Financial Services Commission of Ontario

Neutral Citation: 2009 ONFSCDRS 102 FSCO A08-002247

BETWEEN:

AMBER BHUTTA Applicant

and

ECONOMICAL MUTUAL INSURANCE COMPANY Insurer

DECISION ON A MOTION

Before: Jessica Kowalski Heard: April 24, 2009, at the offices of the Financial Services Commission of Ontario in Toronto.

Appearances: Arvin Gupta for Ms. Bhutta Helen D. K. Friedman for Economical Mutual Insurance Company

Issues:

This is a motion, brought by Economical Mutual Insurance Company (“Economical”), for an order:

1. dismissing the arbitration proceeding on the grounds that it is frivolous, vexatious or brought in bad faith in accordance with Rule 68.1 of the Dispute Resolution Practice Code (the “Code”);

2. in the alternative, for an order staying the issues in the arbitration proceeding and ordering them added to the issues in dispute in Court File CV-08-091869-SR;

3. in the further alternative, an order granting leave to Economical to amend its Response by Insurer to an Application for Arbitration to include the issues of entitlement to income replacement benefits, housekeeping and home maintenance benefits and attendant care benefits in accordance with section 27.1(b) of the Code and section 282(3) of the Insurance Act, R.S.O. 1990, c. I.8.

Result:

1. The Arbitration proceeding is stayed pending the outcome of the court case, subject to Ms. Bhutta’s right to withdraw her arbitration application within 30 days of this order.

2. Ms. Bhutta may, in the alternative and within 30 days of the date of this order, file an Amended Application for Arbitration that includes the issues currently before the Superior Court.

3. Within 30 days of being served with an Amended Application for Arbitration, Economical may serve an Amended Response by Insurer to an Amended Application for Arbitration.

4. The issue of expenses is deferred to the discretion of the hearing arbitrator. In the event that this matter does not go to hearing and the parties are unable to resolve the issue of expenses, they may request an expense hearing before me pursuant to Rule 79 of the Dispute Resolution Practice Code.

The following are the relevant facts:

The Applicant, Amber Bhutta, was injured in a motor vehicle accident on January 16, 2007. She applied for statutory accident benefits from Economical, payable under the Schedule.¹ Disputes arose between the parties concerning Ms. Bhutta’s entitlement to certain benefits. Several issues in dispute proceeded to mediation in June 2008. The mediation failed on all issues. The issue on this motion is whether Ms. Bhutta may proceed to arbitration on some issues and maintain an action in the Superior Court on other issues arising from a single mediation.

Background

1. In a mediation in June 2008, the parties mediated five issues in dispute: Ms. Bhutta’s entitlement to weekly income replacement benefits; attendant care benefits, housekeeping and home maintenance benefits; a medical benefit of $1,220.00 for physiotherapy and chiropractic treatment; and $1,863.72 for the cost of an orthopaedic assessment. The parties were unable to resolve their disputes through mediation. The report of mediator dated June 9, 2008 confirms that the mediation failed on all five issues.

2. On October 20, 2008, Ms. Bhutta filed an application for arbitration at the Financial Services Commission of Ontario (the “Commission”) under the Insurance Act, R.S.0. 1990, c.I.8, as amended.

3. Nine days later, on October 29, 2008, Ms. Bhutta commenced an action against Economical in the Superior Court of Justice.

4. The Application for Arbitration describes only two of the five issues mediated at the June 2008 mediation: the medical benefit for physiotherapy and chiropractic treatment under section 24 of the Schedule, and the cost of the proposed orthopaedic assessment, pursuant to section 15 of the Schedule, totalling $3,083.72. Ms. Bhutta also claimed interest, her expenses, and a special award.

5. In the court action, brought under the simplified rules, Ms. Bhutta claimed the balance of the issues mediated in the June 2008 mediation: the income replacement, attendant care and housekeeping and home maintenance benefits. In the action, she also claims punitive damages against Economical in the amount of $50,000.00.

