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

Neutral Citation: 2011 ONFSCDRS 57

FSCO A08-001134

BETWEEN:

KAMAL GOGNA

Applicant

and

STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY

Insurer

Before: Alec Fadel

Heard: Written submissions completed by March 18, 2011, oral submissions on May 27, 2011 by teleconference

Appearances: Douglas Wright for Mr. Gogna

Darcy McGoey for State Farm Mutual Automobile Insurance Company

Issues:

The Applicant, Kamal Gogna, was injured in a motor vehicle accident on April 17, 2004 and received accident benefits from State Farm. A dispute arose concerning the applicant’s entitlement to an income replacement benefit and ultimately a hearing was scheduled to proceed on the issue on October 25, 2010. By letter dated October 25, 2010, the applicant informed the Commission that the parties had settled all issues in dispute but for the issue of expenses. By letter dated December 9, 2010, the applicant indicated that the parties were unable to resolve the issue of expenses between themselves and requested a hearing. A timetable for written submissions was established which concluded on March 18, 2011, the timeline for the applicant to deliver a reply. The parties agree that the applicant is entitled to his reasonable expenses related to the arbitration but the parties have been unable to agree on the amount of expenses.

The issue in this hearing is:

What is the amount of expenses to which Mr. Gogna is entitled in respect of the arbitration?

Result:

Mr. Gogna is entittled to $26,256.74, plus applicable GST or HST.

ANALYSIS

The applicant is seeking a total of $15,000.00 in legal fees (not including applicable HST or GST) and a total of $24,217.78 for disbursements (inclusive of HST or GST). The applicant points to the fact that his income replacement benefit was reinstated as part of the settlement agreement as the main factor that should be considered in allowing his expenses. The insurer submits that the applicant’s success in the settlement negotiation is only one factor that I should consider noting that the issue in dispute for the arbitration was not novel and did not present new or complex issues and that any expenses awarded should trend away from the maximum permissible under the Regulation.

Section 3 of the Schedule to R.R.O. 1990, Reg. 664 (the “Expense Regulation”) provides that:

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

For all services performed before an arbitration, appeal, variation or revocation hearing.
For the preparation for an arbitration, appeal, variation or revocation hearing.
For attendance at an arbitration, appeal, variation or revocation hearing.
For services subsequent to an arbitration, appeal, variation or revocation hearing.

(2) The number of hours for which legal fees may be awarded shall be determined by the arbitrator, having regard to the criteria set out in subsection 12(2) of this Regulation.

The criteria in subsection 12(2) are used to determine both entitlement to and amount of expenses. They 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 (Statutory Accident Benefits Schedule — Accidents on or after November 1, 1996) made under the Act or refused or failed to provide any material required to be provided by subsection 42 (10) of that regulation.
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), made under the Act, or refused or failed to provide any material required to be provided under subsection 44 (9) of that regulation.

Fees

The applicant is seeking 100 hours of preparation time for the arbitration at the maximum allowable rate of $150.00 per hour. Counsel for the applicant indicated that the lawyers at the firm do not docket their hours, noting however that 100 hours includes time for two lawyers to prepare for the hearing set in May 2010 (which was adjourned) and for one lawyer to prepare for the hearing set for October 2010. It was also submitted that the significant amount of time a law clerk and junior lawyer had put into the file was not being claimed. The insurer referred to a number of arbitration decisions where various ratios were applied representing the time to prepare for a hearing and the number of hearing days, the decisions allowed for a range of 1:1 up to 4:1.

Arbitrator Nastasi in Salva and Paramanantham and Allstate Insurance Company of Canada¹, stated 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.

Arbitrator Blackman in Sangaralingam and Nordic Insurance Company of Canada found that since the matter settled close to the start of the hearing and the set hearing time may have been conservative, 85 hours of legal time was found to be appropriate which included preparation for and attendance at the expense hearing.² This represented a ratio of roughly 3:1 for the scheduled hearing days. In Soobrian and Belair Insurance Company Inc. it was held that the arbitrator should take into account the length of the proceeding and the complexity of the issues, and frequently involves applying a ratio of pre-hearing preparation time to hearing time in the range of 1:1 to 4:1.³

