Ihsan Jarabat v. State Farm Mutual Automobile Insurance Company, 2015 ONFSCDRS 229

Financial Services Commission des

Commission services financiers

of Ontario de l’Ontario

Neutral Citation: 2015 ONFSCDRS 229

FSCO A13-014028

BETWEEN:

IHSAN JARABAT

Applicant

and

STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY

Insurer

DECISION ON A MOTION

Before:

Arbitrator Jeffrey Shapiro

Heard:

By written submissions due August 4, 2015

Appearances:

Ms. Rania Hafez for Mr. Ihsan Jarabat

Mr. Andrew Grayson for State Farm Mutual Automobile Insurance Company

Issues:

The Applicant, Mr. Ihsan Jarabat, was injured in a motor vehicle accident on May 19, 2011 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 the Applicant, through his 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 issues in this Motion are:

Is Mr. Jarabat entitled to withdraw this Application for Arbitration pursuant to Rule 70.3 of the Dispute Resolution Practice Code (“the Code”)?²
If so, pursuant to Rules 70.3 and 75 of the Code, what expenses, if any, is State Farm entitled to recover as a term of the order granting the withdrawal?

Result:

Mr. Jarabat is permitted to withdraw his Application for Arbitration.
State Farm is entitled to its expenses of this Arbitration proceeding, fixed in the sum of $2,000.00 (inclusive of fees, disbursements and H.S.T.).

EVIDENCE AND ANALYSIS:

Background

On May 19, 2011, the Applicant was involved in a motor vehicle accident, and on May 25, 2011 submitted a claim for accident benefits.

The Applicant participated in an Examination Under Oath (“EUO”) on August 27, 2012, at which time he gave undertakings. State Farm also made a request for answers to the undertakings by letter dated September 17, 2012 in accordance with Section 33 of the Schedule. The Applicant failed to answer the undertakings and request.

On November 13, 2013, the Applicant filed the within Application for Arbitration (“Application”), seeking Income Replacement Benefits (“IRB”) and various medical benefits. State Farm claims that its exposure on the IRB alone was $41,600.00. State Farm responded, and on February 21, 2014 requested further documents from the Applicant which included and expanded on the undertaking requests. The Applicant failed to provide those documents.

The first Pre-Hearing was held on November 25, 2014 before Arbitrator Newland. The Applicant provided his Notices of Assessment which State Farm submits showed, inter alia, he continued to declare annual income after the accident, and at a rate higher than prior to the accident, which State Farm claims was inconsistent with his EUO testimony, “…and hence, [he] did not suffer a loss to declare IRBs.” State Farm submits that “if he had provided these returns after his EUO, but before the Arbitration Application, he would have known he could not declare IRBs, making the Application unnecessary in total or at least for IRBs.” Arbitrator Newland proceeded to order the Applicant to produce documents in compliance with his EUO undertakings, and various financial documents.”³

A first resumption of the Pre-Hearing was held on February 26, 2015. As the Applicant had not produced the documents, Arbitrator Newland gave the Applicant one more chance to produce the documents by March 27, 2015.⁴

At the second resumption of the Pre-Hearing on March 31, 2015, the Applicant still had not produced the requested documents. Accordingly, at State Farm’s request, Arbitrator Newland then ordered a submission schedule for State Farm to file a Motion regarding the missing productions, and for the Applicant to respond. In compliance with the schedule, State Farm in turn filed its Motion by April 15, 2015, seeking, inter alia, dismissal of the Application and/or costs. The Applicant, however, did not respond by April 29, 2015, as required, but did attempt to settle the case, and then advised that the Applicant may obtain new legal counsel, which never occurred. Ultimately, State Farm requested a decision on its Motion.

On June 16, 2015, prior to a decision issuing on the production Motion, the Applicant’s representative emailed that her client was seeking to withdraw his Application, on a without costs basis. Based on various emails between the representatives and the undersigned, I made clear to the representatives that a request to withdraw would be under Rule 70.3 (see below), i.e. an opposed request to withdraw, and subject to terms such as cost consequences.

