Neutral Citation: 2016 ONFSCDRS 174

FSCO A10-001161 and A12-005490

BETWEEN:

ISMAIL KAYA Applicant

and

STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY Insurer

DECISION ON EXPENSES

*Minor error on page 1 under “Appearances” corrected on July 20, 2016 in accordance with the Dispute Resolution Practice Code and section 21.1 of the Statutory Powers Procedure Act.

Before: Isabel Stramwasser Heard: May 27, 2016 by written submissions Appearances: Meleni V. David for Mr. Kaya Jonathan Schrieder for State Farm Mutual Automobile Insurance Company

ISSUES:

The Applicant, Ismail Kaya, was injured in a motor vehicle accident on March 25, 2008.

In a decision dated March 31, 2016, I arbitrated his claims for statutory accident benefits under the Insurance Act¹ and attendant Regulation.² I made the following orders, while reserving on the issue of expenses:

Mr. Kaya is not entitled to payment for either an Application for Determination of Catastrophic Impairment (OCF-19) by Dr. Kakar dated May 17, 2010 in the amount of $2,100.00 or an Independent Psychiatric Evaluation by Dr. Kakar dated December 30, 2009 in the amount of $2,400.00.
Mr. Kaya is not entitled to attendant care benefits in excess of what State Farm has already approved on this claim.
Mr. Kaya is not entitled to housekeeping and home maintenance benefits in excess of what State Farm has already approved on this claim.
Mr. Kaya is not entitled to interest payments.
The parties may make submissions regarding entitlement and quantum of the expenses of this arbitration.
State Farm is not liable to pay a special award.

During the hearing, I advised the parties that I would consider their numerous motions and objections in an award of expenses. During the hearing, each party also stated that the other was liable for the expenses of the many motions and objections, without making submissions in this regard. After my decision was issued, State Farm filed a bill of costs, without submissions. Mr. Kaya requested an extension of time for making submissions, which I granted to May 25, 2016. However, on May 27, 2016, he wrote to advise that he would not be making submissions on expenses.

The issue in this further hearing is:

Is any party liable to pay another party’s expenses under section 282(11) of the Insurance Act and, if so, in what amount?

Result:

The Applicant³ is liable to pay the Insurer’s expenses in respect of the arbitration proceeding, fixed in the amount of $13,400.00 (inclusive of fees, disbursements and applicable taxes).

REASONS:

Entitlement

Subsection 282(11) of the Insurance Act provides that an arbitrator may award to the insured person or insurer all or part of the expenses incurred in respect of an arbitration proceeding, according to the criteria prescribed by the Expense Regulation,⁴ to the maximum set out in the regulations. (Section F and Rule 75 of the Dispute Resolution Practice Code⁵ reiterate the legislation).

I am bound by these statutes to consider only seven criteria in awarding expenses:

(a) each party's degree of success in the outcome of the proceeding;

(b) any written offers to settle made in accordance with Rule 76;

(d) 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;

(e) whether any aspect of the proceeding was improper, vexatious or unnecessary.

(f) whether the insured person refused or failed to submit to an examination as required under section 42 of Ontario Regulation 403/96 (Statutory Accident Benefits Schedule — Accidents on or after November 1, 1996) made under the Act or refused or failed to provide any material required to be provided by subsection 42 (10) of that regulation; and

(g) whether the insured person refused or failed to submit to an examination as required under section 44 of Ontario Regulation 34/10 (Statutory Accident Benefits Schedule — Effective September 1, 2010), made under the Act, or refused or failed to provide any material required to be provided under subsection 44 (9) of that regulation.

Of these seven criteria, only three are relevant to this case:

(a) each party's degree of success in the outcome of the proceeding;

(d) 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; and,

(e) whether any aspect of the proceeding was improper, vexatious or unnecessary.

There were no written offers to settle. No novel issues were raised in the proceeding. There was no allegation that the Applicant refused to attend an examination required under either section 42 or section 44.

State Farm was entirely successful

With regard to the first criterion, State Farm was completely successful in its defence of this application. Its success was based largely on my adverse findings of the Applicant’s credibility. Consequently, this criterion fully supports an award of expenses to State Farm.

