Neutral Citation: 2018 ONFSCDRS 120 FSCO A08-000007

BETWEEN:

A.B. Applicant

and

STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY Insurer

EXPENSE DECISION

Before: Arbitrator Charles Matheson Heard: Written Submissions completed on June 20, 2018

Appearances: Mr. J. Raphael, Lawyer, for Ms. A.B. Mr. T. McCarthy, Lawyer, for State Farm Mutual Automobile Insurance Company

Issues:

The Applicant, Ms. A. B. (the “Applicant”), was injured in a motor vehicle accident on July 18, 2005. She applied for and received statutory accident benefits from State Farm Mutual Automobile Insurance Company (the “Insurer”), payable under the Schedule.¹

In my decision dated May 3, 2018, I found that the Applicant was entitled to an income replacement benefit (“IRB”) of $81.63 per week commencing November 13, 2008, and that the Applicant had suffered a catastrophic impairment in accordance with the Schedule as a result of the July 18, 2005 accident. The original hearing arbitrator had separated out the special award issue from the hearing until after the issue of causation had been decided. The parties were then invited to submit further arguments in writing.

In my decision dated May 31, 2018, I found that the Applicant was entitled to a Special Award of 35% of the overdue amounts for the IRB.

I invited the parties to submit their respective expense arguments in writing. Since this invitation Financial Services Commission of Ontario (“FSCO”) has changed its internal policy to include submissions on expenses with the party’s final arguments in order to prevent any delays, should an arbitrator not be available at a later date to hear the expense issue. The Insurer has appealed my earlier decisions and has brought a preliminary issue requesting that I not hear the issue of expenses until the appeal process has been finalized. In light of the new policy I am unable to comply with the Insurer’s request.

The issues in this hearing are:

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

Result:

The Applicant is entitled to her reasonable expenses of $45,306.50, inclusive of H.S.T., disbursements and the costs of this expense hearing.

Arguments

The Applicant argues that the FSCO Dispute Resolution Practice Code² (the “Code”) Rule 75, 78 and Section F of the Expense Regulation sets out what items should be considered and the amounts to be awarded by an arbitrator when making an expense hearing award.

The relevant sections of the Expense Regulation found in Section F of the Code reads as follows:

2 the adjudicator will consider only the criteria referred to in the Expense Regulation found in Section F of the Code. These criteria are:

(a) Each party's degree of success in the outcome of the proceeding;

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

(c) Whether novel issues are raised in the proceeding;

(d) 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;

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

(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; and

(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.

The Applicant agues the above first three criteria are relevant in this case.

Under criteria a), the Applicant argues that it was the wholly successful party at the arbitration. The Applicant was completely successful in all the substantive issues and that of a Special Award, which are considered the most significant issues that are to be decided at FSCO and would require significant preparation and effort to pursue.

Under criteria b), the Applicant suggests that there were no settlement offers that would apply in these circumstances.

Under criteria c), the Applicant argues that the Insurer’s conduct prolonged the proceedings, unnecessarily. The Insurer requested an adjournment of the hearing which was scheduled for June 16, 2014, which was allowed, however, the Applicant’s preparation for the hearing had already been completed. The Insurer should have been ready to proceed.

In regards to the Insurer’s conduct during the hearing, the Applicant argues that the cross-examination of the applicant and Dr. Rosenblat were excessive, in that the length of questioning was far in excess of the evidence in chief and did not reveal any useful information. Furthermore, the Applicant argues that the revelation that the Insurer obtained documents from the Applicant’s employer without her knowledge caused delays in the proceedings.

Finally, the Applicant argues that the Insurer’s behaviour merited a special award, as the award of Arbitrator Lee pointed out that the Insurer did not comply with the Schedule. The Insurer did not rectify the situation after the decision was released. The Applicant submits that the preliminary issue hearing was critical in setting the tone and background of the arbitration. Under this backdrop the Applicant argues that her expenses should be covered by the Insurer to the maximum allowable.

