John Chernet v. RBC General Insurance Company, 2016 ONFSCDRS 146

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

Neutral Citation: 2016 ONFSCDRS 146

FSCO A13-000932

BETWEEN:

JOHN CHERNET

Applicant

and

RBC GENERAL INSURANCE COMPANY

Insurer

DECISION ON EXPENSES

Before: Arbitrator Jeffrey Rogers

Heard: By written submissions, completed on April 28, 2016

Appearances: Mr. Martin Zatovkanuk, solicitor for Mr. Chernet

Mr. Cary Schneider, solicitor for RBC General Insurance Company

Issues:

The Applicant, John Chernet, was injured in a motor vehicle accident on March 31, 2010. I dealt with his claims for statutory accident benefits under the Schedule¹ in a decision dated October 1, 2015. I reserved my decision on the issue of expenses. The parties were unable to resolve the issue on their own and requested this further hearing. The issues are:

1. What is the amount of expenses to which Mr. Chernet is entitled in respect of the Arbitration?

2. Is either party entitled to its expenses of this further hearing, and if so, in what amount?

Result:

1. Mr. Chernet is entitled to his expenses of the arbitration in the amount of $39,766.72.

2. RBC is entitled to its expenses of this hearing in the amount of $800.00.

3. RBC shall therefore pay Mr. Chernet expenses of the arbitration in the amount of $38,966.72.

EVIDENCE AND ANALYSIS:

Mr. Chernet claims expenses of the arbitration in the amount of $129,251.72, comprised of $77,340.00 for fees and $51,911.72 for disbursements. RBC concedes that Mr. Chernet is entitled to recover his reasonable fees and the disbursements, as allowed by the Expense Regulation.² RBC submits that Mr. Chernet’s claim for fees is inflated, excessive and unreasonable and that some of the claimed disbursements are unreasonable or exceed the maximum permitted by the Expense Regulation. For the reasons that follow, I accept RBC’s submissions. I conclude that Mr. Chernet is entitled to $38,966.72.

I will first deal with the claim for fees, setting out the relevant criteria and then applying them to the specific claim. I will then address the claim for disbursements.

Fees:

Rule 75 of the Dispute Resolution Practice Code sets out the criteria that an arbitrator must consider in awarding expenses. As will be seen below, the criteria relevant to assessing Mr. Chernet’s entitlement to expenses are his degree of success and the conduct by his representative during the hearing that tended to prolong the proceeding.

I reject RBC’s submission that Mr. Chernet’s offer to settle is relevant. RBC did not make an offer. Therefore, the hearing was necessary despite the fact that Mr. Chernet offered to settle for more than he eventually recovered. An offer is only relevant if it shows that it would have been more reasonable to accept the offer than to proceed to a hearing.

(a) Degree of Success

The issues in dispute were catastrophic impairment (CAT), income replacement benefits (IRBs), housekeeping and home maintenance benefits (HK), attendant care benefits (ACBs), medical benefits, and the cost of examinations or assessments. Mr. Chernet also claimed a special award.

Mr. Chernet was successful on the issues of CAT, IRBs, HK and ACBs. I reject RBC’s submission that the result in these issues should be construed as mixed success.

I found that Mr. Chernet was CAT due to mental disorder. I therefore found it unnecessary to make a decision on his alternate theory of CAT. That does not mean that Mr. Chernet wasted time pursuing the alternate theory. RBC opposed any CAT finding. Mr. Chernet’s alternate theory was a viable one. It was prudent and reasonable for him to pursue all viable theories.

Similarly, I found that the accident did not cause some of Mr. Chernet’s injuries as he claimed. Rather, the accident aggravated or exacerbated pre-existing conditions. RBC disputed all theories of causation. As with CAT, it was prudent and reasonable for Mr. Chernet to pursue all viable theories.

Although Mr. Chernet recovered less than the amounts he claimed for HK and ACBs, the amounts he recovered were significant. There is no evidence that RBC was prepared to pay any amount without a hearing. Therefore, the arbitration on these issues was necessary, regardless of Mr. Chernet’s level of recovery.

Finally, there can be no doubt that Mr. Chernet was fully successful on the issue of IRBs. I ordered RBC to pay all of the IRBs claimed.

Mr. Chernet was not successful in his claims for payment of a special award and the cost of examinations or assessments. Little time was spent on these issues at the hearing. The lack of success is therefore best reflected in some discount in preparation time.

The parties settled the issue of entitlement to medical benefits after the hearing and before I rendered a decision. They did not agree to reserve to me the question of entitlement to expenses regarding this issue and I am not in a position to determine Mr. Chernet’s degree of success. The time spent on this issue in the hearing was also negligible. The assessment of preparation time should reflect no recovery with regard to this issue as well.

