Fatemea Rezaiezadeh v. State Farm Mutual Automobile Insurance Company, 2015 ONFSCDRS 190

Financial Services Commission of Ontario

Commission des services financiers de l’Ontario

Neutral Citation: 2015 ONFSCDRS 190

Appeal P15-00038

OFFICE OF THE DIRECTOR OF ARBITRATIONS

FATEMEA REZAIEZADEH

Appellant

and

STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY

Respondent

BEFORE:

Delegate Lawrence Blackman

REPRESENTATIVES:

Mr. Shahen A. Alexanian for the Appellant, Ms. Fatemea Rezaiezadeh

Ms. Mai T. Nguyen for the Respondent, State Farm Mutual Automobile Insurance Company

HEARING DATE:

By written submissions. Telephone conference held September 17, 2015.

PRELIMINARY APPEAL ORDER

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

1. The Arbitrator’s June 10, 2015 order that the Appellant is liable to pay the Respondent’s legal expenses is stayed pending the resolution of this appeal, subject to any further or other order of an appellate officer.

2. An arbitration expense hearing is stayed pending resolution of this appeal, subject to any further or other order of an appellate officer and without prejudice to either party requesting an arbitration expense hearing within 30 days of the final appeal order.

3. The question of the legal expenses of this preliminary appeal order is deferred to the final determination of this appeal, subject to any further or other order of an appellate officer.

September 18, 2015

Lawrence Blackman Director’s Delegate

Date

REASONS FOR DECISION

I. BACKGROUND

Following a March 8, 2011 motor vehicle accident, the Appellant, Ms. Fatemea Rezaiezadeh, applied to her first-party automobile insurer the Respondent, State Farm Mutual Automobile Insurance Company, for statutory accident benefits under the 2010 Schedule.¹

The parties came before Arbitrator Anschell (the “Arbitrator”) for determination of the Appellant’s entitlement to attendant care benefits and a special award. The Arbitrator’s June 10, 2015 decision dismissed the Appellant’s claims. The Arbitrator further held that the Appellant was liable to pay the Respondent’s reasonable legal expenses, as agreed or assessed.

The Appellant’s June 18, 2015 Notice of Appeal did not seek a stay of the Arbitrator’s order. The Respondent’s July 14, 2015 covering letter to its Response to Appeal stated that as an appeal does not stay an arbitrator’s order and the parties could not agree on arbitration expenses, it had sent a July 10, 2015 request that the Arbitrator determine same.

The Appellant’s July 14, 2015 letter sought a stay of the Arbitrator’s order, in particular the Arbitrator’s award of expenses, for the following reasons:

1. The appeal was bona fide pertaining to a relatively novel issue regarding the application of subsection 3(8) of the 2010 Schedule. Subsection 3(8) pertains to expenses not incurred being deemed to have been incurred in the circumstances provided.

2. There was substance to appeal. In respect of the award of legal expenses, the Arbitrator failed to receive any submissions from the parties and failed to apply the requisite criteria set out in subsection 12(2) of R.R.O. 1990, Reg. 664 (the “Expense Regulation”).

3. The Appellant would suffer hardship should the stay be refused. The Appellant had little or no discretionary income. Conversely, the Respondent would not suffer any significant hardship should a stay be ordered.

The Respondent submits the Appellant’s request for a stay should be rejected because:

1. The stay request was out of time. The Arbitrator’s decision is dated June 10, 2015. The stay was requested July 14, 2015. Rule 52.1 of the Dispute Resolution Practice Code (Fourth Edition – Updated January 2014) (the “Code”) states that the appellant must file a Notice of Appeal within 30 days of the date of the arbitration order.

2. The Arbitrator followed Veley and Motor Vehicle Accident Claims Fund, (FSCO A13-002630, May 5, 2014), upheld on appeal (FSCO P14-00021, April 20, 2015) and concluded, on the facts presented to her, that “the Applicant failed to meet her duty in the handling of her claim; namely, that she did not provide sufficient evidence that she could not afford to pay for attendant care services.”

