Page 1 Indexed as: Pelzner v. Coseco Insurance Co. Between: Bozena Pelzner and Peter Pelzner, applicant, and Coseco Insurance Co./HB Group/Direct Protect, insurer [2000] O.F.S.C.I.D. No. 81 File No. FSCO A99-000860 Ontario Financial Services Commission D.J. Evans, Arbitrator Heard: March 16, 2000 Decision: May 5, 2000 (37 paras.) Appearances: Roland Spiegel, for Mr. and Ms. Pelzner. Theodore P. Charney, for Coseco Insurance Co./HB Group/Direct Protect. Issues: DECISION ON A PRELIMINARY ISSUE 1 The Applicants, Bozena Pelzner and Peter Pelzner, were injured in a motor vehicle accident on June 13, 1998. They applied for statutory accident benefits from Coseco Insurance Co./HB Group/Direct Protect ("Coseco"), allegedly payable under the Schedule 1 for the costs of examinations at DEAHY Medical Assessments Inc. The parties were unable to resolve their disputes through mediation, and the Applicants applied for arbitration at the Financial Services Commission of Ontario under the Insurance Act, R.S.O. 1990, c. I.8, as amended (the Act). A hearing on the merits is scheduled to start for the week of June 5, 2000.
Page 2 2 By way of this preliminary issue hearing, Coseco seeks an order removing Mr. Roland Spiegel as representative of the Applicants in this proceeding. Ms. Pelzner was present at the beginning of the preliminary motion hearing but was excused and allowed to leave, and only Mr. Spiegel testified. 3 The preliminary issue is: Result: 4 EVIDENCE AND ANALYSIS: 1. Is Mr. Roland Spiegel, representative of Peter and Bozena Pelzner, acting in contravention of sections 397 and 398 of the Insurance Act, R.S.O. 1990, c. I.8? 1. Whether or not Mr. Spiegel is acting in contravention of sections 397 and 398 of the Insurance Act is irrelevant in light of the provisions of the Statutory Powers Procedure Act (SPPA). 2 Accordingly, Mr. Spiegel may continue to represent the Applicants. 5 Mr. Spiegel, the Pelzners' representative, testified that he is neither licensed as an insurance adjuster nor is he a lawyer; he is an agent. Mr. Charney, counsel for Coseco, seeks to overturn the long-standing practice that agents may represent insureds before this tribunal. 6 The rules governing dispute resolution at the Financial Services Commission of Ontario 3 are set out in the Dispute Resolution Practice Code (the Code). The current Code of April 15, 1997, was issued under the authority of section 21 of the Act and section 25.1 of the SPPA. 4 Section 10 of the SPPA thus governs the proceedings before this tribunal. The materials accompanying the Code note that a lawyer is not required in mediation, 5 applicants do not need a lawyer to negotiate a settlement,6 and a lawyer is not required for arbitration. 7 As for the Rules themselves, they do not generally draw a distinction between agents or counsel who represent parties. They do draw a distinction in the matter of expenses 8 and in the power to exclude incompetent representatives who are not lawyers. 9 7 Mr. Charney alleges that the Act requires Mr. Spiegel as the representative of applicants before this tribunal to be either a licensed adjuster, in the case of section 397 of the Act, or a lawyer (meaning a barrister or solicitor acting in the usual course of the practice of law), in the case of section 398. (These sections are discussed in more detail below.) 8 However, section 10 of the SPPA provides that a party to a proceeding may be represented by counsel or an agent. I find that any conflict between the SPPA and the Act should be resolved in
Page 3 favour of the SPPA. I rely in particular upon section 32 of the SPPA: 32. Unless it is expressly provided in any other Act that its provisions and regulations, rules or by-laws made under it apply despite anything in this Act, the provisions of this Act prevail over the provisions of such other Act and over regulations, rules or by-laws made under such other Act which conflict therewith. 9 Certain statutes do expressly override the SPPA. Thus, in the Social Work and Social Service Work Act, 1998, S.O. 1998, c. 31, section 53 reads as follows: "If there is a conflict between this Act, the regulations or the by-laws and the Statutory Powers Procedure Act, the provisions of this Act, the regulations and the by-laws prevail." 10 Since I can find nothing in the Act that expressly overrides section 10 of the SPPA, I find that section 32 of the SPPA provides a complete answer: namely, the provisions of the SPPA prevail over the provisions of the Act. Therefore, whether or not Mr. Spiegel is acting in contravention of sections 397 or 398 is irrelevant for the purposes of this proceeding, and accordingly he may continue to represent the Applicants. 