Financial Services Commission of Ontario
Neutral Citation: 2016 ONFSCDRS 328 FSCO A15-005030
BETWEEN:
ADAM BORTOLUSSI Applicant
and
SECURITY NATIONAL INSURANCE CO./MONNEX INSURANCE MGMT. INC. Insurer
DECISION ON EXPENSES
Before: Alan Mervin, Arbitrator Heard: By telephone conference call on November 4, 2016.
Appearances: Vikram Bhandari for Mr. Bortolussi A. Sandy Williams for Security National Insurance Co./Monnex Insurance Mgmt. Inc.
BACKGROUND:
The Applicant, Adam Bortolussi, was injured in a motor vehicle accident on September 10, 2013. The Applicant made certain claims for benefits under the Schedule1 and disputes arose between the Applicant and the Insurer. The parties were unable to resolve their disputes through mediation, and Mr. Bortolussi applied for arbitration at the Financial Services Commission of Ontario.
A pre-hearing in this matter was held before Arbitrator Stramwasser, on March 10, 2016, at which time the issues in dispute were agreed upon. A date for hearing was set, and the pre-hearing was concluded.
On March 11, 2016, the Insurer served a written offer pursuant to S.76 of the Dispute Resolution Practice Code (DRPC),2 to settle on a full and final basis, open until July 1, 2016, (and subsequently extended to August 16, 2016), which was ultimately not accepted by the Applicant by the expiration deadline.
On August 24, 2016, the Applicant sent FSCO a letter by facsimile transmittal, requesting to withdraw the Application for Arbitration, pursuant to section 70 of the DRPC.
On September 6, 2016, the Insurer wrote FSCO, copying the Applicant, advising that it was not consenting to the withdrawal, as the Insurer submitted that the matter of expenses was not resolved, and requested a hearing to determine expenses as a condition to its consent to the withdrawal.
On September 13, 2016, the Insurer again wrote FSCO, copying the Applicant, advising that it was consenting to the Applicant’s request to withdraw, on condition that an expense hearing be held. The Insurer’s letter advised that the Applicant consented to this process.
In fact, no formal order from an Arbitrator ordering benefits, dismissing the Application for Arbitration, or a letter from FSCO acknowledging the withdrawal was ever made. It appears that this file was never closed, and that the request to withdraw is left for me to grant or refuse.
Nothing of significance took place subsequently, and this expense hearing was then scheduled to be held by teleconference, and was held before me on November 4, 2016.
Issues:
The issues in this hearing are:
Is Security National entitled to its expenses incurred in preparation for this arbitration hearing, despite the Applicant’s request to withdraw his Application prior to a hearing taking place?
Is Mr. Bortolussi entitled to his expenses?
Result:
Security National is not entitled to its expenses of this proceeding.
Mr. Bortolussi is not entitled to his expenses of this proceeding.
Each party shall bear its own expenses.
THE LAW:
Subsection 282(11) of the Insurance Act3 provides that:
The arbitrator may award, according to criteria prescribed by the regulations, to the insured person or the insurer, all or part of such expenses incurred in respect of an arbitration proceeding as may be prescribed in the regulations, to the maximum set out in the regulations.
Section 12(2) of Ontario Regulation 664, R.R.O. 1990, (the expense regulation) made under the Insurance Act, as amended, sets out the criteria for Arbitrators to consider when deciding expense claims. These criteria are also contained in section 75.2 of the DRPC.
These criteria are:
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 the Schedule or refused or failed to provide any material required to be provided under subsection 42(10) of the Schedule.
Whether the insured person refused or failed to submit to an examination as required under section 44 of the Schedule or refused or failed to provide any material required to be provided under subsection 42(10) of the Schedule.
In addition, section 12(3) of the Expense Regulation4 deals with offers to settle, and states as follows:
(3) Upon the request of the insurer or the insured person, the arbitrator shall, for the purposes of awarding expenses, take into account all written offers to settle, if any,
(a) that were made after the conclusion of mediation and before the conclusion of the arbitration; and
(b) that were made in accordance with the rules of practice and procedure applicable to the proceeding.
(4) If the arbitrator is requested to take into account a written offer under subsection (3), the arbitrator shall have regard to the terms of the offer, the timing of the offer, the response to the offer and the result of the proceeding.