3. An arbitrator is not required to receive submissions on legal expenses. The amount of the expense award can be properly addressed through an appointment before an adjudicator under Rule 79.1 of the Code.

The Respondent submitted that if hardship is found to be a concern in this present case, at least part of its legal expenses should still be paid.

The Appellant had until August 10, 2015 to deliver any reply submissions. She did not do so. Rather, she delivered a sworn affidavit. Reply submissions are not an opportunity to provide new evidence to which the Respondent can now not respond. My August 12, 2015 letter stated that I was not considering this affidavit in determining whether to grant the requested stay.

The Appellant’s August 13, 2015 letter stated she was content to withdraw her affidavit. However, she requested an opportunity to reference the now received arbitration transcripts. A telephone conference call was held on September 17, 2015. The transcripts were not referenced. Upon clarification and/or confirmation of certain submissions, I rendered my oral decision with full written reasons to follow.

II. ANALYSIS

The Appellant confirmed on September 17, 2015 that she was seeking a stay solely of the Arbitrator’s June 10, 2015 Order that she was liable to pay the Respondent’s legal expenses in respect of the arbitration and a stay of an arbitration expense hearing.

Rule 52.1 of the Code sets a thirty-day time period within which an appeal may be brought. The Rule does not restrict the time period, within a timely appeal, for a stay of the arbitrator’s order to be sought (although prudence, rather than procedure, would dictate that a stay request be brought early, before “the horse is out of the barn”).

Rule 52.2 of the Code is a saving provision allowing the time for bringing an appeal to be extended where the adjudicator is satisfied there are reasonable grounds for so doing. If the thirty-day rule applied to a stay request, which I find it does not, there would be reasonable grounds to grant an extension, the Appellant requesting a stay four days after the thirty day period and four days after the Respondent’s request for an arbitration expense hearing.

Subsection 283(6) of the Insurance Act, R.S.O. 1990, c. I. 8, provides that an appeal does not stay the order of the arbitrator, unless decided otherwise. Rule 50.3 of the Code reiterates same. The onus regarding a stay is, therefore, on the moving party. The leading case in this regard, Guardian Insurance Company of Canada and Armstrong, (FSCO P00-00037, July 20, 2000), adopted the following criteria in determining 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.

Subsection 3(8) of the 2010 Schedule, the provision in question before the Arbitrator, states:

If in a dispute to which sections 279 to 283 of the Act apply, a Court or arbitrator finds that an expense was not incurred because the insurer unreasonably withheld or delayed payment of a benefit in respect of the expense, the Court or arbitrator may, for the purpose of determining an insured person’s entitlement to the benefit, deem the expense to have been incurred.

At page seven of the decision in Veley, Arbitrator Ahlfeld noted the insured’s argument that subsection 3(8) was designed for the most “vulnerable, disadvantaged and disabled people of Ontario.” At page nine of Veley, Arbitrator Ahlfeld stated that subsection 3(8) “is not meant to waive the requirements of section 3(7) for disadvantaged individuals unless it can be demonstrated that an insurer, knowing that a person is impecunious and cannot afford the attendant care services in the Form 1, unreasonably denied or withheld the benefit.”

The Arbitrator in the present case stated that “in a similar vein” to Veley:

… although the Applicant briefly mentioned her lack of funds at the Examination Under Oath, I am not prepared to find that State Farm adjusters were aware that the Applicant required Attendant Care Benefits but could not afford to obtain them. If the Applicant or her representative had followed up with State Farm to inquire about Attendant Care Benefits and indicated that it was impossible for her to pay for these because of a lack of funds, my conclusion would have been different.

I am presently unable to see where subsection 3(8) of the 2010 Schedule states that it is restricted to “disadvantaged individuals.” Nor am I presently able to see where subsection 3(8) requires, as a pre-requisite to its application, that the insurer know that its insured is impecunious and cannot afford the attendant care services in the Form 1.

