Financial Services Commission of Ontario

Commission des services financiers de l’Ontario

Neutral Citation: 2014 ONFSCDRS 192 Appeal P14-00038

OFFICE OF THE DIRECTOR OF ARBITRATIONS

JOHN COOK Appellant

and

RBC GENERAL INSURANCE COMPANY Respondent

BEFORE: Delegate Lawrence Blackman

REPRESENTATIVES: Ms. Samia M. Alam for the Appellant, Mr. John Cook Ms. Anju Sharma for the Respondent, RBC General Insurance Company

HEARING DATE: December 2, 2014. Oral decision rendered December 2, 2014.

PRELIMINARY APPEAL ORDER

Under section 283 of the Insurance Act, R.S.O. 1990, c.I.8, as amended, it is ordered that:

Exercising my discretion under Rules 50.2 and 51.2(c) of the Dispute Resolution Practice Code (Fourth Edition, Updated – January 2014), I accept this appeal from the Arbitrator’s September 18, 2014 decision on a motion.
The legal expenses of this preliminary appeal decision are deferred to the conclusion of this appeal, subject to any further or other order of an appellate officer.

December 18, 2014

Lawrence Blackman Director’s Delegate

Date

REASONS FOR DECISION

I. BACKGROUND

Rule 50.2 of the Dispute Resolution Practice Code (Fourth Edition, Updated – January 2014) (the “Code”) provides that a party may not appeal a preliminary or interim order of an arbitrator until all of the issues in dispute have been finally decided, unless ordered otherwise. Rule 51.2(c) states that an appeal may be rejected if it is from a preliminary or interim order that does not finally decide the issues in dispute. This present decision concerns the application of these rules.

The Appellant, Mr. John Cook, was involved in a motor vehicle accident on March 4, 2011 when the vehicle he was driving fatally struck a pedestrian crossing in front of his car. The Appellant sought statutory accident benefits under the 2010 Schedule¹ from his first-party automobile insurer, the Respondent, RBC General Insurance Company. The Respondent paid the Appellant weekly income replacement benefits (“IRBs”) until December 2013.

In July 2013, the Appellant’s family doctor submitted an OCF-19 Application for Determination of Catastrophic Impairment (“CAT”) under paragraph 3(2)(e) of the 2010 Schedule, that the Appellant’s impairment or combination of impairments, in accordance with the American Medical Association’s Guides to the Evaluation of Permanent Impairment, 4th Edition, 1993, resulted in 55 per cent or more impairment of the whole person.

The Respondent arranged a CAT insurer medical examination (“IME”). That assessment rated the Appellant at a 7% Whole Person Impairment. The IME, therefore, concluded that the Appellant was not catastrophically impaired as defined under the 2010 Schedule.

The Appellant brought a motion before Arbitrator Mutch (the “Arbitrator”) for an order that the Respondent pay part or all of $12,960 for a CAT assessment either as an interim statutory benefit under paragraph 25(1)5 of the 2010 Schedule or as an interim disbursement expense award under subsection 282(11.1) of the Insurance Act, R.S.O. 1990, c. I.8.

The Arbitrator’s September 18, 2014 decision held that the Appellant’s request was for a one-time payment. It was not for ongoing relief from financial deprivation. Its objective was to provide the Appellant with sufficient evidence to rebut the Respondent’s CAT assessment.

Rather than being a benefit under the 2010 Schedule, the Arbitrator concluded that “the funding of a rebuttal CAT assessment is most properly characterized as an expense.” The Arbitrator considered the criteria set out in the case law in determining an award of interim statutory benefits² to be ill-suited to the request made in the motion. Accordingly, the Arbitrator applied the three-part test for determining entitlement to an award of interim legal expenses from Bernicky and Guardian Insurance Company of Canada, (OIC A-006268, July 6, 1994).

