State Farm Mutual Automobile Insurance Company v. Ya Lin Dave Li, 2016 ONFSCDRS 190

Financial Services Commission of Ontario

Commission des services financiers de l’Ontario

Neutral Citation: 2016 ONFSCDRS 190

Appeal P16-00019

OFFICE OF THE DIRECTOR OF ARBITRATIONS

STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY

Appellant

and

YA LIN DAVE LI

Respondent

BEFORE:

Delegate Lawrence Blackman

REPRESENTATIVES:

Mr. Jonathan B. Schrieder for the Appellant, State Farm Mutual Automobile Insurance Company

Ms. Alyson Toms for the Respondent, Mr. Ya Lin Dave Li

HEARING DATE:

By written submissions due June 23, 2016

APPEAL ORDER

Under section 283 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. Pursuant to Rule 68.1 of the Dispute Resolution Practice Code (Fourth Edition – Updated January 2014), this appeal is dismissed.

July 14, 2016

Lawrence Blackman Director’s Delegate

Date

REASONS FOR DECISION

I. BACKGROUND

This decision pertains to Rule 68 of the Dispute Resolution Practice Code (Fourth Edition, Updated – January 2014) (the “Code”). Rule 68 concerns dismissing a proceeding without a hearing. Rule 68 is consistent with subsection 23(1) of the Statutory Powers Procedure Act, R.S.O. 1990, c. S.22, that a “tribunal may make such orders or give such directions in proceedings before it as it considers proper to prevent abuse of its processes.” Rule 68 states:

68.1 Subject to Rule 68.2, an adjudicator may dismiss a proceeding without a hearing where the proceeding is frivolous, vexatious or is commenced in bad faith. 68.2 Before dismissing a proceeding under this Rule, an adjudicator shall deliver written notice to all parties of the intention to dismiss the proceeding on the grounds set out in Rule 68.1. 68.3 Where a party objects to a dismissal of the proceeding pursuant to Rule 68.1 or seeks to make written submissions with respect to the dismissal, the party must:

(a) provide the grounds upon which the party objects to the dismissal of the proceeding, or set out any other issues or concerns, in writing; and (b) serve the material upon the other parties and file it within 20 days of the date of the notice provided under Rule 68.2.

68.4 An adjudicator will consider any written objections or submissions received and may make an order on such terms as he or she considers just.

The Respondent, Mr. Ya Lin Dave Li, was injured in a January 14, 2010 motor vehicle accident. As a result, he claimed statutory accident benefits under the 1996 Schedule¹ against his first-party automobile insurer, the Respondent, State Farm Mutual Automobile Insurance Company.

Mediation held January 10, 2013 failed to resolve the issues in dispute between the parties. The Respondent filed for arbitration in April 2014. A pre-hearing discussion was held June 24, 2015. A three-day arbitration hearing was held in November 2015 before Arbitrator Mills of ADR Chambers (the “Arbitrator”).

At page 12 of her January 29, 2016 decision, the Arbitrator stated that she found the Respondent to be credible witness. The Arbitrator found entirely in favour of the Respondent, awarding his claimed medical benefits and the cost of examinations on the basis that they were reasonable and necessary, as well as allowing interest and legal expenses.

The Arbitrator further found the Appellant liable to pay a special award under subsection 282(10) of the Insurance Act of $25,165.59 based on the Appellant’s unreasonable withholding of payments to the Respondent.

The Appellant served its Notice of Appeal on February 26, 2016, just under the 30-day time limit provided by Rule 52.1 of the Code. The Notice of Appeal stated that the Appellant was ordering a transcript of the hearing, receipt of which was anticipated within four to six weeks. That meant that the transcript would be delivered between March 29 and April 8, 2016.

My March 21, 2016 acknowledgement letter, faxed to both representatives, noted that this appeals office had received the Notice of Appeal from ADR Chambers. I asked that any further appeal documentation be filed with this office and not with arbitration at ADR Chambers.

The Notice of Appeal sought a stay of the Arbitrator’s January 29, 2016 Orders. My March 21, 2016 letter noted subsection 283(6) of the Insurance Act that an appeal does not stay the arbitrator’s order unless decided otherwise. The form of the Notice of Appeal asks that the appellant provide reasons as complete as possible as to why a stay of the arbitration order is being sought. A box is provided in the form to be ticked off if extra sheets are attached.

