Financial Services Commission of Ontario

Commission des services financiers de l’Ontario

Neutral Citation: 2017 ONFSCDRS 143

Appeal P16-00060

OFFICE OF THE DIRECTOR OF ARBITRATIONS

ILIYAN HUSEIN and IMRAN HUSEIN, minors represented by their parent KAVITA HUSEIN Appellants

and

STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY Respondent

BEFORE: Delegate Jeffrey Rogers

REPRESENTATIVES: Ms. Salina Chagpar and Ms.Delethi Warakaulle, solicitors for the Appellants Ms. Mouna Hanna, solicitor for State Farm

HEARING DATE: May 4, 2017

APPEAL ORDER

Under section 283 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, R.R.O. 1990, as amended, it is ordered that:

The title of proceedings is amended to show the Applicants/Appellants as “Iliyan Husein and Imran Husein, minors represented by their parent Kavita Husein”.
Paragraph 2 of the Arbitrator’s order of July 4, 2016 is rescinded. The issue of entitlement to expenses of the hearing before the Arbitrator is remitted for re-hearing by a different Arbitrator.
The appeal is otherwise denied.
If the parties are unable to agree about expenses of this appeal, an expense hearing may be arranged in accordance with Rule 79 of the Dispute Resolution Practice Code.

May 19, 2017

Jeffrey Rogers Director’s Delegate

Date

REASONS FOR DECISION

I. NATURE OF THE APPEAL

Iliyan and Imran Husein appeal the Arbitrator’s decision dated July 4, 2016. The Arbitrator dismissed their claim for a special award and he determined that State Farm is entitled to its expenses of the hearing. The Appellants submit that the Arbitrator erred by:

Ruling that the adjuster must be summoned to testify, or the adjuster’s log notes must be entered into evidence, in order to prove entitlement to a special award
Ruling that the timing of a settlement is not a factor to be considered when determining entitlement to a special award
Denying Iliyan Husein the right to testify at the hearing
Finding that they failed to prove entitlement to a special award, and
Awarding State Farm its expenses of the hearing, without giving reasons

For the reasons that follow, I conclude that:

The Arbitrator erred in awarding State Farm its expenses, without giving reasons
The Arbitrator did not rule that the adjuster must testify or that the adjuster’s log notes must be entered into evidence
The Arbitrator did not rule that the timing of the settlement is not a factor
The Arbitrator’s refusal to allow Iliyan to testify had no bearing on the outcome, and
The Arbitrator correctly found that the Appellants failed to prove entitlement to a special award

II. BACKGROUND

The Appellants are brothers who were injured in a motor vehicle accident on February 12, 2011. They applied for arbitration at the Commission after mediation failed to resolve disputes that had arisen regarding their entitlement to further claimed accident benefits.

The parties settled all claims for benefits and interest on the eve of the hearing. They were unable to agree on entitlement to a special award and expenses of the arbitration. These were the issues that came before the Arbitrator. No witnesses testified at the hearing. Counsel for the Applicants/Appellants did not expect them to attend the hearing. She informed State Farm that they would not attend and that she did not plan to call any witnesses. To her surprise, they attended. The Arbitrator denied the request to allow Iliyan Husein to testify on the grounds of lack of notice. He went on to dismiss the claim for a special award and he found that State Farm is entitled to its expenses of the hearing.

Title of Proceedings

Iliyan Husein was 6 years old at the time of the accident. His brother was 9. They were minors when the arbitration was commenced, and they still are. The title of proceedings in the arbitration listed Iliyan Husein and Imran Husein as the applicants. Rule 10.2 of the Dispute Resolution Practice Code requires proceedings on behalf of minors to be commenced on their behalf by specified representatives, including a parent with whom the minor resides. The arbitration was in fact commenced on their behalf by their mother, Kavita Husein. I have amended the title of proceedings to reflect this fact.

No fresh evidence

The Appellants sought to admit fresh evidence on the appeal. I denied the request by letter decision dated March 9, 2017. The appellants sought to admit as fresh evidence the oral testimony of the adjuster and the adjusters’ log notes. The Appellants indicated in the Notice of Appeal and their written submissions that this evidence was not introduced at the hearing with a view to minimizing cost. I noted that the Appellants made a tactical decision not to introduce the evidence at the hearing and I denied the request because appeals do not serve as an opportunity to correct perceived tactical errors.

III. ANALYSIS

Procedural Rulings

I made two procedural rulings during the hearing. I considered the Appellants’ Supplementary Written Submissions, although they were delivered late, and I refused to allow the Appellants to raise a new issue in the appeal.

