings of fact as to whether or not the Respondent meets the criteria for NEBs for the period in question. Hence, I am not persuaded that there is anything to be gained by requiring the Appellant to order transcripts for all eight days of the hearing, especially considering my findings as to their lack of official status.

Thus, based on the grounds of this appeal, even if the Appellant is successful, the NEBs awarded may, nonetheless, ultimately be confirmed based on the merits of the case rather than on any presumed concession.

4. The Hardship to the Respective Parties if the Stay is Granted or Refused

The Appellant submits that no basis for any claim of financial hardship by the Respondent “can or has been made and the award involved is not an ongoing benefit required by the insured person to ‘pay for the necessaries of life or obtain treatment,’” citing the Armstrong decision noted above.

The Appellant does not argue that the absence of a stay would present any hardship to itself. In Scavuzzo, the only hardship to the Appellant was the possibility that it would be unable to obtain repayment of amounts paid pursuant to the arbitration decision, should that decision not be sustained on appeal. Delegate Richardson cited the Ontario Court of Appeal in Digiammatteo v. Leblanc (1989), 1989 CanLII 4076 (ON CA), 71 O.R. (2d) 130 that:

In any event, there is always a risk of non-recovery in any litigation, even when successful, and I can see no reason why all of that risk should fall on the respondent in this case.

Arbitrator Renahan, in Kulasekarampillai, in denying a motion for interim benefits, applied the criteria set out by the Supreme Court of Canada in RJR-MacDonald Inc. v. Canada (Attorney General), 1994 CanLII 117 (SCC), [1994] 1 S.C.R. 311 (which involved a civil charter case for injunctive relief), one of which was irreparable harm. He further cited Chen v. Canada Trustco Mortgage Corp., [1997] O.J. No. 2834 (Ontario Court of Justice, July 11, 1997) that:

If the harm is strictly monetary then it can almost by definition be compensated for by monetary damages.

In the latter case, the Court considered that reducing “a person to living in destitution or dependant on charity could result in irreparable harm.” There is no inference in this case that payment by the Appellant of $1,535.50, plus pre-judgment interest, will lead to some undue financial hardship to the Appellant. Inconvenience in the repayment of benefits does not equate to harm, let alone irreparable harm.

In any event, if a stay were granted, the accruing 2% per month interest, compounded monthly, payable pursuant to section 46 of the Schedule might be a greater hardship to the Appellant if it is ultimately unsuccessful in this appeal, than any difficulty it may have in recovering the benefits ordered paid, if it is successful.

As well, although it is not applicable here, the Schedule does provide insurers, pursuant to section 47 of the Schedule, with the ability to make deductions from ongoing income replacement and caregiver benefits amounts an insured person is required to repay an insurer.

IV. RESULT

Considering:

• the nature of the benefits paid pursuant to the Schedule;
• the long history of this matter;
• the exceptional nature of stays in this dispute resolution process;
• the Appellant’s failure to comply with the arbitration order until its late request for a stay;
• the absence of any alleged hardship to the Appellant if a stay is refused;
• the question as to the bona fides of the relief sought of setting aside the arbitration award;
• the question of the status of the transcripts upon which the Appellant relies; and,
• the question as to whether the arbitration order might ultimately be confirmed on a different basis if indeed the Appellant is successful in this appeal,

I am not persuaded that the Appellant has established a basis upon which I should exercise my discretion to grant a stay. Accordingly, the Appellant’s motion for a stay of the June 26, 2007 arbitration order is dismissed.

March 7, 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.
2. 2Ramalingam and State Farm Mutual Automobile Insurance Company, (FSCO A02-001646, September 5, 2003).
3. 3Cripps and AXA Insurance (Canada), (OIC A-013360, August 8, 1997), where it was held that the standard of proof should be “very probable, that an applicant will be found to be entitled to the benefits sought.”