Financial Services Commission of Ontario

Commission des services financiers de l’Ontario

Neutral Citation: 2018 ONFSCDRS 97

Appeal P17-00088

OFFICE OF THE DIRECTOR OF ARBITRATIONS

THERESA HARDI-FRAIL Appellant

and

TD HOME AND AUTO INSURANCE COMPANY Respondent

BEFORE: Delegate Jeffrey Rogers

REPRESENTATIVES: Ms. Samia Alam, solicitor for Ms. Hardi-Frail Mr. Daniel Himelfarb, solicitor for TD

HEARING DATE: Heard by written submissions, completed on April 12, 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:

This appeal is dismissed.
If the parties are unable to agree about expenses of this appeal, an expense hearing may be arranged in accordance with Rule 79 of the Dispute Resolution Practice Code.

May 3, 2018

Jeffrey Rogers Director’s Delegate

Date

REASONS FOR DECISION

I. NATURE OF THE APPEAL

Ms. Hardi-Frail appeals the Arbitrator’s order of November 17, 2017. She submits that the Arbitrator erred when he ordered her to pay TD its arbitration expenses of $10,244.44. The Arbitrator found that TD was entirely successful and that Ms. Hardi-Frail’s counsel unduly prolonged the proceeding. Ms. Hardi-Frail submits that the Arbitrator erred in finding that her withdrawal of her application meant that TD was successful, and in concluding that counsel unduly prolonged the proceeding. She submits that the Arbitrator misinterpreted or improperly applied the criteria of the Expense Regulation, and that the Arbitrator failed to consider the proportionality principle.

For the reasons that follow, I reject these submissions. I find that the Arbitrator correctly ruled that TD was entirely successful and the Arbitrator was entitled to conclude that the conduct of Ms. Hardi-Frail’s counsel unduly prolonged the proceeding. Those rulings by the Arbitrator support his award of expenses to TD, and the amount he awarded is reasonable.

II. BACKGROUND

Ms. Hardi-Frail was injured in an automobile accident on October 27, 2006 and she claimed accident benefits from TD. In February 2012, she applied for arbitration after mediation did not resolve disputes about her entitlement to some of the benefits she claimed. In the arbitration, she claimed entitlement to income replacement benefits (IRBs) of $400 per week, from February 1, 2010 and ongoing, the cost of four examinations totaling $5,243.21, plus interest and expenses. TD disputed entitlement to all benefits and claimed its expenses. TD also alleged that the IRB claim was time-barred. A preliminary issue hearing was scheduled on this issue. This hearing was adjourned on consent and then re-scheduled. TD withdrew this defence shortly before the preliminary issue hearing was to take place.

A hearing on the substantive issues was then scheduled for May, 2015. TD purported to revive the limitation defence about a week before the hearing. The parties then entered into settlement discussions where they discussed withdrawal of Ms. Hardi-Frail’s application. The Commission cancelled the hearing upon receipt of correspondence from counsel for Ms. Hardi-Frail indicating that she intended to withdraw all issues, but the parties could not agree on expenses. Counsel sought to make written submissions on this issue.

A dispute then arose about whether Ms. Hardi-Frail intended to withdraw all issues or just some of them. This dispute was resolved by Arbitrator Alves, after receiving written submissions. In a decision dated June 23, 2016, Arbitrator Alves ruled that Ms. Hardi-Frail only withdrew her claim for IRBs and one examination. She did not withdraw her claim for the remaining examinations, totaling $4,843.21, plus interest and expenses. Arbitrator Alves declined TD’s request for an order for expenses, preferring to leave the issue to the hearing Arbitrator. One reason Arbitrator Alves gave for deferring the issue of expenses was Ms. Hardi-Frail’s advice that she intended to add issues to the arbitration. Arbitrator Alves instructed the parties to contact the Case Administrator about adding issues and about scheduling a hearing. Ms. Hardi-Frail did not add any issues. In June, 2017 Ms. Hardi-Frail withdrew the remaining issues.

The parties still could not agree on expenses. Arbitrator Snider’s decision on that issue is the subject of this appeal. Arbitrator Snider ruled that “the ultimate withdrawal of all issues amounts to a completely successful defence of the claims made by the Applicant in this arbitration¹.” He ruled that Ms. Hardi-Frail’s submission that TD should not be entitled to its expenses because the entire arbitration was ultimately withdrawn was “completely without merit²”. He found that counsel for Ms. Hardi-Frail unduly prolonged the proceeding. He noted the lengthy procedural history, with at least twelve procedural steps scheduled. He noted the failure of Ms. Hardi-Frail’s counsel to respond to correspondence, particularly between the date of Arbitrator Alves’ order, and when the application was finally withdrawn. He stated:

I saw no evidence that the Applicant’s counsel did actually respond to the many pieces of correspondence sent by the Insurer’s counsel for about a year between the June 23, 2016 date of Arbitrator Alves letter order and the final withdrawal date of June 26, 2017. As a consequence, the entire matter was unduly delayed by the actions of the Applicant’s counsel³.

