Personal Insurance Company of Canada v. Christopher Hoang, 2011 ONFSCDRS 120

Financial Services Commission of Ontario

Neutral Citation: 2011 ONFSCDRS 120 Appeal: P11-00025 Office of the Director of Arbitrations

Personal Insurance Company of Canada Appellant

and

Christopher Hoang (A Minor by his Litigation Guardian, San Trieu) Respondent

Before: Delegate Lawrence Blackman

Representatives: Mr. Todd J. McCarthy for the Appellant, Personal Insurance Company of Canada Mr. David F. MacDonald and Mr. Robert Ben for the Respondent, Christopher Hoang, a minor by his Litigation Guardian, San Trieu

Hearing Date: By written submissions received by December 15, 2011

Preliminary Appeal Order

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

1. The Appellant's request for a stay of the Arbitrator's September 29, 2011 Order is denied.
2. The legal expenses of this stay motion are deferred to the conclusion of this appeal, subject to any further or other order of an appellate officer.

December 23, 2011

Lawrence Blackman Director's Delegate

Reasons for Decision

I. Nature of the Appeal

Christopher Hoang was six years old when he was injured in an August 6, 2004 motor vehicle accident, sustaining a catastrophic brain injury. Application was made on his behalf to his first-party automobile insurer, the Appellant, Personal Insurance Company of Canada, for statutory accident benefits available under the Schedule.¹

While paying certain other claims, the Appellant disputed Christopher's entitlement to specific rehabilitation benefits claimed under section 15 of the Schedule. The September 29, 2011 decision of Arbitrator Ashby (the "Arbitrator") ordered the Appellant to pay Christopher, represented by his litigation guardian, San Trieu (the "Respondent"), $13,300 for tuition and related educational expenses pertaining to the Bond Academy and $30,193.90 for the services of a rehabilitation support worker, plus interest under subsection 46(2) of the Schedule.

The Arbitrator further ordered a $28,000 special award under subsection 282(10) of the Insurance Act, R.S.O. 1990, c. I.8, finding that the Appellant had unreasonably denied both the Bond Academy and the rehabilitation support worker claims.

The October 28, 2011 Notice of Appeal seeks to rescind the special award and the Bond Academy tuition orders. In the interim, the Appellant seeks a stay of the Arbitrator's Order.

The form of the Notice of Appeal states that if a party is requesting a stay it should explain why, with the reasons to be as complete as possible. The Notice of Appeal filed did not provide submissions specifically addressing the requested stay. My November 4, 2011 letter acknowledging the appeal also set time lines for the Appellant to provide its written argument regarding a stay and for the Respondent to respond. Neither party pursued the opportunity to provide oral submissions.

II. Stay Submissions and Analysis

Subsection 283(6) of the Insurance Act, R.S.O. 1990, c. I.8, provides that an appeal does not stay the order of an arbitrator, unless decided otherwise. In Guardian Insurance Company of Canada and Armstrong, (FSCO P00-00037, July 20, 2000), Delegate McMahon adopted the following criteria in determining whether a stay should be granted:

1. the bona fides of the appeal;
2. the substance of the grounds for appeal; and,
3. the hardship to the respective parties if the stay is granted or refused.

The Appellant submits that the evidence is undisputed that the Respondent never paid the Bond Academy expenses, no liability was ever incurred and the claim relates to a period when the Respondent was enrolled in a full-time, publicly-funded educational institution. During that same period the Respondent incurred rehabilitation support expenses that would not have been necessary had the Respondent been attending the Bond Academy, expenses the Arbitrator ordered the Appellant to pay in addition to the Bond Academy expenses.

The Appellant argues that section 15 of the Schedule and, if applicable, the Divisional Court decision in Belair Insurance Company v. McMichael, 2007 CanLII 17630 (ON SCDC), require the expenses claimed to have been incurred. As the Bond Academy expenses were not incurred, the Appellant submits that the Arbitrator erred in law in finding those expenses payable.

Regarding the special award, the Appellant submits that the Arbitrator failed to follow the analysis in Liberty Mutual Insurance Company and Persofsky et al., (FSCO P00-00041, January 31, 2003), and failed to provide sufficient detail as to how she determined the special award.

