Mary Stranges v. State Farm Mutual Automobile Insurance Company, 2017 ONFSCDRS 319

Financial Services Commission des

Commission services financiers

of Ontario de l’Ontario

Neutral Citation: 2017 ONFSCDRS 319

FSCO A15-004442

BETWEEN:

MARY STRANGES

Applicant

and

STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY

Insurer

DECISION ON EXPENSES

Before:

Arbitrator Kimberly Parish

Heard:

By written submissions completed on November 17, 2017

Appearances:

Mr. Ben Fortino, Lawyer for Mary Stranges

Ms. Hermina Nuric, Lawyer State Farm Mutual Automobile Insurance Company

Issues:

The Applicant, Ms. Mary Stranges (“Ms. Stranges”), was injured in a motor vehicle accident on September 17, 2004 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 Ms. Stranges, 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.

The issue to be determined in this Expense Hearing:

Is Ms. Stranges liable to pay State Farm’s expenses in respect of the Arbitration proceeding under section 282(11) of the Insurance Act and if so, in what amount?

Result:

Ms. Stranges is liable to pay State Farm’s expenses fixed in the amount of $4,000.00 inclusive of HST.

Background

A Hearing was held before Arbitrator Drory by written submissions completed on July 14, 2017 and a brief oral Hearing on July 21, 2017. The issue in dispute for the Hearing was whether or not Ms. Stranges was entitled to payments for the cost of an examination in the amount of $11,599.99 for catastrophic impairment assessments provided by AssessNet Inc., submitted December 4, 2014. In the written decision issued by Arbitrator Drory dated September 14, 2017, Arbitrator Drory found that Ms. Stranges was not entitled to payment for the cost of examinations in dispute. There was no determination made with respect to expenses within Arbitrator Drory’s decision.

The parties were unable to resolve the issue of expenses and on October 10, 2017, the Insurer’s counsel 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 by telephone conference on October 26, 2017 with both parties.

State Farm’s Position

State Farm submitted it was the successful party on the cost of examination in dispute. In addition, it noted there were no Offers to Settle exchanged pursuant to Rule 76 of the DRPC and the Hearing did not involve any novel issues.

In its submission, State Farm noted that upon review of the file from its prior legal counsel, a telephone discussion between counsel which took place on August 11, 2015 was noted. State Farm further submitted that the “Applicant’s counsel had indicated the Application for Arbitration would be withdrawn and thus the issue in dispute would be abandoned.”² State Farm’s counsel followed up on the intent to withdraw in writing on August 11, 18, September 30, and October 30, 2015, but received no further response from Ms. Stranges’ counsel regarding the withdrawal.

A Pre-Hearing was held on November 30, 2015, and a resumption of the Pre-Hearing was held June 28, 2016. State Farm submitted Ms. Stranges failed to provide State Farm with an explanation or evidence supporting the reasonableness of the disputed cost of examinations. The matter then proceeded to a Hearing. It is State Farm’s position that Ms. Stranges was aware, or ought to have been aware, that her claim was unsupported by law or evidence, and she had multiple opportunities to abandon her claim without cost consequences. As such, State Farm’s position is that it should be awarded its expenses for having to defend this claim.

State Farm noted that Ms. Stranges’ counsel made lengthy submissions at the Hearing “on the issue of whether she had a ‘vested interest’ in catastrophic assessments at the time that the legislation changed in September 2010.”³ Further, State Farm submitted that Arbitrator Drory referenced within his decision, State Farm Mutual Automobile Insurance Co. and Federico.⁴ The case was relied on by the Applicant in support of their position that Legislature should not interfere with vested rights. State Farm noted that Arbitrator Drory indicated within his decision that the above argument advanced by the Applicant did not address whether the assessments in dispute were “reasonable”, which would have been the applicable test regardless of whether the Old Schedule or the New Schedule applied. State Farm maintains the position that this line of argument was “not proper or necessary” and it shifted the focus of the Hearing away from the “applicable test of reasonableness.”

It was State Farm’s submission that the conduct of Ms. Stranges’ counsel unnecessarily prolonged or hindered the proceeding. Further, this conduct and was improper, vexatious, and unnecessary as Ms. Stranges “forced a ‘lengthy argument’ on her “vested interest’ in the disputed OCF-18 instead of making submissions on the reasonableness of the OCF-18.”⁵

Further State Farm noted that it did not obstruct Ms. Stranges’ right to recover costs of the catastrophic impairment assessments as alleged by Ms. Stranges. Arbitrator Drory found the catastrophic impairment assessment amounts in dispute were not reasonable. State Farm lastly submitted that there was no evidence to support the allegation made by Ms. Stranges that State Farm prolonged the proceeding which was commenced on March 11, 2015 through the completion of an Application for Mediation by Ms. Stranges.

