Randhawa v. State Farm Mutual Automobile Insurance Company, 2017 ONFSCDRS 76

Financial Services Commission des

Commission services financiers

of Ontario de l’Ontario

Neutral Citation: 2017 ONFSCDRS 76

FSCO A13-003076

BETWEEN:

SUKHDEV SINGH RANDHAWA

Applicant

and

STATE FARM MUTUAL AUTOMOBILE

INSURANCE COMPANY

Insurer

DECISION ON EXPENSES

Before: Anne Sone

Heard: By telephone conference call on September 30, 2016. Final written submissions received by October 25, 2016

Appearances: J.A. Michael Wolfe for Mr. Randhawa

Jonathan Schrieder for State Farm Mutual Automobile Insurance Company

Issues:

The Applicant, Sukhdev Singh Randhawa, was injured in a motor vehicle accident on September 18, 2011. In a decision dated October 28, 2015, Arbitrator Osunde dealt with his claims for statutory accident benefits under the Schedule.¹ She made the following order, while reserving on the issue of expenses:

Mr. Randhawa was not injured as a result of an “accident” as defined in subsection 3(1) of the Schedule.

The issue in this further hearing is:

Is Mr. Randhawa or State Farm Mutual Insurance Company entitled to their expenses incurred in respect of this arbitration hearing, and if so, in what amount?

Result:

State Farm Mutual Insurance Company is entitled to its expenses in the amount of $11,557.90, inclusive of fees, disbursements and any applicable taxes.

Entitlement to Expenses:

Pursuant to subsection 282(11) of the Insurance Act:

The Arbitrator may award, according to criteria prescribed by the regulations, to the insured person or the insurer all or part of such expenses incurred in respect of an Arbitration proceeding as may be prescribed in the regulations, to the maximum set out in the regulations.

The criteria an adjudicator shall consider when deciding whether to award expenses are found in Ontario Regulation 664, in Rule 75.2 and Section F of the Dispute Resolution Practice Code (Fourth Edition — Updated January 2014). I will discuss each of these criteria in order.

(a) Each party’s degree of success in the outcome of the proceeding:

State Farm was entirely successful in the preliminary issue hearing.

(b) Any written offers to settle made in accordance with Rule 76:

There were no written offers to settle in this proceeding.

Under this criterion, State Farm submitted that there were no novel issues raised in this proceeding. Mr. Randhawa submitted that “the arguments raised legal principles applied to complex facts, including the intertwined nature of credibility, causation and catastrophic impairment.” While this submission may be true, it does not necessarily follow that novel issues were raised here, and I find that novel issues were not raised in this proceeding.

(d) The conduct of a party or party’s representative that tended to prolong, obstruct or hinder the proceeding, including a failure to comply with undertakings and orders:

The conduct of the parties in this proceeding was not an issue; however, there was some delay in Mr. Randhawa providing State Farm with the requested productions following the pre-hearing discussion.² This necessitated a request for a resumption of pre-hearing³ which could have been avoided had Mr. Randhawa complied with the various requests.⁴ Ultimately, the parties reached an agreement as to productions; however State Farm was forced to continue to follow up on the productions when Mr. Randhawa was not forthcoming with compliance.⁵ According to State Farm these productions were necessary to properly evaluate whether Mr. Randhawa was involved in an “accident” under the Schedule. I find that Mr. Randhawa’s delay in providing productions contributed to the necessity of holding a pre-hearing resumption to deal with outstanding productions.

(e) Whether any aspect of the proceeding was improper, vexatious or unnecessary:

State Farm submitted that no aspect of the proceeding was improper, vexatious or unnecessary.

Mr. Randhawa submitted that Arbitrator Osunde found that the evidence of Mr. Sam Kodsi, a mechanical engineer called on behalf of State Farm was “not helpful.” I did not conduct the hearing, so it is difficult for me to evaluate whether presenting Mr. Kodsi as an expert witness was improper, vexatious or unnecessary; under these circumstances, I do not find that this is the case.

(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.

Not applicable to this proceeding.

(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.

Not applicable to this proceeding.

