State Farm Mutual Automobile Insurance Company v. Pamela Blakely, 2012 ONFSCDRS 69

Financial Services Commission of Ontario

Neutral Citation: 2012 ONFSCDRS 69 Appeal: P12-00005

OFFICE OF THE DIRECTOR OF ARBITRATIONS

STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY Appellant

and

PAMELA BLAKELY Respondent

BEFORE: Delegate Lawrence Blackman

REPRESENTATIVES: Mr. Todd J. McCarthy for the Appellant, State Farm Mutual Automobile Insurance Company Mr. David Preszler for the Respondent, Mrs. Pamela Blakely

HEARING DATE: By written submissions received by April 24, 2012

PRELIMINARY APPEAL ORDER

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

1. Pursuant to Rule 51.2(c) of the Dispute Resolution Practice Code (Fourth Edition, Updated August 2011), this appeal from the Arbitrator’s January 19, 2012 decision on preliminary issues is presently rejected.

2. If the parties are unable to agree on the legal expenses of this present appeal, pursuant to Rule 79 of the of the Code, an expense hearing shall be requested, as set out below, within thirty days of the date of this decision.

April 27, 2012

Lawrence Blackman Director’s Delegate

REASONS FOR DECISION

I. BACKGROUND AND NATURE OF THE APPEAL

The Appellant, State Farm Mutual Automobile Insurance Company, requests that, if required, discretion be exercised under Rule 50.2 of the Dispute Resolution Practice Code (Fourth Edition, Updated August 2011) (the “Code”) to accept at this time this appeal from the January 19, 2012 decision of Arbitrator Killoran (the “Arbitrator”) on preliminary issues.

The Respondent, Mrs. Pamela Blakely, was involved in an August 18, 2005 motor vehicle accident. As a result, she sought statutory accident benefits under the Schedule¹ from the Appellant, her first-party automobile insurer. Benefit disputes, including income replacement benefits (“IRBs”) payable under the Schedule, arose between the parties leading to an arbitration hearing being scheduled before the Arbitrator commencing November 7, 2011.

At the hearing, the Respondent renewed its adjournment request previously denied by an adjournment officer. The Arbitrator’s decision states that the Appellant, which had previously argued against an adjournment, did not oppose this renewed request. The Arbitrator states that she adjourned the hearing in order to add the issue of catastrophic impairment to the issues in dispute to avoid recalling the same witnesses at a further hearing, at extra time and expense.

The parties did proceed on November 7, 2011 on the discrete issue of whether “Payments of disability pension benefits under the Canada Pension Plan” in subsection 2(9) of the Schedule include a child’s benefit payable under CPP. This issue went to the question of the IRB quantum.

The Arbitrator found, in part, that the Respondent’s CPP disability benefits were comprised of two distinct components, a monthly disability pension benefit of $852.30 and a monthly child’s benefit of $218.50. The Arbitrator found that the word “pension” in the words “disability pension benefits under the Canada Pension Plan” was included for a reason. Thus, the child’s benefit did not meet the subsection 2(9) definition. It would follow that the child’s benefit would not be deducted from the IRB, under section 7 of the Schedule, as a payment for loss of income being received under an income continuation plan.

The Arbitrator awarded the Respondent her legal expenses incurred as a result of the contested adjournment request and the preliminary issue, fixed at $11,960, including disbursements of $7,440, payable forthwith in any event of the cause. The Arbitrator held that, unlike the adjournment officer, she had the benefit of lengthy submissions from the parties, following which it became evident not only to her, but also to both parties, that the hearing could not proceed prior to catastrophic impairment being determined.

In this appeal, the Appellant seeks orders that:

1. The Arbitrator erred in law in adjourning the arbitration hearing;
2. CPP benefits, including the child’s benefit component, are fully deductible; and,
3. The Arbitrator’s expense order is set aside or, in the alternative, the legal expenses are payable in the cause and not forthwith.

In the interim, the Appellant seeks a stay of the Arbitrator’s January 19, 2012 orders.

II. ANALYSIS

Rule 50.2 of the Code provides that a party may not appeal a preliminary or interim order of an arbitrator until all of the issues in dispute have been finally decided, unless ordered otherwise. Rule 51.2(c) states that an appeal may be rejected if it is from a preliminary or interim order that does not finally decide the issues in dispute.

