Neutral Citation: 2016 ONFSCDRS 66

FSCO A14-002647

BETWEEN:

SHERRY HARLEY Applicant

and

STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY Insurer

DECISION ON EXPENSES

Before: Suesan Alves

Heard: By teleconference call on February 19, 2015. Written submissions were received by March 5, 2015.

Appearances: Russell Palin for Mrs. Harley Christopher Whibbs for State Farm Mutual Automobile Insurance Company

Issues:

The Applicant, Sherry Harley, was injured in a motor vehicle accident on March 9, 2007. She applied for arbitration to obtain payment for prescription medication to treat her chronic pain. The parties settled that dispute, but were unable to agree on the amount of her expenses. Both parties seek expenses of this assessment of expenses hearing.

The issues are:

What is the assessed amount of Mrs. Harley’s expenses?
Which party is entitled to its expenses of the assessment hearing?

Result:

Mrs. Harley’s expenses are assessed at $1, 500 for fees and $601.22 for disbursements plus applicable HST.
State Farm has asked that I defer the determination of entitlement to expenses of the assessment hearing. I encourage the parties to resolve this question

EVIDENCE AND ANALYSIS:

Background

Mrs. Harley was injured in an accident on March 9, 2007. She was driving a pick-up truck and stopped at a traffic light when she was struck from behind by a loaded transport truck which pushed her into the intersection. Her neck, right shoulder and low back pain were treated with two 10-week sessions of physiotherapy, a pain management program and a trial of acupuncture without benefit. Her family physician referred her to Dr. Mason, a physiatrist.

Dr. Mason’s diagnoses include a tear of her right rotator cuff, neuropathic pain in her shoulder and right upper limb and hand paresthesia. He reported that Mrs. Harley had marked limitation of movement in her neck and shoulder. He did investigations, tried injections and referred her to an orthopedic surgeon for a surgical consult. Eventually, he reported to Dr. Lindsay that he could offer no further suggestions for Mrs. Harley’s treatment.

In February 2009, Mrs. Harley’s family physician prescribed Cymbalta for her chronic pain. State Farm paid for that medication for approximately three years. In November 2011, State Farm requested a treatment plan. State Farm then arranged an insurer examination for an opinion as to whether the treatment was reasonable and necessary. That examination was done by way of a paper review by Dr. Grewal, a family physician. Dr. Grewal opined that the medication was not reasonable or necessary.

By that time, Mrs. Harley had retained counsel in relation to her disputes with State Farm. Her counsel asked Dr. Lindsay, Mrs. Harley’s family physician, to provide a report responding to that of Dr. Grewal. In that report, Dr. Lindsay disagreed with Dr. Grewal’s assertion that there was no objective evidence of improvement since Mrs. Harley started Cymbalta. In his opinion, Mrs. Harley had quite significant pathology, including osteoarthritis of her shoulder and radicular pain from her spine. While Cymbalta would not cure her, it would allow her to live with the pain from the osteoarthritis in her shoulder. He opined that it was not advisable for Mrs. Harley to discontinue Cymbalta since it might worsen her pain and clinical condition.

With Dr. Lindsay’s report, counsel for Mrs. Harley asked State Farm to reconsider its position. Dr. Grewal maintained his position. State Farm maintained its denial.

Mrs. Harley applied for mediation then arbitration claiming the accrued cost of the Cymbalta prescriptions, the ongoing monthly cost of those prescriptions, interest and her expenses.

At State Farm’s request, Dr. Blitzer, physiatrist conducted an insurer examination of Mrs. Harley with respect to whether Cymbalta was reasonable and necessary in April 2014. Dr. Blitzer reported that he believed that Mrs. Harley has legitimate pain and did not see secondary gain from taking the medication. In his opinion, her treatment and medication were consistent with the severity of her documented injuries and conditions; Cymbalta was appropriately prescribed and is indicated for back pain and the neuropathic type pain from which Mrs. Harley suffers. He noted that Mrs. Harley had tried discontinuing this medication before undergoing an evaluation procedure and that this had caused an exacerbation of her pain.

The parties settled the dispute with respect to Cymbalta.

Fees and Disbursements

At this hearing, counsel for the Applicant seeks a global award of $5,000 for legal fees and disbursements in relation to services rendered between February 29, 2012 and December 23, 2014. The disbursements total is $601.22, leaving fees in the amount of $4,398.78.

At issue in this hearing are the applicable criteria under which expenses should be awarded:

the hourly rate payable for fees;
the number of hours to be awarded;
the arbitration filing fee of $100; and
the $50 cost of Dr. Lindsay’s report obtained to respond to Dr. Grewal’s opinion.

Criteria guiding award of expenses

Subsection 282(11) of the Insurance Act, R.S.O. 1990, c. I.8, as amended, gives an arbitrator the discretion to award expenses in respect of the arbitration as may be prescribed in the regulations, to the maximum set out in the regulations.

