Financial Services Commission of Ontario

Neutral Citation: 2016 ONFSCDRS 188 FSCO A12-002793, A12-002796, A12-005363 and A12-005365

BETWEEN:

LIOUDMILA MELECHTCHENKO, ANDREI MELECHTCHENKO, AKSANA MITKEVICH and VASILI PASASKI Applicants

and

STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY Insurer

DECISION ON A PRELIMINARY ISSUES

Before: Arbitrator Jeffrey Rogers Heard: April 21, 2016, at the offices of the Financial Services Commission of Ontario in Toronto. Written submissions were completed on: May 23, 2016.

Appearances: Ms. Margaret (Rita) Gratsias and Mr. Kwaku Bona for the Applicants. Mr. Christopher Deeley and Ms. Hina Saeed for State Farm Mutual Automobile Insurance Company

Issues:

The Applicants alleged that they were injured in a motor vehicle accident on June 21, 2010. They applied for statutory accident benefits from State Farm Mutual Automobile Insurance Company (“State Farm”), payable under the Schedule.¹ After paying some claims, State Farm concluded that the alleged accident was staged. It therefore denied further claims. The parties were unable to resolve their disputes through mediation, the Applicants applied for arbitration at the Financial Services Commission of Ontario under the Insurance Act, R.S.O. 1990, c.I.8, as amended.

The preliminary issues are:

1. Did the Applicants wilfully misrepresent material facts with respect to their applications for benefits, within the meaning of section 53 of the Schedule?

2. Is Lioudmila Melechtchenko liable to repay to State Farm, benefits paid to her in the amount of $3,805.79?

3. Is Andrei Melechtchenko liable to repay to State Farm, benefits paid to him in the amount of $3,779.32?

4. Is Aksana Mitkevich liable to repay to State Farm, benefits paid to her in the amount of $3,734.59?

5. Is Vasili Pasaski liable to repay to State Farm, benefits paid to him in the amount of $2,972.44?

6. Is any party liable to pay to the other the expenses of this hearing?

Result:

1. The Applicants did not wilfully misrepresent material facts with respect to their applications for benefits, within the meaning of section 53 of the Schedule.

2. State Farm’s claims for repayment of benefits are dismissed.

3. I reserve the issue of expenses to the hearing arbitrator. If the parties resolve the dispute without a further hearing, but are unable to agree on the issue of expenses, either party may request that I reconvene this hearing to resolve the issue, no later than 30 days after all other issues have been resolved.

EVIDENCE AND ANALYSIS:

Onus of Proof

The principal question in these cases is whether the Applicants staged the collision in which they claimed to have been involved. The pre-hearing Arbitrators described the issue to be whether the Applicants wilfully misrepresented material facts with regard to their applications for accident benefits. In similar factual circumstances, the issue is often described as whether the Applicants were involved in an “accident” as defined in the Schedule. It is well established that Applicants bear the onus of proving that they were involved in an “accident”.

At the hearing, I rejected the Applicants’ submission that State Farm bears the onus of proving wilful misrepresentation. I ruled that the issue in these circumstances remains a question of coverage and the onus of proof does not shift because of how the question is phrased.²

The circumstances in the leading case regarding onus of proof of an “accident” provide a clear example of how the two ways of phrasing the issue are interchangeable. In the appeal decision in TTC Insurance Company Limited and Wootton³ the Director described the factual circumstances as follows: “The TTC was not convinced that the incident happened as Ms. Wootton described it and, as a result, rejected her claim for accident benefits.”⁴ Those facts could just as clearly be described as a question of material misrepresentation.

No Material Misrepresentation

The only witnesses for the Applicants at the hearing were the four Applicants. State Farm called one lay witness. There was no expert testimony. State Farm’s position is that the Applicants should not be believed. That position is based upon alleged inconsistencies in their various reports of the events and inconsistences between each other. I reject State Farm’s submission. I find the Applicants to be credible. The perfect recall that State Farm uses as a standard does not exist. Instead of bolstering credibility, perfect recall and consistency would raise questions about rehearsal of evidence and collusion between the witnesses. I am satisfied that any inconsistencies that State Farm pointed out are explained by ordinary fragility of memory. The evidence contains only a mere hint of the possibility of conspiracy between the parties, a connection explained by their common membership in the same ethnic community. I find no conspiracy between the Applicants. I find that any inaccurate information given to State Farm was not wilfully given and, in any event, not material to the claims the Applicants have made.