(b) Conduct Prolonging the Proceeding

The time required to complete the hearing was unnecessarily prolonged by the conduct of counsel for Mr. Chernet which can be generally classified as seeking unnecessary or tenuous procedural indulgences. That conduct includes:

• Seeking to add a claim for a special award on the first day of the hearing; (Although I added the issue, the facts upon which the claim was based were not new. The claim should have been advanced much earlier.)

• Seeking additional disclosure as a result of the revival of the claim for a special award;

• Seeking to call an expert to testify before Mr. Chernet;

• Seeking to add further claims for medical benefits; and

• Seeking to introduce documents which had not been properly served;

Addressing these issues consumed at least 4 hours of hearing time. Mr. Chernet is not entitled to recover expenses for that time.

(c) Quantum of Fees Allowed

As noted above, Mr. Chernet claims $77,340 for fees. The claim is based on 515.6 hours, allegedly invested by Mr. Chernet’s lawyers in preparation for and attending the hearing in this case, claimed at $150 per hour. The claimed rate is the maximum allowable hourly rate under Rule 78 of the Dispute Resolution Practice Code.

I accept that discretion should be exercised to award the maximum allowable rate. The basic hourly rate Rule 78 allows is the rate for civil matters under the Legal Aid Services Act, but the Rule confers discretion to award up to $150 per hour for legal fees to an insured person, where justified. I find the maximum rate to be justified in this case by the complexity of the CAT claim, the six years of experience by counsel and the gap between the allowable rate and what counsel could actually charge his client.

The hours claimed represent approximately thirteen, forty-hour work weeks. I find the hours claimed to be grossly excessive. Jurisprudence has established that reasonableness is an overarching consideration in applying the expense criteria. A line-by-line analysis of dockets is not appropriate. Rather, the Arbitrator should make a global assessment of reasonable expenses. Assessing preparation time on a ratio with hearing attendance provides a framework for estimating reasonable preparation time. This approach is established by a long line of Commission decisions, often traced to the decision in Henri and Allstate Company of Canada.³ The applicable ratio is not static. A reasonable ratio is informed by the particulars of the case.

In this case, I intend to first fix the hearing time. I will then deduct the 4 hours unnecessarily required by counsel for Mr. Chernet and fix the appropriate ratio, bearing in mind the issues on which there was lack of success or settlement.

The hearing took place over the course of 9 days.⁴ The hearing days usually started at 10:00 a.m. and only once did the hearing end as late as 4:00 p.m. My notes show 34 hours of hearing time, calculated from the scheduled starting time, while always rounding up to the nearest hour of completion.

RBC calculated hearing time at 36 hours. My review of the Bill shows that counsel for Mr. Chernet claimed 49 hours. That claim includes nothing for the hearing days of February 2, 4 and 5 of 2015, but it does include 7 hours of attendance on every other hearing day, including January 27 and 29, 2015, when the hearing time was no more than 2 hours. I find RBC’s calculation to be more accurate. I fix the hearing time at 36 hours and the time for calculating preparation time at 32 hours, after deducting the unnecessary 4 hours counsel for Mr. Chernet required.

Before assigning a ratio I note that, even accepting Mr. Chernet’s calculation of hearing time, the Bill submitted represents a ratio of approximately 9:1. There is no case in which that ratio has been applied. Arbitrators have found ratios of preparation time to hearing time ranging from 1:1 to 4:1 to be reasonable. I find a ratio at the high end of the scale to be justified in this case despite a deduction for the settled issue and issues where Mr. Chernet did not succeed. That conclusion is based upon the complexity of the CAT issue, the number of issues successfully pursued and the fact that the hearing time was limited due to submissions being given in writing. I fix the ratio at 3:1.

Applying that ratio, Mr. Chernet is entitled to expenses for legal fees as follows:

Hearing time :

32 hours@$150hr.

$ 4,800

Preparation time:

32x3hours@150hr.

$14,400

HST

$ 2,496

Total

$21,696

Disbursements

Mr. Chernet claims $51,911.72 for disbursements. The Schedule to the Expense Regulation sets out the categories of expenses that an Arbitrator may award as disbursements. The Schedule also fixes maximum amounts for certain expenses. Reasonableness is also an overarching consideration in deciding whether a particular disbursement is recoverable and, if so, how much.

I have agreed with virtually all of RBC’s objections to Mr. Chernet’s claim for disbursements. The only notable exception is that I have allowed disbursements for reports which could possibly have been claimed as benefits for examinations or assessments under the Schedule. I find the cost of these reports to be recoverable as disbursements because they were incurred in pursuit of the arbitration.

In general, Mr. Chernet’s claim for disbursements ignores the fixed maximums and reflects no effort to be reasonable.

