Melinda Muhi v. Optimum Insurance Company Inc., 2018 ONFSCDRS 128

Financial Services Commission des

Commission services financiers

of Ontario de l’Ontario

Neutral Citation: 2018 ONFSCDRS 128

FSCO A16-004303

BETWEEN:

MELINDA MUHI

Applicant

and

OPTIMUM INSURANCE COMPANY INC.

Insurer

Before:

Arbitrator Alan G. Smith

Heard:

By written submissions due July 16, 2018

Appearances:

Ms. Ashu Ismail participated for Ms. Melinda Muhi

Mr. George Wray participated for Optimum Insurance Company Inc.

BACKGROUND:

The Applicant, Ms. Melinda Muhi, was injured in a motor vehicle accident on April 25, 2014, and sought accident benefits from Optimum Insurance Company Inc. (“Optimum”), payable under the Schedule.¹ The parties were unable to resolve their disputes through mediation, and Mrs. Muhi, through her representative, applied for arbitration at the Financial Services Commission of Ontario (“FSCO”) under the Ontario Insurance Act, R.S.O. 1990, c. I.8, as amended (the “Insurance Act”).

An arbitration hearing took place In person at ADR Chambers on November 27, 28 and 29, 2017 and January 11, 12, 25, and 30, and February 1, and 2, 2018 and at the office of Borden Ladner Gervais in Toronto on February 5, 2018. Arbitrator Tanaka issued her written Decision with reasons on April 20, 2018. The Decision contained a provision that, if the parties could not come to an agreement on the matter of expenses, either party could request, in accordance with Rules 75 to 79 of the Dispute Resolution Practice Code (the “Code”) an appointment before an arbitrator to determine expenses. The parties subsequently requested that a determination of expenses be made, and I requested written submissions from the parties. Written submissions were received from the Applicant and Insurer.

ISSUES:

The issues in this Expense Hearing are:

How much should the Applicant be reimbursed for her expenses arising from the Arbitration?

Result:

The Applicant is entitled to her reasonable expenses of $39,972.51, inclusive of H.S.T., disbursements and the costs of this expense hearing.

EVIDENCE AND ANALYSIS:

Introduction

The Applicant is claiming expenses in the total amount of $53,916.61, including legal fees, disbursements and H.S.T. It appears the Insurer is not taking the position that the Applicant is not entitled to her expenses of the hearing. The Insurer is, however, disputing the amount of expenses and disbursements that are to be awarded to the Applicant and that the expenses awarded should be reduced in accordance with, and based on the various criteria set out in section 75.2 of the Code. The Insurer also argues that the amount claimed is not reasonable and not in keeping with the reasonable expectations of the parties.

Rule 79.1 of the Code 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.

As noted above by the Insurer, Pursuant to Rule 75.2 of the Code, 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 Rule 76;
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, the parties appear to submit, and I concur, that only the first of the Rule 75.2 criteria is relevant: the degree of success in the outcome of the proceeding.

CODE RULE 75.2 CRITERIA

Degree of Success

The Applicant notes in her written submissions that:

The main issue to be determined was whether the applicant was catastrophically impaired. On this count the applicant was successful and the insurer now appeals. The medical / rehabilitation issues were resolved on the CAT finding. The benefits not awarded were attendant care and housekeeping, because they were completed by family members who did not sustain an economic loss. No evidence of economic loss was furnished. The family members were not called, and securing these benefits were not the focus of the evidence. The CAT issue was the sole focus of the witness evidence.

The Insurer argues that:

Success at the underlying arbitration was mixed. While the Applicant was successful on the issue of whether she suffered catastrophic injuries for the purposes of the SABS, Optimum was successful on the attendant care and housekeeping issues.

I agree with the Insurer that success at the hearing was mixed. However, I also concur with the Applicant’s argument that Catastrophic Impairment designation was the predominant issue at the hearing and the Applicant’s success in that regard must be given significant weight.

THE APPLICANT’S BILL OF COSTS

The Jurisprudence

In Henri and Allstate Insurance Company of Canada², 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 consequences³.

The Supreme Court of Canada's decision in Smith v. Co-operators General Insurance⁴ 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”.

Bearing these principles in mind, a line-by-line analysis of the bill of costs is virtually impossible. The breakdown in the Applicant’s bill of costs submitted does not provide sufficiently detailed information to do so. As the Insurer notes there were no time dockets submitted by Applicant counsel and hence little detail. In the circumstances, a more “global” approach to assessing expenses makes sense.

Fees

The Applicant makes the following submission with regard to the appropriate hourly rate to be applied:

The Dispute Resolution Practice Code (the Code) was last published in January, 2014 where Rule 78, sets out that rates payable as follows:

The hourly rates established under the Legal Aid Services Act, 1998 for professional services in civil matters before the Ontario Superior Court of Justice;

the hourly rate referred to in Rule 78.1 (a) adjusted to include, where appropriate, the experience allowance established under the Legal Aid Services Act, 1998

Where an adjudicator is satisfied that a higher amount for legal fees to an insured person is justified, an hourly rate of up to $150 may be awarded.

The Code was published in 2014. At the time, the legal aid complex criminal rate was $148.84, just $1.16 less than the $150, which an adjudicator may award, when satisfied that higher fees were warranted.