II. ANALYSIS

Section 282(11) of the Insurance Act gives arbitrators jurisdiction to award expenses “according to criteria prescribed by the regulations.” The Arbitrator was required to apply the Expense Regulation⁴ in making his decision. It states:

An arbitrator shall, under subsection 282 (11) of the Act, 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.
Whether the insured person refused or failed to submit to an examination as required under section 42 of Ontario Regulation 403/96 (Statutory Accident Benefits Schedule — Accidents on or after November 1, 1996) made under the Act or refused or failed provide any material required to be provided by subsection 42 (10) of that regulation.
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.

The Expense Regulation has gone through major changes since initially conceived. However, it has remained largely unchanged since Director Draper summarized its history in his decision in Pembridge Insurance Company and Howden.⁵ As Director Draper noted, the important milestones in the evolution of the Regulation are as follows:

Originally, expenses could only be awarded to insured persons, not insurers. Under this legislation, arbitrators and appeal adjudicators typically awarded expenses to the insured person, win or lose, as long as the claim was legitimate and the proceedings were conducted in a reasonable manner.
This changed in November 1996. Subsection 282(11) of the Insurance Act was amended to allow expenses to be awarded to either the insured person or the insurer. In addition, a list of criteria was added to the regulations. The adjudicator was to award expenses “having regard to” these criteria. The new expense provisions signalled a change. Although most of the criteria had been discussed in earlier decisions, the analysis was affected by the fact that only one party could be awarded its expenses. Arbitrators now had an obligation to consider the legislated criteria, including the result, applying them to both parties. However the criteria do not reflect a move to the kind of results-based approach used by the courts. Success is only one criterion in an open-ended list and, therefore, must be weighed against the other relevant considerations. The criteria, specifically clause 6, leave room for concerns about the access to the dispute resolution system. One aspect of accessibility is that insured persons should have a reasonable opportunity to raise novel issues of interpretation, particularly those of general importance.
The new criteria, introduced on October 1, 2003, continue the move toward a more results-based approach to expenses. The list of criteria have been changed to some extent, but more significantly, the criteria are now the only factors that can be considered and there is no longer a broad, “any other matter” criterion.

I view Ms. Hardi-Frail’s submissions in this appeal as an invitation to ignore the limits on discretion imposed by the current Regulation and to apply the Regulation as it was before 1996. In paragraph 37 of her written submissions, she states:

It can be gleaned from these cases that expense awards under s.282(11) of the Insurance Act were designed to reimburse insured persons with legitimate claims, whether they were successful or not. Expenses are generally disallowed where applications for arbitration are manifestly frivolous or vexatious.

She relies on a line of cases endorsed in the appeal decision in Allison and Markel Insurance Company of Canada⁶ to support of her position. But Allison is irrelevant because it was decided when expenses could only be awarded against an insured person upon finding that the arbitration was frivolous, vexatious or an abuse of process.

Delegate Makepeace dealt with similar submissions to Ms. Hardi-Frail’s in Truong and Lumbermans Mutual Casualty Company,⁷ which was decided shortly after Howden, but the applicable Regulation still allowed consideration of “any other matter”. The Arbitrator awarded Lumbermans its expenses, based upon its success. Mr. Truong appealed. He argued that he should be entitled to his arbitration expensed because, although he was unsuccessful, his claims had merit. Delegate Makepeace rejected this argument. She stated:

I find that consideration of the reasons for the outcome is inherent in both versions of the regulation and does not rely on the “any other matter” criterion.

Though the Arbitrator’s expenses order undoubtedly creates a hardship for Mr. Truong, I am not persuaded there is any reason to interfere with it. I do not think it would have made a difference if the Arbitrator had considered the “any other matter” criterion because his order was consistent with his thorough rejection of Mr. Truong’s claims⁸.

Regarding the purpose of the Regulation, she stated:

The expenses provisions are intended to discourage unmeritorious cases and ensure that meritorious cases are heard.

Delegate Makepeace’s comments apply with greater force to the current Regulation because an arbitrator’s discretion has been further restricted by removal of the “any other matter” criterion.

