Neutral Citation: 2018 ONFSCDRS 44 FSCO A15-001519

BETWEEN:

MATTHEW MITCHELL Applicant

and

COMMONWELL MUTUAL INSURANCE GROUP Insurer

DECISION ON EXPENSES

Before: Arbitrator Charles Matheson

Heard: By written submissions completed on January 15, 2018

Appearances: Mr. D. Prezler, lawyer, participated for Mr. Mitchell Ms. L. Matthews, lawyer, participated for Commonwell Mutual Insurance Group

Issues:

The Applicant, Mr. Matthew Mitchell, was injured in a motor vehicle accident on May 17, 2013. He applied for and received statutory accident benefits from Commonwell Mutual Insurance Group ("Commonwell"), payable under the Schedule.¹ The parties were unable to resolve their disputes through mediation, and Mr. Mitchell, 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.

The issue in this Expense Hearing is:

Which party is liable for the other party's legal expenses in respect of the Arbitration?

Result:

The Applicant is entitled to his reasonable expenses for the Arbitration Hearing and preparation which are fixed in the amount of $55,000.00 inclusive of disbursements and taxes.

EVIDENCE AND ANALYSIS:

Background

This Expense Hearing arises as a result of the arbitration for this matter which took place on June 20-28, and July 18, 2017. At the outset of the Hearing the Insurer raised a preliminary issue which resulted in the exclusion of the surveillance evidence it wished to enter into evidence.

The Applicant was successful at the Hearing in that he was found to be catastrophically impaired, entitled to an Income Replacement Benefit, and to an Attendant Care Benefit. The Applicant submitted a Bill of Costs of $95,580.97 inclusive of disbursements and taxes. The Insurer raised concerns that the Applicant's costs are excessive for this eight-day Hearing. The parties are unable to resolve this matter between themselves.

The results of the Hearing were as follows:

Mr. Mitchell sustained a catastrophic impairment as a result of the May 17, 2013 accident.
Mr. Mitchell is entitled to Income Replacement Benefits in the amount of $400.00 per week as a result of the May 17, 2013 accident, commencing from October 2, 2015 to date and ongoing.
Mr. Mitchell is entitled to receive Attendant Care Benefits commencing from the release of this award, and a new Form 1 shall be submitted by the Applicant to the Insurer no later than 30 days from this award's release, or as soon as it can be reasonably arranged.
Commonwell is not liable to pay a special award.
Mr. Mitchell is entitled to interest for any overdue amounts, in accordance with the Schedule with respect to Income Replacement Benefits, only.

Arguments

The Applicant argues, in part, that he is entitled to all of his legal expenses, on a full indemnity basis, in the amount of $95,580.97 as he argues that they qualify for same under the Expense Regulation 664, Section 12(2), which reads, in part, as follows:

(2) An arbitrator shall, under subsection 282 (11) of the Insurance Act (now repealed), consider only the following 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 subsection (3).

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.

The Applicant argues that his Bill of Costs breakdown is as follows: $64,435.00 for legal fees, $20, 201.70 for disbursements and $10,944.27 for taxes.

In regards to full indemnity, the Applicant relies upon Waldock and State Farm² ("Waldock"). Further, the Applicant relies on the appeal decision on the same case, State Farm Mutual Automobile Insurance Company and Waldock,³ which the Applicant argues upholds the notion that all expenses of the Applicant were to be payable within the Dispute Resolution Practice Code's⁴ (the "Code"'s) maximums, including legal fees in accordance with the maximum hourly rate of $150.00 per hour as prescribed by Rule 78 of the Code.

The parties agree that the applicable hourly rates for the parties' legal teams fall within the Legal Aid Services Act, 1998,⁵ and that when an adjudicator is satisfied that a higher amount for legal fees to an insured person is justified, an amount of up to $150.00 per hour maybe awarded to an insured person's counsel. As such the $109.13 per hour is the base hourly rate for a lawyer, which may be increased by 12% with four years' worth of litigation experience or up to another 25% with 10 years' experience. Law clerks and articling students are to be compensated at an hourly rate of $32.36 and $64.73, respectfully.

