I.G. v. State Farm Mutual Automobile Insurance Company, 2018 ONFSCDRS 101

Financial Services Commission des

Commission services financiers

of Ontario de l’Ontario

Neutral Citation: 2018 ONFSCDRS 101

FSCO A15-007130

BETWEEN:

I.G.

Applicant

and

STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY

Insurer

DECISION ON EXPENSES

Before:

Arbitrator Alan G. Smith

Heard:

By written submissions due April 25, 2018

Appearances:

Mr. Kwaku Bona participated for Mr. I.G.

Ms. Susan Keenan participated for State Farm Mutual Automobile Insurance Company

BACKGROUND:

On July 8, 2011, a TTC bus ran over Mr. I.G.’s foot and fractured it. He was then 14 years old. On July 12, 2011, his father, as his litigation guardian, applied to State Farm Mutual Automobile Insurance Company (“the Insurer”) for accident benefits payable under the Schedule¹. Mr. I.G. applied for arbitration after mediation did not resolve disputes about his entitlement to Non-Earner Benefits (“NEBs”), attendant care benefits (“ACBs”), and chiropractic treatment. The Insurer subsequently raised two procedural preliminary issues which came for hearing before an arbitrator:

Whether Mr. I.G. is precluded from proceeding to arbitration of his claims for NEBs and treatment because he failed to attend medical examinations pursuant to s. 44 of the Schedule[2] and
Whether Mr. I.G.’s claim for ACBs is barred for failure to commence mediation within the 2-year limitation period under s. 56 of the Schedule.

The arbitrator ruled against the Applicant on both issues and dismissed the Application.

The arbitrator’s decision (which was delivered in the form of a letter) was appealed. The appeal hearing was conducted by way of written submissions. In his decision the Directors Delegate ordered the following:

This appeal is allowed and the Arbitrator’s order is rescinded.
Mr. I.G. is not precluded from proceeding to arbitration of his claims.
If the parties are unable to agree about expenses of this appeal, an expense hearing may be arranged in accordance with Rule 79 of the Dispute Resolution Practice Code. [Emphasis Added]

By letter (including bill of costs) of March 22, 2018, the Applicant requested an expense hearing. The Insurer responded by letter. I granted the expense hearing and provided the parties with an opportunity to make further written submissions. Nothing further was received from either party.

ISSUES:

The issue in this expense hearing is:

Is the Applicant entitled to expenses arising from the appeal proceeding and, if so, in what amount?

Result:

The Insurer shall pay to the Applicant $2,418.20 inclusive of disbursements and all applicable taxes.

THE LAW

Rule 79.1 of the FSCO Dispute Resolution Practice Code (the “DRPC”) provides that where an Arbitrator has determined all issues in dispute except expenses, and the parties cannot agree on entitlement or amount of expenses, either party may request, in writing, an expense hearing within 30 days from the date of the decision on all other issues in dispute. My jurisdiction to conduct an expense hearing is set out in section 282(11) of the Insurance Act.

Pursuant to Rule 75.2 of the DRPC, an arbitrator is to consider only the following six criteria for the purposes of awarding all or part of the expenses incurred in respect of an arbitration proceeding:

Each party’s degree of success in the outcome of the proceeding;
Any written offers to settle made in accordance with subsection (3);
Whether novel issues are raised in the proceeding;
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;
Whether any aspect of the proceeding was improper, vexatious or unnecessary; and
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.

In this present Expense Hearing, only the first of the six criteria appears to be relevant ie., the degree of success in the outcome.

ARGUMENT AND ANALYSIS

Degree of Success

I find the Applicant’s “Bill of Costs” difficult to decipher. It appears to claim a total of the hourly fees (at the prescribed Legal Aid Ontario rate) for three lawyers and one paralegal ($14,205.97) plus H.S.T. ($1,716.78) and disbursements ($350.00) for a total of $16,272.75.

In its written submissions the Insurer submits that:

…I note that [the Applicant’s] only recoverable costs are in relation to the appeal. We were successful at the arbitration stage….Given the fact that we were successful at the arbitration level and you were successful on appeal, it would make sense for both parties to bear their own costs….it may be appropriate to await final determination of the substantive issues in dispute on arbitration before costs are addressed….

