Neutral Citation: 2014 ONFSCDRS 109 FSCO A11-001103

BETWEEN:

LISA JEAN KIMMERLY Applicant

and

STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY Insurer

DECISION ON EXPENSES

Before: Jessica Kowalski Heard: Written submissions received by September 26, 2013 and oral submissions on September 27, 2013 Appearances: Bernard P. Keating for Ms. Kimmerly Aldo Picchetti for State Farm Mutual Automobile Insurance Company

Issues:

What is the amount of expenses to which Ms. Kimmerly is entitled?

Result:

State Farm shall pay to Ms. Kimmerly expenses in the amount of $35,389.06 (inclusive of fees, disbursements and HST).

Background

This matter arises from a motor vehicle accident that occurred on October 23, 2008. The arbitration hearing was scheduled to take place over four days beginning June 17, 2013 in Barrie. Only income replacement benefits (IRBs) were in dispute.¹

On the morning of the hearing, the parties settled the arbitration on terms that were identical to those set out in an offer to settle made by Ms. Kimmerly dated June 7, 2013 (the June 7 offer). Although the parties agreed that State Farm would pay expenses to Ms. Kimmerly, they did not agree on the amount of those expenses. The only issue remaining in dispute is the quantum of expenses State Farm shall pay to Ms. Kimmerly.

Applicant’s position

Ms. Kimmerly claims expenses in the amount of $51,976.80 ($29,232.50 in fees, including HST, plus disbursements of $22,653.30).

Ms. Kimmerly submits that State Farm conducted itself in a manner that was obstructionist and unreasonable, and prolonged the arbitration process by raising superfluous objections. As an example, State Farm advised counsel for Ms. Kimmerly that it would be objecting to the admission of all of her documents because, all but two documents were served in advance of the 30-day deadline in Rule 39.1, her bound document brief was served five days late.² She submits that that position put her to the cost of preparing materials to defend the admissibility of her documents when State Farm did not go on to raise the issue on the morning of the hearing.

Ms. Kimmerly submits that counsel for State Farm took an extremely aggressive approach throughout the arbitration. She submits that State Farm resisted her at every turn, and that she should not be penalized by being forced to bear the costs of an aggressive strategy employed by State Farm.

Finally, Ms. Kimmerly claims that the case was complicated by significant pre-existing injuries and chronic pain and would have taken 9-10 days to complete from start to end. She claims the maximum hourly rate allowance ($150.00) for Mr. Keating’s time.

Insurer’s Position

State Farm submits that the amount of hours claimed is excessive considering the issue in dispute and the experience of applicant’s counsel.

With respect to disbursements, State Farm objects to amounts claimed for two expert reports, to disbursements claimed for the attendance of experts when there was no hearing, and to the amount claimed for photocopies and document scanning as excessive.

State Farm argues that a ratio of 2:1 (hours of preparatory time to hearing time) should be applied to this case on the basis that it was a straightforward single issue arbitration that was neither novel nor complex. On this basis, assuming four eight-hour hearing days, State Farm submits that 68 hours of preparation time should be allowed, plus the four hours of the hearing morning. State Farm also submits that time claimed for an articling student and law clerk on top of Mr. Keating’s time is unnecessary given Mr. Keating’s experience.

Fees

Arbitrator Nastasi in Salva and Paramananthan and Allstate Insurance Company of Canada³ wrote that:

The overriding consideration in fixing arbitration expenses is reasonableness. Rather than a line by line review of expenses claimed, arbitrators have preferred a global assessment of expenses as being more appropriate.

In Ragulan and Security National Insurance Co./Monnex Insurance Management Inc., the general approach with respect to fees was to take a “pragmatic, broad-strokes approach, with a view to fixing an amount that is reasonable.”⁴

Rule 78.1 of the Dispute Resolution Practice Code (the Code) provides that the maximum amount that may be awarded for legal fees is an amount calculated using the hourly rates established under the Legal Aid Services Act, 1998 but permits an adjudicator, where satisfied that a higher amount for legal fees to an insured person is justified, to award an hourly rate up to $150.00.

I am not at all persuaded that this case warranted nine to 10 days of hearing. On the contrary, the case was set for four days by the pre-hearing arbitrator, who, having heard from the parties regarding issues in dispute, productions and witnesses, felt four days was sufficient for a hearing. Furthermore, at the time of the pre-hearing, housekeeping benefits were also in dispute, which later fell away. I find that two experienced counsel could complete a single issue arbitration in well under four days using viva voce evidence and reports.

However, I find that, had State Farm put its mind to the June 7, 2013 offer to settle, all of the expenses related to preparation, preparation of a factum regarding admissibility of documents and expenses incurred thereafter could have been avoided.

State Farm is entitled to its litigation strategy. With it come the associated risks when a strategy stops working. In this case, I find that State Farm’s aggressive strategy backfired, costing both it and Ms. Kimmerly additional preparation time.

