Financial Services Commission des

Commission services financiers

of Ontario de l’Ontario

Neutral Citation: 2008 ONFSCDRS 80

FSCO A05-002870

BETWEEN:

KENNETH REID

Applicant

and

ING INSURANCE COMPANY OF CANADA

Insurer

Before: Judith Killoran

Heard: By written submissions received on March 5, 2008 and April 24, 2008 and a telephone conference call on April 25, 2008.

Appearances: James V. Leone for Mr. Reid

Donald G. Cormack for ING Insurance Company of Canada

Issues:

The Applicant, Kenneth Reid, was injured in a motor vehicle accident on September 19, 2003. In a decision dated November 29, 2007, I dealt with his claims for statutory accident benefits under the Schedule.¹ I made the following orders, while reserving on the issue of expenses:

Mr. Reid is not entitled to receive a weekly income replacement benefit from September 26, 2003 to September 25, 2005, pursuant to section 4 of the Schedule.
Mr. Reid is not entitled to receive a medical benefit of $760 for treatment at Gateway Rehabilitation and Health Institute, according to a treatment plan dated September 24, 2003, and $3,042 for treatment at Gateway Rehabilitation and Health Institute, according to a treatment plan dated April 28, 2004, pursuant to section 14 of the Schedule.
Mr. Reid is not entitled to receive $2,300 for housekeeping from September 19, 2003 to February 27, 2004, pursuant to section 22 of the Schedule.
Mr. Reid is not entitled to interest for the overdue payment of benefits pursuant to subsection 46(2) of the Schedule.

The issue in this further hearing is:

Is ING entitled to its expenses incurred in respect of this arbitration hearing? If so, what is the amount of expenses to which ING is entitled?

Result:

ING is not entitled to its expenses of the arbitration hearing.

EVIDENCE AND ANALYSIS:

I conducted the expense hearing by way of written submissions from the parties, a Bill of Costs from ING and a teleconference to hear oral submissions. During the teleconference, the Applicant confirmed that he was not seeking his expenses. ING indicated that it was seeking its expenses and disbursements in the total amount of $13,330.90.

The Applicant submitted that ING had not complied with Rule 79 of the Dispute Resolution Practice Code. Rule 79 requires that, where the parties cannot agree on entitlement or the amount of expenses, either party may request in writing an expense hearing within 30 days from the date the decision was issued. ING requested an expense hearing after expiration of the 30-day period.

I agree with the arbitrator in Waheed and RBC General Insurance Company² that the issue is one of procedural fairness. It appears that there is no question regarding lack of notice to either party or failure to deal with the issue of expenses expeditiously. After the release of my decision, the parties were in contact with respect to expenses, time elapsed as they attempted to resolve the issue but they were ultimately unable to negotiate a mutually satisfactory resolution. In the circumstances of this case, I am prepared to exercise my discretion and extend the timelines for formally requesting an expense hearing.

The relevant criteria that I have considered when making my decision are found in the Expense Regulation, subsection 12(2) of O.Reg. 664, under the Insurance Act, R.S.O. 1990, c.I.8, as set out below:

12 (2) An arbitrator shall, under subsection 282(11) of the Act, consider only the following criteria for the purposes of awarding all or part of the expenses incurred in respect of an arbitration proceeding:

Each party’s degree of success in the outcome of the proceeding;
Any written offers to settle made in accordance with subsection (3);
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.

Both parties conceded that ING was completely successful in the outcome of the proceeding and there were no written offers to settle. The Applicant relied on my decision in Shreet and RBC General Insurance Company,³ to support his contention that ING was not entitled to its expenses. ING submitted that Shreet could be distinguished from the case before me. The distinguishing factors for ING were my findings in Shreet that: 1) causation and disability needed to be resolved; and (2) the novel aspect was that it involved three separate accidents.

