Soheila Salem v. Economical Mutual Insurance Company, 2013 ONFSCDRS 58

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

Neutral Citation: 2013 ONFSCDRS 58

FSCO A10-003634

BETWEEN:

SOHEILA SALEM Applicant

and

ECONOMICAL MUTUAL INSURANCE COMPANY Insurer

DECISION ON EXPENSES

Before: Arbitrator Maggy Murray

Heard: By telephone conference call on February 13, 2013.

Appearances: Erin Neal for Ms. Salem Helen D. K. Friedman for Economical Mutual Insurance Company

Issues:

The Applicant, Soheila Salem, was injured in a motor vehicle accident on May 13, 2009. She applied for and received statutory accident benefits from Economical Mutual Insurance Company (“Economical”), payable under the Schedule.¹ Economical terminated some benefits and refused to pay for various medical benefits and the cost of an examination. The parties were unable to resolve their disputes through mediation, and Ms. Salem applied for arbitration at the Financial Services Commission of Ontario under the Insurance Act, R.S.O. 1990, c.I.8, as amended.

The arbitration hearing in this matter was scheduled to proceed at the Financial Services Commission of Ontario on November 28, 2011, but was adjourned at the request of the Applicant. It was rescheduled to proceed May 7, 2012, at which time it was again adjourned. The arbitration hearing was then rescheduled to proceed September 17, 2012.

On September 10, 2012,² the Applicant accepted the Insurer’s offer to settle her claims on a full and final basis for $15,000 plus costs and disbursements, as agreed upon or assessed, less $1,746.40 in respect of an expense award against her arising as a result of the adjourned hearing on May 7, 2012.

The parties could not agree on expenses and an expense hearing was scheduled for February 13, 2013. On the morning of the expense hearing, the parties advised that they resolved the issue of disbursements amongst themselves. The Applicant claimed expenses for legal fees in the amount of $18,108 plus HST of $2,345.04, for a total of $20,462.04.

The issue in this further hearing is:

What is the amount of legal fee expenses that Ms. Salem is entitled to?

Result:

Ms. Salem is entitled to her legal fee expenses in the amount of $6,162.57, inclusive of HST.

EVIDENCE AND ANALYSIS:

Rule 79.1 of the Dispute Resolution Practice Code – Fourth Edition (“Code”) 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 issues in dispute because the parties settled the matter on a full and final basis, plus costs and disbursements, as agreed upon or assessed. Both parties were prepared, absent an agreement as to expenses, to have the matter determined by FSCO. My jurisdiction to decide the issue is set out in subsection 282(11) of the Insurance Act which states:

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.

Rule 75.2 of the Code establishes the criteria for an award of expenses. The Applicant submitted that Rule 75 of the Code does not apply because the matter was resolved between the parties.

According to the Insurer, Rule 75 of the Code applies when costs are assessed by FSCO.

I find that Rule 75 of the Code applies when FSCO is assessing expenses, otherwise there is no basis for assessing expenses.³ This is also the approach that was taken by other arbitrators when proceedings were resolved, save for expenses.⁴

The criteria in Rule 75 of the Code are as follows:

Each party’s degree of success in the outcome of the proceeding.

The parties agreed that the Applicant was the successful party because the Insurer agreed to pay her a settlement.⁵

If the Applicant was successful at the hearing, she would have received $81,453.84, exclusive of interest and costs.⁶

Any written offers to settle made in accordance with subsection (3).

On November 14, 2011,⁷ fourteen days before the November 28, 2011 hearing was originally scheduled to commence, the Insurer served an offer to settle on one of two bases: $15,000 for the issues in dispute, plus costs, disbursements and HST or, $20,000 on a full and final basis, plus costs, disbursements and HST. The hearing was then adjourned twice, at the Applicant’s requests.

On August 28, 2012, less than one month before the hearing was scheduled to proceed, the Applicant offered to settle her case on a full and final basis for $100,000.⁸ Because the Applicant did not serve a written offer with respect to the issues in dispute only, it does not comply with an offer to settle pursuant to the Code.⁹

The Insurer’s offer of $15,000 for the issues in dispute, plus costs, disbursements and HST, that was made on November 14, 2011 complied with an offer to settle pursuant to the Code.¹⁰ It was also less than what the Applicant ultimately accepted almost one year later since the offer that was accepted was for a full and final settlement of $15,000.

Whether novel issues are raised in the proceeding.

The parties agreed that the issues raised in the Application for Arbitration were not novel.

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.

The FSCO hearing in this matter was originally scheduled to proceed on November 28, 2011. On November 17, 2011,¹¹ the Applicant requested an adjournment of the hearing because her counsel had a trial in a court proceeding on November 22, 2011.

The Insurer submitted that the Applicant requested an adjournment of the November 28, 2011 hearing at a late date. The Applicant’s counsel was aware on October 7, 2011, six weeks before the request for an adjournment of the FSCO hearing in this matter, that their office was conducting a trial that conflicted with the FSCO hearing.

