Neutral Citation: 2015 ONFSCDRS 66 FSCO A12-003770

BETWEEN:

VIKTORIYA GONCHARIK Applicant

and

STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY Insurer

DECISION ON EXPENSES

Before: Dana Hirsh Heard: Written submissions received by November 28, 2014 Appearances: Neritan Ciraku for Ms. Goncharik Jonathan Schrieder for State Farm Mutual Automobile Insurance Company

Background:

The Applicant, Viktoriya Goncharik, made numerous claims against the Insurer arising from a motor vehicle accident that occurred on April 20, 2010. The disputed issues proceeded to arbitration and were heard by Arbitrator Lloyd (J.R.) Richards on August 20, 21 and 22, 2013. On July 29, 2014, Arbitrator Richards issued his written decision with reasons, dismissing the majority of the Applicant’s claims, except for two treatment plans for medical services. In his order of July 29, 2014, Arbitrator Richards reserved any decision on the issue of expenses of the arbitration proceeding.

Subsequently, counsel for the Insurer requested an expense hearing as the parties were unable to resolve the issue of expenses. Both parties agreed to the proposal that the remaining issue of expenses be dealt with through written submissions, and a timetable was established for each party to deliver submissions. All written submissions that the parties wished to be considered were received by November 28, 2014. I subsequently became seized of this matter.

Issues:

Is either party entitled to expenses incurred in respect of the arbitration proceeding under section 282(11) of the Insurance Act¹ and, if so, in what amount?

Result:

The Applicant is liable to pay to the Insurer its expenses in respect of the arbitration proceeding, fixed in the amount of $6,400.00 (inclusive of fees, disbursements and any applicable taxes).

EVIDENCE AND ANALYSIS:

Claim for Expenses by Each Party:

The Applicant is seeking expenses in the total amount of $8,404.25, comprised of the following: approximately $6,921.25 in fees, inclusive of HST (representing about 45 out of a total of 90 hours of legal services), and approximately $1,483.00 in disbursements. The Applicant proposes that she be awarded 50% of her total fees of $13,842.50 based upon her partial success at the arbitration proceeding.

On the other hand, the Insurer is seeking expenses in the total amount of $13,690.50, made up as follows: approximately $12,148.07 in fees (representing about 116 hours of legal services) exclusive of HST, and approximately $1,542.43 in disbursements.

Entitlement to Expenses:

Subsection 282(11) of the Insurance Act provides that an arbitrator may award to either party all or part of such expenses incurred in respect of an arbitration proceeding, according to criteria prescribed by regulation (in this case, the Expense Regulation²). Rule 75.2 of the Dispute Resolution Practice Code (Fourth Edition, Updated – January 2014) (the “Code”) provides that an arbitrator will consider only the criteria referred to in the Expense Regulation. For purposes of this expense hearing, the relevant criteria are:

each party’s degree of success in the outcome of the proceeding;
any written offers to settle made in accordance with Rule 76; and,
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.

The parties do not agree on the applicability or weight to be given to the relevant criteria.

Each Party’s Degree of Success in the Outcome of the Proceeding

In this case, the most important of the relevant criteria is the relative success of the parties (i.e., each party’s degree of success in the outcome of the proceeding). The Insurer was almost wholly successful, with the exception of Arbitrator Richards’ finding that two treatment plans, in the total amount of $1,691.22, were reasonable and necessary, as well as awarding interest on any overdue payments in relation to that amount. All other claims of the Applicant were dismissed.

The Applicant submits that many previous expense decisions have already established that it is not mandatory for the Applicant to be successful in order to obtain an order for expenses, citing McCormick and Economical Mutual Insurance Company.³ However, the decisions which the Applicant is relying upon dealt with a previous Expense Regulation which allowed an arbitrator to take into consideration any other matter related to the proceeding that the adjudicator considered relevant to the issue of whether an award of expenses was justified. The current Expense Regulation does not provide an adjudicator with the same discretion.

In relation to the caregiver benefits claimed, Arbitrator Richards found that Ms. Goncharik was not substantially disabled from performing her caregiver duties at the time State Farm terminated the benefit. In his decision, he found the Applicant’s evidence to be inconsistent concerning the caregiving that she provided to her daughter.

With respect to attendant care benefits, Arbitrator Richards found that the Applicant had not met the burden of proof to demonstrate that she required attendant care services for the period claimed. For both the caregiver and attendant care benefits claimed by the Applicant, Arbitrator Richards found that the medical evidence relied upon by the Applicant was unconvincing and insufficient to make a finding in her favour.

In relation to the housekeeping and home maintenance expenses claimed by the Applicant, Arbitrator Richards found that she did not suffer a substantial inability to perform her housekeeping and home maintenance services. The evidence provided on behalf of the Applicant was insufficient to make a finding in her favour.

As noted above, Arbitrator Richards found two treatment plans for medical services, dated November 16, 2011, to be reasonable and necessary as he felt that the treatment recommended in the plans appeared to be appropriate to the goals sought in Ms. Goncharik’s recovery. However, he found that a third treatment plan for medical services dated November 16, 2011, was not reasonable and necessary as it was vague about its purpose and the Applicant provided no evidence to assist him in clarifying the plan’s aims.

Of the four remaining treatment plans recommending various assessments, in the total amount of $4,856.50, Arbitrator Richards found none of them to be reasonable and necessary as they were duplicative of similar, earlier assessments.

Lastly, the Applicant was unsuccessful in her claim against State Farm for a special award.

