Financial Services Commission of Ontario
Commission des services financiers de l’Ontario
Neutral Citation: 2018 ONFSCDRS 34
Appeal P17-00028
OFFICE OF THE DIRECTOR OF ARBITRATIONS
ALLSTATE INSURANCE COMPANY OF CANADA
Appellant
and
AMIR SALMAN
Respondent
BEFORE:
Delegate Jeffrey Rogers
REPRESENTATIVES:
Mr. Ian D. Kirby, solicitor for Allstate Mr. Edward Goldentuler, solicitor for Mr. Salman
HEARING DATE:
Heard by pre-hearing written submissions, oral hearing on January 18, 2018, and post-hearing written submissions completed on January 29, 2018
APPEAL ORDER
Under section 283 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 Regulation 664, R.R.O. 1990, as amended, it is ordered that:
The appeal is allowed.
On consent, Paragraph 1 of the Arbitrator’s order is rescinded and replaced with the following: Allstate shall pay Mr. Salman his expenses of the arbitration in the amount of $116,156.60, inclusive of fees, disbursements and all applicable taxes.
Paragraph 2 of the Arbitrator’s order is rescinded.
On consent, Allstate shall pay Mr. Salman interest on accumulated arrears of income replacement benefits for the period December 15, 2008 to February 4, 2011, starting from February 5, 2011.
On Consent, Allstate shall pay Mr. Salman interest on the principal of benefits accumulated between October 28, 2013 to September 15, 2014, starting from September 16, 2014.
No interest accrues on the special award Arbitrator Bayefsky made, except after February 26, 2016.
In calculating the amount of interest payable, Allstate may set off the sum of $2,500 against the amounts owing to Mr. Salman, starting February 26, 2016.
If the parties are still unable to agree on the amount of interest to be paid by Allstate, the issue is remitted for rehearing by an arbitrator.
On consent, neither party is entitled to expenses of this appeal.
February 9, 2018
Jeffrey Rogers Director’s Delegate
Date
REASONS FOR DECISION
I. NATURE OF THE APPEAL
Allstate appeals the Arbitrator’s decisions of March 27, 2017 and April 20, 2017.
Allstate submits that the Arbitrator erred in concluding that he lacked jurisdiction to determine the amount of interest owing under the earlier order of Arbitrator Bayefsky, and that the Arbitrator exceeded his jurisdiction in the amounts he awarded for the attendance of two expert witnesses at the hearing. The parties agreed to resolve the latter issue on terms as set out in my order. The parties also agree that the Arbitrator had jurisdiction to determine the amount of interest owing, and I so find. They could not agree on two issues regarding the calculation of interest. My decision on those issues is set out below and reflected in my order.
II. BACKGROUND
Mr. Salman was injured in an automobile accident on January 30, 2008. He applied for and received statutory accident benefits from Allstate under the Schedule.1 He applied for arbitration after mediation did not resolve disputes about his entitlement to some of the benefits he claimed. The matter came for hearing before Arbitrator Bayefsky. By order dated February 26, 2016, Arbitrator Bayefsky required Allstate to pay Mr. Salman income replacement benefits, attendant care benefits, the cost of certain treatment, the cost of certain assessments, and a special award of $5,000. Arbitrator Bayefsky also ordered Allstate to pay “ interest on the benefits ordered to be paid, subject to interest on income replacement benefits only being payable from February 4, 2011”. He reserved his decision on expenses of the hearing.
The parties could not agree on expenses and on how much interest Allstate owed. They informed Arbitrator Bayefsky and he scheduled a hearing to decide these issues. Arbitrator Bayefsky left the Commission before he could hold the hearing and the matter was re-assigned to Arbitrator Robinson, whose decision is the subject of this appeal. Arbitrator Robinson ruled that he had no jurisdiction to decide the dispute about interest because Arbitrator Bayefsky made a final decision and did not reserve his decision on this issue.
