Marshall v. Federation Insurance Company of Canada, 2012 ONFSCDRS 165

Financial Services Commission des

Commission services financiers

of Ontario de l’Ontario

Neutral Citation: 2012 ONFSCDRS 165

FSCO A06-000602

BETWEEN:

NANCY MARSHALL

Applicant

and

FEDERATION INSURANCE COMPANY OF CANADA

Insurer

DECISION ON EXPENSES

Before: Judith Killoran

Heard: Written submissions received on September 7, 2012, September 21, 2012, September 28, 2012 and October 2, 2012

Appearances: Karl Arvai for Ms. Marshall

Helen D. K. Friedman for Federation Insurance Company of Canada

Issues:

The Applicant, Nancy Marshall, was injured in a motor vehicle accident on October 31, 1997. I conducted a hearing on the issue of catastrophic impairment on January 7, 8, 9, and 10, 2008. Prior to the commencement of the hearing, the issues of income replacement benefits and medical benefits were resolved. Following the initial four days of hearing, an additional eight days of hearing were required. By letter dated February 12, 2008, Federation conceded that the issue of catastrophic impairment had been resolved and it would advise if the parties could not agree on expenses. Subsequent letters from Federation dated March 4, 2008 and June 13, 2008 requested that Mr. Arvai, counsel for Ms. Marshall, submit a Bill of Costs. On July 25, 2012, Mr. Arvai corresponded with FSCO requesting an expense hearing.

The issue in this further hearing is:

Is Ms. Marshall entitled to her expenses incurred in respect of this arbitration hearing? If so, what is the amount of expenses to which she is entitled?

Result:

Ms. Marshall is entitled to her expenses incurred in respect of the arbitration hearing. She is entitled to $22,988.81 for legal fees inclusive of GST plus $7,984 for disbursements inclusive of GST. Ms. Marshall is entitled to expenses totalling $30,972.81.

ENTITLEMENT TO EXPENSES:

Rule 79.1 of the Dispute Resolution Practice Code (DRPC) states that where an adjudicator has determined all issues in dispute except expenses, and the parties cannot agree on entitlement or amount of expenses, either party may request, in writing, an expense hearing within 30 days from the date the decision on all other issues in dispute was issued.

In the case before me, I did not determine the issue of catastrophic impairment and I did not determine all other issues which were in dispute. However, both parties were prepared, absent an agreement as to expenses, to have the matter determined by me. My jurisdiction to do so is set out in subsection 282(11) of the Insurance Act which states the following:

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.

Federation makes the argument that, although there is no arbitrator’s decision determining catastrophic impairment, Ms. Marshall could have obtained such an order on consent. It submits that, as a result, Rule 79 of the DRPC should be applied to the circumstances in this case.

Therefore, as Mr. Arvai did not submit a Bill of Costs or request an expense hearing within 30 days of the resolution of the case, Ms. Marshall is not entitled to her expenses.

Federation concedes that its correspondence made no reference to the timeline in the DRPC and its own follow up telephone call and correspondence of June 13, 2008 was outside the 30-day timeline. It relies on the decision in Rocheleau and Allstate Insurance Company of Canada¹ to argue that even though the insurer invites submissions outside the 30 day timeline, it should not be considered an indefinite waiver of timelines. Federation’s position is that Mr. Arvai’s delay of 4.5 years in requesting an expense hearing, with no explanation or excuse, is egregious.

Federation submits that, given the Commission’s encouragement of settlement and resolution between the parties, to treat an insurer who settles a dispute differently from an insurer who proceeds with a dispute, is inconsistent with the role of the Commission in fostering dispute resolution. Federation also relies, as in Rocheleau, with the importance of finality as an important principle in the administration of justice.

It should be noted that there are two parts to an expense hearing at FSCO. First, there must be either an agreement by the parties about entitlement or if lacking agreement, a decision by the arbitrator and second, there must be an assessment of expenses. I find it noteworthy that in Federation’s correspondence of January 29, 2008, Federation stated that if the parties cannot agree on expenses, they should proceed to an assessment. My reading of this letter and subsequent correspondence is that Federation was not disputing Ms. Marshall’s entitlement to expenses. Rather, Federation was seeking to find agreement with Ms. Marshall’s counsel about the quantum of expenses to which Ms. Marshall was entitled.

The effect of the agreement between the parties about the catastrophic impairment designation was that it reopened Ms. Marshall’s entitlement to ongoing medical and rehabilitation expenses, attendant care and housekeeping benefits. Entitlement to medical rehabilitation expenses ended on October 21, 2007, as it was the tenth anniversary of the accident. Neither housekeeping nor attendant care benefits were available to Ms. Marshall beyond October 21, 1999 until it was agreed by Federation that she was catastrophically impaired.

