Neutral Citation: 2016 ONFSCDRS 331

FSCO A12-006385

BETWEEN:

YA QIN NI

Applicant

and

STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY

Insurer

DECISION ON EXPENSES

Before: Anita Idemudia

Heard: By written submissions completed June 30, 2016

Appearances: Philip (Kai Kwong) Yeung for Ms. Ni Jane Young for State Farm Mutual Automobile Insurance Company

Issues:

The Applicant, Ya Qin Ni, was injured in a motor vehicle accident on October 25, 2010 and sought accident benefits from State Farm Automobile Insurance Company (“State Farm”), payable under the Schedule.¹ The parties were unable to resolve their disputes through mediation, and Ms. Ni, through her representative, applied for arbitration at the Financial Services Commission of Ontario under the Insurance Act, R.S.O. 1990, c. 1.8, as amended, by way of an application dated October 19, 2013.

The issues in this expense hearing are:

Is Ms. Ni permitted to withdraw her Application for Arbitration pursuant to Rule 70.3 of the Dispute Resolution Practice Code, Fourth Edition — Updated January 2014 (the “Code”)?
Is State Farm entitled to recover its expenses pursuant to Rule 70.3 and 75 of the Code?
If so, what is the amount of expenses to which State Farm is entitled?

Result:

Ms. Ni is permitted to withdraw her Application for Arbitration, pursuant to Rule 70.3 of the Code.
State Farm is entitled to its expenses of this arbitration proceeding, fixed in the sum of $2,269.23, inclusive of HST.

BACKGROUND

Ms. Ni’s application for arbitration was received on October 24, 2012.

A pre-hearing was held on January 15, 2014. The issues identified and agreed upon by the parties were as follows: caregiving benefits, medical benefits, attendant care benefits, housekeeping, cost of examinations, expenses of the arbitration and interest.²

A hearing date was scheduled for August 26, 27 and 28, 2014 at the Commission. On July 18, 2014, State Farm’s counsel requested an adjournment of the hearing, and on consent of both parties, the hearing was adjourned to July 6, 7 and 8, 2015.

It appears from an e-mail exchange between the parties on July 3, 2015, that Ms. Ni had withdrawn her claim for Attendant Care, Caregiving, Housekeeping and Home Maintenance Benefits. As well, State Farm had paid the outstanding accounts owed to Carlan Physiotherapy Centre and Inner Balance Psychological Services Inc. (in the sum of $3,942.24) The only issues remaining in dispute were Medical Benefits/Cost of Examinations at Optimum Health Clinic, Interest and Expenses.

At the commencement of the hearing on July 6, 2015, State Farm requested an adjournment on the basis that a preliminary issue, pursuant to section 55 of the Schedule, which had been raised at the mediation of July 18, 2012, but not referred to in the pre-hearing letter, had not been disposed of. The hearing of the substantive issues was adjourned and a preliminary issue hearing was scheduled for March 23 and 24, 2016.

On February 1, 2016, Ms. Ni’s legal representative sent an email to the Commission, stating that that the issues had been resolved and that they wished to vacate the hearing. The e-mail reads:

“[k]indly be informed that the issue has been resolved for. Please withdraw the arbitration hearing on Mar 23 - Mar 24, 2016”.

Ms. Ni submits that sometime in late 2015 (no specific date provided), she was advised that Optimum Clinic was no longer in operation.³

Ms. Ni’s legal representative followed with a letter to Ms. Young (counsel for State Farm) advising that “all issues in the application for arbitration have been resolved and Ms. Ni has already withdrawn the said application from FSCO and that the preliminary issue hearing should be cancelled accordingly.⁴”

Counsel for State Farm submits that the Applicant’s letter dated February 1, 2016,was not received at their offices until February 18, 2016, while they were following up on production requests, which caused State Farm unnecessary preparation time for the preliminary issue hearing.⁵

On February 18, 2016, State Farm wrote to the Commission advising that the preliminary issue has not been resolved and neither had the arbitration issues been resolved.⁶

State Farm relied on Rule 70 of the Code, that permission was not sought prior to the withdrawal by Ms. Ni, and that State Farm did not consent to the withdrawal of the preliminary issue hearing.

In particular, State Farm relied on Rule 70.3(b) in bringing a request for an award for expenses. Ms. Ni is not claiming her expenses.