In the hearing before Arbitrator Robinson, Allstate did not dispute Mr. Salman’s entitlement to expenses of the arbitration, but challenged the amount claimed, including the disbursements for Dr. Scherer and Dr. Gerber. Arbitrator Robinson awarded Mr. Salman expenses in the amount of $139,851.68. The award included $14,831.27 for preparation and attendance at the hearing by Dr. Scherer and $11,500 for Dr. Gerber. By e-mail of March 27, 2017, Allstate asked Arbitrator Robinson to revisit the amount of these awards, suggesting that they were an oversight. Arbitrator Robinson declined the request and informed Allstate that it must seek its remedy elsewhere. Allstate challenged only these two items on appeal. Allstate submitted that these awards cannot stand because they exceed the maximum of $2,100 permitted by the Expense Regulation.2 The parties agreed to resolve this issue when they attended the appeal hearing. They agreed that the total amount payable for fees and disbursements should be $116,156.60 and not $139,851.68, as the Arbitrator ordered. My order reflects this amendment of the Arbitrator’s order.
On the issue of interest, the parties agree that the Arbitrator erred in finding that he lacked jurisdiction to resolve the dispute. The issue of calculation of interest is complicated by the history of this case. The relevant facts are as follows:
Arbitrator Bayefsky found that Mr. Salman is entitled to income replacement benefits from December 15, 2008 and ongoing, but he ordered that interest is only payable from February 4, 2011. That raises the question of whether interest is payable on all of the accrued arrears as of that date. At the appeal hearing, the parties settled this issue upon the agreement that interest runs from February 4, 2011 on the accumulated arrears. That agreement is reflected in my order.
On October 24, 2013, on consent of the parties, Arbitrator Feldman made an order suspending payment of interest on benefits from October 28, 2013 to September 15, 2014. That raises the question of whether interest accrues from September 15, 2014 on the arrears accumulated during the period of suspension. The parties also agreed that interest does accrue on the accumulated arrears. That agreement is reflected in my order.
Arbitrator Bayefsky ordered Allstate to pay Mr. Salman a special award of $5,000. Allstate paid that amount forthwith. Mr. Salman claims that interest is payable on this award from the date on which benefits were found to be owing. The parties could not resolve this issue. For reasons set out below, I conclude that no interest is payable except from the date of Arbitrator Bayefsky’s order.
On October 24, 2013, on consent of the parties, Arbitrator Feldman ordered Mr. Salman to pay Allstate expenses in the amount of $2,500, in any event of the cause, but not forthwith. Mr. Salman did not pay this amount. Allstate submits that it is permitted to set off this award against the benefits later found to be owing, thereby reducing the amount owed on October 24, 2013. The parties could not resolve this issue. For the reasons set out below, I conclude that the award of expenses could not be set off until February 26, 2016, when Arbitrator Bayefsky made the final order regarding entitlement to benefits.
II. ANALYSIS
Calculation of Interest
Although the parties agree that Arbitrator Robinson erred in finding that he lacked jurisdiction to calculate the amount of interest owing, their agreement cannot confer jurisdiction. However, I find that the Arbitrator did err.
The Arbitrator’s conclusion was based upon a finding that Arbitrator Bayefsky issued a final order. The relevant portion of the order is as follows:
Allstate shall pay to Mr. Salman interest on the benefits ordered to be paid, subject to interest on income replacement benefits only being payable from February 4, 2011.
Arbitrator Bayefsky made no order as to how much interest was to be paid. Clearly, he did not consider his order to be final regarding interest or he would not have re-convened the hearing to decide that issue. It would have been an error of law to hold otherwise, because in its current form the order regarding interest is unclear and unenforceable.
An arbitrator is appointed pursuant to s. 282 of the Insurance Act and thereby given authority to resolve “all issues in dispute” between the parties in the arbitration. Although Arbitrator Bayefsky’s order was issued in the form of a final order, it did not finally resolve the issue of how much interest was to be paid. As can be seen from the scope of the dispute that the parties later asked the Arbitrator to decide, many questions remained regarding how much interest was to be paid. Since the issue was not finally resolved, Arbitrator Bayefsky retained jurisdiction to resolve the dispute regarding interest, and so did Arbitrator Robinson to whom the matter was subsequently assigned.
I now turn to the remaining disputes about calculation. The first is interest on the special award. To repeat, Arbitrator Bayefsky ordered Allstate to pay Mr. Salman a special award of $5,000. Allstate paid this amount forthwith. Mr. Salman claims that interest should be added to the special award, from the date that benefits became overdue.
