Allstate Insurance Company of Canada v. Mougan, 2014 ONFSCDRS 30

Financial Services Commission of Ontario

Commission des services financiers de l’Ontario

Neutral Citation: 2014 ONFSCDRS 30 Appeal: P13-00035

OFFICE OF THE DIRECTOR OF ARBITRATIONS

ALLSTATE INSURANCE COMPANY OF CANADA Appellant

and

SEAN MOUGAN Respondent

BEFORE: Delegate Lawrence Blackman

REPRESENTATIVES: Mr. Darrell P. March for the Appellant, Allstate Insurance Company of Canada Mr. Michael A. Yermus for the Respondent, Mr. Sean Mougan

HEARING DATE: By written submissions due February 7, 2014

PRELIMINARY ISSUE APPEAL ORDER

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

1. The Appellant’s request for a stay of the Arbitrator’s October 31, 2013 order set out in its Notice of Appeal is denied.

2. The Arbitrator remained seized of the issue of determining the amount of the special award payable under subsection 282(10) of the Insurance Act. Should the Arbitrator determine the special award amount that is to be paid, the Appellant may seek a stay of that further order. A further request for a stay may also be made regarding future income replacement benefits that are payable under the Arbitrator’s order, as set out within.

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

February 20, 2014

Lawrence Blackman Director’s Delegate

Date

REASONS FOR DECISION

I. BACKGROUND / APPELLANT’S SUBMISSIONS IN FAVOUR OF A STAY

The Respondent, Mr. Sean Mougan, was injured in a March 10, 2006 motor vehicle accident. An arbitration hearing was held before Arbitrator Bayefsky (the “Arbitrator”) to determine the Respondent’s entitlement to a variety of benefits payable under the Schedule¹ by his first-party automobile insurer the Appellant, Allstate Insurance Company of Canada.

The Arbitrator’s October 31, 2013 decision determined that the Appellant pay the Respondent income replacement benefits (“IRBs”) of $351.86 per week ongoing from August 7, 2008, attendant care and housekeeping benefits from March 2006 to March 2008 at specified rates and specific medical and examination expenses, plus interest. The Arbitrator further ordered that the Appellant pay the Respondent a special award in an amount to be determined.

The Appellant’s November 26, 2013 Notice of Appeal requests an order “setting aside the Arbitrator’s decision in its entirety.” The Notice of Appeal sought, in the interim, a stay of the Arbitrator’s decision, stating that the Appellant was “not in a position to determine and pay the Applicant Accident Benefits until the question of the quantum of interest and the quantum of income replacement benefits is determined.”

Delegate McMahon, in Guardian Insurance Company of Canada and Armstrong, (FSCO P00-00037, July 20, 2000), set out the following criteria as to whether a stay should be granted:

1. The bona fides of the appeal;
2. The substance of the grounds for appeal; and,
3. The hardship to the respective parties if the stay is granted or refused.

The Appellant argues:

1. Its appeal is brought in good faith.

2. The Arbitrator erred in calculating the Respondent’s weekly IRB by not deducting the Respondent’s post-accident income when the Arbitrator stated in his decision:

[The Respondent] said that, in 2009, a friend hired him to operate the lights at a dance club in downtown Toronto, and that he did that two times a month. He said that his friend paid him for about half the time he was there, depending on whether it had been a good night. He has worked there recently and expects to be paid for that work. He said that if he was offered more hours there, and could handle it, he would do this. He continues to work there, but with fewer shifts. He states that he helps with the lights, and also deliveries of alcohol and music equipment. He states that he picks up cases of alcohol from the LCBO and delivers them to the club, but that the cases are loaded and unloaded by others.

The Arbitrator further noted:

Mr. Mougan testified that another friend hired him as a glazier in late 2009 at a company called Green Island Irrigation, but that he only lasted about five to six weeks, due to his pain. He said that, about half of the time, he would arrive late for work, due to his sleep problems, that he would sometimes leave early because of his pain, and that he missed approximately five to six days of work.

The Appellant argues that the Respondent “could actually be earning significant income since the accident.” It now being close to two years since the hearing, the Applicant may have gone on to be employed on a full time basis or have increased the number of hours worked. Accordingly, it would be grossly unfair for the Appellant to be required to pay weekly IRBs of $351.86 without considering the Respondent’s post-accident income.

3. The Arbitrator erred in holding the Appellant liable for the maximum special award at 50% of outstanding benefits when the case law² provides that an insurer’s liability for a special award should be determined not as a percentage amount but on a lump sum basis.

4. The Appellant further argues that the Arbitrator erred in his interpretation of the Schedule regarding the Respondent’s entitlement to IRBs, housekeeping, attendant care, medical benefits and examination costs, as will be set out in the Appellant’s main appeal submissions to be provided at a later date.

