Nita Mujku v. State Farm Mutual Automobile Insurance Company, 2013 ONFSCDRS 74

Financial Services Commission des

Commission services financiers

of Ontario de l’Ontario

Neutral Citation: 2013 ONFSCDRS 74

FSCO A10-002979

BETWEEN:

NITA MUJKU

Applicant

and

STATE FARM MUTUAL AUTOMOBILE

INSURANCE COMPANY

Insurer

DECISION ON EXPENSES

Before: Arbitrator Jeffrey Rogers

Heard: By written submissions, completed on May 8, 2013

Appearances: Mr. Daniel Roncari, solicitor for Mrs. Mujku

Ms. Joanna Cox, solicitor for State Farm Mutual Automobile Automobile Insurance Company

Issue:

The Applicant, Nita Mujku, was injured in a motor vehicle accident on November 10, 2005. In a decision dated January 14, 2013, I dealt with her claim that the accident caused her to sustain a catastrophic impairment. I found that it did. I reserved my decision on the issue of expenses. The parties were unable to resolve the issue on their own and sought this further hearing. Mrs. Mujku seeks expenses in the amount of $99,184.04. State Farm submits that the claim is excessive.

Therefore, the issue in this further hearing is:

What is the amount of Mrs. Mujku’s entitlement to expenses in respect of this arbitration hearing?

Result:

Mrs. Mujku is entitled to expenses of this arbitration in the amount of $28,890.86, inclusive of HST.

EVIDENCE AND ANALYSIS:

The only relevant criteria are success and offer to settle:

Section 12 (2) of O. Reg. 664 (the Expense Regulation) sets out 7 criteria an arbitrator must consider in awarding all or part of the expenses incurred in respect of an arbitration. 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. O. Reg. 275/03, s. 4; O. Reg. 548/05, s. 1.
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. O. Reg. 275/03, s. 4; O. Reg. 548/05, s. 1; O. Reg. 36/10, s. 2.

Mrs. Mujku says that only criteria 1 and 2 are relevant. She argues that she was completely successful in the arbitration, and she made an offer to settle on the same terms as the result she achieved. She claims entitlement to all of her expenses, plus a premium.

State Farm submits that criteria 4 and 5 are also relevant and should be applied to reduce the amount awarded. It concedes that Mrs. Mujku was successful on the only issue in the hearing, but argues that time was wasted on other issues she withdrew on the eve of the hearing. State Farm also submits that Mrs. Mujku engaged in improper conduct by failing to comply with her obligation to produce documents and provide information.

I reject State Farm’s submissions. I find that the only relevant criteria are degree of success and offer to settle. I find that Mrs. Mujku was completely successful and made an offer to settle that would have rendered the hearing unnecessary, had State Farm accepted it. I find that the withdrawn issues and the misconduct State Farm alleges have no bearing on this decision. I find no jurisdiction to award the premium Mrs. Mujku claims. She is entitled to her reasonable expenses of the hearing as permitted by the Expense Regulation.

These are the facts regarding Mrs. Mujku’s success. At the pre-hearing in this matter, the parties agreed that the issues in dispute were as follows:

Whether Mrs. Mujku sustained a catastrophic impairment;
Mrs. Mujku’s entitlement to Non-Earner Benefits (NEBs);
Mrs. Mujku’s entitlement to payment for 2 treatment plans;
Mrs. Mujku’s entitlement to a special award; and
Each party’s entitlement to expenses.

At the start of the hearing counsel informed me that the claim for payment of the two treatment plans was settled. They also advised that the parties had agreed that the claim for NEBs would be withdrawn, without costs. The settlement of the treatment plans did not leave open the issue of expenses. And the parties specifically agreed that the withdrawal of NEBs was without costs. That withdrawal cannot now be used to deny Mrs. Mujku her reasonable expenses relating to the issue I decided in the hearing.