The Appellant submits that the CPP and expense arbitration orders are final and not subject to further review at arbitration and, thus, are proper interim appeal questions. Regarding the CPP issue, the Appellant submits that whatever “the outcome of the [arbitration] hearing on the merits, there is no other way that that question of law can be appealed in the context of this case.”

Delegate Makepeace, in Allstate Insurance Company of Canada and Torok, (FSCO P01-00021, May 29, 2001), held that the purpose of Rule 50.2 of the Code is to:

… facilitate the most cost-effective resolution of disputes by minimizing the time and money spent on procedural or collateral matters. The decision whether to hear an appeal of a preliminary order is discretionary … the over-arching principle guiding the exercise of the discretion is that the rule “should be broadly interpreted to produce the quickest, most just and least expensive resolution of the dispute.” The criteria to be considered include the apparent strength of the appeal, the importance or novelty of the issue raised, and whether rejecting the appeal or hearing it will prejudice either party.

Allstate Insurance Company of Canada and Al-Obaidi, (FSCO P99-00009, May 2, 2000), notes that the Code’s general thrust is to defer appeals from preliminary or interim orders until the arbitration is over. Appeals have been allowed to proceed where it makes sense to do so before the parties incur the expense and time of a full arbitration hearing. The importance of the issues, the parties’ preference, whether the decision departs from prior case law and whether hearing the appeal would significantly save time and expense or streamline the process in some way are important considerations.

Rule 50.2 of the Code does not distinguish between a preliminary order and a final order. It distinguishes between a preliminary or interim order and all of the issues in dispute having been finally decided.

Thus, an order finally determining a preliminary issue of whether there was an accident, as defined in the Schedule, is still a preliminary order under Rule 50.2 requiring the exercise of discretion for an appeal to be received. However, appeals from decisions on whether there was an accident are usually received on the basis that any entitlement or quantum question is dependent on that preliminary issue. Thus, it makes sense to allow such an appeal to proceed before the parties incur the expense and time of a full arbitration hearing. The same reasoning does not apply here.

Further, the question before me is whether to accept this appeal at this time. If this appeal is presently rejected, it is without prejudice to any appeal upon all of the issues in dispute in the arbitration having been finally decided.

Turning to the adjournment order, if it is correct that the Appellant did not, in the end, as stated by the Arbitrator, oppose the request, it is difficult to follow the assertion that the Arbitrator erred in the exercise of her discretion. If the argument is that the Arbitrator misapprehended or misstated the parties’ positions such that there was a palpable and overriding error, given that the Notice of Appeal states that the hearing was recorded, it is unclear how the Arbitrator can be overturned in the absence of the pertinent portion of the transcript being produced.

In any case, the Arbitrator adjourned the arbitration to a five-day hearing starting June 4, 2012.

It is unclear how accepting this appeal at this time to address the Arbitrator’s alleged error in law in adjourning the November 2011 hearing, with the perhaps inevitable result of the June 2012 hearing being adjourned, will produce the “quickest, most just and least expensive resolution of the dispute.” Rather, as the Appellant concedes, the adjournment issue is now academic.

Regarding the CPP issue, the Arbitrator notes that the parties agreed to address this question on November 7, 2011 to “streamline the rescheduled hearing.” No transcript is produced in contradiction. It is difficult to discern how adjourning the rescheduled hearing to hear this appeal is consistent with streamlining the arbitration process. If the submission is that this appeal can proceed concurrent with the arbitration, it is difficult to discern how a multiplicity of appeals, resulting in extra time and expense, is consistent with streamlining the overall adjudicative process.

In any event, the Arbitrator’s decision notes CPP disability benefits being received from 2009. IRB entitlement is in dispute from August 13, 2008. If the Respondent fails in her IRB claim, it would seem that the CPP decision at first instance, which is non-binding on other adjudicators, may simply be moot, and the present appeal, conceivably unnecessary. Regardless, my decision leaves the Appellant’s appeal options open at the conclusion of the full arbitration hearing.

