Neutral Citation: 2016 ONFSCDRS 160 FSCO A14-008055

BETWEEN:

RUTH GONZALEZ-IZQUIETA Applicant

and

RBC GENERAL INSURANCE COMPANY Insurer

DECISION ON EXPENSES

Before: Arbitrator Jeffrey Shapiro Heard: By written submissions due March 30, 2016

Appearances: Mr. James Klein for Ms. Ruth Gonzalez-Izquieta Mr. Robert Bowman for RBC General Insurance Company

Issues:

The Applicant, Ms. Ruth Gonzalez-Izquieta, was injured in a motor vehicle accident on May 13, 2013 and sought accident benefits from RBC General Insurance Company (“RBC”), payable under the Schedule.¹ The parties were unable to resolve their disputes through mediation, and Ms. Ruth Gonzalez-Izquieta, 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.

This matter previously came before me as a Preliminary Issue Hearing (“PIH”) to determine if the Applicant's Application for Arbitration was barred by operation of s. 268(1.1) of the Insurance Act. By decision dated February 1, 2015, I found that the Application for Arbitration was in fact barred, and reserved a decision on expenses. The matter is now before me to determine those expenses.

The issue in this Expenses Hearing is:

Is either party entitled to its expenses in this matter?

Result:

Each party shall bear its own expenses.

EVIDENCE AND ANALYSIS:

Background

For purposes of the PIH, the parties were in agreement that the Applicant was an occupant in a “public transit vehicle” (i.e. a TTC bus) when it swerved to avoid - and did avoid - a collision with another vehicle, but which resulted in the Applicant falling inside the bus and sustaining injuries. The Applicant applied for accident benefits from RBC, the Insurer of the vehicle that the TTC bus driver swerved to avoid, but RBC denied benefits based on operation of s. 268(1.1) of the Insurance Act. Section 268(1.1) was introduced by Ontario's Bill 173: Better Tomorrow for Ontario Act (Budget Measures), entered into force on May 12, 2011.

The Applicant applied for Mediation and then, in turn, submitted her Application for Arbitration. The amount of benefits at issue at most totaled $14,147.00.² At the Pre-Hearing of the matter, the parties agreed to the aforementioned PIH to determine whether this new provision - i.e., s. 268(1.1) - acted as a bar to the Applicant’s claims in the Arbitration, and to simplify the process, agreed to a statement of facts for that Motion. From the Pre-Hearing to the present, neither party raised an issue regarding non-production of documents, undue delay or similar behavior; to the contrary, while the parties disagreed over the legal effect of the new provision, they focused on the relevant issues at hand. The focused nature of the submissions in the PIH reflected that approach, as do the current submissions. I commend counsel for sticking to the relevant issues.

On January 8, 2015, RBC served an Offer to Settle upon the Applicant which it contends complied with Rule 76,³ and that “the settlement term was that the Applicant will withdraw all of her claims and applications and will sign a full and final release in exchange for RBC waving costs. The Applicant rejected this offer through her counsel on January 12, 2015.”⁴ I note that the January 8 letter, however, was couched in slightly different terms, and stated, in part:

…Once you have had a chance to review [the cited authority], if your client is now willing to withdraw all her claims… In exchange for RBC waving costs, I expect my client would be willing to accept that.

Do let me know if that proposal is of any interest. I’m prepared to make that recommendation so long as that agreement can be made within the next 30 days. However,…I highly doubt I can persuade RBC to accept that after that point.

Positions of the Parties

RBC seeks its legal expenses at the legal aid rates in the amount of $6,036.86, plus HST and disbursements of $117.37, or a total of $6,939.02. RBC contends that it was wholly successful in the outcome of the PIH, that it made a valid Offer to Settle under Rule 76, and that the issue in the PIH was not novel. In support of its contention that the issue was not novel, RBC notes my comment in the earlier decision “that s. 268(1.1) is ‘a complete bar to statutory accident benefits from any source – is supported by several persuasive authorities’”. RBC supports its request by citation to several decisions setting forth the well-settled law regarding expenses and the decision of Tran and TD Home and Auto Insurance,⁵ where Arbitrator Schnapp “reduced the total hours to 50% of the claimed amount given that the hearing was not complex and based on settled case law.”

