Elena Borissenko v. RBC General Insurance Company, 2008 ONFSCDRS 43

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

Neutral Citation: 2008 ONFSCDRS 43

FSCO A05-002801

BETWEEN:

ELENA BORISSENKO

Applicant

and

RBC GENERAL INSURANCE COMPANY

Insurer

DECISION ON EXPENSES

Before: Richard Feldman

Heard: Written submissions received by February 14, 2008 and a telephone conference call on February 22, 2008.

Appearances: Owen Elliot, student-at-law, for Ms. Borissenko Alexander Curry, counsel, for RBC General Insurance Company

Issues:

The Applicant, Elena Borissenko, was injured in a motor vehicle accident on January 19, 2005. In a decision dated August 8, 2007, I dealt with her claims for statutory accident benefits under the Schedule.¹ I made the following orders, while reserving on the issue of expenses:

The Insurer shall pay to the Applicant $502.00 for treatment provided by Prime Health Recovery Centre pursuant to a treatment plan (Form OCF-18) from Dr. Larry Feldman dated July 26, 2005.
The Applicant is entitled to interest for the overdue payment of this benefit pursuant to section 46(2) of the Schedule.
The Applicant’s claim for $869.50 for the cost of an in-home assessment conducted by Dr. Jeff Sole (chiropractor) of Century Assessment and Diagnostic Centre on April 5, 2005 and the report resulting therefrom is dismissed.

The issue in this further hearing is:

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

Result:

RBC is entitled to expenses in the amount of $400.00.

EVIDENCE AND ANALYSIS:

Subsection 282(11) of the Insurance Act² provides that an arbitrator may award to the insured person or the insurer, according to the criteria (currently six criteria) prescribed by the regulations, all or part of such expenses incurred in respect of an arbitration proceeding, to the maximum set out in the regulations.

The six criteria are as follows:

Each party’s degree of success in the outcome of the proceeding.
Any written offers to settle made in accordance with [the regulations].
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.
Whether the insured person refused or failed to submit to an examination as required under section 42 of the Schedule or refused or failed to provide any material required to be provided under subsection 42(10) of the Schedule.

According to the Expense Regulation, these are the only criteria that may be considered.

At the expense hearing, the parties agreed that there were no written offers to settle made in accordance with the regulations and that no novel issues were raised in the proceeding. Ultimately, the parties also agreed that the sixth criterion (refusal or failure of an applicant to submit to an examination required under s. 42) was not relevant to this case.³

Both parties agreed that the focus in this expense hearing ought to be on each party’s degree of success in the outcome of the arbitration as a whole.

RBC also argued that it was put to unnecessary expense by having to prepare to respond to a number of issues that the Applicant only formally withdrew at the hearing. As a result, RBC contends that it is entitled to all its expenses of the proceeding or, at the very least, to its “costs thrown away” related to the issues that were withdrawn.

Overview of the Law

As pointed out by Arbitrator Muir in Mathur and RBC General Insurance Company⁴, the law related to expenses has changed substantially over the years. Prior to November 1996, arbitration expenses could be awarded to applicants only and were often granted even to unsuccessful applicants. In December 1996, the Expense Regulation was amended to permit arbitrators to award expenses to insurers, based upon criteria fairly similar to those that are still in place. There was, however, one criterion that granted to arbitrators considerable latitude in the exercise of their discretion. An arbitrator could consider “any other matter related to the proceeding” that he or she considered “relevant to the issue of whether an award of expenses is justified”. Relying on this broad discretionary power (and notwithstanding the change in the regulation that permitted insurers to be awarded expenses), some arbitrators continued to award expenses to applicants who were only marginally successful and to decline to order applicants to pay the expenses of successful insurers.

Effective October 1, 2003, however, that broad criterion was removed from the Expense Regulation. As Director Draper stated in Pembridge Insurance Company and Howden⁵, the new criteria (i.e., the removal of the broad, “any other matter” criterion) continued the “move toward a more results-based approach to expenses”.

Arbitrator Muir summarized the development of the law as follows:⁶

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 the predecessor expenses regime. 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.

I agree with this analysis.