Federation submits that the principles set out in Roceleau are determinative in this matter. In Rocheleau, the Director’s Delegate held that having regard to the principles in Smith v. Cooperators General Insurance Company², losing parties should not be obliged to force an expense hearing or indefinitely have a cloud of legal expenses hovering over their heads, an approach which eviscerates expeditiousness where expeditiousness is a crucial component of justice. As also noted in Rocheleau, the avoidance of unnecessary delay is a central principle in the administration of justice. In Rocheleau, Mr. Arvai did not request an expense hearing until 2.5 years after the arbitrator’s decision. Expenses and disbursements were denied due to the lack of appropriate or adequate explanation for the delay.

A fundamental distinction between Rocheleau and the case before me is that no arbitration decision was issued in this case. Mr. Arvai did not seek an order after Federation conceded Ms. Marshall suffered a catastrophic impairment. Consequently, I find that Rule 79.1 of the DRPC is not applicable.

Mr. Arvai asserted that Ms. Friedman, counsel for Federation, was made aware during their telephone discussion in March 2008 that Mr. Arvai was delaying the preparation of a bill of expenses due to his very busy and hectic trial schedule at the time. As time went on, Mr. Arvai submitted that the matter was not given priority and was left to be resolved with other issues. Mr. Arvai submitted and I find, that the only question remaining between the parties was the quantum of expenses not entitlement. Mr. Arvai also submitted that this was only one of many issues ongoing between the parties over the years since January 2008. There is an estimated several hundred pages of correspondence between Ms. Marshall and Federation since January 2008. I find that it is not relevant that there was little, if any, contact between Mr. Arvai and Ms. Friedman. Rather, I find that it is relevant that during the period of time from 2008 to the present, there was ongoing correspondence and contact between Mr. Arvai, on Ms. Marshall’s behalf, and Federation.

As a private mediation was scheduled in July 2012 for the purpose of resolving all outstanding matters, Mr. Arvai prepared the Bill of Expenses and forwarded it to Ms. Friedman by letter of July 20, 2012. Mr. Arvai submitted that until July 2012, Federation expressed no unwillingness to negotiate or pay reasonable expenses of the proceeding nor had it withdrawn its offer to do so. It had not objected to the delay in the preparation of the Bill of Expenses and at no time withdrew its offer to pay those expenses. Federation did not impose a time limit on the preparation of a Bill of Expenses in connection with resolving the matter of expenses. Despite the ongoing dealings between the parties over the years, the many letters and telephone calls and emails, Mr. Arvai asserted that not once did Federation suggest that it would no longer entertain settlement of the expenses or that it was anxious to conclude the matter.

Although Federation has submitted that the delay in submitting a Bill of Expenses created a sense of finality with respect to the issue of expenses, Mr. Arvai submitted that such a sense could not have been created as Federation had not paid the expenses it owed. Federation submitted that “the resolution of expenses cannot be left hanging indefinitely over the head of the insurer.” Federation waited approximately four years from the date of its last letter of June 13, 2008 for a Bill of Expenses. However, I find that during those four years, it appears there was ongoing and continuous correspondence and dealings between the parties during which Federation could and should have raised the issue had it truly felt that this issue was “hanging over its head.”

The decision in Rocheleau is based upon Rule 79.1 of the DRPC which applies where an arbitrator has issued an order determining all issues in dispute except expenses. That is not the case here. The fact remains that Ms. Marshall can apply for an order at present, and if she did so, she could apply within 30 days of the issuance of the order for an expense hearing under Rule 79.1.

As Mr. Arvai points out, the principle of finality is based upon the dismissal of the action which creates the finality. Unlike Rocheleau, there can be no such consideration in the present case since finality has never been achieved. Mr. Arvai relies on the Rule of Civil Procedure as a guide and notes that Rule 58.04(4) does not take away a defaulting party’s entitlement to costs due to delay. Mr. Arvai cited a large number of cases where, despite delays of up to 11 years in seeking costs, the party entitled to costs was permitted to recover these costs despite significant, inordinate and unexplained delays. According to Mr. Arvai, the issue of finality was not mentioned because it did not apply as delay generally results in a benefit or advantage to the party responsible for paying costs.

The ongoing dealings between the parties over the years have been in relation to Ms. Marshall’s ongoing entitlements to accident benefits, insurer’s medical examinations, home modifications and other similar issues. In fact, I note that according to our records, Ms. Marshall has filed an Application for Arbitration dated October 22, 2012 with respect to some of these remaining issues. Although both parties have attempted to attain a full and final resolution of all issues, such a resolution has not occurred.

The parties attended a private mediation in July 2012 in yet another attempt to resolve all outstanding matters on a full and final basis. The issue of the outstanding expenses from the arbitration proceedings in January 2008 were a very minor part of the various issues to be resolved, including past and future entitlements. As the issue of expenses was not resolved, a hearing was requested by letter from Mr. Arvai dated July 25, 2012.