The present Notice of Appeal included a Schedule “B” setting out the Appellant’s argument for a stay of the Arbitrator’s Order. These submissions, in full, read:

1. The Arbitration Order, dated January 29, 2016, is the result of invalid and/or insufficient grounds considered by the Arbitrator, and would therefore be prejudicial for State Farm

to pay the award.

2. The Applicant has not led any evidence of financial hardship or need.

Schedule “A” of the Notice of Appeal provided five grounds for the appeal:

1. The Arbitrator failed to provide adequate reasons. However, the Appellant does not provide any details of this allegation.

2. The Arbitrator failed to properly apply subsection 38(1.1) of the 1996 Schedule. However, the Appellant does not state how the Arbitrator erred in this regard.

3. The Arbitrator failed to properly apply subsection 69.1(2) of the 1996 Schedule. However, the Appellant does not state how the Arbitrator erred in this regard.

4. The Arbitrator erred in granting a special award by considering Lin and State Farm Mutual Automobile Insurance Company, (FSCO A12-007465, June 23, 2015), and failing “to consider the significant history of fraud and abuse of process perpetuated by the clinics.” However, the Appellant provides no specifics in support of this allegation.

5. A catch-all “Any other errors in law by the arbitrator to be determined following review of the transcripts and/or as noted by this Honourable Appeal Tribunal.”

Applying Guardian Insurance Company of Canada and Armstrong, (FSCO P00-00037, July 20, 2000), and Young and Liberty Mutual Insurance Company, (FSCO P03-00043, June 20, 2005), application for judicial review dismissed, 2006 CanLII 7286 (ON S.C.D.C.), my March 21, 2016 letter held that the Appellant’s present bald, minimum submissions did not support the extraordinary remedy of a stay of the Arbitrator’s Orders.

However, I stated that should the Appellant seek to serve expanded submissions in support of a stay, I would set a time-line for responding and reply submissions. My caveat was that the timing of any such further motion for a stay might go to a determination, in part, of the bona fides of the request.

The Respondent delivered his Response to Appeal on April 14, 2016. His covering letter stated that his representative had contacted the Appellant’s counsel on March 21, 29 and April 6, 2016 in follow-up to my March 21, 2016 letter. The Respondent stated that the Appellant had not responded.

My March 21, 2016 acknowledgement letter noted Rule 54.2 of the Code that the time for the Appellant’s written submissions (normally 30 days after receipt of the Response to Appeal) is extended to 30 days from the date the transcript is received.

My May 9, 2016 follow-up letter, faxed to both representatives, stated that it was now ten weeks from the date of the Notice of Appeal. I did not see that this office had received the arbitration transcript the Appellant anticipated would be received by April 8, 2016, nor had this office been advised that the Appellant had received the transcript. I noted that this appeal remained on hold. I asked that the Appellant advise by return correspondence the status of the transcript.

This office received no response to my May 9, 2016 letter. My June 2, 2016 letter, faxed to both parties’ representatives, stated that this office had not received any reply from the Appellant to my May 9, 2016 letter, or any other communication since the Appellant had delivered its Notice of Appeal three months before. I gave written notice to the parties under Rule 68.2 of the Code of the intention to dismiss this appeal on the grounds set out in Rule 68.1.

In accordance with Rule 68.3 of the Code, the parties were given until June 23, 2016 to deliver their written submissions under Rule 68.3(a) and/or material under Rule 68.3(b) with respect to whether to dismiss this appeal on the basis that it was frivolous, vexatious or commenced in bad faith, including the opportunity to provide submissions on appeal legal expenses.

My June 3, 2016 letter, again faxed to both representatives, acknowledged the Appellant’s letter of the same day advising that at all times it intended to proceed with its appeal. The Appellant, however, was silent as to whether it had forwarded the arbitration transcript, whether the transcript had been received or whether the transcript was still being ordered.

The Appellant’s letter also stated that it would be submitting its appeal submissions by the June 23, 2016 date provided. My June 3, 2016 letter reminded the Appellant that the submissions noted in my letter the day before were not the main appeal submissions under Rule 54 of Code, but rather submissions under Rule 68.3 of the Code with respect to whether this appeal should be dismissed on the basis that it was frivolous, vexatious or commenced in bad faith, including any submissions on appeal legal expenses.

