Intact Insurance Company v. Marianayagam, 2011 ONFSCDRS 44

Financial Services Commission of Ontario

Commission des services financiers de l’Ontario

Neutral Citation: 2011 ONFSCDRS 44

Appeal P09-00028V

OFFICE OF THE DIRECTOR OF ARBITRATIONS

INTACT INSURANCE COMPANY (Formerly known as ING Insurance Company of Canada) Applicant

and

JOSEPH ANTON MARIANAYAGAM Respondent

BEFORE: Lawrence Blackman

REPRESENTATIVES: Mr. William M. Sproull for the Applicant, Intact Insurance Company Mr. David S. Wilson for the Respondent, Joseph Anton Marianayagam

HEARING DATE: By written submissions due May 2, 2011

VARIATION EXPENSE ORDER

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

1. The parties shall each bear their legal expenses of this variation proceeding to date.

May 11, 2011

Lawrence Blackman Director’s Delegate Date

REASONS FOR DECISION

I. BACKGROUND

The Respondent, Joseph Anton Marianayagam, was injured in a May 26, 2004 motor vehicle accident. As a result, he applied to the Applicant, Intact Insurance Company, for statutory accident benefits payable under the Schedule.¹

In resolving entitlement issues that subsequently arose, the parties agreed to a May 3, 2006 Arbitration Order that provided, in part, that the Applicant pay the Respondent weekly income replacement benefits (“IRBs”) of $400 ongoing from September 27, 2005, subject to the appropriate deduction under the Schedule for collateral benefits and post-accident income.

Following the issuance of this consent order, the Respondent began receiving, in 2007 and 2009 respectively, benefits from Equitable Life Insurance Company of Canada (“Equitable”) and the Canada Pension Plan (“CPP”). Accordingly, the Applicant applied under section 284 of the Insurance Act, R.S.O. 1990, c. I.8, to vary the May 3, 2006 weekly IRB Order to $169.66.

My February 20, 2011 variation decision determined that both collateral benefits being received were deductible, the Equitable benefits under subsection 7(1) of the Schedule, the CPP benefits under paragraph 2(9)(1). Subject to any further or other order of a Commission adjudicator, the variation application was otherwise stayed pending the resolution of a related Ontario Superior Court of Justice action wherein the Applicant sought recovery from the Respondent of past IRBs.

Both parties now seek their legal expenses of this variation application. The Applicant claims a corrected amount of $7,865.04, including 69.6 hours of legal work at the applicable legal aid rates. The Respondent claims $7,101.47, including 42.85 hours at the maximum $150 hourly rate for insured’s counsel under Rule 78.1 of the Dispute Resolution Practice Code (Fourth Edition – Updated September 2010) (the “Code”).

II. THE RELEVANT LEGISLATION

Subsection 282(11) of the Insurance Act, R.S.O. 1990, c. I.8, provides that:

The arbitrator may award, according to 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.

Under subsection 284(5) of the Insurance Act, subsection 282(11) applies, with necessary modifications, to variation applications. Subsection 12(2) of R.R.O. 1990, Reg. 664 (the “Expense Regulation”) provides that the following criteria shall be considered for the purposes of awarding all or part of incurred legal expenses:

• Each party’s degree of success in the outcome of the proceeding
• Any written offers to settle made in accordance with the Expense Regulation
• Whether novel issues are raised in the proceeding
• The conduct of a party or a representative that tended to prolong, obstruct or hinder the proceeding, including failure to comply with undertakings and orders
• Whether any aspect of the proceeding was improper, vexatious or unnecessary
• Whether an insured refused or failed as required under applicable provision to submit to a medical examination or provide required material

III. THE PARTIES’ EXPENSE SUBMISSIONS

The Applicant argues it is entitled to its legal expenses of this proceeding, having been entirely successful regarding collateral benefit deductibility. It further submits that this proceeding raised relatively novel and complex legal issues requiring significant research, the interpretation of subsections 2(9) and 7(1) having not previously been addressed in the same depth as in this case.

