Financial Services Commission of Ontario

Neutral Citation: 2009 ONFSCDRS 15 FSCO A06-001684

BETWEEN:

JESS TENDENILLA Applicant

and

ALLSTATE INSURANCE COMPANY OF CANADA Insurer

DECISION ON EXPENSES

Minor errors on pages 2, 9, 10 and Order corrected on February 25, 2009 in accordance with the Dispute Resolution Practice Code and section 21.1 of the Statutory Powers Procedure Act.

Before: Lloyd (J.R.) Richards Heard: Written submissions received by October 16, 2008. Telephone conference call held on November 7, 2008.

Appearances: Arvin Gupta for Mr. Tendenilla Richard Horst for Allstate Insurance Company of Canada

Issues:

The Applicant, Jess Tendenilla, was injured in a motor vehicle accident on June 27, 2005. The arbitration hearing was originally scheduled for the week of February 11, 2008. Instead, a preliminary issue hearing was held on February 13, 2008. The arbitration hearing, which was adjourned to July 8 and 9, 2008, dealt with Mr. Tendenilla’s claim for statutory accident benefits under the Schedule.¹

The issue in this hearing is:

1. Which, if any, party is entitled to its expenses incurred in respect of this arbitration proceeding, and if a party is entitled to its expenses, what is the quantum?

Result:

1. Allstate shall pay Mr. Tendenilla’s arbitration expenses in the amount of $7,670.22.

EVIDENCE AND ANALYSIS:

Subsection 282(11) of the Insurance Act, R.S.O. 1990, c. I.8 (as amended), provides that:

The arbitrator may award, according to criteria prescribed by the regulations, to the insured person or the insurer, all or part of such expenses incurred in respect of an arbitration proceeding as may be prescribed by the regulations, to the maximum set out in the regulations.

Regulation 664, R.R.O. 1990, made under the Insurance Act, as amended to O. Reg. 275/03 reads as follows:

12(1) The expenses set out in the Schedule are prescribed for the purpose of subsection 282 (11) of the Act.

(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:

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 refused or failed to submit to an examination as required under section 42 of the 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 the Schedule.

(3) Upon the request of the insurer or the insured person, the arbitrator shall, for the purposes of awarding expenses, take into account all written offers to settle, if any,

(a) that were made after the conclusion of mediation and before the conclusion of the arbitration; and (b) that were made in accordance with the rules of practice and procedure applicable to the proceeding.

(4) If the arbitrator is requested to take into account a written offer under subsection (3), the arbitrator shall have regard to the terms of the offer, the timing of the offer, the repsonse to the offer and the result of the proceeding.

Entitlement to Expenses:

Mr. Tendenilla and Allstate agreed at the pre-hearing in this case, on February 26, 2007, that Mr. Tendenilla claimed the following:

1. Income Replacement Benefits of $400.00 per week from July 11, 2005 to November 19, 2005;
2. Medical Benefits at East Sheppard Rehabilitation in the amount of $6,490.90;
3. Medical Benefits of $413.70 for assistive devices;
4. Housekeeping and Home Maintenance expenses of $100.00 per week from June 27, 2005 to February 2, 2006; and
5. Assessment expenses of $917.00 and $703.00 for in-home assessments at Phoenix Assessments.

As a defence, Allstate asserted that Mr. Tendenilla is precluded from proceeding to arbitration with regard to the claimed income replacement benefits and housekeeping benefits, because he failed to attend for an examination under oath.

Mr. Tendenilla’s claims for benefits, not including any interest or expenses, totalled approximately $19,224.60.

Mr. Tendenilla submits that Allstate improperly served, two weeks prior to the commencement of the hearing, surveillance tapes and reports and its arbitration brief. Further, Allstate served a transcript of an examination under oath, dated March 19, 2007, on February 11, 2008, the date scheduled for the commencement of the arbitration. These actions, according to Mr. Tendenilla, necessitated the hearing adjournment from February 11, 2008 to July 7, 2008.

On February 3, 2008, Mr. Tendenilla and Allstate participated in a preliminary issue hearing to address Mr. Tendenilla’s eligibility period for benefits. Allstate was successful at the preliminary issue hearing and was not liable to pay housekeeping, home maintenance and income replacement benefits from September 9, 2005 until such time as Mr. Tendenilla complied with subsection 33(1.1) of the Schedule.

The preliminary issue hearing significantly narrowed the issues. As a result, the only claims at the hearing on July 8, 2008 were for medical benefits of $4,677.00 and housekeeping and home maintenance benefits of $300.00, totalling $4,977.00. The hearing arbitrator awarded Mr. Tendenilla $4,600.00 plus interest.