I find that the Applicant’s counsel was aware of the need for an adjournment of the FSCO hearing on October 7, 2011, six weeks before the Insurer’s counsel was informed of the need for an adjournment. Another arbitrator dealt with the November 28, 2011 adjournment request. According to that arbitrator’s letter to the parties, the delay in the Applicant’s request for an adjournment caused the Insurer to put its witnesses on notice and prepare for the hearing. That arbitrator concluded that those expenses could have been avoided if the adjournment request was made in a more timely manner.¹² The arbitrator then rescheduled the hearing to May 7-10, 2012.

At the commencement of the hearing on May 7, 2012, the Applicant’s counsel sought, without prior notice to the Insurer, to add additional issues to the arbitration hearing. Those additional issues were attendant care benefits for a further 21 months than was originally claimed on the Application for Arbitration and three unmediated medical benefits.

The Applicant’s counsel advised that that although she was aware in 2011 that additional medical issues were not mediated, she thought she would address having the issues added to the arbitration hearing on the first morning of the hearing. Counsel for the Applicant also advised that the period claimed for attendant care benefits was a typographical error on both the Application for Arbitration and the Pre-hearing letter that she only realized on May 7, 2012, the morning of the arbitration hearing.

On May 7, 2012, I gave the Applicant the choice of proceeding with the hearing on the basis of the issues outlined in the Pre-hearing letter and filing another Application for Arbitration on the additional claims for attendant care and medical benefits or adjourning the hearing so that it would include the additional issues, subject to the Insurer’s costs thrown away. After consultation with her counsel, the Applicant chose to adjourn the hearing so that all issues would be dealt with in one hearing.

I find that the Applicant’s delay in requesting an adjournment of the November 28, 2011 hearing, as well as the Applicant’s request at the commencement of the hearing on May 7, 2012 to add additional issues caused unnecessary delay and expense to both her and the Insurer. This was noted by both myself¹³ and the arbitrator who dealt with the adjournment of the November 28, 2011 hearing.¹⁴

Whether any aspect of the proceeding was improper, vexatious or unnecessary

According to the Applicant, she was in a similar position having accepted a $15,000 full and final settlement in September 2012 instead of $15,000 for the issues in dispute or $20,000 for a full and final settlement in November 2011.

According to the Insurer, the Applicant failed to properly address the Insurer’s reasonable offers to settle which were made on November 14, 2011,¹⁵ almost one year before the matter was resolved.

I disagree with the Applicant. The Insurer’s offers that were made November 14, 2011, over nine months before the matter settled, would have put the Applicant in a better position than she was in when the matter settled in September 2012 because neither she nor the Insurer would have incurred further legal expenses. In addition, the Insurer’s offer in November 2011 of $20,000, plus costs, disbursements and HST for a full and final settlement was $5,000 more than the amount the Applicant agreed to settle the matter for ten months later, in September 2012.

Whether the insured person failed or refused to attend examinations.

The parties agreed that this criterion is not relevant to this matter.

Amount of Expenses:

The amount of expenses which I may award are set out in section 3 of the Schedule to Ontario Regulation 664 which states:

3 (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 Applicant claimed expenses in the amount of $18,108 plus HST of $2,345.04, for a total of $20,462.04 based on $150 per hour for the following lawyers:

Mr. Jeffrey Strype who was called to the bar in 1979: 7.1 hours

Mr. Kyle Smith who was called to the bar in 2007: 32.2 hours

Ms. Erin Neal who was called to the bar in 2010: 79.4 hours

Mr. Jason Brown who was called to the bar in 2012: 1.7 hours

In Henri and Allstate Insurance Company of Canada,¹⁶ Arbitrator Makepeace confirmed that a “line-by-line assessment of the expenses claimed is not appropriate. Rather, the Arbitrator should make a global assessment of reasonable expenses.”

Having regard to the criteria set out in Ontario Regulation 664, as well as the principles of fairness, proportionality and justice,¹⁷ I find that the amount of the Applicant’s claim for expenses is disproportionate to the amount for which her claim resolved and is excessive.

The total number of hours spent by Ms. Salem’s counsel is 120.4 hours, which is roughly a ratio of 4:1 hours based on a 7.5 hour day x 4 days that the hearing was scheduled.

According to the Insurer, the Applicant’s expenses should be reduced based on reasons which include the following:

(a) each of the Applicant’s counsel billed for internal discussions amongst themselves and it is unnecessary for each member of a discussion to bill their time.

I disagree. If time was spent on a matter, it should be docketed and compensated based on reasonableness;

(b) Ms. Neal took over carriage of the Applicant’s file from Mr. Kyle Smith, another, more senior, lawyer in her office. Ms. Neal then had to familiarize herself with it. According to the Insurer, it should not be penalized for Ms. Neal’s time to familiarize herself with the matter.

