Old Republic Insurance Company v. Borzoo Safari, 2010 ONFSCDRS 124

Financial Services Commission of Ontario

Commission des services financiers de l’Ontario

Neutral Citation: 2010 ONFSCDRS 124

Appeal P10-00015

Appellant

and

Respondent

BEFORE:

Delegate Lawrence Blackman

Ms. Jennifer McGlashan for the Appellant, Old Republic Insurance Company

Mr. Daniel J. Holland for the Respondent, Mr. Borzoo Safari

By written submissions due October 19, 2010

Under section 283 of the Insurance Act, R.S.O. 1990, c.I.8, as amended, it is ordered that:

Pursuant to Rule 51.2(c) of the Dispute Resolution Practice Code, (Fourth Edition - Updated September 2010), this appeal from a preliminary, pre-hearing order is rejected.
The Appellant’s subsection 282(12) motion, as well as any dispute regarding entitlement to and/or the quantum of the legal expenses of this appeal from a preliminary order, shall be determined as set out in the body of this decision.

October 26, 2010

Lawrence Blackman Director’s Delegate

Date

I. NATURE OF THE APPEAL

The Respondent, Mr. Borzoo Safari, was injured in a March 1, 2008 motor vehicle accident and applied to the Appellant, Old Republic Insurance Company, for first-party automobile accident benefits under the Schedule.¹ As the Appellant refused to pay the Respondent certain benefits, the Respondent applied to the Financial Services Commission of Ontario for arbitration after mediation failed to resolve the disputes between the parties.

The parties subsequently came before Arbitrator Wilson (the “Arbitrator”) at a pre-hearing discussion held August 3, 2010. The Arbitrator’s pre-hearing letter of the same date indicated that the parties were unable to agree on the extent of their production obligations. The parties were to provide brief written submissions as to the requests that remained in dispute. The Arbitrator would make any necessary orders after the August 10, 2010 deadline for submissions.

Further, the Arbitrator ordered that:

(1) The parties provide brief submissions on whether there should be any consequences, including a cost order, from the Appellant’s apparent lack of authority at the pre-hearing discussion;

(2) The parties confirm their production undertakings within thirty days of the pre-hearing;

(3) Production exchange, or proof of best efforts regarding documents not in a party’s possession, control or power, were to be completed by October 15, 2010; and,

(4) The parties prepare a joint document brief at least thirty days before the arbitration hearing. An eight-day arbitration hearing was scheduled to start June 13, 2011.

The Appellant’s August 6, 2010 written arbitration submissions set out ten production requests agreed to by the Respondent and, in addition, what the Appellant termed “a further list of documents requested of the applicant.” The latter consisted of three areas of production requests, namely, the Workplace Safety and Insurance Board file, attendant care documentation and documentation pertaining to the Respondent’s claim for income replacement benefits (“IRBs”).

The Arbitrator’s August 19, 2010 pre-hearing decision included the following orders:

(1) The Appellant produce all adjuster’s notes, correspondence between the insurer and the independent adjuster, as well as any other e-mail or log notes prior to the application for mediation in this matter that are not privileged;

(2) The Appellant identify those documents for which it was claiming solicitor/client privilege and the particulars of the claim for privilege; and,

(3) Finding that the Appellant had breached subsection 279(5) of the Insurance Act, R.S.O. 1990, c.I.8, as amended, in failing to ensure the attendance of its representative at the pre-hearing with full authority, the Appellant was to provide a written explanation for its representative’s non-availability and pay costs fixed at $200.

The Arbitrator found that the Appellant had not indicated that any of its production requests had been refused or frustrated by the Respondent, nor had it provided any reason why it required a formal production order. Consequently, the Arbitrator found that the Appellant’s request for a production order was premature. The pre-hearing was set to resume on October 15, 2010.

The Notice of Appeal submits that the Arbitrator made palpable and overriding errors in failing to properly address the Appellant’s request for a production order of documents that had indeed been refused and, in so doing, denied natural justice, committed a miscarriage of justice, erred in applying the relevant legislation and exhibited bias against the Appellant and its counsel. The Appellant argued that it would be prejudiced if it were required to proceed to a hearing without its production requests being decided and that it would be unable to properly assess the Respondent’s claim or resolve or narrow the issues in dispute.

