Financial Services Commission of Ontario

Commission des services financiers de l’Ontario

Neutral Citation: 2008 ONFSCDRS 64

Appeal P07-00001

OFFICE OF THE DIRECTOR OF ARBITRATIONS

GARY STEPHENSON Appellant

and

ECONOMICAL MUTUAL INSURANCE COMPANY Respondent

BEFORE: David R. Draper

REPRESENTATIVES: Laurie Tucker for Mr. Stephenson Katie Gauthier for Economical

HEARING DATE: April 8, 2008

APPEAL ORDER - EXPENSES

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

1. Mr. Stephenson shall pay Economical’s appeal expenses, fixed at $4,318.79, inclusive.

April 22, 2008

David R. Draper Director of Arbitrations

Date

REASONS FOR DECISION

I. BACKGROUND AND ANALYSIS

In a decision dated December 4, 2007, I dismissed Mr. Stephenson’s appeal from the arbitrator’s conclusion that he was not injured as a result of an “accident,” as defined in the SABS–1996.¹ Economical Mutual Insurance Company (“Economical”) now seeks its appeal expenses.

A. Entitlement to Expenses

The criteria for awarding expenses are found in subsection 12(2) of R.R.O 1990, Reg. 664, made under the Insurance Act:

1. Each party’s degree of success in the outcome of the proceeding.
2. Any written offers to settle made in accordance with subsection (3).
3. Whether novel issues are raised in the proceeding.
4. 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.
5. Whether any aspect of the proceeding was improper, vexatious or unnecessary.
6. Whether the insured person refused or failed to submit to an examination as required under section 42 of Ontario Regulation 403/96 (Statutory Accident Benefits Schedule — Accidents on or after November 1, 1996) made under the Act or refused or failed to provide any material required to be provided by subsection 42 (10) of that regulation.

Economical submits that it should recover its appeal expenses because it was completely successful, it made an offer to settle the entire claim, the issues involved were not novel and Mr. Stephenson’s decision to file an application for variation/revocation, which was withdrawn on the day of the appeal hearing, unnecessarily prolonged the proceeding.

Mr. Stephenson contends that the parties should bear their own appeal expenses. Addressing the relevant criteria, he submits as follows:

Success

• This dispute was always an all-or-nothing issue of great importance to him. If the arbitrator determined he was injured in an automobile accident, he would have received substantial benefits due to the extent of his injuries.
• Although he was not successful in the result, he was able to convince the arbitrator on some key points. For example, the arbitrator accepted that sleeping in the fold-down seat in the van was a well-known use of an automobile.
• Success is not determinative – it is only one criterion in a list.

Offer to settle

• It was not unreasonable to refuse Economical’s settlement offer based on the situation at the time of the offer. It was impossible to determine the reasonableness of the offer when no benefits had been paid and the claim had been denied from the outset.
• He also made an offer to settle, based on a modest payment of past benefits.

Novel issue

• Determining whether a situation involving the use, not the operation, of an automobile can be complicated, as it was in this case.
• It was reasonable for him to pursue this claim given the extent of his injuries and the importance to him of receiving compensation. As well, he was encouraged by his social worker to apply for benefits.

Conduct prolonging the proceedings / Improper, vexatious or unnecessary

• While not successful the claim was not devoid of merit.

The parties also made submissions on whether access to justice and hardship are appropriate considerations in determining expenses. Economical argued they are not, relying on my decision in Howden and Pembridge Insurance Company, (FSCO P02-00031, May 17, 2004) and the arbitration decision in Abela and Wawanesa Mutual Assurance Company, (FSCO A03-000905, August 30, 2004). Mr. Stephenson submits that access to justice and hardship remain relevant considerations, citing the decisions in Truong and Lumberman’s Mutual Casualty Company, (FSCO P03-00007, March 31, 2005), and Hart and Allstate Insurance Company of Canada, (A98-000988, April 3, 2006).

These decisions, with the exception of Abela, were directed at determining which version of the expense regulation should apply. As well, a number of more recent arbitration decisions have considered just how far the current expense regulation has moved toward a loser-pay model.² I agree with the general propositions expressed in these decisions that the legislation, including the expense regulation, should be interpreted in light of the purpose of the dispute resolution process, including its history, but that adjudicators cannot read criteria into a fixed list that simply are not there. That said, I do not need to determine where the line falls for arbitration expenses. My focus is on appeal expenses, where it has long been accepted that concerns about access to justice are different because there already has been a full hearing on the merits.³

In this case, Mr. Stephenson argues convincingly that, given the difficult circumstances he faced, it was reasonable for him to pursue a claim for accident benefits and not settle for less than he required to meet his needs. There is little doubt, however, that he was pushing the boundaries of what might be included within the definition of “accident.” He was unsuccessful at arbitration and then on appeal. Not only was he unsuccessful, the legal issues raised in the appeal were not particularly novel. Rather, he challenged the arbitrator’s application of relatively well-settled law to an unusual set of facts. In my view, this is not enough to avoid responsibility under the regulation for Economical’s appeal expenses.

In reaching the conclusion that Economical should recover its appeal expenses, I am not relying on Mr. Stephenson’s refusal to accept Economical’s settlement offer, as that offer was made in the context of the arbitration hearing. Nor am I relying on any bad conduct issues. In my view, any delays caused by Mr. Stephenson in this case are better addressed through the amount of the expenses.

B. Amount of the Appeal Expenses

Economical claims appeal expenses of $5,000. This is a global amount, reduced from its Bill of Costs calculated at $6,667.86. At Mr. Stephenson’s request, Economical also provided dockets, which I have reviewed.

Mr. Stephenson submits that if the “ratio approach” often used to determine arbitration expenses applies to appeals, the amount claimed is excessive. In my view, however, arbitration ratios have no application to appeals – the nature of the work is simply too different.

I accept Mr. Stephenson’s submission that Economical’s Bill of Costs should be reduced. The rate for senior counsel is limited to the Legal Aid rate of $92.34, which includes the experience increase. This reduces the amount for his legal services from $2,025.00 to $1,246.59. I also agree that Mr. Stephenson should not bear the cost of two lawyers attending at the appeal hearing. For this reason, the expenses will be reduced by four hours for junior counsel, or $295.48. This results in expenses of $4,318.79, calculated as follows:

Legal fees Senior counsel $1,246.59 Junior counsel #1 $2,016.65 Junior counsel #2 $ 11.50 Disbursements (GST incl) $1,044.05 $4,318.79

I conclude, therefore, that Economical should recover its appeal expenses, fixed at $4,318.79, inclusive.

April 22, 2008

David R. Draper Director of Arbitrations

Date

Footnotes

1. 1The Statutory Accident Benefits Schedule – Accidents on or after November 1, 1996, Ontario Regulation 403/96, as amended.
2. 2For example, see Kamel and TD General Insurance Company, (FSCO A06-002469, March 28, 2008); Borissenko and RBC General Insurance Company, (FSCO A05-002801, March 11, 2008); Waheed and RBC General Insurance Company, (FSCO A06-000076 and A06-000856, February 28, 2008); Shreet and RBC General Insurance Company, (FSCO A05-002602, January 11, 2008); Mazunder and Security National Insurance Co., (FSCO A05-001642, December 5, 2007); Mathur and RBC General Insurance Company, (FSCO A06-000931, November 22, 2007); Yogarajah and RBC General Insurance Company, (FSCO A04-001702, November 15, 2007); and Patterson and State Farm Mutual Automobile Insurance Company, (FSCO A06-000068, October 15, 2007).
3. 3Guzman and Dominion of Canada General Insurance Company, (OIC P-007209, January 18, 1996).