Section 3(1) of the Schedule to the Expense Regulation deals with quantum, and states:
(1) The legal fees payable by the insured person or the insurer for the following matters may be awarded:
For all services performed before an arbitration, appeal, variation or revocation hearing.
For the preparation for an arbitration, appeal, variation or revocation hearing.
For attendance at an arbitration, appeal, variation or revocation hearing.
For services subsequent to an arbitration, appeal, variation or revocation hearing.
(2) The number of hours for which legal fees may be awarded shall be determined by the arbitrator, having regard to the criteria set out in subsection 12(2) of this Regulation.
Arbitrators have a wide discretion in awarding expenses, and consider a number of general principles that have emerged from past arbitration decisions.
Henri and Allstate Insurance Company of Canada5 provided guidance to the general principles arbitrators should consider when deciding these cases, including, but not limited to:
- the overriding consideration in fixing arbitration expenses is reasonableness.
- a line-by-line assessment of the expenses claimed is not appropriate.
Rather, the Arbitrator should make a global assessment of reasonable expenses.
Additionally, it has long been accepted that the SABS are consumer-oriented legislation, designed so that access to justice is available to the public without fear of exorbitant costs or other consequences.
The Supreme Court of Canada's decision in the leading case of Smith v. Co-operators General Insurance Co.6, establishes that consumer protection is one of the main objectives of automobile insurance law. In that decision, Justice Gonthier reasoned as follows at paragraph 11:
There is no dispute that one of the main objectives of insurance law is consumer protection, particularly in the field of automobile and home insurance. The Court of Appeal was unanimous on this point and the respondent does not contest it. In Insurance Law in Canada (loose-leaf ed.), Professor Craig Brown observed,
‘In one way or another, much of insurance law has as an objective the protection of customers.’
In this case, I must also take into account the fact that this matter never proceeded to a hearing. because the parties came to an agreement with respect to a conditional withdrawal. Did this matter then continue to be a “proceeding” after the purported withdrawal, so as to ensure that the arbitrator maintains jurisdiction to hold the hearing?
As well as determining entitlement in this expense hearing, I must also decide the amount of legal fees, appropriate hourly rate and disbursements, if any, that each party is entitled to, using as a guide, the above principles of “reasonableness” and “global assessment.”
Having heard the oral submissions of the parties, and the submissions with respect to the Insurer’s bill of costs, I have considered the principles contained in the Expense Regulation, as stated above, and have found the following to be of greatest assistance in deciding this case:
Each party’s degree of success in the outcome of the proceeding.
Any written offers to settle made in accordance with subsection (3).
I have also considered whether novel issues were raised in the proceeding, whether the conduct of a party or a party’s representative tended to prolong, obstruct or hinder the proceeding, and whether any aspect of the proceeding was improper, vexatious or unnecessary. I found these to be of little importance in assessing expenses.
While the Applicant submitted that the expense claim of the Insurer was unnecessary, and therefore prolonged the proceeding, it was the Insurer’s right to have a hearing on this issue, and the Applicant consented. In these circumstances, I cannot see how it can be said that the claim was improper, vexatious or unnecessary.
I have not considered items 6 and 7, regarding attendance at examinations, because they are not relevant to the facts of this case.
POSITION OF THE PARTIES:
The Insurer:
The request for this expense hearing was made by the Insurer. The Insurer made several submissions in support of its request for an order for expenses, and filed a bill of costs in advance of the hearing, dated October 7, 2016, in the amount of $3,720.31 for all services leading up to the withdrawal of the application by the Applicant, with detailed explanations of the work that was done by each person, the time spent and the amounts billed.
The Insurer’s submissions can be summarized as follows:
The Insurer was the successful party, in that the arbitration was withdrawn. The offer made appeared to satisfy the conditions stated in Rule 76, but in any event, its validity was not challenged by the Applicant. This offer was not accepted, and the Insurer submitted that it was therefore ultimately successful beyond the Rule 76 offer it had served, as per Rule 75(b).
The conduct of the Applicant prolonged the hearing, inasmuch as the offer to settle involved a financial payment of $1,535.00, which the Insurer submitted was the maximum amount it could pay for treatment under the MIG. By withdrawing the Application, the Applicant received nothing.