Exhibit 1 in this hearing is a Motor Vehicle Accident Report dated July 3, 2010. It is prepared by a Toronto police officer who attended at the scene. It describes a collision between a black Infinity, owned and driven by Vasili Pasaski and a blue Audi driven by Andrei Melechtchenko and owned by Natalia Melechtchenko.

The officer reports that the accident occurred at 5:53 p.m., southbound on Allen Rd. According to the report, the Audi was stopped at a red light and started to move when the light turned green. The Infinity approached from behind and hit the Audi. The report records the Applicant, Aksana Mitkevich, and 2 others as passengers in the Infinity. The Applicant, Lioudmila Melechtchenko, is shown as a passenger in the Audi. The officer laid a charge against Mr. Pasaski under the Highway Traffic Act.

The evidence of all of the Applicants was generally consistent with the account of the collision in the Accident Report. There was no evidence to refute the fact that a collision occurred between the Audi and the Infiniti, as reported and recorded. State Farm commissioned an expert to investigate and chose not to tender the resulting report or to call the expert to testify. At the hearing, State Farm conceded that the collision occurred and advised that its position was limited to an allegation of staging.

State Farm nevertheless submitted that the Applicants did not prove that a collision occurred. In my view, having conceded that fact, State Farm is precluded from revisiting the issue in its submissions. In any event, the only evidence is that a collision occurred between an Infinity driven by Mr. Pasaski and an Audi driven by Andrei Melechtchenko, on June 21, 2010, at the approximate time and at the place and in the manner, as recorded in the Accident Report. I find that to be a fact.

I now turn to the question of staging. There is no direct evidence to support that conclusion. The Applicants’ fail only if I accept State Farm’s submission that they lack credibility. That submission is based upon a connection between the two vehicles, lack of complete consistency between various accounts of the events by the Applicants and lack of uniformity between the reports by the Applicants.

I will first address the connection between the vehicles. Mr. Pasaski bought the Infinity he was driving at the time of the incident from Anastasia Sheina. Anastasia Sheina worked for Natalia Melechtchenko who owned the Audi involved in the incident. Anastasia Sheina was the only witness for State Farm. She confirmed Mr. Pasaski’s evidence that he became aware that she was selling the car through a mutual acquaintance who lived in the building that he lived in. She generally confirmed his evidence regarding the terms of the sale. She confirmed that there was no other connection to him. She confirmed Andrei Melechtchenko’s evidence of the possibility of a passing acquaintance between them through her workplace.

Anastasia Sheina testified that her connection to the incident was not unlikely. She said that she was likely acquainted with all Russian speaking persons in the building where Mr. Pasaski and the occupants of his vehicle lived. There was no evidence of any further connection between the occupants of the two vehicles and I find none. Nothing in the connection suggests conspiracy to stage a collision. I place no significance on the fact that Mr. Pasaski bought his car from someone who had a connection to the car he hit.

The remaining question is what to make of the lack of total recall and the differing accounts of the events. As I noted earlier, I find nothing sinister in the inconsistencies that State Farm submits should lead to rejecting the applicants’ evidence. In my view, the inconsistencies between the accounts by the individual applicants are inconsequential and lack of uniformity between their accounts is to be expected.

I do not propose to address every instance that State Farm raised, but here are some examples:

• Mr. Pasaski was unclear about his employment status at the time of the accident. His application for accident benefits states that he was unemployed. He gave conflicting information at his examination-under-oath (EUO) in September 2010. He admitted to having been on welfare but also said that he found a job before the accident. His representative attempted to summarize his evidence by saying: “He was not receiving welfare at the time of the accident, because he found a job, but he didn’t start. So he dropped the welfare.”⁵ At the hearing, he appeared to readily admit that he was on welfare at the time of the accident but also working “unofficially”.