The Applicant is seeking an hourly rate of $150.00 per hour, which the Insurer has not challenged. The Applicant is also seeking $47,775.00 plus $6,210.75 for H.S.T for a balance of $53,985.75 for her legal fees for the arbitration. The Applicant seeks disbursements costs of $33,742.61 for those expenses apportioned to the arbitration. The total expenses claimed, including H.S.T., is $87,728.36. The Applicant states that her Bill of Costs were calculated in accordance with Rule 78.1 of the Code, as directed under the Legal Aid Services Act, 1998.

The Insurer argues that no costs associated with the preliminary issue hearing before Arbitrator Lee or the proceedings before the Director’s Delegate, the Divisional Court or the Court of Appeal should be part of the costs award in favour of the Applicant.

The Insurer argues that the overall principle of proportionality is as applicable to FSCO arbitrations as it is to Court proceedings, and that disbursements must be limited to the maximum allowed under the Expense Regulation.

The Insurer submits that 64 hours of hearing time plus 25 hours of preparation time plus a further 10 hours of written submission time at the rate of $150.00 would equal a total of $15,000.00 plus $1,950.00 for H.S.T. for a total of $16, 950.00 for legal expenses.

In regards to disbursements, the Insurer submits that the report costs of $7,000.00 for Drs. Becker and Rosenblat is excessive and beyond the claimable amount. Dr. Rosenblat’s attendance fee of $10,150.00 is also not allowable as it is excessive. It is also submitted that Dr. Doxey’s report which is claimed at $5,000.00 is excessive and not allowable under the Regulation.

The Insurer argues that $10,000.00 disbursement is reasonable and that a total of $30,000.00 all inclusive for expenses is a reasonable amount of expenses to be awarded in light of the fact that the IRB was for a benefit of less than $100.00 per week.

Decision

It is trite law that the objective of an expense hearing is to fix an amount that is fair and reasonable, and that an arbitrator should take a broad stroke approach to expenses and not a line by line review of a Bill of Costs. It is also established that a 4:1 ratio of preparation time to hearing time for FSCO hearings is a reasonable ratio when assessing costs.

In my view of the case, the Applicant did have to pursue her interest and rights to arbitration, in order to dispute the Insurer’s position. Therefore expenses are applicable in this case, as the Applicant was successful in all aspects of the substantive issues in dispute.

I note that the IRB award may only be less than $100.00 per week, but the Applicant is young, and it is uncertain how long her disability benefits from her employer last. Thus the benefit of the ongoing IRB is larger than it may seem. The catastrophic determination in this matter is also larger than it seems at first glance. Even though no specific dollar amount can be attached to the determination itself, possible future entitlement to specified benefits is significant.

An 8 day hearing, as argued by the Insurer, at 8 hours per day is a total of 64 hours. 64 hearing hours multiplied by 4 is a total of 132 preparation hours for a total of 196 hours of work at $150.00 per hour which subtotals to $19,800.00. When H.S.T. is added in ($2,574.00) the total of $22,374.00 for legal fees.

The Expense Regulation s. 3.1(1) reads as follows:

(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.

(Underlined for my emphasis)

I remain unpersuaded by the Insurer’s arguments that the claimed 35 hours for legal fees by the Applicant’s counsel for the preliminary issue hearing is not claimable under the Regulation. Therefore, I am allowing the additionally claimed 35 hours, at the applicable rate of $150.00 per hour ($5,250.00), to be added to the Applicant’s legal expense total. The new subtotal is $25,050.00 plus H.S.T. ($3,256.50) for a total of $28,306.50 for the Applicant’s legal fees.

In regards to disbursements, I agree with the Insurer that the costs of medical reports and expert attendance fees are regulated in the Expense Regulation with maximums attached to them. I remain unpersuaded that I should allow for anything beyond the allowable maximums. Therefore, after making the proper adjustments to these amounts, disbursements are set at $17,000.00.

For the above reasons, the Applicant is entitled to her reasonable expenses in regards to the arbitration, which are set at the total of $45,306.50, inclusive of disbursements, taxes and the costs of this expense hearing.

June 22, 2018

Charles Matheson Arbitrator

Date

Financial Services Commission of Ontario