Allstate Insurance Company of Canada v. Klimitz, 2010 ONFSCDRS 31

Financial Services Commission of Ontario

Neutral Citation: 2010 ONFSCDRS 31

Appeal P08-00018

OFFICE OF THE DIRECTOR OF ARBITRATIONS

ALLSTATE INSURANCE COMPANY OF CANADA Appellant

and

EDNA KLIMITZ Respondent

BEFORE: David Evans

REPRESENTATIVES: Grant R. Dow for Allstate Insurance Company of Canada Donald Harvey for Mrs. Klimitz

HEARING DATE: May 22, 2009

APPEAL ORDER

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

1. The arbitrator’s order dated April 18, 2008 is rescinded. The parties did not conclude a settlement in the amount of $17,000.

2. The arbitration expenses are remitted to the arbitrator.

3. If the parties are unable to agree on the expenses of this appeal, an expense hearing may be arranged in accordance with Rule 79 of the Dispute Resolution Practice Code.

March 16, 2010

David Evans Director’s Delegate

Date

REASONS FOR DECISION

I. NATURE OF THE APPEAL

Allstate Insurance Company of Canada appeals the arbitrator’s finding that at some point during mediation in early 2007 it made an all-inclusive settlement offer of $17,000 to Mrs. Klimitz, which she later purported to accept in May 2007.

II. BACKGROUND

Mrs. Edna Klimitz was injured in a motor vehicle accident on November 7, 2003. She sought non-earner benefits (NEBs) from Allstate under the SABS–1996.¹ These were denied, leading to mediation. The mediator’s report of failed mediation on March 5, 2007 indicated the last offer to settle NEBs was “0.” Mrs. Klimitz then filed an application for arbitration. A pre-hearing was held before the arbitrator in November 2007, when the issue of whether there was a “valid offer and acceptance to resolve the issues in dispute between the parties” was raised. The arbitrator arranged a preliminary issue hearing before her.

The arbitrator first considered contract law principles, finding there had been a meeting of minds about and timely acceptance of the offer.

Before the arbitrator were the affidavits of Barry Goldman, Mrs. Klimitz’s solicitor, and Sheryl Storey, adjuster. These showed that an offer of at least $17,000 was made at some point in the course of extended mediation sessions. While Mr. Goldman referred to $17,500, he also conceded he may have misheard the amount. The arbitrator found that the discrepancy between the two figures was not significant enough to conclude there was no meeting of the minds and that Allstate did make an offer of $17,000 on a full and final basis to settle the claims. She also found that Mr. Goldman accepted the offer on behalf of Mrs. Klimitz in a conversation with Ms. Storey on May 3, 2007.

The arbitrator stated that there was no evidence before her that Allstate revoked or withdrew its offer at any time before Mr. Goldman advised that Mrs. Klimitz would accept it on May 3, 2007. She noted that an offer not specified to be time-limited remains available for a reasonable period of time and the acceptance of the offer on May 3, 2007, in the absence of any communication purporting to revoke, rescind or withdraw it, was reasonably timely.

The arbitrator then considered various statutory provisions. Allstate submitted that all offers made during mediation lapse by operation of law once the mediator issues a failed mediation report, so since the last offer was zero, there could have been no settlement. The arbitrator found that the “last offer” provisions of the Insurance Act and the Dispute Resolution Practice Code² did not apply because only Mrs. Klimitz’s NEBs were at issue at mediation, whereas the offer at issue was for a full and final settlement.

Allstate argued that the absence of any written confirmation of a settlement was further proof that there was none, or else it was unenforceable because no Settlement Disclosure Notice had been signed, as required by the Settlement Regulation.³ However, the arbitrator found that the insurer could not resile from the alleged agreement and had to provide a settlement disclosure notice to Mrs. Klimitz.

The arbitrator concluded that there had been a settlement for $17,000 and, without reasons, ordered Allstate to pay expenses of $500. Allstate appeals both orders.

III. ANALYSIS

In reaching her conclusion, the arbitrator unjustifiably reversed the onus, gave weight to evidence that either should have been ignored or given little weight, and completely ignored other crucial evidence.

First, some background on how the Commission deals with issues arising out of mediation: The Director of Arbitrations set out in Aggarwal and Allstate Insurance Company, (OIC P‑002621, June 30, 1994) that the Report of Mediator is not written by the parties but constitutes the opinion of a disinterested third party participant: “It is not the agreement of the parties, but rather evidence about what issues were referred to mediation, subsequently resolved or not.” Presumably, the Report of Mediator can also provide evidence as well of the last offer, without necessarily being binding. In this case, of course, the Report of Mediator provided evidence that the last offer was zero.

The arbitrator found that the offer in the Report of Mediator was not relevant because the alleged offer was for an all-inclusive settlement and was therefore not included in the Report. However, Rule 18.1 states that all offers not included in the Report of Mediator “are deemed to be made for the purpose of settlement and shall not prejudice any position that the parties take in any subsequent arbitration or court proceeding.”