5. The Appellant submits that there is no evidence that the Respondent will suffer any hardship if a stay is granted. Rather, the evidence was that the Respondent was maintaining employment at the time of the hearing, and that has likely continued. If the Appellant were required to pay IRBs without deducting post-accident income, the Respondent would likely be overcompensated and the Appellant may later be unable to recover the overpayment.

6. Lastly, the Appellant submits that it makes little sense for the Arbitrator to determine the actual special award payable without first having this appeal decided.

II. ANALYSIS

I am denying the Appellant’s request for a stay of the Arbitrator’s October 31, 2013 order set out in its Notice of Appeal for the following reasons:

1. Subsection 283(6) of the Insurance Act provides that an “appeal does not stay the order of the arbitrator unless the Director decides otherwise.” Rule 50.3 of the Dispute Resolution Practice Code (Fourth Edition, Updated - August 2011) states that an “appeal does not stop an arbitration order from taking effect, unless the Director orders otherwise.” Pursuant to subsection 6(4) of the Insurance Act, the Director has appointed me to exercise his powers and perform his duties relating to this appeal.

2. Delegate McMahon held in Armstrong that subsection 283(6) of the Insurance Act “provides that a stay from the order of an arbitrator ruling on accident benefit claims is the exception rather than the rule … The fact that a stay is the exception rather than the rule, suggests to me that the drafters of the legislation recognized that the insurer is in a much better position than the insured person to bear the risks inherent in not staying the arbitrator’s order.” Thus, as the Respondent submits, the onus is on the party seeking a stay to establish that the pre-arbitration decision status quo ought to be preserved.

3. The Notice of Appeal makes broad allegations that the Arbitrator erred in law regarding the entitlement test for every benefit found payable. The Appellant alleges that the Arbitrator’s decision “was contrary to the weight of the evidence and law.”

Subsection 283(1) of the Insurance Act restricts appeals from the order of an arbitrator to questions of law. Housen v. Nikolaisen, 2002 SCC 33, [2002] 2 S.C.R. 235, stated that “an appeal is not a retrial of a case.” The Supreme Court quoted with approval Underwood v. Ocean City Realty Ltd. (1987), 1987 CanLII 2733 (BC CA), 12 B.C.L.R. (2d) 199 (C.A.), that:

The appellate court must not retry a case and must not substitute its view for the views of the trial judge according to what the appellate court thinks the evidence establishes on its view of the balance of probabilities.

I am specifically not prepared to stay payment of attendant care, housekeeping, medical and examination benefits based on presently bare-bone submissions the Appellant states “will be more fully developed in its submissions with respect to the appeal proper.”

4. The Appellant submits that the Arbitrator erred in ordering interest at 2% per month, rather than 1% per month after September 1, 2010. However, the Divisional Court of Ontario held in State Farm Mutual Automobile Insurance Company v. Federico et al., 2014 ONSC 109, that is binding on this Tribunal:

… we find that the Tribunal reasonably interpreted sections 3(1)(1.4) of the Old Regulation and s. 2(2)2 of the New Regulation as providing that an amount that would have been paid under the Old Regulation after August 31, 2010, shall be paid under the New Regulation, but in an amount determined under the Old Regulation.

With respect to interest on overdue amounts, the amount payable under the Old Regulation was 2%. By virtue of the transitional provisions referred to above, this amount continues to be payable under the New Regulation on amounts that become overdue after September 1, 2010.

In any event, the Arbitrator held, starting at page 32 of his decision, after stating that the applicable interest on any amounts found to be overdue was 2 per cent per month compounded monthly, that the Respondent:

… sought interest on the amounts ordered to be paid. The Insurer did not dispute this. I see no basis for not awarding interest in this case. I find that Mr. Mougan is entitled to interest on all of the benefits to which I have found him entitled.

5. The Arbitrator found that the Respondent had suffered significant injuries in the accident that prevent him returning to his pre-accident employment or a suitable alternative. The Arbitrator found that the Respondent’s attempts to work had been “only temporary, part-time and intermittent work, unlike his full-time employment prior to the accident.”

The Arbitrator’s decision states that the weekly IRB payable is $351.86. The decision does not indicate how this weekly amount was derived or whether quantum was disputed. The Respondent submits that the Appellant did not address at arbitration the question of IRB quantum. The Appellant declined to take advantage of the opportunity provided to deliver reply submissions on the issue of its requested stay.

The onus is on the moving party to establish that the exceptional order of a stay of the arbitration order is justified. I have no idea what post-accident income was received by the Respondent or whether this was more than a minimal amount compared to the Respondent’s pre-accident full-time work as a glazier installing glass on commercial construction sites.

I am not persuaded to grant the Appellant’s request that the Arbitrator’s entire IRB order back to August 7, 2008 be stayed. Nor am I prepared to blindly take a stab in the dark regarding what deduction should be made for post-accident income that the Respondent may have received and that may have not been reflected in the Arbitrator’s order.

