Financial Services Commission of Ontario
Neutral Citation: 2016 ONFSCDRS 27
FSCO A15-000419
BETWEEN:
PING LIAO
Applicant
and
STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY
Insurer
DECISION ON A MOTION
Before: Arbitrator Cheryl Gaster
Heard: By teleconference on December 8, 2015
Appearances:
Ms. Ping Liao did not participate
Ms. Dana R. Spadafina participated for State Farm Mutual Automobile Insurance Company
Issues:
The Applicant, Ms. Ping Liao, was injured in a motor vehicle accident on June 22, 2012, and sought accident benefits from State Farm Mutual Automobile Insurance Company (“State Farm”), payable under the Schedule.1 The parties were unable to resolve their disputes through mediation and Ms. Liao, 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.
The issues in this Motion are:
Should Ms. Liao’s Application for Arbitration (“Application”) be dismissed without a Hearing on the grounds that it is frivolous, vexatious or commenced in bad faith pursuant to Rule 68.1 of the Dispute Resolution Practice Code (“the Code”)?
In the alternative, should Ms. Liao’s Application be deemed withdrawn pursuant to Rule 70 of the Code?
Is Ms. Liao liable to pay State Farm’s expenses pursuant to subsection 282(11) of the Insurance Act?
Result:
Pursuant to Rule 68.1 of the Code, a finding that Ms. Liao’s Application is frivolous, vexatious or commenced in bad faith is not appropriate in these circumstances.
Pursuant to Rule 70 of the Code, Ms. Liao’s Application be deemed withdrawn.
Ms. Liao is to pay to State Farm their expenses in the amount of $500.00, inclusive of fees, disbursements and HST, forthwith.
EVIDENCE AND ANALYSIS:
Chronology
On November 27, 2014, the Report of Mediator was released.
On January 21, 2015, Ms. Liao’s Application was received by the Commission. Although unsigned by Ms. Liao, it was signed on her behalf by her then legal representative.
On September 16, 2015, the Pre-Hearing was conducted before me. Ms. Liao did not participate, although her representative, Ms. Zenan Babb, Licensed Paralegal, along with State Farm’s counsel all attended in person. A resumption was scheduled to be held via teleconference for October 15, 2015 to permit Ms. Liao’s representative to make best efforts to contact her at a new address provided by State Farm and inform her of the resumption. I provided Ms. Liao with written notice of the resumption and its purpose.
On October 15, 2015, Ms. Babb, Ms. Liao’s representative, requested her firm be removed from the record as Ms. Liao’s representative as Ms. Liao had ceased communicating with her, resulting in a breakdown in the solicitor-client relationship.
On that date, I ordered that Ms. Babb and her firm, Pace Law Firm, be removed as representatives of Ms. Liao, based on the evidence demonstrating compliance with the requirements of Rule 9 of the Code, including but not limited to, her documented failed attempts to contact Ms. Liao both by telephone and written communication over a period of several months. In addition, Ms. Babb gave Ms. Liao written notice of their request to be removed as solicitors of record.
In addition, on October 15, 2015, I gave Ms. Liao notice that a Hearing would be scheduled for December 8, 2015 via teleconference and that should she participate, the Hearing would be converted into a resumption. Further, I advised Ms. Liao that should she fail to contact ADR Chambers by December 8, 2015, it would be assumed her intention was to not advance her Application. Ms. Liao did not participate nor has she contacted ADR Chambers.
On December 8, 2015, State Farm made oral submissions in respect of their request that Ms. Liao’s Application be dismissed and I asked for written submissions by December 15, 2015 in support of their oral request for costs. Ms. Liao did not participate nor had she contacted ADR Chambers.
State Farm submits that Ms. Liao’s failure to attend, participate or respond to any written communication, despite notice, demonstrates she has abandoned her claim and meets the test for dismissal of her Application as set out in Rule 68 of the Code.
Decision
Should Ms. Liao’s Application for Arbitration be dismissed on the grounds that it is frivolous, vexatious or commenced in bad faith?
Arbitrators have taken two different but equally efficacious approaches when dealing with the issue of abandoned proceedings. When dismissing proceedings without a Hearing, some Arbitrators rely on Rule 68, while others rely on the principle of “deemed” or “constructive withdrawal” under Rule 70.3. As noted in Fedoseev and RBC General Insurance Company,2 both approaches are an attempt to interpret the Rules consistent with Rule 1.1, which calls for a broad interpretation designed to achieve the most just, quickest and least expensive resolution of disputes.
Rule 68.1 provides that an adjudicator may dismiss a proceeding without a Hearing where the proceeding is “frivolous, vexatious or commenced in bad faith.” Rule 68’s other subsections require the adjudicator to deliver written notice to all parties of the intention to dismiss under Rule 68.1 and provide for a party to object to the dismissal of the proceedings.
