Financial Services Commission of Ontario
Commission des services financiers de l’Ontario
Neutral Citation: 2012 ONFSCDRS 88
Appeal P09-00040
OFFICE OF THE DIRECTOR OF ARBITRATIONS
JEVCO INSURANCE COMPANY Appellant
and
FRANK RODRIGUES Respondent
BEFORE: David Evans
REPRESENTATIVES: Chris T. J. Blom for Jevco Insurance Company Frank Rodrigues, self-represented
HEARING DATE: June 27, 2011
APPEAL ORDER
Under section 283 of the Insurance Act, R.S.O. 1990, c.I.8, as amended, it is ordered that:
The appeal of the arbitration order, dated November 4, 2009, is hereby dismissed.
If the parties are unable to agree on the legal expenses of this appeal, an expense hearing shall be requested pursuant to the Dispute Resolution Practice Code (Fourth Edition, Updated - August 2011), but as set out below and within sixty days of the date of this decision.
June 8, 2012
David Evans Director’s Delegate
Date
REASONS FOR DECISION
I. NATURE OF THE APPEAL
Jevco appeals Arbitrator Rogers’s decision of November 4, 2009, in which he refused Jevco the right to dispute the calculation of Mr. Rodrigues’s income replacement benefits (IRBs) on the basis of res judicata.
II. BACKGROUND
Mr. Frank Rodrigues suffered serious injuries in an accident on May 25, 1996. As a result, although he continued to work and has had post-accident income ever since the accident, he took days off due to his injuries. After using up his sick day entitlements, he took leave without pay (LWOP) and claimed IRBs pursuant to the SABS–1994.1
At issue before Arbitrator Lee in the first decision in this matter, dated September 27, 2006, were Mr. Rodrigues’s days off work from February 2000 to November 2005. Arbitrator Lee found that Mr. Rodrigues was entitled to IRBs for the dates he took LWOP but not for the dates where he received sick leave pay, and that Jevco could deduct the sick leave benefits received from the IRBs payable. He ordered Jevco to pay at a daily rate of one-fifth of the weekly quantum of IRBs. What is germane to the subsequent decision and this appeal is that Arbitrator Lee wrote that “[t]he parties have indicated to me that they were in agreement that Mr. Rodrigues was absent from work during the days claimed in the Summary of Claim for Loss of Sick Days and that the IRB rates are correct for those periods listed [emphasis in the original].” He ultimately determined that the amount withheld was $7,869.64 (Arbitration decision, p. 16).
As Arbitrator Rogers noted in his decision, Jevco then took the position that the daily rate should be one-seventh and not one-fifth of the weekly quantum of IRBs, and that post-accident earnings should also be considered in the IRB calculation. It paid ongoing IRBs based on these revised calculations, leading to a shortfall compared to the IRBs ordered in the first decision. Mr. Rodrigues therefore had to apply for mediation and arbitration all over again.
The issue before Arbitrator Rogers was IRB quantum for the period from January 3, 2006 to the date of the decision. Arbitrator Rogers rejected Jevco’s submission that quantum had not been in issue in the first hearing. He noted that Mr. Rodrigues claimed IRBs for specific dates at a specific rate and that the rate had been agreed to after numerous pre-hearings to clarify the issues. He noted that near the hearing date Jevco added the issue of deducting sick leave benefits, and that the pre-hearing arbitrator noted that this was the only issue of deductibility raised. Arbitrator Rogers found that Jevco could not raise the further issues of deductibility of post-accident earning or of pro-rating IRBs, based on a seven-day week instead of a five-day week. He cited the principle of res judicata as preventing a party from relitigating an issue upon which there has already been a final determination by a tribunal of competent jurisdiction, in a dispute between the same parties, and encompassing not only issues that were raised, but issues that could have been raised, but were not. He cited the following definition from Black’s Law Dictionary2:
An issue that has been definitively settled by judicial decision. An affirmative defense barring the same parties from litigating a second lawsuit on the same claim, or any other claim arising from the same transaction or series of transactions and that could have been − but was not − raised in the first suit…
The Arbitrator added that “Jevco submitted that it did not pursue the issue of post-accident earnings at the first arbitration because, if it had succeeded on the issue of entitlement, the issue of quantum would have been moot.”