The Applicant’s conduct prolonged the proceedings

With regard to the fourth criterion, the Applicant’s conduct prolonged these proceedings. Although both parties interrupted the hearing with motions and objections, I find that, on balance, those interruptions were caused by the Applicant’s failure to comply with his procedural obligations.

First, the Applicant infringed on the Insurer’s right to cross-examination. Despite requests from the Insurer at least six months before the hearing, the Applicant never notified Dr. Kianian that the Insurer required his attendance for cross-examination and never served the doctor with a summons. At the same time, the Applicant did not inform the Insurer that he was not taking the usual steps to summon the doctor. It was not until the hearing proper that the Applicant suggested that it was the Insurer’s responsibility to call the witness. Given that the Applicant led the Insurer down a garden path for six months, I reject his after-the-fact argument.

Rule 41.2 requires a party to notify a witness of the intention to call him or her at least 30 days prior to the hearing and Rule 73.4 requires that a summons be served at least five business days prior. Although the Applicant sent Dr. Kianian a letter in January 2015, it merely advised that the Applicant “may request” his attendance at the hearing. Further, although the Applicant made an attempt to formally summon the witness, it was just four (and not the minimum five) days before the hearing and the attempt failed because the Applicant was unable to locate the witness for service.

Next, the Applicant failed to meet his production obligations. Mr. Kaya’s late production of evidence was contrary to his agreement at the pre-hearing discussion before Arbitrator Osunde on January 2, 2014 to complete production exchange (or provide proof of best efforts to comply, in the case of documents not in his possession, power or control) in March 2014, being one year prior to the hearing. In addition, his late production was outside the requirement under the Code that parties produce all documents on which they intend to rely at least 30 days before the hearing.

Instead, the Applicant served Dr. Janjua’s clinical notes and records just one week before the hearing. These documents dated from 2011 and the Applicant had no reasonable explanation for failing to produce them earlier. While the Applicant requested the documents of Dr. Janjua by letters in 2011 and 2012 and by phoning the doctor in February 2015, he took no other steps, such as seeking a third party order. Further, while the Applicant provided a letter from Dr. Janjua’s own physician advising that Dr. Janjua was ill in February 2015 and could not attend any meetings, this does not explain why the Applicant had not made reasonable attempts to update the file since 2011. Moreover, the fact that Dr. Janjua did produce the records in February 2015 shows that his illness was not an obstacle to production.

Furthermore, the Applicant repeatedly proffered new evidence during the hearing, with no notice to the defence. He started his direct examination by attempting to enter a photograph of his child that had never been shown to the defence. When his expert witness, Dr. Veidlinger, was on the stand, the Applicant tried to enter the doctor’s previously undisclosed handwritten notes. The doctor had created those notes four years prior; they could have been disclosed earlier.

The Applicant also sought to enter addenda to two expert reports in the middle of the hearing. When Dr. Veidlinger was on the stand, the Applicant solicited his medical opinions on both an MRI and an insurer’s examination, neither of which had been previously disclosed to the defence. During Dr. Kakar’s testimony, the Applicant’s representative tried to change the diagnosis of pain disorder to panic disorder, suggesting that the difference was due to a typographical error in the report. Notably, that report had been written five years prior.

In addition, on the second day of the hearing, the Applicant served the Insurer with particulars of the claim for a special award that had 39 allegations. These had never been disclosed before.

The Applicant had ample time to meet his production obligations. Over the years, he requested and obtained three adjournments of the arbitration. As a result of his requests, the hearing took place five years after he filed his first application for arbitration and two and half years after he filed the second.

Lastly, the Applicant expressed entitlement to, and little remorse for, his pattern of disregard for procedural rules. In his closing submissions, he argued that the Insurer’s lawyer was engaging in “abuse” and “harassment” for making objections and bringing motions. After extensive discussions on and off the record, the Applicant withdrew these and other serious allegations against counsel. However, he warned that he would pursue some remaining allegations against the Insurer (such as allegations of bad faith) at an expense hearing, which he did not.

