Financial Services Commission of Ontario

Commission des services financiers de l’Ontario

Neutral Citation: 2010 ONFSCDRS 83

Appeal P09-00033

OFFICE OF THE DIRECTOR OF ARBITRATIONS

DOMINION OF CANADA GENERAL INSURANCE COMPANY Appellant

and

JASWINDER SINGH Respondent

BEFORE: Delegate Lawrence Blackman

REPRESENTATIVES: Ms. Lisa A. Armstrong for Dominion of Canada General Insurance Company Mr. Andrew R. Kerr for Mr. Jaswinder Singh

HEARING DATE: June 16, 2010

APPEAL ORDER

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

1. The appeal is allowed in part. The November 17, 2009 consent stay of the Arbitrator’s Order is lifted and the following order is substituted for paragraph one of the Arbitrator’s September 15, 2009 Order:

   Dominion of Canada shall pay Mr. Singh the sum of $3,250 together with interest thereon in accordance with subsection 46(2) of the Schedule from January 21, 2009 to the date of payment. Mr. Singh shall provide Dominion of Canada with a witnessed release.

2. If the parties are unable to agree on the legal expenses of this appeal, an expense hearing may be arranged in accordance with Rule 79 of the Dispute Resolution Practice Code (Fourth Edition, Updated – October 2003).

June 30, 2010

Lawrence Blackman Director’s Delegate

REASONS FOR DECISION

I. NATURE OF THE APPEAL

Parties resolving their disputes regarding statutory accident benefits under the Schedule¹ on a timely basis is an increasingly critical issue in this alternative dispute resolution system where the Commission’s externally distributed statistics show a fourfold increase from 2007 to 2010 to some 14,000 pending mediation cases and a tripling of claims in the system settling without a meeting with a mediator.

This appeal, therefore, raises an important, yet novel question. If parties settle a dispute regarding first-party automobile accident benefits, subject to the requisite compliance with sections 9.1 and 9.2 of Ontario Regulation R.R.O. 1990, Reg. 664, as amended by O. Reg. 275/03 (the “Settlement Regulation”), what are the ramifications of a dispute over the execution of the release?

The Respondent, Mr. Jaswinder Singh, was injured in a May 23, 2006 accident and applied for benefits under the Schedule from his first-party insurer, the Appellant, Dominion of Canada General Insurance Company. The parties disagreed on the Respondent’s entitlement under the Schedule. Accordingly, following a failed mediation, the Respondent applied for arbitration at the Commission. By letter dated December 5, 2008, Arbitrator Alves confirmed the parties’ advice that they had settled this matter subject to compliance with the Settlement Regulation.

By letter dated December 30, 2008, the Appellant’s counsel provided the Respondent’s counsel with a Settlement Disclosure Notice and a Full and Final Release of Specified Benefits. The release included a certification for signature by the Respondent’s counsel that he had fully explained the release to the signing party, whose signature he confirmed.

The Respondent’s counsel’s January 21, 2009 responding letter enclosed copies of the signed Settlement Disclosure Notice and Release, the latter uncertified but, in the words of counsel, “executed by Jazz Singh,” as well as an executed Consent to dismissal of the arbitration proceeding and a draft Order approved as to form and content. The Respondent’s counsel’s follow-up letter of January 22, 2009 stated that he was not sure why his certification was required and, in any event, he was not in a position to sign the certification due to solicitor/client privilege.

The Appellant’s counsel sent a revised release February 3, 2009, omitting the certification that the release was explained but retaining counsel’s certification of the Respondent’s signature.

The Respondent’s counsel’s February 11, 2009 letter stated that being required to witness his client’s signature breached solicitor/client privilege. If the Respondent later challenged the release, the Appellant would look to the Respondent’s counsel to give evidence that his client voluntarily signed the document. In any event, the Respondent was working in a different city and only by taking time off work could he attend his lawyer’s office to sign the documents.