The Insurer submitted that I should find that Dr. Altaf Virani, the treating chiropractor and the Applicant colluded, based on an email exchange in the correspondence between them, (which will be discussed further in the following section), and that this was conduct that obstructed or hindered the proceedings.
The Insurer’s Rule 76 offer to the Applicant was for a full and final settlement. The only live issues at the time of the withdrawal were with respect to two relatively modest Treatment Plans, all other issues originally in dispute having been resolved or withdrawn previously. The dollar amount of that offer was essentially the balance remaining in the MIG for medical treatment.
The Applicant purportedly withdrew his claims and the insurer had classified the Applicant’s injuries as falling within the Minor Injury Guideline (MIG). Since the issue of MIG was never resolved, it was the Insurer’s position that by withdrawing the Application and not challenging the Insurer’s determination with respect to the MIG, the Applicant had accepted and attorned to the Insurer’s decision to place him in the MIG.
It was the Insurer’s position that, since it “beat the Rule 76 offer” and, since the Applicant received less than the Rule 76 offer would have given him, the continuation of the claim at that point was frivolous and additional unnecessary costs were incurred by the Insurer as a result of the Applicant prolonging the case.
As to quantum, the Insurer’s account totalled $3,720.31 for fees, disbursements and HST, for what appears to be 3 lawyers and a law clerk, for all services. Mr. Williams submitted that, although the Application was withdrawn over a month prior to the hearing, as defence counsel, Mr. Williams begins his preparation far in advance of the hearing, including summonsing witnesses, interview, research and preparation. It was his submission that at the time of the withdrawal, the amounts that appear in the account for preparing this case were incurred and necessary to properly defend the claim.
The Applicant:
The Applicant submitted that, since the Application was withdrawn, there ought to be no costs awarded. The Applicant’s main submissions can be summarized as follows:
As the matter was withdrawn prior to hearing, there never was a “proceeding” as referred to in Rule 75 of the DRPC.
The attempts to retrieve costs in this action amounts to frivolous and vexatious behaviour on the part of the Insurer, and shows bad faith. The Applicant withdrew in August, well over a month prior to the hearing, and the Insurer had adequate notice to avoid extra costs.
As the Applicant withdrew over a month prior to the hearing date, the amounts and times for witness preparation and research in the bill of costs were grossly inflated. The Applicant questioned whether this work was actually performed that far in advance of a hearing.
The allegations of collusion with respect to the email exchange between the doctor and the former representative are serious issues if proven, but the Applicant questions how the Insurer drew that inference from the brief correspondence alluded to between the representative and the doctor, and urges me to dismiss any such allegations.
The Applicant’s representative submitted that his client suffered legitimate injuries and his application was not frivolous. He submitted that he had a genuine medical claim, and required treatment. The amount offered by the Insurer was for a full and final settlement, and did not even cover the cost of the outstanding amounts owed to service providers. He submitted that he was not fully recovered, was still in pain, that he may need additional future medical treatment, and was not willing to close the file on a full and final basis.
He submitted that the insurer’s offer in fact offered no consideration for the full and final aspect of the settlement, and the prospect of keeping the file open should further medical treatment be required, was an aspect that the Insurer’s offer did not address. Therefore, the submission was that, while the dollar value of the offer was higher than the ultimate result, because the proposed offer was for a full and final settlement and did not address the prospect of future treatment, the Rule 76 offer was not, in fact, better than the final result.
As the Schedule is intended to be viewed as consumer legislation, an expense award made against the Applicant under the circumstances of this case would not satisfy those principles.
There was nothing to suggest that the Applicant ever obstructed the proceedings, or did anything to inordinately lengthen the proceedings other than to pursue what he felt to be a real medical claim.
As the withdrawal was well in advance of the hearing date, the Applicant submitted that, “everyone knows” that the bulk of witness preparation and legal research are done closer in time to the hearing date, so as to question the legitimacy of the preparation billed. Further, this case presented a simple set of issues which, it was submitted, required minimal research compared to what was contained in the bill of costs.