The Appellant did not appeal the Arbitrator’s August 19, 2010 orders regarding production from its adjusting file, identification of documents for which it claimed solicitor/client privilege, that the Appellant explain why it failed to have its representative attend the pre-hearing with full authority or that it pay costs fixed at $200.

The Appellant’s reply submissions state that at the October 15, 2010 pre-hearing resumption the Arbitrator agreed that the Appellant’s production requests were relevant to the issues in dispute and “requested that counsel for the Respondent make inquiries” as to the documents’ availability and provide copies to the Appellant. The Appellant seeks the following appellate orders:

(a) That the Respondent be compelled to deliver the documentary productions as requested by the Appellant and that such documentation be provided by the Appellant or obtained from third parties within 45 days of the appellate order;

(b) That the Respondent be precluded from claiming interest on IRBs to which he may be found entitled, from the date the documentation was first requested to the date the documentation is ultimately produced;

(c) That a new arbitrator be appointed pursuant to subsection 282(12) of the Insurance Act to adjudicate the interlocutory matters that may arise between the parties; and,

(d) That leave is granted to appeal the Arbitrator’s interlocutory order.

The Respondent requests that the appeal be rejected in accordance with Rule 51.2 of the Dispute Resolution Practice Code, (Fourth Edition - Updated September 2010), (the “Code”), as the appeal does not involve a question of law, arises from a preliminary order that does not finally decide the issues in dispute, is certain to fail and does not involve any novel issue. The Respondent submits that the allegation of bias is unfounded.

II. ANALYSIS

Rule 50.2 of the Code provides that a party may not appeal a preliminary or interim order of an arbitrator until all of the issues in dispute have been finally decided, unless the Director (or in this case, his delegate) orders otherwise.

Rule 51.2(c) of the Code provides that an appeal may be rejected if it is from a preliminary or interim order that does not finally decide the issues in dispute.

Delegate Makepeace, in Allstate Insurance Company of Canada and Torok, (FSCO P01-00021, May 29, 2001) held that the purpose of Rule 50.2 is to:

… facilitate the most cost-effective resolution of disputes by minimizing the time and money spent on procedural or collateral matters. The decision whether to hear an appeal of a preliminary order is discretionary … the over-arching principle guiding the exercise of the discretion is that the rule “should be broadly interpreted to produce the quickest, most just and least expensive resolution of the dispute.” The criteria to be considered include the apparent strength of the appeal, the importance or novelty of the issue raised, and whether rejecting the appeal or hearing it will prejudice either party. [emphasis added]

The Appellant has the onus of establishing that discretion should be exercised to accept this appeal from a preliminary, pre-hearing order. My September 22, 2010 letter indicated that, subject to submissions, it was my intention to determine whether to accept this appeal on the basis of the written submissions, as allowed by Rule 56.5 of the Code, as the quickest and least expensive resolution of this issue, but still allowing both parties a reasonable opportunity to provide their respective argument and to respond to the other party’s submissions.

Neither party requested an opportunity to provide oral submissions on this preliminary issue.

Therefore, upon reading the material filed, I find that I should not exercise my discretion to accept this appeal from a preliminary, pre-hearing order for the following reasons:

There is little apparent strength to this appeal. More specifically:

(a) Rule 33.1(c) of the Code provides that one of the functions of the pre-hearing discussion is deciding any dispute relating to the exchange of documents. The Arbitrator initially declined to order production of the Appellant’s requested documentation only because he was not persuaded that there was a dispute. The Arbitrator confirmed a resumption of the pre-hearing for October 15, 2010.

(b) The Appellant states that at the October 15, 2010 pre-hearing resumption the Arbitrator determined that its production requests were relevant and that the Respondent should make inquiries as to the availability of the documents requested and provide copies of same. The Arbitrator’s letter of October 15, 2010 states that the “parties agreed between themselves on the resolution of any outstanding production disputes.” Although it is not clear what precisely transpired at the resumption, it is not apparent that the Appellant has been denied any production request.

(c) The remedy for a party’s failure to produce documents in compliance with either an order or an agreement is Rule 34 of the Code, as part of the pre-hearing arbitration process. The statutory role of an appellate officer is to address submitted errors of law. The role of an appellate officer is not to be an alternative enforcement officer of the arbitration pre-hearing process.

