Neutral Citation: 2008 ONFSCDRS 45 FSCO A07-000984

BETWEEN:

TERESA MURPHY Applicant

and

CERTAS DIRECT INSURANCE COMPANY Insurer

DECISION ON A PRELIMINARY ISSUE

Before: Edward Lee Heard: January 7, 2008, in St. Catharines, Ontario.

Appearances: Meredith J. Donohue for Mrs. Murphy Kimberley Tye for Certas Direct Insurance Company

The Applicant, Teresa Murphy, was injured in a motor vehicle accident on December 5, 2001. In March 2004, she commenced a court action in the Ontario Superior Court of Justice against Certas Direct Insurance Company (“Certas”) for accident benefits payable under the Schedule.¹ In May 2007, Mrs. Murphy filed an Application for Arbitration to determine that she was catastrophically impaired as a result of the same accident. In August 2007, Mrs. Murphy also amended her court proceeding to seek certain accident benefits at rates and for time periods permissible only to those applicants who have been catastrophically impaired. Certas argues that Mrs. Murphy has now commenced two proceedings in two forums and that the court proceeding must take precedence over the arbitration.

The Preliminary Issue:

Is Mrs. Murphy precluded from proceeding to arbitration because she has an outstanding court action?
If not, should the following additional disputes be added to the arbitration: caregiver benefits, housekeeping and home maintenance benefits, attendant care benefits, and three medical/rehabilitation claims for a bicycle, prescription eyeglasses, and Dr. Darcy’s treatment plan?

Result:

Mrs. Murphy is not precluded from proceeding to arbitration so long as she confirms in writing within thirty days of this decision that she has sought leave of the Court to withdraw or discontinue her court action.
The additional disputes may be added to the arbitration once step one has been confirmed. Certas may raise any defence it feels appropriate in regard to these claims, including and not limited to, defences based upon limitation periods.

This is a case where proceedings have been commenced in both the Courts and at the Financial Services Commission of Ontario in regard to the same motor vehicle accident.

The following is a brief résumé of the salient facts leading to this application:

Mrs. Murphy’s motor vehicle accident occurs on December 5, 2001;
Mrs. Murphy commences a court action for accident benefits in March 2004;
Joint discoveries in the court action take place in February and June 2005;
Mrs. Murphy files an Application for Arbitration at FSCO in May 2007 to determine if she suffered a catastrophic impairment arising from her accident of December 2001;
Mrs. Murphy amends her court action for accident benefits in August 2007 to include benefits at monetary rates and for time periods permissible only after a catastrophic determination;
An Arbitration hearing date at FSCO is set for September 2008.

Certas’ Argument:

Certas argues that Mrs. Murphy has commenced two proceedings in different forums for the same or similar accident benefits arising from the same accident. The Court action, commenced in March 2004, includes claims for medical and rehabilitation benefits, attendant care, housekeeping and caregiving, and a claim for punitive damages. In August 2007, the Statement of Claim was amended to include benefits sought at rates and for time periods permissible only for plaintiffs who are catastrophically impaired. Mrs. Murphy’s Application for Arbitration, filed in May 2007, seeks a determination that she was catastrophically impaired and a claim for a special award.

Certas asserts that these claims are so intertwined that it would offend the common law rule against multiple proceedings to allow both to continue. The lines of inquiry will require decision-makers in both forums to examine issues of causation, diagnoses, and the extents of accident-related impairments, including the catastrophic determination. Evidence will be duplicated and there is a real risk of inconsistent or contradictory conclusions. Although arbitrators have sometimes allowed cases to proceed in different forums, they have only done so when the issues in the proceedings were separate and distinct.

Certas suggests that other factors further support its argument that the court proceeding should take precedence over the arbitration. The Court action was commenced earlier, and is broader in scope than the arbitration. The Applicant bears the burden of proof in both cases. The court action has already proceeded to a significant stage: examinations for discovery have been completed, and defence medicals have taken place. There is no obvious impediment to the applicant adding the issue she seeks to arbitrate to the Court action. Finally, a pre-trial date may be available as early as April 2008, and a three-week trial could be scheduled for late fall 2008 or early January 2009.

In light of the above, Certas submits that Mrs. Murphy’s arbitration should be dismissed, stayed or otherwise discontinued.

Mrs. Murphy’s Argument:

Mrs. Murphy agrees that should her arbitration proceed, there would be overlapping issues and similar factual determinations to be made in the two proceedings. Nevertheless, she is not seeking to have concurrent proceedings in both the court and at FSCO. What Mrs. Murphy really seeks is a consolidation of all her accident benefits claims before an arbitrator at FSCO. She also requests that she be permitted to have those accident benefit claims already commenced in the court action added to the Application for Arbitration.