Despite this evolution in the relevant provisions of the Expense Regulation, representatives for applicants have continued to urge arbitrators to award expenses to applicants who are largely unsuccessful or to deny successful insurers their expenses on the general principle that the Insurance Act is meant to be “consumer protection” legislation⁷ that is intended to be remedial in nature and that must receive such fair, large and liberal construction and interpretation as is necessary to give effect to its intended purpose.⁸

There are many aspects of the current Expense Regulation that serve to protect applicants. Even an unsuccessful applicant is protected from having to pay expenses where he or she raises a novel issue or where the insurer has rejected a reasonable formal offer from the applicant or where the conduct (in relation to the arbitration proceeding) of the insurer or its counsel has otherwise been unreasonable. The potential liability of an applicant to legal fees is limited to the much-reduced Legal Aid rates (while an applicant’s counsel can be compensated at a higher rate). The exposure of an applicant to disbursements incurred by the insurer is also limited by the Expense Regulation in both type and quantum. Thus, there are many aspects of the Expense Regulation that reflect the “consumer protection” nature of this legislative scheme.

I agree that the intended purpose of the Insurance Act is a relevant and important factor in interpreting the words actually contained in the regulations made thereunder. In my view, however, this does not permit an arbitrator to read into the Expense Regulation provisions that simply are not there or to ignore the clear and unambiguous words that are contained therein. Where the only relevant criterion is each party’s degree of success, absent very unusual circumstances, the Expense Regulation dictates that expenses will usually follow the outcome of the application as a whole.

Each Party’s Degree of Success

With respect to the substantive issues that ultimately required adjudication (not including interest or expenses), the Applicant in this case claimed:

the cost (approximately $2,500.00) of treatment recommended by Dr. Larry Feldman in a plan dated July 26, 2005 (of which $502.00 was actually incurred by the Applicant); and
the cost ($869.50) of an in-home assessment conducted by Dr. Jeff Sole of Century Assessment and Diagnostic Centre on April 5, 2005 and the report resulting therefrom.

The Applicant was awarded $502.00 for the cost of the treatment she received but her claim for the cost of a duplicative in-home assessment was dismissed.

From the perspective of both the Applicant’s entitlement to the benefits claimed and the amount of benefits awarded, the success of the parties was divided.

RBC submitted that it is entitled to its expenses because it achieved a greater degree of success than the Applicant, whose success was minor (especially if one considers all of the issues that were originally listed in the Application, as opposed to those that actually proceeded to hearing).

The Applicant submitted that she is entitled to her expenses based on her partial success. She relies on the decision in Abulibdeh and RBC General Insurance Company⁹, Gabrielyan and Wawanesa Mutual Insurance Company¹⁰ and Randhawa and Liberty Mutual Insurance Company¹¹ to support her argument that applicants who are partially successful can be awarded their expenses. She also argued that, despite her modest success, she should be awarded her expenses because of the “imbalance of power” in her relationship with the Insurer.

Abulibdeh is distinguishable on its facts from the case before me. In that case, the arbitrator found that the applicant had achieved “a significant degree of success”.¹² The Arbitrator also found that the applicant achieved a better result than an offer he had made and that the insurer had engaged in conduct that prolonged and hindered the proceeding. In the case currently before me, there were no relevant offers to settle and there was no evidence of misconduct on the part of the Insurer in the way it responded to this Application.

In Randhawa, the Applicant was largely successful and a failed allegation of fraud made by the Insurer formed a large part of the arbitrator’s decision to grant expenses to the Applicant. There was no such failed allegation of fraud in the case before me. I also note that Randhawa was decided at a time when an arbitrator still had discretion to consider any other matter related to the proceeding that he or she considered relevant to the issue of whether an award of expenses is justified.

With respect to the Gabrielyan case, I agree that there are cases where an applicant who is partially successful on her application may be entitled to her expenses. As I have already indicated, however, I do not agree with the proposition that the consumer protection nature of the Insurance Act permits me to ignore the clear and unambiguous wording of the only criteria that I am permitted by regulation to consider. For this same reason, I do not accept the submission that “imbalance of power” is a factor to be considered. The Expense Regulation specifically states that the listed criteria are the only ones to be considered. It specifically requires consideration of “[E]ach party’s degree of success”, not just that of the Applicant. As stated by Arbitrator Rogers recently in Waheed and RBC General Insurance Company¹³, “‘Imbalance of power’ cannot be imported to negate recognition of the Insurer’s degree of success.”

