Salvatore Suppa v. Motor Vehicle Accident Claims Fund, 2009 ONFSCDRS 113

Financial Services Commission des

Commission services financiers

of Ontario de l’Ontario

Neutral Citation: 2009 ONFSCDRS 113

FSCO A08-002241

BETWEEN:

SALVATORE SUPPA

Applicant

and

MOTOR VEHICLE ACCIDENT CLAIMS FUND

Insurer

PRE-HEARING DECISION

Before: Robert Bujold

Heard: By written submissions received on June 17, July 23 and 31, 2009.

Appearances: Theodore Charney for Mr. Suppa

Lorraine E. Takacs for Motor Vehicle Accident Claims Fund

Issues:

The Applicant, Salvatore Suppa, was injured in a motor vehicle accident on August 7, 2006. He applied for and received statutory accident benefits from Motor Vehicle Accident Claims Fund (“MVAC Fund”), payable under the Schedule.¹ MVAC Fund refused to pay a non-earner benefit to Mr. Suppa as well as the cost of an orthopaedic examination. The parties were unable to resolve their disputes through mediation, and Mr. Suppa applied for arbitration at the Financial Services Commission of Ontario under the Insurance Act, R.S.O. 1990, c.I.8, as amended.

At the pre-hearing discussion on June 16, 2009, Mr. Suppa sought production of all surveillance that currently exists as well as forthwith production of any future surveillance that may be conducted. MVAC Fund refused to confirm whether any surveillance currently exists and further submitted that it need only produce surveillance upon which it intends to rely. The parties were unable to resolve this issue.

Mr. Suppa undertook to put his request in writing with any supporting case law by June 19, 2009. MVAC Fund was given until July 3, 2009 to deliver any responding materials and case law in support of its position. Mr. Suppa indicated that he did not require time for reply submissions. Due to a miscommunication regarding the time to respond, MVAC Fund was provided with an additional week to provide its response, i.e., until July 10, 2009.

Mr. Suppa’s submissions were apparently sent to an incorrect firm and fax number and, as a result, MVAC Fund did not have submissions to which it could respond. Counsel for MVAC Fund indicated that she believed Mr. Suppa had decided not to proceed with his motion when his submissions were not received. As a result of this mix-up, I agreed to further extend the time for MVAC Fund’s response submissions which were received by the Commission on July 23, 2009. Due to my absence from the office, I did not review MVAC Fund’s submissions until July 28, 2009.

Although Mr. Suppa had indicated that he did not require time for reply submissions, a letter from Mr. Suppa’s counsel setting out his reply submissions were received on July 31, 2009. I accepted the reply submissions.

The issues are:

Is MVAC Fund required to produce surveillance or investigative evidence whether or not it intends to rely on same?
Is MVAC Fund required to disclose the existence of surveillance or investigative evidence whether or not it intends to rely on same?

Result:

MVAC Fund is neither required to produce surveillance or investigative evidence nor disclose its existence, unless and until it decides to rely on same. If MVAC Fund intends to rely on any portion of surveillance or investigative evidence, then, at least 30 days before the hearing, it shall provide to Mr. Suppa all surveillance or investigative evidence and information required to be produced pursuant to Rule 40 of the Dispute Resolution Practice Code (Fourth Edition).

ANALYSIS:

Mr. Suppa seeks production of any and all surveillance conducted of him by MVAC Fund, whether or not MVAC Fund intends to rely on the surveillance. Impliedly, Mr. Suppa is also requesting that MVAC Fund be required to disclose whether any surveillance exists. Mr. Suppa relies on the decision of Suhanic-Knox and Economical Mutual Insurance Company.²

MVAC Fund resists Mr. Suppa’s requests including disclosure of whether any surveillance exists. MVAC Fund takes the position that its obligation to produce surveillance or investigative evidence only arises when it decides to rely on any portion of surveillance or investigative evidence. MVAC Fund relies largely on Security National Insurance Co./Monnex Insurance Mgmt. Inc. and Morgan; Puljic and Zurich Insurance Company; MacKenzie and Royal & SunAlliance Insurance Company of Canada; and, Graham and ING Insurance Company of Canada.³

For the reasons that follow, I agree with MVAC Fund that it is not obligated to produce surveillance or investigative evidence nor disclose its existence, unless and until it decides to rely on same. If MVAC Fund intends to rely on any portion of surveillance or investigative evidence, then, at least 30 days before the hearing, it must provide to Mr. Suppa all surveillance or investigative evidence and information required to be produced pursuant to Rule 40 of the Dispute Resolution Practice Code (Fourth Edition) (the “Code”).

