Neutral Citation: 2018 ONFSCDRS 42

FSCO A16-004806

BETWEEN:

EDWIN ELLUL

Applicant

and

TD GENERAL INSURANCE COMPANY

Insurer

DECISION ON EXPENSES

Before: Arbitrator Jeff Musson

Heard: By written submissions completed December 8, 2017

Appearances:

Ms. Samia Alam for Mr. Edwin Ellul

Mr. Claude Blouin for TD General Insurance Company

Issues:

The Applicant, Mr. Edwin Ellul, was injured in an accident on May 24, 2014 and sought accident benefits from TD General Insurance Company (“TD”), payable under the Schedule.¹ The parties were unable to resolve their disputes through mediation, and Mr. Ellul, through his representative, applied for arbitration at the Financial Services Commission of Ontario under the Insurance Act, R.S.O. 1990, c. I.8, as amended.

Arbitrator Davies conducted the Hearing for this case on October 16, 2017. At the Hearing, Ms. Alam, counsel and Ms. Grzybowski, licensed paralegal for the Applicant attended. In addition, Mr. Blouin, counsel for TD General Insurance Company (“TD”) attended. The Applicant did not attend but his mother sat in as an observer.

Applicant’s counsel initially requested an adjournment of the Hearing due to a potential capacity issue related to the Applicant. In the alternative, should an adjournment not be granted, Ms. Alam requested that the Application for Arbitration be withdrawn on a without cost basis.

Arbitrator Davies in her decision wrote the following:

The Insurer was opposed to the adjournment as Applicant’s counsel has been aware since April 10, 2017 there may be a capacity issue, based on the report of Dr. Vitelli, and is only acting on it now. Despite their opposition to the adjournment, the Insurer had released their witnesses. In the alternative, the Insurer would consent to the Applicant’s request to withdraw the Application for Arbitration on a with cost basis.

Ultimately, Ms. Alam requested withdrawal of the Applicant’s Application for accident benefits at the start of the Hearing. The Insurer consented to the withdrawal of the Arbitration Application, but indicated that it would be seeking an Expense Hearing for its costs.

As a final effort to prevent a need for an Expense Hearing, Insurer’s counsel was asked to consult with their client to determine if the Insurer would waive the right to seek costs. After assessing this request, ADR Chambers received correspondence from the Insurer’s counsel advising that the parties were unable to resolve the issue of expenses and requested an Expense Hearing to determine the amount, if any, to which the Insurer is entitled.

Arbitrator Davies subsequently issued a letter allowing the Applicant to withdraw his Application for accident benefits and an Expense Hearing request by the Insurer was scheduled to address the issue of costs. Both Applicant and Insurer counsel made submissions on the issue of costs.

The issue in this Expense Hearing is:

What is the quantum, if any, that the Applicant is liable to pay with regards to the Insurer’s expenses in respect of the withdrawal of the Applicant’s Application for accident benefits under section 282(11) of the Insurance Act?

Result:

The Insurer is not entitled to any expenses.

EVIDENCE AND ANALYSIS:

Introduction

The Insurer is claiming expenses in the total amount of $11,211.69, including HST. This amount is comprised of both fees and disbursements.

My jurisdiction to conduct an Expense Hearing is set out in subsection 282(11) of the Insurance Act.² An arbitrator shall, under Rule 75.2 of the DRPC, 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.
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.

Entitlement to Expenses

The Applicant submitted the following comments in regards to this Expense Hearing.

Each party should bear their own expenses for the following reasons. The whole premise behind the FSCO dispute resolution system is to provide access to justice for claimants. It is a vehicle to dispute a denial of benefits by an Insurer. It is the only way to dispute a claim where an Insurer maintains its denial. Clearly, claimants do not win every case however, the “loser pays” system in Ontario is an obvious barrier to the notion of access to justice.

Assessment of Expenses

This case was withdrawn prior to the start of the Hearing, however the Insurer in its submission stated that it had incurred significant costs in order to prepare for this Hearing.

The Applicant did not present his expenses, so it was difficult to assess how the Insurer’s fees compared to the fees that the Applicant incurred from his own counsel. Therefore, I am left to determine the reasonableness of the expenses that the Insurer submitted based on similar cases, as well as the principle of fairness. Using this methodology, both the fees and disbursements claimed by the Insurer will be reduced.

Even though the Applicant’s FSCO Application for Arbitration is withdrawn, the issue of catastrophic impairment remains open and the Applicant has the opportunity to proceed with this issue at the Licensing Administrative Tribunal (“LAT”). The Applicant in his expense submission put forward the position that there were not any novel issues raised with the Applicant’s Application for Arbitration which would have caused undue expenses on behalf of the Insurer to defend.

Further, the Applicant takes the position that there was no conduct by either side that tended to prolong or obstruct the proceeding. In his opinion, this Application occurred in the normal course of proceedings. The benefits in dispute were denied, then mediated and finally an Arbitration Hearing was scheduled. In addition, the Applicant stated that there was no evidence submitted by the Insurer to show that the Applicant’s claim was frivolous, vexatious or an abuse of process.

As part of his submission, the Applicant relies on Allison and Markel.³ In this case, Delegate Naylor found that expense awards are punitive in nature and should only be made if an arbitrator finds a claim was brought frivolously, vexatiously or under abuse of process. I agree with the Applicant in the case before me that there was no credible evidence submitted to show that the Applicant’s claim was frivolous, vexatious or an abuse of process.

The Applicant also submitted Heinecke and TD General Insurance⁴ in defense of his position that each party should bear their own costs in respect of this Arbitration Application. In Heinecke and TD General Insurance, Arbitrator Davies declined to award expenses to TD where the Application for Arbitration was withdrawn prior the Arbitration Hearing. As part of her decision, Arbitrator Davies set out the criteria for awarding costs in the Expense Regulation and focused on whether any aspect of the proceeding was improper, vexatious, or unnecessary. She declined to award TD’s expenses in preparing for the Arbitration Hearing.

Competency of the Applicant

In order to address the Insurer’s claim that the competency of the Applicant was an issue known months prior to the commencement of the Hearing, the Applicant’s counsel put forward the position that:

Competency and capacity to instruct counsel were very live issues in the lead up to this arbitration hearing. Capacity exists on a spectrum and it does not mean incapacity will manifest itself readily at every instance. Where or when it does become apparent that a client may have diminished capacity, the Rules of Professional Conduct⁵ requires lawyers at any stage of proceedings to take appropriate steps.

Principle of Fairness

Case law has determined that the Schedule is consumer protection legislation. As such, it is not reasonable to expect the Applicant to pay $11,211.69 in the Insurer’s expenses leading up to an Arbitration Hearing that never took place.

Conclusion

Based on the evidence submitted, I am not satisfied any justifiable purpose is served by ordering the Applicant to personally pay the Insurer’s expenses. Considering the principles of fairness, the Applicant should not be punished by having to pay the legal costs of the Insurer. The Schedule is consumer protection legislation and its authors never intended to financially penalize those who have legitimate disputes but disagree with how an insurer has handled their file. Therefore, I am accepting the Applicant’s position that each party should bear their own costs related to this Arbitration Application.

EXPENSES:

I find that the Insurer is not entitled to any expenses.

February 27, 2018

Jeff Musson

Arbitrator

ARBITRATION ORDER

Financial Services Commission of Ontario