Zewde Berhe v. Security National Insurance Co./Monnex Insurance Mgmt. Inc., 2009 ONFSCDRS 51

Financial Services Commission of Ontario Commission des services financiers de l’Ontario

Neutral Citation: 2009 ONFSCDRS 51

FSCO A06-001646

BETWEEN:

ZEWDE BERHE

Applicant

and

SECURITY NATIONAL INSURANCE CO./ MONNEX INSURANCE MGMT. INC.

Insurer

*Minor corrections were made on pages 1 and 2, on May 7, 2009, in accordance with the Dispute Resolution Practice Code and section 21.1 of the Statutory Powers Procedure Act.

DECISION ON EXPENSES

Before: Arbitrator John Wilson

Heard: By written submissions filed on August 28, 2008 and September 12, and 15, 2008

Appearances: Ms. Jwan Desai for Mr. Berhe

Mr. Christopher Caston and Mr. Gaspare Di Salvo for Security National Insurance Co./Monnex Insurance Mgmt. Inc.

Issues:

The Applicant, Zewde Berhe, was injured in a motor vehicle accident on November 17, 2004. In a decision dated May 30, 2008, 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. Berhe is not entitled to a non-earner benefit.
Mr. Berhe is not entitled to a medical benefit for treatment and prescriptions.
Mr. Berhe’s claim for attendant care benefits was withdrawn.
Mr. Berhe is entitled to payment for housekeeping and home maintenance expenses at the rate of $100 per week until the two-year mark, subject to any amounts already paid by Security National, plus interest.

The issue in this further hearing is:

Is Mr. Berhe entitled to his expenses incurred in respect of this arbitration hearing?

Result:

Mr. Berhe is entitled to his expenses.

EVIDENCE AND ANALYSIS:

At the hearing of this matter which concluded on December 5, 2007, several issues were referred to arbitration. These included a non-earner benefit, certain medical expenses and housekeeping, as well as attendant care expenses.

Prior to the commencement of the hearing, Mr. Berhe’s lawyer, Ms. Desai, advised that Mr. Berhe intended to withdraw the claim for attendant care expenses, and would be calling no evidence on that issue.

Counsel for Security National refused to accept the withdrawal of the attendant care claim and advised that his client intended to address that issue as part of its case.

Following the completion of the hearing, I issued a decision that found that, although Mr. Berhe had not proven entitlement to non-earner benefits (although not for the reasons that Security National had specified − that Mr. Berhe was gainfully “employed” at the time of the accident), he was entitled to succeed on the housekeeping benefit claim.

In the context of that award, I noted that early on in the claims process Security National had credible evidence that Mr. Berhe required some housekeeping assistance. It terminated on the basis of a questionable report that relied on assumption beyond the competence of its O.T. author, and did not reconsider in the light of another report submitted by Mr. Berhe that supported his housekeeping needs.

The criteria for an order of expenses are set out in section 75 of the Practice Resolution Practice Code (4^th Edition, Updated October 2003). Subsection 75.1 establishes the jurisdiction of an arbitrator to award expenses, while subsection 75.2 reflects the principles for an award, as set out in the Expense Regulation (Regulation 664, R.R.O. 1990, as amended).

The Expense Regulation now reads:

(1) The expenses set out in the Schedule are prescribed for the purpose of subsection 282 (11) of the Act, R.R.O. 1990, Reg. 664, s. 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. O. Reg. 275/03, s. 4.

The Expense Regulation uses the term “expenses” instead of the more usual word “costs” in the context of a reimbursement of legal expenses incurred by a party to an arbitration. While “costs” generally refers to the practice of providing an allowance to a successful party, based on known scales or tariffs, to indemnify him or her for some of the expenses incurred, “expense” seems to have a more simple meaning.

The Canadian Oxford Dictionary describes “expense” as:

Cost incurred; payment of money. 2 a costs incurred in doing a particular job etc. (will pay your expenses). b an amount paid to reimburse this

Clearly, the legislature in using the word “expense” meant to indemnify a party for its actual incurred expenses up to any statutory limit.

The Insurer bases its claim for expenses on what it views as the Insurer’s mixed success in this matter. Out of all the claims raised in this matter, Mr. Berhe succeeded in receiving a positive order for only one. However, notwithstanding that Mr. Berhe withdrew the attendant care issue at the outset of arbitration, Mr. Caston claims that Security National was successful on that issue as well as on the majority of the issues in this arbitration.

Director’s Delegate Draper in the appeal of Gray and Zurich Insurance Company (FSCO P98-00047, June 11, 1999), examined the role of an arbitrator in awarding expenses subsequent to the implementation of subsection 282(11) of the Insurance Act and the Settlement Regulation.

Arbitrators now have an obligation to consider the legislated criteria, including the result, applying them to both parties. However, I agree with the arbitrator that the criteria do not reflect a move to the kind of results-based approach used by the courts. Success is only one criterion in an open-ended list and, therefore, must be weighed against the other relevant considerations. I also agree with the arbitrator that the criteria, specifically clause 6, leave room for concerns about the access to the dispute resolution system. One aspect of accessibility is that insured persons should have a reasonable opportunity to raise novel issues of interpretation, particularly those of general importance.