I note there is not a rate for paralegals listed in the regulation. To this point the Applicant argues that the paralegal working on this case should be paid at a rate of $150.00, as he is experienced in arbitrations in his own right.

The Applicant argues that he won every single substantive issue in the Hearing and as a result of the award did better than his settlement offer to the Insurer. In regards to the offers of settlement, the Applicant argues the Insurer did not present a particularized offer in respect to the issues in dispute that would be in compliance with Rule 76 of the Code, thus the Insurer never made an offer that would have prevented the Hearing. This fact should be taken into consideration when awarding expenses.

In regards to the novelty of the Glasgow Coma Score ("GCS") issue, the Applicant argues that there were no novel issues within the Hearing, as Insurer's counsel's own precedents were referred to within the Hearing.

In regards to the Insurer's conduct during the Hearing, the Applicant argues that serving surveillance hours prior to the commencement of the Hearing only served to prolong the Hearing, consuming most of the first day of the Hearing. Other actions Applicant's counsel found to be wasteful were Insurer's counsel reading some 60 pages of reports to her expert witnesses, accusing an expert for the Applicant of bias, in a way that threatened to bring the legal profession into disrepute, and berating the Applicant for almost eight hours on cross-examination about his life of substance abuse prior to the accident.

The Applicant points out that he complied with all section 44 requests of the Insurer.

The Insurer argues that the test for legal expenses is reasonableness and a line-by-line analysis of dockets is inappropriate, rather a global assessment of reasonable expenses based on a ratio of hearing to attendance time should be used by applying the Commission's usual ratios of 1:1 to 1:4.

The Insurer argues that the Applicant has listed his expert witness reports within his disbursements. As such, paying an expert witness for his expert report by way of disbursements would be double dipping, if the Insurer has already paid the maximum under the Schedule. The Insurer argues these disbursements should be removed from the Applicant's Bill of Costs. Further the expenses of an expert witness must be capped at $200.00 per hour to a maximum of $1,600.00 per day, plus a further $500.00 per day for preparation for the Hearing as per the Schedule, therefore corrections in the disbursements must be made accordingly. The Insurer relies, in part, on State Farm Mutual Insurance Company and Waldock,⁶ and Du v. Security National Insurance Co.⁷ to support its position.

In regards to mitigating factors to be considered the Insurer argues it won on the issue of Attendant Care Benefits and the special award and as such the Applicant's expenses should be reduced. Further, the Insurer argues that because the outcome has been split the Insurer should realize a 30-40 percent reduction in the Applicant's expenses after allowing for the corrections for the noted over charges above. The Insurer relies upon Keck v. Sovereign General Insurance Co.⁸ for these requested reductions.

The Insurer argues that I should also discount the paralegal's fees (Mr. Klein) within the Bill of Costs, or in the alternative adjust his hourly rate to that of a law clerk, or $32.36 per hour, as he (from the Insurer's perspective) did not give any discernable support to the primary lawyer. The Insurer relies on case law such as Yogesvaran v. State Farm Mutual Automobile Insurance Co.⁹ to support its position in this regard.

Further the Insurer argues that the fees for an articling student and a student should be also be disallowed as their combined total of 0.9 hours contributes nothing to the case.

The Insurer denies that any of its actions were wasteful, inappropriate, or obstructive.

The Insurer argues that the GCS issue was novel in that no other Insurer had brought a case where it was alleged that the Applicant had a GCS score of 9 or less prior to the accident.

In reply the Applicant argues that the Insurer erred when it argued that the outcome of the substantive issues was split. The Applicant argues that entitlement to Attendant Care Benefits was substantiated in the award, and thus the substantive part of the issue was won by the Applicant. Further, the Applicant argues that the special award is not a substantive issue and was only contemplated and argued for less than 30 minutes at the final stages of the Hearing. The Applicant relies upon the Ontario Court of Appeal's decision of Cobb v. Long Estate,¹⁰ at paragraph 84, which paraphrases and supports the Supreme Court of Canada's decision in R. v. Dineley,¹¹ at paragraph 10 and 11: "the key task lies not in labelling the provisions "procedural" or "substantive", but in discerning whether they affect substantive rights". Further the Applicant relies on other precedent Commission cases which continue to separate the issue of a special award from substantive issues of entitlement to specified benefits. These cases include T.N. and Personal Insurance Company of Canada,¹² and Baker and ING Insurance Company of Canada.¹³ Therefore the Applicant argues that as the success of the arbitration was not divided, no discounting of the Applicant's claimed expenses should be applied.

