Financial Services Commission of Ontario

Commission des services financiers de l’Ontario

Neutral Citation: 2016 ONFSCDRS 73

Appeal P16-00006

OFFICE OF THE DIRECTOR OF ARBITRATIONS

STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY

Appellant

and

IRAM ANSARI

Respondent

Before:

Delegate Lawrence Blackman

Representatives:

Ms. Jenna M. Ng for the Appellant, State Farm Mutual Automobile Insurance Company

Ms. Supriya Sharma for the Respondent, Ms. Iram Ansari

Hearing Date:

By written submissions due February 24, 2016

PRELIMINARY APPEAL ORDER

Under section 283 of the Insurance Act, R.S.O. 1990, c.I.8, as amended, it is ordered that:

Arbitrator Bowles' November 9, 2015 decision is not stayed.
The legal expenses of this preliminary issue appeal order are deferred to the conclusion of this appeal, subject to any further or other order of an appellate officer.

March 4, 2016

Lawrence Blackman Director’s Delegate

Date

REASONS FOR DECISION

I. BACKGROUND

This preliminary appeal order pertains to the Appellant's request that an arbitration order be stayed.

In his forty-page, December 24, 2014 decision, Arbitrator Patrick N. Bowles of ADR Chambers (the "Arbitrator") found the Respondent, Ms. Iram Ansari (who was injured in an October 8, 2010 automobile accident) entitled under the 2010 Schedule¹ to specified medical benefits, weekly non-earner benefits of $185 ongoing from April 8, 2011 and her arbitration legal expenses. He dismissed the Respondent's claims for housekeeping and attendant care benefits.

The Arbitrator further held that the Respondent could apply for a special award under the Insurance Act, R.S.O. 1990, c. I.8.

Neither party appealed the Arbitrator's December 24, 2014 order. The Arbitrator's November 9, 2015 decision addressed arbitration legal expenses and the special award. The Arbitrator stated, at pages 2 and 10 of the November 9, 2015 decision, that on July 6, 2015, more than half a year after his December 24, 2014 Order, the Appellant, State Farm Mutual Automobile Insurance Company, paid the Respondent $46,179.26, inclusive of interest, in full satisfaction of his award.

The Arbitrator's November 9, 2015 decision ordered the Appellant to pay the Respondent legal expenses of $28,415.06, plus HST, and a special award of $20,000.

The Arbitrator found the Respondent entitled to her legal expenses, in part, because:

The Respondent had to go to considerable expense and effort to pursue this matter. The Appellant had a continuing obligation to adjust this claim as new information became available. It was difficult to see how the Appellant could continue to deny the Respondent non-earner and medical benefits claims after receiving two comprehensive expert reports.
The Appellant was unable to refute the Respondent's medical evidence. Rather, it went to great effort to argue the Respondent was unreliable, untrustworthy and improperly motivated by financial incentives. After a ten-day hearing, including nine witnesses, five for the Respondent and four for the Appellant (including its adjuster, Ms. Kazi), the Arbitrator rejected the Appellant's view of the case.
The Respondent would have been successful in her dismissed housekeeping and attendant care claims had she been able to establish an economic loss.
The Respondent's offer to settle was within a reasonable settlement range. The Appellant's offer to settle for all past, present and future claims was a "broad brush approach to offers of settlement ... [it was] unworkable and was unreasonable in its requirement. An Applicant could not be expected to accept such an offer, particularly as this Applicant was required to give up her entire entitlement and any benefits she might be entitled to on an ongoing basis under the policy."

The Arbitrator found the Respondent liable to pay a special award for unreasonably withholding or delaying payments, finding:

The Appellant unreasonably delayed moving the Respondent out of a Minor Injury Guideline status, notwithstanding the Respondent's pre-existing medical issues.

The earlier difficulties in adjusting this claim indicated the Respondent's mindset that took on the appearance of inflexibility and unreasonableness in the face of its receipt in April 2014 of two medical reports. The Appellant chose not to seriously assess its position and chose to proceed to a hearing.

After hearing the oral evidence of the Respondent's experts and its own experts, the Appellant again chose not to consider a realistic appraisal of its position.

The Appellant's closing submissions showed "a continued determination to undermine the character of the Applicant and her husband as being completely unreliable in their evidence and portrayed them as schemers trying to get the best they could from the insurance company. The Insurer's view was that the Applicant was able to mislead her doctors and experts and therefore the information relied on by her multiple health professional was unreliable."

The Appellant continued to deny non-earner and medical benefits for more than six months after the Arbitrator rendered his order.

Rule 52.1 of the Dispute Resolution Practice Code (Fourth Edition, Updated – January 2014) (the "Code") provides that, subject to Rule 52.2, an appellant must file a Notice of Appeal within 30 days of the date of the arbitration order. Rule 52.2 allows the time for requesting an appeal to be extended on such terms the appellate officer considers appropriate if satisfied there are reasonable grounds for granting the extension.