There have been significant changes since Gray, however. The Expense Regulation now, constrains the arbitrator with the words “consider only the following criteria” followed by a list that expressly removes the “catch-all clause” “any other matter related to the proceeding that the adjudicator considers relevant.”

In this matter, there have been offers to settle made by Mr. Berhe and Security National. Security National’s offer was either for a withdrawal of all issues in dispute, without costs, or for a full and final settlement for $1,000.

I note that it is hard to find a useful comparator in an offer which exchanges all past, present and future claims for a fixed sum when only limited claims are at issue in the arbitration. As for the offer of withdrawal without costs, it is clear that Mr. Berhe easily exceeded that offer.

Likewise, Mr. Berhe’s settlement offer of $16,648 all inclusive cannot be easily compared to the outcome since the attribution of value to such items as future medical care and rehabilitation services, not to mention expenses, is not at all clear. Consequently, it is impossible to tell whether or not Mr. Berhe exceeded his own settlement offer.

On the whole, if settlement offers are to be considered, it is clear that Mr. Berhe exceeded the best offer made by the Insurer relating to the issues in arbitration. Consequently, that criterion favours Mr. Berhe.

With regard to the success criterion, while not determinative, Mr. Berhe succeeded in obtaining an award of housekeeping benefits. On the issue of the non-earner benefit, he was at least as successful as the Insurer. While no award was made of the benefit claimed, the Insurer’s position, one which formed the basis of its rejection of the claim (namely, that Mr. Berhe was gainfully employed), was rejected out of hand.

In my earlier decision I commented:

I would suggest as well that Security National’s current position on qualification could be seen as at best ingenuous, and at worst inconsistent and misleading. It should be noted that on the Explanation of Benefits issued March 18, 2005, with regard to income replacement benefits, the Insurer stated:

…We have determined that you where (sic) paid cash by both your previous employers, Auto Works and Amber Kitchen Cabinets. As per section 64 of the Statutory Accident Benefits Schedule we are unable to process an Income Replacement Benefit for any income that is not reported to revenue Canada.

It is difficult to understand how an insurer can insist that that an insured is entitled to an income replacement benefit that it refuses to process or consider at all. If Security National wished to rely on entitlement as a bar to a non-earner, it should have processed the application…

In the light of the above comments I find it hard to understand how Security National can base its claim for expenses on my earlier finding that Mr. Berhe is not entitled to a non-earner benefit.

As well, an award of expenses or costs has a double nature. On one hand, it is some compensation for the expenses incurred by a party in successfully litigating a matter. On the hand, it may also be, to some degree, a punitive matter, awarded to ensure that a potential abuse of process or outrageous conduct by a party is appropriately sanctioned.

While I did not find that Security National’s position on non-earner was so egregious as to be either an abuse of process or evidence of outrageous conduct, an award of expenses to the Insurer would only serve to reward it for its “at best ingenuous, and at worst inconsistent and misleading” technical position on Mr. Berhe’s entitlement to non-earner benefits, a position that drove much of this hearing.

On the balance, Mr. Berhe was successful in this matter. He succeeded in receiving a positive award. The Insurer did not, and indeed found its position on the non-earner benefit was soundly condemned. On the basis of success Mr. Berhe is entitled to an expense award.

The Insurer has rightly suggested that Mr. Berhe’s conduct in not formally withdrawing the attendant care benefit until the eve of the hearing should be considered in making an award. However, I disagree with the Insurer as to whether this conduct should disentitle Mr. Berhe from an award of expenses, or even entitle the Insurer to its own award.

While I accept that Security National would likely have prepared to argue this issue, and could well be compensated by what were in effect costs thrown away by the last minute withdrawal, nowhere has the Insurer broken out its costs on this issue alone as opposed to the arbitration as a whole.

Given that housekeeping and non-earner benefits were live issues for the duration of the hearing, it would seem logical that similar witnesses and evidence would have to be reviewed for the balance of the hearing as for attendant care alone. In the absence of positive evidence to the contrary, I find that Security National has not demonstrated that it incurred any significant costs thrown away due to the withdrawal of the Attendant Care issue.

I note as well that it might well be said that the withdrawal of the Attendant care issue served to shorten the hearing and avoid unnecessary costs, something that should be considered in Mr. Berhe’s favour.

I find, therefore that Mr. Berhe is entitled to his expenses.

In light of my earlier comments about the nature of an expense award, it is clear that Mr. Berhe would be entitled to indemnity for his actual expenses up to the maximum amounts provided for in the legislation and the Practice Code.

Ms. Desai served and filed her Bill of Costs. Her fees total $16,457.50, with a further $822.87 for G.S.T.; $1,478.39 for disbursements and $73.92 for G.S.T on disbursements. The hourly rates claimed seem in line with FSCO guidelines, and indeed are likely far less than full indemnity, since it is notorious that most counsel in the private sector bill well in excess of the legal aid tariff.² Mr. Tkatch’s billings while above the legal aid rate, are within the maximum provided for by FSCO for experienced applicant counsel.

Given that Security National did not appear to take great exception to specific amounts billed by Ms. Desai on behalf of Mr. Tkatch’s office I see no reason to embark on a line by line analysis of the amounts billed. Consequently, I find that Security National should bear Mr. Berhe’s expenses as billed which I find to be in the amount of $18,832.68 including disbursements and G.S.T.

April 27, 2009

John Wilson Arbitrator

Date