The Appellant’s counsel’s letter of February 24, 2009 offered as an alternative that the Respondent attend at her office with government-issued photo identification to sign the release and pick up the settlement funds. The Respondent’s response was a March 9, 2009 letter to the Commission asking that this matter be put back on the list for arbitration and that a preliminary issue hearing be arranged to determine whether there was a settlement and, if so, what documentation was required to complete the settlement.

Following scheduling problems, Arbitrator Ashby wrote the parties on May 25, 2009 that the most efficient and cost effective means of deciding the preliminary issues was by written submissions. The Respondent was given four weeks for his submissions, the Appellant had an equal, consecutive period to respond, with a further two weeks for the Respondent’s reply.

Under covering letter of June 26, 2009, the Respondent filed his submissions seeking an order:

(a) enforcing the December 5, 2008 settlement; and,

(b) that the Appellant pay forthwith (i) the settlement sum of $3,250, (ii) a special award of $1,625, and (iii) interest on both sums from January 21, 2009 to date.

The Respondent submitted that this case had broad implications. If the Respondent was correct, then the Appellant was wrongfully withholding the settlement monies. If the Appellant was correct, then either there was no settlement or direction was required as to what documentation the Appellant could require.

The Respondent indicated he had been unable to find any decision as to what documentation was required to complete this settlement. However, the Settlement Regulation only required a signed disclosure notice and a valid release, which had been provided. The Respondent argued that an insurer cannot put whatever terms it wants in a release, nor can it add additional documents at will. The requested lawyer’s certifications were not a usual or standard part of a release and contravened solicitor/client privilege by disclosing confidential communications as to whether counsel had adequately explained the release to the client.

The Appellant’s submissions sought an order that one of the two releases it had provided be executed by the Respondent and his counsel within ten days, failing which the settlement was considered repudiated and the matter proceed to arbitration. The Appellant argued that there was no settlement in this case as there was no meeting of the minds on the essential issue of the settlement documentation.

The Appellant did not dispute that a lawyer’s certificate was a waiver of solicitor/client privilege. However, the insured’s waiver was necessary to protect the integrity of the agreement. The Appellant’s counsel submitted that her firm had been using a release with the lawyer’s certificate for over 20 years that had been unfailingly accepted. Counsel submitted that “everyone who works in this area of law knows” that it would be unfair for insurers to be forced to settle a claim with insufficient documentation.

The Appellant, in addressing the claimed special award, stated that it had offered alternatives to the Respondent, who had failed to provide any compromise.

The Respondent’s counsel’s reply submissions commented on the intolerable months of delay disputes over such requested certifications had caused his clients and that it was impossible for this client to attend either at his office or that of the insurer. Further, to say that there was no settlement in this case due to a dispute regarding the settlement documentation would give an insurer the de facto right to rescind any settlement (a right the Settlement Regulation does not provide to insurers) by insisting on unreasonable terms in the release.

The September 15, 2009 decision of Arbitrator Killoran (the “Arbitrator”) held that the Settlement Regulation does not specify that a lawyer’s certification or witnessing an insured’s signature is required on the release. The Arbitrator found that all of the requirements for a valid and binding settlement under the Settlement Regulation were met on January 21, 2009. The Arbitrator held that it was not acceptable for the Respondent to have “arbitrarily added an additional requirement which was not statutorily mandated.”

Finding that the Appellant was unreasonable “to a flagrant degree” in withholding payment of settlement funds, the Arbitrator found the Respondent entitled to the highest end of the scale for a special award. Accordingly, the Arbitrator ordered that the Appellant pay the Respondent the settlement sum of $3,250 and a special award of $1,625, with interest on both amounts from January 21, 2009 to date.

II. THE APPELLANT’S SUBMISSIONS

The Appellant’s October 13, 2009 Notice of Appeal sought (1) an order allowing the appeal to proceed from September 15, 2009 preliminary issue decision, (2) a stay of the Arbitration Order, (3) that the Arbitrator’s order be set aside, and (4) its legal expenses at arbitration and on appeal. The Appellant submitted that the Arbitrator had erred in finding that there had been a settlement and in granting a special award.