Upon being informed of the parties’ agreement, I pointed out to counsel for Mrs. Mujku that, with the claims for payment of benefits resolved, the issue of a special award appeared moot. Counsel then withdrew the claim for a special award. No significant time was spent on this issue. State Farm could not have spent any time preparing for it, since State Farm indicates that Mrs. Mujku never provided particulars of this claim. I also note that Mrs. Mujku’s offer to settle made no reference to a special award. I therefore reject State Farm’s submission that Mrs. Mujku’s entitlement to expenses should be reduced because of the withdrawn and settled issues.

That brings me to State Farm’s claim that Mrs. Mujku’s conduct should be considered relevant to her entitlement to expenses. Only conduct that tends to “prolong, obstruct or hinder the proceeding” is relevant. State Farm did not raise the issue of outstanding productions at the hearing. It made no specific allegation in its submissions to support a finding that the hearing was prolonged. I saw no evidence of it in the hearing. I therefore find this criterion to be irrelevant. As a result of this finding, it is not necessary to address Mrs. Mujku’s denials of the alleged misconduct.

The dispute about catastrophic impairment was the only issue that proceeded to hearing. Mrs. Mujku was successful on that issue. Twelve days before the hearing started, Mrs. Mujku made an offer to settle as defined in the Expense Regulation. The only terms of the offer were that State Farm would accept that Mrs. Mujku suffered a catastrophic impairment, and pay a small amount for the treatment plans in dispute. The parties resolved the treatment plans. Had State Farm accepted the only term of the offer that remained open at the start of the hearing, the hearing would not have been necessary. The inescapable conclusion is that Mrs. Mujku is entitled to her reasonable expenses of the hearing.

Amount of expenses: Fees

Mrs. Mujku claims $55,550.10, plus HST, for legal fees. The claim includes $18,516.70, described as an award for consequences for failing to beat the offer to settle. This represents 50% of the fees otherwise claimed. No authority or precedent for such an award is cited. I find no jurisdiction to make such an award. No authority to do so is found in the Insurance Act, the Schedule, the Expense Regulation, or the Dispute Resolution Practice Code.

Without the premium, the claim for fees is $37,033.40, plus HST. The hearing took place over 6 days. The claim for fees includes 238.85 hours for 3 lawyers working on the file, and 31.9 hours by law clerks and a law student. The bill accurately attributes 29.75 hours to attendance at the hearing. When converted to a ratio, preparation time to hearing time is about 9:1. Looked at in another way, the claim for fees suggests that a combination of lawyers, law clerks and a student worked on this file for 6 weeks, full-time, 40 hours per week, before the hearing.

The overriding consideration in fixing arbitration expenses for legal fees is reasonableness. Arbitrators generally do not undertake a line-by-line analysis of dockets. Instead, they make a global assessment of reasonable expenses. Assessing preparation time on a ratio-to- hearing attendance provides a framework for estimating reasonable preparation time. This approach is established by a long line of Commission decisions, often traced to the decision in Henri and Allstate Insurance Company of Canada.¹ The applicable ratio is not static. A reasonable ratio is informed by the particulars of the case, including the amount of the claim, the complexity of the issues, the conduct of the parties that tended to either prolong or shorten the proceedings, and their degree of success.

I find it appropriate to apply a ratio in this case. It is a particularly useful tool because Mrs. Mujku did not proceed to hearing on all the issues initially in dispute. She is not entitled to expenses on the issues that were not the subject of the hearing. Her claim for expenses does not identify the time spent preparing for other issues. A reasonable ratio allows only for the time required for preparation for the hearing that actually took place.

Arbitrators have generally allowed between 1 and 4 hours of preparation time for each hour of hearing time. I find that a ratio of 4:1 is appropriate in this case for 3 reasons. First, the issue was complicated, both factually and legally. Second, written submissions were made, thus reducing the time spent at the hearing. And third, the time actually spent at the hearing was short, given the complexity of the issue.

Applying that ratio, I allow 119 hours for preparation time. I attribute 10 hours of the preparation time to the law student, and 10 hours to law clerks. This represents all of the time claimed for the student and clerks, after arbitration was commenced. Much of the time claimed for the clerk, Jason Morris, was before arbitration was commenced. That is not a recoverable expense.

