Financial Services Commission of Ontario

Neutral Citation: 2017 ONFSCDRS 82

FSCO A14-004878

BETWEEN:

ANN MARIE MCGANN

Applicant

and

AVIVA CANADA INC.

Insurer

DECISION ON EXPENSES

Before: Arbitrator Lynda Tanaka

Heard: By written submissions due January 17, 2017

Appearances: Mr. Shane LeRoux for Ms. Ann Marie Mcgann Ms. Lyndra Griffith for Aviva Canada Inc.

Issues:

The Applicant, Ms. Ann Marie Mcgann, was injured in a motor vehicle accident on June 8, 2013 and sought accident benefits from Aviva Canada Inc. (“Aviva”), payable under the Schedule.¹ The parties were unable to resolve their disputes through mediation, and the Applicant, through her representative, applied for arbitration at the Financial Services Commission of Ontario under the Insurance Act, as amended (“Insurance Act”).

The issues in this Expense Hearing are:

1. Is the Applicant liable for the expenses of Aviva incurred respecting the Hearing and, if so, in what amount?
2. Is the Applicant liable for the expenses of Aviva incurred for the request for expenses?

Result:

1. The Applicant is liable for the expenses of Aviva in the amount of $3,700.00, inclusive of HST.
2. The Applicant is not liable for the expenses of Aviva incurred for the request for expenses.

EVIDENCE AND ANALYSIS:

The claims by the Applicant were for a medical benefit for physiotherapy services, two claims for the cost of examinations, a special award for unreasonably denying or delaying payments to the Applicant, interest on the claims and expenses. The total amount of the treatment claimed was around $7,000.00. None of the claims for medical benefits or costs of examinations or for a special award were successful.

The Hearing was scheduled for two days but the in-person evidence portion was completed in less than one day. The parties requested and later provided written submissions, completed August 6, 2016. Only one witness, the Applicant, was called to testify at the Hearing. The parties relied on written documents, including medical reports of their expert witnesses, and did not call the experts to testify.

In my decision, dated October 31, 2016, I made the following order as to expenses:

5. If the parties are unable to agree on the entitlement to, or quantum of, the expenses of this matter, the parties may request an appointment with me for determination of same in accordance with Rules 75 to 79 of the Dispute Resolution Practice Code.

Aviva has requested an order that the Applicant is liable for its expenses in the amounts of $16,057.30 for fees and $1,568.18 for disbursements, both inclusive of HST, for the Hearing, and also that it recover its expenses for the expense submissions.

In considering a request for an award of expenses, an Arbitrator must consider the criteria set out in the Dispute Resolution Practice Code (“DRPC”), Rule 75.2 and the provisions of the Expense Regulation, Regulation 664.²

Aviva was successful on all issues in this matter. There was no reason given to vary from the standard practice that expenses should follow success in these proceedings. The issue is rather the quantum.

The quantum of expenses that may be ordered must be reasonable. It is generally accepted that a line-by-line assessment of the expenses is not appropriate; rather, the Arbitrator should make a global assessment of reasonable expenses.³

I have considered the various relevant criteria from the DPRC as set out below.

Criteria 1: Each party’s degree of success in the outcome of the proceeding

Aviva was entirely successful in this proceeding.

Criteria 2: Any written offers to settle that were made in accordance with the rules of practice and procedure applicable to the proceeding after the conclusion of Mediation and before the conclusion of the Arbitration

Aviva refers in its submissions to offers to settle made on August 25, 2015 and on June 28, 2016. The August 25, 2015 offer was contained in an email and flowed from an exchange of emails in which the parties discussed settlement and production issues. The Applicant’s representative made a settlement offer including costs. The actual offer from Aviva in response is as follows:

Given that my client is maintaining that your client fall (sic) under the MIG all I can offer as a settlement is the remainder of the MIG limits.⁴

Aviva gave no additional proposal with respect to costs, and there was no time period identified for the offer to be available, as is required to be considered per Rule 76.1(a)(ii) of the DPRC.