In his written submissions the Applicant responds:

I write this letter further to an appeal hearing in this matter before Director’s Delegate Jerry Rogers….Because of the Order of Director’s Delegate Rogers the Applicant in arbitration is seeking his costs and disbursements in a hearing.

Please find enclosed a Bill of Costs that was severed [sic] on the lawyer for the insurer, Ms. Susan Keenan….Ms. Keenan has indicated that because the insurer was successful in the arbitration hearing they are not required to pay the applicant costs and disbursements. Indeed, Ms. Keenan may be right to the extent that there is no Order by an arbitrator for the applicant to seek his costs in arbitration, again, by reason of his success in the appeal.

In his decision Delegate Rogers ordered that an expense hearing could be requested, “about the expenses of this appeal”. Contrary to the Insurer’s submission, I have no jurisdiction to, in any regard, consider any other expenses eg., those incurred in advancing or defending the substantive merits of the Application or the expenses incurred in preparing and responding to the preliminary issue hearing. The Insurer’s submissions note that the Application’s substantive issues in dispute have yet to be addressed. In my view, the expenses incurred by the parties, other than those of the appeal, should be addressed at the same time as the substantive issues.

Likewise, Rule 75.2 (a) of the DRPC requires that I consider, “each party’s degree of success in the outcome of the proceeding”. In my view, the “proceeding” in the present case is the appeal before Director’s Delegate Rogers. Given that the Applicant was 100% successful in that Appeal, he is entitled to have his expenses reimbursed by the Insurer.

THE APPLICANT’S BILL OF COSTS

The Jurisprudence

In Henri and Allstate Insurance Company of Canada,³ Arbitrator Makepeace provided guidance to the general principles arbitrators should consider when deciding these cases, including, but not limited to:

the overriding consideration in fixing arbitration expenses is reasonableness.
a line-by-line assessment of the expenses claimed is not appropriate. Rather, the Arbitrator should make a global assessment of reasonable expenses.

It has long been accepted that the Schedule is consumer-oriented legislation, designed so that access to justice is available to the public without fear of exorbitant costs or other consequences⁴.

The Supreme Court of Canada's decision in Smith v. Co-operators General Insurance Co⁵ established that consumer protection is one of the main objectives of automobile insurance law. In that decision, Justice Gonthier reasoned:

There is no dispute that one of the main objectives of insurance law is consumer protection, particularly in the field of automobile and home insurance. The Court of Appeal was unanimous on this point and the respondent does not contest it. In Insurance Law in Canada (loose-leaf ed.), Professor Craig Brown observed, that, “In one way or another, much of insurance law has as an objective the protection of customers”.

Fees

As I also noted above, I find the Applicant’s bill of costs difficult to understand in that it appears to include all work done, including the initial preparation of the Application, pre-hearings, and defence of the preliminary procedural issues raised by the Insurer. I cannot find any line item which specifically addresses the hours spent preparing the appeal. I am therefore left having to estimate reasonable hours spent on the appeal.

It appears that Mr. Bona was the lead practitioner with by far the largest number of hours claimed in the bill of costs. I will assume that 3 full days of work at 8 hours per day was spent preparing the appeal. Accordingly, I will reimburse 24 hours at the requested hourly rate for a paralegal ($85.00). In the result, $2,040.00 is payable.

Disbursements

The only disbursement specifically claimed is for an “Arbitration Filing Fee”. That request appears to be allowable under the FSCO Expense Regulation. It also seems reasonable. I will therefore allow the full amount claimed: $100.00.

CONCLUSION

Total Legal Fees

Disbursements

$2,040.00

$100.00

HST @ 13%

$278.20

TOTAL AWARD FOR ALL FEES, DISBURSEMENTS AND HST

$2,418.20

For the reasons set out above, the Insurer shall pay to the Applicant its expenses in respect of the appeal, fixed in the amount of $2,418.20 (inclusive of fees, disbursements and any applicable taxes).

May 8, 2018

Alan G. Smith

Arbitrator

Date