Applying the current Regulation, the Arbitrator correctly found that success, and counsel’s conduct that tended to prolong the proceeding were the only relevant criteria. Since the Regulation dictates that the listed criteria are the only ones to be considered, the Arbitrator was not required to consider Ms. Hardi-Frail’s economic circumstances, as she submits. Ms. Hardi-Frail’s withdrawal of all of her claims, with no concessions from TD, can only be seen as complete success for TD. Even if Ms. Hardi-Fail’s good faith in commencing the arbitration were a relevant consideration, that does not lead to a one-sided analysis. There is no suggestion that TD did not defend in good faith. Therefore, TD’s success in the outcome would still tilt entitlement to expenses in its favour.

The Arbitrator’s finding that counsel unduly prolonged the proceeding is a finding of fact. There was evidence before the Arbitrator to support that finding. He referred specifically to counsel’s failure to respond to correspondence and the long procedural history. The Arbitrator’s finding attracts deference.

I reject Ms. Hardi-Frail’s submission that reasonableness is an overriding consideration in determining entitlement to expenses. This principle is an overriding consideration in determining quantum, and not entitlement. The Arbitrator correctly applied it in deciding quantum. He noted the lengthy procedural history and he found that TD “meticulously followed the requirements and limitations on hourly fee rates⁹”. He was not required to engage in a line-by-line analysis.

I will not review in detail the various decisions in which Ms. Hardi-Frail submits arbitrators have taken a different approach to expenses in similar circumstances. Suffice it to say that no appeal decision has endorsed a departure from the results based analysis that the current Regulation dictates.

I reject Ms. Hardi-Frail’s submission that a different result flows from the fact that her claims are grounded in consumer protection legislation. This fact does not dictate results that always favour the consumer. It only requires a broad interpretation in favour of the consumer where the legislation allows it. The result that Ms. Hardi-Frail proposes is not based upon interpretation. Rather, it proposes to ignore the clear language of the Regulation and the fact that TD was entirely successful. This argument has been repeatedly raised and rejected. In Borissenko and RBC General Insurance Company,¹⁰ Arbitrator Feldman wrote:

As I have already indicated, however, I do not agree with the proposition that the consumer protection nature of the Insurance Act permits me to ignore the clear and unambiguous wording of the only criteria that I am permitted by regulation to consider. For this same reason, I do not accept the submission that “imbalance of power” is a factor to be considered. The Expense Regulation specifically states that the listed criteria are the only ones to be considered. It specifically requires consideration of “[E]ach party’s degree of success”, not just that of the Applicant. As stated by Arbitrator Rogers recently in Waheed and RBC General Insurance Company [FSCO A06-000761 and A06-000856, February 28, 2008] “‘Imbalance of power’ cannot be imported to negate recognition of the Insurer’s degree of success.”¹¹

I reject Ms. Hardi-Frail’s submission that the decision by the Legislature to move jurisdiction over accident benefits disputes to the Licence Appeal Tribunal is a relevant consideration. Although the new Tribunal is required to take a different approach to expenses, the Legislature made no changes to the legislation governing these decisions at the Commission.

I reject Ms. Hardi-Frail’s submission that the Arbitrator should have taken into account the possibility that some of the time counsel for TD expended in defending her claims at the Commission could be applied to defending a claim she intended to bring at the Licence Appeal Tribunal. I fail to see how the Arbitrator could have peered into the future and determine what work, if any, will be duplicated in an application that Ms. Hardi-Frail might or might not bring.

I reject Ms. Hardi-Frail’s submission that the application of the proportionality principle leads to a different result. That principle is simply one element of the principle of reasonableness. It required the Arbitrator to consider the nature of the proceeding in fixing the award of expenses. Ms. Hardi-Frail’s claim was not a small one. Her IRB claim potentially involved hundreds of thousands of dollars. There is no basis for discounting the amount awarded because of the nature of the proceeding.

Finally, I reject Mr. Hardi-Frail’s submission that Arbitrator Alves made findings that dictated a different result. Arbitrator Alves declined to make an award of expenses when the matter was before her. She could not fetter the discretion of the arbitrator who would finally decide the issue. Although her decision suggests that her view of the procedural history might have differed from Arbitrator Snider’s, it was up to Arbitrator Snider to find the facts and to decide which of the mandated criteria were relevant.

As noted above, I see no basis for interfering with Arbitrator’s decision. This appeal is therefore dismissed.

IV. EXPENSES

If the parties are unable to agree about expenses of this appeal, an expense hearing may be arranged in accordance with Rule 79 of the Dispute Resolution Practice Code.