For this reason, I find that the expenses between the June 7 offer date and the hearing start date, should be awarded in full.

Ms. Kimmerly’s submission that State Farm gave no indication before the hearing that it was open to settlement and did not respond to the June 7 offer was undisputed and the Minutes of Settlement executed by the parties on June 17, 2013 mirror the June 7 offer. I find that all the work that followed the June 7 offer was for naught, and entirely preventable had State Farm given meaningful consideration to the offer closer to the time it was made.

I find the time spent by an articling student preparing a factum to address the issue of admissibility of documents compensable. Notwithstanding Mr. Keating’s years of practice – or perhaps because of them – I find it an entirely reasonable and acceptable practice to delegate that work to an articling student. The work was required to respond to State Farm’s objection to the admissibility of Ms. Kimmerly’s documents but wasted since State Farm did not raise the objection on June 17th. The time spent by the law clerk between June 7 and 17th is nominal (1.8 hours) and I find no reason to deny it when she likely provided important support.

With respect to Mr. Keating’s time, State Farm did not take issue with the hourly rate of $150 claimed. He is a specialist whose years of practice allow him to receive the maximum rate and I find no reason to depart from this proposition.

Accordingly, I have broken down the expenses related to fees as follows, using the Legal Aid tariff rates, and allowing Mr. Keating’s time at the $150 maximum:

Bernard P. Keating 111.4 hours from June 7 to and including June 17 x $150 / hr $16,710.00

Articling student 30.1 hours x $58.72 / hr $1,767.47

Law clerk 1.8 hours x $29.36 / hr $52.85

Subtotal $18,530.32

Disbursements

State Farm takes issue with the disbursements claimed for two expert reports that exceed the maximum allowable and submits that the account for photocopying and scanning at $2,431.50 is excessive.

State Farm also submits that no disbursements should be paid toward attendance of expert witnesses because no hearing took place.

For the reasons set out below, I find disbursements of $14,449.80. This amount represents the $22,653.30 claimed, reduced $8,203.50 for the reasons that follow.

Expert Reports and Attendance

Paragraph 5.5 of the Schedule to Dispute Resolution Expenses⁵ states that the maximum amount payable for the preparation of an expert report is $1,500.00.

The FASTEC report (claimed in the amount of $3,050.00) and the Read Clinic report (claimed in the amount of $1,691.00) are reduced to the maximum allowance of $1,500.00 each.

The hearing in this case did not proceed. The Schedule to Dispute Resolution Expenses is clear at paragraphs 5.1, 5.3 and 5.4 that payment for the attendance of experts at a hearing is allowed. Paragraph 5.4 states that expenses may be awarded up to a maximum of $500 for preparation for a hearing “at which the witness testifies.” Paragraph 5.3 sets out the hourly amounts for “attendance” of the expert witness. In this case, no experts’ attendance was ultimately necessary and I do not have the authority to order payment of preparation or attendance of experts where no hearing took place where an expert testified.

While some doctors were required to clear their schedules in anticipation of giving evidence, it is a hazard that comes with the privilege of being an expert. Even in circumstances different from these, hearings often settle on the morning of, and witnesses are routinely cancelled close to the hearing date.

Photocopies

Finally, State Farm takes issue with the $2,431.50 claimed for photocopying and scanning. I agree with State Farm that, on its face, the amount seems high, however, I also find that Ms. Kimmerly has a reasonable explanation for the amount. She submits that, as part of State Farm’s aggressive tactics in defending her claim, State Farm demanded substantial productions and Ms. Kimmerly diligently obtained all requested productions which then had to be copied and/or scanned. I find no reason to reduce the amount claimed for photocopying and scanning where I have no evidence that the productions were not requested, or that any were extraneous or superfluous.

In conclusion, the disbursements are unchanged except for the following:

Disbursement Claimed Allowed

FASTEC – Dr. Ko, Dr. Kinsinger & C. Agaton $3,050.00 $1,500.00

Read Clinic – Dr. Scherer & Dr. Misener $1,691.00 $1,500.00

Dr. Ko – deposit for court appearance [sic] $3,000.00 $0

Dr. S. Kinsinger – deposit for court appearance [sic] $2,000.00 $0

Dr. D. Misener – arbitration preparation fee $1,100.00 $0

Christopher Agaton – arbitration preparation fee $362.50 $0

Total reduction of disbursements $8,203.50

Conclusion

State Farm shall pay to Ms. Kimmerly her expenses in the amount of $35,389.06, inclusive of fees, disbursements and GST. This amount is made up of the following:

(i) legal fees in the amount of $18,530.32, plus HST in the amount of $2,408.94, totaling $20,939.26; and,

(ii) disbursements in the amount of $14,449.80.

July 2, 2014

Jessica Kowalski Arbitrator

Date

Financial Services Commission of Ontario