The Appellant cited Rahman and TD General Insurance Company, (FSCO P07-00005, March 31, 2008) that an insured must personally sign the release or there is no settlement. An insurer was, therefore, entitled to satisfy itself that its insured has indeed signed the release. The Arbitrator had erred in finding that the Respondent had signed the Settlement Disclosure Notice and the Release in the complete absence of evidence or on the basis of conjecture.

The Appellant argued that the Arbitrator had further erred in determining that the parties were required to conclude the settlement on December 5, 2008 with no further terms. It submitted that an insurer cannot be required to blindly accept that a signature on a release is that of its insured, given the ramifications if the insured later challenged the validity of the settlement.

The Appellant stated that the release proffered by the Respondent was unacceptable because it did not document the Applicant’s informed agreement to surrender the claims in question nor did it evidence that it was signed personally by the insured. The Appellant argued that it thus did not have an enforceable release, which was the Appellant’s consideration for entering into this settlement. The Appellant, however, stated that it had not looked for any case law in support of its proposition that it did not have a binding release.

Nonetheless, the Appellant argued that the Arbitrator’s decision meant that one party had received what it had bargained for and the other had not. While the case law provides that there can be a settlement without agreement on the terms of the release, in this case the release itself was the consideration and there could be no settlement in the absence of a binding release. The Appellant read from the Arbitrator’s decision that as the Settlement Regulation did not mandate any insurer input into the release, any such input would be arbitrary and unreasonable.

The Appellant argued that either party is entitled to submit such releases or other documentation it thought appropriate. The Appellant agreed that the Settlement Regulation governed and there must be strict adherence. Non-compliance by an insurer rendered the settlement documentation voidable by an insured. However, the Settlement Regulation did not give direction as to the terms or particulars of the release and, hence, was not a complete code. While witnessed releases are not statutorily mandated, they are not legislatively precluded. Accordingly, the common law comes into play.

The Appellant cited Fieguth v. Acklands Ltd., 1989 CanLII 2744 (BC CA), [1989] B.C.J. No. 857 (B.C.C.A.), that the drafting of a release is to be done according to ordinary business and professional practice. The Appellant submitted that a lawyer’s certificate in a release was common practice amongst members of the bar practicing first-party automobile and other types of insurance law, protecting both parties against uncertainty and possible future litigation. A lawyer’s certificate also provided consumer protection in ensuring that an insured was properly informed of the consequences of signing the release. As well, an insurer would be able to satisfy itself that an informed insured had signed the release. Such a certificate on a release, it was argued, was not an arbitrary requirement but rather appropriate, reasonable and standard in the industry.

The Appellant submitted that lawyer’s certificates were required in Affidavit of Documents in civil actions, certifying, in part, that the lawyer had explained to the deponent the necessity of full disclosure. In every document commencing divorce proceedings, counsel certified that they had complied with section 9 of the Divorce Act, R.S.C. 1985, c. 3 (2nd Supp.) in discussing the possibility of reconciliation and the advisability of negotiating support and custody. The Appellant also submitted that lawyer’s certificates were also used in enduring powers of attorney.

The Appellant cited Griffore v. Adsett 2001 CanLII 28207 (ON SC), [2001] 18 R.F.L. (5th) 63, where the Ontario Superior Court of Justice, in commenting on a marriage contract, held that the solicitor’s certificate and affidavit of Independent Legal Advice were waivers of solicitor/client privilege to “protect that the integrity of the agreement, with the expectation that each party to the contract can and will rely on the other party’s solicitor’s affidavit and certificate in order to enhance the enforceability of the contract.”

The Arbitrator thus, it was argued, erred in failing “to give effect to known and common principles and practice which prevail within the industry” and in determining that the Appellant was not allowed to require a final release that was mutually acceptable in order to effect a full and final settlement of the issues in the arbitration.

Regarding the special award, the Appellant submitted that while an arbitrator had jurisdiction to issue a special award, it was beyond an arbitrator’s jurisdiction to issue a special award in relation to a settlement. The Appellant acknowledged, however, that it had not raised this jurisdictional argument before the Arbitrator.