EVIDENCE AND ANALYSIS

The Application for Arbitration

Ms. Ni has requested to end the arbitration proceeding, by withdrawing her application for arbitration.

In exercising my discretion pursuant to Rule 70 of the Code, I am permitting the withdrawal, subject to liability for expenses in accordance with Rule 75 of the Code and subsection 282(11) of the Insurance Act.

Entitlement to Expenses

Subsection 282(11) of the Insurance Act permits an arbitrator to award all or part of the expenses incurred by a party in respect of an arbitration proceeding, and provides thus:

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.

Rule 75.2 of the Code sets out the criteria to be considered in awarding expenses, and provides:

The adjudicator will consider only the criteria referred to in the Expense Regulation found in Section F of the Code. The criteria are set out below:

a. Each party’s degree of success;

b. Any written offers to settle made in accordance with Rule 76;

c. Whether any novel issues are raised in the proceeding;

d. 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;

e. Whether any aspect of the proceeding was improper, vexatious or unnecessary;

f. Whether the insured person refused or failed to submit to an examination as required under section 42 of the Statutory Accident Benefit Schedule;

g. 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.

I will now consider each, in turn:

(a) Each Party’s Degree of Success

State Farm submits that it was completely successful as the proceeding was withdrawn by the Applicant, Ms. Ni.

Ms. Ni disagrees with State Farm and submits that she was partially successful in light of the proceedings. Ms. Ni asserts that by paying for treatment incurred in the amount of $3,942.24 to Carlan Physiotherapy and Inner Balance Psychological Services - an amount in excess of the minor injury guideline limit, State Farm conceded that she was entitled to the benefits and that her injuries fell outside of the Minor Injury Guideline.

As this matter did not proceed to a hearing, I am unable to determine which party enjoyed a greater degree of success. At best, I can say that both parties derived some degree of success in the outcome of the proceeding. State Farm conceded some of the medical benefits by paying for treatment provided by Carlan Physiotherapy and Inner Balance Psychological Services, while Ms. Ni withdrew the remaining issues: Cost of Examinations from Optimum Clinic, Expenses and Interest.

(b) Any written offers to settle made in accordance with Rule 76;

Both parties agree that Ms. Ni submitted an offer to settle to State Farm on June 29, 2015, “in the amount of $7,500.00 plus interest and costs/disbursements as agreed upon or assessed”.

It is not clear from the submissions of the parties if Ms. Ni made that offer to settle after or prior to learning about the payments to Carlan and Inner Balance Psychological Services. Two assumptions can flow from this. The first is that Ms. Ni made the offer to settle prior to learning about the payment of the outstanding balance. The second assumption could be that the offer was made after learning about the payment of the outstanding balance. Either way, it would appear that Ms. Ni offered to withdraw her application for much less than what she had offered to settle for.

(c) Whether any novel issues are raised in the proceeding

Ms. Ni submits that the Insurer’s preliminary issue pursuant to section 55 of the Schedule, raised a novel issue on the question of whether an Insurer has an unfettered right to assign any interpreter they choose for the purpose of an Insurer’s Examination, and furthermore, whether an Insurer should reasonably accommodate an Applicant’s request for an interpreter of a certain level of accreditation.

As the preliminary issue hearing did not proceed, I am unable to consider this criteria.

(d) 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

State Farm submitted that Ms. Ni failed to comply with undertakings by refusing to comply with a number of requests for productions. Specifically, State Farm alleged that as of February 17, 2016, approximately eight requested items remained outstanding. State Farm did not provide sufficient evidence in support of this assertion.⁷

In response, Ms. Ni argued that by paying the clinic directly without informing the applicant, State Farm prolonged the proceeding. Ms. Ni also contends that the failure by State Farm to raise the preliminary issue at the pre-hearing of January 15, 2014 and thereafter seeking an adjournment at the start of the July 6, 2015 hearing, significantly prolonged the proceeding.

I disagree with the point raised by Ms. Ni, that payment made directly to the clinic amounted to a delay in the proceeding, particularly since the parties had engaged in a series of settlement discussions in an attempt to resolve the issues in dispute.⁸ At best, State Farm’s actions in paying the balance demonstrates a willingness to resolve the issues in dispute.