The applicable criteria which guide an arbitrator in the exercise of that discretion are set out below.¹

Counsel for the Applicant submitted that the entire proceeding was unnecessary. Counsel for the Insurer submitted that in cases where parties reach a settlement both parties benefit and it can be difficult to measure degree of success. He submitted that in these circumstances the only criteria to be applied was that of reasonableness. I find the most significant criterion is degree of success.

I find that it is possible to measure the Applicant’s degree of success in relation to the claim she advanced. While both parties obtained the benefit of certainty with the settlement, I find that Mrs. Harley enjoyed a greater degree of success. In this arbitration, she claimed the cost of prescription medication which she incurred in the amount of $4,863.41, and an ongoing monthly expense which ranged between $278.19 and $280.67 per month together with interest and expenses.

The parties agreed that State Farm would pay Mrs. Harley’s incurred expenses for Cymbalta prescriptions, accrued interest, and pay future prescription expenses for Cymbalta which she submitted during the remaining period of the policy. According to correspondence from counsel for the Applicant to State Farm, the Insurer paid $6,314.67 together with interest of $626.29. She was thus completely successful in her claim. In these circumstances, I find that Mrs. Harley enjoyed a greater degree of success than did State Farm. I apply this criterion in the assessment of Mrs. Harley’s expenses.

Hourly rate

Counsel for the Applicant claimed an hourly rate of $150. Rule 78 of the Code states that an arbitrator has the discretion to award an hourly rate to lawyers for insured persons of up to $150 per hour. Counsel for the Insurer submitted that counsel for the Applicant is senior counsel. However, this was a one issue claim which was settled shortly after the arbitration was commenced and the Legal Aid hourly rate of $98.99 for services rendered between April 1, 2013 and April 1, 2014 and of $103.94 between April 1, 2014 and April 1, 2015 was appropriate.

I have considered the Applicant’s degree of success. I have reviewed the correspondence which was filed. I find that the correspondence sent by counsel for the Applicant was focused and required thought and advocacy on his client’s behalf.

For example, faced with Dr. Grewal’s opinion that the medication was not reasonable and necessary, he wrote to State Farm to find out what documents it had sent to Dr. Grewal and attempted to determine the basis for the differing medical opinions. He obtained a responding report from Dr. Lindsay with a view to resolving the dispute. When State Farm arranged the further insurer examination with Dr. Blitzer, he ensured that State Farm would pay her transportation expense before she set out on the required 564 kilometre round trip.

When State Farm agreed to pay for the Cymbalta prescription expenses, counsel for the Applicant asserted her right to interest and to payment of expenses. As he put it, there was a need to “monitor” the case throughout to ensure that his client obtained what was owed to her under the policy of insurance. Those efforts contributed to the Applicant’s degree of success. I am satisfied that the hourly rate of $150 in this case is reasonable, appropriate and justified.

Number of hours & disbursements post-mediation

I will first deal with the amounts incurred following the mediation. Counsel for the Applicant submitted an amended account in which the amount of time expended during this period is 8.6 hours. Ordinarily, arbitrators have not used a line by line approach in assessing expenses, but have adopted instead the approach of overall reasonableness. Denis Henri and Allstate Insurance Company of Canada, (OIC A-007954, August 8, 1997).

I allow 8.5 hours as reasonable, eliminating the January 20, 2013 entry which relates to another dispute, and allowing some time for matters which were not docketed based on the advice of counsel for the Applicant.

I allow the disbursements which were not disputed.

I allow the arbitration filing fee of $100. This is a fee which is required to be paid at the time the arbitration application is filed. Counsel for the Applicant attempted to resolve the dispute before mediation by, among other things, obtaining a responding report from her family physician. Dr. Grewal’s opinion was unchanged. Counsel for the Applicant wrote again to State Farm seeking a rationale for the denial and commenting on the reports. State Farm sent the letter to Dr. Grewal who issued an addendum to his report. The denial was maintained. Mrs. Harley applied for mediation and when that was unsuccessful, to arbitration to resolve a longstanding dispute concerning prescription medication for chronic pain.

Fees and Disbursements “in respect of the arbitration”

A significant component of the time expended, as well as the disbursement for the medical report of Dr. Lindsay were incurred before the arbitration was commenced. Counsel for the Applicant submits that the payments should never have been denied, that State Farm forced her to spend her own monies to ensure that she obtained proper treatment for her injuries Mrs. Harley should not have been put to the expense in order to obtain payment of prescription medication which was legitimately prescribed, from which she derived benefit and was entitled to under the policy. Counsel for the Applicant submitted that Mrs. Harley should be reimbursed for all of her expenses.

In Pembridge and Howden, (OIC P02-00031, November 20, 2003), the Director of Arbitrations held,

“Mediation is a distinct step. Because the insured person can choose to go to either court or arbitration following a failed mediation, mediation cannot be viewed as part of the arbitration process. For whatever reason, the legislators have chosen not to provide for mediation expenses, and that must be respected. Under the current legislation, an arbitration proceeding is not commenced until one of the parties files an application. While I have no difficulty with the proposition that steps taken after the mediation directly related to completing the arbitration application are part of the arbitration proceeding, expenses that precede the mediation are doubtful at best.”

