Simon Ponte v. Economical Mutual Insurance Company, 2010 ONFSCDRS 137

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

Neutral Citation: 2010 ONFSCDRS 137

FSCO A10-000970

BETWEEN:

SIMON PONTE

Applicant

and

ECONOMICAL MUTUAL INSURANCE COMPANY

Insurer

DECISION ON A PRELIMINARY ISSUE

Before: Arbitrator John Wilson

Heard: By written submissions November 4, 9 and 12, 2010.

Appearances: Frank Van Dyke for Mr. Ponte Shawn J. O'Connor for Economical Mutual Insurance Company

Issues:

The Applicant, Simon Ponte, was injured in a motor vehicle accident on May 2, 2006. He applied for and received statutory accident benefits from Economical Mutual Insurance Company (“Economical”), payable under the Schedule.¹ The parties were unable to resolve their disputes through mediation, and Mr. Ponte applied for arbitration at the Financial Services Commission of Ontario under the Insurance Act, R.S.O. 1990, c.I.8, as amended.

The preliminary issue is:

Is Mr. Ponte precluded from proceeding to arbitration because his application for arbitration on the issue of attendant care benefits as claimed has not been properly the subject of a failed mediation?

Result:

Mr. Ponte is entitled to proceed to arbitration on all elements of his attendant care claim.

EVIDENCE AND ANALYSIS:

Economical in its Response raised an issue as to the ability of Mr. Ponte to refer the issue of attendant care to arbitration. Relying on section 281(2) of the Insurance Act, it alleges that this issue has not been the subject of a failed mediation and consequently cannot be arbitrated.

Section 281 (2) reads as follows:

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. 1996, c. 21, s. 37.

A copy of a mediator’s report dated April 8, 2010 was attached to Mr. Ponte’s Application for Arbitration. The mediator stated in his report:

The following matters remain in dispute:

Attendant care benefits from September 29, 2009 to date and ongoing at the rate of $6,682.91 per month up to date and ongoing less amounts paid by the insurer.

The Insurer states its position as follows:

It is the Insurer’s position that the September to December 2009 period has not been the subject of any mediation even though there was an adjournment of the mediation to allow the second and third applications to proceed and “catch up” to the mediation.

The issue is further narrowed to the difference between the amount applied for by the insured and the amount paid by the insurer. The insurer has paid $12,504.64 for attendant care which is all but $4948.00 sought by Mr. Joe Silva, and all but $6324.00 sought by the three nephews of the insured, combined. These are the figures for the period September 29, 2009 to March 31, 2010, and the insurers (sic) payments are continuing.²

There is no question that as a general principle, statutory mediation is a precondition to beginning an arbitration of an accident benefits dispute.

The wording of section 281(2) however, is interesting. While it mentions referring “the issues in dispute to an arbitrator” the reference to the mediation process is less precise. The precondition to an action is only: “unless mediation was sought,” and “mediation failed.” Patently absent from the provision is any specific linkage of the word mediation to “issues.”

Due, perhaps, to the obtuse wording of the section there is a wide range of views as to just what it means. Some are of the opinion, like Economical in this matter, that every potential element of every issue must be mediated in order to be dealt with by a court or an arbitrator. The other end of the spectrum is that put forward by Charbonneau J. in Woodman v. State Farm Mutual Insurance, who listed, as one of the factors that would meet the mediation precondition, that “There had been a failed mediation involving the same accident.” ³

Notwithstanding the potential range of interpretations, there are some common strands to be identified. The first is that mediation is not supposed to be an undue impediment to the resolution of accident benefit disputes. Rather it is meant to facilitate resolution. As Arbitrator Blackman stated in Robertson and Co-operators General Insurance Company:

The clear purpose of mediation under the Act is to facilitate dispute resolution. It is not the purpose of mediation to impede dispute resolution by adding pro forma steps to address technical minutia. ⁴

This approach to the mediation process has been applied by the courts as well. Both Woodman v. State Farm⁵ and Pilon v. Zurich⁶ take a liberal approach to the mediation prerequisite in subsection 281(2) of the Insurance Act.

In Pilon v. Zurich, Cunningham J. allowed a matter to proceed because he was “satisfied that the plaintiff has acted within the spirit of the procedures set out in the Insurance Act and has done everything in his power to resolve the matters in issue.”

In the Bajic appeal, the Director of Arbitrations made the following comments:

Mandatory mediation is meant to ensure that disputes do not go to arbitration or court without an initial effort to resolve them by agreement. It is not intended to impede legitimate actions.⁷

On the more restrictive end of the spectrum there are essentially a trio of court cases: Amorini v. Select Coffee Roasters Inc.⁸, Christakos v. Dominion of Canada General Insurance,⁹ and Wancho v. Liberty Mutual.¹⁰ In each of these matters, an action which began without a mediation first taking place was dismissed by the court in question.

Recently, A.D. Grace J. in Wadwhani reviewed the jurisprudence and tried to reconcile these various decisions:

In three pre-Amorini decisions, members of this Court dealt with situations where some, but not all, issues raised in a statement of claim had been mediated. In each case, the defendant unsuccessfully moved for an order dismissing the portion of the accident benefit claim which had not been mediated; Pilon v. Zurich, [1998] O.J. No. 333 (Gen. Div.); Royal Insurance v. Pisani, [1994] O.J. No. 2616 (Gen. Div.); Woodman v. State Farm Mutual Automobile Insurance Co., [1999] O.J. No. 521.

In this case, there were three failed mediations. Two focused on income replacement benefits and the third the cost of an SEMG. As outlined above, medical and rehabilitation expenses were mentioned in the first mediator’s report albeit under the heading “Issues Resolved”. In reality, they appear to have been issues which were deferred and not mentioned again.