In this instance the hearing was set for 4 days. The parties agree that the hearing would likely have taken longer than the allotted time given the new medical evidence that arose since the pre-hearing. There was no actual agreement as to how many days the hearing would last in total. That being said, even on a conservative estimate, a ratio of 3:1 hours, which I find reasonable, would amount to more legal hours than the 100 claimed. Therefore, I find that the applicant is entitled to 100 hours of counsel time. I reject the insurer’s suggestion that since the applicant has not provided dockets of their hours they should not be entitled to a ratio of 3:1. Rule 79.2(c) of the Dispute Resolution Practice Code (“DRPC”) lists examples of supporting documentation that must be provided. The Rule does not make mandatory that applicant’s counsel keep dockets in order to be reimbursed at a higher rate, it merely indicates that if dockets are kept they must be provided. Also, I note that insurer’s counsel has not provided me with their docketed hours which would have assisted in my determination of a reasonable number of hours to permit.

As previously indicated, the applicant is requesting compensation for legal fees at the rate of $150 per hour. The insurer submits that given the lack of complexity in this matter and the failure to actually proceed to a hearing, a rate of $120 per hour is a more reasonable amount to award. Rule 78 of the DRPC states:

78.1 The maximum amount that may be awarded to an insured person or an insurer 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;

Where an adjudicator is satisfied that a higher amount for legal fees to an insured person is justified, an hourly rate of up to $150 may be awarded.

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."⁴ I confirm that the Tier 3 legal aid rate is $112.24 per hour. In this case, I agree with the insurer and find an appropriate hourly rate to be $120 per hour. The applicant is therefore entitled to 100 hours x $120 per hour totalling $12,000 plus any applicable GST or HST.

Disbursements

The applicant has claimed disbursements as follows: $2,434.50 for translation services; $240.92 for fax, postage and courier costs; $2,321.32 for photocopying; $17,260.85 for various medical reports and preparation fees; and, $860.00 for clinical notes and records/OHIP summary.

In its written submissions, the insurer noted that the applicant failed to substantiate the significant amounts claimed for photocopying, courier services and other expenses. I resumed the expense hearing by way of teleconference to address these unanswered questions. The applicant clarified that $899.07 was paid to the previous solicitor for photocopying and that the present solicitor has incurred a further $1,422.25 in photocopying which includes $257.55 paid to the insurer for reproduction of the insurance file. After hearing submissions from the applicant at the resumption, the insurer made no further submissions regarding the excessiveness of these expenses. I find that although some of these expenses are on the high side, given that the issue only resolved after several adjournments and on the eve of the arbitration hearing and given the nature of the resolution resulting in reinstatement of the claimed benefit, the applicant is entitled to the claimed expenses for fax, courier, postage, photocopying, the cost to retrieve clinical notes and records and the cost of obtaining the OHIP summary in the total amount of $5,856.74 plus applicable GST or HST.

The expert fees are mandated by the Expense Regulation and there is no discretion to make an order for an award above the amounts set out therein. It is clear, that the expert reports that were commissioned assisted in the resolution of the issue at arbitration. Section 5(5) of the Expense Regulation states:

(5) The amount of the expenses paid by or on behalf of the insured person or the insurer to an expert for the preparation of a report may be awarded, to a maximum of $1,500.

An important consideration in this particular case is that the settlement of the issue of income replacement benefit included a reinstatement of the benefit. Therefore, I am exercising my discretion and awarding the maximum allowable payment of $1,500 for each of the five expert reports where the actual charge is greater than $1,500 totalling $7,500 and $900 toward the report of Dr. Kiman plus any applicable GST or HST.

The applicant also stated that under s. 5 of the Expense Regulation, I have the jurisdiction to compensate a party for an expert’s time to prepare to testify even if that expert did not actually testify. The applicant stated that if the insurer wanted to wait until the eve of an arbitration hearing to settle a matter, it was exposed to this kind of expense and that s. 5(4) was intended to be a “catch-all” section. Section 5(4) of the Expense Regulation states:

(4) The amount of expenses paid by or on behalf of the insured person or the insurer to an expert witness for preparation for a hearing at which the witness testifies may be awarded, to a maximum of $500. (emphasis added)

The insurer submits that the wording is clear and the applicant is only entitled to this amount if the expert actually testified at the hearing. I agree with the insurer and find that this amount is not payable for any of the expert witnesses, given that they did not testify.

CONCLUSION

The applicant is entitled to the following:

$12,000.00 in legal fees plus GST or HST;
$8,400.00 toward the cost of expert reports plus any applicable GST or HST; and,
$5,856.74 toward all other accessible disbursements plus applicable GST or HST.

June 28, 2011

Alec Fadel Arbitrator

Date