Neutral Citation: 2014 ONFSCDRS 29 FSCO A11-002727

BETWEEN:

AHMAD SADOZAI Applicant

and

AVIVA CANADA INC. Insurer

DECISION ON INSURER'S CLAIM FOR REPAYMENT AND EXPENSES

Before: Richard Feldman Heard: Written submissions received by January 30, 2014

Appearances: Arvin Gupta for the Applicant Aimee M. Draper for the Insurer

Background:

The Applicant claims to have been involved in an accident on September 13, 2009. On August 13, 2010, on the basis of its investigations, the Insurer wrote to the Applicant to advise as follows: (1) it had concluded that the Applicant had not been involved in an accident; (2) it had concluded that the Applicant had wilfully misrepresented material facts to the Insurer; and (3) as a result, the Insurer was terminating payment of all benefits and was requesting repayment from the Applicant (pursuant to s. 47(1)(a) of the Schedule¹) of $14,557.94 (the total amount of accident benefits purportedly paid up to that point).

When the Applicant filed his application for arbitration, the Insurer sought a hearing to first obtain a determination of the issue of whether or not the Applicant had in fact been involved in an “accident” on September 13, 2009. That hearing was conducted by me on April 15 and 16, 2013. The parties attended for about 2 hours on the first day and about 5 hours on the second day. On June 6, 2013, I issued a decision in this application in which I found that the Applicant had failed to prove that he was involved in an “accident” on September 13, 2009. I also indicated in paragraph 3 of my order that if Aviva wished to pursue its claim for repayment of $14,557.94 or if either party wished to pursue a claim for expenses, written notice had to be provided to the opposing party and to the Financial Services Commission of Ontario (FSCO) within 30 days.

On June 26, 2013, FSCO received a request from counsel for the Insurer requesting a hearing on both issues. Counsel for both parties consented to these issues being adjudicated by way of a written hearing and we agreed upon a time frame for the delivery of written material.

Issues:

The issues in this hearing are:

Is the Applicant liable to repay to the Insurer $14,557.94 pursuant to paragraph 47(1)(a) of the Schedule?
Is the Applicant liable to pay the Insurer's expenses in respect of the arbitration proceeding under section 282(11) of the Insurance Act?

Result:

The Applicant is not liable to repay to the Insurer $14,557.94 pursuant to paragraph 47(1)(a) of the Schedule.
The Applicant is liable to pay to the Insurer its expenses in respect of the arbitration proceeding, fixed in the amount of $7,000.00 (inclusive of fees, disbursements and any applicable taxes).

EVIDENCE AND ANALYSIS:

Issue 1 - Repayment

Aviva's claim for repayment is dismissed for the following reasons:

The Insurer bases its claim for repayment solely on an allegation that the Applicant has wilfully misrepresented material facts to the Insurer. Despite the fact that the Applicant failed to establish, on a balance of probabilities, that he was involved in an accident on September 13, 2009 and despite the existence of some suspicious circumstances, I did not make a finding in my order of June 6, 2013 that the Applicant wilfully misrepresented material facts to the Insurer. Given the wording of the preliminary issue I was asked to adjudicate, it was not necessary to rule on that issue, nor am I prepared to make such a finding now based upon the evidence before me.
From the scant² information provided concerning the amounts being claimed for repayment, it appears to me that some of the expenses were not related to benefits under the Schedule (for example, the cost of the insurer hiring a verbatim reporter and an engineer as part of the Insurer's investigation of the Applicant's claims are not statutory accident benefits) and none of the payments appear to have been made to the Applicant.

As I held in Addae,³ repayment under paragraph 47(1)(a) can only be claimed for benefits paid to the [insured] person. My reasoning for this is explained in the Addae decision, a decision upon which the Insurer is relying.

Thus, Aviva’s claim for repayment is dismissed because Aviva has failed to prove, on a balance of probabilities, both that the Applicant has wilfully misrepresented material facts to the Insurer and that any of the expenses claimed by Aviva represent benefits paid to Mr. Sadozai.

Issue 2 - Expenses

Introduction

The Insurer was completely successful in this case. On that basis, it is entitled to its reasonable expenses of this arbitration proceeding. This is not challenged by the Applicant. The real dispute is over quantum. The Applicant suggests that a relatively modest award ($1,000.00) is appropriate. The Insurer is seeking an order for almost $17,000.00.

Offer to Settle

In seeking a rather large award of expenses, the Insurer relies, in part, upon the fact that it made a written offer to settle this matter. Aviva offered to forego any claim for repayment or its expenses of this proceeding if the Applicant withdrew his claim. Pursuant to the Expense Regulation and Rule 75.2 of the Dispute Resolution Practice Code, in adjudicating a claim for expenses, an adjudicator must consider (in addition to the other relevant criteria) any written offers to settle made in accordance with Rule 76.

For an offer to comply with Rule 76, it must be made in writing, be served on the other party and contain: (1) the full terms of the offer; (2) the date when the offer was served; and (3) the time period during which it remained open for acceptance (Rule 76.1(a)). It must also have been made after the conclusion of mediation and before the conclusion of the hearing (Rule 76.1(b)). The offer made by Aviva appears to meet all of these qualifications and I will take it into consideration when deciding Aviva's claim for expenses.

This offer was made, however, on April 11, 2013, less than 5 days before the commencement of the hearing. Consequently, it will not be given as much weight as it would have been had the offer been made at least 5 days prior to the commencement of the hearing (pursuant to Rule 76.1(b)).

