Financial Services Commission of Ontario

Neutral Citation: 2011 ONFSCDRS 121 FSCO A09-000641

BETWEEN:

DENNIS FERGUSON Applicant

and

ING INSURANCE COMPANY OF CANADA Insurer

DECISION ON EXPENSES

Before: Jessica Kowalski Heard: By written submissions received by December 15, 2010 Appearances: Michael Kealy for Mr. Ferguson Antonella Albano for ING Insurance Company of Canada

Issues:

The Applicant, Dennis Ferguson, was injured in a motor vehicle accident on August 23, 2007. He applied for and received statutory accident benefits from ING Insurance Company of Canada (“ING”), payable under the Schedule.¹ A dispute arose between the parties regarding the nature of Mr. Ferguson’s pre-employment status, which affected the quantum of the weekly income replacement benefit to which he was entitled. ING argued that Mr. Ferguson was self-employed at the time of the accident, with self-employment income that entitled him to a weekly income replacement benefit of $27.70. In an order issued August 6, 2010, I found that Mr. Ferguson was an employee, and that he was entitled to an income replacement benefit in the amount of $294.12 per week from August 30, 2007, plus interest on overdue amounts.

The issue in this further hearing is:

1. Is Mr. Ferguson entitled to his legal expenses from ING in respect of the arbitration hearing, and if so, in what amount?

Result:

1. Mr. Ferguson is entitled to his legal expenses in respect of the arbitration hearing in the amount of $4,378.11, plus applicable GST or HST.

LEGAL FRAMEWORK

Award of Expenses

Arbitration expenses are awarded under ss.282(11) of the Insurance Act, which provides that:

282(11) the arbitrator may award, according to the criteria prescribed by the regulations, to the insured person or the insurer, 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. [emphasis added]

Rule 75.1 of the Dispute Resolution Practice Code (the “Code”) provides that an arbitrator may award expenses to one party if satisfied that the award is just. Rule 75.2 of the Code sets out the criteria for an award of expenses prescribed by Ontario Regulation 664, R.R.O. 1990 (the “Expense Regulation”) by reference.

Section 12(2) of the Expense Regulation sets out the following relevant criteria in making an award of expenses:

12(2) Each arbitrator shall, under subsection 282(11) of the Act, consider only the following criteria for the purposes of awarding all or part of the expenses incurred in respect of an arbitration proceeding:

1. Each party’s degree of success in the outcome of the proceeding;

2. Any written offers to settle made in accordance with subsection (3);

3. Whether novel issues are raised in the proceeding;

4. The conduct of a party’s representative that intended to prolong, obstruct or hinder the proceeding, including a failure to comply with undertakings or orders;

5. Whether any aspect of the proceeding was improper, vexatious or unnecessary;

6. Whether an insured person refused or failed to submit to an examination as required under section 42 of Ontario Regulation 403/96, Statutory Accident Benefits Schedule – Accidents on or after November 1st, 1996, or refused or failed to provide any material required to be provided by subsection 42(10) of that Regulation; and/or

7. Whether the insured person refused or failed to submit to an examination as required under section 44 of Ontario Regulation 34/10, Statutory Accident Benefits Schedule – effective September 1, 2010, or refused or failed to provide any material under subsection 44(9) of that Regulation.

Section 3(1) of the Schedule to the Expense Regulation provides that:

The legal fees payable by the insured person or the insurer for the following matters may be awarded:

1. For all services performed before an arbitration, appeal, variation or revocation hearing.

2. For the preparation for an arbitration, appeal, variation or revocation hearing.

3. For attendance at an arbitration, appeal, variation or revocation hearing.

4. For services subsequent to an arbitration, appeal, variation or revocation hearing.

Rates

Rule 78.1 of the Code provides that the maximum amount that may be awarded for legal fees is an amount calculated using:

(a) the hourly rates established under the Legal Aid Services Act, 1998 for professional services in civil matters before the Ontario Superior Court of Justice; or,

(b) the hourly rate referred to in Rule 78.1(a) adjusted to include, where appropriate, the experience allowance established under the Legal Aid Services Act, 1998.

Rule 78.1 permits an adjudicator, where satisfied that a higher amount for legal fees to an insured person is justified, to award an hourly rate of up to $150.00.

APPLICATION TO THIS CASE

Is Mr. Ferguson entitled to an award of expenses?

The relevant consideration is Mr. Ferguson’s success at hearing. I found that he fit the definition of “employee” in the Schedule and the Commission’s Guideline for Identifying Self-Employed Individuals. As such, I find that Mr. Ferguson is entitled to an award of expenses.

Criteria 2 through 7 are irrelevant. The parties did not submit offers to settle for my consideration, and there were no novel issues.

With respect to criterion 3, Mr. Ferguson submits that, had ING “properly investigated [his] claims”, the arbitration would have proved unnecessary and the costs of a two-day hearing avoided.

I am not persuaded that ING prolonged the hearing simply because it had an opposing view of how the facts surrounding Mr. Ferguson’s employment ought to be interpreted. The arbitration concerned the narrow issue of Mr. Ferguson’s employment status. The hearing turned on the facts and credibility of the oral testimony, and especially on the testimony of Mr. Ferguson and Mark Smith. I found Mr. Ferguson’s evidence to be forthright and consistent and preferred his account of his employment relationship with Ken Baker to Mr. Smith’s.

