State Farm Mutual Automobile Insurance Company v. Kandy Pedisic, 2008 ONFSCDRS 44

Financial Services Commission of Ontario

Commission des services financiers de l’Ontario

Neutral Citation: 2008 ONFSCDRS 44

Appeal P08-00002

OFFICE OF THE DIRECTOR OF ARBITRATIONS

STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY

Appellant

and

KANDY PEDISIC

Respondent

BEFORE:

Delegate Lawrence Blackman

REPRESENTATIVES:

Mr. Nawaz Tahir for State Farm Mutual Automobile Insurance Company

Mr. Robert W. Vitols for Ms. Pedisic

HEARING DATE:

Written submissions were received by March 13, 2008

APPEAL ORDER

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

1. Pursuant to Rules 50.2 and 51.2(c) of the Dispute Resolution Practice Code (Fourth Edition, Updated – October 2003), on the basis that it is an appeal from a preliminary or interim order, this appeal is rejected until all of the issues in dispute in the arbitration have been finally decided.

2. If the parties are unable to agree about the legal expenses of this appeal, an expense hearing may be arranged in accordance with Rule 79 of the Code.

March 20, 2008

Lawrence Blackman Director’s Delegate

Date

REASONS FOR DECISION

I. BACKGROUND

The Notice of Appeal herein was filed with the Financial Services Commission of Ontario (the “Commission”) on February 20, 2008 by State Farm Mutual Automobile Insurance Company (the “Appellant”). The Appeal pertained to a preliminary order of Arbitrator Feldman (the “Arbitrator”), made during the course of an ongoing arbitration hearing which commenced January 21, 2008.

The Arbitrator’s order was not to allow into evidence a report prepared by Dr. R. Ferrari, who was retained by the Appellant to conduct a paper review. According to his curriculum vitae, Dr. Ferrari is a Clinical Professor with the Department of Medicine at the University of Alberta, with areas of study in whiplash, chronic pain and rheumatology.

The Respondent, Kandy Pedisic, was involved in motor vehicle accidents on March 6, 1997 and February 5, 2003. The arbitration hearing was to determine the Respondent’s entitlement to $57,078.55 of massage therapy treatments, claimed pursuant to the Schedule.¹ Another five hearing days are scheduled for the week of November 24, 2008, four hearing days having already been held.

Upon being appointed Delegate in this matter pursuant to subsection 6(4) of the Insurance Act, R.S.O. 1990, c. I.8, as amended, to perform the duties of the Director as are necessary in this matter, by letter dated February 22, 2008 I wrote the parties that:

Rule 50.2 of the Code states 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 orders otherwise.” Rule 51.2(c) of the Code provides that an appeal may be rejected if “it is from a preliminary or interim order that does not finally decide the issues in dispute.”

My letter set out time lines for written submissions to be filed by March 13, 2008 as to whether the appeal should be accepted or rejected at this time.

The Appellant states that in the first four hearing days, the Arbitrator heard oral testimony from the Respondent, another lay witness, and the treating massage therapist, Mr. S. Reid. While the latter’s examination-in-chief has been completed, his cross-examination is yet to begin. The Appellant states that the Respondent proposes calling another three witnesses, Dr. Somers, a chiropractor, Dr. Sequeira, a physiatrist, and Dr. Delaney, a physiatrist. The Appellant states that it will likely call two witnesses, Dr. Clifford, a physiatrist, and Mr. R. Overeem, a massage therapist and Designated Assessment Centre (“DAC”) assessor.

The Appellant states that the Arbitrator refused to allow Dr. Ferrari’s report into evidence on the basis that it was not served prior to the thirty day time line set out in subsection 39.1 of the Dispute Resolution Practice Code (Fourth Edition, Updated – October 2003) (the “Code”).

The Appellant argues that the Arbitrator erred in law when he failed to exercise his jurisdiction pursuant to Rules 39.2 and 81 of the Code to permit the report into evidence notwithstanding the “procedural irregularity” that service of the report was not in accordance with the Code.

Specifically, the Appellant submits that the report should be allowed into evidence because:

(1) otherwise, there would be significant prejudice to the Appellant, in that:

(a) an extensive amount of massage therapy expenses is claimed;

(b) the order deprives the Appellant from advancing expert evidence in response to the Respondent’s expert evidence; and,

(c) the Respondent would gain a technical advantage if Dr. Ferrari’s report is not admitted.