As a result of the Applicant’s pattern of disregard for the rules of this tribunal, considerable time was spent on motions and objections for which Insurer's counsel had to do some research to prepare. I have noted that not all motions and objections were the sole result of the Applicant’s conduct. Consequently, I find that the Insurer is entitled to some, but not all, of its expenses under this criterion.

The Applicant pursued aspects of the proceedings that were unnecessary

With regard to the fifth criterion, the Applicant pursued aspects of the proceedings that were unnecessary.

He sought reimbursement for two benefits to which he was procedurally not entitled. Specifically, he sought reimbursement for Dr. Tavazanni’s April 25, 2013 orthopaedic assessment although it had never been mediated and, in fact, never denied. Further, as set out in my decision, the Applicant sought reimbursement of Dr. Kakar’s December 2009 psychiatric assessment although he had made no request for pre-approval.

Further, the Applicant had not clearly identified the issues in dispute before the hearing and so unnecessary time was spent trying to understand what was in dispute during the hearing. He brought a motion at the hearing to add the issue of reimbursement of Dr. Tavazanni’s report, adduced evidence and argued it, only to withdraw it by the end of the hearing. For years preceding the hearing, he incorrectly claimed reimbursement for an OCF-19 dated December 30, 2009 when, as I realized when writing the decision, there was no such document. As a result of the confusion around this non-existent document, time was lost during the testimonies of the Applicant and Dr. Kakar, as well as during the parties’ submissions.

Lastly, as I described above, the Applicant made serious allegations against the conduct of the Insurer and its representative. He later withdrew many of those allegations and did not pursue the remainder at the expense hearing.

The Applicant’s pursuit of these unnecessary aspects of the litigation demanded considerable time at the hearing. Consequently, this criterion fully supports an award of expenses to the Insurer.

Quantum

State Farm seeks its expenses in the amount of $51,913.44. Counsel for the Insurer provided a bill of costs showing the breakdown of expenses as $34,642.26 in legal fees and $17,271.18 in disbursements, but made no submissions. The Applicant led no evidence and made no submissions on expenses.

As neither party has made submissions, I find it inappropriate to conduct a line-by-line analysis of the Insurer's bill of costs. Rather, this is an appropriate case for fixing expenses at a global amount that includes fees, disbursements and taxes.

In doing so, I have had regard to subsection 3(1) of the Schedule to the Expense Regulation and section 78.1 of the Code. The Code specifies that the applicable rate for legal fees is set out in Ontario’s legal aid tariff⁶ for civil matters before the Ontario Superior Court of Justice.

For the reasons that follow, and having considered the relative complexity of this matter, the time spent, the applicable legal aid rates and the documentation filed, I find it appropriate to fix the Insurer’s expenses at $13,400.00, inclusive of all fees, disbursements and applicable taxes.

Fees

The Insurer is seeking reimbursement for legal fees of nearly $35,000.00 based on a total of about 300 hours of legal services (about 160 hours by Mr. Schrieder, 13 hours by junior lawyers and 130 hours by a clerk or law student) performed between May 2010 and April 2016.

I find the amount of legal fees claimed on behalf of the Insurer to be high, given the actual duration of the hearing and the degree of complexity of the proceedings. The hearing lasted about 40 hours, including drafting the bill of costs. The issues were not complex. Rather, on the Insurer’s own submission, the hearing turned primarily on the Applicant’s credibility.

Bearing in mind the usual amount of time permitted by the Commission for preparation in relation to the time spent at the hearing (typically, a ratio of anywhere from 1:1 in preparation time to hearing time for simple cases to 4:1 for significantly more complex cases), a reasonable amount of time to have spent in relation to this entire proceeding is 80 hours (for both preparation and attendance). The bulk of this would relate to work done by Mr. Schrieder, but approximately one-quarter would be attributable to law clerks and/or articling students.