At the end of the hearing, the Applicant submitted that I might consider making an expense order in the amount of $500.00 in his favour because of the additional time and expense this hearing required. He again submitted that an expense request by the Insurer is frivolous and without grounds under the circumstances.
ANALYSIS:
Jurisdiction:
This case is somewhat unusual. The Applicant purportedly chose to voluntarily request to withdraw his application, within a very short time after refusing to accept a valid Rule 76 offer that would have provided him a sum of money for outstanding medical bills and with no expense order made against him. Instead, he chose to withdraw the application, has not received any monetary compensation, and finds himself facing a request for an expense order against him for almost $4,000.00.
While the Applicant initially questioned the grounds for this hearing, in reviewing the correspondence in the file, it is clear that the Insurer initially opposed the Applicant’s request to withdraw, and subsequently only offered its written consent to the withdrawal after the Applicant had agreed to an expense hearing to determine expenses.
Rule 75 clearly gives an Arbitrator jurisdiction to award expenses, as does section 282(11) of the Insurance Act. Section 282(11) of the Insurance Act provides:
(11) The arbitrator may award to the insured person such expenses incurred in respect of an arbitration proceeding as may be prescribed in the regulations to the maximum set out in the regulations. R.S.O. 1990, c. I.8, s. 282(11).
However, the Applicant challenged the jurisdiction of the Arbitrator, submitting that as this matter did not go to a hearing, it was not a “proceeding”.
What is a “Proceeding”?
A “proceeding” is defined in section 4 of the DRPC as a matter requiring the exercise of a statutory power of decision. Under section 20(2) of the Insurance Act, an arbitrator has exclusive jurisdiction to determine all questions of fact and law that arise in any proceeding before him or her and under section 279(4), every arbitrator shall determine issues before him or her by order.
In my view, a “proceeding begins with the filing of the Application, and ends with the order of the Arbitrator,7 or completion of a settlement. This is in accord with the findings of Arbitrator Renahan, in Thevasagayam and Security National Insurance Company/Monnex Insurance Mgmt. Inc.8
In Arunasalam and State Farm Mutual Automobile Insurance Company9, Arbitrator Rogers stated the following:
I accept the logic expressed by the Arbitrator in Thevasagayam and Security National Insurance Company/Monnex Insurance Mgmt. Inc. that, where parties settle a dispute, because of the many reasons influencing the decision to settle, it is unrealistic to assess the degree of success in hindsight. State Farm agreed to pay the expenses of the arbitration.
I find that it makes no difference whether the matter proceeded to hearing. The matter was commenced with the filing of the Application for Arbitration, but was not yet ended by an Order from an Arbitrator. Since the matter of granting permission for the withdrawal has been left to me and, because there was no formal withdrawal, dismissal or order of any type to dispose of this Application ordered by an Arbitrator, I find that this matter continues to meet the definition of a proceeding until otherwise ordered, I find I therefore have jurisdiction to hold this expense hearing.
Was there Collusion:
During the hearing, after hearing arguments with respect to the correspondence between Dr. Virani and Mr. Bhasin, I ruled orally that in my view, on its face, the exchange was too vague to rise to the level of establishing a prima facie case which demonstrated interference with the medical experts.
The initial email from Dr. Virani to Mr. Bhasin appears to be no more than a note accompanying his report with a request to get back to the writer. Nothing in Mr. Bhasin’s response, “it is what it is”, suggests that the representative was requesting any alteration, change, or had discussed the contents of the report. While this type of exchange admittedly does not often appear in parties files for exactly this reason, I find it does not go far enough to establish a prima facie case of collusion/obstruction/interference with the independence of the expert, and see it as no more than a request to get back to the writer.
The Rule 76 Offer:
The Insurer submitted that, with respect to the submission that the non-acceptance of a valid Rule 76 offer that was greater in dollar value than the final result, the issue as to whether or not it makes a difference that the offer given is only for a full and final settlement is irrelevant and that I should not consider that in arriving at my decision.
I disagree.
Bearing in mind the well-recognised consumer aspect of the Schedule, a closure of this file will deny the Applicant of an opportunity, if required, to ask for further assistance. I find the aspect of whether the file remains open to be a separate and important issue in considering whether the Applicant “beat the offer”. A full and final settlement is very different from an offer to settle the issues in dispute. The Insurer presented me with no authorities in support of this submission.