Written Offers to Settle

Based on the outcome of the hearing and for the reasons stated below, I find that this criterion has no impact on my determination of an expense award in this case.

The Applicant made a written offer to settle, in the amount of $10,000.00 “plus interest and all collateral set-offs under the Insurance Act; her costs as agreed upon by the parties or as fixed by the hearing arbitrator together, with harmonized sales tax on said costs”.⁴ That offer was not accepted by the Insurer, and as it turns out, it was for an amount substantially greater than that awarded to the Applicant.

Prior to the commencement of the arbitration hearing, State Farm made an informal counteroffer to settle the Applicant’s case on a full and final basis for $5,000.00.⁵ Because State Farm did not serve a formal written offer with respect to the issues in dispute, it did not comply with Rule 76 of the Code and does not have to be considered in this analysis. Furthermore, since the offer related only to a final settlement of all claims for accident benefits, it is difficult to relate its value to the outcome of these proceedings.

Whether Conduct of a Party or a Party’s Representative Tended to Prolong, Obstruct or Hinder the Proceeding

The Applicant submits that counsel for the Insurer inappropriately introduced reports from the Applicant’s previous accident of August 26, 2008 without the Applicant’s consent, and that this tended to prolong, obstruct or hinder the proceeding. There is nothing on the record to show that the Insurer acted improperly or that its conduct prolonged the proceedings.⁶

The Applicant further submits that approximately 30 days prior to the commencement of the arbitration proceeding, counsel for the Insurer advised the Applicant by letter dated July 19, 2013 that the Insurer intended to call 36 witnesses and/or would be relying on their reports.⁷ The Applicant submits that this resulted in unnecessary preparation on the Applicant’s part since counsel for the Insurer did not call any of the witnesses on his list. While this conduct did not prolong the hearing, it did tend to obstruct or hinder the proceeding, by making it harder for the Applicant to know the case she had to meet, and as such, it is a factor that I will take into account when considering the Insurer’s claim for expenses.

The Insurer submits that the Applicant prolonged the proceedings by not promptly providing State Farm with requested productions and that, as a result, State Farm spent a considerable amount of time pursuing documentary disclosure. There is insufficient evidence on the record to substantiate this submission.

Entitlement to Expenses – Conclusion:

Primarily as a result of the overwhelming success of the Insurer, I find that the Insurer is entitled to its expenses. However, taking into consideration that the Applicant was marginally successful in pursuing her claim for medical benefits, and the conduct of the Insurer in failing to identify witnesses that it actually intended to call at the hearing, the total expense amount awarded to the Insurer will be slightly reduced.

Quantum:

Fees

The hearing lasted approximately two and a half days. This was a relatively simple case with only three witnesses and limited documentary evidence. Ultimately, it was a case that turned largely upon the credibility of the Applicant and the presence or absence of reliable corroborating evidence.

The Insurer is seeking expenses related to a total of about 116 hours of legal services (approximately 65 hours by Mr. Schrieder, 9 hours by Ms. Populus, a lawyer, 27 hours for Ms. Woodward, a law clerk, 8 hours for Ms. Wright, a law clerk, and 7 hours for Mr. Dunlop, a student-at-law).

With respect to preparatory work prior to the hearing, given the nature of the issues in dispute, 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 all legal services in this case (including, but not limited to, reviewing the Application for Arbitration, preparing a Response, preparing for and attending the pre-hearing discussion, exchanging documentation and preparing for and participating in the hearing) would be approximately 60 hours. About half of this relates to work that was done by Mr. Schrieder, and most of the other work was completed by law clerks. At the appropriate Legal Aid Tariff rates,⁸ this would be equivalent to legal fees of about $5,500.00, inclusive of HST. Taking into consideration the marginal success of the Applicant, and the conduct of the Insurer as noted above, I shall fix the fees at $5,000.00, inclusive of HST.

Disbursements

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. Although the individual disbursements claimed by the Applicant were somewhat different than those claimed by the Insurer, I note that the total amount of disbursements claimed by both parties was quite similar. Neither party provided detailed written submissions or extensive documentation, nor did either party challenge the other party’s quantum of disbursements.

The Insurer is seeking reimbursement for the following disbursements:

Description	Amount
Conduct money for Dr. A. Kjalil	$ 53.00
Conduct money for Dr. Amir Owliaei	53.00
Photocopying/Printing Expenses	1,371.26
Courier Expenses	65.17
Total	$1,542.43

The disbursements claimed are all types of disbursements that can be permitted under the Expense Regulation. Given the nature and amount of these claims, I am generally prepared to accept these expenses, even in the absence of detailed written submissions or extensive documentation. However, in the absence of particulars or any justification from the Insurer, I am not permitting conduct money for persons who were not actually called as witnesses at the hearing.

Thus, of the disbursements claimed on behalf of the Insurer, based on the written submissions of the parties, I find that a total of about $1,400.00, inclusive of HST would be reasonably permitted under the Expense Regulation.

Total Expenses

Having considered the relative complexity of this matter, the time spent, the applicable Legal Aid Tariff rates, the written submissions of the parties, and the maximum amounts permitted under the Expense Regulation, I find it appropriate to fix the Insurer’s expenses at $6,400.00, inclusive of fees, disbursements and any applicable taxes.

CONCLUSION:

For the reasons set out above, the Applicant shall be ordered to pay to the Insurer its expenses in respect of this arbitration proceeding, fixed in the amount of $6,400.00 (inclusive of fees, disbursements and any applicable taxes).

March 27, 2015

Dana Hirsh Arbitrator

Date

Financial Services Commission of Ontario