(2) there would be little, if any, prejudice to the Respondent if the report were admitted as:

(a) there is sufficient time for the Respondent’s doctors, primarily Drs. Delaney and Sequeira, to review Dr. Ferrari’s report and to respond by further written and oral evidence;

(b) Mr. Reid’s cross-examination has not been commenced, therefore, Mr. Reid would have an opportunity, if necessary, to give further viva voce evidence prior to being cross-examined. The Appellant submits that Mr. Reid has created a documented response to Dr. Ferrari’s report which has not been admitted into evidence at the arbitration hearing;

(c) Dr. Ferrari would be subject to cross-examination; and,

(d) there would be no additional costs to the Respondent, for if Dr. Ferrari’s report had been served in a timely manner, the Respondent would have incurred those legal expenses in any event.

(3) the report is important, relevant and material evidence which would assist the Arbitrator. Dr. Ferrari’s curriculum vitae, especially his extensive writing, “illustrates that he will be an expert whose testimony will be of great assistance to the Arbitration fact finding process and a decision being reached on the merits of the claim;”

(4) the order to exclude the report was based on a “mere technicality.” The case should be decided on its merits with all of the relevant evidence, as opposed to some evidence being excluded on grounds unrelated to the merits of the claim;

(5) the exclusion of such important expert evidence is unfair, particularly as there is a “pragmatic and practical approach to a unique situation, without prejudicing the parties,” which will effectively and cost efficiently rectify the Arbitrator’s error, allowing the Respondent’s experts to respond to Dr. Ferrari’s report both in advance of the arbitration resumption by written reports and at the resumption itself;

(6) if the appeal is not heard presently, when it is later heard, should the appeal be successful and the report is allowed in, there may have to have a new hearing; and,

(7) “there is a bona fide possibility that allowing the appeal to go forward on its merits will result, in the words of Rule 1.1, ‘the most just, quickest and least expensive resolution of the dispute.’”

The Appellant cites the decision of S.D. and TTC Insurance Company Limited, (FSCO A00-000206, May 23, 2002) where an applicant served an expert report three days before the start of the arbitration hearing. Under Rule 36.3 of the Dispute Resolution Practice Code – Third Edition (April 15, 1997), reports were to be served not less than ten days before the start of the hearing. The arbitrator held that:

. . . in my view, an adequate and cost-effective remedy to TTC's claim of prejudice was to require the Applicant to produce Dr. Kaye for cross-examination, and to allow TTC to have Dr. Kaye's report reviewed by its own expert, should it feel this was necessary, who would also have an opportunity to testify. I also agreed to consider the late introduction of Dr. Kaye's report when dealing with costs.

The Appellant also relied on the appeal decision in Allstate Insurance Company of Canada and Francis, (FSCO P99-00014, June 11, 1999), wherein Delegate Draper stated that:

Because the arbitrator’s order is a preliminary order, Allstate did not have a right to appeal. Rule 46.2 of the Dispute Resolution Practice Code provides that a party may not appeal a preliminary or interim arbitration order until all issue in dispute have been decided, unless the Director orders otherwise. However, after considering the written submissions filed by counsel, I concluded that the appeal should be allowed to proceed. Not only did it raise important questions of interpretation, but it was possible to conclude the appeal before the arbitration hearing was scheduled to resume in September 1999, eliminating concerns about delay.

The Appellant further relied on the Court of Appeal decision in Mader v. Hunter, et al., 2004 CanLII 17834 (ON CA), [2004] O.J. No. 748, which held that:

The court is always reluctant to dismiss a potentially meritorious claim on grounds that do not address its merits. Unless the defendant can demonstrate prejudice in the sense that to grant the plaintiff the indulgence he or she seeks will prejudice the defendant's ability to defend the claim, the indulgence will usually be granted on appropriate terms.