As to the expense order, subsection 282(11.1) of the Insurance Act, R.S.O. 1990, c. I.8, provides that the arbitrator may, at any time during an arbitration proceeding, make an interim order of expenses, subject to such terms and conditions as may be established by the arbitrator. It is difficult to discern that it would be an error of law, in any circumstances, to award interim expenses payable immediately, or in any event of the cause. Thus, the Appellant submits that there were no circumstances warranting the specific expense order in this case.

The case law pertaining to legal expenses, as noted by Arbitrator Richards in Mahjourian and TD Home and Auto Insurance Company, (FSCO A08-001115, August 26, 2010), recognizes that R.R.O. 1990, Reg. 664 (the Expense Regulation) has moved toward a more results based approach. Rule 75.2(a) of the Code provides that one criterion in awarding expenses is each party’s degree of success in the outcome of the proceeding.

The Appellant does not argue that the Arbitrator erred in law in awarding expenses that reflect the outcome of the preliminary CPP issue. If the CPP order is ultimately overturned on appeal, the accompanying expenses can be concurrently addressed.

The Appellant submits that the Arbitrator erroneously found that it had unreasonably opposed the adjournment. The Appellant alleges it was the Respondent’s failure to add the catastrophic impairment issue in a timely manner that led to the adjournment. Correspondence, however, before the adjournment arbitrator notes, in part, the Appellant refusing the Respondent’s September 9, 2011 request that the Appellant consent to a technical failure of mediation of the catastrophic impairment issue so that the upcoming arbitration could also deal with that issue.

In light of the disputed evidence, it is especially questionable that I seemingly hear, at this present time, the interim expense issue de novo and arguably substitute my discretion for that of the Arbitrator, contrary to Certas Direct Insurance Company v. Gonsalves, 2011 ONSC 3986.

The Appellant argues that the Arbitrator’s order fetters the arbitrator determining the final legal expenses payable. It submits that it is unclear what part of the present expense order pertains to costs thrown away rather than the continuing preparation for the hearing on the merits. Thus, it is argued, the expense order has created the risk of duplication of payment.

A significant part of the expense award is disbursements. The Arbitrator notes that expert and medical witnesses have invoiced $6,660 plus HST for “preparation time, attendance, travelling costs and cancellation fees.” The Appellant does not indicate how any of the specific expenses are not properly costs thrown away.

In any case, the Appellant’s submissions regarding overpayment are presently speculative, pending the final expense award. It makes little sense, in terms of the “quickest, most just and least expensive resolution of the dispute,” to address hypothetical issues at this time. Again, the present rejection of this appeal is without prejudice to the Appellant later addressing before the hearing arbitrator what was encompassed in the interim award and to appealing any final expense decision as well as renewing its appeal of the interim expense order.

Accordingly, exercising my discretion under Rule 50.2 of the Code, this appeal from the Arbitrator’s January 19, 2012 decision on preliminary issues is presently rejected, without prejudice to any appeal upon all of the issues in dispute in the arbitration having been finally decided.

Turning to the requested stay, subsection 283(6) of the Insurance Act provides that an appeal does not stay the order of an arbitrator, unless decided otherwise. Having not accepted this present appeal, the stay issue would be moot. In any event, I would not be persuaded to grant a stay. In Guardian Insurance Company of Canada and Armstrong, (FSCO P00-00037, July 20, 2000), Delegate McMahon adopted the following criteria in determining whether to grant a stay:

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 adjournment issue, as conceded by the Appellant, is academic.

Regarding the CPP order, IRB entitlement is still in issue. IRBs were not ordered paid. The Appellant does not set out what hardship it would suffer if a stay of that order is not granted.

As to the expense order, the Appellant argues that the final expense order may possibly result in overpayment. The appropriate time then for a stay request would be upon the issuance of the final expense order, when a party would be able to assess whether that has indeed occurred.

III. EXPENSES

If the parties cannot agree on the legal expenses of this present appeal, pursuant to Rule 79 of the Code, an expense hearing shall be requested within thirty days of this decision. The request shall be accompanied by a Bill of Costs describing the expenses claimed, the services received and the costs, as well as submissions on such entitlement or quantum expense issues as are in dispute.

April 27, 2012

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.