On July 10, 2015, the Applicant served his request to withdraw, without costs, accompanied by a Form F.⁵ On July 16, 2015, by email, followed by a Pre-Hearing letter, I provisionally granted the Applicant’s Motion to Withdraw, pending further information from the parties, and set a schedule for submissions, if any, on expenses. State Farm confirmed that it opposed the withdrawal without costs, and on July 23, 2015 filed its submission on expenses.

The Applicant’s response on expenses, if any, was due on July 30, 2015. No submission has been received, nor did I receive a response to my August 6, 2015 inquiry if one had been filed. In sum, State Farm argues:

… the Respondent has continuously attempted to move this matter forward, including attending at an Examination Under Oath and three hearings at FSCO. Furthermore, the Respondent has continually attempted to accommodate the Applicant, despite incurring greater costs. However, though the Applicant initiated the proceedings, he has not only failed to co-operate with the Respondent, he has also failed to comply with undertakings given at his Examination Under Oath and the Order of Arbitrator Newland. The Respondent submits that the Applicant obstructed and hindered the proceeding by failing to comply with undertakings and Orders of the Arbitrator. The Respondent submits that ultimately it was shown that the Respondent should have never commenced this Arbitration…⁶

Analysis

Motions to Withdraw are governed by Rule 70 of the Code, which provides as follows:

Withdrawal

70.1 A party may seek permission to withdraw all or part of a dispute by:

(a) serving a request to withdraw on all parties; and

(b) filing the request to withdraw together with a Statement of Service in Form F; or …

70.2 An adjudicator may permit a party to withdraw all or part of a dispute where the parties agree.

70.3 Where a party does not agree to the withdrawal, an adjudicator may:

(a) permit the withdrawal on such terms and conditions as he or she considers just;

(b) award expenses to either party as permitted by Rule 75 and following.

In short, the Applicant’s opposed request to withdraw is specifically addressed by Rule 70.3, and thus, I grant the Motion to withdraw, but with terms. Based on the submissions and record before me, the appropriate term(s) are expenses, which I address below.

EXPENSES:

Entitlement to Expenses

The criteria for awarding expenses in respect of an Arbitration proceeding are prescribed by subsection 12(2) of O. Reg. 664 (the Expense Regulation),⁷ which provides as follows:

An arbitrator shall, under subsection 282 (11) of the Insurance Act, consider only the following criteria for the purposes of awarding all or part of the expenses incurred in respect of an arbitration proceeding:

Each party's degree of success in the outcome of the proceeding.
Any written offers to settle made in accordance with subsection (3).
Whether novel issues are raised in the proceeding.
The conduct of a party or a party's representative that tended to prolong, obstruct or hinder the proceeding, including a failure to comply with undertakings and orders.
Whether any aspect of the proceeding was improper, vexatious or unnecessary.
[Omitted]
[Omitted]

The relevant criteria in this case are items 1 (degree of success), 4 (conduct prolonging the proceeding), and 5 (improper, vexatious). With respect to item 1, there is no dispute that State Farm was entirely successful at Arbitration.

With respect to item 4, I find the Applicant did prolong the proceeding by failing to provide productions in a timely manner. The result of that delay, however, appears to be a relatively small portion of the expenses incurred by the Insurer. On the flipside, the Applicant gave notice of his intention to withdraw his Application significantly prior to the Arbitration.

With respect to item 5, State Farm submits the IRB claim is frivolous as defined by the decision of Fedoseev and RBC General Insurance Company,⁸ which it paraphrases, as follows:⁹

FSCO proceedings are “frivolous” or “vexatious” where a litigant willfully brings an unmeritorious claim, conducts the action deceptively or maliciously, or fails to fulfill a duty or obligation in a manner inconsistent with an honest mistake. [Emphasis added.]

Assuming that the claim is unmeritorious, I do not have evidence to conclude it was willfully brought as an unmeritorious claim. Additionally, there remained other benefits at issue, for which no such allegation is made.