Fees

The hearing took one and a half days. The Applicant testified for about one and a half hours on April 15, 2013 and we were finished by noon that day. On April 16th, I heard testimony from the Insurer's two experts, Robert Seaton (for about one and a half hours) and Sam Kodsi (for about one hour) and then I heard closing arguments (about fifteen minutes). The whole second day lasted about 5 hours, which included a one and a half hour lunch break.

This was not a particularly complex case. It turned largely upon evidence from the Insurer's accident reconstruction experts and my assessment of the credibility of the Applicant. The Insurer is seeking expenses related to a total of about 67 hours of legal services (about 56 hours by Ms. Draper and about 11 hours by a clerk or law student).

Counsel for the Applicant suggests that it was unnecessary and duplicative for the Insurer to call two expert witnesses to testify in this proceeding. I do not agree. The two experts were hired by different insurers and independently came to the same conclusion. It was helpful to me to hear from both Mr. Seaton and Mr. Kodsi and it provided Applicant’s counsel with the opportunity to test their evidence through cross-examination.

Given the success of the Insurer at the hearing and the written offer made by the Insurer a few days before the hearing, I find that the Insurer is entitled to its expenses of the hearing. With respect to preparatory work prior to the hearing, I find that a ratio of about 2:1 (the ratio of preparation time to hearing time) is appropriate. I find that a reasonable number of total hours for legal services in this case would be about 24. The bulk of this would relate to work done by Ms. Draper, with a small proportion (approximately 15%) of the services attributable to law clerks and/or articling students. At the appropriate Legal Aid rates, this would be equivalent to legal fees of about $2,500.00 (not including HST).

Disbursements

The Insurer is seeking reimbursement for the following disbursements:

Description	Amount ($)
Fax	20.50
Photocopies and printing	343.66
Courier	79.11
Conduct money*	159.00
Official Examiner Fees	916.00
Postage	0.63
Mileage	36.96
Expert Testimony- Rob Seaton	1,573.00
Expert Testimony - Sam Kodsi	5,003.75
Subtotal	8,132.61
HST	1,036.57
Total	9,169.18

not subject to HST

The Applicant has not taken any position with respect to the specific disbursements claimed, except to object to: (1) having to pay for a report from Robert Seaton (as it was commissioned by another insurer); and (2) having to compensate the Insurer for having two experts testify when, according to the Applicant, one would have sufficed.

A party to an arbitration proceeding at FSCO is only permitted to seek compensation for expenses of a type and in an amount permitted under the Expense Regulation.

As for the disbursements related to faxes, copying, courier, conduct money, postage and mileage, these are all types of disbursements that can be permitted under the Expense Regulation and the Applicant has not challenged the amounts being claimed. I will therefore permit these disbursements (a total of approximately $640.00).

With respect to the cost ($916.00) of having a verbatim reporter attend the hearing, however, it is not an expense that is specifically permitted under the Expense Regulation and there is case law from FSCO to the effect that such expenses generally cannot be claimed as a disbursement.⁴ I will not allow this claim.

With respect to experts, the maximum amounts that may be claimed under the Expense Regulation are: $1,500.00 for preparation of a report; $200.00 per hour for attendance at a hearing (up to $1,600.00 per day); and $500.00 for preparation for a hearing at which the expert actually testifies.

According to the invoice from Robert Seaton's company (Collision Analysis & Reconstruction), Robert Seaton spent two hours preparing for the hearing and charged $500.00 for that. My records indicate that Mr. Seaton appeared before me from about 10:00 a.m. until 11:30 a.m. on April 16, 2013; at $200.00 per hour, this would represent $300.00 for his testimony. As for his travel to and from Orillia, there is no provision for reimbursement of his travel time but under Tariff A to the Rules of Civil Procedure, Mr. Seaton would be entitled to reimbursement at $0.24 per kilometre (in this case, 274 kms.) for a total of $65.76. Aviva is not claiming any amount related to the preparation of the report of Mr. Seaton. Thus, in total, under the Expense Regulation, a reasonable amount for Mr. Seaton's time to prepare for and testify at the hearing would be about $865.76.

The invoice from Kodsi Engineering dated April 17, 2013 contains almost no particulars and is for a total amount of $5,003.75 (plus HST). I can only assume that this is the charge for preparing his report, preparing to testify and testifying from 1:00 to 2:00 p.m. on April 16, 2013. The most that would be permitted for such services under the Expense Regulation would be $1,500.00 for the report, $500.00 for preparation and $200.00 for his testimony. Therefore, if I were to take the most generous possible view of this claim, I could, at most, allow $2,200.00 (plus HST).

Thus, of the disbursements claimed on behalf of Aviva, I find that a total of about $3,700.00 (exclusive of HST) would be reasonably permitted under the Expense Regulation.

Total Expenses

Having considered the relative complexity of this matter, the Insurer's offer to settle, the time spent, the applicable Legal Aid rates, the written submissions of the parties, the supporting documentation filed and the maximum amounts permitted under the Expense Regulation, I find it appropriate to fix the Insurer's expenses at $7,000.00, inclusive of all fees, disbursements and any applicable taxes.

CONCLUSION:

For the reasons set out above, the Insurer's claim for repayment shall be dismissed but the Applicant shall be ordered to pay to the Insurer its expenses in respect of this arbitration proceeding, fixed in the amount of $7,000.00 (inclusive of fees, disbursements and any applicable taxes).

February 14, 2014

Richard Feldman Arbitrator

Date

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