Based on the above analysis, and especially on the outcome that State Farm was entirely successful in the preliminary issue hearing, I find that State Farm is entitled to its expenses of this proceeding.

Amount of Expenses:

Statutory Framework:

The amount of expenses I may award is set out in section 3 of the Schedule to the Expense Regulation (Dispute Resolution Expenses) pursuant to subsection 282(11) of the Insurance Act. It states as follows:

3(1) The legal fees payable by the insured person or the insurer for the following matters may be awarded:

For all services performed before an arbitration, appeal, variation or revocation hearing.
For the preparation for an arbitration, appeal, variation or revocation hearing.
For attendance at an arbitration, appeal, variation or revocation hearing.
For services subsequent to an arbitration, appeal, variation or revocation hearing.

(2) The number of hours for which legal fees may be awarded shall be determined by the arbitrator, having regard to the criteria set out in subsection 12(2) of this Regulation.

(3) The maximum amount that may be awarded for legal fees is the amount calculated using the hourly rates set out in the Dispute Resolution Practice Code published by the Ontario Insurance Commission or the Financial Services Commission of Ontario, as it may be amended from time to time.

Insurer’s Claim for Expenses:

In an amended Bill of Costs dated October 24, 2016, State Farm claimed $18,556.21 for fees and $6,243.50 for disbursements.

Analysis and Findings:

The overriding consideration in fixing arbitration expenses for legal fees is reasonableness.

Mr. Randhawa submitted that State Farm’s claims for expenses were excessive, and, should I decide to award expenses, they should be considerably reduced. In addition, he argued the following:

The hearing took 20 hours over three days, and therefore the insurer’s claim for 223.2 hours, including hearing time, was excessive.
Under the heading of Pre-Hearing, the claim for 6.2 hours for Martin Tiidus was excessive
Under the heading of Review and Analysis, the claim for “drafting appeal expenses” should not have been included.
Under Disbursements, State Farm claimed $4,154 for ordering transcripts.

Fees:

In terms of the hearing time, Arbitrator Makepeace confirmed in Henri and Allstate Insurance Company of Canada,⁶ that “a line-by-line assessment of the expenses claimed is not appropriate. Rather, the Arbitrator should make a global assessment of reasonable expenses.”

As a rule of thumb, Arbitrators have allowed expenses for preparation for hearing time to the actual hearing time on a ratio of between 1:1 and 1:4.

The Applicant submitted that since only one issue was involved in this case, the ratio should be 2:1. The Insurer argued that the ratio should be 4:1 as it was a very complex case, potentially involving a lot of money. It therefore required reviewing a lot of documentation and preparing expert reports.

As it was a complex case, but only involving one issue, I find that 3:1 is an appropriate ratio here. Since the hearing took 20 hours, and I allow 60 hours of preparation time, this totals 80 hours, which the insurer may claim.

The times claimed by State Farm for expenses are mostly split between services provided at the Legal Aid Tier 3 rate of $136.43 per hour, and the Legal Aid Tier 2 rate of $122.78 per hour.

Accordingly, I find that State Farm is entitled to its expenses at the Tier 3 rate for 40 hours and at the Tier 2 rate for 40 hours which totals $10,368.40.

Disbursements:

State Farm claims $6,243.50 for disbursements. As noted above, Mr. Randhawa objects to $4,154 claimed for transcripts. Mr. Randhawa submits that this expense was unnecessary for the purposes of the hearing itself, and are usually ordered for an appeal.

State Farm submits that the transcripts were needed for the completeness and accuracy of the closing submissions.

Transcripts are not an expense that is specifically permitted under the Expense Regulation and there is case law at the Commission that finds that such expenses cannot be generally claimed as a disbursement.⁷ As a result, I do not allow this part of the Insurer’s claim.

I find that the remaining disbursements totaling $1,189.50 are payable.

Conclusion:

For the reasons set out above, I order Mr. Randhawa to pay to State Farm its expenses in respect of this arbitration proceeding, fixed at $11,557.90, inclusive of fees, disbursements and any applicable taxes.

March 13, 2017

Anne Sone

Arbitrator

Date