Frank Rodrigues v. Jevco Insurance Company, 2010 ONFSCDRS 80

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

Neutral Citation: 2010 ONFSCDRS 80

FSCO A08-002458

BETWEEN:

FRANK RODRIGUES

Applicant

and

JEVCO INSURANCE COMPANY

Insurer

DECISION ON QUANTUM OF SPECIAL AWARD and EXPENSES

Before: Jeffrey Rogers

Heard: By written submissions completed on May 6, 2011

Appearances: Mr. Frank Rodrigues, self-represented Mr. Chris T. J. Blom, solicitor for Jevco Insurance Company

Issues:

What is the amount of the special award to which Mr. Rodrigues is entitled, pursuant to section 282(10) of the Insurance Act?
Is Jevco liable to pay Mr. Rodrigues his expenses incurred in respect of the arbitration, pursuant to section 282(11) of the Insurance Act?
If entitled to expenses, what is the amount of expenses to which Mr. Rodrigues is entitled?

Result:

Mr. Rodrigues is entitled to a special award in the amount of $3,000.
Mr. Rodrigues is entitled to expenses of the arbitration in the amount of $100.

EVIDENCE AND ANALYSIS:

Background

Mr. Rodrigues was injured in a motor vehicle accident on May 25, 1996. In a decision dated November 4, 2009, I dealt with his claim for payment of income replacement benefits under the Schedule.¹ I made the following orders:

Jevco shall pay Mr. Rodrigues IRBs of $11,851.29, plus interest pursuant to section 68 of the Schedule.
Jevco shall pay Mr. Rodrigues a special award, in an amount to be determined, pursuant to section 282(10) of the Insurance Act.
Jevco shall provide Mr. Rodrigues with a statement, showing the amount upon which the special award is to be calculated, as set out in section 282(10) of the Insurance Act, no later than 45 days after the date of this decision.
If Jevco does not provide the statement within 45 days or, if the issue remains unresolved 30 days after that statement is delivered, either party may request that the hearing be resumed in order to determine the quantum of the special award.
If they are unable to resolve the issue of expenses, either party may make an appointment for me to determine the matter in accordance with Rules 75 to 79 of the Dispute Resolution Practice Code.

The hearing before me was the second arbitration hearing on the issue of Mr. Rodrigues’ entitlement to IRBs as a result of injuries sustained in the accident. I found that the quantum issues Jevco raised as defences before me were resolved in the earlier arbitration and that Mr. Rodrigues was therefore entitled to payment of the IRBs he claimed. I found that Mr. Rodrigues was entitled to a special award because “faced with the ongoing claim, Jevco chose to mount an unreasonable and incremental attack on the concession it made in the first hearing.”

By letter dated December 22, 2009, Mr. Rodrigues demanded that Jevco pay his expenses of the arbitration and a special award in the amount of $5,925.65, plus interest. Jevco did not respond. After receiving oral submissions from the parties on April 23, 2010, I decided to resolve the remaining issues on the basis of written submissions.

Special Award

Section 282(10) of the Insurance Act sets the maximum amount of a special award at “a lump sum of up to 50% of the amount to which the person was entitled at the time of the award together with interest on all amounts then owing to the insured (including unpaid interest) at the rate of 2 per cent per month, compounded monthly, from the time the benefits first became payable under the Schedule.”

The approach to fixing the amount of a special award was established in Liberty Mutual Insurance Company and Persofsky et al.² In that decision, the Director states that, having decided whether the insurer unreasonably withheld or delayed payment of benefits, the arbitrator should determine the maximum amount of the special award that can be awarded, or at least a reasonable approximation, and then consider all relevant factors to determine the appropriate amount. The Director interpreted the language of section 282(10) to mean that the maximum award is “50% x (benefits that were unreasonably withheld or delayed + interest on those benefits calculated under the SABS + compound interest calculated according to s. 282(10)).”³ The Director pointed out that this calculation is not straightforward, but it is what the legislation demands.

Jevco did not comply with my order to provide Mr. Rodrigues with a statement setting out the amount upon which a special award is to be calculated. Mr. Rodrigues has not provided that information. However, I do not find that information critical in this case. Persofsky notes that “the arbitrator should focus on the dollar amount of the special award. That is the penalty visited on the insurer...” Knowing the maximum award is critical when the award will approach the maximum because it is important in those cases to be aware of the limit of one’s jurisdiction. The maximum penalty should generally be reserved for cases of the most egregious conduct or cases where the amount withheld is so small that the award must approach the maximum in order to satisfy the punitive intent of section 282(10). This is not such a case.