ING submitted that I should only consider categories 1, 4 and 5 of the Expense Regulation. However, the Applicant argued that the most important factor for me to consider is category 3 of the Expense Regulation regarding the raising of novel issues in the proceeding. ING did not concede that category 3 should be considered. According to ING, the novel issue about whether income replacement benefits can be calculated based on a written offer of employment even though the Applicant was already employed was not the real issue in the hearing. ING asserted that the evidence did not establish a fact situation in keeping with the issue as presented.

ING also submitted that there was no finding of disability with respect to Mr. Reid in that he continued to be employed so that this was not a case of balancing competing interests. ING asserted that Mr. Reid’s claim fell within categories 4 and 5 of the Expense Regulation.

ING argued that the proceeding was prolonged because Mr. Reid presented a claim for income loss and there were findings of credibility against him. Also, his case fits within the category of a party extending a proceeding with issues that did not need to be added. For example, the housekeeping claim was statute barred and not proven.

According to ING, the proceeding was also improper as it proceeded on other grounds which could not be proven. With respect to the medical claims, the treating service provider did not appear at the hearing to offer evidence in support of his own treatment plans. So it follows that claim should also not have been advanced in the proceedings. As there was no basis for the special award claim, it, too, should not have been advanced. ING also asserted that there was a long history of non-disclosure on the part of the Applicant who invoked the dispute resolution process before submitting any documents to support his claim.

The Applicant argued that there was a novel issue in the case before me. The issue is: If someone is working and is offered a second job through a job offer, should it be included when calculating income replacement benefits? This issue has never been dealt with previously in an arbitration hearing.

The Applicant argued that this case is no different than Shreet as there are always credibility issues with respect to arbitration hearings. However, there is a contractual relationship between the insurer and its own insured. FSCO exists to deal with disputes between insurers and their insured. It would have a chilling effect on applicants’ claims, including those that are meritorious, to find that Mr. Reid must pay ING’s expenses.

ING responded that the so-called novel issue never became an issue at the hearing as the factual underpinnings were not proven. The Applicant replied that while I made credibility findings with respect to the evidence advanced by certain witnesses, that does not detract from the importance of the novel issue, whether or not the facts supported it.

CONCLUSION

I find that ING is not entitled to its expenses of the arbitration hearing. The case before me is very similar to Shreet. While I have some sympathy for ING’s argument that the factual underpinnings of the novel issue were lacking after the evidence was presented, I find that does not negate the fact that the Applicant believed that there was a novel issue to be decided. It is not possible to predict with precision before a hearing how persuasive the evidence will be.

A lack of success by an applicant at arbitration does not automatically result in making the applicant responsible for the insurer’s expenses. The relationship between insurer and insured is a contractual one. The insured is entitled to access the dispute resolution process at FSCO as a result of that contract. The Insurance Act and its regulations must be interpreted in such a way as to uphold the protective and remedial nature of the legislation from which it flows. While changes to the Expense Regulation have moved towards a more results-based approach to expenses, the approach cannot be entirely results-based or the legislative purpose of the Insurance Act could be undermined.

While I am required to apply the criteria enumerated in the Expense Regulation, I have the discretion to weigh each criterion appropriately taking into account the particular facts and circumstances of each case. Although I considered all of the factors listed in the Expense Regulation, I find that the most important category for consideration is that of a novel issue. I find that the Applicant proceeded to an arbitration hearing primarily for the purpose of resolving the novel issue about whether an income replacement benefit can be calculated based on a full-time job and a job offer. That motivation was central to the proceeding.

It was determined by me at the conclusion of the hearing that the factual underpinnings of the novel issue were lacking. However, I cannot conclude that proceeding to arbitration was a frivolous, vexatious exercise on the part of the Applicant nor was it recklessly undertaken for the purpose of prolonging the proceeding. All of the issues in question required a determination from an arbitrator. The reasonableness of proceeding to arbitration cannot be evaluated properly solely with the benefit of hindsight. The strength of the evidence put forward by both parties is often not known until it is tested at a hearing.

I find that ING is not entitled to its expenses of the arbitration hearing. As ING is not entitled to its expenses, I am not required to proceed with an assessment of expenses.

May 22, 2008

Judith Killoran

Arbitrator

Date