The Appellant submitted that its conduct was completely reasonable, appropriate and consistent with settled and standard accident benefits industry practice for the last two decades. Further, the Arbitrator had erred in granting a special award without proper notice being given and in the absence of defined pleadings.

Rather, the special award was first raised in the Respondent’s written submissions to enforce the settlement and, even then, only in a bald statement, with no particulars provided as to how the Appellant unreasonably withheld or delayed payments. The Appellant submitted that it is not for it “to speculate as to what conduct, throughout the course of adjusting the claim, the mediation process and/or the arbitration process, was unreasonable.”

The Appellant argued that the common law principles of fairness and natural justice were thus contravened and that it was deprived of due process and proper notice under section 8 of the Statutory Powers and Procedure Act, R.S.O. 1990, c. S.22, that entitled the Appellant to reasonable information respecting allegations as to the propriety of its conduct. However, the Appellant acknowledged that it, again, did not raise these concerns with the Arbitrator.

The Appellant argued that as there are no decisions as to the requisite or acceptable terms for releasing claims under the Schedule, it cannot be said to have acted unreasonably. Nonetheless, the Appellant had attempted to accommodate the Respondent and co-operate in negotiating the terms of the release while maintaining that the documentation must be acceptable to both parties and an insurer should not be required to draft a release that realizes an insured’s interests while ignoring its own. The Appellant submitted that, in contrast, the Respondent had refused to negotiate or meet commonly accepted standards of which his counsel was allegedly aware.

The Appellant thus asked that the Arbitrator’s September 15, 2009 order be replaced with an order that a witnessed release be provided by the Respondent, failing which the settlement is considered repudiated by the Respondent and the matter proceed to arbitration.

In oral submissions, the Appellant withdrew its initial request that the release with the lawyer’s certification be executed. Further, while the Appellant preferred that counsel witness the Respondent’s signature, it was now content with merely a witnessed release, with the contact details of the witness provided. This, it submitted, was hardly onerous, yet provided assurance that the Respondent had entered into the settlement.

The Appellant submitted that the Respondent’s abrupt referral of this issue to the Commission had prevented it from earlier agreeing to someone other than counsel witnessing the signature. It was not, however, the Appellant’s responsibility to provide this alternative option. In any event, the Appellant argued that the lawyer’s certification and witnessing were “red herrings.”

During oral reply submissions, the Appellant raised for the first time that interest should be awarded only if the insurer was acting unreasonably. The Appellant was prepared to withdraw its appeal request for its legal costs of arbitration if it could return to arbitration to seek those expenses. The Appellant maintained its request for its legal expenses of the appeal.

III. THE RESPONDENT’S SUBMISSIONS

The Response to Appeal requested that this appeal be dismissed, with costs. The Respondent denied that the Appellant’s releases were consistent with standard practice. In any event, even if they were standard, they could still be unreasonable. The Respondent submitted that:

(1) The Arbitrator properly concluded, based on the case law, that a binding settlement can be made without an agreement on the exact terms of the release;

(2) The requested certification by counsel was overreaching and unreasonable, as it required, “even if only in a modest way,” the disclosure by counsel of communications protected by solicitor/client privilege. Such privilege is a vital concept, usually only waived by specific legislation or by genuine voluntary waiver by the client. In this case, the Settlement Regulation codifies the requirements of a valid settlement and does not mention any such requirement;

(3) Further, there is no reason to limit the acceptable witnesses to the insured person’s lawyer, especially when it imposes a considerable inconvenience on the insured;

(4) The Respondent was the innocent party trying to maintain the settlement. It would be unfair to insist on too stringent conditions to complete the settlement. The Arbitrator was thus correct in concluding that the settlement monies were due from January 21, 2009 when the Appellant was forwarded the signed Disclosure Notice and Release;

(5) A special award is a matter of discretion and ought not to be disturbed unless clearly wrong. If the Appellant’s demands regarding the release were unreasonable, then so was its withholding of Settlement Funds; and,

(6) The Appellant’s submissions regarding lack of proper notice were disingenuous. As the argued grounds for a special award arose following the settlement discussion, they could not have been set out in the earlier Application for Arbitration. The Respondent’s arbitration submissions gave reasonable notice of its special award claim, which the Appellant certainly noted and to which it duly responded. The Appellant did not object to the procedure chosen to determine this issue, did not request additional time to respond to the special award claim and had a full opportunity to respond.