Mr. Pasaski did not make a claim for income replacement benefits and I know of nothing he could gain by misrepresenting his employment status to State Farm. He showed no reluctance to admit the possibility that he was both working and receiving welfare at the time of the accident. His employment status has no direct bearing on the circumstances of the collision. I find that his evidence in that regard does not diminish his overall credibility on that issue.

• At his EUO⁶ and in his testimony, Mr. Pasaski’s account of the circumstances of the collision was consistent with the information in the Accident Report: as he approached the intersection, the light changed from red to green. The Audi which had been stopped at the light started to move. He expected the Audi to accelerate faster and his miscalculation caused him to hit the Audi. Mr. Pasaski’s Application for Accident Benefits⁷ has a different account of the collision. It states that he was driving on a green light when the car in front of him slowed suddenly.

The discrepancy was not put to Mr. Pasaski during cross-examination. Therefore, he had no opportunity to explain. I have no information on how the conflicting information was obtained. The description that was given to the police officer and given twice under oath was simple enough to remember. I find it likely that there is an innocent explanation for the differing account in the Application. I find the discrepancy to be of no significance.

• At his EUO Mr. Pasaski said that there was nothing to distract him from seeing the Audi in front of him.⁸ At the hearing he said that his attention was compromised because he was trying to get the lighter in the car in order to light a cigarette.

I find no inconsistency between the two accounts. Mr. Pasaski did not claim that the lighter prevented him from seeing the Audi. He has consistently admitted that he saw the Audi. At his EUO he testified that: “Maybe I just turned my head sideways a little bit.”⁹ He was not asked what caused him to turn his head. Turning his head is consistent with his evidence that he was trying to get the lighter.

• At his EUO, Mr. Pasaski testified that the vehicles did not remain in contact after impact.¹⁰ At the hearing he said that the vehicles did remain in contact. When confronted with the discrepancy, he said that after impact there was probably a space between the vehicles. It appeared to me that Mr. Pasaski did not recall whether or not the vehicles remained in contact and ended up testifying as to what likely occurred. This information is not critical to the circumstances leading up to the collision and I give no weight to Mr. Pasaski’s lack of perfect recall in this regard.

• Andrei Melechtchenko gave different timelines for his activities preceding the collision in his EUO and his testimony at the hearing. He was consistent about making two stops at Russian stores before proceeding to the scene of the collision, but his travel times and times at the stores differed. He explained that he was not keeping track of time since he had no appointments to keep. In the circumstances, I would not expect an accurate estimate, even immediately following the events. I place no weight on the discrepancy between attempted reconstructions, almost 6 years apart.

• Andrei Melechtchenko was on his way home, travelling southbound on Allen Rd. at the time of the collision. At the time, he lived north and west of the point from which he started to head home. State Farm suggests something sinister in the choice or route. Mr. Melechtchenko explained that he intended to take Highway 401 west and then head north to his destination. As I noted at the hearing, I take judicial notice of the fact that Mr. Melechtchenko’s intended route was likely the best option. I give no significance to the fact that he was heading south, before going north.

• At his EUO Mr. Melechtchenko testified that his Audi was stationary upon impact.¹¹ During his examination-in-chief he testified that he had just started moving. When confronted with the discrepancy, he said he was not sure. He was consistent in his evidence regarding being stopped at a red light and the collision occurring just after the light changed. In my view, nothing turns on whether he accurately recalls whether his vehicle had started moving, six years after the event. I place no significance on this discrepancy.

• The trip the Melechtchenkos took included two stops at stores that sold Russian goods. They first stopped at a store at the intersection of Cedarcroft and Bathurst. They then went to a store at Dufferin and Finch. Lioudmila Melechtchenko appears to have given different testimony about the time spent at these stores in her EUO and the evidence at the hearing. Her testimony at the hearing was that she spent around half an hour at each store. When asked about the time spent at these stores at her EUO, she responded: “I don’t remember.” She then went on to estimate that she spent maybe one or two hours at each store.¹²

Ms. Melechtchenko appeared genuinely surprised when confronted with the discrepancy at the hearing. She did not recall giving the estimates at the EUO and stated that she could not have spent 2 hours at these stores. She suggested that there was a problem with interpretation.