11 For the purposes of appeal, I will set out Mr. Spiegel's testimony and, briefly, the arguments. 12 Considering the important issues at stake here, including access to justice, I note that the Director, on an appeal, may request persons who are not parties to make submissions on any issue of law arising in the appeal. 10 I am sure that the broader community, including other representatives who are neither licensed adjusters nor lawyers, would be interested in making their views known. The issues raised in this case have already been a matter of discussion, as noted in the following from the Bar Dispute Resolution Group Forum minutes of December 3, 1999 11 : One member suggested that she has a problem with paralegals who appear at PH's and do not have the skill or authority to deal with the case, only to find that a lawyer has been appointed two weeks before the Hearing. Counsel was referred to s. 393 12 of the Insurance Act. The Arbitrator does have residual jurisdiction to prohibit a specific paralegal in a specific case from acting, and has done so in the past. 13 Returning to Mr. Spiegel specifically, he testified that he carries no Errors and Omissions insurance, nor is his practice overseen by any statutory body. He did take some courses in ethics while he was a member of the Insurance Institute of Canada; membership required him to pay an annual fee and be involved in the courses. He is not a member now. I also note Arbitrator Sampliner's comments on Mr. Spiegel's conduct at the hearing in Grozdanovsky: 13 Mr. Grozdanovsky's representative used the first hour of the hearing arguing with Wawanesa that his client was not required to obtain the productions noted at in
Page 4 the prehearing letter, and that Universal personnel were not required to produce any of their records or appear pursuant to summons. Mr. Spiegel provided no explanation or legal precedent for characterizing all of Wawanesa's requests as irrelevant. He denied receiving the prehearing letter, although admitting his address was correctly printed. Further, he denied undertaking to obtain the material at the prehearing... Mr. Spiegel's submissions on Mr. Grozdanovsky's behalf are spurious... I find that, through his representative, Mr. Grozdanovsky prolonged the hearing by arguing production matters that were unfounded and frivolous. 14 I also note that, at the pre-hearing in this matter, Mr. Spiegel asked for information regarding all of the accounts in the previous year that Coseco had paid for all its insureds' assessments, including a listing of the method of remuneration for each health care practitioner who assessed the insured, the exact amount paid to each health care practitioner for these assessments and any documentation relating thereto. The pre-hearing arbitrator characterized this request as a fishing expedition and refused it. Mr. Spiegel also indicated that at the hearing he will be calling as witnesses Coseco's adjuster, supervisor, claims manager, ombudsman and president. Section 397: Licences of Insurance Adjusters 15 Most of Mr. Spiegel's testimony related to section 397, 14 which sets out licencing procedures for adjusters. In particular, subsection 397(7) provides that a person who acts as an adjuster without such a licence is guilty of an offence. I heard no evidence that Mr. Spiegel has ever been charged under this provision. Surely the issue of his breach of these provisions would more properly be heard before the relevant Provincial Court. Of course, Mr. Spiegel could raise as a defence that the SPPA specifically allows him to represent applicants before this tribunal. Presumably, the higher burden of proof would also inure to Mr. Spiegel's benefit, unlike the burden of the balance of probabilities in this tribunal. 16 Be that as it may, the term "adjuster" is defined in section 1 of the Act: "adjuster" means a person who, (a) (b) on behalf of an insurer or an insured, for compensation, directly or indirectly solicits the right to negotiate the settlement of or investigate a loss or claim under a contract 15 or a fidelity, surety or guaranty bond issued by an insurer, or investigates, adjusts or settles any such loss or claim, or holds himself, herself or itself out as an adjuster, investigator, consultant or adviser with respect to the settlement of such losses or claims,