In my view, slotting the expenses claimed into pre and post mediation is not the end of the inquiry required by section 282(11) of the Insurance Act. Under that section, an arbitrator is to determine if the expenses claimed are “in respect of the arbitration”.

The meaning of the phrase “in respect of” was considered in Markevich v. Canada, (2003), 2003 SCC 9, 223 D.L.R. (4th) 17 by the Supreme Court of Canada. Writing for the majority, Justice Major stated:

“The words ‘in respect of’ are, in my opinion, words of the widest possible scope. They import such meanings as ‘in relation to’, ‘with reference to’ or ‘in connection with’. The phrase ‘in respect of’ is probably the widest of any expression intended to convey some connection between two related subject matters”

In the case of Economical Mutual Insurance Co. v. Northbridge Commercial Insurance Company, [2016] O.J. No. 324, the Superior Court of Justice adopted the meaning of the phrase “in respect of” in Markevich in construing that phrase in section 275(3) of the Insurance Act.

The phrase “in respect of” is used more than one hundred times in the Insurance Act. According to the presumption of consistent expression, it is presumed that similar language used in the same statute has a similar meaning. On this basis, I find that in determining whether an expense is incurred in respect of the arbitration in section 282(11) of the Insurance Act, an arbitrator is required to look at whether there is some connection between the expense and the arbitration.

In my view, there will be times when expenses incurred before the arbitration become expenses in respect of the arbitration. For example, in Cruz and Royal and Sun Alliance Insurance Company, (FSCO A00-001179, September 14, 2001), Arbitrator Blackman, as he then was, held that expenses incurred before an arbitration was commenced, to obtain productions (such as those outlined in Practice Note 4 The Exchange of Documents), should nevertheless be reimbursed.

In this case, counsel for the Applicant obtained a report from Dr. Lindsay to respond to Dr. Grewal’s opinion that the medication he prescribed was not reasonable or necessary. The report was obtained before the mediation with a view to resolving the dispute. The cost of $50 was modest. It alerted State Farm that Mrs. Harley had developed osteoarthritis in her shoulder and this was no longer the soft tissue injury described in the initial disability certificate.

I find that the medical report became an expense in respect of the arbitration because it was identified as a key document in the arbitration application at the point where the Applicant is asked to: “List any key documents in your possession to which you will refer in the arbitration”. Counsel for the Applicant listed: “Item (c) Report of Dr. Lindsay dated May 11, 2012.”

As part of his Response, counsel for the Insurer requested a copy of Dr. Lindsay’s report as he requested a copy of the Applicant’s medical brief as well as a copy of all medical reports in the possession of the Applicant or her representative from five years prior to the accident to date. Counsel for the Insurer also sought production of the medical charts of all health care providers for a similar period. One of Mrs. Harley’s health care providers was her family physician, Dr. Lindsay. For these reasons, I find that the report was incurred in respect of the arbitration. I also find that the time required to request and review that report was expended in respect of the arbitration. In the circumstances, I allow an additional hour and a half of legal fees.

Subsection 282(11) of the Insurance Act, R.S.O. 1990, c. I.8 as amended, gives an arbitrator the discretion to award expenses in respect of the arbitration as may be prescribed in the regulations, One of those regulations is the Schedule of Dispute Resolution Expenses prescribed for purposes of subsection 282(11) of the Insurance Act. I find the cost of Dr. Lindsay’s report payable under item 3 of the Schedule which states, “3. For a report prepared by an expert, provided to the other parties to the arbitration or hearing and necessary for the conduct of the arbitration or hearing, in accordance with subsection (4).”

I also find that the legal fees incurred in obtaining and reviewing that report are payable under item: “1. For all services performed before an arbitration, appeal, variation or revocation hearing.”

As a result, Mrs. Harley is entitled to 10 hours of legal fees at the rate of $150 per hour for a total of $1,500, together with the disbursements as claimed in the amount of $601.22, together with applicable HST.

Expenses

Counsel for State Farm requested that I withhold my decision with respect to the expenses of the assessment hearing. I urge the parties to resolve this question, failing which initiating submissions are to be provided in writing within 15 days. Responding submissions are due in a further 10 days and reply if any in 7 days. Each submission is limited to 3 pages, exclusive of any offers to settle which may have been exchanged.

Order:

State Farm Mutual Insurance Company shall pay Mrs. Harley’s expenses in respect of the arbitration assessed in the amount of $1,500 for fees and $601.22 for disbursements plus applicable HST, within 30 days of the date of this Order.
If the parties are unable to resolve the expenses of this hearing, they should provide written submissions within 15 days. Each submission is limited to 3 pages, exclusive of any offer to settle on which a party may intend to rely.

February 26, 2016

Suesan Alves, Arbitrator

Date

Financial Services Commission of Ontario