The Applicant cites Ruffolo v. Sun Life Assurance Co. of Canada, 2009 ONCA 274, [2009] O.J. No. 1322 (C.A.) for the proposition that a successful insurer is not barred from recovering its legal expenses in a proceeding where novel issues are raised. The Applicant further submits that while insurers do have greater financial resources than any one individual insured, the typical insured person is dealing with only one claim while an insurer is defending many.

The Respondent, however, argues that the Applicant inappropriately divided the variation issues between two forums, this application having sought to vary the May 3, 2006 Order solely regarding ongoing IRBs whereas the related court action addresses varying the amount of past payments and obtaining repayment of any overpaid benefits. The Respondent submits that this has resulted in unnecessary expense, to its specific detriment. The Respondent argues that this was a vexatious tactic, contrary to the consumer protection intent of this legislation.

The Respondent agrees that the deductibility issues were relatively complex and the submissions novel. The Respondent argues, however, that these considerations support his claim for legal expenses, that discouraging insured persons from advancing novel questions of law is also contrary to the principle of consumer protection, especially considering the unequal financial resources between insureds and insurers.

The Respondent challenges the Applicant’s Bill of Costs, specifically (a) that the hours claimed prior to June 21, 2009 pertain to a prior, incorrect variation application and should not be recoverable, (b) the time expended regarding the transcripts was unnecessary, and (c) the hours to draft the Bill of Costs were excessive. The Respondent does not object to the Applicant’s $858.05 disbursement claim.

The Applicant responds that it was entirely permissible and appropriate for it to divide its issues between two forums, there was nothing improper, vexatious or unnecessary in its actions, nor does consumer protection enshrine double recovery. The Applicant submits that it commenced two proceedings for the following reasons:

1. Liberty Mutual Insurance Co. v. Fernandes (2006), 82 O.R. (33d) 524 supports its right to do so;
2. Paragraph 47(2)(b) of the Schedule restricts a Commission adjudicator to deducting up to twenty per cent of the amount of the continuing IRBs from each IRB payment. The Court, however, has broader enforcement remedies;
3. Enforcement of a Commission order beyond paragraph 47(2)(b) of the Schedule depends, pursuant to Rule 66 of the Code, entirely on registering a certified copy of the order in the Ontario Superior Court of Justice;
4. There is no clear or recent authority confirming that repayment would be ordered at the Commission in appropriate circumstances. The Applicant cites Caringi and Wawanesa Mutual Insurance Company, (OIC V-000860, November 4, 1996) where the Director remitted a proceeding to arbitration where the arbitrator was found to have erred in not addressing a repayment claim;
5. The Court, unlike the Commission, would allow up to two hours of oral examination for discovery under the simplified procedure of Rule 76.04(2) of the Rules of Civil Procedure;
6. The variation application was necessary because “[o]n a plain reading of section 287 of the Insurance Act, an insurer cannot reduce or stop payment of accident benefits unless an order is varied or revoked by the Director or an arbitrator.”

The Applicant argues that the Respondent’s 12.5 hours of preparation time is excessive as the Respondent’s counsel had significant prior experience on the issue of collateral benefits deductibility. The Applicant does not dispute the Respondent’s $352.59 disbursement claim.

IV. RESULT

I am persuaded that both parties should bear their respective legal expenses of this variation application to date, for the following reasons:

