Shaazil Khan v. State Farm Mutual Automobile Insurance Company, 2016 ONFSCDRS 70

Financial Services Commission des Commission services financiers of Ontario de l’Ontario

Neutral Citation: 2016 ONFSCDRS 70

FSCO A13-014868

BETWEEN:

SHAAZIL KHAN

Applicant

and

STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY

Insurer

DECISION ON EXPENSES

Before: Arbitrator Charles Matheson

Heard: By teleconference on January 5, 2016 and by written submissions completed January 15, 2016

Appearances: Ms. Nour Salman, paralegal, for Mr. Shaazil Khan Mr. Nicholaus de Koning, lawyer, for State Farm Mutual Automobile Insurance Company

Issues:

The Applicant, Mr. Shaazil Khan, was injured in a motor vehicle accident on April 26, 2011. He applied for statutory 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 Mr. Khan, through his legal 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 issue in this Expense Hearing is:

Is Mr. Khan liable to pay State Farm’s expenses in respect to this Arbitration?

Result:

Mr. Khan shall pay the legal expenses of State Farm at the fixed amount of $3,172.50, inclusive of all fees, disbursements and taxes.

EVIDENCE AND ANALYSIS:

Legislation and Case Law considered

Dispute Resolution Practice Code - Rules 70 and 75

Background

The Applicant was a minor who was 6 years old at the time of the accident.

The original Application for Arbitration consisted of a non-earner benefit of $185.00 per week from the date of loss to date and ongoing; attendant care benefits at the rate of $3,592.40 per month from the date of loss and ongoing and two costs of exams for a total body x-ray for $1,185.00 and a total body MRI for $1,885.00.

The non-earner benefit was withdrawn as of the Pre-Hearing dated February 18, 2015, and the rest of the claim was withdrawn by the Applicant as of December 18, 2015. The Arbitration in this matter was set to commence on January 5, 2016. This is being contested by the Insurer, as it wishes for me to assess costs for withdrawing the Application for Arbitration as the Insurer has spent considerable time, effort and resources on this file.

The Insurer is seeking relief from the applicable criteria as set out in Section 12(2) of the Insurance Act. Rule 75 of the Dispute Resolution Practice Code (“the Code”) sets out the following relevant criteria for expenses, which reads as follows:

75.1 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 amounts which may be awarded are found in Rule 78 and the Schedule to the Expense Regulation found in Section F of the Code.
75.2 The adjudicator will consider only the criteria referred to in the Expense Regulation found in Section F of the Code. These criteria are:

(a) each party's degree of success in the outcome of the proceeding;

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

(c) whether 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 Ontario Regulation 403/96 (Statutory Accident Benefits Schedule — Accidents on or after November 1, 1996) made under the Act or refused or failed to provide any material required to be provided by subsection 42 (10) of that regulation; and

(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.

Decision

The Insurer argues that the Applicant’s complete withdrawal of the application confirms that the Application for Arbitration was without merit.

The Insurer argues that the Applicant or his legal representative did not comply with any orders for productions by the Pre-Hearing Arbitrator, which were contained in the February 18, 2015 Pre-Hearing letter and thus prolonged or hindered the proceedings.

In regards to the non-earner benefit, the Insurer argues that the Applicant refused to withdraw this issue until the Pre-Hearing, when on the plain reading of the Schedule, the Applicant was not eligible for this benefit until his 16th birthday.

In regards to attendant care, the Insurer argues that the Applicant nor his representatives were able to show that the expenses were incurred as per the statutory definition of the term incurred as found in section 3(7) of the Schedule, nor was there any evidence provided that an economic loss by any family member or service provider for the Applicant was suffered as a result of this accident.

In this instant case, the Insurer is not contesting the withdrawal of the Application for Arbitration, however, it is seeking unreasonably incurred expenses due to the very late withdrawal of the application inside three weeks prior to the Hearing.

I note that it is uncontested by either party that the Code allows an Arbitrator to assess expenses of an Arbitration process where there is a withdrawal of an Application for Arbitration in Rule 70. Rule 70 reads as follows:

Withdrawal

70.1 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.

70.2 An adjudicator may permit a party to withdraw all or part of a dispute where all parties agree.

70.3 Where a party does not agree to the withdrawal, an adjudicator may:

(a) permit the withdrawal on such terms and conditions as he or she considers just;

(b) award expenses to either party as permitted by Rule 75 and following.

I agree with the Applicant’s argument that the expenses must be reasonable under the circumstances and the award of expenses does not necessarily flow from a withdrawal.

The Applicant maintains that the requested amounts by the Insurer are excessive because the average award for Insurer’s appeal expenses is approximately $2,800.00.

The Applicant argues that the out of pocket disbursements being claimed by the Insurer are unrecoverable as these expenses were the result of the Insurer asking for said documents and the Applicant signing the proper authorization forms for same and forwarding them to the Insurer. The outcome still would have been the same (i.e. that the Insurer pay for the requested documents) regardless of who mailed the requests.

The Insurer has requested that a total of $3,172.50, inclusive of HST, be ordered for its legal expenses, adjusted by the Legal Aid Rates. This total includes two senior lawyers’ time, a junior associate’s time and two law clerks’ time spent on this file.

I am satisfied that the amount of hours and the rates charged for these hours are reasonable. I also find that the out of pocket disbursements are unrecoverable as argued by the Applicant.

Accordingly, I find and order that Mr. Khan, via his litigation guardians, shall pay the legal expenses of State Farm at the fixed amount of $3,172.50, inclusive of all fees, disbursements and taxes.

EXPENSES:

Mr. Khan shall pay the legal expenses of State Farm at the fixed amount of $3,172.50, inclusive of all fees, disbursements and taxes.

February 29, 2016

Charles Matheson Arbitrator

Date