The hourly rate of $150.00 claimed by Mr. Schrieder is more than what is allowable under the legal aid tariff. I find it reasonable that he would have done 58 out of 60 hours of preparation and attendance in the 12 months before and at the hearing. The applicable rate in the government tariff for that time period is $103.94. Counsel can also reasonably bill the two remaining hours evenly over the four previous years (2010 to 2014), which average $92.14 under the tariff. At these rates, the total for the 60 hours of work that I attribute to Mr. Schrieder is approximately $7,000.00, inclusive of tax.

The hourly rates that the Insurer claimed for law clerks and articling students of $64.73 and $32.36, respectively, are also excessive. Under the legal aid tariff, these amounts represent services provided after April 1, 2015. Yet, most of the work by the law clerks and articling students would have been done before that date and ought to have been calculated at the hourly rates permissible at the time the legal services were provided. In calculating a reasonable rate, I have averaged their 20 hours of work over the five years of litigation and divided those hours equally between law clerks and articling students. On this calculation, I find that an hourly rate of $43.12 applies. Consequently, 20 hours of legal services is approximately $1,000.00, including tax.

As a result, I calculate the total amount of legal fees payable to State Farm in this arbitration at $8,000.00, inclusive of applicable taxes (rather than the near $35,000.00 it claimed).

Disbursements

Court Reporter

With respect to the disbursements claimed by State Farm (set out in its bill of costs), I find that State Farm has no right under the Expense Regulation to claim the cost ($7,883.56) of a court reporter. See, for example: Tyrell and RBC General (FSCO A05-002463, February 19, 2008) Expenses; Kingsway General Insurance Company and Pereira (FSCO P05-00031, September 17, 2007) Appeal; D.F. and Wawanesa Mutual Insurance Company (FSCO A05-000779, December 22, 2006); Burke and Allstate Insurance Company of Canada (FSCO A01-000969, August 7, 2003); and Erskine and Personal Insurance Company of Canada (FSCO A01-000588, January 28, 2003).

Expert Attendance

The Insurer is seeking reimbursement for the expert attendance fee in the amount of about $600.00. This includes five hours attendance, one hour preparation, one hour travel time and parking. I find these amounts to be reasonable (particularly as the maximum allowable amounts in the regulation for attendance and preparation are $2,100.00) and I allow them at $600.00.

Process Service

State Farm is also seeking approximately $7,200.00 in process service fees. The amount relates to the need to serve witnesses four times, in preparation for the four hearing dates set in this arbitration - three of which the Applicant adjourned. Specifically, the Insurer seeks approximately $1,500.00 for process service in February and March 2012, $1,600.00 in October 2012, $3,200.00 in September and October 2014 and $800.00 in February 2015.

The amount that State Farm claims for process service is high and cannot be reasonably justified. Once served, a witness need not be served again in the event of an adjournment. Rather, the witness can simply be bound over to the new date. Consequently, I allow the Insurer $3,200.00 in process service fees. This amount was for process service incurred in 2014, shortly before that hearing date was adjourned. Of the four bills for process service fees that the Insurer claimed in these proceedings, the one in 2014 is the highest. I find it fair to award the process service fees for 2014 for two reasons. First, most of the witnesses served in the 2014 bill were served again before the actual hearing in 2015. Second, even though some witnesses were not served again in 2015, an award of expenses for serving them acknowledges the Insurer’s costs thrown away as a result of the Applicant’s repeated adjournments.

Copying, Courier and Parking

Lastly, the Insurer is seeking a further $1,600.00 (approximately) related to miscellaneous disbursements, such as photocopying, courier and parking expenses. Since there is no challenge to these disbursements claimed and they do not exceed the amounts permitted by the Expense Regulation, I permit them as claimed.

Total Disbursements

Therefore, of the almost $17,300.00 claimed by State Farm in disbursements, I find that it is entitled to just $5,400.00, inclusive of tax, for expenses related to expert attendance, process service, photocopying, courier and parking.

CONCLUSION:

For the preceding reasons, the Applicant is liable to pay to the Insurer its expenses in respect of the arbitration proceeding, fixed in the amount of $13,400.00, inclusive of fees, disbursements and applicable taxes.

June 16, 2016

Isabel Stramwasser Arbitrator

Financial Services Commission of Ontario