In short, I find that I am bound by the decision in Morgan. In that decision, the Director’s Delegate agreed with the Director’s Delegate in Puljic that “the clear implication of Rule 37.1 [3rd] [the functional equivalent of the current Rule 40] is that the insurer’s production obligation only arises when it decides ‘to rely on any portion of surveillance or investigative evidence.’”

The Director’s Delegate in Morgan concluded as follows:

In conclusion, I find that the purpose of Rule 40 is to simplify the procedures in FSCO arbitrations. Sidestepping the Rule will lead to unnecessary complications. The insurer is entitled to rely on Rule 40, regardless of when the surveillance took place. Of course, the 30 day requirement is a minimum, and arbitrators often require insurers to make the decision earlier, a fact the insurer in this case recognized. However, Rule 40 cannot be simply ignored, and the arbitrator was bound by the appeal decision in Puljic, as there was no basis for her to distinguish it.

I am not persuaded that I am not bound to follow Morgan on the basis that the Director’s Delegate “failed to take into account the relevant provisions of the Insurance Act (Section 22(1)) and the Statutory Powers Procedure Act (Section 23(1))”⁴ or on the basis that stare decisis does not apply to administrative tribunals.

On the latter point, I am not convinced that Borins, J.A., in the case of TransCanada Pipelines Ltd. v. Beardmore (Township)⁵, was referring to tribunals that include a statutory right of appeal when he remarked that “there is a well-accepted principle of administrative law that stare decisis does not apply to administrative tribunals. A tribunal is not bound to follow its own decisions on similar issues, although it may consider an earlier decision persuasive and find that it is of assistance in deciding the issue before it.” In the TransCanada Pipelines case, the Court was dealing with a decision of the Greenstone Restructuring Commission. Borins, J.A. noted that “the commission was intended by the legislature to supersede the adjudicative role performed previously by the OMB in municipal restructuring. The role of the commission in this process, which is the restructuring of political boundaries is a political process and, therefore, is essentially legislative, and neither quasi-judicial nor administrative.” Further, the order of the commission proceeded directly to judicial review and was not subject to an internal appeal process. It is in this context that Borins, J.A. found that the commission was not bound by an earlier decision of the OMB.

In the context of decision-making at FSCO, I agree with the analysis by Arbitrator Leitch in Poirier and Royal Insurance Company of Canada⁶:

Sections 282(1) and (5) of the Insurance Act provide a right of appeal from the decision of an arbitrator to the Director and permit the Director to confirm, vary or rescind the order appealed from or substitute his or her order for that of the arbitrator. In my opinion, the legislature could not have created this right of appeal without intending to make decisions of the Director binding on arbitrators, regardless of any prior consensus that may have developed amongst them. I reach

this conclusion by reflecting upon the implications of a right of appeal which did not produce binding decisions.

The first implication would be the “longer process” inherent in the development of precedents through consensus. The existence of a right of appeal suggests a legislative intention to create a quicker process whereby Director’s rulings immediately bind and govern subsequent decision-making by arbitrators.

A second implication would be that Director’s decisions would only be binding on the actual parties involved in appeals to the Director and not on other parties or the same parties appearing before arbitrators in other matters, even when questions of law were involved. Arbitrators’ refusals to be bound by Director’s rulings would force Applicants or Insurers to appeal to the Director merely to obtain results in line with earlier Director’s decisions.

Even after Directors’ decisions were issued, they would still only be binding on the parties to the appeals in question and hence leave voids as to the proper interpretation of the Schedules. These voids would undoubtedly be filled through increased applications to the Divisional Court for judicial review with all the associated costs and delays.

I regard the creation of a right of appeal to the Director under the Insurance Act as a legislative attempt to avoid these problems. For it to work as intended, however, the decisions of the Director must be binding on the arbitrators of first instance. As stated by David Foulkes in his text, Administrative Law:

Tribunals must of course follow relevant court decisions. But what about precedent within a particular hierarchy of tribunals? Take for example, the social security tribunals where the first decision is taken by the adjudication officer with appeal to the local tribunal and then to a Social Security Commissioner. The latter gives reasons, decisions are written, and selected decisions are reported. Obviously the Commissioner’s decisions bind those below them, so it is necessary that their decisions should be known by those below them.

Likewise, I find that to fulfill the legislative intention to create an effective internal appeal system under the Insurance Act, Director’s decisions must be and are binding on arbitrators.