Mr. Tendenilla submits that the maximum exposure to Allstate was $19,224.60 plus interest. As a result of the arbitration, Mr. Tendenilla was awarded $9258.33, inclusive of interest. It is Mr. Tendenilla’s position that he was substantially successful in the arbitration, even if the issues which did not proceed to hearing are included in calculating Allstate’s maximum exposure.

Mr. Tendenilla submits that on January 31, 2008 he offered to settle for $9,500.00 plus expenses. On June 27, 2008 he reduced his offer to settle to $4,000.00 plus expenses. Mr. Tendenilla further submits that on February 27, 2007, Allstate offered to settle for $358.00. On June 18, 2008 Allstate increased its offer to settle to $2,500.00. Mr. Tendenilla submits that not only was it unreasonable for Allstate to reject his offers, but that Allstate’s offers fell well below the awarded amount.

Mr. Tendenilla submits that throughout the proceedings, Allstate refused to participate in reasonable settlement discussions. As a result, he was compelled to commence arbitration proceedings to obtain benefits to which he was entitled.

Mr. Tendenilla brought a motion on July 8, 2008 for the hearing arbitrator to recuse himself from the proceeding. The motion was dismissed. It is Mr. Tendenilla’s assertion that the motion was necessary as the hearing arbitrator made findings that reflected a bias against Mr. Tendenilla.

The arbitration proceeded on July 8 and 9, 2008 and lasted approximately 2 days of hearing time, inclusive of the recusal motion.

Allstate contends that Mr. Tendenilla’s claims were for approximately $20,000.00 plus interest, for a total of nearly $40,000.00. Allstate’s position is that it is entitled to its expenses for the successful preliminary issue motion which resulted in most of Mr. Tendenilla’s claim being dismissed.

I find the relevant factors in deciding expenses in this case are: (1) each party’s degree of success in the proceeding; (2) Mr. Tendenilla’s offer to settle on June 28, 2008; and (3) whether the recusal motion was unnecessary.

Degree of Success

With respect to the first criterion, I find that Mr. Tendenilla was substantially successful in the arbitration. As Arbitrator Blackman noted in McLellan and Aviva Canada Inc.,² an applicant does not need to be entirely successful to be entitled to full expenses. Such a scheme would lessen the need for an insurer to serve a meaningful offer to settle and enhance the pressure for an insured to settle, even improvidently.

Allstate was, however, wholly successful at the preliminary issue hearing. At that hearing, Allstate maintained that Mr. Tendenilla was not entitled to benefits for the period during which he refused to comply with a request that he attend an examination under oath. The hearing arbitrator agreed. The preliminary issue hearing significantly narrowed the issues. Allstate had raised the preliminary issue on February 26, 2007, at the pre-hearing in this case. I find that Allstate is entitled to its expenses for having to prepare for and attend at the preliminary issue hearing.

Offers to Settle

With respect to the second criterion, Mr. Tendenilla’s offer to settle on June 28, 2008 was reasonable. Once the preliminary issue hearing had narrowed the issues, the final award in the case was roughly $400.00 less than the June 28, 2008 offer. I find that if Allstate had accepted the offer, both parties could have avoided the expenses of the arbitration hearing that addressed the issues in dispute.

Recusal Motion

With respect to the third criterion, the hearing arbitrator, in the recusal motion decision dated August 13, 2008, concluded that Mr. Tendenilla failed to abide by an agreement outlined in a letter dated February 12, 2008. Allstate engaged in activities and incurred costs because it believed that it had entered into an agreement with Mr. Tendenilla. I find that Allstate is entitled to its expenses related to the agreement. It is clear that the recusal motion was unnecessary, given that Mr. Tendenilla had agreed with Allstate to add issues to the arbitration and then resiled from the agreement. I find that Allstate is entitled to the expenses of the recusal motion.

Other Issues

Allstate submits that the hearing, scheduled to begin on February 11, 2008, was adjourned at Mr. Tendenilla’s request. Allstate also asserts that the parties had an agreement that Mr. Tendenilla add to the existing arbitration, issues in dispute arising out of a second motor vehicle accident in which he was involved. Allstate would then be spared Mr. Tendenilla’s commencing a second application for arbitration and the $3,000.00 filing fee.

The hearing arbitrator’s letter to the parties, dated June 23, 2008, confirms that Mr. Tendenilla resiled from this agreement.