Following the criteria in Bernicky, the Arbitrator made the following findings:

Based on the breadth of opinion as to the Appellant’s psychological state and degree of impairment “there is no question in my mind that there is a bona fide issue as to whether Mr. Cook is or is not catastrophically impaired.” The Arbitrator noted the June 18, 2011 report of Dr. Gozlan, psychologist, including that the Appellant had a severe post-traumatic stress disorder, and the June 30, 2014 report of Dr. Waldenberg, psychiatrist, that the Appellant was severely depressed and incapable of working in any capacity.
A CAT assessment for the Appellant approximately as thorough as that of the Respondent (submitted to have cost $15,280), was a reasonable and necessary expense for the conduct of the arbitration hearing in light of the divergent opinions of Dr. Waldenberg and the Respondent’s CAT assessors. Dr. Waldenberg, however, had not addressed the technical components of paragraphs 3(2)(e) and (f) of the 2010 Schedule determining catastrophic impairment.
The Appellant had “extremely limited financial resources” and was “not in the position to fund the full cost of the proposed assessment.” The Arbitrator found that the Appellant had not been employed since the accident. The Appellant’s affidavit evidence was that he was facing eviction as he could not make his rent payments. The Appellant then went to live with his sister. He began receiving social assistance in February 2014. In June 2014, the Appellant was approved for a CPP disability pension. He presently had a total monthly income of some $1,200.

The Arbitrator found that had there been no other considerations, he would have ordered the Respondent to pay at least some of the claimed expenses.

However, the Arbitrator noted that subsection 18(3) of the 2010 Schedule limits the medical and rehabilitation benefits payable in non-catastrophic cases to $50,000. It was uncontested that the Respondent had paid over $50,000 to the Appellant, exhausting those benefits. The Arbitrator found that to grant interim legal expenses would defy the legislated limits in subsection 18(3). He, therefore, denied the Appellant’s request for an order for interim payment of legal expenses.

The Arbitrator, however, stated that the Legislature had not provided for situations as here where the very question was whether more than $50,000 in medical and rehabilitation benefits could be claimed. He opined that a voluntary payment by the Respondent “would help to banish the state of inertia in which this matter presently stands. In my view, it goes against the remedial nature of this legislative scheme to leave matters at a standstill.”

Delegate Makepeace, in Allstate Insurance Company of Canada and Torok, (FSCO P01-00021, May 29, 2001), held that the purpose of the present Rule 50.2 of the Code is to:

… facilitate the most cost-effective resolution of disputes by minimizing the time and money spent on procedural or collateral matters. The decision whether to hear an appeal of a preliminary order is discretionary … the over-arching principle guiding the exercise of the discretion is that the rule “should be broadly interpreted to produce the quickest, most just and least expensive resolution of the dispute.” The criteria to be considered include the apparent strength of the appeal, the importance or novelty of the issue raised, and whether rejecting the appeal or hearing it will prejudice either party.

In Security National Insurance Co./Monnex Insurance Mgmt. Inc. and Hodges, (FSCO P12-00029, August 13, 2012), I held:

As set out in Allstate Insurance Company of Canada and Tesfay, (FSCO P99-00023, June 21, 1999), Allstate Insurance Company of Canada and Al-Obaidi, (FSCO P99-00009, May 2, 2000) and Allstate Insurance Company of Canada and Torok, (FSCO P01-00021, May 29, 2001), the decision whether to hear an appeal from a preliminary or interim order is discretionary. The relevant criteria include:

(a) the apparent strength of the appeal;

(b) the importance or novelty of the issue(s) raised;

(c) whether rejecting or hearing the appeal will prejudice either party;

(d) the preference of the parties;

(e) whether the arbitration decision represents a departure from prior cases; and,

(f) whether rejecting or hearing the appeal would provide the quickest, most just and least expensive way of disposing of the issues between the parties.

The October 17, 2014 Notice of Appeal submits, in part, that the Arbitrator erred in applying section 18 of the 2010 Schedule when he found that the Appellant’s motion was best characterized as a request for interim expenses, not statutory accident benefits. The Appellant, in seeking leave to appeal the Arbitrator’s interim order, submits:

The appeal has strength given the Arbitrator’s decision in favour of the Appellant subject to section 18 of the 2010 Schedule.
The appeal raises a novel, broadly important issue of law whether catastrophic reports under the 2010 Schedule are payable as a benefit, a legal expense, or both.
Rejecting the appeal will significantly impair and prejudice the Appellant’s ability to present his case at arbitration.

The Respondent opposes this appeal from an interim or preliminary decision being accepted, submitting that the appeal fails to meet any of the applicable criteria. Specifically, it argues:

(1) Section 18 of the 2010 Schedule encompasses both statutory benefits and legal expenses. The Arbitrator correctly found he had no authority to award interim expenses in excess of the $50,000 limit. In addition, those expenses have not been incurred, the Respondent has not approved those assessments and the fees are in excess of the FSCO Guidelines.