I do not accept State Farm’s submission that this evidence detracts from Ms. Melechtchenko’s credibility. At her EUO, she did not remember the time spent. Her memory could not have improved in the subsequent years. In my view, she was giving an estimate on both occasions of her testimony. Her evidence suggests that she considered her first estimate to be a rash one. Given that she was unquestionably familiar with the two locations, I conclude that this is what occurred. She then gave what she considered to be a more reasonable estimate at the hearing.

• Aksana Mitkevich’s evidence at her EUO and at the hearing was that she was a passenger in the back seat, talking to the passenger next to her and knew nothing of the impending collision until it occurred. Given that fact, it is not at all surprising to me that she recalls very little about the circumstances of the collision. I reject State Farm’s submission in this regard. I also reject State Farm’s submission that weight should be given to medical reports that state that Ms. Mitkevich was a front-seat passenger and that her car was hit from behind. There is no evidence regarding the source of that conflicting information or the accuracy of its recording. One would not expect that anyone would be inconsistent about those details, whether involved in a conspiracy or not. I am not satisfied that Ms. Mitkevich gave the conflicting information.

As noted above, I find that the issues of credibility that State Farm raises do not individually or cumulatively detract from the Applicants’ credibility. I accept the Applicants’ evidence. I conclude that they did not misrepresent material facts with regard to their applications for accident benefits.

Two further points should be noted:

First, I draw no adverse inference against the Applicants for their failure to call as witnesses, two passengers in the Infiniti who are not parties to these disputes. The Applicants did not have exclusive access to these witnesses. In fact, State Farm summoned them to testify and then declined to call them as witnesses. I presume that State Farm concluded that their testimony would not support its position. If there is an adverse inference to be drawn, it is against State Farm.

Second, as I stated at the hearing, I find it irrelevant to consider whether State Farm focussed on the Applicants’ ethnicity in making its decision to allege material misrepresentation. State Farm could have been unreasonable in making this decision and still be right in its conclusion. The manner of making the decision is relevant only to the question of a special award.

Repayment

The issue of repayment is moot, since I have found that the Applicants did not intentionally misrepresent material facts with regard to their applications. In any event, the claim would be dismissed because State Farm provided no evidence on repayment at the hearing.

EXPENSES:

I reserve the issue of expenses to the hearing Arbitrator. If the parties resolve the dispute without a further hearing, but are unable to agree on the issue of expenses, any party may request that I reconvene this hearing to resolve the issue, no later than 30 days after all other issues have been resolved.

July 6, 2016

Jeffrey Rogers Arbitrator

Date

Financial Services Commission of Ontario

Neutral Citation: 2016 ONFSCDRS 188 FSCO A12-002793, A12-002796, A12-005363 and A12-005365

BETWEEN:

LIOUDMILA MELECHTCHENKO, ANDREI MELECHTCHENKO, AKSANA MITKEVICH and VASILI PASASKI Applicants

and

STATE FARM MUTUAL AUTOMOBILE 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, as amended, it is ordered that:

1. The Applicants did not wilfully misrepresent material facts with respect to their applications for benefits, within the meaning of section 53 of the Schedule.

2. State Farm’s claims for repayment of benefits are dismissed.

3. I reserve the issue of expenses to the hearing arbitrator. If the parties resolve the dispute without a further hearing, but are unable to agree on the issue of expenses, either party may request that I reconvene this hearing to resolve the issue, no later than 30 days after all other issues have been resolved.

July 6, 2016

Jeffrey Rogers Arbitrator

Date

Footnotes

1. 1The Statutory Accident Benefits Schedule — Effective September 1, 2010, Ontario Regulation 34/10, as amended.
2. 2In written submissions, both parties stated the issue as whether the applicants were involved in an “accident”.
3. 3(FSCO P04-00004, November 2, 2004)
4. 4At page 2
5. 5Exhibit 3, Transcript of EUO, Question 14
6. 6Exhibit 3, Questions 130-140
7. 7Exhibit 2
8. 8Exhibit 3, Question 157
9. 9Exhibit 3, Question 157
10. 10Exhibit 3, Question 153
11. 11Exhibit 4, EUO of Andrei Melechtchenko, Question 124-125
12. 12Exhibit 6 EUO of Lioudmila Melechtchenko, Questions 51-56