The June 28, 2016 offer of $4,000.00 was more detailed as it included an amount of $2,000.00 for disbursements, and $2,000.00 for treatment and costs. This second offer was more specific as to quantum than the first and included an amount for costs. Again, the offer did not provide a time period during which the offer was open to be accepted. It is clear that the offers were greater than the amount the Applicant achieved in the outcome of the Hearing.

While the last offer was made three days prior to the commencement of the Hearing, the lack of notification as to how long the offer was open is significant. The offers do not meet the requirements to be given weight in determining the expenses to be awarded.

Criteria 3: Whether any novel issues are raised in the proceeding

The issues were not novel.

Criteria 4: The conduct of a party or a party’s representative that tended to prolong, obstruct or hinder the proceeding, including the failure to comply with undertakings and orders.

Aviva alleges that the Applicant failed to attend Insurer’s Examinations to address the claims for chronic pain assessment and treatment, and that therefore the process was prolonged. I specifically refused to hear the claims for chronic pain assessment, and Aviva had objected to those claims being added to this matter. I agree with the Applicant that it is not appropriate to award expenses for this debate over non-attendance for the chronic pain issue. There is no allegation that there was any prolonging of the matter with respect to the claims dealt with in the Arbitration, beyond the adjournment of the Hearing which, in my view, was appropriate in the circumstances.

Criteria 5: Whether any aspect of the proceeding was improper, vexatious or unnecessary

Aviva describes the claims as “frivolous in the face of the medical evidence” and submits that the Applicant knew or ought to have known that she would not be successful. I find that a conclusion that a claim is “frivolous” must be supported by much more than a lack of success at a Hearing. The evidence on the issue of the pre-existing medical condition had to be carefully reviewed in face of what were arguably inconsistencies on the record. There is no evidence that the Applicant was lying or exaggerating her claims that she has ongoing pain as a result of the accident, and there is some evidence that those claims may be well-founded and objectively supported. I do not find that her claims were frivolous in these circumstances.

Issue 1 - Is the Applicant liable for the expenses of Aviva and, if so, in what amount?

Aviva was successful in this Arbitration and therefore is entitled to an award of expenses. The issue is the quantum that is appropriate.

The claim is for a total of $14,210.00, plus HST of $1,847.30. The fees are calculated by Aviva at $145.00 per hour, and cover the stages as follows:

Preparation for the Pre-Hearing – 8 hours Attendance at the Pre-Hearing – 2 hours Preparation for the Arbitration Hearing – 64 hours Attendance at the Arbitration Hearing – 4 hours Drafting closing submissions – 20 hours

In support of the fees, Aviva has disclosed the docket entries of its representative, totalling 30 pages of a “Transactions Listing Report”. The docket entries contain references which are not explained, such as “units”, which appear to be hours, as the first arithmetic on the first entry of 0.3000 units on a price of 140.0000 leads to a value of 42.0000. I interpret this as 0.3 hours (20 minutes) at $140.00 per hour with a value of $42.00. Different figures appear in the column under “Price” ranging from 125.0000 to 225.0000. The individuals whose time is docketed appear to be identified by initials in the column headed “Prof”, but no details are provided as to their full names, whether they are lawyers, clerks or students-at-law, if lawyers their date of call and years of experience in this field. No information is given as to what aspects of the claim are being dealt with during the time spent.

While I accept that a line-by-line analysis of the dockets is not appropriate, an Arbitrator must ensure that the claim reflects the Expense Regulation. That information is not clearly provided here. The Arbitrator should also ensure that fees are reasonable by assessing whether or not there is duplication of effort, that the services relate to the file in question, and that those with appropriate experience are assigned appropriate levels of tasks (that is, that clerks are used judiciously to promote cost-effective service).

According to the reference on page 38, the units totalled 153.2500 and, if these are indeed the hours spent, the request for expenses does cover 98 of those 153.25 hours. Therefore, the submission indicates Aviva has applied some kind of filter, but its nature has not been disclosed.

In terms of hourly rates, the price of 140.000 appears to be the predominant price throughout 2014, and then the price of 145.0000 appears and continues through 2015 and 2016. The claim uses the rate of $145.00 for the 98 hours claimed.