(2) The awarding of interim benefits and/or legal expenses is not a novel issue.

(3) Permitting the appeal would necessarily require adjourning the arbitration hearing scheduled for March 9, 2015, prejudicing the Respondent with additional cost and delay.

(4) The Appellant would not be prejudiced should his appeal be dismissed. The Arbitrator’s decision did not finally dispose of his rights. The Appellant has medical records and reports addressing the pertinent issues in dispute upon which to rely at arbitration.

II. ANALYSIS

As the Respondent states at paragraph 10 of its Schedule B to its Response to Appeal, the Code provides discretion on whether to hear an appeal from a preliminary or interim order of an arbitrator. I exercise my discretion to accept this appeal for the following reasons:

The Arbitrator found that the funding of a rebuttal CAT assessment was most properly characterized as a legal expense under the Insurance Act rather than a benefit under the 2010 Schedule. The Respondent concedes, at paragraph 5 of its Schedule “A” submissions on whether this appeal should be accepted, that “the Learned Arbitrator correctly characterized the Appellant’s request as a request for interim expenses.”

The Arbitrator found that the Appellant had satisfied all three criteria in Bernicky for payment of interim legal expenses under subsection 282(11.1) of the Insurance Act. The Respondent states, at paragraph 28 of its Schedule “B” submissions, that the Arbitrator’s “interpretation of those legal tests do not properly form any basis for the within appeal.”

I am persuaded that there is a prima facie strong, legitimate question of whether the statutory benefit maximums set out in subsection 18(3) of the 2010 Schedule apply to interim expense awards under subsection 282(11.1) of the Insurance Act.

This appeal raises novel issues. Whether section 18 of the 2010 Schedule applies to arbitration legal expenses under subsections 282(11) and (11.1) of the Insurance Act in addition to applying to statutory accident benefits is an entirely novel issue. Further, the parties were not aware of any case at the appellate level at the Commission that addresses the issue of interim legal expense awards.

In addition, the Respondent raises the novel issue of whether interim legal expenses must first be incurred in order to be awarded. The Respondent states that although “incurred” does not appear in subsection 282(11.1) of the Insurance Act pertaining to interim legal expenses, it does appear in subsection 282(11), the general legal expense provision.

At this preliminary stage of this appeal, the Arbitrator’s decision appears to represent a departure from prior cases by applying monetary restrictions under a statutory accident benefits schedule to interim awards of legal expenses. Again, whether this is warranted by changes in the 2010 Schedule is an entirely novel question.
The Respondent submits that the Appellant would not be prejudiced should this appeal be presently rejected; that the “appropriate forum for the Appellant to seek the relief sought would be on a full hearing of all of the issues in dispute.” However, proceeding to a full hearing that determines both catastrophic impairment as well as entitlement to the cost of reports to be subsequently prepared addressing the determination of catastrophic impairment is to render the latter issue moot.
Accepting this appeal makes the presently set March 9, 2015 arbitration hearing untenable. However, the Appellant submits that in the absence of this appeal being accepted he will be going to an arbitration hearing on the issue of determining catastrophic impairment without having any of his own reports that address that determination; in other words, the outcome of the hearing is essentially a fait accompli.

I am persuaded that this appeal raises questions of broad importance regarding access to justice and the circumstances in which an award of interim legal expenses is appropriate under subsection 282(11.1) of the Insurance Act.

I set the following time-lines for this appeal, as both parties agreed on December 2, 2014 and as I confirmed by letter dated December 4, 2014:

The Appellant will have until Monday, January 19, 2015 to serve on the Respondent and file (with a Statement of Service in Form F) with this office his written submissions under Rule 54.1 of the Code.
The Respondent will have until Tuesday, February 17, 2015 to serve on the Appellant and file (with a Statement of Service in Form F) with this office its written submissions under Rule 54.3 of the Code.
The Appellant will have until Friday, March 6, 2015 to serve on the Respondent and file (with a Statement of Service in Form F) with this office any reply submissions.
Oral submissions will be heard at the Commission’s offices in Toronto on Monday March 30, 2015.

II. EXPENSES

The legal expenses of this preliminary appeal decision are deferred to the conclusion of this appeal, subject to any further or other order of an appellate officer.