Expenses claimed

Mr. Ferguson is seeking 74.1 hours of time at the maximum allowable rate (pursuant to Rule 78 of the Code) of $150.00 for time solely billed by Mr. Kealy, plus HST. Mr. Kealy was called to the Bar in 2002. The maximum hourly rate prescribed the Legal Aid tariff is $85.51.

Of the 74.1 hours claimed, 19.3 hours are claimed for preparation for mediation, and a further 3.6 hours attending mediations.

Expenses prior to arbitration

In Pembridge Insurance Company (Pafco Ins. Co.) and Howden², Director’s Delegate Draper considered the issue of mediation expenses that pre-dated the arbitration. In reducing the expenses by the time claimed for mediation he found that “expenses incurred in respect of an arbitration proceeding”, as set out in ss.282(11) of the Insurance Act, could not be interpreted to include preparation for mediation:

Mediation is a distinct step. Because the insured person can choose to go to either court or an arbitration following a failed mediation, mediation cannot be viewed as part of the arbitration process. For whatever reason, the legislators have chosen not to provide for mediation expenses, and that must be respected.³

Writing on the distinction between mediation and arbitration expenses, the Director’s Delegate noted that arbitrators have consistently held that expenses incurred during the mediation process are not recoverable. He cited the decision in Epps and Co-Operators General Insurance Company⁴, in which Arbitrator Mackintosh wrote that:

Unlike “expenses incurred in respect of an arbitration proceeding”, there is no specific provision in the Insurance Act or its regulations pertaining to expenses incurred in respect of mediation at the Commission. It would have been an easy matter for the legislature to have expressly included such a reference. The omission of expenses related to mediation must be given some significance in the overall legislative scheme. I excluded this time when reducing the claim for 164 hours of preparation time prior to the hearing.

What is the appropriate quantum?

Arbitrator Nastasi in Salva and Paramanathan and Allstate Insurance Company of Canada⁵ wrote that:

The overriding consideration in fixing arbitration expenses is reasonableness. Rather than a line by line review of expenses claimed, arbitrators have preferred a global assessment of expenses as being more appropriate.

In Ragulan and Security National Insurance Co./Monnex Insurance Management Inc., the general approach with respect to fees was to take a “pragmatic, broad-strokes approach, with a view to fixing an amount that is reasonable.”⁶

In keeping with a broad-stroke approach, I find the number of hours claimed for expenses relating to the arbitration reasonable. However, for the reasons set out above – namely that expenses for preparation for and attendance at mediation are not recoverable – I have reduced the hours claimed by 22.9 hours, which represents the total hours claimed for preparation for and attendance at mediation.

I also find no compelling reason to depart from the hourly rates set out by the Legal Aid Services Act, 1998 or to increase the hourly rates by an experience allowance.

In this case, the hearing was set for 2 days. There were three witnesses (one for the insured, two for the insurer). This was a straightforward arbitration that turned on the interpretation of facts. There were no extraordinary circumstances that in my view warrant a departure from the maximum allowable Legal Aid rate, and given the lack of complexity in this matter, I agree with ING that a departure from the Legal Aid rate is not justified. As set out above, subject to the removal of time claimed for preparation for and attendance at mediation, I find that hours claimed related to arbitration are not unreasonable given the expected preparation for and attendance an arbitration hearing.

Accordingly, I find that Mr. Ferguson is entitled to his expenses related to the arbitration proceeding for 51.2 hours x $85.51, totalling $4,378.11, plus applicable GST or HST.

December 30, 2011

Jessica Kowalski Arbitrator

Financial Services Commission of Ontario

Neutral Citation: 2011 ONFSCDRS 121 FSCO A09-000641

BETWEEN:

DENNIS FERGUSON Applicant

and

ING INSURANCE COMPANY OF CANADA Insurer

ARBITRATION ORDER

Under section 282 of the Insurance Act, R.S.O. 1990, c.I.8, as amended, it is ordered that:

1. Mr. Ferguson is entitled to his expenses of the arbitration proceeding in the amount of $4,378.11, plus applicable GST or HST.

December 30, 2011

Jessica Kowalski Arbitrator

Footnotes

1. 1The Statutory Accident Benefits Schedule — Accidents on or after November 1, 1996, Ontario Regulation 403/96, as amended.
2. 2(FSCO P02-00031, November 20, 2003) Appeal
3. 3Ibid. See also Olszynko and Dominion of Canada General Insurance Company (FSCO A97–001495) in which Arbitrator Makepeace wrote that it “is long settled that mediation expenses are not recoverable.”
4. 4(OIC A-002340, September 3, 1993)
5. 5(FSCO A05-002958 and A06-000004, July 30, 2007)
6. 6(FSCO A05-002940, July 16, 2008) See also, Henri and Allstate Insurance Company of Canada (OIC‑007954, August 8, 1997) and West and Aviva Canada Inc., (FSCO A08-000170, March 15, 2010)