Neither the Insurance Act, the Schedule, the Statutory Powers Procedure Act, nor the Code provide definitions for the terms “frivolous”, “vexatious” or “commenced in bad faith”. However, Black’s Law Dictionary and case law provide some guidance. Black’s Law Dictionary defines the terms “frivolous and vexatious” as when the party initiating the action is not acting bona fide and merely initiates the proceeding in order to annoy or when knowing the proceeding will not lead to a practical result. I find the reasoning in the case law to be insightful on the applicability of these terms to Rule 68.1. In Almaliah and Dominion of Canada General Insurance Company,3 the Arbitrator indicated that a finding of frivolous, vexatious or commenced in bad faith can only be made after an assessment of the merits of the claim. In Fedoseev,4 the Arbitrator concluded the Black’s Law Dictionary definition of the terms infers a wilful intention on the part of the litigant to bring an unmeritorious claim, to act in a malicious manner and to fail to demonstrate they have made an honest mistake. Subsequent decisions in which those findings are followed include Niaze Tibi and Economical Mutual Insurance Company5 and James King and Waterloo Insurance Company.6 These cases speak to a high threshold in order to conclude that a proceeding is frivolous, vexatious or is commenced in bad faith.
To hold that Ms. Liao’s Application is “frivolous, vexatious or commenced in bad faith” would be to find that Ms. Liao knew from the outset of her claim that it was without merit. To make that determination requires an assessment of the merits of her case and consideration of the substantive issues in dispute along with the evidence in support of or rebutting her claim, which may include evidence of witnesses and cross examination of those giving testimony. Ms. Liao’s claims are not being subjected to this independent scrutiny as none of these processes are being undertaken in this matter.
No evidence has been presented to me to establish that Ms. Liao’s failure to continue to participate, communicate, or respond on her own behalf support a finding that her Application is frivolous, vexatious or commenced in bad faith. Therefore, based on the circumstances of this case, I find that concluding that Ms. Liao’s Application is frivolous, vexatious or commenced in bad faith under Rule 68.1 is not appropriate. However, Ms. Liao’s failure to continue to participate, communicate or respond has interfered with the dispute resolution process.
Should Ms. Liao’s Application for Arbitration be deemed withdrawn pursuant to Rule 70 of the Code?
Neither the Insurance Act, the Schedule, the Statutory Powers Procedure Act nor the Code provides a specific Rule which deals with the abandonment of claims. However, Rule 70 provides that an adjudicator may permit a withdrawal on such terms and conditions as the Arbitrator deems just even in circumstances where a party does not agree to a withdrawal.
In all the circumstances of this case, Ms. Liao’s actions over the several months since the first Pre-Hearing have led to a presumption of a lack of interest in advancing his claim. On October 15, 2015, I granted the order for her representative to be taken off the record due to a breakdown in solicitor client relationship, based on a lack of communication on the part of Ms. Liao since in or around early January 2015.
I find that Ms. Liao has withdrawn from the process as she has not communicated with her representative since earlier in the process and she has not participated in the subsequent proceedings over an approximate eleven-month period. This permits ADR Chambers to close the file, and for State Farm to conclude that further proceedings are unlikely, while at the same time, Ms. Liao’s claim is not extinguished. This broad interpretation of Rule 70 is consistent with the mandate that the Rules are to be interpreted to produce the most just, quickest and least expensive resolution of the dispute.
EXPENSES:
Rule 70.3 of the Code gives an adjudicator the jurisdiction to award expenses where there has been a withdrawal of a claim. Rule 75 outlines the criteria for awarding expenses by an Arbitrator.
State Farm requested expenses for the cost of its preparation and attendance at the proceedings. I received written submissions with regard to this issue on December 15, 2015.
Given the particular circumstances of this claim, I am ordering Ms. Liao to pay to State Farm the amount of $500.00 inclusive of fees, disbursements, and HST, forthwith.
January 18, 2016
Cheryl Gaster Arbitrator
Date
Financial Services Commission of Ontario
Neutral Citation: 2016 ONFSCDRS 27
FSCO A15-000419
BETWEEN:
PING LIAO
Applicant
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 amended, it is ordered that:
Pursuant to Rule 68.1 of the Dispute Resolution Practice Code, a finding that Ms. Liao’s Application for Arbitration is frivolous, vexatious or commenced in bad faith is not appropriate in these circumstances.
Pursuant to Rule 70 of the Dispute Resolution Practice Code, Ms. Liao’s Application for Arbitration be deemed withdrawn.
Ms. Liao is to forthwith pay to State Farm their expenses in the amount of $500.00 inclusive of fees, disbursements and HST.
January 18, 2016
Cheryl Gaster Arbitrator
Date
Footnotes
- The Statutory Accident Benefits Schedule - Effective September 1, 2010, Ontario Regulation 34/10, as amended.
- FSCO A15-00245, December 6, 2006.
- FSCO A06-000741, October 18, 2006.
- FSCO A15-00245, December 6, 2006.
- FSCO A09-001695, March 25, 2011.
- FSCO A10-003386, March 28, 2014.