Quantum of Expenses

Fees

In determining the appropriate quantum of expenses, the objective is to fix an amount that is fair and reasonable given the number of issues, their complexity and the amounts in dispute.¹⁰ In so doing, a pragmatic, broad-stroke approach (rather than a line-by-line assessment) is frequently favoured.

In Reid and ING Insurance Company of Canada, ¹¹ Arbitrator Killoran held, with respect to Arbitration legal expenses, that:

The relationship between insurer and insured is a contractual one. The insured is entitled to access the dispute resolution process at FSCO as a result of that contract. The Insurance Act and its regulations must be interpreted in such a way as to uphold the protective and remedial nature of the legislation of which it follows.

In Halim and Security National Insurance Co./Monnex Insurance Mgmt. Inc.,¹² Director’s

Delegate, Lawrence Blackman held:

I find that these expense criteria do not exist in a vacuum segregated from the overall legislative intent. Rather, the criteria are defined by and help define the broader, overarching legislative intentions, including consumer protection, as set out by the Supreme Court of Canada in Smith v. Co-Operators General Insurance Co., 2002 SCC 30, [2002] 2 S.C.R. 129, which encompasses a fair and reasonable measure of access to justice.

State Farm submitted a Bill of Costs claiming fees of $6,979.76, which it submits is reasonable given the $41,600.00 exposure it faced on the IRB. I would like to briefly address the three decision references provided by the Insurer. Although all are relevant, none are squarely on point.

Yogesvaran and State Farm Mutual Automobile Insurance Company¹³ considered costs thrown away in preparing for an Arbitration Hearing which was adjourned due to a Motion. The Arbitrator found that the Insurer acted unreasonably in bringing the Motion close to the Hearing, causing a duplication of the hearing preparation. Ms. Yogesvaran was awarded expenses of $6,034.20. In this proceeding, while I accept that the duplication of attendance at two Pre-Hearing Resumptions was due to the Applicant’s conduct, it is a relatively small part of the expenses sought. Likewise, no adjournment of the scheduled Hearing was ever sought.

The $10,701.50 expenses award in Lo-Papa v. Certas Direct Insurance Company¹⁴ involved two lawyers preparing for and attending an Arbitration Hearing. In this proceeding, no Arbitration took place. Rather a production Motion was filed regarding overdue productions, which drew a request to withdraw the entire matter.

Fedoseev involved a Motion to dismiss due to a missing Applicant. Rather than dismissing the Motion, the Arbitrator found the Applicant’s non-involvement constituted a ‘constructive withdrawal’ of the claim. The Arbitrator awarded expenses of $1,000.00.

While the Applicant did not make submissions, I note that the Applicant stated his intention to withdraw the Application long prior to the Hearing, and did not file a response to the Motion on productions or require it to go to a decision, so as not to prolong the matter. While those factors do mitigate the amount of an award, other factors make granting the withdrawal on a without cost basis unreasonable. I do believe the Insurer is entitled to some costs. While this matter was voluntarily withdrawn, the Insurer reasonably needed to, inter alia, attend an initial Pre-Hearing, two resumptions of the Pre-Hearing, and prepare a written Motion regarding productions.

In applying all the considerations above, I fix costs at $2,000.00, inclusive of H.S.T.

Disbursements

State Farm seeks a single disbursement of $3,000.00, which represents State Farm’s filing fee. Permissible disbursements are provided for in the Schedule to the Expense Regulation. While Section 7 of the Expense Regulation provides that the filing fee may be awarded where an Applicant has refused or failed to submit to an Insurer’s Examination, or refused or failed to provide material required for an Insurer’s Examination, there is no evidence that those circumstances apply here.¹⁵ Thus, the disbursement is not recoverable.

Conclusion

Having considered the above, I find that State Farm is entitled to its expenses, fixed in the amount of $2,000.00 for fees inclusive of H.S.T., and no award for disbursements.

November 4, 2015

Jeffrey Shapiro

Arbitrator

Date