Insurer’s submissions

Economical argues that the commencement of the arbitration application in conjunction with the Superior Court litigation matter constitutes a multiplicity of proceedings: the issues to be determined at both proceedings arise from the same motor vehicle accident, are factually interwoven, and will require the production of the same evidence.

Economical submits that Ms. Bhutta’s having commenced multiple proceedings against it necessitates duplication and is a waste of resources, designed to put Economical to additional and unnecessary inconvenience. The two issues claimed in arbitration total $3,083.72,² only slightly more than the $3,000.00 Economical was assessed when it filed its response to Ms. Bhutta’s application for arbitration. Economical argues that the issues in each forum overlap and there is therefore a risk of inconsistent findings. Economical further submits that the application for arbitration is frivolous, vexatious and brought in bad faith, and that it constitutes an abuse of process.

Applicant’s submissions

Ms. Bhutta argues that the benefits claimed in each forum are distinct from one another, and that the mere fact that an insured person elects to pursue some benefits in one forum and some in another forum is insufficient to establish that an arbitration proceeding is frivolous, vexatious or commenced in bad faith. Ms. Bhutta also submits that, as the benefits claimed in each forum are distinct, each trier of fact will consider different underlying factual questions when determining entitlement.

Ms. Bhutta gave limited explanation for her choice to split the proceedings at the motion. First, she argued that she prefers her chances of success at the Commission for recovering her treatment expenses and cost of the orthopaedic examination based on the Commission’s appellate-level jurisprudence. She cited no cases. Second, Ms. Bhutta argued that her claims deserve a hearing on their merits – something a single proceeding does not, in my view, defeat. Third, with respect to the benefits claimed in the Superior Court, Ms. Bhutta submits that she has access to earlier disclosure of surveillance evidence than at the Commission.³

Notably, at the motion, Ms. Bhutta did concede that the necessary determinations by a trier of fact in each forum would not, in fact, be too different, and that to consolidate the proceedings into one would not be all that cumbersome.

Law and Analysis

The rule against multiple proceedings is one of the more basic common law principles.⁴ It is fundamental that multiplicity of proceedings is to be avoided wherever possible.⁵ Ontario has codified the common law rule against multiple proceedings in section 138 of the Courts of Justice Act, R.S.O. 1990, c. C.43, which provides that, “[a]s far as possible, multiplicity of proceedings shall be avoided.”

Subsection 281(1) of the Insurance Act gives an insured person, after a failed mediation, the option of litigation or arbitration. Section 281 provides, in part, as follows:

Litigation or arbitration

281(1) Subject to subsection (2),

a) the insured person may bring a proceeding in 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.

Limitation

(2) No person may bring a proceeding in any court, refer the issues in dispute to an arbitrator under section 282 or agree to submit an issue for arbitration in accordance with the Arbitration Act, 1991 unless mediation was sought, mediation failed and, if the issues in dispute were referred for an evaluation under section 280.1, the report of the person who performed the evaluation has been given to the parties.

The language of subsection 281(1) clearly gives the insured person a choice of forum, setting out a clear and unambiguous election of litigation or arbitration. After mediation (a mandatory first step) that has failed to resolve the issues in dispute, the insured person has the choice to “bring a proceeding in a court of competent jurisdiction” or “refer the issues in dispute to an arbitrator.” ⁶ While section 281 makes it clear, in my view, that the same issue cannot both be litigated and arbitrated, the question in the instant case concerns distinct benefits mediated in a single mediation.

The leading case that decided this issue is Mangat v. Non-Marine Underwriters, Mbrs. of Lloyd’s.⁷ Mangat was an appeal of a decision on a preliminary issue to determine whether Mr. Mangat’s existing court action prevented him from bringing and proceeding with an arbitration on medical and rehabilitation benefits. The hearing arbitrator held that nothing in the legislation prevents an insured person from proceeding in both forums as long as the issues are distinct.⁸ She found that the supplementary medical and rehabilitation benefits claimed in the court proceeding were different from the ones claimed in arbitration. According to the appeal decision, by stopping there, the hearing arbitrator ignored the substantial overlap between the two proceedings. Director’s Delegate Draper found this approach too narrow and held that, by “focussing only on Mr. Mangat’s claims for supplementary medical and rehabilitation expenses, she failed to consider the overlapping factual questions central to both proceedings.”⁹ The Director’s Delegate confirmed the rule against multiple proceedings:

The rule against multiple proceedings is one of the more basic common law principles. It is based on concerns that multiple proceedings will increase the cost and complexity of litigation, and lead to inconsistent results that undermine the credibility of the system.