The Appellant submits that there can be no prejudice to the Respondent in staying the Arbitrator's order pending the disposition of the appeal as a special award is not a benefit under the Schedule and the Bond Academy expenses were never incurred. Further, it makes little sense to require payments of monies that may have to be repaid.

The Respondent states that it has no information to suggest that the appeal is not brought in good faith.

Regarding the substance of the appeal of the Bond Academy order, the Respondent relies on Kennelly and Wawanesa Mutual Insurance Company, (FSCO A99-000139, January 21, 2000). In that case, Arbitrator Baltman ordered the insurer to pay for speech therapy that had been recommended, notwithstanding that it had not been and could no longer be provided. In this case, the Respondent submits that the Arbitrator found that the Respondent was prevented from attending the Bond Academy by reason of the Appellant's denial of the tuition claim.

As to the substance of the appeal of the special award, the Respondent cites Rocca and AXA Insurance Company, (FSCO P99-00020, August 1, 2000), where Delegate Naylor held:

A finding that the insurer's actions were unreasonable is a finding of fact, resting to a large extent on the arbitrator's view of the evidence. However, while such a finding is given a great deal of leeway on appeal, it must have an adequate evidentiary basis and take into account all relevant evidence.

The Respondent argues that the Arbitrator's decision is entitled to a great deal of deference, the Arbitrator having taken into account all of the relevant evidence, including that the report upon which the Appellant relied was preliminary, its testing being administered too close to other ongoing testing and some of its tests not being standardized for the appropriate age group.

Finally, the Respondent submits that there is no evidence or submission by the Appellant that it would suffer any hardship in paying the amounts ordered by the Arbitrator, or that it is legitimately concerned about being able to recover any monies paid pursuant to the Order, should it be successful on appeal.

Applying the criteria in Armstrong, I firstly find that there is no dispute that the appeal is brought in good faith.

As to the substance of the appeal of the Bond Academy Order, the Divisional Court in McMichael dismissed, in the circumstances of the case, the application for judicial review of the arbitration decision upheld on appeal, that attendant care expenses had been incurred although the insured did not actually receive the monetary benefit or the care to which he was entitled. The Divisional Court noted the reasoning of Arbitrator Baltman in Kennelly that:

... if the insurer were allowed to withhold payment, the result would be that the statutory goal of prompt payment for necessary services would be undermined as insurers might deny payment for needed services with impunity, believing that arbitrators would not order them paid for later, when they would no longer benefit the insured.

The Divisional Court also cited Campbell J. in Wawanesa Mutual Insurance Co. v. Smith, (1998) 1998 CanLII 18861 (ON CTGD), 42 O.R. (3rd) 441 (Div. Ct.), that:

A purposive and remedial interpretation requires that the legislation be read so as not to require an insured person to finance, or to pledge her credit, in order to receive the very benefits for which she is insured.

For these three reasons, I conclude that an insured, in order to incur an expenditure ... need not actually receive the items or services or spend the money or become legally obliged to do so. It is sufficient if the reasonable necessity of the service or item and the amount of the expenditure are determined with certainty ... It is a question of fact in each case, whether the requisite degree of certainty has been established.

Neither the Notice of Appeal nor the Appellant's stay submissions challenge the certainty of the amount of the Bond Academy expense. The Arbitrator's findings as to reasonable necessity are challenged only to the extent that if Christopher had indeed attended the Bond Academy, the Arbitrator found that this would likely have reduced the cost of the rehabilitation support worker services.

However, the Arbitrator's order regarding the rehabilitation support worker services is not appealed. Further, it is presently unclear from the Notice of Appeal and the Appellant's stay submissions as to how the Arbitrator failed to follow McMichael, or, in the alternative, how the Divisional Court's interpretation of the term "incurred" under section 16 of the Schedule pertaining to attendant care would not equally apply to the same term "incurred" found in the section 15 rehabilitation provision.

Regarding the substance of the appeal of the special award, the Appellant's stay submissions suggest that an insurer is shielded from a special award if there are expert reports upon which it relies. However, Arbitrator Seife in Maas and State Farm Mutual Automobile Insurance Company, (OIC A-015935, October 16, 1996) held that:

In my view, when considering termination of benefits, an insurer must not rely selectively on reports that tend to support termination. It must consider the totality of the evidence available to it.

