Neutral Citation: 2016 ONFSCDRS 175 FSCO A14-006546

BETWEEN:

ASHA WARSAME Applicant

and

STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY Insurer

DECISION ON EXPENSES

Before: Richard Quan Heard: Written submissions received concluding on April 5, 2016 Appearances: Diana Colangelo for Ms. Warsame David Raposo for State Farm Mutual Automobile Insurance Company

Background:

The Applicant, Asha Warsame, was injured in a motor vehicle accident on June 17, 2010. In a decision dated January 6, 2016, I dealt with a preliminary issue raised by State Farm Mutual Auto Insurance Company, ("State Farm"). For the reasons stated in my decision, I dismissed Ms. Warsame's application for arbitration. As there were no submissions on the issue of expenses at that time, I left the matter for the parties to negotiate.

The parties were unable to reach agreement on the issue of expenses. State Farm requested this expense hearing and it was conducted by way of written submissions.

Issue:

The issue in this further hearing is:

Is State Farm entitled to its expenses of the arbitration proceeding and, if so, in what amount?

Result:

State Farm is entitled to its expenses of the arbitration proceeding in the amount of $3,459.39 inclusive of fees, disbursements and H.S.T.

EVIDENCE AND ANALYSIS:

Entitlement to Expenses:

Subsection 282(11) of the Insurance Act gives arbitrators the discretion to award expenses to parties at a preliminary issue hearing, according to criteria prescribed by the Regulations. Subsection 12(2) of O. Reg. 664, (the Expense Regulation), prescribes the awarding of expenses in respect of an arbitration proceeding.¹ In describing what an Arbitrator shall consider, the subsection provides as follows:

An arbitrator shall, under subsection 282 (11) of the 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.
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.
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.

Pursuant to the first criterion, State Farm is entitled, as the successful party, to its reasonable expenses at the preliminary issue hearing, of Subsection 12(2) of the Settlement Regulation. State Farm had raised a preliminary issue claiming that Ms. Warsame was not entitled to proceed with mediation and arbitration on the issue of non-earner benefits at the Financial Services Commission of Ontario as she had failed to apply for dispute resolution services within two years from the date the insurer denied this benefit. The preliminary issue hearing took place by way of written submissions and through a teleconference call on October 13, 2015. In my decision, I found in favour of State Farm dismissing Ms. Warsame's Application for Arbitration.²

In respect of the additional criteria for determining entitlement to expenses, I note the following. The only criteria relevant in this case is item 1 (degree of success). It does not seem to be necessary to consider any of the others given State Farm's degree of success at the preliminary issue hearing. There have been no offers to settle presented by either party; neither party raised any novel arguments; and State Farm did not raise any instances of a failure by Ms. Warsame to attend at an examination. The remaining criteria, (criteria 4 and 5), will be discussed as part of the consideration of the reasonable quantum of expenses to be awarded.

Quantum of Expenses

The amount of expenses to be awarded must be fair and reasonable in the circumstances taking into account, among other things, the nature of the proceedings, complexity and number of issues, and, bearing in mind the criteria listed above, the conduct of the parties.³ It has been suggested that a pragmatic, broad-stroke approach (rather than a line-by-line assessment) is frequently favoured using a ratio in the range of 1:1 to 4:1 for pre-hearing preparation time to hearing time.⁴

The formula of hearing time and preparation time would over-complicate what actually took place. All meetings were conducted by teleconference call. The preliminary issue hearing consisted of a short exchange of oral submissions taking only a few minutes, with no witnesses being called, and with no court reporter being present. In my view, therefore, it would not be reasonable to determine expenses in this case strictly on the basis of a ratio of hearing to preparation time.

The preliminary issue hearing, over which I presided, was a short exchange of submissions which took mere minutes in duration; no witnesses were called and no court reporter was present. Therefore, considering hearing time as being distinct from and as a ratio of the time spent preparing for the hearing, would make things overly technical and is not necessary. In my view, the preliminary issue hearing, at least in the instant case, is similar to a motion or other proceeding which assists the parties to answer legal or factual questions in preparation for a full hearing. I will thus not employ this proportional timing approach in considering the quantum of expenses to be awarded.

Fees:

State Farm presented its Bill of Costs as part of its written submissions dated March 2, 2016. State Farm stated its legal fees to be $4,932.68 plus H.S.T. in the amount of $641.25 which accounted for work performed by five members of its representative firm, Dutton Brock LLP. State Farm billed at the maximum allowable hourly rate of $109.13, (for 2015), permitted by Rule 78.1 of the Dispute Resolution Practice Code.⁵ This amount represented legal work that took place from the time of mediation (roughly June 8, 2014) to preparation of submissions for this expense hearing.

Ms. Warsame submitted that this amount was "excessive and duplicative." I am inclined to agree with Ms. Warsame's assessment of the extent of these legal fees.

This was a relatively straightforward preliminary issue hearing involving the application of the two-year time limitation found in s.56 of the Schedule.⁶ I accept that State Farm expended considerable time on legal research, preparing document briefs, taking sworn affidavits, and reviewing the matter with their lawyers. I find, however, that the involvement of four lawyers and a law clerk for a matter that essentially involved a restatement of the chronology of events with a focus on particular forms and pieces of relevant correspondence to establish a breach of the two-year limitation period was excessive and, to some degree, duplicative.

In my view, a reasonable amount for State Farm's general legal fees is $2,500.00, inclusive of H.S.T. which roughly represents half of the fees requested by State Farm and mirrors the amount billed by Mr. Raposo, the lead lawyer who worked on this case.

State Farm took the position that it has been forced to incur additional expenses through the conduct of Ms. Warsame in moving ahead with the case. State Farm submitted that Ms. Warsame had ample opportunity to withdraw the claim; but, in moving ahead despite having to contend with a breach of a limitation period, she prolonged the matter. State Farm submitted as follows:

The entire proceeding - from filing for mediation to present - has been unnecessary. It is the Insurer's position that as the proceeding moved along through the process, it grew to become improper and possibly vexatious.…⁷

I am sure that what is being questioned by State Farm is not Ms. Warsame's right to proceed with her claim or to advance legal arguments in support of it. The fact that she did not withdraw her claim even with the jurisdictional question hanging over it is fully within her right to exercise. One mechanism for dealing with issues of jurisdiction is the preliminary issue hearing; and, as I became involved at this juncture, I did not witness any conduct by Ms. Warsame that could be said to have prolonged or delayed this proceeding. Furthermore, I do not find that the proceeding was improper or vexatious.

Nevertheless, I find it significant that Ms. Warsame did not file any written submissions for the preliminary issue hearing; and, her oral submissions were minimal to say the least. In these circumstances, I find that State Farm's expenses have been adversely affected, and that it is, therefore, entitled to an additional $750.00 in legal fees inclusive of H.S.T.

I therefore find that State Farm is entitled to legal fees in the amount of $3,250.00 inclusive of H.S.T.

Disbursements:

The Schedule to the Expense Regulation sets out the types and amounts of disbursements that a party can claim.

State Farm stated its disbursements to be $185.30 plus H.S.T. in the amount of $24.09. I find this to be a reasonable request.

I, therefore, find that, in total, State Farm is entitled to its arbitration expenses in the amount of $3,459.39 inclusive of H.S.T.

June 17, 2016

Richard Quan Arbitrator

Date

Financial Services Commission of Ontario