Page 5 but does not include, (c) (d) (e) (f) (g) a barrister or solicitor acting in the usual course of the practice of law, a trustee or agent of the property insured, a salaried employee of a licensed insurer while acting on behalf of such insurer in the adjustment of losses, a person who is employed as an appraiser, engineer or other expert solely for the purpose of giving expert advice or evidence, or a person who acts as an adjuster of marine losses only. 17 I find two things of immediate interest from the point of view of common understanding. First, the definition provides that a person can be an adjuster who acts on behalf of an insurer or an insured. 18 Second, salaried employees of licensed insurers while acting on behalf of their employer in adjusting losses (commonly called adjusters) are in fact excluded in paragraph (e) from the definition of "adjuster." Thus, agents of applicants, whom I have never heard called adjusters, may in fact be adjusters, and salaried insurance company "adjusters," so-called, may not be. 19 As I read the definition of adjuster in paragraph (a), the first question is whether Mr. Spiegel acts "on behalf of... an insured, for compensation." The definition then splits into two heads: first, directly or indirectly soliciting the right to negotiate the settlement of a claim under an insurance contract, or second, settling any such claim. Mr. Spiegel testified that he acts as a representative on behalf of insureds for compensation at mediation and arbitration. I find that he thus meets the first part of the test. However, Mr. Spiegel's position is that it is always the insured (or, more accurately, DEAHY Medical Assessments Inc.) that settles the claim, and accordingly he does not fit within the definition under either head. 20 Mr. Spiegel testified that he represents insureds at mediation and, after a matter fails at mediation, he will fill in the Application for Arbitration and represent them in the various stages of an arbitration, as he did in this case. Under the section "Applicant's Representative" on Ms. Pelzner's Application, he listed as his title "ADR Specialist." He defined this occupation as a person who facilitates dispute resolution. As an example, if clients asked him if they were entitled to treatment for an unresolved impairment, he would say yes. He would also give them his opinion for alternative treatments. He described his function as "facilitation" of communication during the process of settlement negotiations. When asked how that function differs from negotiation of a settlement, his answer was: "You tell me." 21 In the same part of Ms. Pelzner's Application, beside "Firm Name," Mr. Spiegel wrote "DEAHY Medical Assessments Inc." Mr. Spiegel testified that he is self-employed, and DEAHY hires him as an ADR specialist. DEAHY pays his remuneration, partly on an hourly basis and partly
Page 6 on a percentage basis, depending on the amount recovered. As part of the settlement negotiations in these circumstances, he is hired to deliver the amount that the service provider will accept for the services rendered. In this case, the facility provided the services and undertook the liability for payment while only asking the insured to participate in the process. As long as Ms. Pelzner cooperates in this proceeding, for instance, then DEAHY will bring no claim against her. This explains why Ms. Pelzner had so little interest in staying at the hearing, as the matter appears to be of little importance to her, as long as she fulfills her obligations to DEAHY. She was not present at the pre-hearing. Perhaps, since it is DEAHY that actually instructs Mr. Spiegel, a principal of DEAHY should have been present at the pre-hearing, for, as Mr. Spiegel puts it, his conduct of settlement negotiations consisted of receiving instructions and advising the opposing party about the amount that the service provider would accept for its services. Mr. Spiegel testified that he does not advise DEAHY, since they make the decision first and then hire him. He considers his role as "sort of a courier" who transmits the decision of his client to the other parties. 22 Mr. Spiegel testified that he prepares when he is appearing on behalf of an Applicant by meeting with the Applicant and the main representative, as a lawyer is usually involved. For example, Ms. Pelzner is also represented by a Mr. Daly, counsel, who oversees her accident benefits claims and handles the accounts. Mr. Spiegel does not have an office at Mr. Daly's, although a desk is available if needed. Mr. Spiegel sees Mr. Daly quite often, and Mr. Daly advises and directs him. (At the pre-hearing, Mr. Spiegel agreed to provide a copy of Mr. Daly's undertaking to protect DEAHY's accounts and copies of any letters Mr. Daly sent relating to the assessments performed at DEAHY.) Mr. Spiegel has taken matters through to a hearing. Decisions in which he was the representative have been issued since the preliminary issue hearing in this matter. 