The Applicant contends that the preliminary issue was, in fact, novel, and as she argued in the previous Hearing, she asserts that none of RBC’s cited authorities were binding or on point, and some were irrelevant – given that none of the decisions or authority provided an analysis and interpretation of s. 268(1.1). She cites the Superior Court decision of Fischer v. IG Investment Management Ltd., for the proposition that “a novel issue is described as one legally significant with no precedent and one which has not been decided in the factual context of the case before the court. The issues are considered open even if the case law provided guidance but the guidance was not adequate. In such a case no cost should be ordered.”⁶

The Applicant also points to the “modest amount of benefits at issue” and a Director Delegate’s comments concerning the “protective and remedial nature” of the Insurance Act and its regulations, and that “the lack of success by [an] applicant at arbitration does not automatically result in making the applicant responsible for the insurer’s expenses. The insured has a contractual relationship with the insurer and is entitled to access the dispute resolution process at FSCO as a result of that contract.”⁷

In agreeing to a PIH, the Applicant submits she “was engaging in conduct designed to shorten the arbitration proceeding and that should be a factor to consider in its favour when considering the awarding of costs.” Finally, the Applicant submits that the Insurer’s quantum of costs sought is excessive in regard to the amount of benefits at issue, 7.5 hours sought for cost submissions is improper, and that there is unnecessary duplication of effort with several lawyers and clerks.

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),⁸ 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]

There is no dispute that key relevant criteria in this case are items 1 (degree of success), 2 (written offers to settle) and 3 (novel issues). The Applicant argues, in essence, that criteria 4 (conduct prolonging the proceeding) should also be considered, albeit in the reverse - i.e. not only was there an absence of conduct prolonging the proceeding, there was cooperative conduct to shorten the proceeding. I agree that there was agreement to the PIH, and it shortened the procedure. With that, I turn to the 3 key factors.

With respect to item 1, there is no dispute that RBC was entirely successful at Arbitration.

With respect to item 2, from my perspective, I do not find the purported Offer to Settle qualifies as an Offer to Settle under Rule 76, in that it’s not a firm offer that if accepted forms a binding settlement. Rather, while useful and appropriate, it was a settlement negotiation or inquiry. The letter itself expresses that if the Applicant would commit to the proposed settlement, “I expect my client would be willing to accept that” and “I’m prepared to make that recommendation…” (emphasis added). While I commend counsel for proactively trying to reach an early resolution, it was insufficiently firm to be a binding offer. Counsel’s client, RBC, could have rejected its counsel’s recommendation.

With respect to item 3, I find that this matter does involve a novel issue. While RBC’s counsel properly identified, cited and argued an array of relevant and persuasive authority – from a Commission Bulletin to persuasive decisions addressing related issues to industry blogs – I agree with the Applicant that there was no precedent which was decided in the factual context before this tribunal, i.e. a decision that applied sections 268(1.1) of the Insurance Act to a private Insurer.⁹ In fact, my quoted words refer to “supported by several persuasive authorities.” Persuasive is not binding.

A factor in weighting this criterion is that an argument could be made that, although novel, the statute is so clear that only one result was a foregone conclusion.¹⁰ While I ultimately concluded that RBC’s interpretation is correct and the Applicant’s misplaced, I did find substance to the Applicant’s arguments - as mentioned in Fischer v. IG, “it never struck me that the outcome of the Defendants’ argument was a foregone conclusion by the simple application of established principles.” I find that this issue was novel.

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. In so doing, a pragmatic, broad-stroke approach (rather than a line-by-line assessment) is frequently favoured.¹¹ In Reid and ING Insurance Company of Canada,¹² 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.,¹³ 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.

RBC submitted a Bill of Costs claiming fees of $6,036.86, plus HST and disbursements of $117.37, for a total of $6,939.02.

The degree of success mitigates in favour of an award of costs, but the existence of a novel issue – indeed the only issue – mitigates in favour of each party bearing their own expenses. There is also an absence of a qualifying Offer to Settle or conduct prolonging the matter, and only a relatively modest amount in dispute. I note the Insurer cited Tran and TD, where the award reduced the claimed expenses by 50% in a case that was not complex and based on settled case law. Here, there isn’t settled case law, and while the issue was rather defined, I would not characterize it as particularly simple, but rather mildly complex.

When considering all these factors, by my perspective, I see a strong basis for each party to bear their own costs with some thought to, at most, a modest award of expenses. Ultimately I will follow the reasoning in Fischer v. IG, and so order that each party shall bear its own costs.

Conclusion

Having considered the above, each party shall bear its own expenses.

June 6, 2016

Jeffrey Shapiro Arbitrator

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 Ontario Regulation 664,as amended, it is ordered that:

Each party shall bear its own expenses.