With respect to the issues that I heard, given the divided success of the parties, I find that the appropriate result is that each party bear her/its own expenses. This finding is subject to my comments below concerning those issues that were withdrawn by the Applicant at the hearing.

The Conduct of the Applicant and Her Representatives

In addition to the other issues previously discussed, the Applicant identified in her Application for Arbitration the following issues:

Is Ms. Borissenko entitled to receive weekly caregiver benefits in the amount of $300 per week from March 13, 2005 through July 1, 2005, pursuant to section 13 of the Schedule?
Is Ms. Borissenko entitled to payments for housekeeping and home maintenance services, in the amount of $100 per week from March 13, 2005 through July 1, 2005, pursuant to section 22 of the Schedule?
Is RBC liable to pay a special award pursuant to subsection 282(10) of the Insurance Act because it unreasonably withheld or delayed payments to Ms. Borissenko?

RBC responded to these claims in its Response. These issues were identified by the parties at the pre-hearing conference as issues that required adjudication. RBC incurred legal expenses in preparing to defend against these claims.

On May 10, 2007 (two business days prior to the commencement of the hearing), the Applicant’s representatives wrote to counsel for RBC to inform them of the Applicant’s intention to withdraw these three claims. At the hearing, RBC did not object to the withdrawal of these issues, but it reserved the right to make submissions with respect to its entitlement to costs related to the issues that were being withdrawn.

The Applicant offered no explanation for the late withdrawal of these claims. I find that this conduct put RBC to unnecessary expense. Such brinkmanship ought to be avoided. Therefore, despite the divided success of the parties on the issues that proceeded before me (and my finding that, generally, each party should bear her/its own expenses of this Arbitration), with respect to the issues that the Applicant withdrew at the commencement of the hearing, I find that RBC is entitled to its “costs thrown away”.

Mr. Curry acknowledged that it is impossible to calculate such expenses with precision. He acknowledged that virtually all of Mr. March’s time spent in preparing for the hearing occurred after May 10, 2007 (the date upon which the Applicant advised of its intention to withdraw these issues) and, therefore, would not have been incurred in relation to the issues that Mr. March knew were being withdrawn. According to the Bill of Costs submitted by the Insurer, the bulk (over 80%) of the legal preparation done prior to May 10, 2007 was performed by law clerks (i.e., at the compensable rate of $23.00 per hour) and much of that preparation time was likely related to the issues that proceeded (i.e., the issues that were not withdrawn by the Applicant).

With respect to the disbursements claimed by RBC (a total of about $650.00), few particulars were provided by RBC. For instance, with respect to the cost of obtaining clinical notes and records (about $180.00), Mr. Curry could not provide particulars of whose clinical notes and records they were or to which issue(s) the records relate. RBC claimed about $250.00 for conduct money allegedly paid to witnesses but failed to provide a persuasive argument as to why the Applicant should have to reimburse the Insurer for conduct money paid to witnesses who never actually testified (or even appeared) at the hearing and who, as a result, were not entitled to keep any conduct money that they may have received. With respect to the other disbursements claimed (courier charges, the cost of an OHIP summary, photocopying and binding), RBC failed to provide sufficient particulars to permit me to calculate the amount that was exclusively (or even primarily) related to the issues that were withdrawn.

CONCLUSION

As previously stated, had the Applicant not withdrawn a substantial number of issues at the “eleventh hour”, given the divided success of the parties, I would have simply ordered each party to bear that party’s own expenses. Since, however, the Applicant put the Insurer to unnecessary expense, I find that the Applicant ought to pay to the Insurer its “costs thrown away”. I also find that this is an appropriate case in which to fix the amount of expenses awarded. Given the length of the hearing¹⁴, the nature of the issues in dispute, the amount of time that can reasonably be attributed to dealing with the issues that were ultimately withdrawn, the applicable hourly rates permitted under the Expense Regulation for legal fees related to these issues, the nature and amount of disbursements claimed and based upon the oral and written submissions of the parties, I find that the Applicant should pay to the Insurer its expenses, fixed in the amount of $400.00 (inclusive of all fees, disbursements and GST).

March 11, 2008

Richard Feldman Arbitrator

Date