Neutral Citation: 2017 ONFSCDRS 43 FSCO A12-005588

BETWEEN:

YEVGENIY IVANCHENKO Applicant

and

CERTAS DIRECT INSURANCE COMPANY Insurer

Before: Deborah Pressman Heard: October 22, 2015, at the offices of the Financial Services Commission of Ontario in Toronto and by written submissions received by October 13, 2016 Appearances: Alyson Toms for Mr. Ivanchenko Lucie Pivrnec for Certas Direct Insurance Company

Background:

The Applicant, Yevgeniy Ivanchenko, was in a motor vehicle accident on October 2, 2009. He claimed statutory accident benefits from Certas Direct Insurance Company ("Certas") pursuant to the Schedule.¹ Disputes arose with respect to Mr. Ivanchenko's entitlement to certain accident benefits. Where there is a dispute about entitlement to statutory accident benefits, applying for mediation is a mandatory first step in the dispute resolution process.²

Mr. Ivachenko applied for mediation on July 22, 2011. Due to a mediation backlog, FSCO confirmed receipt of his application and noted that assignment to a mediator was pending on June 7, 2012.³ Mr. Ivanchenko's mediation was scheduled for September 14, 2012, more than a year after he filed his application.⁴

On the day of the mediation, the mediator called both parties but determined that 'mediation did not take place' and closed the file without issuing a Mediator's Report.⁵ Mr. Ivanchenko then filed an Application for Arbitration, which was received and date stamped by FSCO on September 19, 2012.⁶

Initially, FSCO's Arbitration Unit refused to accept Mr. Ivanchenko's Application for Arbitration without a Mediator's Report because Section 281(2) of the Insurance Act ("Act") precludes referring issues in dispute to arbitration "unless mediation was sought" and "mediation failed".⁷ FSCO later accepted his Application for Arbitration on the basis of a Court of Appeal decision⁸ that determined applicants in FSCO's dispute resolution process are not required to wait longer than 60 days for a mediation date and could proceed to arbitration without a Mediator's Report.⁹

Issues:

Certas raised the following preliminary issues:

Whether Mr. Ivanchenko is precluded from proceeding to arbitration because he failed to commence mediation within 2 years of Certas' refusal to pay the benefits claimed as set out in sections 281(2) of the Insurance Act?
Whether Mr. Ivanchenko or Certas are entitled to expenses incurred in respect of this preliminary issue hearing?

Result:

Mr. Ivanchenko is not precluded from proceeding to arbitration.
Mr. Ivanchenko is entitled to his expenses incurred in respect of this preliminary issue hearing in the amount of $1,500 (inclusive of HST and disbursements).

EVIDENCE AND ANALYSIS:

Subsection 281(2) of the Act prevents insured persons from commencing arbitrations (or court actions) "unless mediation was sought" and "mediation failed."

A person seeking mediation must "file an application for the appointment of a mediator with the Commission."¹⁰ Mediation has failed "when the mediator has given notice to the parties that…mediation will fail, or when the prescribed or agreed time for mediation has expired and no settlement has been reached."¹¹

In this case, I find that Mr. Ivanchenko did not fail to commence arbitration as outlined in subsections 281(2) and 280(7) of the Act and he is not precluded from proceeding to arbitration.

Was mediation sought pursuant to the Insurance Act?

Section 281.1 of the Act requires that an Application for Mediation be filed no later than 2 years from the date the insurer provided written notice of refusal to pay an amount claimed.

There is no dispute with respect to the timing between Certas' refusal to pay the benefits claimed in the Application for Mediation and the commencement of the mediation. Mr. Ivanchenko filed an Application for the Appointment of a Mediator with FSCO on July 22, 2011. Therefore, the first requirement is satisfied.

Did mediation fail pursuant to the Insurance Act?

The real issue is whether Mr. Ivanchenko satisfies the second requirement in s.281(2), which prevents insured persons from commencing arbitrations unless their "mediation failed."

Pursuant to s. 280(7) of the Insurance Act, mediation can fail in one of three ways:

When the mediator has given notice to the parties that in his/her opinion mediation failed.
When the prescribed time for mediation has expired and no settlement has been reached.
When the agreed time for mediation has expired and no settlement has been reached.

Relevant to this case is the third requirement.¹² When the agreed time for Mr. Ivanchenko's mediation expired (on September 14, 2012, the date of the mediation), no settlement had been reached.