Arbitrator Wilson, in Gabremichael and Zurich Insurance Company, (FSCO A97-002061, October 12, 1999), found an insurer's reliance on two reports, in the face of consistently credible information to the contrary, unreasonable and granted a special award of $10,000. In the appeal decision of Cole and Allstate Insurance Company of Canada, (FSCO P01-00016, May 23, 2003), Delegate Makepeace held that:

Allstate contends it was entitled to rely on the report of its expert. An insurer has an ongoing obligation to weigh all the available information when considering whether to terminate benefits. It is not entitled to rely on a single sentence, offered without supporting reasons, without further enquiry.

This was not a compelling case for a special award. However, an arbitrator's finding of unreasonableness deserves deference because it "is highly dependent on the arbitrator's view of the evidence" ...

The Appellant asserts that it is the very nature of arbitration that one party will prevail over the other having regard to the Arbitrator's view of the evidence, expert or otherwise, and that it was insufficient for the Arbitrator, in preferring the Respondent's experts, to condemn in hindsight the Appellant for having relied on its own experts. It is presently unclear how this statement, argued more as a general principle than a case-by-case analysis, is consistent with the case law set out in Maas, Gabremichael and Cole.

In Young and Liberty Mutual Insurance Company, (FSCO P03-00043, June 20, 2005), application for judicial review dismissed, 2006 CanLII 7286 (ON S.C.D.C.), Delegate Evans cited Delegate McMahon in Lombardi and State Farm Mutual Automobile Insurance Company, (FSCO P01-00022, February 26, 2003), that:

... errors of law include findings of fact made in the complete absence of supporting evidence, made on the basis of conjecture, or made on the basis of a misapprehension of the evidence caused by a misdirection on a legal principle. The vital distinction is between a conclusion that there was "no evidence" to support a finding and a mere "insufficiency of evidence."

While the Appellant argues the sufficiency of the Arbitrator's reasons and her alleged failure to consider mitigating or other factors, it is not clear that it is argued that there is no evidence to support a finding of a special award.

As stated by Delegate McMahon, in Armstrong, a stay from an order of an arbitrator is the exception, not the rule. The onus is on the party seeking a stay to establish that the pre-decision status quo ought to be preserved.

The Appellant notes the inconvenience of monies going back and forth if it is ultimately successful on appeal, but not hardship or prejudice, if the stay is not granted.

Looking at the justice of whether to order a stay, mediation of this claim on behalf of a minor took place from November 2009 to January 2010. The Report of Mediator notes that the Bond Academy was recommended in an OCF 18 dated July 29, 2008. More than three years later, following a six-day hearing, the Arbitrator's 26-page decision determines entitlement.

In Persofsky, upon which the Appellant relies, Director Draper held that the purpose of a special award "is to punish insurers that unreasonably fail to pay accident benefits promptly, as required by the" Schedule and "to deter that company and others from acting similarly in the future."

Under subsection 282(10), the maximum special award is calculated based, in part, on accrued interest under the Schedule to the date of the award and further interest to the date of the award calculated under subsection 282(10). To stay a determined special award, when interest no longer runs under the Schedule or the Insurance Act, serves to dilute the special award granted should the appeal be ultimately unsuccessful, undermining the legislative intent.

This has been a long and presumably expensive procedure in a system intended to be expeditious and inexpensive. Balancing the interests of the parties, I am not persuaded that any prejudice to the Appellant in not staying the Arbitrator's Order exceeds the prejudice to the Respondent in ordering a stay.

Although it is not disputed that this appeal is brought in good faith, given the present questions regarding the substance of the grounds for appeal, the relative prejudice or hardship, the exceptional nature of a stay order under the Insurance Act and the legislative intent of a special award, I am not persuaded to exercise my discretion to stay the Arbitrator's order. Accordingly, the Appellant's motion for a stay is denied.

II. Expenses

The legal expenses of this stay motion are deferred to the conclusion of this appeal, subject to any further or other order of an appellate officer.

December 23, 2011

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.