16 23 Turning to the first head under paragraph (a) of the definition, the question is whether Mr. Spiegel directly or indirectly solicits the right to negotiate the settlement of a claim. I find that he directly solicits from DEAHY (and thus at least indirectly from the insured) the right to represent the claims of the insured at mediations, pre-hearings and hearings. 24 The settlement of claims clearly plays a very large role at the Commission. Thus, all statements and offers to settle made during mediation, except those contained in the Report of Mediator, are made for the purpose of settlement. 17 One or more pre-hearing discussions may be held before an arbitrator who will attempt to resolve the dispute. 18 Similarly, preliminary conferences for the purposes of settlement may be held before an appeal or before an Application for Variation/Revocation. 19 The opinion given in neutral evaluation is for the purpose of settlement.20 Based on the number of applications mediated in 1996 to 1997 and the number of arbitration applications received, less than 20 per cent of mediations proceeded to arbitration. Of claims that continued on to arbitration, 84 per cent were settled prior to the hearing and only nine per cent actually required a hearing and decision. 21 As noted by Arbitrator Vanderbent, "it is clear that the general intent of the statutory accident benefit scheme is to encourage and support the parties' ability to negotiate a resolution of their disputes." 22
Page 7 25 Turning to the definition of "negotiate," The Canadian Oxford Dictionary (COD) gives two relevant meanings: "confer with others in order to reach a compromise or agreement," and "arrange or settle (a matter) or bring about (a result) by negotiating (negotiated a settlement; negotiate a loan)." Surely, the whole point of Mr. Spiegel's attendance at mediations and an important aspect of his attendance at pre-hearings is to confer with his clients and with the other parties in order to reach a compromise or agreement. (If it is not, then one wonders what point Mr. Spiegel's attendance would have.) I find that, notwithstanding Mr. Spiegel's protestations that he acts only as a "facilitator," he does solicit the right to negotiate the settlement of claims and therefore fits within the definition of "adjuster." 26 If I am wrong on this point, I will consider the second definition of "adjuster" set out in paragraph (b), namely, whether Mr. Spiegel is a person who holds himself out as an adjuster, investigator, consultant or adviser with respect to the settlement of claims under an insurance contract. 27 The words "consultant" or "adviser" are particularly broad in meaning. The COD's relevant definition of "consultant" reads: "a person who gives professional advice or services in a specialized field, esp. on a freelance basis." The definition of "advise," in turn, also means "giving advice," and "advice" includes among its meanings "words offered as an opinion or recommendation about future action; counsel." 28 As noted above, Mr. Spiegel describes himself on the Applications for Arbitration as an "ADR specialist." He filed a number of certificates, such as a Certificate in Dispute Resolution from York University, a certificate that he attended a 5-day intensive mediation workshop at Osgoode Hall Law School in June 1998, a certificate from Seneca College for a 72-hour program of study in alternative dispute resolution, and another from Seneca in rehabilitation counselling. He testified that the latter included a portion relating to insurance courses and that he took all the Insurance Institute of Canada program courses related to statutory accident benefits, although he only audited some of the courses and so did not receive a certificate. On the resume he filed, Mr. Spiegel includes these headings under EXPERTISE: - Personal Injury / Disability / Accident Benefits / Bodily Injury Claims examiner (Analyst) - Alternative Dispute Resolution (ADR), Conflict Management, Conciliation / Negotiation / Mediation / Arbitration (Insurance Disputes Resolution...) - Rehabilitation Case Management and Counselling, Disability and Accident Benefits Claims Analyst / Counsellor/ Facilitator/ Coordinator 29 Thus, in his own resume, Mr. Spiegel lists himself as a "counsellor" with respect to accident benefits claims, and the definition of "counsellor" in the COD includes among its meanings "a person who gives counsel; an adviser." In light of his also listing "negotiation" as an expertise, and looking at the resume as a whole, I find that Mr. Spiegel holds himself out as an adviser with