I requested additional written submissions after noting that the initial submissions did not address two cases dealing with the question of whether notice is required before a party may testify. I set a deadline of 15 days before the hearing for delivering them. The Appellants delivered theirs 3 days before the hearing. State Farm submitted that I should not consider them but confirmed that accepting them would cause no prejudice. The objection was based upon what State Farm perceived to be a history of breach of timelines by the Appellants during the arbitration. I accepted them because there was no prejudice to State Farm in doing so.

The Arbitrator’s order dealt with expenses of the hearing but it did not deal with expenses of the rest of the arbitration. The Appellants raised the issue for the first time in oral submissions before me. The issue was not identified in the Notice of Appeal or in the Appellants’ written submissions. I denied the request because of the obvious prejudice to State Farm in raising the issue in breach of the appeal timelines and without prior notice.

No Reasons for Arbitrator’s Award of Expenses

Failure to give reasons is a breach of natural justice that mandates setting aside the decision.

The Supreme Court of Canada set out this principle in Baker v. Canada (Minister of Citizenship and Immigration):

…it is now appropriate to recognize that, in certain circumstances, the duty of procedural fairness will require the provision of a written explanation for a decision. The strong arguments demonstrating the advantages of written reasons suggest that, in cases such as this where the decision has important significance for the individual, when there is a statutory right of appeal, or in other circumstances, some form of reasons should be required.¹

The Arbitrator found that State Farm is entitled to its expenses of the hearing, but he gave no reasons for that finding. He simply stated: “State Farm is entitled to their expenses in respect of the Arbitration Hearing.”

In its decision in Kanareitsev v. TTC Insurance Company Limited,² the Divisional Court summarized the jurisprudence regarding the adequacy of reasons as follows:

Determining adequacy of reasons is a contextual exercise. The essential question is whether reasons provide the basis for meaningful judicial review.
The reasoning process must set out and reflect consideration of the main relevant factors.
It is insufficient to summarize parties’ positions and baldly state conclusions.
Factors to be considered include the decision maker setting out essential findings of fact and the evidence upon which they are based. The reasons must address the major points in issue.
Particularly when results turn on credibility and involve fact-driven analysis, appellate review must take proper account of the distinct advantage of the decision maker’s assessments. Appeal officers must not try the case de novo or substitute his or her view.

Section 12 of the Expense Regulation³ and Rule 75 of the Dispute Resolution Practice Code require an Arbitrator to consider six criteria in deciding whether to award a party its expenses of an arbitration. The first listed criterion is “each party’s degree of success in the outcome of the proceeding”. State Farm was entirely successful in the hearing before the Arbitrator. It submitted that the Arbitrator must have found that it is entitled to its expenses because of its success. I agree that this could be the reason that the Arbitrator ruled as he did, but I cannot conclude that it is the reason because he did not say so. The Appellants are left to wonder as to the reason. Perhaps the Arbitrator applied some other criterion. Perhaps he made the decision without reference to the permitted criteria. Only the Arbitrator knows.

This analysis shows that the Arbitrator’s decision on expenses does not provide the basis for meaningful appellate review. I have therefore rescinded the Arbitrator’s order in this regard and I have remitted the issue for re-hearing.

No error in denying claim for special award

Section 280(10) of the Insurance Act allows an Arbitrator to order an insurer to pay a special award upon finding that the insurer unreasonably withheld or denied payments. The Appellants bore the onus of proving entitlement to a special award. At the hearing, the Arbitrator denied their request to file any new documents in support of their claim because they did not give proper notice.⁴ The only medical reports the Arbitrator admitted were the ones commissioned by State Farm. No witnesses testified.

In this context, the Arbitrator prefaced his analysis by commenting:

A special award determination of whether an Insurer unreasonably withheld or delayed paying a benefit is a fact driven exercise. In the case before me, the Applicants did not call any witnesses and there was very little evidence submitted on behalf of the Applicants in order to justify a claim for a special award. In my opinion, when an Applicant puts forward a claim for a special award, they will summons the insurance adjuster to testify at the Hearing or, at a minimum, the adjuster’s log notes are submitted in an attempt to show that an Applicant’s file was mishandled. In the case before me, neither the insurance adjuster was called to testify nor were the adjuster’s log notes entered as evidence.⁵

I reject the Appellants’ submission that this statement is a ruling that the adjuster must testify or the adjuster’s log notes must be entered as evidence, as a prerequisite for success in a claim for a special award. The Arbitrator was simply commenting on the lack of evidence in this case and noting what he would have expected.