Accordingly, the Appellant submits that the reasonable solution to these “extraordinary circumstances” is that:

1. the Arbitrator’s order be set aside;
2. Dr. Ferrari’s report be allowed into evidence;
3. the Respondent’s medical witnesses be given thirty days to respond to Dr. Ferrari’s report with their own reports should they so desire, and be entitled to testify at the hearing resumption on the subject of Dr. Ferrari’s report;
4. Dr. Ferrari be allowed to testify at the resumption; and
5. the Appellant be awarded its legal expenses of this appeal proceeding.

The Respondent submits that the Arbitrator properly exercised his discretion to exclude

Dr. Ferrari’s report given that (1) it was served only seven days prior to the start of the arbitration hearing and that (2) no extraordinary circumstances exist to justify an exception to Rule 39.1, which requires that reports be served at least thirty days before the start of the arbitration hearing. The Respondent, however, takes no position as to whether the appeal should be heard on this issue at this stage of the proceeding.

II. ANALYSIS

Legislative Deference to Arbitration Decisions

Rule 50.1 of the Code, reflecting subsection 283(1) of the Insurance Act, provides that a party to an arbitration may appeal an order of an arbitrator to the Director only on a question of law. In AXA Insurance Company and Kernaghan, (FSCO P07-00018, February 4, 2008), I stated that:

The restriction of appeals to matters of law reflects, in my view, legislative recognition that judicial resources are limited, that deference should be given to the skills and expertise of first-level adjudicators and that the need for a speedy, simplified and inexpensive dispute resolution system necessitates a narrowed basis for appeal. This 1996 legislative change confirms that arbitrations are not dress rehearsals; appeals are not a “second kick at the can.”

Subsection 282(6) of the Insurance Act, which states that an “appeal does not stay the order of the arbitrator unless the Director decides otherwise,” also shows a legislative intent of deference to arbitration decisions.

Rule 50.2 of the Code provides further evidence of legislative deference to arbitration, stating 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 orders otherwise.

Case Law concerning Appeals from Interim or Preliminary Decisions

The Appellant provided a number of cases where the appellate officer allowed an appeal of a preliminary or interim issue to proceed. As noted by the Appellant, in some of these cases, no specific rational was provided² or the appeal proceeded on consent.³ In cases where a rationale was provided and the appeal was allowed to proceed, determining factors were whether “serious legal issues” were raised,⁴ whether there was “sufficient strength to the appeal,”⁵ whether there was “sufficient merit”⁶ or whether the issue raised on appeal had “strength or urgency,”⁷

In Torok and Allstate Insurance Company of Canada, (FSCO P01-00021, May 29, 2001), Delegate Makepeace set out what she considered to be the relevant criteria in determining whether to accept an appeal on a preliminary or interim order:

The purpose of Rule 46.2[⁸] is to facilitate the most cost-effective resolution of disputes by minimizing the time and money spent on procedural or collateral matters. The decision whether to hear an appeal of a preliminary order is discretionary. As Delegate Naylor stated in General Accident and Glynn, the over-arching principle guiding the exercise of the discretion is that the rule “should be broadly interpreted to produce the quickest, most just and least expensive resolution of the dispute.” . . . The criteria to be considered include the apparent strength of the appeal, the importance or novelty of the issue raised, and whether rejecting the appeal or hearing it will prejudice either party . . .

I will consider the more thorough criteria set out in Torok.

The Specific Procedural Provisions Relevant to this Case

Rule 39.1 of the Code states that:

Subject to Rule 39.2, all documents, reports (including experts’ reports) and assessment to be introduced at a hearing by either party must be served on the other party at least 30 days before the first day of the hearing.

[emphasis in the original]

Rule 39.2 provides:

In extraordinary circumstances, a party may seek an arbitrator’s permission to

serve a document, report or assessment on the other party for use at a hearing less than 30 days before the first days of the hearing.

[emphasis in the original]

Rule 81.1 states that:

Subject to the requirements of the Insurance Act and the Statutory Powers Procedure Act, the adjudicator may on such terms as he or she considers just:

(a) set aside any time limit set out in these Rules for doing any act, serving any notice, filing any document or holding any hearing.

(b) decide that any Rule does not apply in respect of a proceeding.

Application of the Law to this case

The best information before me, as submitted by the Respondent (the Appellant being silent on this point), is that the Arbitrator made his order regarding Dr. Ferrari’s report at the outset of the arbitration hearing. The onus is on the Appellant to persuade me that this appeal should be presently accepted. However, as pointed out by the Respondent, no written order of the Arbitrator has been put before me.