Page 8 respect to the settlement of accident benefits claims and thus fits within the definition of adjuster as set out in paragraph (b). 30 Notwithstanding, I have set out above that where a conflict exists between the Insurance Act and the SPPA, the SPPA prevails. Section 398: Prohibition against Public Adjusters of Motor Accident Claims 31 Section 398 reads as follows: (1) Subject to subsection (2), no person shall, on the person's own behalf or on behalf of another person, directly or indirectly, (a) (b) solicit the right to negotiate, or negotiate or attempt to negotiate, for compensation, the settlement of a claim for loss or damage arising out of a motor vehicle accident resulting from bodily injury to or death of any person or damage to property on behalf of a claimant, or hold himself, herself or itself out as an adjuster, investigator, consultant or otherwise as an adviser, on behalf of any person having a claim against an insured for which indemnity is provided by a motor vehicle liability policy. [Emphasis added] (2) This section does not apply to a barrister or solicitor acting in the usual course of the practice of law. 32 Mr. Charney advised that after careful thought he decided that this section only applies to tort claims. It was passed in the 1930s, when accident benefit claims did not exist. He included the legislative background, such as it is: a newspaper clipping from April 1935. The clipping notes that the legislation was introduced to curb the activities of "ambulance chasers" - "insurance adjusters who grew fat on claims arising out of motor accidents." 33 Indeed, on reviewing this section, I find that it only makes sense if the words "on behalf of any person having a claim against an insured for which indemnity is provided by a motor vehicle liability policy" apply to both paragraphs (a) and (b) of subsection 1. It seems that the word "claimant" is used in paragraph (a) and then defined in paragraph (b). That definition limits the claim to a tort claim. On its face, then, this section does not prohibit non-lawyers from acting in accident benefits claims. 34 Mr. Charney argued that by analogy, this tribunal should exclude non-lawyers from representing applicants, since the legislature did not want anybody else but lawyers acting on tort
Page 9 claims, and accident benefits claims are as complicated as tort claims. 35 Even if I were so inclined, I have already set out above the binding legislative provisions allowing non-lawyers to represent applicants at the Financial Services Commission. Accordingly, I find that section 398 does not prevent Mr. Spiegel from representing Ms. and Mr. Pelzner. EXPENSES: 36 I leave the determination of the expenses incurred in this preliminary issue hearing to the arbitrator at the main hearing. ARBITRATION ORDER 37 Under section 282 of the Insurance Act, R.S.O. 1990, c. I.8, as amended, it is ordered that: qp/i/nc/qlamc 1. Mr. Spiegel may continue to represent the Applicants. 1 The Statutory Accident Benefits Schedule - Accidents on or after November 1, 1996, Ontario Regulation 403/96, as amended by Ontario Regulations 462/96, 505/96, 551/96 and 303/98. 2 R.S.O. 1990, c. S.22, as amended. 3 Formerly known as the Ontario Insurance Commission. 4 Rule 1.4. 5 Some Answers to Questions Frequently Asked by Claimants (FAQ), p. 7. 6 The Code, Practice Note 2, Reaching a Settlement within the Dispute Resolution Process. 7 FAQ, p. 10. 8 Rule 76. 9 Rule 63.6. 10 The Code, Rule 56.1.
Page 10 11 The minutes are posted at the Commission web site www.fsco.gov.on.ca and are available to applicants, insurers and their representatives. 12 Sic: presumably a reference to s. 398, as s. 393 refers to the licensing of insurance agents. 13 Grozdanovsky and Wawanesa Mutual Insurance Company (FSCO A99-000289, April 7, 2000). 14 Set out in Appendix A. 15 Section 1 of the Act defines "contract" to mean, among other things, a contract of insurance. 16 Hernandez and Kingsway General Insurance Company (FSCO A99-000685, April 6, 2000); Grozdanovsky, supra. 17 The Code, Rule 18.1. 18 The Code, Rule 33.1. 19 The Code, Rules 54, 61.2. 20 The Code, Rule 43.2. 21 From the most recent Annual Report posted at the Commission's web site (www.fsco.gov.on.ca). 22 King and Wawanesa Mutual Insurance Company (FSCO A96-000601, January 31, 2000).