I disagree. This situation is similar to a situation where a client changes law firms. In such an instance, it is unlikely that counsel assuming carriage of a file would familiarize themselves with the file without docketing their time and without compensation for doing so. In addition, Ms. Neal was called the bar later than Mr. Smith, so, it is reasonable for her to spend time familiarizing herself with a file that she takes over from a more senior lawyer.

According to the Insurer:

(a) the maximum legal fees recoverable by the Applicant are $6,527.91 + $848.63 for HST,¹⁸ which totals $7,376.54 based on the legal aid rate for counsel fees;

(b) a reduction of this amount by one third is reasonable because of the Insurer’s offers to settle made in November 2011 before the hearing was originally scheduled to commence and the delays caused by her counsel, which totals $4,917.69;

(c) the expense order in respect of the adjourned hearing on May 7, 2012 reduces this amount by $1,746.40, which totals $3,171.29 and is the appropriate award for the Applicant’s legal fees.

The $150 hourly rate claimed is justified. It has been in place since April 15, 1997, over sixteen years. It is not a rate that is reserved only for senior and experienced counsel.¹⁹

I am reducing the Applicant’s expenses by 20% based on:

(a) the Insurer’s timely offer to settle on November 14, 2011, ²⁰ fourteen days before the hearing was originally scheduled to proceed and the Applicant’s counsel prolonging this matter and not accepting the Insurer’s offer of November 14, 2011 of $15,000 for the issues in dispute, or $20,000 on a full and final basis, plus costs; and

(b) the Applicant’s counsel’s failure to notify the Insurer in a timely manner of the need for an adjournment of the November 2011 hearing due to the double booking of a trial despite the Applicant’s counsel knowing six weeks before.²¹

The arbitrator’s letter to the parties regarding this “late” request for an adjournment stated that the Insurer could raise the issue of expenses in the future.

The hearing was scheduled for four days. I find that a ratio of 2:1 is appropriate because the matter was resolved one week before the hearing was scheduled to proceed. Based on 7.5 hours per day and a ratio of 2:1, the total number of hours is 60 x $150 per hour = $9,000, less 20%²² is $7,200 minus $1,746.40 in respect of the expense award against the Applicant for the hearing that was adjourned in May 2012 is $5,453.60.

The total allowable expenses of the arbitration proceeding are $6,162.57 ($5,453.60 + $708.97 HST at 13%).

Allegation of Bias:

As outlined above, I granted the adjournment of the hearing on May 7, 2012, as requested by counsel for the Applicant. As a result of the adjournment I also awarded costs thrown away in the amount of $1,746.40 payable to the Insurer by the Applicant.

On October 2, 2012, the Insurer’s counsel requested an expense hearing because the parties could not agree on expenses. The parties consented to conduct an expense hearing and were notified on October 11, 2012 that FSCO scheduled the expense hearing.

On January 31, 2013, eight months after the parties settled the file, save for expenses, the Applicant’s counsel wrote to FSCO and stated “My client advised that she objects to having Arbitrator Murray hearing this assessment as the Arbitrator did not allow the interpreter to sit beside her in the hearing room, making it difficult for my client to understand what was going on.”

Subsection 282(12) of the Insurance Act provides that a party may request an appointment of a new arbitrator if a party believes that the arbitrator was biased. The practice is that the adjudicator against whom the allegation is made decides the question of bias at first instance. Given the Applicant’s objection, I treated her request as an allegation of bias.

As a result of the letter from counsel for the Applicant, at the outset of this expense hearing, I invited the parties to make submissions on the issue of bias. The Applicant made no oral submissions. The Insurer made extensive oral submissions and asserted that the Applicant had numerous opportunities to consult with her counsel throughout the day on May 7, 2012, prior to my granting the adjournment request.²³ Indeed, in the Insurer’s submissions that were received by FSCO over two weeks prior to the Applicant’s counsel’s letter of January 31, 2013, the Insurer used the phrase “much discussion and delay”²⁴ in reference to the length of time it took for the Applicant to consult with her counsel regarding the adjournment of the May 7-10, 2012 hearing.

After considering the letter of January 31, 2013 from counsel for the Applicant, and hearing the oral submissions of the Insurer on February 13, 2013, I dismissed the allegation of bias. I explained to the parties that it is my practice when conducting a hearing in which an interpreter is involved to have the interpreter sit beside the individual requiring translation services.

Bias is a serious allegation against an adjudicator. Even if the Applicant’s allegations as outlined in the letter to FSCO dated January 31, 2013 were correct, it does not support a claim of actual or apprehended bias. I find such a claim by the Applicant devoid of any merit. For these reasons I proceeded to hear the expense assessment.

May 2, 2013

Maggy Murray Arbitrator

Date