In 2015, the complex legal aid rate was raised to $161.05. Rule 78 appears to be written to permit adjustment, where appropriate, by the allowance established by the legal aid legislation. The applicant submits …both [the] passage…of time, since the Code was first published and the complexity of the case are appropriate considerations which permit the Commission to defer to the complex legal aid rate established in 2015. Certainly, this amount is much below the amount the insurer expended on its own counsel. Using this rate is in keeping with the flexibility proffered by the Code in determining the fee.

The Insurer counters that:

…the costs submission on behalf of Ms. Muhi seek an hourly rate for Ms. Ashu Ismail, of $161 per hour. However, s. 78.1 of the DRPC provides that the maximum amount to be awarded is the hourly rate established under the Legal Aid Services Act, 1998, for professional services in civil matters before the Ontario Superior Court of Justice. The rates for civil matters is prescribed under Schedule 2, and provides for a maximum hourly rate of $109.13. Under s. 24.2 of Part IV, there is an allowance of a 25% increase for a lawyer who certifies that they have the equivalent of 10 years of practice in civil litigation, which would increase Ms. Ismail’s maximum hourly rate to $136.41.

I agree with the Insurer that, pursuant to the Legal Aid Ontario (“LAO”) tariff, the $161.00/hour rate is reserved for complex criminal cases and is not applicable to civil matters such as the present case. However, I will allow the Applicant counsel to be reimbursed at the $150.00/hour maximum rate given the complexity of the Catastrophic Impairment issue.

The Rule 75.2 criteria favouring the Applicant’s reimbursement is her substantial success at Arbitration. It is established that a 4:1 ratio of preparation time to hearing time for FSCO hearings is a reasonable ratio when assessing costs⁵. There were 6 days of hearing. At a 4:1 ratio that means 24 preparation days plus the 6 days of hearing for a total of 30 reimbursable days. At 6 hours per day, the total number of reimbursable hours is 180. In fact, counsel is only claiming 160 hours. I will therefore allow the time she has claimed in full. I will also allow the full claim of 40 hours for the paralegal’s work. In my view, these amounts respect both the principle of proportionality and reasonableness.

Accordingly, the following number of hours will be reimbursed at the applicable LAO tariff rates:

Counsel Ismail: 160 hours @ $150.00 = $ 24,000.00

Paralegal Chinah 40 hours @ $40.00 = $ 1,600.00

HST = $ 3,328.00

Total Fees Reimbursable: = $ 28,928.00

Disbursements

The Insurer objects to the following claims made by the Applicant:

a. Charge of $759.80 for a global mediation, which included the tort defendant;

b. C.P.S. process server charge of $402 – no supporting invoices have been provided to demonstrate this charge was incurred for the purposes of the within arbitration, rather than the tort action or some other proceeding(s);

c. Century Courier charge of $219.32 – no supporting invoices have been provided to demonstrate this charge was incurred for the purposes of the within arbitration, rather than the tort action or some other proceeding(s);

d. Photocopying charges of $1,501.23 and $1,397.12 – these charges, which total $2,898.35 – are not supportable, as Optimum incurred the photocopying cost of preparing the briefs for the arbitration – and no supporting invoices have been provided to demonstrate these charges were incurred for the purposes of the within arbitration, rather than the tort action or some other proceeding(s);

e. Fax expenses of $27.20 – no supporting invoices have been provided to demonstrate this charge was incurred for the purposes of the within arbitration, rather than the tort action or some other proceedings;

f. Transportation expenses of $145 and $145 – no supporting invoices have been provided to demonstrate these charge was incurred for the purposes of the within arbitration, rather than the tort action or some other proceedings; and

g. Printing expense of $285.36 – this charge is not supportable, as Optimum incurred the photocopying cost of preparing the briefs for the arbitration – and no supporting invoices have been provided to demonstrate this charge was incurred for the purposes of the within arbitration, rather than the tort action or some other proceeding(s).

In a similar situation in Nguyen⁶ Arbitrator Mervin reduced the reimbursement of claims made without supporting documentation. Accordingly I will apply a 50% discount to the claims disputed by the Insurer.

The Insurer also objects to the following expert fee claims as above the maximums allowed pursuant to the Code’s Expense Regulation:

…amounts claimed for the reports prepared by Dr. Kiraly must be reduced from $6,000 ($1,000 and $3,500 and $1,500 plus HST) to $1,500, which is the maximum amount for preparing reports;

…amounts claimed for the preparation time and attendance of Dr. Kiraly must be reduced from $4,500 ($3,000 and $1,500 plus HST) to $2,100, which is the maximum amounts for both preparation and attendance;

…the amount claimed for the preparation time and attendance of Dr. Gallimore must be reduced from $4,000 ($2,000 and $2,000 plus HST) to $2,100, which is the maximum amounts for both preparation and attendance.

I agree with the Insurer with regard to the maximum allowable claims and accordingly have reduced the amounts reimbursable to the Applicant to accord with the Insurer’s submissions.

All other disbursement claims appear to be allowable under the FSCO Expense Regulation.

They also all seem reasonable. In the result, calculated at the Expense Regulation rate, I will allow reimbursement of disbursements in the amount of $11,044.51 (including HST).

CONCLUSION

Legal Fees (including HST):

Disbursements (including HST) :

$ 28,928.00

$ 11,044.51

TOTAL AWARD FOR ALL FEES, DISBURSEMENTS AND HST:

$ 39,972.51

For the reasons set out above, the Insurer shall be ordered to pay the Applicant’s expenses, fixed in the amount of $39,972.51 (inclusive of fees, disbursements and taxes).

July 18, 2018

Alan G. Smith

Arbitrator

Date