For example, the claim includes $12,794.20 for photocopies, consisting of $12,000 for in-house copies and $794.20 at the Printing House. I doubt that in-house copies could cost more than 10 cents a page. At that rate, the claim represents 120,000 copies. I allow $500 for in-house copies plus the claimed $794.20 for the Printing House.

Mr. Chernet’s claims for disbursements and the amounts allowed are as follows:

CLAIM

RATIONALE

ALLOWED

$12,794.20 Copies

As above

$1,294.20

Arbitration fee

Allowed as claimed

$100.00

$100.00 Postage

Allowed as claimed

$25.00

$452 Dr. William Peter Ray (should be “Bray”)

Allowed as claimed

$452.00

$208.23 Binding

Allowed as claimed

$208.23

$1,104.99 Courier, transportation costs & expenses, mileage & parking

No invoices or particulars, amount appears inflated

$400.00

$42 MTO searches

Not apparent that this relates to arbitration

Nil

$198.98 MVA Interpreting Services (transportation)

No invoice, Mr. Chernet does not require an interpreter and no justification for entitlement to cost of transportation

Nil

$2,147 Joel Kumove Consulting (Vocational Assessment)

Not apparently related to arbitration

Nil

$2,167.42 Various CNRs

RBC earlier paid $667.80

$1,499.62

$1,800 Dr. Gupta chronic pain report

Exceeds maximum allowable. Maximum allowed.

$1,500.00

$2,700 Dr. Gupta preparation and attendance at arbitration

Exceeds maximum allowable. Maximum is $500 for preparation and $200 per hour of attendance. Dr. Gupta testified 3.5 hrs. 4hrs. allowed

$1,300.00

$7,292 Omega Medical, CAT Assessment

Exceeds maximum allowable. 3 doctors involved. Includes 2 assessments plus summary

$4,000.00

$12,034.50 Omega Medical, preparation and attendance at arbitration

Exceeds maximum allowable. Two Omega doctors testified for a total of 4.5 hrs. 5 hrs allowed plus $1,000 for preparation.

$3,000.00

$4,800 Galit Liffshiz & Associates Attendant Care report

Exceeds maximum allowable. Maximum allowed

$1,500.00

$2,260 Galit Liffshiz & Associates, Situational Assessment Report

Exceeds maximum allowable. Maximum allowed

$1,500.00

$2,034 Galit Liffshiz & Associates, Arbitration Preparation and attendance

Exceeds maximum allowable. Maximum allowed. Testified 4.5 hrs. 5 hrs allowed.

$1,500.00

Total allowed

$18,070.72

In conclusion, the amount allowed for fees is $21,696.00 and the amount allowed for disbursements is $18,070.72. The total allowed is therefore $39,766.72.

Expenses of this hearing:

Both parties claim expenses of this hearing. I find that RBC is entitled to its expenses, because of its success.

The only issue in this hearing was quantum of expenses. RBC took a reasonable approach to payment of expenses. The Bill that Mr. Chernet submitted can be charitably described as fanciful. I have given some examples above. There are many others. They include: billing for time spent before the commencement of the arbitration; billing for time clearly related to the tort claim;⁵ and, billing a total of 35.5 hrs. on a single day (April 29, 2015). Submitting such a Bill made a dispute inevitable and Mr. Chernet recovered about one third of the amount he claimed.

I fix RBC’s expenses of this hearing at $800, to be set off against the amount awarded to Mr. Chernet. The net amount to be paid is therefore $38,966.72.

May 17, 2016

Jeffrey Rogers Arbitrator

Date

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

Neutral Citation: 2016 ONFSCDRS 146

FSCO A13-000932

BETWEEN:

JOHN CHERNET

Applicant

and

RBC GENERAL INSURANCE COMPANY

Insurer

ARBITRATION ORDER

Under section 282 of the Insurance Act, R.S.O. 1990, c.I.8, as it read immediately before being amended by Schedule 3 to the Fighting Fraud and Reducing Automobile Insurance Rates Act, 2014, and Regulation 664, R.R.O. 1990, as amended it is ordered that:

1. Mr. Chernet is entitled to his expenses of the arbitration in the amount of $39,766.72.

2. RBC is entitled to its expenses of this hearing in the amount of $800.00

3. RBC shall therefore pay Mr. Chernet expenses of the arbitration in the amount of $38,966.72.

May 17, 2016

Jeffrey Rogers Arbitrator

Date

Footnotes

1. 1The Statutory Accident Benefits Schedule — Effective September 1, 2010, Ontario Regulation 34/10, as amended.
2. 2O. Reg. 664, s. 12 and attached Schedule
3. 3(OIC A-007954, August 8, 1997)
4. 4January 28, 2015 was a scheduled day, but there were no witnesses.
5. 5See review of transcript of discoveries on April 23, 2015