Section 280(5) of the Act allows the parties to agree to extend the time for mediation:

The parties may by agreement extend the time for the completion of the mediation process, even if the time for completion has expired. [emphasis mine]

On the balance of the evidence, I find that there was an agreement to extend the time for mediation, which is implied from the actions of the parties as follows:

Mr. Ivanchenko requested to amend the issues in dispute and submitted a revised Schedule 'A' to the Application for Mediation on August 29, 2012.¹³
Certas' representative, Stephen Folowell, participated in the mediation.¹⁴

The real issue in this case is that the mediator did not issue a Mediator's Report. Instead, he determined that "mediation did not take place" and issued a letter stating same.

It is not entirely clear why the mediator determined that mediation did not take place. The parties provided me with an Agreed Statement of Facts that confirmed that Mr. Ivanchenko's mediation was scheduled as a teleconference and that the mediator telephoned and spoke with both parties on the day and time scheduled for the mediation.

It seems that the mediator determined that mediation did not take place because he wasn't sure Mr. Ivanchenko, the applicant, was available and because his representative, Mr. Evdassin, refused to participate in a joint telephone conference with Certas and the mediator.¹⁵

I was not provided with any further evidence clarifying why after shuttling between the parties and attempting to settle the dispute, the mediator determined that mediation did not take place and closed the file. In any event, the mediator's determination that "mediation did not take place" does not preclude Mr. Ivanchenko from proceeding to arbitration.

The dispute resolution scheme for statutory accident benefits requires that insured persons resort to a mandatory mediation process before submitting their disputes to arbitration (or commencing a court proceeding). The scheme also postpones the right of insured persons to commence arbitrations against their insurer to allow the mediation process to be completed within the time prescribed or within an agreed time to extend, but once that time expires, it leaves them free to commence arbitration.

Significantly, section 280(7) identifies that mediation may fail when "the agreed time for mediation has expired and no settlement has been reached" [emphasis mine]. It does not refer to a failed mediation or a Mediator's Report or even that mediation take place. In my opinion, Mr. Ivanchenko was within his rights to commence arbitration after he did not reach settlement with Certas on the day of the mediation. His mediation failed by statutory definition.

Is a Mediator's Report required to proceed to arbitration?

Rule 25.2 of the DRPC requires a person applying for arbitration to file a copy of the Report of Mediator along with the application.

Rule 81.1(b) of the DRPC allows an arbitrator to decide that any Rule does not apply in respect of a proceeding.

I already found that Mr. Ivanchenko's mediation failed by statutory definition. In addition, I find that the requirement under the DRPC for Mr. Ivanchenko to attach a Report of Mediator to his Application for Arbitration is unreasonable in the circumstances of this case and should be waived for the following reasons.

Mr. Ivanchenko took steps in respect of mediation before the expiration of the two year limitation and waited more than a year for his mediation to take place. It would be unreasonable to prevent him from proceeding to arbitration.¹⁶

Accordingly, I exercise my discretion under Rule 81.1(b) of the DRPC to waive compliance with Rule 25.2.

I find that Mr. Ivanchenko sought mediation and that his mediation failed because when the agreed time for mediation expired he did not reach settlement with Certas. At the relevant time, September 14, 2012, Mr. Ivanchenko's time to complete the mediation process expired and he was free to commence arbitration, even without a Report of Mediator.

EXPENSES:

I find that Mr. Ivanchenko is entitled to his expenses of the arbitration in the amount of $1,500 (inclusive of HST and disbursements) for the following reasons.

When assessing legal expenses, arbitrators at FSCO determine entitlement and quantum by applying the criteria dictated by the legislation and bearing in mind the overriding principle of reasonableness.

The Expense Regulation requires an arbitrator to consider seven criteria in awarding all or part of the expenses incurred in respect of an arbitration.¹⁷ Relevant to this decision is: "Each party's degree of success in the outcome of the proceeding." Mr. Ivanchenko is entirely successful and there are no other relevant criteria to consider. Therefore, the analysis is fairly simple and Mr. Ivanchenko is entitled to his reasonable expenses.

With respect to quantum, the parties had already agreed on the amount $1,500.00, which I find to be an appropriate and reasonable amount considering the length of the preliminary issue hearing.

Pursuant to section 282 of the Insurance Act, R.S.O. 1990, c.I.8, as amended, I am fixing Mr. Ivanchenko's expenses in this proceeding at $1,500 (inclusive of HST and disbursements).

February 9, 2017

Deborah Pressman 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, and Ontario Regulation 664, as amended, it is ordered that:

Mr. Ivanchenko is not precluded from proceeding to arbitration.
Certas shall pay Mr. Ivanchenko his expenses incurred in respect of this preliminary issue hearing in the amount of $1,500 (inclusive of HST and disbursements).