1. The Applicant’s primary objective in this proceeding was to vary the May 3, 2006 ongoing IRB Order from $400 a week to $169.66. It was not successful in this regard. Rather, I deferred this specific question to the court action, noting my concern about making factual findings in this present proceeding as to the correct ongoing IRB quantum based on speculation and non-current data. This was especially pertinent as my numerical findings, drawn from such insufficient evidence, might be inconsistent with overlapping determinations ultimately made in the related court action.
2. I am not persuaded the availability of oral discovery in the court system warrants two related procedures. My prior decision noted the Applicant’s failure to avail itself of the pre-hearing document discovery procedures of this system to confirm the current receipt of benefits. It further failed to avail itself of the hearing procedures to provide any oral evidence. It is inconsistent to argue that regarding past collateral benefits the Commission system is inadequate, while simultaneously arguing to vary ongoing IRBs at the Commission without accessing its procedures that assist the search for the truth.
3. Paragraph 47(2)(b) of the Schedule provides that if a person is required to repay an amount to an insurer, the insurer may give notice it intends to collect the repayment by deducting up to 20 percent of each further IRB. It is not clear how this specific statutory language, restricted to ongoing weekly benefits, would not apply equally to the court.
4. I am not persuaded there is a significant difference in the enforcement process of a Commission order from a Court order. Rather, Rule 66.2 of the Code specifically provides that a Commission order can be enforced by the Court “in the same manner as an order of that Court.”
5. Contrary to the Applicant’s submission that there is no clear or recent (since 1996) authority confirming that a Commission adjudicator can order repayment in appropriate circumstances, to give but one example, I ordered IRB repayments in Soobrian and Belair Insurance Company Inc., (FSCO A04-000422, September 20, 2005). The insurer in that case was represented by the same law firm as retained by this Applicant.
6. Fernandes upheld the motions court judge’s decision that an insurer does not have the ability to commence a court proceeding to challenge the determination of a Catastrophic Impairment Designated Assessment Centre. The appellate decision, in dicta, confirmed an insurer’s continuing common law right of access to the courts to obtain repayment from an insured person of benefits received in error or by fraud or misrepresentation. I do not read Fernandes as sanctioning a multiplicity of proceedings.
7. Section 287 of the Insurance Act protects an insured’s benefits ordered paid by a Commission adjudicator. It provides that only on consent or by order of the Director of Arbitrations, or his or her appointee, may the initial order be reduced.

If the Applicant persuades the Court that notwithstanding section 287, the Court has jurisdiction to amend the May 3, 2006 Order regarding prior weekly IRBs, it is uncertain why the Court would not equally have jurisdiction to amend the same Order regarding ongoing IRBs. If, however, the Court finds that it does not have jurisdiction to amend the May 3, 2006 Order, the Applicant will be required to resume this variation proceeding.

Section 281 of the Insurance Act only allows insureds to access arbitration. Hence, it is important to insurers to be able to access the court for a repayment order when they voluntarily paid benefits under the Schedule due to error, fraud or misrepresentation. However, this Applicant paid IRBs pursuant to an arbitration order. Section 284 of the Insurance Act provides a specific Commission variation procedure to vary such an order.

Accordingly, I am not persuaded that it was necessary for the Applicant to divide its case between two forums, which has led to unnecessary expenses being incurred regarding varying the quantum of ongoing IRBs.

8. On the other hand, the Applicant was successful on the deductibility of the Equitable and CPP payments, issues that occupied the larger part of the argument and the complexity in this proceeding to date.
9. However, the parties agree the deduction of collateral benefits is an evolving and complex issue. It is important these issues be clarified. In Halim and Security National Insurance Co./Monnex Insurance Mgmt. Inc., (FSCO P07-00035, November 21, 2008), I stated that:

I find that these expense criteria do not exist in a vacuum, segregated from the overall legislative intent. Rather, the criteria are defined by, and help define the broader, overarching legislative intentions, including consumer protection, as set out by the Supreme Court of Canada in Smith v. Co-operators General Insurance Co., 2002 SCC 30, [2002] 2 S.C.R. 129, which encompasses a fair and reasonable measure of access to justice.

Ruffolo does not provide that the existence of a novel issue entitles an insurer to its legal expenses; only that a novel issue does not uniformly bar an insurer from receiving its costs. This specialized forum has concurrent jurisdiction with the courts over a distinct, consumer protection area of the law. Especially where significant, broadly important issues of law are raised, as here, the criterion of novelty should militate in favour of an insured person, to the extent determined appropriate in the circumstances.

If, however, I were to assess the reasonableness of the parties’ claimed legal expenses, I would have allowed the Respondent’s Bill of Costs at $7,101.47. I would have reduced the Applicant to $7,000, all in, reflecting that part of the Applicant’s hours claimed for the period prior to filing this application pertained to an earlier, incorrect variation application and the Applicant’s endeavour to remedy same.

May 11, 2011

Lawrence Blackman Director’s Delegate Date

Footnotes

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