However, I would agree that State Farm’s adjournment request of July 6, 2015 and the failure to raise the preliminary issue at the pre-hearing tended to prolong the proceedings.

State Farm’s conduct contributed to the delay in the proceedings. State Farm ought to have noticed that the preliminary issue pursuant to s.55 of the Schedule was not addressed in the pre-hearing letter dated February 18, 2014, and should have requested a resumption of the pre-hearing to deal with it. State Farm failed to do so, and instead waited until the commencement of the hearing on July 6, 2015 to raise the issue. I note State Farm’s defence stated in their reply submissions that the issue was raised in their response and the mediator’s report. However, it is the responsibility of the parties to state their respective positions at a pre-hearing. State Farm ought to have raised this issue at the pre-hearing of January 15, 2014, or requested resumption upon receipt of the pre-hearing letter, to raise its concerns with respect to the preliminary issue.

I also note that State Farm, in its reply submissions, alleged that the Applicant was not ready to proceed with the July 6 hearing, as counsel for the Applicant raised for the first time that he wished to cross examine the representative for State Farm and a representative of Life Mark Clinic.

However, I do not find anything in the hearing Arbitrator’s letter of July 6, 2015 that mentions the Applicant’s unpreparedness to proceed with the July 6 hearing. The letter simply states that an adjournment was sought by State Farm on the basis that a preliminary issue raised at the mediation held on July 18, 2012, had not been disposed of.⁹

(e) Whether any aspect of the proceeding was improper, vexatious or unnecessary

State Farm submits that the failure of the Applicant to follow the procedure laid down in the Code by requesting a withdrawal of the proceedings pursuant to s.70.1 (a) of the Code was improper and the fact that it only learned of the withdrawal several weeks later, while following up on productions resulted in unnecessary preparation for the preliminary issue hearing.

Ms. Ni submits that although she failed to consult with State Farm prior to withdrawing the issues, she avoided expenses for all parties and should not be penalised in the circumstances.

Ms. Ni submits that she decided to withdraw the issues after learning at the end of 2015, that Optimum Health Clinic was no longer in operation. She suggests that she ought not be penalized under these circumstances.¹⁰

State Farm contends that it was never advised that Optimum was no longer in operation.

(f) Whether the insured person refused or failed to submit to an examination as required under section 42 of the Statutory Accident Benefit Schedule (the “Schedule”)

This criteria is not applicable to the case.

(g) 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)

State Farm submits that the Applicant failed to attend several Insurer Examinations unless she was provided with a Ministry of Attorney General certified interpreter and that her refusal to attend these examinations contravened her obligations under the Schedule.

Ms. Ni submits that she was always willing to attend an Insurer’s Examination and that the delay in attending the Insurer’s Examination was due to disagreements over the choice of a suitable/accredited interpreter. She argues that in order to rely upon section 55 of the Schedule, State Farm bears the onus to prove that they provided proper notice in accordance with the Schedule. Ms. Ni submits that as this issue had not been decided in the proceedings, it cannot be said that she failed or refused to attend an Insurer’s Examination.

Ms. Ni further submits that she attended the Insurer’s Examination in June and July 2012, after an agreeable interpreter was arranged.

I am unable to consider this criteria as the hearing of the preliminary issue did not take place.

Having considered the above criteria and the submissions of the parties, I find the following criteria justifies an award of expenses to State Farm; written offers to settle and aspects of the proceeding that were improper.

Having made an offer to settle for $7,500.00 prior to the July 6, 2015 hearing, Ms. Ni subsequently withdrew the proceeding on February 1, 2016, thereby conceding to State Farm. Furthermore, by failing to promptly inform State Farm of the withdrawal from the proceedings and take the necessary steps to withdraw as provided in Rule 70 of the Code, Ms. Ni caused State Farm to incur further expenses in preparing for the Preliminary Issue hearing.

The Expense Regulations

The authority to award expenses and the applicable criteria are governed by the following:

Subsection 282(11) of the Insurance Act provides as follows:

Rule 75.1 of the Code provides:

An adjudicator may award expenses to a party if the adjudicator is satisfied that the award is justified having regard to the criteria set out in Rule 75.2. The items and the amounts which may be awarded are set out in Rule 78 and the Schedule to the Expense Regulation found in Section F of the Code.