Mangat also addresses Ms. Bhutta’s submission that there is no danger of inconsistent results:

Mr. Mangat contends that there is no danger of inconsistent results because the tests for weekly income benefits and supplementary medical and rehabilitation benefits are different. For example, he might not meet the test for ongoing weekly income benefits, but could still be entitled to some or all of the benefits he is claiming in arbitration. While this is true, it misses the point. Concerns about inconsistency are not limited to the ultimate orders. Inconsistent factual findings supporting the orders are at least as big a concern. If Mr. Mangat is found ineligible in court for weekly income benefits on the basis that his ongoing problems are unrelated to the automobile accident, it would be inconsistent for an arbitrator to conclude that he was entitled to supplementary medical and rehabilitation benefits due to those same problems.

I note that in Ms. Bhutta’s case, while they have the semblance of being separate and discrete, the issues overlap to the extent that they will require an assessment of Ms. Bhutta’s accident-related impairments. While Ms. Bhutta argues that there is some apparent ability to separate the issues because the tests for entitlement, for example, are different, the inquiries in both forums will necessarily relate to Ms. Bhutta’s functional status and therefore have intertwining evidence: Ms. Bhutta’s claim at arbitration for the treatment expense intertwines with her functional status. That inquiry is the subject of the Superior Court action. Similarly, with respect to the orthopaedic assessment, the issue at arbitration will be determined based on Ms. Bhutta’s medical condition – also the subject matter of the Superior Court action.

In Mangat, Director’s Delegate Draper concluded that:

Section 281 of the Insurance Act gives the insured person a choice of forum. It does not follow, however, that he or she has an unfettered election with respect to each claim. Looking back at the procedures in the Insurance Act, mediation is a mandatory first step. If the issues in dispute are not resolved, the insured person can “bring a proceeding in a court of competent jurisdiction” or “refer the issues in dispute to an arbitrator.”¹⁰ This involves an election. When a mediation fails on a number of issues, the insured person clearly cannot go to both forums claiming the same benefits. In my view, it goes beyond that. Because the election is with respect to “the issues in dispute,” the insured person is not entitled to take some issues to court and others to arbitration. [emphasis added]

Notably, Mangat held that an election to go to court does not necessarily govern all future claims. Director’s Delegate Draper found that there could be later issues that arise that might be sufficiently distinct, or the timing so problematic, that it would be “unnecessary or unfair” to insist that they be brought to an existing action. “It is not, enough, however, to simply ask whether the new claim involves a different benefit.”¹¹

Not only do I agree with the Delegate Draper’s analysis in Mangat, I am bound by it. I agree with Economical that the multiple proceedings in this case will not only increase both parties’ costs, but that they have the potential to lead to inconsistent findings that would serve to undermine the credibility of the system.

Economical is not seeking to force Ms. Bhutta into one particular forum over the other: its position is that Ms. Bhutta should have to choose a single forum. I agree.

There is no serious impediment to having the issues at arbitration dealt with in the court proceeding or vice-versa. Economical has maintained throughout that, depending on Ms. Bhutta’s choice, it will consent to either her withdrawing her application for arbitration or discontinuing the court action, and to the addition of the issues to the other proceeding. Ms. Bhutta, for her part, conceded that to combine the proceedings at this stage is not unduly cumbersome. Permitting Ms. Bhutta to proceed with both proceedings would, in my view, duplicate the proceedings, lead to greater costs and delays and raise the spectre of inconsistent results.¹²

Ms. Bhutta’s argument that the issues before arbitration deserve to be heard on their merits is not fettered if those merits are heard by a court and not the Commission, or vice-versa. That she believes she has a greater chance of success at the Commission to recover her physiotherapy and chiropractic treatment costs and the costs of an orthopaedic assessment, and that she believes she has access to earlier disclosure before the Court are but two factors to consider in choosing the forum in which she wishes to proceed.