The Respondent argued that it was a truism of contract law that a signature purporting to be that of a party in the proper place on a document is, in the absence of evidence to the contrary, proof that the party signed the document. The Respondent stated that while it was probably true he never provided any alternative to the Appellant’s releases, he had never refused to provide a witness to his signature, although he objected to counsel being the only acceptable witness.

The Respondent submitted that he did not provide a witness for the release because the Appellant’s forms had no place for such a signature and it was for the Appellant to supply the proper release. It was not for an insured “to bail out” the insurer. However, the Appellant did provide a signed Settlement Disclosure Notice and a signed Release, as well as his counsel’s signed consent to a dismissal of the arbitration and a draft dismissal order approved as to form and content. At that point, he had provided everything that was required.

The Respondent stated that he was not suggesting that having a witness to his signature was unreasonable, but that requiring counsel as the only acceptable witness was unreasonable. While the Respondent agreed that counsel fully explaining a release to his or her client would be proper practice, it was unreasonable to require a breach of solicitor/client privilege to confirm same when it was not legislatively required. The Respondent did not, however, provide any case law as to the impropriety of counsel witnessing a release.

The Respondent was now not opposed to providing a witnessed release so long as interest was paid in compensation for the delay in payment of the settlement funds and the special award remained. Special awards were remedial legislation especially appropriate where there was an outrageous refusal by the Appellant to honour a settlement. Withholding of money in such circumstances was a powerful weapon, and insurers should do so only at their peril.

IV. PRELIMINARY APPEAL MATTERS

My letter of November 9, 2009 accepted this appeal, on the consent of both parties, exercising my discretion under Rule 50.2 of the Dispute Resolution Practice Code (Fourth Edition, Updated – October 2003) (the “Code”). I held, as the parties submitted, that the Arbitrator’s Order entirely disposed of this dispute. In accordance with Allstate Insurance Company of Canada and Torok, (FSCO P01-00021, May 29, 2001), I was persuaded that accepting this appeal would “produce the quickest, most just and least expensive resolution of the dispute.”

By letter dated November 17, 2009, pursuant to subsection 283(6) of the Insurance Act, R.S.O. 1990, c. I.8, on the consent of both parties, I stayed the Arbitrator’s September 15, 2009 order on the condition that the applicable interest continued to accrue in accordance with subsection 46(2) of the Schedule from January 21, 2009 to the date of payment and that if the Arbitrator’s order was upheld, the principal amounts and the accrued interest would then be payable.

V. ANALYSIS

The first question before the Arbitrator was whether there was a binding settlement.

In determining whether there is a binding settlement, the British Columbia Court of Appeal held in Fieguth that it is necessary to separate the question of the formation of contract from its completion. In that wrongful dismissal case, the Court found that the parties had reached an agreement on all essential terms in settling an action and that “a settlement implies a promise to furnish a release and, if there is an action, a consent dismissal unless there is a contractual agreement to the contrary.”

The Court held that:

The next stage is the completion of the agreement. If there are no specific terms in this connection either party is entitled to submit whatever releases or other documentation he thinks appropriate … One can tender whatever documents he thinks appropriate without rescinding the settlement agreement. If such documents are accepted and executed and returned then the contract, which has been executory, becomes executed. If the documents are not accepted then there must be further discussion but neither party is released or discharged unless the other party has demonstrated an unwillingness to be bound by the agreement by insisting upon terms or conditions which have not been agreed upon or are not reasonably implied in these circumstances.