My June 3, 2016 letter further confirmed that under Rule 54.2 of the Code, the time for an appellant’s main written submissions runs from the date the arbitration transcript is received and that this appeals office still did not have the arbitration transcripts the Appellant had anticipated would be received by April 8, 2016. I thus asked “why does this office not have the arbitration transcripts and confirmation of service of same on the Respondent?”

I did not receive a response to my June 2 and 3, 2016 letters from either party. By letter dated July 4, 2016 faxed to both representatives I confirmed that no communication had been received from either party since my June 3, 2016 letter, including having not received either any submissions or the arbitration transcript. I stated that if either party had sent anything, I was to be advised by return correspondence that day with proof of service.

The only response was from the Respondent who advised by a July 5, 2016 letter, copied to the Appellant’s counsel, that he had not received any communication from the Appellant with respect to this Appeal. The Respondent stated that as he had not received any further submissions, he was unable to respond other than asking that this appeal be dismissed.

II. ANALYSIS

Imalele and Zurich Insurance Company, (FSCO A98-000531 July 19, 1999), considered Ontario

Regulation 664, R.R.O. 1990, as amended by Ontario Regulation 464/96, that allowed an award

of expenses where the proceeding or any position taken by a party was “manifestly unfounded, frivolous, vexatious, fraudulent or an abuse of process.” Arbitrator Hale held:

1. For a proceeding to be found to be frivolous, it must relate to a claim which is trivial or inconsequential.

2. For a finding that an application is vexatious, the adjudicator must determine that it was designed primarily to cause inconvenience and unnecessary expense.

3. To find a proceeding to be an abuse of process, the adjudicator must have evidence of a course of conduct on the part of a party that demonstrates a wilful disregard for the adjudication process.

I adopt Arbitrator Hale’s analysis.

In this present case, there is the following evidence that the Appellant’s course of conduct demonstrates a wilful disregard for this appeal process:

1. The Notice of Appeal anticipated receipt of the arbitration transcripts by April 8, 2016. My March 21, 2016 acknowledgement letter confirmed that the exchange of written submissions was on hold pending receipt of the arbitration transcripts.

It is now July 14, 2016. The Appellant has not delivered the arbitration transcripts. The Appellant has not provided proof of service of the transcripts on the Respondent. The Respondent states that it has not received anything from the Appellant. The Appellant has not provided any explanation for why the transcripts were not delivered. The Appellant did not indicate when the transcripts might be received. The Appellant did not indicate whether the transcripts are still being requested.

2. My May 9, 2016 follow-up letter requested the Appellant’s advice by return correspondence as to the status of the arbitration transcript. The Appellant did not respond to this letter.

3. My June 3, 2016 letter asked the Appellant why this office had not received the arbitration transcripts. The Appellant did not respond to this letter.

4. My June 2, 2016 letter gave the parties until June 23, 2016 to deliver their written submissions and material on whether to dismiss this appeal on the basis it was frivolous, vexatious or commenced in bad faith. The Appellant’s June 2, 2016 letter stated it would be providing its submissions by June 23, 2016. The Appellant did not provide any submissions, material or further communication by that due date. The Appellant remained silent as to the status of the transcripts its Notice of Appeal said it was ordering.

5. My July 4, 2016 letter gave the Appellant a further opportunity to respond. The Appellant did not reply to this letter. The Appellant continued its silence as to the status of the transcripts, receipt of which it anticipated, at the latest, three months before.

Rule 68.1 includes, as a ground for dismissing a proceeding without a hearing, that the proceeding was commenced in bad faith. A willful disregard of the process, while evidence of continuing bad faith, may be insufficient by itself to establish that the proceeding was commenced in bad faith. In this case, there is the following further evidence that this appeal proceeding was commenced in bad faith:

1. The Arbitrator found the Appellant’s actions in this litigation to be “stubborn, inflexible and unyielding and contrary to the purpose of the Schedule, which is ‘designed to ensure the timely submission and resolution of accident benefits.’” She held at page 11 of her decision that the Appellant:

… never actually denied the medical benefits and examinations on the basis that they were not reasonable and necessary. It simply issued an OCF-9 a year later, with a blanket statement that it was “unable to consider his treatment and assessment plans.”

At no time prior to January 22, 2011 did State Farm correspond with the Applicant regarding the impugned medical benefits and examinations. There were no concerns raised by State Farm with respect to the Applicant’s application for accident benefits, and nothing to suggest that in State Farm’s view the application did not meet the statutory requirements of the Schedule.