I am not satisfied that Ms. Bhutta proceeded in both jurisdictions and created multiple proceedings primarily with a design of causing Economical to incur additional expenses or for some other nefarious purpose. I do, however, find that section 281 of the Insurance Act nevertheless requires Ms. Bhutta to make a choice. While I find the decision to split the case – especially in view of the timing – suspect, I have insufficient evidence to make the finding that proceeding in both forums was frivolous, vexatious, or gives evidence of bad faith. Whatever Ms. Bhutta’s motive, even without finding that Ms. Bhutta purposefully chose to split her case to cause Economical inconvenience, I find that section 281 of the Insurance Act, as clarified by the decision in Mangat, requires Ms. Bhutta to choose a single forum to determine her issues arising from the June 2008 mediation.

EXPENSES:

I did not hear submissions from the parties with respect to expenses. Accordingly, I defer this issue to the discretion of the hearing arbitrator. In the event that the matter does not go to hearing and the parties are unable to resolve the issue, they may request an expense hearing before me in accordance with the Dispute Resolution Practice Code.

July 17, 2009

Jessica Kowalski Arbitrator

Date

Financial Services Commission of Ontario

Neutral Citation: 2009 ONFSCDRS 102 FSCO A08-002247

BETWEEN:

AMBER BHUTTA Applicant

and

ECONOMICAL MUTUAL INSURANCE COMPANY Insurer

ARBITRATION ORDER

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

1. Ms. Bhutta’s Application for Arbitration is stayed pending the outcome of Superior Court Action CV-08-091869-SR, subject to Ms. Bhutta’s right to withdraw her application within 30 days of the order.

2. Ms. Bhutta may, in the alternative and within 30 days of the date of this order, file an Amended Application for Arbitration that includes the issues currently before the Superior Court.

3. Within 30 days of being served with an Amended Application for Arbitration, Economical may serve an Amended Response by Insurer to an Amended Application for Arbitration.

4. The issue of expenses is deferred to the discretion of the hearing arbitrator. In the event that this matter does not go to hearing and the parties are unable to resolve the issue of expenses, they may request an expense hearing before me pursuant to Rule 79 of the Dispute Resolution Practice Code.

July 17, 2009

Jessica Kowalski Arbitrator

Date

Footnotes

1. 1The Statutory Accident Benefits Schedule – Accidents on or after November 1, 1996, Ontario Regulation 403/96, as amended.
2. 2Before the claims for interest, expenses and a special award are considered.
3. 3I note that Ms. Bhutta’s claim is brought under the simplified procedure, which limits discovery rights. Similarly, with no discovery at the Commission, both forums offer an abridged process and each has rules for the disclosure of surveillance, being factors to weigh by an insured person in choosing a forum.
4. 4Mangat and Non-Marine Underwriters, Mbrs. of Lloyd’s, (FSCO P00-00020, August 1, 2000), p. 8.
5. 5Victoria Property and Investment Co. (Canada) Ltd. Et al. v. Vatznau Management Ltd. et al. (1998) 8 C.P.C. 38 at 41.
6. 6Mangat and Non-Marine Underwriters, Mbrs. of Lloyd’s, (FSCO P00-00020, August 1, 2000), p. 8.
7. 7Mangat and Non-Marine Underwriters, Mbrs. of Lloyd’s, (FSCO P00-00020, August 1, 2000).
8. 8Mangat, supra, at p. 5. The issues for arbitration were whether Mr. Mangat was entitled to medical and rehabilitation expenses arising out of surgeries he underwent post-accident.
9. 9Mangat, supra, at p. 5.
10. 10“or, by agreement, the parties can opt for private arbitration.” [Footnote in Original]
11. 11Mangat, supra, at p. 14.
12. 12In having to respond to both the application and statement of claim, Economical has already been forced to bear some costs associated with defending the two proceedings against it.