Lisa Knott v. State Farm Mutual Automobile Insurance Company, 2018 ONFSCDRS 31

Financial Services Commission des

Commission services financiers

of Ontario de l’Ontario

Neutral Citation: 2018 ONFSCDRS 31

FSCO A15-005048

FSCO A15-005097

BETWEEN:

LISA KNOTT

Applicant

and

STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY

Insurer

DECISION ON EXPENSES

Before:

Arbitrator Marcel D. Mongeon

Heard:

By written submissions completed on November 24, 2017

Appearances:

Mr. Robert N. Kostyniuk, Lawyer, participated for Ms. Knott

Mr. Mohamed Hashim, Lawyer, participated for State Farm Mutual Automobile Insurance Company

Issues:

The Applicant, Ms. Lisa Knott, was injured in motor vehicle accidents on November 23, 2012 and December 5, 2012, and sought accident benefits from State Farm Mutual Automobile Insurance Company (“State Farm”), payable under the Schedule.¹ The parties were unable to resolve their disputes through mediation, and Ms. Knott, through her representative, applied for arbitration at the Financial Services Commission of Ontario under the Insurance Act, R.S.O. 1990, c. I.8, as amended for both Motor Vehicle Accidents (“MVAs”). The two files (A15-005048 for the November 23, 2012 MVA; and A15-005097 for the December 5, 2012 MVA) have been related for this Hearing.

The issue in this Expense Hearing is:

What expenses, if any, is either party entitled to?

Result:

Expenses of $3,928.96 plus HST of $510.76 and disbursements of $571.26 are awarded to the Insurer, for a total of $5,010.98, payable forthwith by the Applicant.

EVIDENCE AND ANALYSIS:

This is related to my Hearing decision dated October 12, 2017 in the above-captioned files. The Applicant was seeking non-earner benefits for a period of time following the accident, a declaration that the injuries sustained in both files were not predominantly a ‘minor injury’ within the meaning of the Schedule and the costs of three different assessments. I determined that the Applicant’s injuries as a result of both accidents are predominantly a ‘minor injury’ and that the Applicant was not entitled to any other benefits.

In this case, the Insurer prevailed in both files. More importantly, the parties had discussed a settlement for both files during a telephone settlement conference on June 23, 2017. However, due to a dispute between the parties in allocating the settlement amounts, the settlement was not consummated.

A preliminary matter was raised and determined by a Pre-Hearing Arbitrator in a letter of August 25, 2017 as to whether an enforceable settlement had been reached. The determination of the Pre-Hearing Arbitrator was that an enforceable settlement had not been reached. The Applicant sought to appeal that decision and sought an adjournment of the Hearing. I denied the request for an adjournment.

The parties were unable to agree on entitlement to the expenses of the Hearing which lasted two days and have sought my determination. I also note that the Pre-Hearing Arbitrator considering the preliminary issue left the matter of expenses to me to decide.

The Insurer has requested fees well in excess of $20,000. Disbursements of $571.26 primarily comprising photocopy fees and HST are also sought. The detail provided shows the work of two lawyers and two law clerks going back to 2015. The rates used are those under the legal aid tariff.

Expenses in an arbitration hearing are governed by Regulation 664, R.R.O. 1990, Automobile Insurance made under the Insurance Act, as amended. Section 12 thereof, as it read immediately before being amended by Schedule 3 to the Fighting Fraud and Reducing Automobile Insurance Rates Act, 2014, sets out a number of criteria that an arbitrator shall consider in awarding all or part of the expenses of an arbitration proceeding. These criteria are (with some editing):

Each party’s degree of success in the outcome of the proceeding.
Any written offers to settle […]
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 […]
Whether any aspect of the proceeding was improper, vexatious or unnecessary.
Whether the insured person refused or failed to submit to an examination […]

To respond to each of these criteria in turn, I note:

The Insurer prevailed in the applications. However, the Insurer was prepared a few months earlier to settle the matter for $18,000. The monetary value of the benefits in dispute was modest: the non-earner benefits were being sought for two years maximum (exposure: less than $20,000), the three examinations had $6,000 at risk and the determination of Minor Injury Guideline status had no immediate cost consequence to the Insurer.

The parties were unable to consummate the settlement transaction. However, I believe that the time of the putative settlement (June 23, 2017) is an appropriate time frame from which to start measuring the Insurer’s entitlement to costs.

There were no novel issues considered by me. Arguably, the issue considered in the preliminary issue as to whether a settlement had been achieved was novel. Based on the preliminary issue being novel, it is appropriate for the Applicant to have acted in making the application. Even though unsuccessful, the application could have, if successful, obviated the holding of a two-day hearing. Based on the preliminary issue being novel, I hold that no expenses arise from the Applicant’s having made it.

There were no novel issues in the Hearing.

On the issue of hindrance, the Insurer suggested that a hindrance was the failure of the Applicant to attend an Examination under Oath (“EUO”) until May 2017. However, in its factum, the Insurer does not fault the Applicant for the EUO.

The Insurer does find fault with the adjournment requests made by the Applicant’s previous counsel and suggests that this was a hindrance. Although that may be the case, I also have as a fact the putative settlement of June 23, 2017. That suggests to me as of that date, both parties were prepared to forgive any hindrances in the file against the proposed settlement amount. Clearly, all the Insurer would have had to do to prevent the Hearing would be to pay this amount out.

The Hearing on the benefits payable took two days. Although the Applicant did not prevail in any part of the Hearing, it was not improper, vexatious or unnecessary for the Applicant to have pursued these benefits. To some extent after the failed settlement attempt, this was the only reasonable course of action available to her. The possible settlement amount certainly established an expectation of her entitlement to benefits in that amount.

Neither party has cited any arbitral awards previously made in Schedule matters in support of its position on expenses.

Based on the foregoing, the Insurer is entitled to an expense award. However, the expense award will be modest recognizing the need to provide it with an indemnity for its time and effort only from the time that the parties were unable to consummate the settlement. When the Insurer was prepared to settle the matter, it clearly indicated by that action that it was prepared to condone its preparation time up to that point.

I have already determined that the Applicant was justified in making the preliminary issue application and no expenses are payable as a result of that.

With respect to the Hearing itself, the Insurer should receive an indemnity for one lawyer attending the Hearing for two days and for two additional preparation days. No additional indemnity is provided for there being two separate files. I agree that, as indicated in the Applicant’s material, the issues were ultimately not complicated by having had two files.

In setting applicable rates for the representative, I am guided by section 78 of the Dispute Resolution Practice Code. This provides that the legal aid rates should be used unless, in the case of an applicant, I am satisfied that a higher rate should be used. Under the foregoing criteria, I find that the normal legal aid rates are appropriate.

I find that there should be 8 hours per day for four days (two hearing days and two preparation days) for the principal lawyer involved in the file for the Insurer ($122.78 per hour): $3,928.96 plus applicable HST ($510.76). I note that this amount of expenses is also proportional to the amount of the failed settlement and the amount at risk in the Hearing. I have reviewed the disbursements of the Insurer of $571.26 and find this amount to be reasonable.

EXPENSES:

Expenses of $3,928.96 plus HST of $510.76 and disbursements of $571.26 are awarded to the Insurer, for a total of $5,010.98, payable forthwith by the Applicant.

February 7, 2018

Marcel D. Mongeon

Arbitrator

Date