Neutral Citation: 2017 ONFSCDRS 310 FSCO A15-006454

BETWEEN:

J.C. Applicant

and

STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY Insurer

DECISION ON EXPENSES

Before: Arbitrator Kimberly Parish Heard: By written submissions completed on October 4, 2017

Appearances: Mr. Jeffrey Strype, lawyer for J.C. Ms. Jessica Kuredjian, lawyer for State Farm Mutual Automobile Insurance Company

Issues:

The Applicant, J.C., was injured in a motor vehicle accident (“MVA”) on November 7, 2011 and sought 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 J.C. through her representative, applied for arbitration at the Financial Services Commission of Ontario under the Insurance Act, R.S.O. 1990, c. I.8, as amended.

An in-person Hearing was held on the dates of May 10, 11, 12, 15, and 16, 2017. A written Decision dated August 21, 2017 was issued by Arbitrator Drory. The issue in dispute at the Hearing was whether or not the Applicant was entitled to income replacement benefits and Arbitrator Drory found that the Applicant was not entitled to income replacement benefits.

The parties were unable to resolve the issue of expenses and the Insurer requested an Expense Hearing in accordance with the provisions of Rules 75-79 of the Dispute Resolution Practice Code (“DRPC”). A timetable for written submissions was scheduled and a final written reply was received from the Insurer’s counsel on October 4, 2017. On October 10, 2017, the Applicant’s counsel submitted a further written response to the Insurer’s final written reply. However, this further written response from the Applicant’s counsel did not originally form part of the timetable for the written submissions for this Expense Hearing. Therefore they have not been reviewed and considered within this Decision.

Issue:

Should the Insurer be entitled to its expenses claimed against the Applicant and/or her Litigation Guardian arising from this Arbitration, and if so, in what amount?

Result:

The Insurer is not entitled to its expenses with respect to this Arbitration.

EVIDENCE AND ANALYSIS:

Insurer’s Position - Claiming Expenses Against the Applicant/and or the Litigation Guardian

The Insurer submits it is entitled to its reasonable expenses of the Hearing and requests that they be paid by the Applicant and/or the Litigation Guardian.

It was submitted by the Insurer that the Order signed by Justice Matheson appointing the Applicant’s mother, L.C., as the Litigation Guardian for this Application for Arbitration does not declare the Applicant mentally incapable of managing her property, or personal care. It is the Insurer’s submission that this calls into question whether L.C. had the authority to participate and instruct counsel in this Application for Arbitration.

The Insurer submits that a person who acts as a Litigation Guardian may be required to pay any costs against the party they are representing. In the alternative, the Insurer requested through its submissions that the Arbitrator exercise their statutory power under section 282(11.2)(b) of the Insurance Act² and issue an Order requiring L.C. to pay the expenses of this Arbitration as the Applicant’s personal representative.

The Insurer submitted that L.C. attended the Hearing as the Applicant’s main witness and L.C. has advanced a frivolous claim on behalf of the Applicant.

A Bill of Costs was provided with the Insurer’s submissions.

Applicant’s Position - Claiming Expenses Against the Applicant/and or the Litigation Guardian

The Applicant’s counsel submits there should not be an Order issued for expenses arising from this Arbitration.

The Applicant’s counsel submits that the Applicant’s claim for accident benefits needed to be presented through the Applicant’s mother, who was appointed as the Litigation Guardian. The Applicant’s counsel through their submissions noted: “In this Arbitration, we determined that J.C. [Applicant’s real name omitted by me to ensure Applicant remains anonymized] would not testify because of her historical conduct which was evident in the records and further J.C. [Applicant’s real name omitted by me to ensure Applicant remains anonymized] had a history which was also evident in the records of denying all of her problems.” The Applicant could not be located in the years prior to the Hearing as she had been living on the streets. The Applicant’s income source was the Ontario Disability Support Program (“ODSP”), which cannot be ceased.

Further, the Applicant’s counsel submitted that under Rule 10 of the DRPC it is not noted that a Litigation Guardian is responsible for the payment of expenses and further there has been no acknowledgement by the Litigation Guardian that she may be responsible for expenses for this matter. Applicant’s counsel submitted that the issuance of an Order for expenses in this case makes it impossible for disabled persons to advance their rights available under the Accident Benefits Legislation. Their submission is as the DRPC and Ontario Regulation 664³ make no reference to the Rules of Civil Procedure⁴ of the Superior Court of Ontario, there is therefore no authority to compel the Litigation Guardian to pay expenses.

Criteria for Expenses

Under subsection 282(11) of the Insurance Act (as reiterated in Rule 75.2 of the DRPC), an Arbitrator shall consider only the following criteria for the purposes of awarding all or part of the expenses incurred in respect of an Arbitration proceeding:

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.

The criteria to be considered in addressing the issue of expenses are: a), c), d), e), and g).

Through their written submissions, it was agreed by both parties that the Insurer was successful on all of the issues addressed at the Hearing and there were no written offers to settle in accordance with Rule 76 of the DRPC.

The Insurer submitted that there were no novel issues raised, but the subject matter of the Arbitration and the Applicant’s pre- and post-accident medical condition was complex.

Applicant’s counsel’s submission noted that the Applicant suffers from Borderline Personality Disorder and as a result was not well enough to attend her own medical assessments and the Insurer Examinations (“IEs”) requested by State Farm. The Applicant subsequently did not attend the Hearing and her claim was presented through her Litigation Guardian, L.C., who had been appointed by the Ontario Superior Court on October 11, 2016 for the purpose of this Arbitration. The Applicant also had a history of drug abuse both before and after the MVA. The Applicant submitted this case was very complex in addressing the impact of the MVA on the Applicant who had severe pre-accident psychiatric and drug issues and this raised issues which were both novel and complex.