The Arbitrator stated at page 4 of her decision that the Respondent’s January 22 and 24, 2011 OCF-9s (Explanation of Benefits) advised that the Respondent was currently in a dispute with the assessment centres and “for that reason was unable to consider [the Respondent’s] treatment and assessment plans.”

2. The Appellant’s actions in this present appeal proceeding mirror the Arbitrator’s finding at first instance that the Appellant actions were “contrary to the purpose of the Schedule, which is ‘designed to ensure the timely submission and resolution of accident benefits.’”

3. The Notice of Appeal does not allege fraud against the Respondent. The Arbitrator found the Respondent to be a credible witness. Subsection 283(1) of the Insurance Act limits appeals from the order of an arbitrator to questions of law. Alleged errors of fact may not be appealed.

4. In its Notice of Appeal, the Appellant makes a general allegation of fraud against service providers. Fraud is an extremely serious allegation. As stated above, a stay of an arbitrator’s order is the exception under the Insurance Act, not the rule. Where an appeal is commenced in good faith, especially where there is an allegation of fraud, one would expect to see a fulsome and cogent argument for any requested stay, in accordance with the actual form of the Notice of Appeal. That did not occur in this case.

5. My March 21, 2016 letter allowed the Appellant an opportunity to serve expanded submissions in support of a stay. Where an appeal is commenced in good faith, especially where there is an allegation of fraud, one would have expected the Appellant to have seized this further opportunity. In this case, in the more than three months that followed, the Appellant made no such request.

6. Where an appeal is commenced in good faith, especially where fraud is alleged, one would expect an appellant to move expeditiously. It is now more than five months since the Arbitrator’s decision. This appeal remained on hold pending receipt of the arbitration transcript. The Appellant did not deliver the arbitration transcript, nor did it advise why the transcript had not been provided, when it might be provided or whether it was still being requested.

7. The Appellant did not provide any submissions objecting to the dismissal of this appeal on the basis that was frivolous, vexatious or commenced in bad faith, nor did it provide any material in that regard.

Rather, this morning, on July 14, 2016, at 9:14 a.m., this office received from the Appellant a one-sentence letter. While the Appellant’s letter is dated July 7, 2016, the Appellant’s Fax Cover Sheet has the typed date crossed out and replaced with a hand-written date of July 14, 2016.

The Appellant’s letter states that the Appellant “hereby withdraws its appeal of Arbitrator Janet Mills’ January 29, 2016 decision in the above-mentioned matter.” Nothing further is provided.

Rule 70 of the Code pertains to withdrawals. Rule 70.1 states that a party may seek permission to withdraw all or part of a dispute by:

(a) serving a request to withdraw on all parties; and (b) filing the request to withdraw together with a Statement of Service in Form F; or (c) making an oral request to withdraw all or part of a dispute during a neutral evaluation, pre-hearing discussion, settlement discussion, preliminary conference or at a hearing.

The Appellant has not followed either option mandated by the Code. The Appellant does not seek permission to withdraw this appeal.

Rule 70.2 of the Code provides that “an adjudicator may permit a party to withdraw all or part of a dispute where all parties agree.” Rule 70.3 of the Code states that where a party does not agree to the withdrawal, an adjudicator may permit the withdrawal on such terms and conditions as he or she considers just and may award expenses to either party as permitted by Rule 75 and following. A party may not unilaterally withdraw a proceeding.

I find the Appellant’s (1) further non-compliance regarding the Code, adjudicative orders and its own undertakings, and (2) its abrupt notice it is withdrawing this appeal amidst its continuing silence in providing any explanation for its non-compliance to be further evidence that the Appellant commenced this appeal in bad faith.

For the above enumerated reasons, I find that the Appellant has commenced this appeal in bad faith. Under the authority of Rule 68 of the Code, this appeal is dismissed.

Although provided an opportunity in my June 2, 2016 letter, the Respondent has not delivered any submission regarding legal expenses or any other term of a dismissal order. I decline to make an order of appeal expenses.

July 14, 2016

Lawrence Blackman Director’s Delegate

Date

Footnotes

1. 1The Statutory Accident Benefits Schedule — Accidents on or after November 1, 1996, Ontario Regulation 403/96, as amended.