Other arbitrators have also found it problematic to view decisions of the Director’s Delegates as persuasive only. In Boyer and Allstate Insurance Company of Canada⁷, Arbitrator Bayefsky found that he was bound by an appeal decision of the Director’s Delegate in a undistinguishable case. He then noted:

Nor do I think that arbitrators should engage in what is tantamount to a judicial review of appellate decisions by subjecting those decisions to a test of patent unreasonableness (or what would now be a test of reasonableness simpliciter, pursuant to Dunsmuir v. New Brunswick, 2008 SCC 9, [2008] 1 S.C.R. 190) as was done in the arbitration decision of Sekyiwaa and Yeboah and Kingsway General Insurance Company (FSCO A07-001502 and A07-001516, December 11, 2007). In my view, this would turn the statutory, constitutional appellate-review system on its head.

Director’s Delegates have also weighed in on the binding effect of their decisions.

In Vo and Maplex General Insurance Company and Insurance Bureau of Canada⁸, the Director’s Delegate arrived at the following conclusion:

Binding precedent on the interpretation of the Schedule and Act does exist in the administrative tribunal created by the Legislature as alternative adjudicative system for the resolution of disputes over statutory accident benefits. Decisions of the Director, to the extent they cannot be distinguished are binding on the arbitrators. Flexibility and the application of precedent are not mutually exclusive. To hold otherwise would deprive the appeal process of its logical purpose.

An appeal is not a right of “reconsideration” as generally understood in administrative law, nor is it a right to a hearing de novo. The Director may undertake new hearings, but this involves primarily questions of fact, not law. Where a Director’s decision formulates a rule on the interpretation of the statutory provisions under which claims for benefits are made, that interpretation is binding on the first instance adjudicators. If the interpretation is to be properly

challenged, an application for judicial review is required.

The Director’s Delegate in Coachman Insurance Company and Hejnowicz⁹ also concluded that arbitrators of first instance were bound by the decisions of Director’s Delegates, unless otherwise distinguishable.

For the reasons outlined in Poirier, Vo, Boyer and Hejnowicz, I find that I am bound by the decisions of the Director’s Delegates on matters of interpretation, including the interpretation of the Code governing the dispute resolution process. In my view, whether stare decisis is to be regarded as a matter of law or convention, it makes practical sense that arbitrators at FSCO should follow the decisions of the Director’s Delegates. Appeal decisions bring a certain measure of consistency and predictability to the law which is of benefit to both the parties and the administration of justice. Those laudable purposes would be thwarted should arbitrators find themselves free not to follow decisions of the Director (or his Delegates) in the exercise of the Director’s legislated power to review the decisions of arbitrators of first instance.

Even if I am wrong on the issue of whether I am bound by the Morgan and Puljic decisions, I nevertheless agree with those decisions. As Arbitrator Muir noted in MacKenzie¹⁰:

Even if I were not bound by the decision in Puljic, I agree with its interpretation of the relevant Rules. That said, there are significant issues that arise when considering this Rule in the context of a first-party system, however the Rule exists. I think its meaning is plain and straightforward.

I also agree with Arbitrator Slotnick in Graham¹¹ that there is nothing in the Code that compels MVAC Fund to disclose whether it has undertaken surveillance. Further, and apart from the fact that there is no positive obligation in the Code, it seems to me that if surveillance or investigative evidence need not be disclosed unless the insurer intends to rely on some portion of it, then the existence of such evidence would also be subsumed by the same requirement. I see no point of making it a requirement that an insurer disclose the existence of surveillance when there is no concomitant requirement to produce it.

As an aside, I do not accept that MVAC Fund should be subject to more limited disclosure requirements because it does not have a “contract involving the exchange of consideration and return for insurance coverage.”¹² Although MVAC Fund may not stand in exactly the same position to an applicant as other “insurers,” I find it both inappropriate and unnecessary to devise different standards of disclosure for first party insurers and Her Majesty. In any event, I have found that MVAC Fund is not required to disclose any surveillance, or even whether any surveillance was conducted, unless and until it decides to rely on surveillance or investigative evidence. I find this to be the case for any “insurer” and it is not necessary to distinguish MVAC Fund from other first party insurers.

In conclusion, I find that MVAC Fund is neither required to produce surveillance or investigative evidence nor disclose its existence, unless and until it decides to rely on same. If MVAC Fund intends to rely on any portion of surveillance or investigative evidence, then, at least 30 days before the hearing, it shall provide to Mr. Suppa all surveillance or investigative evidence and information required to be produced pursuant to Rule 40 of the Code.

EXPENSES:

The expenses of this motion are left to the hearing arbitrator.

August 11, 2009

Robert Bujold

Arbitrator

Date