The Insurer submitted that the Applicant failed to attend two Pre-Hearings, even though she had been ordered to attend. The initial scheduled Hearing was adjourned, after that the Applicant sought to add catastrophic impairment determination two months before the new scheduled date for the Hearing. This led to a contested resumption being held and the Applicant was unsuccessful in this issue being added to the Arbitration.

The Applicant’s counsel submitted that the pre-accident psychiatric impairments which the Applicant had cannot form the basis of the failure of this Application for Arbitration.

It is the Insurer’s position that this proceeding was unnecessary and the Applicant’s claim was “non-meritorious”.

Applicant’s counsel submitted that the pursuit of accident benefits was to obtain funding which would provide the basis for institutionalizing the Applicant in an environment more secure than the streets.

Both parties submitted section f) was non-applicable.

The Insurer submitted the Applicant failed to attend numerous IEs which required rescheduling. The Insurer further submitted this was due to the Applicant being homeless or periodically residing in the province of British Columbia. This resulted in a significant delay in the Insurer being able to obtain the required assessments to “legally justify” the stoppage of the income replacement benefits (“IRBs”) being paid to the Applicant.

Applicant’s counsel submitted that the failure of the Applicant to attend the scheduled IEs is not applicable as the Applicant’s psychiatric condition prevented her from functioning sufficiently to be able to attend the scheduled IEs.

ANALYSIS

It is acknowledged that the Insurer was the successful party at the Hearing.

There were severe pre-accident psychiatric and drug issues suffered by the Applicant. This has been submitted by the Applicant’s counsel and also evidenced through the clinical notes and records which formed a component of the Decision issued by Arbitrator Drory.

The Applicant was not present at the Hearing and did not testify. The Litigation Guardian attended the Hearing and testified on behalf of the Applicant and provided instruction to the Applicant’s legal counsel.

The Insurer submitted that a Litigation Guardian may be required to pay costs. In reviewing a copy of the Order from Superior Court, dated October 11, 2016, which was provided with the Insurer’s final reply submissions, Justice Matheson did not note within the Order that the Litigation Guardian may be responsible for costs. This Order was served upon the Insurer prior to the Hearing and the Insurer could have appealed that Order, or brought a Motion in Court to address the issue of costs but there is no evidence that the Insurer did either. I also note there is no specific authority noted under the DRPC for an Arbitrator to assess expenses against a Litigation Guardian. Justice Matheson’s Order also does not note whether the Applicant was a person under a disability. The Insurer proceeded to an Arbitration Hearing with LC. already appointed as the Litigation Guardian. I therefore do not accept the Insurer’s submission that it is questionable whether L.C. had the authority to participate and instruct counsel in this Application for Arbitration. An Order dated October 11, 2016 appointed L.C. as the Litigation Guardian for this Arbitration. There has been no evidence that the Insurer sought to challenge that Order prior to the Hearing.

The Insurer has submitted that in the alternative, I consider awarding costs against the Litigation Guardian pursuant to s. 282(11.2)(b) of the Insurance Act⁵ which specifies:

Liability of representative for costs

(11.2) An arbitrator may make an order requiring a person representing an insured person or an insurer for compensation in an arbitration proceeding to personally pay all or part of any expenses awarded against a party if the arbitrator is satisfied that,

(b) in respect of a representative of an insured person, the representative caused expenses to be incurred without reasonable cause by advancing a frivolous or vexatious claim on behalf of the insured person; or…

The appointment of L.C. as a Litigation Guardian does not make L.C. the Applicant’s legal counsel. Instruction was provided by L.C. to the Applicant’s legal counsel. Section 282(11.2)(b) of the Insurance Act addresses when costs can be awarded against a legal representative representing an insured person. It is not referencing the award of costs against a Litigation Guardian.

I find no evidence that there was an acknowledgement from L.C. that she may be liable for any costs by acting as the Litigation Guardian on behalf of the Applicant. The Order from Superior Court is silent with respect to costs. I do not find evidence that the Litigation Guardian acted in a frivolous or vexatious manner in the pursuit of accident benefits on behalf of the Applicant. For these reasons, I am not awarding costs against the Litigation Guardian for this Arbitration proceeding.

Accident benefits legislation was created under the governance of consumer protection legislation and the Applicant is a vulnerable person who through her legal counsel exercised her right to access accident benefits under the Schedule. The Applicant was unsuccessful in obtaining further IRBs. However, as a result of this, I do not find this claim was frivolous or vexatious. The Applicant’s failure to attend the Pre-Hearings and medical examinations can be attributed to her psychiatric diagnoses, drug dependence issues, and living on the streets, all of which contribute to her being a vulnerable person.

I agree with the Applicant’s counsel’s submissions that this case involved both novel and complex issues. The Applicant’s pursuit to obtain further IRBs was challenging as the Applicant was not present to testify and evidence was provided through the testimony of the Litigation Guardian, medical experts, and the Applicant’s clinical notes and records.

I note that there has been no case law or jurisprudence provided by the Insurer in which costs have been awarded against an Applicant in circumstances which are similar to this case.

I find to issue an award for costs in this case against the Applicant who is a vulnerable person and who was not present at the Hearing could have a detrimental effect for persons attempting to access benefits through accident benefits legislation. Therefore, based on the above reasons, I will not be issuing an Order for costs against the Applicant or her Litigation Guardian.

November 22, 2017

Kimberly Parish Arbitrator

ARBITRATION ORDER

Under section 282 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 Ontario Regulation 664, as amended, it is ordered that:

The Insurer is not entitled to its expenses with respect to this Arbitration.