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Practice
& Procedure at FSCO
Mediations
& Arbitrations
By
Brian C. Atherton
Atherton Barristers
Mediation
Checklist
Preliminary Considerations
- On
receiving an assignment, review the file for background and basis
for termination of benefits or basis of dispute.
- Is the case appropriate for counsel?
- What
is expected of counsel (i.e. settlement or preparation for anticipated
arbitration/litigation)?
Conduct of Mediation
- Confirm
with Financial Services Commission of Ontario (FSCO) that counsel
has authority to bind company.
- Recent
practice at FSCO re: settlement authority can be found in Maplex
v. Barnes:
- Mediator
questioning monetary amount of authority.
- Mandate
of mediators to settle as many issues in dispute as possible.
- Privileged
nature of discussion and additional issues joined to mediation.
- Using
mediation as a form of discovery (if permitted by insured and/or
counsel).
- Procedural
agreements to obtain additional documentation at an early stage.
Mediator's Report
- Forms
basis of pleadings in an Application for Arbitration.
- Must
review Mediator's Report carefully to ensure it accurately reflects
discussions and agreements reached at mediation.
- Must
ensure no additional or new issues have crept in, unless by agreement.
- If
company participated in the mediation, review the Mediator's Report
with the company to ensure it reflects the discussions, agreements,
etc.
Checklist
for Applications
for Arbitration
Preliminary Considerations
- Vitally
important that documents or information to be used in defending the
Application for Arbitration are obtained as early as possible.
- Pitfalls with improper termination leading to unnecessary arbitration. Examples:
- Relying on hearsay evidence (i.e., termination of benefits by L.T.D. carrier).
- 'Weak'
investigation and surveillance.
- Refusal to acknowledge or rely upon independent medical examinations.
- Little or no follow-up on issues relating to loss of income and supporting documentation.
- Are issues and applications the same as those that form the basis of the dispute?
- Has
the company responded in a timely fashion to the application?
- The
foregoing pitfalls must all be considered prior to preparing response.
- All can lead to special damage awards.
- See
Trends below.
Checklist
for Responding to an Application for Arbitration
- Also
forms the basis of pleadings (i.e. first impression of issues).
- Apparently,
hearsay and evidence is permitted in application re: new policy considerations
at FSCO.
- Confirm
with client new issues to be added.
- Steps
to be taken if new issue to be added (i.e. contact other parry and
seek consent).
Key Decisions
- Kotsiokos
v.
State Farm; Resugno v. State Farm
- Both
decisions hold that it is within an arbitrator's discretion to add
new issues, but only if they pertain to the "matters in dispute"
(which is subject to interpretation).
- Kotsiokos:
Insured application based on quantum. At arbitration, insurer sought
to add question of overpayment based on argument that it should have
terminated benefits earlier. Issue of length of entitlement. Arbitrator
agreed he had power to add this issue but only if the new issue was
a "matter in dispute." He held that the issue was quantum
only and that overpayment was a separate issue. He refused to add
the new issue.
- Resugno: Similar findings.
Pre-Hearing Checklist
Pre-hearing arbitrator is mandated to attempt the following (Section 17 of Code):
- Identify and obtain agreement as to issues for arbitration.
- Obtain agreement as to facts.
- Ensure exchange of all relevant documents.
- Resolve preliminary objections and procedural problems.
- Encourage settlement discussions.
- Deal with any other matters which may arise.
Note:
new authority to make interim order for expenses and other orders as
seem appropriate pursuant to Section 279 (4.1) and (11.1).
Key Decisions
- Bernicky
v.
Guardian Insurance; DeCicco v. State Farm Mutual Automobile
Insurance Company
- Bernicky:
- Rule
18.2(A): Arbitrator
cannot permit in evidence at a hearing anything that will be inadmissible
by reason of privilege under the law of evidence.
- Arguments re: medical examinations after mediation and before arbitration and whether privileged.
- Privilege
appears to attach to surveillance as practice of FSCO not to order
production or any surveillance "other than insurer intends to
rely upon.”
- Additional
interest re: right to an Independent Medical Examination after mediation.
- Discussion re: Maplex v. Bartholomew
- Whether
a right exists for IME after termination of benefits.
- Remjeet v. State Farm says yes.
- Counsel for insured still refuses.
- Question: What is proper forum?