Rule 78 of the DRPC fixes the base rate for recoverable legal fees at the rates established under the Legal Aid Services Act, 1998. The Rule gives an Arbitrator the discretion to award a higher rate of up to $150 per hour, for counsel for applicants. Mr. Roncari, who represented the applicant at the hearing, was called to the bar in 2009. The applicant claims his fees at $150 per hour. State Farm submits that his rate should be the Legal Aid rate of $91.62 per hour, because of his year of call. I disagree. I find that the complexity of the issue and the efficiency with which Mr. Roncari presented his client’s case at the hearing, justify increasing his rate to the maximum of $150 per hour.

The preparation time I have allowed for lawyers is far less than the hours claimed for Mr. Roncari. Therefore, it is not necessary to address State Farm’s submission that nothing should be awarded for other lawyers working on the file.

In summary, I award the following for fees:

Hearing time

29.75 hours @ $150 per hour

$ 4,662.50

Law Student preparation time

10 hours @$48.30 per hour

483.00

Law Clerk preparation time

10 hours @$24.15 per hour

241.50

Lawyer preparation time

99 hours @ $150 per hour

14,850.00

HST

2,630.81

Total

$22,867.81

Amount of expenses: Disbursements

The disbursements that an Arbitrator may award are set out in sections 4, 5 and 6 of the Expense Regulation. These sections prescribe the kinds of disbursements that may be reimbursed, and the maximum amounts that may be awarded for certain disbursements. As with her claim for fees, Mrs. Mujku’s claim for disbursements is made with little or no attempt to conform to the limits of the Expense Regulation. A dispute was guaranteed. Mrs. Mujku claims $36,412.43 in disbursements. I find that the Expense Regulation allows recovery of $6,023.05 for disbursements, including HST.

I allow the claimed filing fee of $100.

Mrs. Mujku claims $1,532.50 for services provided by Kaplan and Kaplan with regard to preparation of a report. The Expense Regulation allows a maximum of $1,500. I allow $1,500. Mrs. Mujku claims a $135.60 preparation fee, and an attendance fee $1,695 for Dr. Holdway, her family doctor. Dr. Holdway did not testify as an expert witness at the hearing. Mrs. Mujku called him to give factual evidence, after I denied her request to call more than 2 expert witnesses. The Expense Regulation limits the recoverable disbursement for his attendance to $50. I allow $50.

Two experts testified for Mrs. Mujku at the hearing. She claims $27,581.81, plus interest, for their preparation and attendance. The Expense Regulation allows a maximum of $500 per expert for preparation, and $200 an hour for attendance, up to a maximum of $1,600 per day. I allow $500 for preparation by each expert. I allow $400 for attendance by Asma Malik, and $1,000 for attendance by Dr. Brian Levitt. No precedent or jurisdiction for the award of interest was cited, and I find none. I deny the claim for interest.

Mrs. Mujku claims $557.90 for service of summonses on 7 witnesses, 3 of whom attended at the hearing. No supporting documentation was provided. No explanation was given for summoning the witnesses who did not attend. I allow $278.95, being 50% of the claim.

Except for the $0.35 per page charge for in-house photocopies, I find the other claimed disbursements to be reasonable, despite lack of supporting documents. I allow $0.25 per page for photocopies.

The recoverable disbursements are therefore:

Application Fee

$ 100.00 (plus HST)

Report by Kaplan and Kaplan

1,500.00 (plus HST)

Witness Fee for Dr. Holdway

50.00

Preparation and attendance for Asma Malik

900.00 (plus HST)

Preparation and attendance for Dr. Levitt

1,500.00 (plus HST)

Service of Summonses

278.95

Photocopies

473.50

Binding supplies, courier charges, faxing charges and postage

700.60

Total, inclusive of HST

$6,023.05

In the result, I have ordered State Farm to pay Mrs. Mujku fees of $22,867.81, plus disbursements of $6,023.05 = $28,890.86, inclusive of HST, for her expenses of the hearing.

June 13, 2013

Jeffrey Rogers Arbitrator

Date