In regards to the offer of settlement the Applicant maintains that his is the only offer to settle that could have been accepted by the parties that would have prevented the necessity of the Hearing, and as such I should give added weight when considering expenses.

In regards to Mr. Klein's expenses, the Applicant argues that his expenses are warranted as he prepared witnesses and documents for the Hearing along with other duties before and after the Hearing. As such the Applicant argues that his expertise was necessary and required. I also take arbitral notice that Mr. Klein is a skilled advocate in his own right as he has argued for claimants previously in front of me, while working at another firm, as cited by Applicant's counsel.

The Applicant argues that the line-by-line analysis of the Applicant's expenses that the Insurer is arguing for goes against its original position of a global assessment which in turn goes against previous case law in Mujku and State Farm Mutual Automobile Insurance Co.¹⁴ and Chernet and RBC General Insurance Co.¹⁵ ("Chernet"). Further, the Applicant argues that the dockets submitted by the Applicant underrepresent the actual time spent by counsel in this matter and should be awarded in accordance with the full indemnity principle.

Finally the Applicant argues that a ratio of 3:1 as awarded in Chernet should be rejected because this case is distinguishable from that case, in that Applicant's counsel was found to have "unnecessarily prolonged" the Hearing, which is not the case in this proceeding.

Decision

I agree with the parties that in fixing the quantum of arbitration expenses for legal fees that a line-by-line analysis is inappropriate and a global assessment of reasonable expenses based on a ratio of one to four hours of preparation to each hour of Hearing attendance time provides the best framework for the estimation of the expenses.

I agree with the Insurer in regards to its disbursements arguments, and the double dipping of expert witness report expenses, and also agree that the maximums under the Code are the limits to which I may award same.

In regards to the substantive issues, I agree with the Applicant in that he was successful on all substantive issues within the Hearing. For the reasons stated by the Applicant I agree that the Courts and this Commission have separated the substantive entitlement to specified benefits from those of a special award. Attendant Care Benefits was an issue of entitlement only, which was won by the fact that the Applicant was found to be catastrophically impaired. The Applicant conceded that there were no incurred Attendant Care expenses post-104 weeks of the accident. The Applicant was completely successful.

In regards to the principle of full indemnity, I agree with the Applicant that the approach taken in Waldock is correct as it has withstood the test of multiple appeals, and remains indicative of the proposition that full indemnity for all expenses including legal fees (to the maximum rate of $150.00 per hour under Rule 78 of the Code) is correct.

In regards to Mr. Klein's legal expenses being claimed, I remain unconvinced that $150.00 per hour is the applicable rate for a paralegal, as experienced as he is. I believe in the principle that a person should be paid for work being performed. I note that as a paralegal he could not be recognized before the Commission on behalf of the Applicant as this was a catastrophic impairment case. I also believe in pay equity for services provided and, given his experience over that of a law clerk, I find that Mr. Klein's hourly rate is more equivalent to that of an articling student or $64.73 per hour.

In regards to the actions of Insurer's counsel during the Hearing, as well as the Applicant's settlement offer presented to the Insurer, and arguments of the novelty of the GCS issue, these have all been considered and given the appropriate weight in my global approach decision. I note that during the cross-examination of the Applicant, I eventually warned Insurer's counsel about the language and tone she used while referring to the Applicant or when framing a question to the Applicant. I also note counsel quickly complied with my one and only request.

Having considered the applicable criteria in the Code, the written submissions of the parties, and the Bills of Costs from the Applicant, I find that the Applicant is entitled to his reasonable expenses for the Arbitration Hearing and preparation, which are fixed in the amount of $55,000.00 inclusive of disbursements and taxes.

February 28, 2018

Charles Matheson Arbitrator

Financial Services Commission of Ontario