- Section 20 of Insurance Act gives exclusive jurisdiction to Directors and Arbitrators to determine all questions of fact and law that were in a proceeding.
- Have requested motion/hearing with Director.
- Relief
to Order IME questionable, but at least can control own process (i.e.
refuse to let arbitrations proceed until attend IME)
- Awaiting word from Director.
- Emphasize importance of productions from insured and wide ranging nature of same.
- Case really starts to develop with these productions.
Conduct
of Arbitration Checklist
- Common sense is guiding principle.
- Emphasize distinction between arbitrators and judges.
- Approach arbitrators as though they are part jury and part judge.
- Note
background of arbitrators (i.e. WSIAT or Human Rights Commission).
- No
stare decisis as between arbitrators' decisions and therefore
more flexibility to "do the right thing" in each individual
case.
- Emphasize
distinction in arbitration at FSCO (i.e. First Party Claimant v. Third
Party Claimant in tort setting).
- Case can be built on credibility but is much more successful on a common sense interpretation of the facts, in conjunction with the statute.
- Theory
of case and method in which it is presented should keep all of the
foregoing in mind.
- As
all applications are judged on a "case by case" basis, there
are no fixed rules re: when to call witness or file reports.
- Note power of arbitrator to make special award of own volition Section 32(10) of Act.
-
See Bernicky re: payment of medical reports during conduct
of arbitration.
- Let
certain decisions work for you (e.g. onus on proving income of the
insured).
- Note
amendment to Act, Section 282 (11.2)- the arbitrator can make an award
against insured person to the amount of filing fees (now $2,000).
- See
Ferreira v. Royal Insurance Company re: use of this
provision (case decided on withdrawal of application at arbitration
which is considered to be an abuse of the process)
Decisions & Appeals Checklist
- It
usually takes 6 to 12 months for a decision to be released
- If
appealed, can take 4 to 6 months to actually have hearing and another
6 months or more for a decision on appeal.
- Recent
rumour re: no oral hearing except in extraordinary cases.
- Vo
Decision
on stare decisis yet to be released, but it remains an important
consideration for all future
arbitrations.
Trends (Recent Cases)
Special Awards
- Ericson
v.
Guarantee Insurance Company re: setting out guidelines for
special award based on "unreasonable conduct of insurer"
- Befer
v.
Alpine Insurance Company re: use of surveillance with no supporting
medicals in face of medicals in favour of insured; when got information
requested and confirmed disability did not reinstate benefits.
- Note Supplemental Decision re: no compound interest on special damage award.
- Dugas
v.
Wellington Insurance Company: Failed to respond "appropriately"
to medical reports confirming disability. Independent inquiry once
prima facie claim established.
- Whitney
v.
Co-operators Insurance Company: No authority to make special
award unless insured entitled to damages.
- Rustico
v.
Royal Insurance Company: No explanation for delay in providing
benefits.
- Phillipe
v. Royal Insurance Company: Didn't accept IME re: evidence
of disability. Held back benefits until went to another IME
- Hounsell
v.
Zurich Insurance Company: Same re: hold until IME; Also, arbitrator
rejected mitigation argument.
- Cristofoli
v.
Zurich Insurance Company: No medical evidence to support argument
capable of work-related activity.
Spousal Status
- McGuire
v.
Zurich Insurance Company: Must be spouse on the date of loss.
More applicable to common law spouses.
Mitigation Of Damages
- Hounsell
v.
Zurich; Cristofoli v. Zurich Insurance Company: Cases
seem to suggest that mitigation of damages is a concept which can
apply to FSCO decisions, but proper case for same has not yet appeared
before it. Earlier decisions suggest must be able to demonstrate that
act or event not undertaken by insured, on objective basis would have
had desired result. May be too high an onus to meet, but not necessarily
impossible
Ceasing Expenses
- Meandro
v.
Pilot Insurance Company; Phillipe v. Royal Insurance Company:
Cases suggest ceasing expenses are deducted from post accident income
as part of normal expenses. However "every case must be decided
on own facts." Foregoing appears to be underlying philosophy
of FSCO which ties in with concept of "doing the right thing"
and judging insured's conduct by what is "reasonable." Vastly
different approach compared to Third Party Claims. If insurers are
to be successful, it will call for a new approach in claims handling
and refocusing of counsel's skills as an advocate.
For
more information on how we can assist you, please contact us at Atherton
Barristers at 416.365.1030 or Toll Free at 866.237.1030
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