Mrs. Murphy has offered to withdraw or have dismissed or to obtain a stay of her court proceeding if her arbitration proceeds. Should her arbitration be permitted to continue, she has also agreed to allow Certas the use of the transcripts from the examinations for discovery and the defence medicals that have already taken place in the upcoming arbitration. She is also agreeing to waive her claim for punitive damages or have it dismissed before the courts. Instead, she will seek a special award in the arbitration.

Given that she is not seeking to split her case into two sets of proceedings, she argues that the case law Certas has cited is distinguishable from the present case. She submits that when she originally commenced her court proceeding there was a related tort action. At that time, it was appropriate and reasonable for her to have the two actions take place before the court. In the interim, the tort action settled, and now, only the accident benefits case remains.

Mrs. Murphy’s submission is that a FSCO arbitration for a catastrophic determination and related accident benefits would be less costly and more expedient than a court action. A further impediment is the more intimidating and challenging atmosphere of the court. She wishes to bring herself before the greater expertise and knowledge of FSCO arbitrators. Mrs. Murphy also submits that the changing circumstances of her homelife, as set out in the affidavit of Lucianna Tummillo and Tab 5 of her Exhibit A-1,² make it imperative that her case be dealt with as soon as possible. She states that due to a marriage breakdown her husband has left the home, and she is now attempting to manage family and home care for her children alone.

The court case has not yet reached the pre-trial stage, although it is likely to take place in the fall of 2008. No trial date has been set and Mrs. Murphy suggests that Certas’ estimates of a late fall 2008 or January 2009 trial are far too optimistic. She suggests that a three-week trial is not likely to take place until late 2009 or in 2010. At the present time, the arbitration has already been set for September 2008. Mrs. Murphy relies on the decision of Bolger and CGU Insurance Company of Canada³, where an arbitrator permitted an applicant to continue an arbitration concurrently with a court proceeding on the condition that the applicant withdraw the overlapping claims from the court action.

The Law:

Arbitrators have on numerous instances addressed the issue of multiple proceedings arising from accident benefits claims. This is largely a result of the wording of section 281 of the Insurance Act⁴ which allows an Insured a choice between instituting a court proceeding or an arbitration.

The relevant provisions read as follows:

Section 281(1) Subject to subsection (2),

(a) the insured person may bring a proceeding to a court of competent jurisdiction;

(b) the insured person may refer the issues in dispute to an arbitrator under section 282; or

(c) the insurer and the insured person may agree to submit any issue in dispute to any person for arbitration in accordance with the Arbitration Act, 1991.

Arbitrators have long recognized an insured person’s right to an initial election as to where to take their claim. Nevertheless, as set out by the Director’s Delegate in Non-Marine Underwriters, Mbrs. of Lloyd’s and Mangat, the more difficult question involves subsequent claims arising out of the same accident.

It is inherent in this system that insured persons will submit claims at different times. As a result, insurers will often make a series of decisions that can be mediated and, indeed, must be mediated if they are to be taken further. If mediation is unsuccessful, the question is whether the insured person’s ability to choose arbitration is restricted by his or her previous election to go to court.⁵

Later in the same decision, he added:

…Where the insured person elects to pursue statutory accident benefits through arbitration, that choice should be respected to the greatest extent possible. Judges and arbitrators should be slow to force an unwilling insured person into court. If the insurer wants to raise its own issues, it should add them to the arbitration proceeding as now allowed by s.283(3).⁶ [emphasis mine]

In Royal & SunAlliance Insurance Company of Canada and Reid, the Director’s Delegate stated the following:

… I agreed that an insured person who has already elected to go to court on accident benefits does not have an absolute right to take later cases to arbitration, even if they involve different benefits. Instead a pragmatic balancing is required, as seen in the decisions of Citadel General Assurance Company v. Gogna, [1992] O.J. 1996 and King and Royal Insurance Company of Canada, (FSCO A98-000234, March 24, 1999), and suggested in Miller.⁷

In Allstate Insurance Company of Canada and Miller, the Director’s Delegate held the following:

An insured is not necessarily stuck with their initial choice of forum. In a number of cases, for example, where an insured has started an action before mediating the dispute but then chooses to go to arbitration, arbitrators have not held insureds to their initial choice and have permitted them to continue in arbitration, provided the action is promptly discontinued.⁸

ANALYSIS:

All these decisions are highly fact-specific, but a few basic principles may be distilled. First, it is clear that no arbitrator is prepared to allow the same issues or claims to be the subject of both an arbitration and a court proceeding. Nevertheless, subject to this and other related concerns, the decisions also suggest that an applicant’s choice of forum should be respected, if at all possible.