The Respondent notes Rule 65.2 of the Code, which states that:

An adjudicator may make an oral order with oral reasons where he or she considers it appropriate. The adjudicator will confirm the provisions of an oral order in writing if requested by the parties at the conclusion of the oral order.

There is no indication that the Appellant, or any other party, has requested confirmation from the Arbitrator of the provisions of his oral order in writing.

Further, the best information before me, again provided by the Respondent (the Appellant being also silent on this point), indicates that “following initial proceedings,” the Arbitrator set a further five hearing days, commencing November 24, 2008. There is no indication that when the Arbitrator made his order, the matter was to conclude other than that same week. There is also no indication that any subsequent request was made to the Arbitrator regarding reconsideration of his order in light of the further hearing dates being set.

Upon reading the submissions filed by the parties, I am not persuaded that this appeal should be presently accepted. Accordingly, pursuant to Rules 50.2 and 51.2(c) of the Code, this appeal is rejected, as being an appeal from a preliminary or interim order, until all of the issues in dispute in the arbitration have been finally decided. My reasons for doing so are as follows:

1. This appeal involves an exercise of discretion by an arbitrator. The traditional formula for the exercise of discretion, as stated by the British Columbia Court of Appeal in Pugh v. Pugh, 1979 CanLII 766 (BC CA), 17 B.C.L.R. 14 (C.A.), is that:

. . . this Court does not have an independent discretion and should only interfere with the exercise of discretion by the trial judge when clearly of the opinion that he acted on a wrong principle, or wrongly exercised his discretion in not giving sufficient weight to relevant considerations, or that, on other grounds, the decision might result in injustice.

As stated by the Ontario Divisional Court in Kalin v. Ontario College of Teachers, 2005 CanLII 18286 (ON SCDC), 75 O.R. (3d) 523:

Generally speaking, decisions made in the exercise of discretion are entitled to considerable deference, provided the discretion is exercised judicially and in accordance with principles of fairness and natural justice: Prassad v. Canada (Minister of Employment and Immigration), 1989 CanLII 131 (SCC), [1989] 1 S.C.R. 560, [1989] S.C.J. No. 25, at para. 18; Baker, supra, at para. 53.

The discretion given to first level adjudicators is enhanced by the broader deference given Commission arbitrators by the Legislature, as noted above. In this particular case, there is no allegation that the Arbitrator acted arbitrarily, that he failed to consider relevant factors or that he breached his duty to act fairly and in accordance with natural justice. The heart of the appeal, implicitly, is a dispute about the weight that the Arbitrator may have assigned to the relevant criteria.

2. In deciding whether to accept an appeal of an interim or preliminary decision, the first criteria set out in Torok is the apparent strength of the appeal. This criterium should include the bona fides of the appeal. In this case, the Appellant has not presented any written order of the Arbitrator for consideration. Hence, I am left to speculate as to the Arbitrator’s specific reasons for his order, what factors he weighed in exercising his discretion and what weight he may have given to those factors. In these circumstances, it is difficult to see how one can determine that there has been an error of law in that the Arbitrator has clearly wrongly exercised his discretion.

3. An additional concern regarding the bona fides of this appeal is that the Appellant, in large measure, relies on the additional hearing dates now set, which in its view removes any prejudice to the Respondent. It is most uncertain whether this argument was made to the Arbitrator, and if it was, I have no idea as to what, if any, weight he gave this factor, having not been given the Arbitrator’s written reasons. I have a significant concern that this appeal on a preliminary order may be an effort to circumvent the Arbitrator (who is obviously in a far better position to determine the merits of the Appellant’s request and to properly weigh the competing criteria set out below) and try to persuade someone else to exercise discretion in the Appellant’s favour.

4. Also regarding the strength of the appeal, Rule 39.1 of the Code provides that reports are to be served “at least” thirty days before the start of the arbitration hearing. The Appellant does not set out the history of this matter, such as when the treatment in question was provided, the Respondent’s opportunities to obtain its own medical reports, the progress of this matter through the pre-hearing process or the time period between receiving notice of the hearing and the hearing itself. Nor does the Appellant say a word as to why the report was served only seven days prior to the start of the hearing, as submitted by the Respondent, let alone provide any submissions as to what “extraordinary circumstances” necessitated the late creation of the January 11, 2008 report, a report which arises from motor vehicle accidents some five and eleven years earlier.