Did the Applicant Attorn to the Minor Injury Guideline:
The Insurer submitted that the Applicant has attorned to the MIG by withdrawing his Application. Again I was not presented any authority for this proposition.
Firstly, as discussed, this application has technically not yet been formally withdrawn, so it cannot be said that he attorned by withdrawing.
However, even had this arbitration been withdrawn by order of an Arbitrator, in my view, when an arbitration is withdrawn, all the issues in dispute are withdrawn as well. I do not know how it can be said that an Applicant attorned to the MIG after a withdrawal.
Was the Bill of Costs Excessive:
I do not agree with the Applicant’s submission that the Insurer had sufficient time to avoid excess preparation, in that some counsel, depending on their schedule and work habits, prepare months in advance for hearings. Some leave preparation to the last minute. Still, having said that, the number of hours and amount of work billed by the Insurer for various individuals involved with this file appears to be far in excess of what should be required under these circumstances.
I do, however, agree with the Applicant that this was a straightforward and relatively simple case, and the amount claimed was well in excess of what might ordinarily be ordered in similar circumstances to those of this case.
In my view, there is nothing so unusual about this case that would ordinarily call for the amount of preparation submitted, when the parties knew well in advance that the hearing would not proceed.
However, as I have decided not to make an order against the Applicant, the issue of the quantum and amount of time spent on this file becomes moot.
Conclusion:
This was not a case where the Applicant did not fully participate in the process. I do not see that anything in the file that indicates that his behaviour lengthened the proceedings or caused increased costs.
In this case, the Applicant submitted that he had a legitimate medical claim, and did not want to close his file, as he allegedly owed more to service providers than what was available to him. As I did not adjudicate the merits, I am only repeating the submission of the Applicant, but, if true, is a very good reason for not accepting the offer given and closing his file.
To saddle this Applicant with a substantial costs order would not be in line with the consumer protection aspect of the legislation, and might discourage future injured persons to claim benefits that they otherwise might be entitled to.
Similarly, as the Applicant had agreed to this expense hearing as a condition of the purported withdrawal, the Insurer ought not to be penalized for exercising its right to claim its expenses.
Under the circumstances of this case, I have therefore decided to exercise my discretion, and order that each party shall bear its own expenses.
I have also taken the liberty of ordering that the Arbitration be withdrawn. Although the lack of a formal withdrawal to this point in time is an important consideration in deciding whether there is jurisdiction to hold this expense hearing, it is clear that both parties intended that this Application for Arbitration be withdrawn on consent, that the lack of a formal order for withdrawal appears to be an oversight, and I therefore so order.
December 6, 2016
Alan Mervin Arbitrator
Date
Financial Services Commission of Ontario
Neutral Citation: 2016 ONFSCDRS 328 FSCO A15-005030
BETWEEN:
ADAM BORTOLUSSI Applicant
and
SECURITY NATIONAL INSURANCE CO./MONNEX INSURANCE MGMT. INC. 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:
Each party shall bear their own expenses of this arbitration.
Mr. Bortolussi’s Application for Arbitration, FSCO A15-005030, is withdrawn.
December 6, 2016
Alan Mervin Arbitrator
Date
Footnotes
- The Statutory Accident Benefits Schedule — Effective September 1, 2010, Ontario Regulation 34/10, as amended.
- Dispute Resolution Practice Code (Fourth Edition — January 2014)
- R.S.O. 1990, c. I.8, as amended.
- Ontario Regulation 664/90.
- (FSCO A-007954, August 8, 1997)
- Smith and Co-operators General Insurance Co. 2002 SCC 30, [2002] 2 S.C.R. 129
- See discussion of “a proceeding” by Arbitrator Renahan in paragraphs 4-9, of Thevasagayam and Security National Insurance Co./Monnex Insurance Mgmt. Inc. (FSCO A05-000493, April 18, 2006)
- Thevasagayam and Security National Insurance Company/Monnex Insurance Mgmt. Inc. (FSCO A05-000493, April 18, 2006)
- Arunasalam and State Farm Mutual Automobile, Insurance Company (FSCO A07-002068, December 11, 2009)