The Court did not think that “tendering an excessive release was anything more than an overzealous attempt to get the best possible release. Insisting upon a release with covenants and indemnities may have been some evidence of unwillingness to complete the contract, but the parties never got to that stage because the plaintiff rushed into litigation.” The Court held, that:

… parties who reach a settlement should usually be held to their bargains. Subsequent disputes should be resolved by application to the court or by common sense within the framework of the settlement to which the parties have agreed and in accordance with the common practices which prevail amongst members of the bar. It will be rare for conduct subsequent to a settlement agreement to amount to repudiation.

Chapnik J., in Cellular Rental Systems Inc. v. Bell Mobility Cellular Inc., [1995] O.J. No. 721, held that the onus is on the party claiming repudiation to show that the disagreement consequent upon the settlement constitutes a repudiation of it. I am not persuaded that the Arbitrator erred in finding that there was an agreement on all essential terms and that the settlement between the parties was not breached or repudiated by a subsequent disagreement restricted to the execution of the release.

I agree that the principle that parties should, barring rare or statutorily mandated exceptions, be held to their bargains takes on special significance in the context of first-party automobile insurance. As stated by Arbitrator Palmer in Mihas and Pafco Insurance Company Limited, (OIC A-013472, November 15, 1995) “[I]nsurance contracts have been characterized as contracts where the parties must deal with each other in utmost good faith: uberrimae fides.” As the Settlement Regulation only allows an insured person to rescind a settlement, and then only within two days of the later of the day he or she signs the Disclosure Notice and the day of signing the release, an insurer cannot use overzealous terms or inflexibility on a release as a back door to resile from a settlement.

The second question before the Arbitrator regarded the appropriate execution of the release to complete the settlement agreement. The Arbitrator cited Cellular Rental Systems Inc., where Chapnik J. ruled that although the parties had not agreed on the details of the settlement documentation, they had concluded an agreement on all essential terms. Chapnik J. held that:

It is well established that settlement implies a promise to furnish a release unless there is agreement to the contrary. On the other hand, no party is bound to execute a complex or unusual form of release: although implicit in the settlement, the terms of the release must reflect the agreement reached by the parties. The principle accords with common sense and normal business practice.

The Arbitrator noted that the Settlement Regulation contemplates an insurer sending a Settlement Disclosure Notice and a Release to an insured person for execution. Although the Settlement Disclosure Notice must be in a form approved by the Superintendent, the release has no such requirement. Thus, in determining the terms of the release, as stated in Fieguth, one must look to the framework of the agreed settlement and the prevailing common practices amongst the bar.

There was no lack of submissions by both counsel as to their personal beliefs as to the usual, normal, standard, settled, known, common, appropriate and reasonable professional and business practice of the industry and the bar regarding releases. However, Rule 4.02(2) of the Law Society of Upper Canada’s Rules of Professional Conduct provides that:

Subject to any contrary provisions of the law or the discretion of the tribunal before which a lawyer is appearing, a lawyer who appears as advocate shall not testify before the tribunal unless permitted to do so by the rules of court or the rules of procedure of the tribunal, or unless the matter is purely formal or uncontroverted.

The accompanying commentary to this Rule states that:

A lawyer should not express personal opinions or beliefs or assert as a fact anything that is properly subject to legal proof, cross-examination, or challenge. The lawyer should not in effect appear as an unsworn witness or put the lawyer’s own credibility in issue. The lawyer who is a necessary witness should testify and entrust the conduct of the case to another lawyer …

The Arbitrator thus had little or no proper evidence put before her as to the common practice regarding releases and specifically the certifications put forward by the Appellant. The Respondent’s counsel’s letter of February 11, 2009, however, acknowledged that he quite frequently in the past did witness his client’s signature without realizing that it might be a problem and that only recently, when first-party insurers started sending releases with certificates, did he begin to realize there was a problem with his being a witness.