5. The Appellant presumes, as set out in paragraph 21 of its written submissions, that Rule 39.1 is a “mere technicality.” It is not. The rule is fundamental to a just, fair, expeditious and cost-efficient system of adjudication, namely that each party should have reasonable and fair notice of the other party’s case and should not be taken by surprise, or at the very least, not be taken by unreasonable surprise at a hearing. There may be legitimate reasons why a party could not serve an expert report in a timely manner, such as responding to the other side’s very recent production of entirely new evidence or due to an expert’s illness. That is not argued here. Rule 39 of the present Code, requiring thirty days notice, came into effect May 31, 2001. The prior Code required only ten days notice, indicating a legislative intention for earlier, not later, disclosure of a party’s case. The information before me is that Dr. Ferrari’s report was produced late under both versions of the Code.

6. The Appellant’s implicit argument is that the “search for the truth,” if not sacrosanct, at least trumps all other concerns. It does not. There are limits to “the search for the truth,” moderated by, amongst other things, procedural fairness, efficiency and cost concerns. Otherwise, proceedings could be endless, and justice available only for the very wealthy, or perhaps also for those with nothing to lose. Rule 1 of the Code enshrines that an adjudicator must endeavour to balance justice, speed and cost efficiency, criteria which are not uncommonly in conflict. This balancing of criteria while not novel (addressing the second criteria in Torok), is important. The importance in this case appears to be particular to the exact facts of this case, rather than of more general import.

7. Turning to the last criteria in Torok, that of prejudice to either party, I am not persuaded that there has been significant prejudice to the Appellant or that an injustice has occurred. The Appellant has expressed its intention to call two other medical witnesses to support its case, in addition to Dr. Ferrari. This is not a case of a party being unable to call any expert evidence (which may also, in particular circumstances, be insufficient to warrant the exercise of discretion); rather, this appears to be more a case of a desire for expert equilibrium. In any event, there is no suggestion that the late production of Dr. Ferrari’s report is in any way the fault of the Respondent or anyone other than the Appellant.

8. As noted by Arbitrator Bayefsky in Strzalka and Coachman Insurance Company, (FSCO A03-000366, January 13, 2006), in Mader, while reversing the trial judge's decision to dismiss the plaintiff's claim for failure to comply with undertakings, “despite its emphasis on the issue of prejudice, the Court [of Appeal] rejected the plaintiff's motion for the admission of fresh evidence.” The case before me pertains not to extinguishing a party’s entire claim, but rather to the proper exercise of discretion regarding late production. In the proper exercise of discretion, there is not, necessarily, a single correct answer. With entirely the same facts, two adjudicators may arrive at diametrically different results, neither having erred in law.

III. EXPENSES

If the parties are unable to agree about legal expenses of this appeal, an expense hearing may be arranged in accordance with Rule 79 of the Code.

March 20, 2008

Lawrence Blackman Director’s Delegate

Date

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 orders otherwise.

Footnotes

1. 1The Statutory Accident Benefits Schedule - Accidents on or after November 1, 1996, Ontario Regulation 403/96, as amended.
2. 2Co-operators General Insurance Company and Overley, (FSCO P96-00043, March 20, 1997, Royal Insurance Company of Canada and Christo, (FSCO P96-00049, September 11, 1996).
3. 3St. Louis and Allstate Insurance Company of Canada, (FSCO P01-00023, October 9, 2001).
4. 4State Farm Mutual Automobile Insurance Company and Mohamed and American Home Assurance Company, (FSCO P99-00022, December 1, 1999).
5. 5Royal & SunAlliance Insurance Company of Canada and Reid, (FSCO P00-00014, August 1, 2000).
6. 6Benn and Certas Direct Insurance Company, (FSCO P02-00032, February 5, 2003).
7. 7Dominion of Canada General Insurance Company and Ms. Z, (FSCO P98-00053, December 11, 1998).
8. 8Rule 46.2 of the Dispute Resolution Practice Code - Third Edition (April 15, 1997), which states: