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

Neutral Citation: 2015 ONFSCDRS 224

FSCO A13-012792

BETWEEN:

RAJANI PARARAJASINGAM

Applicant

and

STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY

Insurer

Before: Arbitrator Thérèse Reilly

Heard: In person at ADR Chambers on June 17, 2015 and by written submissions completed August 28, 2015

Appearances: Mr. Deva Devendran and Ms. Mary Selvanathan for Ms. Rajani Pararajasingam Ms. Mari Maimets for State Farm Mutual Automobile Insurance Company

Issues:

The Applicant, Ms. Rajani Pararajasingam, was injured in a motor vehicle accident on July 13, 2010 and sought accident benefits from State Farm Mutual Automobile Insurance Company (“State Farm”), payable under the Schedule.¹ The parties were unable to resolve their disputes through mediation, and Ms. Pararajasingam, through her representative, applied for arbitration at the Financial Services Commission of Ontario under the Insurance Act, R.S.O. 1990, c. I.8, as amended.

The issue in this Motion is:

Whether Ms. Pararajasingam’s Application for Arbitration is to be dismissed as it is statute barred under s. 281.1(1) and 281(2) of the Insurance Act?

Result:

Ms. Pararajasingam’s Application for Arbitration is dismissed as it is statute barred under s. 281.1(1) and 281(2) of the Insurance Act.

EVIDENCE AND ANALYSIS:

The Motion

The Insurer, State Farm, brings this Motion for a dismissal of the Application for Arbitration on the basis that the Applicant failed to participate in the mediation proceeding. The Insurer maintains that mediation did not take place contrary to s. 281(2) of the Insurance Act. Mediation was scheduled on two occasions and the Applicant failed to attend. The Insurer argues that on August 15, 2013, the mediation should have been cancelled due to the Applicant’s non-participation. Under Rule 17.3 of the Dispute Resolution Practice Code (“the Code”), the Mediator ought to have issued a report indicating that mediation did not take place. The Application for Arbitration is statute barred by virtue of s. 281.1(1) and 281(2) of the Insurance Act.

The Insurer submits that an Arbitrator has the jurisdiction to determine whether or not mediation has failed and whether the contents of a Report of Mediator are conclusive.²

The Applicant’s Position

It is the Applicant’s position that the “failed” Report of Mediator was correctly issued. In this case, the mediation failed because the Mediator had formed an opinion that the time limit for mediation including any extension has expired and no settlement had been reached. Further, the Mediator before failing the mediation sought consent from the Insurer and the Applicant’s former legal representative to fail the mediation. With consent of both parties, the Mediator correctly failed the mediation and issued a “failed” Report of Mediator. It is the Applicant’s position that mediation was sought, and failed in accordance with s. 281(2) of the Insurance Act.

The Applicant, in its additional submissions, dated August 28, 2015, submits that the Report of Mediator is final and binding on all parties and cited the following FSCO decisions in which Rule 23.1 of the Code was discussed: Ponte, McCallum, Downey and Wachenko (referenced below).

Both parties agreed to proceed with the Motion with no witnesses being called. Written submissions were presented by the parties in February, April, May, June, July, and August 2015.

Statutory Provisions

Section 10 of Ontario Regulation 664.

Dispute Resolution Practice Code, Rule 17, 19, 21, 23, 65.7 and 81.

The Insurance Act, Section 280, 281, 281.1 and 282 R.S.O. 1990, c. I-8.

The Statutory and Regulatory Framework

Section 10 of Ontario Regulation 664 states as follows:

A mediator is required, under subsection 280(4) of the Act, to attempt to effect a settlement of a dispute within sixty days after the date on which the application for the appointment of a mediator is filed.

Section 280 of the Insurance Act states as follows:

(1) Either the insured person or the Insurer may refer to a mediator any issue in dispute in respect of the insured person’s entitlement to statutory accident benefits or in respect of the amount of statutory accident benefits to which the insured person is entitled.

(2) The party seeking mediation shall file an application for the appointment of a mediator with the Commission.

(3) The Director shall ensure that a mediator is appointed promptly.

(4) The Mediator shall enquire into the issues in dispute and attempt to effect a settlement of as many of the issues as possible within the time prescribed in the regulations for the settlement of the type of dispute in question.

(5) The parties may by agreement extend the time for the completion of the mediation process, even if the time for completion has expired.

(6) If at any time before a settlement is effected the mediator is of the opinion that mediation will fail, he or she shall forthwith notify the parties.

(7) Mediation has failed when the mediator has given notice to the parties that in his or her opinion mediation will fail, or when the prescribed or agreed time for mediation has expired and no settlement has been reached.

(8) If mediation fails, the Mediator, in addition to any notice required to be given, shall prepare and give to the parties a report,

(a) setting out the insurer’s last offer and the mediator’s description of the issues that remain in dispute;

(b) containing a list of materials requested by the parties that have not been produced and that, in the opinion of the mediator, were required for the purpose of discussing a settlement of the issues; and

(c) containing a recommendation as to whether or not the issues in dispute should be referred for an evaluation under section 280.1.

Section 281(1) states as follows:

Subject to subsection (2),

(a) the insured person may bring a proceeding in a court of competent jurisdiction;

(b) the insured person may refer the issues in dispute to an arbitrator under section 282; or

(c) the insurer and the insured person may agree to submit any issue in dispute to any person for arbitration in accordance with the Arbitration Act.

(2) No person may bring a proceeding in any court, refer the issues in dispute to an arbitrator under section 282 or agree to submit an issue for arbitration in accordance with the Arbitration Act, 1991 unless mediation was sought, mediation failed and, if the issues in dispute were referred for an evaluation under section 280.1, the report of the person who performed the evaluation has been given to the parties.

(3) Subject to subsection (4), if mediation fails, the insurer shall pay statutory accident benefits in accordance with the last offer of settlement that it had made before the failure until otherwise agreed by the parties or until otherwise ordered by a court, by an arbitrator acting under this Act or the Arbitration Act, 1991, or by the Director.

(4) If a dispute involves a statutory accident benefit that the insurer is required to pay under subsection 268(8) and no step authorized by subsection (1) has been taken within 45 days after the day mediation failed, the insurer shall pay the insured in accordance with the last offer made by the insurer before the failure until otherwise agreed by the parties or until otherwise ordered by a court, by an arbitrator acting under this Act or the Arbitrations Act, 1991, or by the Director.

Section 281.1(1)

A mediation proceeding or evaluation under section 280 or 280.1 or a court proceeding or arbitration under section 281 shall be commenced within two years after the insurer’s refusal to pay the benefit claimed.

Section 281.1(2)

Despite subsection (1), a proceeding or arbitration under clause 281 (1) (a) or (b) may be commenced,

(a) if there is an evaluation under section 280.1, within 30 days after the person performing the evaluation reports to the parties under clause 280.1 (4) (b);

(b) if mediation fails but there is no evaluation under section 280.1, within 90 days after the mediator reports to the parties under subsection 280 (8).

Section 282(1)

(1) An insured person seeking arbitration under this section shall file an application for the appointment of an arbitrator with the Commission.

Dispute Resolution Practice Code, 4th Edition³

Rule 17 of the Code:

17.1 Parties to the mediation and their representatives (if any) must participate in good faith in the mediation process and provide all relevant documents within the time frames set out in these Rules.

17.2 The appointment of a representative does not relieve any party of the obligation to participate in the mediation, in person, by telephone or other electronic technologies, and to provide instructions to any representative in respect of any issue in dispute or settlement offers made.

17.3 Where a party does not comply with Rules 17.1 and 17.2 the mediator may:

a) adjourn the mediation on such terms as he or she considers appropriate; or

b) report to the parties that mediation did not take place.

Rule 21 of the Code:

21.1 Mediation has failed on an issue when:

(a) the mediator is of the opinion that mediation will fail and notifies the

parties; or

(b) the time limit for mediation, including any extension, has expired and no settlement has been reached.

21.2 If mediation fails on any of the issues in dispute, the insurer will provide the mediator with its last offer in respect of such issue or issues.

21.3 No party may bring a proceeding in any court, refer the issues in dispute to an arbitrator, or agree to submit an issue to private arbitration unless mediation was sought and has failed.

Rule 23 of the Code:

23.1 If a party believes that the Report of Mediator is not accurate, the party must notify the mediator and the other parties in writing, with reasons, within 10 days of receiving the Report.

23.2 After considering the reasons and the comments of the parties, the mediator may issue an amendment to the Report of Mediator, if the Mediator considers it appropriate.

23.3 The Dispute Resolution Group will deliver a copy of the amendment to the Report of Mediator to the parties, to the person approved by the Director to perform a neutral evaluation, and to an arbitrator appointed by the Director.

Rule 65.7 of the Code:

An adjudicator may make such orders or give such directions as he or she considers proper to prevent an abuse of process.

Rule 81.1 of the Code:

Subject to the requirements of the Insurance Act and the Statutory Powers Procedures Act, the adjudicator may on such terms as he or she considers just:

(a) Set aside any time limit set out in these Rules for doing any act, serving any notice, filing any document or holding any hearing.

(b) Decide that any Rule does not apply in respect of a proceeding.

The parties referred to the following authorities:

Leone v. State Farm Mutual Automobile Insurance Co., (February 10, 2012) FSCO A11-002196 (Arbitrator J. Rogers) (Leone);
Cornie v. Security National Insurance Co., 2012 ONCA 837, 2012 CarswellOnt 15019 (also known as Hurst v. Aviva) Ontario Court of Appeal (Cornie);
Smith v. Co-operators General Insurance Co., 2002 SCC 30, [2002] 2 S.C.R. 129 (Smith);
Zeppieri v. Royal Insurance Co. of Canada, (February 17, 1994) OICA-005237;
Zeppieri v. Royal Insurance Co. of Canada, (December 22, 1994) OIC P-005237 (Zeppieri);
Mohammed-Amin v. RBC General Insurance Co., (June 25, 2007) FSCO A06-002188 (Amin);
Couraud v. Co-operators General Insurance Co., (October 31, 1994) A-006346, 1994 CarswellOnt 4972. (Couraud);
Navage v. Pilot Insurance Co., June 17, 2005, FSCO A95-000168, 2005 CarswellOnt 8344 (Navage);
Howden v. Pembridge Insurance co., November 30, 2003, P02-00031, 2003 CarswellOnt 6511 (Howden);
Ginette Lacroix and Halifax Insurance Company FSCO A00-001015, February 29, 2001;
Bailey and CAA Insurance Company (OIC A001139, October 29, 1992);
Simon Ponte v. Economical Mutual Insurance Company, FSCO A10-000970, December 6, 2010 which also refers to the decision in Amorini v. Select Coffee Roasters Inc. case 2001 CanLII 62759 (ON SC), [2001] O.J. No. 581;
Brian McCallum and Economical Insurance Company, FSCO A99-001169 Arbitrator K. Julaine Palmer, November 21, 2000;
Greta Wachmenko v. Canada Life Casualty Insurance, FSCO A00-000446, July 20, 2001;
Matilda Downey vs State Farm Mutual Automobile Insurance Company, FSCO A01-001603.

FACTS NOT IN DISPUTE

The First Mediation on July 4, 2013

The Insurer denied the Applicant’s claim for accident benefits on December 22, 2010. The Applicant’s former representative filed an Application for Mediation on August 23, 2012. The mediation was then scheduled for July 4, 2013,⁴ 315 days after the Application for Mediation was filed.

On July 3, 2013, the Insurer received a call from the Applicant’s representative who advised they had not been able to contact the Applicant.⁵ The Adjuster then contacted the Mediator to advise that she had a call from the representative and the mediation would have to be cancelled as the Applicant would not be present.

The Adjuster noted in her log notes⁶ dated July 3, 2013, that she learned the day before the mediation that as the legal representative for the Insured could not locate the Applicant, the mediation scheduled for July 4, 2015 was to be rescheduled. She noted further in the log notes that State Farm wanted the mediation to be rescheduled and have the Applicant present as this matter involved a s. 53 denial, which involves an allegation that the Applicant has misrepresented a material fact.

On July 4, 2013, the Mediator, the Applicant’s representative and State Farm attended the mediation by telephone. As expected, the Applicant did not attend the mediation. State Farm advised it was not willing to fail the mediation and wanted the mediation rescheduled.⁷ The Applicant’s representative at the time of the mediation and State Farm’s representative agreed to reschedule the mediation to August 15, 2013.⁸

The mediation was adjourned to August 15, 2013 with the parties’ consent. The Applicant in her submission of June 17, 2015 highlighted the importance of the fact that the Mediator did not decide to fail mediation at this point but rather agreed with the parties to provide an extension and therefore adjourned the mediation.

The Rescheduled Mediation on August 15, 2013

The mediation was to proceed at 9:00 a.m. on August 13, 2015. The Applicant was not in attendance. The representative for the Applicant had indicated that she could not locate the Applicant.

The Adjuster noted in her log notes that she requested the mediation be cancelled due to the Applicant’s non-participation in the process. The Adjuster noted being advised by the Mediator that they could not cancel the mediation. They could only move to resolve or fail the mediation.

The Insurer maintains that having no other choice other than to either resolve or fail the mediation, that the Adjuster agreed to fail the Mediation.⁹

The Failed Report of Mediator

On August 23, 2013, a Report of the Mediator was issued declaring the mediation had failed.¹⁰ The report states it is issued under section 280(7) and (8) and Rule 21.1(b) of the Code and confirms the prescribed or agreed time for mediation of the issues in dispute has expired, no settlement has been reached and mediation has failed. The report also states none of the issues were resolved.

On October 9, 2013,¹¹ 45 days after the failed Report of Mediator was issued, the former representative filed an Application for Arbitration for all issues in dispute.

On November 8, 2013, the current legal representative filed a second Application for Arbitration to protect the rights of the Applicant. The Application was signed by the Applicant. The Application for Arbitration was done within 90 days of the issuing the Report of Mediator.

The parties agree that the mediation was scheduled twice and that the Applicant failed to attend on both occasions. There is also agreement that a failed Report of Mediator was issued. As outlined below, there is agreement that the parties agreed to extend the time for Mediation by scheduling the second mediation to August 15, 2013.¹²

The Insurer concedes that State Farm did not request an amendment to the Report of Mediator, dated August 23, 2013.¹³

DISPUTED FACTS

What is disputed are the circumstances surrounding the issuance of the failed Report of Mediator and whether the failed Report of Mediator was correctly issued.

The Insurer maintains the Mediator refused to cancel the mediation on August 15, 2013. It was only after the Mediator had stated to the Adjuster that there were only two options being to “resolve or fail” that the Adjuster had no choice but to agree to fail the mediation. The Insurer maintains that State Farm protested the Mediator’s decision to issue the failed Report of Mediator but was overruled by the Mediator. It thus agreed to fail all issues.¹⁴

The Applicant’s representative argues the Adjuster’s Supplementary Affidavit, dated May 29, 2015, is misleading and should not be considered in evidence. He states that the statement in the Supplementary Affidavit, dated May 29, 2015, post-dates the entry in the Adjuster log notes of August 15, 2013. The Supplementary Affidavit states the Adjuster was left with no option but to accept the mediation as failed. The August 15, 2013 log notes indicate the Insurer consented to the Mediator issuing a failed Report of Mediator. He urges that the August 15, 2013 log notes reflect an agreement to fail the mediation and the log notes are more probative than the Supplementary Affidavit.

In support of its position, the Insurer relies on Rule 17 of the Code which requires the Applicant and its representative to participate in the mediation in good faith. Rule 17.2 states that appointing a representative does not relieve an Applicant from participating in the mediation and providing instructions to the representative. Most important, under Rule 17.3 where a party does not comply with Rules 17.1 and 17.2, the Mediator may:

a) adjourn the mediation on such terms as he or she considers appropriate; or

b) report to the parties that mediation did not take place. (Emphasis added)

In this case, the Insurer states that the Mediator did neither of these things, and chose to fail the mediation. This fact is a pivotal point under which the entire motion hinges. The Insurer maintains the failed Report of Mediator should not have been issued as it is contrary to Rule 17.3 of the Code and the Insurance Act. The Insurer agrees that the time for mediation had expired and no settlement had been reached but disagrees that the mediation had failed. Mediation did not fail because mediation did not take place, and mediation did not take place because the Applicant did not participate.

The Insurer submits further that the law is clear that Arbitrators have jurisdiction to determine whether or not mediation has failed, the contents of a Report of Mediator are not conclusive and that either party to a mediation retains the right to challenge the conclusions reached in the report. The Insurer cites the Lacroix decision in support of this position stated as follows:¹⁵

It has long been decided at the Commission that a report of mediator is not conclusive. As Arbitrator Mackintosh found in Bailey and CAA Insurance Company (OIC A001139, October 29, 1992):

Either party to a mediation must retain the right to challenge the conclusions reached in the Report of Mediator. This is especially so when participation in mediation is mandated.

The Applicant takes a different view of the August 15, 2013 mediation. The Applicant’s position is the mediation had failed. First, as per s. 280(7) of the Insurance Act, the Mediator had an opinion that the time limit for mediation including any extension had expired and no settlement had been reached. The Mediator had an opinion that this would not come to a resolution because the dispute involved a s. 53 denial. Section 53 of the new Schedule provides that an Insurer may terminate the payment of benefits to an insured person if the insured person has willfully misrepresented material facts with respect to the application for the benefit. The Mediator issued the report on basis of the opinion that settlement could not be reached.

Second, the Mediator, before failing the mediation, sought consent from the Insurer and the former legal representative to fail the mediation and obtained agreement to fail the mediation. The Applicant relies on the August 15, 2013 Adjuster’s log notes which state: “…. Therefore, agreed to fail all issues”.

The Applicant maintains the opinion of the Mediator is crucial to determine if a mediation has failed.

Third, the Applicant’s representative submits that in this case the Applicant was not aware that there was a mediation scheduled on July 4, 2013 nor was she aware of the adjourned mediation date scheduled on August 15, 2013. Had she known of these dates she would have fully participated in the mediation. I agree with the Insurer that there is no evidence that if the Applicant had given her representative notice of her change of addresses she would have attended and on this basis, I give no further consideration to this issue.

Lastly, the Applicant in the additional submissions, dated August 28, 2015, submits that the Report of Mediator is final and binding on all parties. No case however was cited in support of this position.

Authorities

The Insurer maintains the issue of a failed mediation is a question of mixed fact and law.

Both parties agree that subsection 281(2) of the Insurance Act and Rule 21.3 of the Code prohibit the commencement of an Application for Arbitration unless mediation was first sought, and mediation failed.

Section 281(2) states:

Rule 21 of the Code provides that:

No party may bring a proceeding in any court, refer the issues in dispute to an arbitrator, or agree to submit an issue to private arbitration unless mediation was sought and has failed.

The Applicant relies on the decision of Arbitrator Rogers in the Leone¹⁶ case which stands for the proposition that where an insured person has submitted an Application for Mediation but there is a long delay between the filing of the Application for Mediation and appointment of a Mediator, the mediation is deemed to have failed after 60 days, and the insured person can submit an Application for Arbitration without participating in a formal mediation.

The Insurer explains that Leone was cited with approval by the Ontario Court of Appeal in Cornie and Security National Insurance Co. (also cited as Hurst and Aviva). In Cornie, the Ontario Court of Appeal was asked to decide whether insured persons who had filed Applications for Mediation and whose disputes were not mediated within 60 days, could commence court actions despite the fact that no mediation had taken place. In Cornie, the Application for Mediation was filed with the regulator, the parties waited 60 days and then commenced a court action although no Mediator had been appointed. The Court of Appeal ruled that the claimants could by-pass mandatory mediation and proceed directly to arbitration if the mediation does not occur within 60 days from the date that the Application for Mediation is filed.

The Insurer submits that where mediation has not occurred within 60 days within the filing of the Application for Mediation, it is deemed failed. Then the insured has a right to submit an Application for Arbitration or issue a statement of claim. The Insurer maintains this is good law.¹⁷

State Farm submits however that both Cornie and Leone are distinguishable on their facts from the present case. In the present case, in contrast to Cornie and Leone, mediation was scheduled, and rescheduled, on consent between State Farm and the Applicant’s legal representative. Further, s. 280(5) of the Insurance Act provides that the parties may by agreement extend the time for the completion of the mediation process, even if the time for completion has expired. This is what occurred in this case. The timeline for mediation was extended on consent, and mediation was therefore not “deemed failed” sixty days after the Application for Mediation was filed. The parties had agreed to extend the time for mediation¹⁸ and when that occurs there is no deemed failure 60 days after the submission of the Application for Mediation.¹⁹ The Insurer maintains this is a key distinguishing point that the time for mediation was extended on consent. Moreover, the fact that the mediation was extended on consent aligns more closely with the facts in the Couraud case which is a pivotal case for the Insurer.

The Insurer agrees the time for mediation had expired and no settlement was reached, but based on the Couraud case and s. 280(4), the inquiry does not end. The Mediator must inquire into the issues in dispute and attempt a settlement. This did not happen in this case because the Applicant was not present and the representative could not take instructions. Further, a Mediator cannot form an opinion that mediation will fail merely at the request of a party. Parties have to give a Mediator an opportunity to fulfill obligations to make preliminary inquiries into settlement. Before forming the opinion that mediation will fail, a Mediator has a primary obligation, as outlined in the Couraud case and set out in s. 280(4) of the Insurance Act, to “…enquire into the issues in dispute and attempt to effect a settlement of as many of the issues as possible….”²⁰

Further,

The parties must give the mediator the opportunity to fulfil his or her obligations, at least to the extent of making preliminary enquiries and efforts at settlement.

The Act obliges a mediator to enquire into a case and attempt to settle as many of the disputed issues and [sic] possible. ²¹

I find the Couraud case persuasive on this point and based on the facts and the Applicant’s failure to participate in the mediation process, this precluded the Mediator from inquiring into the issues in dispute, attempting to effect a settlement and consequently, the Mediator could not form an opinion that mediation would fail. On this basis I also find that the statement in the failed Report of Mediator that the issues were resolved was incorrect and not supported by the facts as they occurred.

The Applicant offers a different perspective on the application of the Couraud case and the findings in Leone and Cornie. The Applicant states that Justice Juriansz in Cornie²² made the following comments:

As can be seen, the section does not require that a person await the receipt of a mediator's report before commencing a proceeding. All that is required is that mediation has been sought and mediation has failed. I reiterate that s. 280(7) provides that one of the ways in which mediation can fail is that the 60 days prescribed for mediation expire.

In the present case, the Applicant agrees the 60 day time period does not apply, but as

Mr. Justice Juriansz stated, section 281(2) of the Insurance Act does not require receipt of

a Mediator’s report before starting a proceeding. He states: ²³

Subsection 280(8), it seems to me, has no bearing on the operation of s. 281(2). Whether s. 280(8) applies when mediation fails by the expiration of time, and what FSCO must or may do upon the expiration of the 60-day time period are not questions before the court on these appeals. I find it sufficient to observe that the failure of a statutory actor to perform a statutory duty does not eliminate a person's rights granted by the statute. Even if there is a breach of s. 280(8), that breach does not affect the operation of s. 281 (2).

I find and agree with the Insurer that the Leone and the Cornie cases are distinguishable from the case at hand. Furthermore, the facts in this case are more closely aligned to the Couraud case. The non-attendance by the Applicant at both scheduled dates for mediation which were scheduled on consent of both parties well past the 60 days for mediation is crucial and a determinative factor. Unlike the Cornie and Leone case, the Applicant was not present and the time for mediation had been extended on consent. Further, in Cornie, the activity of the regulator resulted in the mediation not being scheduled. In our case, the mediation was scheduled but the Applicant failed to attend. These two cases are distinguishable as there are two different sets of facts and as such not applicable to the case at hand.

Failure to Participate

The Insurer refers to Couraud as the authority for the proposition that where an Applicant does not participate in a mediation proceeding in good faith, the Mediator is entitled to conclude that the mediation never took place. In Couraud, there was a face-to-face mediation where all parties were present but the Insurer and Insurer’s representative walked out within 5 minutes of the start of the mediation and refused to participate. This case is similar to the case at hand in that the Applicant did not participate at all in the mediation. The court stated:²⁴

In my view, parties to a mediation have a concomitant obligation to participate in the process in good faith. I conclude that if a party frustrates and attempts to short-circuit the process, a mediator is free to form the opinion, not that mediation has failed, but that it did not take place… (emphasis added)

Parties must seek mediation before having their disputes adjudicated, as provided under section 281(2) of the Act, above. I find that the parties’ obligations under that requirement must include more than simply filing the designated application forms. I conclude that they are obliged to participate in the mediation process, at least to an extent sufficient to enable a mediator to form an opinion of the case. Otherwise, mediation is reduced to an empty and meaningless formality: a result which surely was not intended by the legislators. (emphasis added)

The Insurer states that the Applicant’s failure to participate in the mediation proceedings means that mediation did not “fail”, but that it did not take place at all.²⁵ As such, State Farm submits that the Mediator did not have the jurisdiction to issue a failed Report of Mediator. In the absence of the Applicant’s good-faith participation in the mediation proceedings, the Mediator ought to have reported that mediation did not take place. The failed Report of Mediator is void ab initio. As the matter was not mediated and failed, the requirements of s. 281(2) of the Insurance Act have not been met and the matter cannot proceed to arbitration.

Further arguments raised include:

The Applicant cannot rely on the findings in Cornie and Leone to argue that the expiry of the time limit for mediation resulted in a failed mediation that opened the door for the Applicant to apply for arbitration. The Applicant must be accountable for her failure to participate in the mediation proceedings.
Permitting this Application to proceed in the face of the Applicant’s failure to participate in the mediation would result in an abuse of process and permit Applicants to exempt themselves from the requirement in Rule 17 of the Code to participate in good faith in the mediation proceedings and to instruct their representatives during the proceedings.
As to an extension of the limitation period, the Insurer maintains the arbitration is time-barred by operation of subsection 281.1(1) of the Insurance Act, which sets out as follows:

281.1 (1) A mediation proceeding or evaluation under section 280 or 280.1 or a court proceeding or arbitration under section 281 shall be commenced within two years after the insurer’s refusal to pay the benefit claimed.

Subsection 281.1(2)(b) creates an exception to the two-year limitation period:

281.1 (2) Despite subsection (1), a proceeding or arbitration under clause 281 (1) (a) or (b) may be commenced … (b) if mediation fails but there is no evaluation under section 280.1, within 90 days after the mediator reports to the parties under subsection 280 (8).

State Farm’s position is that subsection 281.1(2)(b) of the Insurance Act does not operate to extend the limitation period for the Applicant. In these proceedings, the mediation did not “fail”, and therefore the precondition to the application of subsection 281.1(2)(b) is not met.

The Insurer states the Applicant’s claim is now time-barred. State Farm denied her accident benefits claim in its entirety on December 22, 2010, and the Application for Arbitration was filed well beyond the two-year limitation period stipulated by subsection 281.1(1) of the Insurance Act.

Amendment of Mediator’s Report under Rule 23

The final argument advanced by the Applicant is that Rule 23 states that if a party believes that a Report of Mediator is not accurate, the party must notify the Mediator and the other parties in writing within 10 days of receiving the Report with reasons and after considering the reasons and the comments of the parties, the Mediator may issue an amendment to the Report of Mediator, if the Mediator considers it appropriate. The Insurer did not do so in this case and the Applicant maintains the Insurer is barred from advancing an argument now that the failed Report of Mediator is not correct.

The Applicant maintains that Rule 23.1 of the Code provides a remedy to both parties to object or amend the Mediator's report. In this case, the Insurer failed to evoke the remedy available to them. As such, the Insurer has no right to dispute the validity of the Mediator's report. The said report is issued correctly by the Mediator.²⁶

The Insurer maintains it is not estopped from raising the issue now. The fact that the “Insurer did not request an amendment to the Mediator's report pursuant to Rule 23.1 of the Code is not, and cannot be, determinative of the central issue in this case: namely, whether the Report of Mediator stating that mediation had "failed" ought to have been issued in the first place, where in fact, mediation did not take place at all due to the Applicant's failure to participate in the mediation process”. ²⁷

The Insurer submits further that the “Insurer is unaware of any authority, nor has the Applicant cited any authority, for the proposition that a party that does not exercise its rights under Rule 23.1 of the DRPC is somehow barred from raising, at arbitration, the issue of whether or not mediation "failed" on any given issue, or at all”.

ANALYSIS

The Applicant maintains the mediation did fail on the basis that the Mediator had formed an opinion that the mediation would not settle and therefore would fail. I find the facts and cases cited do not support this position. I find the reasoning in Couraud persuasive on this point. The Mediator is to inquire into the issues and try to effect a settlement. There is no evidence that this occurred.