(d) A party cannot be ordered to produce documents over which it has no control. A party can be ordered to make best efforts to obtain such documents, and to produce them upon receipt. A party’s remedy where a third party declines to provide a document is a third-party motion under Rule 67 of the Code. As appellate officer, I have no greater power, nor should I, than an arbitrator to order production from a third party without first allowing the third party proper notice and an opportunity to respond.

(e) The Appellant provides no statutory or case law basis for an order suspending pre-judgment interest. Subsection 46(2) of the Schedule provides, in mandatory language, that if a payment of a benefit under this Regulation is overdue, the insurer “shall” pay interest on the overdue amount for each day the amount is overdue from the date the amount became overdue at the rate of two per cent per month, compounded monthly. The issue of pre-judgment interest is properly left to the hearing arbitrator.

(f) There is no issue of novelty or general import in this appeal, nor is any argued by the Appellant.

(g) It is difficult to discern the prejudice or the adverse effect of any alleged bias to the Appellant in the orders provided. Although postponed, for reasons given by the Arbitrator, the Appellant has now, acknowledged by the Arbitrator, agreed to by the Respondent, or both, confirmation that its further production list will be honoured.

(h) Allowing this appeal from a preliminary, pre-hearing order would be contrary to the over-arching principle of producing the quickest, most just and least expensive resolution of the dispute.

Turning to subsection 282(12) of the Insurance Act, this provision states that a party may apply to the Director for the appointment of a new arbitrator if the party believes that the arbitrator is biased and the Director shall determine the issue.

In Kahkesh and Lloyd’s Non-Marine Underwriters, (OIC P-000378, August 19, 1992), Director Sachs stated that “[b]ias on the part of an adjudicator against a party is a serious allegation. It should not be made lightly, nor as a catch-all ground for appeals.” The Director cited Newfoundland Telephone Company Limited v. Newfoundland (Board of Commissioners of Public Utilities), 1992 CanLII 84 (SCC), [1992] 1 S.C.R. 623 that:

… The test for bias, and the reasonable apprehension of bias … is whether, taking all considerations into account, the arbitrator closed her mind to being persuaded, or prejudged the issues so as to preclude the acceptance of representations to the contrary and denied a party a fair hearing.

The Appellant’s submissions regarding subsection 282(12) are simply that “the Arbitrator exhibited bias against [the Appellant] and its counsel as contained throughout his direction dated August 3, 2010 and pre-hearing decision dated August 19, 2010.”

Subsection 282(12) is distinct from a section 283 appeal from the order of an arbitrator and is not determined by the rejection of an appeal from a preliminary or interim decision.

To proceed with its bias application, applying Rule 67 of the Code that pertains to orders within proceedings, the Appellant shall, within fourteen days of this decision, advise the Respondent and the Commission, in writing, of the time, date and manner in which it seeks to have its separate subsection 282(12) motion heard and, within that same time period, serve and file (with proof of service) any additional written submissions or documentation upon which it relies in this regard.

Within ten days of being served, the Respondent shall serve on the Appellant and file, with proof of service with the Commission, a written response to the Appellant’s further materials and any other documents upon which the Respondent relies.

III. EXPENSES

If the parties are unable to agree on the legal expenses of the appeal itself, in accordance with Rules 81.1(a) (amending time lines) and 1.1 (to expedite resolution) of the Code, an expense hearing shall be requested within fourteen days of the date of this decision. The request shall be accompanied by a Bill of Costs describing the expenses claimed, services received and the costs, as well as submissions as to entitlement to and the quantum of the legal expenses of the appeal.

The responding party shall, within ten days of receipt of the moving party’s materials, serve and file a written response to the account, identifying the items in dispute and the reasons for disputing entitlement and/or quantum.

The moving party shall then have ten days from receipt of the responding party’s submissions to provide copies of any supporting documentation as well as any reply submissions. Subject to any submissions of the parties, in accordance with my authority under Rule 56.5 of the Code, I will determine legal expenses on the basis of these filed materials.

October 26, 2010

Lawrence Blackman Director’s Delegate

Date

Footnotes

The Statutory Accident Benefits Schedule — Accidents on or after November 1, 1996, Ontario Regulation 403/96, as amended.