Delegate Evans’s appeal decision in Veley did not limit subsection 3(8) to disadvantaged individuals. Nor did he limit its application to situations where the insurer knew its insured was impecunious and could not afford the attendant care services in the Form 1. Rather, he stated:

The exception regarding incurred expenses in s. 3(8) provides that, in a dispute at FSCO, if an arbitrator finds that an expense was not incurred because the insurer unreasonably withheld or delayed payment of a benefit in respect of the expense, the arbitrator may deem the expense to have been incurred.

Turning to the Arbitrator’s specific expense entitlement order, the Respondent does not dispute that the Arbitrator failed to receive submissions on this issue. An adjudicator’s failure to receive submissions on a disputed issue raises concerns as to a breach of natural justice.

The Arbitrator’s decision at page eleven regarding legal expense entitlement notes her result, without providing her reasons. R. v. Walker, 2008 CSC 34, citing R. v. Sheppard, 2002 SCC 26, held:

Sheppard recognized a duty to give adequate reasons on a number of broad policy grounds. At the trial level, the reasons justify and explain the result. “Reasons for judgment are the primary mechanism by which judges account to the parties and to the public for the decisions they render” … The losing party is entitled to know why he or she has lost. “Informed consideration can be given to grounds for appeal. Interested members of the public can satisfy themselves that justice has been done, or not, as the case may be” …

Neither the Code nor the Expense Regulation automatically award legal expenses to the successful party. Rather, other criteria for consideration include whether any novel issues were raised in the proceeding, the conduct of the parties and whether any aspect of the proceeding was improper, vexatious or unnecessary.

On the remaining criterion on whether to grant a stay, the Respondent does not dispute the hardship to the Appellant should a stay not be granted nor does it argue that there is any prejudice to it should the stay be granted.

Following Armstrong, on the basis of the bona fides and the present apparent substance of the appeal, and that the Respondent does not dispute the relative hardship to the Appellant if a stay is not granted, I am persuaded to stay, pending resolution of this appeal, the Arbitrator’s June 10, 2015 Order that the Appellant is liable to pay the Respondent’s legal expenses. This is subject to any further or other order of an appellate officer.

I note the following statement in Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53, that I find applies equally to consideration of a stay request as to a request for leave to appeal:

… A court considering whether leave should be granted is not adjudicating the merits of the case … A leave court decides only whether the matter warrants granting leave, not whether the appeal will be successful … This is true even where the determination of whether to grant leave involves, as in this case, a preliminary consideration of the question of law at issue. A grant of leave cannot bind or limit the powers of the court hearing the actual appeal …

Director Sachs, in Menard and Royal Insurance, (OIC P-001055, October 22, 1992), held that a request that the resumption of an arbitration hearing be postponed pending an appeal affects an arbitrator’s control of the process. Director Sachs held that for this reason it must be seen as a rare request for an exercise of appellate discretion, requiring special circumstances.

The Respondent does not dispute that the Arbitrator failed to receive any submissions from the parties on the question of legal expense entitlement. The Arbitrator does not provide reasons for her decision on legal expense entitlement. I find these to constitute special circumstances.

Given my stay of the Arbitrator’s expense order and the special circumstances in this specific case, I find that a stay of any arbitration expense hearing pending resolution of this appeal is warranted. This further stay order is also subject to any further or other order of an appellate officer. The stay is also without prejudice to either party requesting an arbitration expense hearing within 30 days of the issuance of the final appeal order.

IV. EXPENSES

The question of the legal expenses of this preliminary appeal decision is deferred to the final determination of this appeal, subject to any further or other order of an appellate officer.

September 18, 2015

Lawrence Blackman Director’s Delegate

Date

Footnotes

1. 1The Statutory Accident Benefits Schedule — Effective September 1, 2010, Ontario Regulation 34/10, as amended.