This office received the Notice of Appeal, dated January 15, 2016, on January 18, 2016, more than two months after the Arbitrator's November 9, 2015 Order. The Appellant did not seek leave to extend the time for requesting an appeal. The Respondent did not object to the late delivery. I exercise my discretion to extend the time for requesting this appeal. The parties may speak to the late delivery when appeal legal expenses are being determined.

The Notice of Appeal seeks a stay of the Arbitrator's special award. The form of the Notice of Appeal states, on page 3, that if an appellant is asking for a stay, the reasons should be as complete as possible. The Appellant's reasons, attached at Schedule "B," consisted of two paragraphs:

The Arbitrator considered invalid grounds. Therefore, there is no basis for a special award and no sum is owed.
The Respondent did not seek a special award until February 2, 2015. In light of this, there is no prejudice to the Respondent in having the special award stayed. The Appellant, however, would face prejudice if the special award was to be paid in advance of the appeal decision, given the risk that the Appellant may have difficulty in recovering that award, if successful on appeal.

In Schedule "A," the Appellant argued in support of the substance of its appeal:

The Arbitrator did not hear evidence regarding the Appellant's treatment of the Respondent's expert reports.
The Appellant's submission that the evidence of the Respondent and her husband was unreliable does not speak to unreasonable withholding or delay of payment of a benefit.
There was no evidence as to the reason for the timing of the Appellant's payment of the arbitration award on July 6, 2015. When the arbitration order was honoured does not speak to whether or not the Appellant unreasonably withheld or delayed payment of a benefit.
The Arbitrator erred in law in "his underlying belief that the Applicant was automatically entitled to a special award, given the Arbitration Order that the Applicant was entitled to receive non-earner and medical benefits."
The Arbitrator "erred in law in his failure to identify any specific conduct on the part of the Insurer that gave grounds to a special award and in his failure to address as to whether or not the Insurer unreasonably withheld or delayed payment of a benefit."

The Respondent submits, in part, that the Respondent's own August 31, 2012 Response to an Application for Arbitration acknowledged the Respondent was claiming a special award and stated that it had not unreasonably withheld or delayed payments.

The Appellant's reply submissions regarding its requested stay state, in part:

The Appellant meant to say that the Respondent's full particulars of her claim for a special award were only provided on April 30 and July 27, 2015.
Its appeal is brought in good faith.
The Arbitrator made demonstrable and significant errors of law, as particularized in the Notice of Appeal, that necessitate a stay of the special award, an award for which there is no justification.
As the Appellant made her full claim for a special award late she "had no reasonable expectation of receiving a special award." The Respondent has paid all benefits and expenses owed as a result of the Arbitration Orders. The Respondent's current needs are being met.
Prudential of America General Insurance Company (Canada) and Chafe-Moote, (P99-00044, September 8, 2000), held that a special award is a penalty imposed on the insurer. It is not a benefit intended to meet the insured's needs. Delegate Draper (as he then was) "applied a more lenient test for staying the special award, concluding that Prudential's appeal had sufficient strength that it should not be required to pay the special award pending the outcome of the appeal."

As the Respondent will not face any hardship if the special award is stayed, the award being above her needs, a more lenient test should be applied.

II. ANALYSIS

My January 22, 2016 acknowledgement letter noted Rule 56.5 of the Code that an appeal may be decided in any manner considered appropriate. Having received no request for oral submissions, applying Rule 1.1 of the Code, I find the most expeditious, least costly and most just means of determining whether the Arbitrator's November 9, 2015 order should be stayed is on the record.

A stay of the order of an arbitrator is the exception. It is not the rule. I fully agree with Delegate Draper in Chafe-Moote that:

The general rule, established in s. 283(6) of the Insurance Act and Rule 46.3 of the Dispute Resolution Practice Code, is that an appeal does not stay the arbitrator's order unless the Director orders otherwise. This is different from the Rules of Civil Procedure and the Statutory Powers Procedure Act, where the presumption is that an appeal stays the order. Therefore, the party asking for the stay has the onus of establishing why the general rule should not apply.

Guardian Insurance Company of Canada and Armstrong, (FSCO P00-00037, July 20, 2000), adopted the following criteria as to whether a stay should be granted:

The bona fides of the appeal;
The substance of the grounds for appeal; and,
The hardship to the respective parties if the stay is granted or refused.

I am not persuaded the Appellant has met its onus of establishing that the Arbitrator's November 9, 2015 decision should be stayed, for the following reasons:

In Commercial Union Assurance Company and Singh, (FSCO P01-00042, June 12, 2002), Director Draper upheld Arbitrator Miller's special award of $61,829.52 in Singh and Commercial Union Assurance Company, (FSCO A99-001160, September 11, 2001). Arbitrator Miller found that it was unreasonable for the insurer to turn a "blind eye" to "very significant medical evidence" supporting the insured's disability.