State Farm included a Bill of Costs with its submissions. State Farm claimed a total of 88.45 hours for legal fees in accordance with the Legal Aid Tariff Rates for time spent by two lawyers who are tier 2 and tier 3 levels, and a law clerk. The total amount claimed by State Farm for legal fees is $7,330.28 (including $675.29 for this Expense Hearing) plus HST of $952.94. State Farm has submitted that disbursements are not being sought.

Ms. Stranges’ Position

Ms. Stranges agreed that State Farm was the successful party at Arbitration and further that there were no Offers to Settle exchanged pursuant to Rule 76 of the DRPC, nor any novel issues raised.

Ms. Stranges did not agree with State Farm’s submissions that the conduct of her counsel unnecessarily prolonged or hindered the proceeding, or that her claim was improper, vexatious, and unnecessary. Alternatively, Ms. Stranges submitted that on November 30, 2015, she put State Farm on notice that she would not be abandoning the issues in dispute. Therefore, the Applicant had a right to pursue recovery of “costs of the Catastrophic Examination.” Further, State Farm prolonged these proceedings and obstructed Ms. Stranges’ “right to recover the costs of the Catastrophic Assessments by not moving forward in a timely manner.”

Ms. Stranges’ position is that the outstanding balance in dispute for the catastrophic impairment assessments represents a significant amount of money to her. Ms. Stranges noted: “There is nothing vexatious or improper about claiming these costs from the Insurer.”⁶

Ms. Stranges noted that all five assessments which formed the basis for her catastrophic impairment assessments were necessary to reach the conclusion which was formed regarding her catastrophic impairment status. Further, Ms. Stranges submitted the assessments were reasonable under the Old Schedule and the New Schedule.

It is Ms. Stranges’ position that State Farm be awarded no costs, and in the alternative if costs are to be awarded to State Farm, costs should not be awarded with respect to a delay which was not her fault.

Lastly, Ms. Stranges’ position is that State Farm’s Bill of Costs “are excessive and inappropriate for a matter of this nature.” Ms. Stranges requested in the alternative, should costs be considered, the costs should be “substantially reduced for the reasons noted above.”

Evidence and Analysis:

Both parties agree that State Farm was the successful party at this Arbitration regarding the amount in dispute for the catastrophic impairment assessments. There were no Offers to Settle exchanged, nor any novel issues raised.

State Farm submitted that Ms. Stranges’ pursuit of this claim was frivolous, vexatious, and unnecessary. State Farm noted that Ms. Stranges’ counsel agreed to withdraw the Application for Arbitration for this dispute in August 2015 and despite follow-up from State Farm’s counsel, the Application was never withdrawn. Ms. Stranges’ position is that the Applicant’s catastrophic impairment assessments were reasonable and necessary in order to try and prove she met the threshold and sustained a catastrophic impairment as a result of the accident.

I find that Ms. Stranges is entitled to dispute her claim for entitlement to the amounts in dispute for the catastrophic impairment assessments. State Farm cannot deny her that. Ms. Stranges decided to change her position from withdrawing her Application for Arbitration to further pursue her claim. I find this does not warrant her behaviour as being frivolous, vexatious, or unnecessary.

Reviewing the decision of Arbitrator Drory, I agree with State Farm’s submission that there were lengthy arguments from Ms. Stranges’ counsel at the Hearing regarding “vested interest”. These arguments shifted the focus away from the reasonableness and necessity of the cost of examination amounts in dispute. I therefore find that the time spent by Ms. Stranges’ counsel making arguments regarding “vested interest” tended to prolong the Hearing.

I do not find there has been any evidence which demonstrated that State Farm prolonged these proceedings, or obstructed Ms. Stranges’ right to recover the costs of the catastrophic impairment assessments.

In considering an award for expenses for this matter, I find State Farm is entitled to an amount for its expenses which is both fair and reasonable. The amount in dispute for this Arbitration was $11,599.99 which does impact the total amount to be awarded for costs. In its submissions, State Farm claimed $675.29 as fees for this Expense Hearing and I will not consider awarding an amount for this. I find the total amount claimed by State Farm for its expenses in the amount of $8,283.22 to be excessive for this Arbitration.

EXPENSES:

For the reasons I have noted above, State Farm is entitled to its expenses in the amount of $4,000.00 inclusive of HST.

November 28, 2017

Kimberly Parish

Arbitrator

Date