The claim for fees for time spent on the preparation for and attendance at the Pre-Hearing appears to be prudent and appropriate, given the importance of that step in the process. The issues then are the 64 hours of preparation time for the Hearing and the 20 hours of time spent on the submissions.

Aviva argues that it had to prepare for a two-day Hearing, including a claim for a special award, which involved meeting with its client adjuster. It argues that it is entitled to be reimbursed for that preparation, even though the Hearing only took four hours “given that the claimant claimed that she was allegedly suffering from serious injuries and chronic pain”.⁵ The submissions assert that Aviva was prepared to call expert witnesses, and had begun to prepare them but chose not to call them in light of the evidence. Aviva also submits that while the matter was not particularly complex, it was not straight-forward, and at times it was not entirely clear what the issues in dispute were.⁶

Aviva also relies on the line of Commission decisions traced to Henri and Allstate Insurance Company of Canada⁷ for the proposition that the proper approach is to take a ratio of Hearing attendance to reasonable preparation time.

The Applicant’s submissions rely on the decision of Chernet and RBC General Insurance Company,⁸ in which the ratio of preparation time to Hearing time is endorsed in the range of 1:1 to 4:1. She argues that the Hearing was in fact only 3 hours with a one-hour break for lunch, and that the time for the Pre-Hearing should be included in the total hours of preparation calculated under the ratio. The ratio she uses is 4:1, though she argues that the preparation time claimed was excessive because the Hearing was only for the medical and rehabilitation expenses and costs of examinations (disregarding the special award claim).

In this case, the preparation time claimed at 64 hours is 16 times the Hearing time, disregarding the time for the written submissions. The written submissions time is equivalent to over three days of Hearing time—much more than had been scheduled for the Hearing itself, including submissions. Only two days had been scheduled, so at maximum, the Hearing time would have been about 13 hours. The usual ratio of preparation time to Hearing time awarded in Expense Hearings varies up to 4:1—usually reserved for complex cases.

I find that the claims for preparation time and written argument are excessive, even with the filter that Aviva has already applied to the time apparently spent. The offers to settle do not support the claim for expenses, and there is no allegation with respect to the specific claims dealt with in this Arbitration that the Applicant unduly prolonged or delayed the Hearing. The Applicant’s representative agreed to written submissions, and therefore the Applicant cannot avoid the inclusion of additional time over and above the Hearing and preparation time to account for some portion of the 20 hours claimed.

Both parties agreed to written submissions, with the resulting very large claim for time spent. It is unreasonable to require the Applicant to bear the whole of Aviva’s substantial costs in this process, even though her representative agreed to written submissions. This case was not so complex, with its limited number of issues, that it required written argument, and the only beneficiaries of that process appear to me to be the two representatives who did not have to participate further in an in-person Hearing.

I find that Aviva’s expenses should reflect the hours for the preparation for and attendance at the Pre-Hearing, but that a lower ratio of preparation to Hearing time (2:1) is appropriate for compensation for the balance of the preparation time, given the lack of complexity of the issues, and that only a small portion of the written argument (7 hours) is recoverable, representing 3.5 hours of actual Hearing time for the balance of the Hearing day when oral argument could have been accommodated within the Hearing schedule. I have applied a ratio of 2:1 to account for the preparation that oral argument would have required.

The Applicant, in her argument, calculates the fees for Aviva’s representation on the basis of the Legal Aid Tier 2 rate of $122.78 per hour. She also argues that the Legal Aid rate would apply to the hourly rate of all the professionals who worked on the file, and she notes the absence of information on the other professionals who worked on the file. The total legal fees calculated on this basis are $1,841.64.

The hourly rate used in Aviva’s calculation of the expense claim is high and is not supported by the complexity of the case. I agree with the Applicant that the appropriate rate is $122.78 per hour.

On considering all these factors to arrive at a reasonable award of legal fees in this matter, I find that the reasonable legal fees for which the Applicant should be liable is $3,500.00, inclusive of HST.

Disbursements

In addition, Aviva claims $1,387.77 plus HST of $180.41 for disbursements, and the Applicant’s submissions consent to that figure.