In examining this question, I agree that Mrs. Murphy’s case is somewhat unusual because she really has no desire to bifurcate her claim. Unlike the cases referred to me by the parties, Mrs. Murphy is not seeking one claim at the court and another at FSCO. What she really wants is to consolidate her entire accident benefits case before an arbitrator. That being said, I do not accept her argument that all the arbitral jurisprudence brought to my attention is irrelevant or wholly distinguishable from this matter. I find that the principles enunciated in those cases are still applicable in the present determination.

Mrs. Murphy commenced her case in the courts. By doing so, I find that I must frame my analysis under the rubric suggested by the Director’s Delegate in Mangat where he held the following:

The situation is fundamentally different if, as here, the insured person first elects to go to court. While a subsequent mediation may offer a further choice of forum, the insured person may not be allowed to proceed to arbitration if the claims could reasonably have been added to the court action, and allowing both proceedings to continue would result in both forums dealing with evidence or issues that substantially overlap.⁹

The Director’s Delegate then went on to enumerate eight criteria that led him to decide that the court action should take precedence over the arbitration:

The court action was started before this application for arbitration and is broader in scope.
The same parties are involved in both proceedings, with Mr. Mangat having the chief burden of proof in both forums.
The court action includes a broad claim for supplementary medical and rehabilitation benefits that is broad enough to include the benefits claimed in the arbitration proceeding.
The court action includes a claim for punitive damages based on Lloyd’s refusal to pay supplemental medical and rehabilitation benefits, likely resulting in the need for the same evidence in both forums.
The court action includes a claim for weekly income benefits. As Lloyd’s is challenging the connection between the accident tans far. Mangat’s ongoing problems, the same evidence will be required inn both forums.
There is no obvious impediment to Mr. Mangat adding the issues to the court action.
The two proceedings will require substantially overlapping medical evidence, inflating the cost of the litigation.
The overlapping factual and legal issues create a real possibility of inconsistent findings. If issue estoppel is going to be used to preclude the parties from revisiting findings in the later proceeding, these findings are better made in the more comprehensive proceeding.¹⁰

In the present case, as suggested by Certas, most of these criteria would appear to favour the court case over the arbitration. Nevertheless, the analysis changes when one considers the concessions offered by Mrs. Murphy, which include the waiving or dismissal of her court action, and the agreement to allow Certas the use of the transcripts from the examinations for discovery and defence medicals in any upcoming arbitration.

These steps would remove any possibility of duplication of evidence or inconsistent findings. Costs already incurred in the court proceedings would not be wasted, as evidence from the examinations for discovery and the defence medicals would be used in the arbitration. The special award claim would be likely narrower and less encompassing than the punitive damages claim in the courts.

In effect, Mrs. Murphy proposes that she be permitted to re-elect her forum after having commenced her claim in the Court. Insureds have previously sought and have been granted re-elections. In Gouliaeff and Commercial Union Assurance Company¹¹, an insured who commenced an action before mediation and then sought an arbitration was permitted to continue the arbitration so long as he promptly discontinued the action.

This was also the approach contemplated by the arbitrator of first instance in the Allstate and Miller appeal. In that decision, mediation had taken place and the initial application was before an arbitrator. Later, the insured commenced a court action for essentially the same issue. The arbitrator of first instance held that the arbitration could be continued if the applicant withdrew the Court action or filed an amended Statement of Claim removing the common benefit in question. That case was overturned, not because of the arbitrator’s approach, but because the Director’s Delegate found that the remedy fashioned had come “‘out of the blue’”;¹² neither party had requested that the Statement of Claim be amended or the court action withdrawn.

This is not the situation in the present instance. Mrs. Murphy has in both her pre-arbitration communications and in her pleadings expressed her desire to have the case addressed in this manner and Certas has had ample opportunity to make a full reply.

I find that the present case has more in common with the decision reached in Bolger and CGU Insurance Company of Canada. There, an insured also commenced a court action where he claimed attendant care benefits. He later filed an arbitration where he also made a claim for attendant care benefits. The arbitrator found that he faced a one-year waiting period for his trial as opposed to a one-month wait for his arbitration and that the insured was under a substantial risk of suicide.