Mamaca v. Coseco, 2004 CanLII 36059 (ON SC), [2004] 17 C.C.L.I. (4th) 293, however, provides that “[w]itnessing a signature on a form is not considered solicitor client privilege. It has been deemed by the courts to be an act, not a communication, and therefore is not privileged.” No case law to the contrary was provided by the Respondent. On the other hand, a release limiting the acceptable witness to counsel appears unduly restrictive, especially if there may be logistical problems, and not in accord with common sense if the purpose of having a witness is to verify a signature.

The Appellant concedes that a lawyer’s certification regarding explaining the ramifications of the release breaches solicitor/client privilege. Mamaca states that “Solicitor-client privilege is a cornerstone of our system of justice and courts must be vigilant to protect this long enshrined privilege except in the clearest case of waiver.”

Unlike the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, or the Divorce Act, there is no statutory requirement for such certification. There are only counsel’s submissions that the Appellant’s requested certification accords with normal business practice. The Settlement Regulation, however, mandates only that an insured be advised to consider getting independent advice, not that he or she receive such advice. The Appellant advanced no evidence or submission of any business practice of itself or other insurers to provide independent legal advice to unrepresented insureds prior to their signing the release documentation.

On the other hand, there was no evidence or case law that requesting a witness to the insured’s signature on a release was complex, unusual or contrary to ordinary business and professional practice. Rather, one can take judicial notice that having a witness to a contractual signature is reasonable and commonplace, notwithstanding that the Settlement Disclosure Notice does not require a witness for that specific document. A witnessed release reflected the settlement agreement reached by these parties and accorded with common sense, confirmed by the shift during oral appeal submissions by both parties to this sensible resolution.

Turning to the third question, subsection 282(10) of the Insurance Act, R.S.O. 1990, c., I.8, gives arbitrators the specific jurisdiction to issue a special award.

In Branchaud and Co-operators General Insurance Company, (FSCO P96-00048, May 2, 1997), Delegate Naylor found that an arbitrator had authority to determine the existence of a settlement. In Haripersaud and State Farm Mutual Automobile Insurance Company, (FSCO P98-00018, December 17, 1999), Delegate Makepeace agreed that arbitrators have the powers that are conferred expressly by the legislation or by necessary implication. This includes authority to deal with those questions that must be answered in order to rule on an insured’s entitlement to benefits, including whether a settlement agreement precluded further claims.

If an arbitrator has authority to (1) determine the existence of a settlement and (2) to rule on an insured’s settled entitlement to benefits (the Appellant not objecting to the Arbitrator’s jurisdiction, by necessary implication, to order payment of the settlement monies), then an arbitrator has jurisdiction to make a special award, to quote subsection 282(10) of the Insurance Act, “in addition to awarding the benefits and interest to which an insured person is entitled” under the Schedule up to fifty per cent “of the amount to which the person was entitled at the time of the award” together with the requisite interest factor.

Thus, in Falconer and York Fire and Casualty Insurance Company, (FSCO A98-00080, March 15, 2001), Arbitrator Sapin found that the insurer’s refusal to acknowledge a binding agreement was unreasonable in the circumstances and awarded the maximum special award of 50 percent of the amount of the negotiated settlement.

The Appellant did not assert in its submissions to the Arbitrator that it was taken by surprise by the special award claim, that it did not have sufficient information of the allegations regarding the propriety of its conduct or that it did not have an opportunity to properly respond. Rather, its arbitration submissions indicated a full understanding of the claim being made, although its counsel, in effect, became an unsworn witness, putting her own credibility in issue as to her personal opinions or beliefs or assertions as fact, matters that were properly subject to legal proof, cross-examination or challenge.

The Respondent’s reply arbitration submissions, in addition to also having his counsel as an unsworn witness, unfortunately also divided his submissions such that the Appellant had no opportunity to respond to new assertions of fact that were properly subject to legal proof.

The British Columbia Court of Appeal commented in Pugh v. Pugh, 1979 CanLII 766 (BC CA), 17 B.C.L.R. 14 (C.A.) regarding the exercise of discretion that:

. . . this Court does not have an independent discretion and should only interfere with the exercise of discretion by the trial judge when clearly of the opinion that he acted on a wrong principle, or wrongly exercised his discretion in not giving sufficient weight to relevant considerations, or that, on other grounds, the decision might result in injustice.