In my view, section 281(2) of the Insurance Act is not so broadly drafted so as to require a detailed analysis of every issue raised in a mediation. Indeed, such an analysis is impossible here. Given the purpose of mediation, the brevity of each mediator’s report is unsurprising. It is not even clear to me from the reports who participated in the mediations. Counsel conceded the reports offered limited assistance. In short, the evidentiary record before me gives me no confidence the issues of medical and rehabilitation benefits were not specifically discussed. Since the parties could not even resolve the SEMG claim for $401.95 in February, 2006 I have little doubt no agreement was or would have been reached on other, more economically significant, items.¹¹

I agree with A.D. Grace J. that “section 281(2) of the Insurance Act is not so broadly drafted so as to require a detailed analysis of every issue raised in a mediation.”

Dealing with the mediation prerequisite in this claim is even simpler than the situations identified by A.D. Grace J.

As is evident from the mediator’s report, the mediator clearly believed that “Attendant care benefits from September 29, 2009 to date and ongoing at the rate of $6,682.91 per month up to date and ongoing less amounts paid by the insurer” were mediated and failed. The Insurer has provided me with no evidence suggesting that the mediator’s statement is wrong.

While variations in services provided, or payments made by the Insurer may have resulted in differing net amounts claimed on a monthly basis, it would make no sense to require an insured to return to mediation and obtain a new mediator’s report every time that the amount claimed varied.

The fact remains that the issue of attendant care benefits was the subject of a mediation, which evidently failed. In my mind, that goes far beyond the bare requirement that mediation be sought, and that mediation should have failed.

Indeed, I find it bizarre that the Insurer should attempt to raise this issue at all at this point in the dispute resolution process. This was not a situation where there was no mediation at all such as in Wancho v. Liberty Mutual¹², or only one mediation on a distantly related issue. There was not only a mediation directly on the issue, but one involving the same time period as that disputed by the Insurer. Moreover, it was clearly identified as an issue remaining in dispute by the mediator’s report.

If the mediator’s report was not accurate, then the Dispute Resolution Practice Code provides a remedy:

23.1 If a party believes that the Report of Mediator is not accurate, the party must notify the mediator and the other parties in writing, with reasons, within 10 days of receiving the Report.

23.2 After considering the reasons and the comments of the parties, the mediator may issue an amendment to the Report of Mediator, if the mediator considers it appropriate.

23.3 The Dispute Resolution Group will deliver a copy of the amendment to theReport of Mediator to the parties, to the person approved by the Director to perform a neutral evaluation, and to an arbitrator appointed by the Director.

There is no evidence of any contact with the mediator pursuant to Rule 23, nor any suggestion that the mediator ever revised his report to reflect the Insurer’s position. Nor is there any evidence that the mediator’s report does not reflect the reality of the outcome of that mediation.

Consequently, I find not only that the complete issue of attendant care was mediated and failed for the purposes of section 281(2) of the Insurance Act, but that this should have been evident to Economical both at the time that it filed its Response, and the time it raised the issue again at the pre-hearing.

EXPENSES:

It is not self-evident that costs automatically follow the cause in arbitrations, let alone in interim or interlocutory or preliminary matters during an arbitration. Success, or the lack thereof, is indeed one criterion for the determination of an award of expenses in arbitration. Sometimes, however, it is necessary to sanction unproductive or other conduct to be discouraged. This is one of those situations.

The Expense Regulation outlines the following considerations:

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.
Whether the insured person refused or failed to submit to an examination as required under section 42 of Ontario Regulation 403/96

In this matter, I would be inclined to focus on items 1, 3, 4 and 5 as being relevant to the determination of this preliminary issue. In particular, I would find that item 5 bears close examination.

While I would be loathe to use the word “improper” with regard to the Insurer’s position, unnecessary and vexatious come to mind as appropriate descriptors.

“Unnecessary” needs no definition but “Vexatious” is not a common term. Rather, it is a term of art used in legal decisions and law for centuries to describe a specific manner of conduct. Lord Blackburn observed in Metropolitan Bank Ltd. et al. v. Pooley:¹³

(T)he Court had inherently in its power the right to see that its process was not abused by a proceeding without reasonable grounds, so as to be vexatious and harassing.

The courts have often examined the meaning of “vexatious” in the context of “hopeless” litigation. Vexatious litigation includes situations where the court has no power to grant the relief sought (see Dreyfus v. Peruvian Guano Co. (1889) 41 Ch.D. 151); if no reasonable person can possibly expect to obtain relief in it, (see Lawrance v. Lord Norreys et al., (1888) 39 Ch. D. 213); or if the applicant has no proper authority to pursue the remedy (see R. ex rel Tolfree v. Clark et al. 1943 CanLII 90 (ON CA), [1943] O.R. 501).

While Economical has every right to file a spirited defence, such a defence, if maintained, must bear some semblance of reality. While there may well be situations where the mediation precondition is clearly not met, this is far from being such a case. It was not even debatable.

There was a specific mention of a failed mediation on the issue in the mediator’s report. There was no record of a challenge to that report under Rule 23.1 of the Practice Code, and no explanation for any such omission.

Under the circumstances, I would have no trouble finding that Economical’s continual assertion that there had been no mediation was both frivolous and vexatious, since no reasonable person could possibly expect to obtain the claimed relief in such circumstances.

It also offends against the principle of Rule 1.1 of the Practice Code which provides for a process that is “most just, quickest and least expensive”, in that Mr. Ponte was put to the time, trouble and expense of responding to the Insurer’s spurious arguments.

Consequently, I exercise my discretion to award Mr. Ponte his expenses incurred in this preliminary issue hearing. If the parties are unable to agree on the amount of expenses, I may be spoken to on this issue.

December 6, 2010

John Wilson Arbitrator

Date