The Arbitrator does create some confusion by using “opinion” to mean “experience”. He states: “In my opinion, when an Applicant puts forward a claim for a special award, they will summons the insurance adjuster to testify at the Hearing or, at a minimum, the adjuster’s log notes are submitted…” However, when the Arbitrator says “they will summon the insurance adjuster”, it becomes clear that he is relating his experience. Had he intended the meaning that the Appellants suggest, he would have said “they must summon the insurance adjuster”.

In addressing the Appellants’ submission regarding the timing of the settlement, the Arbitrator stated:

At the Hearing, there were two main issues that the Applicants were attempting to use as evidence to prove that the Insurer failed to live up to its obligation and as such, a special award should be assessed against it. The first issue was the timing of the settlement of issues prior to the Hearing

The Applicants submitted that by settling some of the issues on the eve of the Hearing, this showed bad faith by the Insurer as it related to the Applicants’ files. In my opinion, it is not unusual to have disputes settle between an Applicant and Insurer right up until the start of a Hearing. There are various factors which cause settlement to occur prior to a Hearing. In order to reach settlement, it requires consent of both parties. One can assume that the Applicants were satisfied with the offer to settle specific issues, otherwise they would not have agreed to the settlement. Neither an Insurer nor an Applicant should be punished based on the timing of when settlement occurred, without some additional factors (emphasis added).⁶

The Arbitrator did not say that the timing of settlement is not a factor to be considered in determining entitlement to a special award. He said that an award cannot be made, based upon the timing of the settlement alone. The Arbitrator could not have concluded that State Farm unreasonably delayed or denied payments, simply because it decided to pay the claims for benefits on the eve of the hearing, with no new medical evidence. That was the submission the Appellants made before the Arbitrator and he was correct to reject it. I agree with the Arbitrator that many other factors, unrelated to its handling of the file, could have influenced State Farm’s decision.

The Appellants submit that State Farm’s own reports, which were before the Arbitrator, contain an inconsistency which should have led State Farm to reconsider its denial. I disagree. The only example provided was that Dr. Esmat Dessouki, an orthopaedic surgeon, examined Imran on April 18, 2011 and concluded that he had reached maximum recovery on his right knee and did not require further treatment. Then, Dr. Edward G. Blackstock, a psychologist, reported on August 19, 2011 that Imran had injured his leg or foot and had some difficulty putting weight on that side.

Dr. Blackstock was only recounting the history of the immediate after-effects of the accident, as it was recounted to him by Imran’s mother. He made no direct observations, he did not examine the leg and he expressed no opinion on the alleged injury. As a psychologist, that was outside the scope of his expertise. The inclusion of this history in Dr. Blackstock’s report was not a reason for State Farm to reconsider the opinion it obtained from Dr. Dessouki, whose expertise directly relates to the kind of injury alleged.

The only remaining question is the Arbitrator’s refusal to allow Iliyan to testify. In refusing to allow this testimony, the Arbitrator appeared to apply the notice requirements of Rule 41.1 which states:

Each party must provide the other parties with the names of witnesses that the party intends to call and the names of persons the party requires to attend for cross-examination on a report, at least 30 days before the first day of the hearing.

The Appellants argue that this Rule does not apply to parties, so Iliyan had a right to give evidence, without prior notice. There are no appeal decisions on the issue. Arbitrators recently decided that Rule 41.1 does not apply to parties, in Cyr and State Farm Mutual Automobile Insurance Company⁷ and in Amidi and State Farm Mutual Automobile Insurance Company.⁸

The Appellants appear to have a valid agrument on this issue, subject to the issue of procedural fairness that arises from their specific information to State Farm that they did not plan to testify. However, I find it unnecessary to resolve the question here because the Arbitrator’s decision in this regard had no bearing on the outcome.

Iliyan would have given no evidence about how State Farm adjusted his claim. He intended to testify about how State Farm’s delay in payments affected his recovery. Delay alone, and even delay that has an adverse effect on recovery, does not prove entitlement to a special award. The appellants first had to prove that the delay was unreasonable, and then the effects of the delay could be taken into account in deciding the amount of the special award. The Appellants did not prove unreasonable conduct. Therefore the exclusion of Iliyan’s evidence had no bearing on the outcome.

In summary, the Arbitrator correctly found that the Appellants failed to prove entitlement to a special award. I have therefore dismissed the appeal as it relates to this finding.

IV. EXPENSES

The parties have enjoyed mixed success in this appeal. I urge them to bear this in mind in attempting to negotiate a settlement of the issue of entitlement to expenses. If they are unable to agree, an expense hearing may be arranged in accordance with Rule 79 of the Dispute Resolution Practice Code.