The Arbitrator found Mr. Rodrigues was entitled to about $12,000 plus interest. (At the start of the appeal process, there was some dispute about that calculation, but the parties ultimately agreed on what Jevco owed.) He also ordered a special award and, in a decision dated June 15, 2010, he set it at $3,000. The Arbitrator wrote that the main thrust of the special award was deterrence and not injustice to Mr. Rodrigues, since if Jevco had taken advantage of ss. 10(3) and (4) of the SABS, which would have allowed it to deduct 90% of Mr. Rodrigues’s net income in the weeks in which he took days off, it likely would have owed him nothing.
III. ANALYSIS
Subsection 287 of the Insurance Act provides that an insurer “shall not, after an order of the Director or of an arbitrator appointed by the Director, reduce benefits to an insured person on the basis of an alleged change of circumstances, alleged new evidence or an alleged error, unless the insured person agrees or unless the Director or an arbitrator so orders in a variation or appeal proceeding under section 283 or 284.”
As Arbitrator Rogers pointed out, Arbitrator Lee had set the IRB at a specific rate. In seeking to raise the issues of deductibility of post-accident earning or of pro-rating IRBs based on a seven-day week instead of a five-day week, Jevco was seeking to reduce Mr. Rodrigues’s benefits. The only bases for doing so are an alleged change of circumstances, alleged new evidence or an alleged error, and then only after a variation or appeal proceeding. Instead, Jevco sought to relitigate the issue of the IRB calculation in an attempt to skirt the protection of benefits set out in s. 287. In any event, since Arbitrator Rogers was neither conducting a variation proceeding nor an appeal, he had no power to reduce the benefits.
Furthermore, there was no change of circumstances or new evidence. The issue of changing the pro-rating formula arose simply due to a change in Jevco’s opinion on how to make the calculation, and Jevco made a tactical decision not to pursue the issue of the post-accident earnings because it was so confident that it would win.
These same factors suggest that Arbitrator Rogers made no error in finding that res judicata applied. Although these issues were not raised at the first arbitration, they could have been. They are therefore subject to res judicata.
Jevco submits that the Arbitrator applied a too-strict definition of res judicata. Indeed, as Jevco notes, there have been a number of cases discussing how res judicata can be a poor fit in a system that contemplates serial arbitration applications for medical rehabilitation benefits. Thus, for instance, Jevco refers to Zurich North America and Stelzer, (FSCO P02-00035, February 6, 2004). In that case, one arbitrator had dismissed an insured’s claim for medical benefits 1997-1998, but a second arbitrator allowed it for 1998-2001. However, there was evidence that the subsequent treatment was reasonable and, as noted on appeal, the first arbitration did not decide the underlying issues of impairment, causation and the need for treatment.
There is no comparison to this case, which is not a medical/rehabilitation case. Indeed, in Ladhar and Economical Mutual Insurance Company, (FSCO P09-00035, April 24, 2012), I confirmed that when it comes to weekly benefits like IRBs the system does not contemplate multiple applications. Furthermore, the issue of Mr. Rodrigues’s entitlement was decided in the first arbitration decision and, as I already pointed out, the only thing that changed afterwards was Jevco’s revised IRB calculation.
Jevco also refers to the case of Nandkumar and Economical Mutual Insurance Company, (FSCO A03-000831, October 20, 2004), as an example of a case where the question was raised whether an issue settled between the parties could no longer be arbitrated. The parties had settled on a reinstatement of IRBs, but then when it came to the Loss of Earning Capacity Benefit offer, the insurer had a residual earning capacity (REC DAC) report indicating the insured could return to her previous employment. Ms. Nandkumar submitted that the insurer in settling IRBs was estopped from claiming she could return to work. Arbitrator Rogers, who was the arbitrator in that case as well, found that while the parties were the same, there had been no decision and therefore no decision on the issue. Accordingly, res judicata did not apply. However, in this case, there was more than a settlement: there was a decision, leading me back to the first point I made above. Thus, if there had been a decision instead of a settlement in Nandkumar, the insurer would have had to seek a variation order based on its new evidence. Accordingly, I find Nandkumar of no assistance to Jevco, considering the different circumstances.
The appeal is dismissed, and the decision is affirmed.
IV. EXPENSES
If the parties are unable to agree on the legal expenses of this appeal, an expense hearing shall be requested within sixty 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 written submissions regarding entitlement to or the quantum of these expenses, or both, as are in dispute.
June 8, 2012
David Evans Director’s Delegate
Date
Footnotes
- The Statutory Accident Benefits Schedule — Accidents after December 31, 1993 and before November 1, 1996, Ontario Regulation 776/93, as amended.
- Eighth Edition, page 1336.