There is no provision in the Insurance Act or the DRPC which deprives a successful party of his or her entitlement to expenses when the issue or issues in dispute have been settled between the parties together with a mutual agreement about the successful party’s entitlement to expenses. Subsection 282(11) states that an arbitrator may award all or part of the expenses of an arbitration proceeding, not none of the expenses. An adjudicator is limited to the factors contained in Rule 75.2 in determining an award of expenses. Federation has added a further factor, which is the delay in the bill of expenses, as being the only relevant consideration for me when awarding expenses.

CONCLUSION

I find that, as of January 2008, the parties agreed that Ms. Marshall was entitled to her expenses of the arbitration proceeding, subject to an assessment of the quantum if the parties could not agree. I also find that Ms. Marshall’s circumstances do not fit within the ambit of Rule 79.1 of the DRPC which requires that an adjudicator issue an order determining all issues in dispute. At no time has an arbitrator issued an order in the case before me. Rather, the parties have resolved some of the issues between themselves. Therefore, my jurisdiction is found in subsection 282(11) of the Insurance Act which states that an arbitrator may award to the insured or the insurer all or part of the expenses incurred in an arbitration proceeding. Further, I find that there have been ongoing dealings and disputes between the parties from 2008 to the present. This is not a case which involves reopening a matter or considering an independent new issue. I accept that Mr. Arvai expected that the expenses of the arbitration hearing formed part of the subject matter of the mediation which was scheduled for July 2012. I find that was a reasonable expectation on his part and that he responded expeditiously in July 2012 when he applied to FSCO for an expense hearing after being told that Ms. Marshall’s claim for expenses was being denied by Federation due to delay. Consequently, I find that Ms. Marshall is entitled to her expenses of the arbitration hearing.

Assessment of Expenses

Rule 75.2 of the DRPC establishes the criteria for an award of expenses. The relevant criteria with respect to the case before me are as follows:

(a) Each party’s degree of success in the outcome of the proceeding;

(b) Any written offers to settle made in accordance with Rule 76;

(d) 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.

(a) Each party’s degree of success in the proceeding

Ms. Marshall was the successful party at arbitration because Federation conceded her determination of catastrophic impairment.

(b) Offers to Settle

Federation submits that by conceding to the issue of Ms. Marshall’s determination of catastrophic impairment, it made the offer to settle which ended the projected 12-day arbitration hearing after only four days. Federation also points to its settlement of other issues prior to the arbitration as evidence of its desire to expedite the process.

I find that Ms. Marshall is entitled to the expenses of the preparation for and the conduct of the 4-day hearing, which Federation claims was necessary to gain a full appreciation of Ms. Marshall’s case and the strengths and weaknesses of both parties’ arguments.

(d) Conduct of a Party or Party’s Representative

Federation submits that it acted in a manner which limited the length of the arbitration by conceding the issue of catastrophic impairment. Also, Federation submitted that it tried to address expenses in a prompt manner while Mr. Arvai failed to address expenses within a reasonable period of time without explanation or excuse can only be seen as conduct prolonging, obstructing or hindering the proceeding. For this reason, Federation submits that any award of expenses should be discounted. I disagree for the reasons outlined earlier in this decision.

CONCLUSION

Mr. Arvai has submitted a Bill of Expenses with a claim for fees and GST of $24,123.23, based on reductions included in his reply submission. I find that the fees claimed, both as to rate and quantum of hours, are reasonable considering the complexity of the case and the applicant’s success. Mr. Arvai has claimed $150 an hour which is to be expected considering his many years of experience and the skill with which he prepared and presented the applicant’s case. I have included 4.5 hours for the expense hearing in my calculations as I accept that at least that amount of counsel’s time would be required. I also find it reasonable to claim 36.5 hours for the assistance of an associate at the rate of $100 per hour, which is only 2/3 of the maximum allowable rate. Finally, 29.2 hours has been claimed for a law clerk, at the rate of $60. While the amount of time claimed is reasonable, the hourly rate for the law clerk is restricted to the legal aid rate of $23 per hour which totals $671.60 plus GST of $33.58 which amounts to $705.18 not $1839.60. I find that Ms. Marshall is entitled to legal fees and GST totalling $24,123.23 minus $1134.42 which is $22,988.81.

Based on his reply submissions, Mr. Arvai has reduced his claim for disbursements to $7,984.00, including GST. I have reviewed the disbursements claimed which appear to be reasonable in the circumstances. I find that the claims for courier services, photocopying, telephone and sundry costs are reasonable. I accept Mr. Arvai’s submissions that courier invoices were not provided as courier charges are not invoiced on an individual file basis but rather, by way of a monthly invoice which lists all of the files for which courier services were provided. I also accept his submission that photocopy expenses of eight cents a copy at Corporate Imaging Centre and office copying charges of 25 cents a copy are well within the norm. I do not consider it reasonable in light of considerations of proportionality to require that invoices be produced for each and every item in the list of disbursements as most of the individual items claimed are modest. I find that Ms. Marshall is entitled to payment of $7,984 in disbursements, inclusive of GST. Consequently, I find that Ms. Marshall is entitled to expenses totalling $30,972.81.

December 18, 2012

Judith Killoran Arbitrator

Date