Allstate’s position is that it is entitled to its costs thrown away as a result of Mr. Tendenilla’s resiling from the agreement. Further, that should issues in dispute from the second accident proceed to arbitration, Mr. Tendenilla should be required to pay Allstate the $3000.00 filing fee. Allstate also submits that, given the hearing arbitrator’s comments in the recusal motion decision, it would be entirely appropriate to deprive Mr. Tendenilla of the costs he might otherwise have received.

Allstate relies on Lukas and York Fire and Casualty Insurance Company.³ In that case, the Applicant sought to withdraw an arbitration. Arbitrator Muir permitted the applicant to withdraw. He also ordered that the applicant pay the filing fee in the event she ever commence a subsequent arbitration in respect of the issues in dispute. Lukas is distinguishable as the Applicant in that case alluded to withdrawing an arbitration and applying for a new arbitration in respect of the same issues. In this case, Mr. Tendenilla is entitled to file an application for arbitration in respect of the second motor vehicle accident. Allstate’s concerns related to the agreement are addressed by my recognition that Allstate is entitled to its expenses incurred in addressing Mr. Tendenilla’s resiling from the agreement.

Quantum

Counsel for both Allstate and Mr. Tendenilla provided me with detailed Bills of Costs. The senior counsel for Mr. Tendenilla, Mr. Alon Rooz, would normally be entitled to claim fees at an hourly rate of $83.10 ($73.87 plus a bonus of 12.5%). Pursuant to Rule 78.1 of the Commission’s Dispute Resolution Practice Code an arbitrator may award an hourly rate of up to $150.00 to an applicant’s counsel, where it is justified. Allstate did not oppose Mr. Rooz’s claim of $150.00 per hour. Mr. Tendenilla also claimed $77.56 per hour for Ms. Amanda Heerschop.

I have reduced Samiya Ahmed’s file review and preparation in advance of the pre-arbitration by .5 to 3 hours. I have reduced Mr. Rooz’ review of the pre-arbitration memo to 1 hour. I recognize Natalya Lepsky’s preparation of the applicant’s brief as a disbursement and not a fee. Arvin Gupta’s preparation for the arbitration has been reduced from 80 hours to 14 hours, representing 2 hours preparation for 1 hour of hearing time. I have disallowed Mr. Gupta’s further 5 hour arbitration preparation time. I have disallowed all expenses relating to the preliminary hearing, Rule 30 submissions and the bias motion. Arvin Gupta’s further preparation, for what I assume is the July 7 arbitration, has been reduced from 24 hours to 7 hours, representing 2 hours of preparation for 1 hour of hearing time.

Allstate objects to Mr. Tendenilla’s claim for the cost of Dr. Joaquin’s report. Allsate submits that Dr. Joaquin provided the report 3-1/2 years after the motor vehicle accident had taken place. In addition, the hearing arbitrator did not mention the report in his decision and does not seem to rely on Dr. Joaquin’s evidence.

I will allow Dr. Joaquin’s report cost in the amount of $1,500.00. I allow the cost because an overly restrictive approach to awarding expenses for reports could have the effect of discouraging parties from producing evidence which could be helpful in making a decision in a hearing. It is difficult for an arbitrator to discern what evidence will be useful until he or she actually has an opportunity to review and consider what the parties produce.

Based on the parties’ submissions, I find that Mr. Tendenilla is entitled to the following expenses:

Fees: $4,010.14 Disbursements: 5,444.00 Application Fee: 100.00 Fees and Disbursements: $9554.14 G.S.T. on fees: 200.50 TOTAL FEES, DISBURSEMENTS AND G.S.T.: $9,754.64

Less: Insurer expenses Review of Material (re: 2nd MVA): $581.70 Preliminary Issue Hearing: $581.70 Review of decision: 48.47 Teleconference with Arbitrator Muir: 387.80 Prepare for bias motion: 290.85 Attendance at bias motion: 193.90 Total: $2,084.42

TOTAL: $7,670.22

Accordingly, pursuant to subsection 282(11) of the Insurance Act, I find that Mr. Tendenilla is entitled to his expenses with respect to his application for arbitration in the amount of $7,670.22 (inclusive of G.S.T. and disbursements).

February 4, 2009

Lloyd (J.R. Richards) Arbitrator

ARBITRATION ORDER

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

1. Allstate shall pay Mr. Tendenilla’s arbitration expenses in the amount of $7,670.22.

February 4, 2009

Lloyd (J.R.) Richards Arbitrator

Footnotes

1. 1The Statutory Accident Benefits Schedule — Accidents on or after November 1, 1996, Ontario Regulation 403/96, as amended.
2. 2(FSCO A06-001263, February 12, 2007)
3. 3(FSCO A07-000651, August 12, 2008)