I summarize the guidance Persofsky provides for fixing the amount of a special award as follows: The purpose of a special award is to punish the insurer for its misconduct and to deter it, and others, from future, similar action. The arbitrator should consider all relevant factors to determine an appropriate lump sum, within the maximum percentage. The amount awarded must respond to the facts of the case and bear a reasonable relationship to other special awards, thus satisfying the principles of rationality and proportionality established by the Supreme Court of Canada regarding punitive damages. ⁴

The factors to be considered include:

the amount of the benefits unreasonably withheld or delayed;
how long the benefit is withheld or delayed;
the blameworthiness of the insurer’s conduct;
failing to respect important obligations under the SABS;
the harm or potential harm directed at the insured;
the need for deterrence;
breach of important obligations under the Schedule;
mitigating factors;
other consequences the insurer might suffer as a result of its conduct.

My order required Jevco to pay Mr. Rodrigues IRBs of $11,851.29, plus interest pursuant to section 68 of the Schedule. I found the periods for which payment was outstanding to be as follows:

Year

Amount

2006

$ 1,201.75

2007

$ 1,773.99 and $ 3,240.68

2008

$ 2,537.82

2009

$ 3,097.05

Total

$11,851.29

I decided that the issue of quantum of IRBs was determined in the earlier arbitration. I awarded Mr. Rodrigues the amounts claimed for that reason. I found that the question of whether Jevco’s new position on calculating quantum was correct was irrelevant to Mr. Rodrigues’ entitlement to payment. However, I now find it necessary to address that question in order to assess the degree of blameworthiness of Jevco’s conduct.

In the earlier arbitration, Jevco was ordered to pay Mr. Rodrigues one-fifth of his weekly quantum of IRBs for each day that he received no pay because he was unable to work as a result of accident-related injuries. Jevco conceded this quantum which does not take into account Mr. Rodrigues’ income in the weeks in which he takes days off. IRBs are a weekly benefit. The Schedule requires calculation of entitlement on a weekly basis. Jevco’s concession ignored sections 10(3) and (4) of the Schedule which would have allowed it to deduct 90% of Mr. Rodrigues’ net income in the weeks in which he took days off. Those sections provide as follows:

10(3) The insurer may deduct from the amount of the weekly income replacement benefits payable to an insured person a percentage of the net income received by the insured person in respect of any employment subsequent to the accident.

(4)The percentage mentioned in subsection (3) shall be,

(a) 75 per cent, if the insured person started the employment more than twenty-six weeks after the onset of the disability in respect of which the weekly income replacement benefits are paid and has been engaged in the employment for less than twenty-six weeks; and

(b) 90 per cent, in any other case.

If Jevco had taken advantage of sections 10(3) and (4), it likely would have owed Mr. Rodrigues nothing for IRBs. This fact removes from the assessment of the quantum of the special award any concern for injustice visited upon Mr. Rodrigues by Jevco’s conduct. Therefore, the main thrust of the special award in this case is deterrence of future abuse of the arbitration process. I find an award of $3,000 to be reasonable in all of the circumstances.

Expenses

Mr. Rodrigues claims arbitration expenses in the amount of $5,774.73. That sum includes $100 he paid for the filing fee, $5,443.75 claimed for time spent preparing for and participating in the arbitration (charged at $67 per hour) and $230.98 described as leave without pay while participating in a telephone conference call on April 23, 2010.

Section 282(11) of the Insurance Act gives an arbitrator jurisdiction to award “according to criteria prescribed in the regulations, all or part of such expenses incurred in respect of an arbitration proceeding as may be prescribed in the regulations, to the maximum set out in the regulations.”

The prescribed criteria are:

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

Applying the criteria, I find that Mr. Rodrigues is entitled to his allowable expenses of the arbitration, based on his success. I find that the only allowable expense claimed is the $100 paid for the filing fee. I find that Mr. Rodrigues did not incur expenses when he spent time preparing for and participating in the arbitration. Although it is arguable that he incurred an expense if he lost wages in order to participate in the arbitration, I have no authority to order recovery because there is no provision for such an award in the Expense Regulation.

Further, I am not satisfied that it would be reasonable to do so, if I did have the authority. The hearing was resumed, by telephone conference call, at 2:00 p.m. Mr. Rodrigues provided no evidence that he took the day off and was not paid. He also provided no explanation of why it was necessary to take a day off, in the circumstances.

June 15, 2010

Jeffrey Rogers Arbitrator

Date