In view of all these circumstances, especially since Mr. Bolger is willing to withdraw all overlapping portions of his court claim, and is at a significant, ongoing apathy and suicide risk, I consider it just that I permit Mr. Bolger to combine the proceedings in his Supplementary Application for Arbitration with the proceedings in his Application for Arbitration scheduled for a hearing on June 10, 11, 12, 2003. I find that this method of proceeding would lead to the quickest and least expensive means of dealing with the Applications, since it is quicker and less expensive to have one proceeding. In addition, it avoids inconsistent results since it will be heard by one arbitrator. As stated previously, I only give this permission on the condition that Mr. Bolger confirms writing within 14 days of this decision that he has amended his statement of claim, issued December 12, 2001, to withdraw all claims that may potentially overlap with the claims being decided at the arbitration hearing.¹³

In Bolger, the insured was allowed to continue a court case and an arbitration. Bolger was confirmed on appeal and the Director of Arbitrations endorsed the arbitrator’s approach with the following statement:

The insured person’s initial decision to go to court or arbitration does not necessarily determine the forum for all future claims. What is required is a “pragmatic balancing of interests.”¹⁴ [emphasis mine]

In the same way, I find that permitting Mrs. Murphy’s arbitration to proceed under the conditions set out below would lead to the most pragmatic balancing of the interests of the parties with the criteria set out in Mangat. All issues of overlapping evidence and inconsistent decision making would be obviated by the withdrawal of the claim before the courts. The punitive damages action would be waived. The examinations for discovery and the defence medicals already completed would still be admissible before the arbitrator. Even under Certas’ most optimistic estimates, the case would be still heard before an arbitrator before it came before the court. At worst, a court date might not be available until 2010, long after the September 2008 arbitration date.

Certas argued that Bolger was distinguishable from the case at bar because Mrs. Murphy’s situation is not “urgent”. Unlike Bolger, Mrs. Murphy is not a suicide risk. I am not convinced that this factor wholly distinguishes the instant case from Bolger. The general criteria of Mangat included a discussion of “impediments”, rather than an explicit requirement for “urgency”. Further, “urgency” was just one of the factors employed in Bolger to achieve a pragmatic balancing of interests. In the present instance, while there is no evidence that Mrs. Murphy is a suicide risk, there is evidence of significant and recent changes in her home life necessitating a swift resolution of her accident benefits dispute.

Another factor canvassed by the arbitrator in Bolger was cost. Mrs. Murphy argued that she wished to avail herself of the less expensive process before a FSCO arbitrator. Although no specific evidence was presented on this point before me, I am prepared to accept, as have other arbitrators, that arbitration in general is a cheaper and faster alternative to the Court.¹⁵

In addition, Certas was not able to persuade me that it would be in any way prejudiced by permitting the case to go before an arbitrator. Nor do I see any reason why Certas would not also benefit from having the case resolved sooner than later. No tactical advantage accrues to Mrs. Murphy by permitting the arbitration to proceed rather than the court case. Certas will be permitted to use the defence medicals and examinations for discovery already obtained. By waiving her punitive damages and bad faith claims in favour of a special award, Certas will likely face a narrower, less complicated and possibly less onerous dispute.

Finally, Certas put Mrs. Murphy on notice that if I permitted her to add the accident benefits claims already sought in the court case to the arbitration, it would raise preliminary defences to those claims based on limitations arguments. Under the conditions to follow, I am prepared to allow Mrs. Murphy to add those claims to her arbitration. It is not necessary for me to decide whether Certas’ proposed limitations defence is well-founded, but it is clearly a defence that would not be available to Certas if the case continued in the courts. Therefore, I am again not convinced that allowing Mrs. Murphy’s arbitration to go forward would result in any prejudice to Certas.

Therefore, I am allowing Mrs. Murphy’s arbitration to continue on the condition that she confirm in writing within thirty days of this decision that she has sought leave of the court to withdraw or discontinue her court action, including her punitive damages claim. I am also permitting her to add to the present arbitration, her claims for caregiving, attendant care, and housekeeping. She is also permitted to include in her arbitration the claims for the three medical rehabilitation items which are the bicycle, the prescription eyeglasses, and the treatment plan of Dr. Darcie. Certas may raise any preliminary or other defence it wishes in regard to these claims. Certas shall also be permitted to use the defence medicals and examinations for discoveries already completed in the upcoming arbitration. The arbitration proceeding is stayed until Mrs. Murphy fulfills the conditions set out above.

EXPENSES:

The parties did not make submissions in regard to expenses and I leave it to the arbitrator who finally decides this matter on the merits to make any decision in regard to the expenses of this preliminary hearing.

March 25, 2008

Edward Lee Arbitrator

ARBITRATION ORDER

Under section 282 of the Insurance Act, R.S.O. 1990, c.I.8, as amended, it is ordered that:

Mrs. Murphy is not precluded from proceeding to arbitration so long as she confirms in writing within thirty days of this decision that she has sought leave of the Court to withdraw or discontinue her court action.
The claims for caregiver benefits, housekeeping and home maintenance benefits, attendant care benefits, and the three medical rehabilitation claims for a bicycle, prescription eyeglasses, and Dr. Darcy’s treatment plan may be added to the arbitration once step one has been completed. Certas may raise any defence it feels appropriate in regard to these claims, including and not limited to, defences based upon limitation periods.