Further, Rule 21(3) of the Code states that mediation has failed when one of two criteria have been met: (a) the Mediator is of the opinion that mediation will fail and notifies the parties; or (b) the time limit for mediation, including any extension, has expired and no settlement has been reached. It is to be noted that the Report of Mediator does not refer to the criteria in (a). Secondly, there is no evidence that the parties were notified that in the Mediator’s opinion the mediation will fail. The Applicant was not present and from the portions of the Adjuster’s log notes read into evidence, it does not appear that any of the issues including a s. 53 denial were ever discussed. The Applicant was absent and with no discussion on settlement, there is no evidence to conclude that the Mediator had an opinion that the mediation would fail.

Further, I find the Insurer’s position persuasive regarding the events of the August 15, 2013 mediation. I agree with the Applicant that the log notes state “Therefore I agree to fail the mediation” and thus lend support that the parties agreed to fail the mediation. However, the inquiry does not end there. The evidence presented, namely the Adjusters log notes and the explanation provided in Affidavit 1 and 2, provide context for that statement. I find that the Insurer was provided only one of two choices, and thus had no choice to agree to fail. I find there was no agreement to fail.

I do not accept the Applicant’s position that the Supplementary Affidavit is misleading. The affidavit is more current in date but it is a sworn document and adds context to the entries in the Adjuster’s log notes. I find the notes substantiate that the Insurer made it clear it wanted the Applicant to be present at the mediation and agreed to extend the time to allow that to happen. Further, the log notes refer to a request to cancel the mediation which was not granted. The Supplementary Affidavit is not misleading but supports the position advanced that the Mediator only offered two choices, resolve or fail, and with no other option chose to “fail” the mediation. I find that the Mediator should have offered a third option under Rule 17.3 being that the mediation did not take place.

I accept the Insurer’s position that based on Couraud, the Mediator must make inquiries and attempt to settle as many of the disputed issues as possible. As stated by the Insurer this never occurred in this case as the participant was not present. I concur the mediation did not “fail”. It did not take place.

Accordingly, the Applicant proceeded to arbitration without meeting the requirements in section 281(2) and Rule 21.3 that before proceeding to arbitration, the mediation must first be sought and failed. The Mediator should have reported to the parties that the mediation did not take place. I find the failed Report of Mediator was issued incorrectly and without jurisdiction. As the mediation did not take place contrary to s. 281(2) of the Insurance Act, the 2 year limitation period has run out and the Application for Arbitration is statute barred.

As to the argument that not pursuing a remedy under Rule 23.1 is a bar to raising this issue now, I find the Insurer is not barred from raising the issue at this stage of the proceedings. The parties did not present any authority for the proposition that a party who does not exercise its rights under Rule 23.1 is barred from raising the issue at arbitration.

Further, not attending the mediation is not compliance with the requirements of s. 281(2) of the Insurance Act. In the case of Amorini, referred to in the Ponte decision, the court was found to have no jurisdiction to hear a case as no mediation had occurred. The court concluded that failure to mediate was not imperfect compliance, it was non-compliance which denied relief against forfeiture under s. 129 of the Insurance Act. The parties to a mediation have an obligation to participate in the process in good faith. To allow an Applicant to by-pass the mediation process by not attending the mediation would I find be an abuse of process. Rule 65.7 of the Code enables an Arbitrator to make an order or give such directions as he or she considers proper to prevent an abuse of process.

Lastly, Rule 81 of the Code does provide the authority to an Arbitrator to dispense with a requirement as long as there are no provisions of the Insurance Act or the Statutory Powers Procedure Act that preclude me from exercising my discretion. No provision has been presented to me that would preclude me from exercising my discretion. In conclusion, the Insurer is not estopped from raising the argument at this stage. The motion is successful. The Application for Arbitration herein is dismissed as the precondition in s. 281(2) of the Insurance Act is not met and the Application is statute-barred under s. 281.1(1).

RESULT

Ms. Pararajasingam’s Application for Arbitration is dismissed as it is statute barred under s. 281.1(1) and 281(2) of the Insurance Act.

EXPENSES:

If the parties are unable to agree on the entitlement to, or quantum of, the expenses of this matter, the parties may request an appointment with me for determination of same in accordance with Rules 75 to 79 of the Dispute Resolution Practice Code.

October 30, 2015

Thérèse Reilly Arbitrator

Date