The Response to Appeal submits that an insurer has an ongoing responsibility, regardless at what state a claim may be, to treat its insured with the utmost good faith and to continue to adjust the file in a prudent manner. I do not see the error in that submission.

I do not see the strength of an argument that a first-party insurer does not have a duty to reconsider its position upon the receipt of new information. I do not see the strength in the argument that a six-month delay in honoring an arbitration order does not speak to whether or not the Appellant unreasonably withheld or delayed payment of a benefit.

I do not see the strength in the Appellant's argument that the Arbitrator, who provided his reasons for ordering a special award, had an underlying belief that the Respondent was automatically entitled to a special award. Having set out part of those reasons above, I do not see the strength in the Appellant's argument that the Arbitrator failed to identify any specific conduct on the part of the Appellant as a ground for a special award. I am not persuaded that this preliminary appeal decision should be a green light to insurers either not to honour arbitration awards or to delay their payment.

In El-Saikali and Co-Operators General Insurance Company, (FSCO P01-00059, March 13, 2003), Delegate Makepeace distinguished between the shifting evidentiary burden of proof and the ultimate legal burden of proof. The Appellant does not dispute the evidential finding that it received new medical reports from the Respondent. I am presently unable to see the strength in the Appellant's argument for a stay that there is no evidence (including its own) whether or not it reconsidered this new information.
There is no evidence the Appellant has honoured the Arbitrator's November 9, 2015 Order. Rather than proceed swiftly with its stay request so as to respect the Arbitrator's Order and mitigate against non-compliance, the Appellant delivered its appeal to the Commission some 40 days after the expiry of the 30-day period allowed for an appeal. The Appellant, in seeming contempt of the Arbitrator's Order and the process of this Tribunal, granted itself a stay of the Arbitrator's Order.

The Notice of Appeal itself, when delivered, provided minimal submissions in support of a stay, in part boiler-plate (the possibility of non-recovery without any evidence in support), and in part inaccurate (that the Respondent did not claim a special award until February 2015).

I agree with Delegate Draper Chafe-Moote that a special award is a penalty imposed on the insurer. I agree with him, at page 31 of Liberty Mutual Insurance Company and Persofsky, (FSCO P00-00041, January 31, 2003), that the purpose of the subsection 282(10) of the Insurance Act special award "is to punish insurers that unreasonably fail to pay accident benefits promptly, as required by the SABS, and to deter that company and others from acting similarly in the future."

Respectfully, I find that the legislative purpose of punishing unreasonable delay and deterring such conduct in the future would be undermined if an insurer, upon whom a special award order has been imposed, could, incongruously, delay payment of the penalty by a more lenient adjudicative application that allowed, amongst other things, weaker if any, substance for the appeal.

As noted, the onus is on the moving party to establish that a stay should be awarded. The Appellant provides no evidence that it will be unable to collect the special award, should it be successful on appeal. In any event, as stated in earlier decisions, the fact that the Legislature made a stay the exception showed that regarding first-party insurance claims, it was of the view that insurers were better placed to handle the risk. Further, in Digiammatteo v. Leblanc, (1989), 1989 CanLII 4076 (ON CA), 71 O.R. (2d) 130 (C.A.) the Court held under the Rules of Civil Procedure where a stay was automatic, not the exception:

In any event, there is always a risk of non-recovery in any litigation, even when successful, and I can see no reason why all of that risk should fall on the respondent in this case.

In summary, I am not persuaded of the strength of the grounds of appeal advanced. I am not persuaded, in the absence of evidence, as to the prejudice to the Appellant if a stay is not granted. I am persuaded as to the prejudice to the integrity of this dispute resolution system should I grant the requested stay.

As in prior cases where I have addressed in a preliminary appeal decision the strength of the appeal, I note the following excerpt from Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53:

A court considering whether leave should be granted is not adjudicating the merits of the case ... A leave court decides only whether the matter warrants granting leave, not whether the appeal will be successful ... This is true even where the determination of whether to grant leave involves, as in this case, a preliminary consideration of the question of law at issue. A grant of leave cannot bind or limit the powers of the court hearing the actual appeal ...

III. WRITTEN SUBMISSIONS

Amending by extending the time lines under Rule 54 of the Code for the written submissions of both parties, as allowed by Rule 81, the Appellant having advised that the arbitration transcripts have been ordered and received, I set the following time line for the exchange of written submissions on the substantive appeal:

The Appellant shall, by Wednesday, April 20, 2016, serve the Respondent and file (with a Statement of Service in Form F) with this office its written submissions.
The Respondent shall, by Wednesday, May 18, 2016, serve on the Appellant and file (with a Statement of Service) with this office her responding written submissions.
The Appellant shall, by Wednesday, June 15, 2016, serve the Respondent and file (with a Statement of Service in Form F) with this office its written reply submissions.

IV. EXPENSES.

The questions of entitlement to and the quantum of the legal expenses of this preliminary issue appeal order are deferred to the conclusion of this appeal, subject to any further or other order of an appellate officer.