Amount of Expenses

It is established case law that in determining the appropriate quantum of expenses, the objective is to fix an amount that is fair and reasonable, given the number of issues, their complexity and the amounts in dispute. In so doing, a broad-stroke approach rather than a line-by-line assessment is frequently chosen by arbitrators.

In Reid and ING Insurance Company of Canada, (FSCO A05-002870, May 22, 2008) Arbitrator Killoran held:

The relationship between insurer and insured is a contractual one. The insured is entitled to access the dispute resolution process at FSCO as a result of that contract. The Insurance Act and its regulations must be interpreted in such a way as to uphold the protective and remedial nature of the legislation from which it flows.

Also, In Henri and Allstate Insurance Company of Canada (OIC A-007954, August 8, 1997) Arbitrator Makepeace agreed that the overriding consideration in fixing expenses is reasonableness.

The issues in this case were fairly straightforward and did not proceed to a hearing. The substantive issues as noted in the July 6, 2015 letter were for Medical Benefits/Cost of Examinations under $5,000.00, interest and costs.¹¹

State Farm paid for most of the medical and rehabilitation expenses. The remaining issues were withdrawn by Ms. Ni prior to the preliminary issue hearing.

I note that a lot of time was spent on correspondence between the parties. The actual proceedings that took place were: the pre-hearing discussion by telephone conference on February 18, 2014 oral submissions at FSCO on July 6, 2015, with respect to the preliminary issue in dispute.

State Farm claims its costs in defending this claim from the receipt of Ms. Ni’s Application for Arbitration in October 2012 to the date of withdrawal, and while I can appreciate the fact that State Farm has incurred expenses in defending the claim, I agree with Ms. Ni that the expenses claimed by State Farm in the amount of $11,329.22, are excessive, exaggerated, duplicative and out of proportion to the amounts in dispute.

State Farm’s Bill of Costs:¹²

The breakdown of fees claimed by State Farm is as follows:

David Raposo called to the bar in 2004 1.7 hours @ $116.94/hr $ 198.80

Sotheary Kiev called to the bar in 2007 21.1 hours @116.94 /hr 2,467.43

Nancy Coppola, Law Clerk 5 hours @30.83/hr 154.15

Heather D’Armour, Law Clerk 4 hours @30.83/hr 123.32

Monique Wright, Law Clerk 3.8 hours @30.83/hr 117.15

Janet S. Young, called to the bar in 1991 35.8 hours @150.00/hr (for work performed post mediation to withdrawal of claims) 5,370.00

Janet Young 3.7 hours @150.00/hr (for preparing the bill of costs and cost submissions) 555.00

I find the hourly bill of $150.00 in excess of what is allowed, given the provision in Rule 78.1, which provides that “Where an adjudicator is satisfied that a higher amount for legal fees to an insured person is justified, an hourly rate of up to $150.00 may be awarded”. Thus, the $150.00 rate is not available for legal fees to an insurer.

I also find that some of the services listed in the Bill of Costs including: reviewing file contents, insurance forms, legal research, gathering and serving relevant documents, preparing the Bill of Costs etc., could have been carried out by the law clerks.

Given the non-complexity of this matter, the issues in dispute and the fact that this matter did not proceed to an actual hearing, I find the hours claimed by State Farm (a total of 62.3 hours) excessive.

I find it appropriate to fix State Farm’s expenses as follows:

David Raposo 1.0 hours @ $116.94/hr $ 116.94

Sotheary Kiev 3 hours @116.94 /hr 350.82

Law Clerks 12.8 hours @30.83/hr 394.62

Janet S. Young total of 8 hours @136.43/hr 1,091.44

TOTAL FEES $1,953.82

With respect to disbursements claimed, I find the costs for photocopies in the amount of $36.35 and courier in the amount of $18.00 reasonable. Since I have no reports or invoices on file relating to expenses incurred for experts/consultants/medicals, I did not consider those expenses.

Conclusion

Having considered the applicable criteria in the Expense Regulation, the written submissions of the parties, the Insurer’s Bill of Costs, the duration of the proceeding, and the reasonable amount of legal services that can be claimed. I find that State Farm is entitled to some of its expenses, fixed in the sum of $2,269.23, inclusive of HST.

December 9, 2016

Anita Idemudia Arbitrator

Date

Financial Services Commission of Ontario