Aviva did not include a summary in its material of the disbursements for the Hearing, but included Exhibit E, a Transactions Listing Report. The first two pages of Exhibit E include what are described as “Soft Costs”, with a total value of 387.5400. These “Soft Costs” include courier charges, copies, tabs and binding materials, and long distance charges: the sorts of expenses that would normally be included in a claim for disbursements. The next two pages are described as “Hard Costs”, with the notation under “Value” of 1,387.7700, a number which matches the disbursement claim. The “Matter Description Narrative” indicates air fare, taxis, meals, discovery/reporting services, mileage and something on July 5, 2016 called “Document Productions”. It therefore appears that no claim is being made for the “Soft Costs”.

Discovery/reporting services (totalling $405.00) are not recoverable expenses and there are insufficient details for me to discern what the difference is between “document productions”, which appears to be claimed, and “Copies” and “Tabs and Binding Materials” noted under “Soft Costs”, which do not appear to be claimed. Further, Aviva has not provided the specifics as to the difference between the “Price” and “Value” columns in Exhibit E in the context of disbursements.

The onus is on Aviva to prove its claim and, on disbursements, the material, while detailed, is not clear and does little to assist me in determining whether or not the claim complies with the Expense Regulation. Further, the claim appears to include inappropriate disbursements such as air fare, taxis, mileage and meals that flow from Aviva’s choice of counsel. It has the right to do so, but the travel costs are in stark contrast to the amount in issue and there is no breakdown as to whether or not any of the hours included in preparation time include travel time. The Applicant should not be liable for those travel costs in this particular case with limited issues.

I accept that Aviva incurred some disbursements that should be charged to the Applicant. The elimination of the discovery/reporting services immediately lowers the claim to $982.77. The elimination of the travel expenses for airfare and mileage lowers the claim by an additional $477.67 to $505.10. The balance of the “Hard Costs” charges are taxis, meals and the document productions, of which only the document productions ($61.62) are recoverable on a reasonable basis, assuming they are photocopies. Those document productions costs were all incurred July 5, 2016, and therefore probably relate to the written submissions process for which some charge for photocopies would be a reasonable expense. There were also document briefs prepared by Aviva for the Hearing. Those costs appear to be reflected in the “Soft Costs” on page 1 of Exhibit E, incurred on June 23, 2016 for 420 copies at $0.20 per page for a total of $84.00, plus $11.40 for tabs and binding materials. In addition, there are two charges under “Soft Costs” of 306 copies and 284 copies incurred July 8, 2016 contemporaneously with the written submissions stage; but the written submissions only totalled about 60 pages, so it is unclear whether these charges actually relate to this file. The total of the photocopies (leaving aside the July 8charges) appears to be approximately $157.02.

I find that it is reasonable to award disbursements in this case totalling $200.00, reflecting the document copying and courier charges reasonably required for the production of the document briefs and written submissions, as well as service of documents and HST.

EXPENSES:

Aviva has requested costs of preparing the costs submissions. I refuse to make that award. The total costs award is closer to the amount that was included in the submissions of the Applicant than to those of Aviva. The costs submissions were detailed but unclear. I refuse to award expenses against the Applicant in these circumstances.

Therefore, the Applicant is liable for the expenses of Aviva in this matter in the amount of $3,700.00, inclusive of HST.

March 20, 2017

Lynda Tanaka 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:

1. The Applicant is liable for the expenses of Aviva in the amount of $3,700.00, inclusive of HST.
2. The Applicant is not liable for the expenses of Aviva incurred for the request for expenses.

March 20, 2017

Lynda Tanaka Arbitrator

Footnotes

1. 1The Statutory Accident Benefits Schedule - Effective September 1, 2010, Ontario Regulation 34/10, as amended.
2. 2R.R.O. 1990, Reg. 664: Automobile Insurance.
3. 3Chernet and RBC General Insurance Company (FSCO A13-000932, May 17, 2016).
4. 4Exhibit B, p. 1, Expense Submissions of Aviva Canada Inc. (“Aviva Expense Submissions”).
5. 5Paragraph 13, Aviva Expense Submissions.
6. 6Ibid., paragraphs 14 and 15.
7. 7OIC A-007954, August 8, 1997.
8. 8Op. cit., at p. 6.