Thus, the arbitrator either had evidence that the last offer was zero, or else she gave weight to an alleged offer that should not have prejudiced Allstate’s position. Notwithstanding, the arbitrator stated that there was no evidence before her that Allstate revoked or withdrew its offer before May 3, 2007. This was a clear reversal of onus. I agree with the statement in Pal and Guardian Insurance Company of Canada, (OIC A-003633, October 24, 1994) that the burden of proof that an issue was settled at mediation rests on the party who alleges this fact. Equally, it follows that the burden of even showing that an offer survived mediation fell on Mrs. Klimitz.

The arbitrator then ignored the evidence that nothing was done by Mrs. Klimitz to enforce the alleged settlement from May 2007 until the pre-hearing in November, on the basis that the insurer could not resile from a settlement. Aside from the difficulty in this logic, this position is contrary to case law at the Commission.

In Mouriopoulos and The Citadel General Insurance Company, (OIC A-002166, March 23, 1993), the Report of Mediator indicated that there had been a settlement of a matter in issue in mediation. A preliminary issue hearing was held to determine if that was so. While the report was not conclusive of the existence of a settlement at mediation, little weight was given to the evidence about conversations during mediation, since the mediator could not be called to testify, rendering that evidence “in the general nature of hearsay and ... essentially unverifiable.” Rather, the best objective indication of the existence or otherwise of an agreement was reflected in the actions of the parties afterwards: the applicant immediately took steps to correct the mediator’s report, did not complete a confirmation of settlement form, and requested and obtained a further mediation; the insurer never forwarded any settlement payment. A similar view was expressed in Pal, mentioned above.

The arbitrator should have considered the evidence between May 2007 and the pre-hearing in determining whether or not there was indeed a settlement. The arbitrator went beyond simply giving insufficient weight to evidence, which is not a matter for me to decide, to giving no weight to important evidence, which is an error of law.

Turning to the law of contract, Allstate submits that Mr. Goldman, counsel for Mrs. Klimitz, made a counteroffer during the May 3, 2007 conversation with Ms. Storey when he offered to “split the difference,” and refers to this passage from the arbitration decision: “Mr. Goldman’s undated handwritten note of that conversation records that he asked Ms. Storey if they could ‘split the difference’ between $17,500 and $21,000 to settle the matter, she said no, and he then said he would accept the $17,500...” Allstate says the law is set out in Cameron v. MacLennan, 2002 NSCA 13, 200 N.S.R.(2d) 340 (NSCA), where an initial offer to sell at $45,000 was effectively rejected by a counteroffer to purchase at $40,000, which terminated the offer. The original offer could not be revived by tendering an acceptance of it after that rejection.

However, this issue was not put to the arbitrator. The arbitrator did not turn her mind to making any factual findings on that point, having simply reiterated what is in Mr. Goldman’s note.

It is not my role to weigh the evidence, and neither Rule 18.1 nor the law regarding counteroffers were put to the arbitrator. If these were the only issues, I would send the matter back for reconsideration.

However, there is a further point of law which resolves the matter. Allstate submits that the arbitrator erred in finding that the parties had “reached agreement on all of the essential terms of the settlement,”⁴ in particular the amount. Thus, in Fitzgerald v. Scandrett, 1999 CarswellOnt 3492 (SCJ), there was no agreement because the parties differed on whether the phrase “all inclusive” included an advance payment.

In this case, the arbitrator found that “the discrepancy under the circumstances not to be significant enough to conclude on that basis that there was no meeting of the minds.” Nevertheless, whether the difference is $50,000, as in Fitzgerald, or $500, the value of a settlement has to be agreed upon. The amount of a settlement is an essential term. The arbitrator could not simply dismiss the discrepancy in figures and conclude there was a meeting of the minds. There was no evidence of a meeting of the minds, and in fact the arbitrator recognized there was a discrepancy in the figures, so her order cannot stand.

The appeal is allowed.

As for the arbitration expense order, no reasons were provided. However, given that there was to be another preliminary issue hearing regarding a limitation period that was not held, the arbitration expenses order is remitted for reconsideration as part of that further hearing.

IV. EXPENSES

If the parties are unable to agree about expenses of this appeal, an expense hearing may be arranged in accordance with Rule 79 of the Dispute Resolution Practice Code.

March 16, 2010

David Evans Director’s Delegate

Date

Footnotes

1. 1The Statutory Accident Benefits Schedule – Accidents on or after November 1, 1996, Ontario Regulation 403/96, as amended.
2. 2Subsection 281(3) of the Insurance Act and Rule 22.1(c) of the Dispute Resolution Practice Code require the insurer to pay benefits in accordance with the last offer of settlement before mediation failed and the Report of Mediator to include the insurer’s last offer in respect of any issue that remains in dispute.
3. 3R.R.O. 1990, Reg. 664, as amended by O. Reg. 275/03.
4. 4See Olivieri v. Sherman, 2007 ONCA 491, at para. 41.