Mr. Salman relies on the decision in Liberty Mutual Insurance Company and Persofsky3 where it was held that a special award is punitive. He argues that the award of $5,000 is too small to be seen as punitive and submits that interest must be added to cure that defect. I find that this argument fails, both on the facts and on the law. First, Arbitrator Bayefsky recognized the punitive nature of the award and he made an award that was appropriate to the circumstances. Second, when an arbitrator fixes the amount of a special award, no interest accrues on it except as part of the enforcement process.
This is the relevant section of Arbitrator Bayefsky’s reasons:
While I find that the Insurer unreasonably denied or delayed the payment of Mr. Salman’s medication, and while this may have caused Mr. Salman considerable distress, I am unable to conclude, based on the evidence available to the Insurer at the time (which raised legitimate questions concerning the veracity of Mr. Salman’s complaints), that the Insurer’s non-payment of benefits was sufficiently egregious to warrant a significant special award. I note, as well, that Mr. Salman’s entitlement to medical benefits for prescription medication was not, in fact, at issue in this arbitration, and that there is no other evidence before me of unreasonable or improper conduct on the part of the Insurer.
Therefore, while the benefits which were disputed in this arbitration, and to which I have found Mr. Salman entitled (including, as discussed below, the interest flowing from these benefits) are very substantial, I find that Mr. Salman is only entitled to a very modest special award in respect of the non-payment of medications. The evidence before me suggests that the prescriptions not paid were perhaps $1,000-2,000 in value, and that they were not paid for perhaps a few months. In attempting to achieve a reasonable balance between the specific benefits denied, the circumstances under which they were withheld and the relative importance of this to the actual benefits disputed and awarded in this arbitration, in all of the circumstances, I find that a special award of $5,000 is warranted.4
Note that Arbitrator Bayefsky found that Allstate only unreasonably delayed payment for $1,000 to $2,000 for medications, and only did so for “perhaps a few months”. He concluded that Mr. Salman was only entitled to “a very modest special award” and he ordered payment of a penalty of $5,000. Mr. Salman has not appealed, but he is asking me to reject Arbitrator Bayefsky’s findings of fact and replace them with his version of them. There is no basis for doing so.
The maximum special award that Arbitrator Bayefsky could make under s. 282(10) of the Insurance Act was 50% of the benefits found to be owing, plus interest. As noted in Persofsky, the interest component in s. 282(10) is part of the calculation of the maximum and not a separate component of the special award. The award then bears interest like any other order which is enforceable under the Courts of Justice Act.5 It follows that no interest is to be paid on the special award, except from the date of Arbitrator Bayefsky’s order.
The second issue in dispute is the effect of Arbitrator Feldman’s order of October 24, 2013. He ordered Mr. Salman pay Allstate’s expenses of $2,500, in any event of the cause, but not forthwith. Allstate submits that this award may be set off against the benefits Arbitrator Bayefsky later found to be owing to Mr. Salman, with the effect that amount of benefits owed is reduced by $2,500 on October 24, 2013 and there is a corresponding reduction in the interest Allstate would otherwise owe.
At the hearing, I raised the question of whether there is any jurisprudence to support setting off an award of expenses against benefits, and I received post-hearing submissions from the parties on the issue. However, I have concluded that it does not matter on the facts of this case. In its submissions, Allstate concedes that payment by Mr. Salman was not due on October 24, 2013. I agree. I find that Arbitrator Feldman’s order means that payment was due when “the cause” was determined. Arbitrator Bayefsky determined the cause when he issued his order of February 26, 2016. Mr. Salman did not owe Allstate interest on the expense award before it became payable. Therefore, Allstate cannot deduct interest from the amount it owes Mr. Salman until February 26, 2016.
IV. EXPENSES
The parties agree that no expenses of this appeal are to be paid. Their agreement is reflected in my order.
February 9, 2018
Jeffrey Rogers Director’s Delegate
Date
Footnotes
- The Statutory Accident Benefits Schedule — Accidents on or after November 1, 1996, Ontario Regulation 403/96, as amended.
- O. Reg 275/03, as amended
- (FSCO P00-00041, January 31, 2003)
- At pages 41 and 42.
- At page 20