Nicola Federico v. State Farm Mutual Automobile Insurance Company, 2013 ONFSCDRS 95

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

Neutral Citation: 2013 ONFSCDRS 95

FSCO A08-001138

BETWEEN:

NICOLA FEDERICO

Applicant

and

STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY

Insurer

DECISION ON EXPENSES

Before: Arbitrator Maggy Murray

Heard: By telephone conference call on May 2, 2013

Appearances: David S. Wilson for Mr. Federico Ian D. Kirby for State Farm Mutual Automobile Insurance Company

Issues:

The Applicant, Nicola Federico, was injured in a motor vehicle accident on December 20, 2006. In decisions dated March 23, 2012 and December 10, 2012, I dealt with Mr. Federico’s claims for statutory accident benefits under the Schedule.¹ I made the following orders, while reserving on the issue of expenses:

State Farm shall pay Mr. Federico a weekly income replacement benefit of $400 per week from February 16, 2008 and ongoing pursuant to section 4 and subparagraph 5(2)(b) of the 1996 Schedule.
State Farm shall pay Mr. Federico a medical benefit of $1,953.58 for psychological services pursuant to paragraph 14(2)(b) of the 1996 Schedule.
State Farm shall pay Mr. Federico a medical benefit of $1,373.58 for physiotherapy pursuant to paragraph 14(2)(b) of the 1996 Schedule.
State Farm shall pay Mr. Federico housekeeping and home maintenance services in the amount of $100 per week from January 13, 2008 to December 19, 2008 pursuant to section 22 of the 1996 Schedule.
State Farm shall pay Mr. Federico for an MRI in the amount of $995 as outlined in an OCF-22 by MedCentra dated January 30, 2007 pursuant to section 24 of the Schedule.
State Farm shall pay Mr. Federico interest for the overdue payment of benefits pursuant to section 46(2) of the 1996 Schedule in the amount of 2% per month compounded monthly.
Mr. Federico is entitled to a special award fixed in the amount of $58,000, inclusive of interest.

The issue in this further hearing is:

Is Mr. Federico entitled to his expenses incurred in respect of this arbitration hearing?

Result:

Mr. Federico is entitled to his expenses incurred in respect of the arbitration hearing. He is entitled to $45,595.50 for legal fees inclusive of HST.

EVIDENCE AND ANALYSIS:

At the commencement of the expense hearing, the parties advised that they resolved the issue of disbursements amongst themselves.

Subsection 282(11) of the Insurance Act, R.S.O. 1990, c. I.8 (as amended), 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.

The criteria for determining entitlement to expenses of the arbitration proceeding are set out in s.12 of Ontario Regulation 664, R.R.O. 1990, as amended (“the Expense Regulation”). According to Pinto and General Accident Assurance Co. of Canada,² the Expense Regulation that applies is the regulation in effect at the time the Application for Arbitration was commenced. At the time the Application for Arbitration was commenced, s.12 of the Expense Regulation read as follows:

12(2) An arbitrator shall, under subsection 282(11) of the Act, consider only the following criteria for the purposes of awarding all or part of the expenses incurred in respect of an arbitration proceeding:

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.

I consider each of the six criteria in order.

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

The hearing concerned Mr. Federico’s entitlement to various benefits. Mr. Federico was successful. State Farm was unsuccessful. However, State Farm appealed my decision on the issues of entitlement to the MRI expense and the rate at which interest is payable. My Order regarding the MRI was rescinded it. It was determined that State Farm was not responsible for paying the $995.³ My Order regarding interest being payable at 2% per month, rather than 1% per month, compounded annually, was confirmed and State Farm’s appeal on this issue was dismissed.⁴ An Application for judicial review was filed by State Farm on the issue of the rate of interest payable by an insurer after September 1, 2010 but the court has not yet heard the matter.

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

Neither party made any written offer to settle.

Whether novel issues are raised in the proceeding.

This the first case that dealt with the rate of interest following amendments to the Schedule that became effective September 1, 2010. The question was whether State Farm was obliged to pay Mr. Federico interest on overdue amounts at the rate of 2% per month compounded monthly, 1% per month compounded monthly, or, some combination of the two rates. The parties agreed that up to August 31, 2010 the rate of interest was 2% per month compounded monthly. They disagreed on the rate at which interest is payable after September 1, 2010.

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.

State Farm prolonged the proceeding. State Farm’s representative testified prior to an adjournment of the hearing of several months that: (a) a physiatrist’s report that it relied upon in terminating Mr. Federico’s benefits was flawed and required clarification; (b) State Farm should not have terminated Mr. Federico’s benefits if it used the correct test for entitlement to benefits; and, (c) if the correct test for entitlement to benefits was used, the right thing to do would have been to reinstate benefits. However, State Farm did not reinstate Mr. Federico’s benefits between the hearing adjourning and the hearing resuming thereby adding several months of further delay.

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

No aspect of the hearing 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.

This criteria is not applicable to this case.

Having regard to the above criteria, I order State Farm to pay Mr. Federico his expenses of the hearing, plus HST.

AMOUNT OF EXPENSES:

The amount of expenses and disbursements which I may award are described in s.3 of the Schedule - Dispute Resolution Expenses 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.

Mr. Wilson was called to the bar over 20 years ago. He claimed a total of approximately 308 hours⁵ of his time which was supported by his Bill of Costs. The Bill of Costs included 28.45 hours⁶ for preparing and conducting a motion brought by State Farm to determine whether its request for Mr. Federico to attend a neurological examination under section 42 of the Schedule was reasonable. Mr. Federico lost that motion and another arbitrator found that it was reasonable for State Farm to request that Mr. Federico undergo a neurological examination. An additional 11 hours of travel time to and from FSCO was included, one hour for each day of hearing. However, in a case involving the same counsel for an Applicant as in this case,⁷ the Director’s Delegate confirmed the arbitrator’s Order that travel time to FSCO is not an expense that is payable when awarding expenses.

According to counsel for State Farm’s docket entries which were forwarded to me at my request, his office spent a total of 220 hours preparing for and attending on the hearing.⁸ State Farm submitted that the time spent by the Applicant's counsel was excessive.

This case was complex and the Applicant was the successful party. I find that the fees claimed are reasonable, except for the fees for the motion that the Applicant lost, as well as the travel time to and from FSCO. I have decreased the total number of hours claimed by 39 hours,⁹ which is comprised of 28.45 hours for the motion and a further 11 hours for travel time Mr. Wilson 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 find that the $150 hourly rate claimed is justified. It has been in place since April 15, 1997, over sixteen years.

The total allowable expenses of the arbitration proceeding are $45,595.50 (308-39 = 269 hours x $150 per hour [$40,350] + HST at 13% [$5,245.50]).

July 24, 2013

Maggy Murray Arbitrator

Date