Arbitrator Palmer, in Plowright and Wellington Insurance (OIC A-003985, October 29, 1993), commenting on the meaning of unreasonable withholding or delay to warrant a special award, stated that:

“Unreasonable” behaviour by an Insurer in withholding or delaying payments can be seen as behaviour which was excessive, imprudent, stubborn, inflexible, unyielding or immoderate.

The Arbitrator’s special award in this case was not based on the specific initial certification requested by the Appellant or the various alternatives it offered being “excessive, imprudent, stubborn, inflexible, unyielding or immoderate.” Rather, the Arbitrator ordered a special award on the broader principle that the Settlement Regulation was not ambiguous about its requirements and the Appellant had “arbitrarily added an additional requirement which was not statutorily mandated.”

However, the parties agree that the Settlement Regulation is silent on the terms and on the execution of the release. Respectfully, I find that the Arbitrator acted on a wrong principle in exercising her discretion granting a special award in finding that the Respondent providing a signed, but unwitnessed release implicitly ended all discussion as to the common practice of the bar. That any such discussion, including having any witness to the insured’s signature on that specific document was “excessive, imprudent, stubborn, inflexible, unyielding or immoderate” does not accord with Fieguth or Cellular Rental Systems Inc.

Rather, Fieguth held that “[o]rdinary business and professional practice cannot be equated to a game of checkers where a player is conclusively presumed to have made his move the moment he removes his hand from the piece.” If the documents are not accepted, then there must be further discussion, keeping in mind the overriding legislative objective of expeditiously and fairly resolving disputes.

As the Respondent himself stated in his submissions, a party “must act reasonably to try and fulfill his or her end of the bargain.” Fieguth does not concur with the submission that an insured is absolved from reasonably working out a timely, mutually acceptable execution of a release on the basis that he or she has no obligation “to bail” out the insurer or there was no formal place on the provided release for a witness other than counsel.

Accordingly, the Arbitrator’s special award is rescinded.

Regarding the Arbitrator’s interest award, Rigitano Estate v. Western Assurance Co., [2007] O.J. No. 3857, addressed, in part, the question of what interest was payable on a delayed full and final settlement of all past, present and future statutory accident benefits. The Divisional Court found that the lower court judge erred in not awarding the plaintiff interest pursuant to subsection 46(2) of the Schedule from the date the defendant insurer had rescinded its offer to settle. The Court held that the interest provisions were “designed to compensate insured persons for the given value of money.”

The Court of Appeal for Ontario, in Attavar v. Allstate Insurance Co. of Company (2003), 63 O.R. (3d), held that interest under the Schedule is “compensatory, not punitive. The provision is designed to compensate insureds for the time value of money and to encourage insurers to pay accident benefits promptly.”

I am bound by these decisions. I do not accept the Appellant’s submissions that interest would be payable only if it were found to have been acting unreasonably. Accordingly, I see no error in the Arbitrator’s award of interest on the settlement monies.

In conclusion, the appeal is allowed in part. The November 17, 2009 consent stay of the Arbitrator’s Order is lifted and paragraph one of the Arbitrator’s September 15, 2009 Order is substituted with an order that Dominion of Canada shall pay Mr. Singh the sum of $3,250 together with interest thereon in accordance with subsection 46(2) of the Schedule from January 21, 2009 to the date of payment and that Mr. Singh shall provide Dominion of Canada with a witnessed release.

VI. EXPENSES

I refer the parties to the Arbitrator if they are unable to agree on entitlement to and/or the quantum of the legal expenses of arbitration.

If the parties are unable to agree on the legal expenses of this appeal, an expense hearing may be arranged in accordance with Rule 79 of the Dispute Resolution Practice Code (Fourth Edition, Updated – October 2003).

June 30, 2010

Lawrence Blackman Director’s Delegate

Footnotes

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