The IRB payable is on an ongoing basis. Paragraph 33(1)1 of the Schedule states that an insured person shall provide information reasonably required to assist the insurer in determining the person’s entitlement to a benefit. Subsection 6(2) provides that the insurer may deduct from the IRB payable 80% of the net income received by the insured person in respect of any employment subsequent to the accident. Subsection 47(2) states that where the insured person is receiving an IRB or caregiver benefit, upon notice being given to the insured of the amount to be repaid, the insurer may give notice it intends to collect the repayment by deducting up to 20 per cent of each payment of the benefit.

However, section 287 of the Insurance Act protects benefits being paid pursuant to an order. The provision states:

An insurer shall not, after an order of the Director or of an arbitrator appointed by the Director, reduce benefits to an insured person on the basis of an alleged change of circumstances, alleged new evidence or an alleged error, unless the insured person agrees or unless the Director or an arbitrator so orders in a variation or appeal proceeding under section 283 or 284.

Section 287 of the Insurance Act provides protection to both insured persons and insurers. It is now almost two years after the arbitration hearing ended. My order denying the Appellant’s request for a stay set out in its Notice of Appeal is without prejudice to a stay request based on section 287 of the Insurance Act, restricted to receipt of post-hearing income.

6. In the body of his decision pertaining to the Respondent’s claim for a special award, the Arbitrator stated:

I find that the maximum special award in respect of Mr. Mougan’s entitlement to income replacement benefits is warranted in these circumstances. However, given that the quantum of Mr. Mougan’s entitlement to income replacement benefits and interest must still be worked out by the parties, I am unable to determine the amount owing for the special award at this time. If required, I will remain seized of this issue, pending the parties’ calculation of the income replacement benefits and interest owing.

The Arbitrator’s actual order states that “Allstate shall pay to Mr. Mougan a special award, in an amount to be determined.” As the Arbitrator has not yet determined the special award to be paid, there is presently no payment order to stay. Should the Arbitrator, as he allowed for in his decision, decide the special award payable, the Appellant may revive its request for a stay of that specific order.

7. Delegate Richardson, in Canadian Home Assurance Company and Scavuzzo, (OIC P-000626, May 18, 1992), addressed the possibility of an insurer being unable to obtain repayment. She cited Digiammatteo v. Leblanc, (1989), 1989 CanLII 4076 (ON CA), 71 O.R. (2d) 130 (C.A.). In that court case, under the Rules of Civil Procedure a stay was automatic, not the exception. Even in the very different context in Digiammatteo where the respondent was applying to have the stay lifted, the Court of Appeal held:

In any event, there is always a risk of non-recovery in any litigation, even when successful, and I can see no reason why all of that risk should fall on the respondent in this case.

8. The Respondent provided submissions as to his financial hardship should the Arbitrator’s award be stayed. He did not provide evidence in this regard, either by affidavit or by what was put before the Arbitrator. I am not relying on submissions unsupported by evidence.

I am relying on the Arbitrator’s findings. The Arbitrator found that the Respondent presented in a credible and reliable way during medical assessments. He placed no weight on the Appellant’s surveillance evidence. He found that the Respondent wanted to go back to work and attempted to do so. He found, as a whole, that the Respondent’s evidence was credible and reliable and that it supported his claim of being disabled from returning to either his pre-accident position or a reasonably suitable alternative. The Arbitrator found that the Respondent had suffered psychological and emotional problems (including sleep problems) as well as chronic lower back pain as a result of the accident.

I am also relying on the history of this matter. This accident took place March 10, 2006. The Appellant denied IRBs on June 17, 2008. The Respondent applied for mediation July 19, 2008. Mediation failed April 14, 2009. The Respondent applied for arbitration May 13, 2009. The arbitration hearing began May 30, 2011. It ended March 12, 2012, following thirteen hearing days. The Arbitrator issued his decision October 31, 2013.

It is now approaching five years since the Respondent applied for arbitration. Arbitration is intended be an expeditious, cost-effective and fair means of resolving issues of entitlement and quantum on policies of insurance predicated on timeliness. I am persuaded that to stay the Arbitrator’s specified payment orders would constitute a hardship to the Respondent that would outweigh any hardship to the Appellant.

III. EXPENSES

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

February 20, 2014

Lawrence Blackman Director’s Delegate

Date

Footnotes

1. 1The Statutory Accident Benefits Schedule — Accidents on or after November 1, 1996, Ontario Regulation 403/96, as amended.
2. 2Liberty Mutual Insurance Company and Persofsky et al., (FSCO P00-00041, January 31, 2003), Johnston and AXA Insurance Canada, (FSCO A04-002670, February 8, 2008), Wawanesa Mutual Insurance Company and Michalski, (FSCO P06-00003, December 5, 2007), Stewart and Liberty Insurance Company of Canada, (FSCO A03-000833, November 16, 2004) reversed on appeal (FSCO P04-00038, December 7, 2005).