Insurers involved in FSCO proceedings should be aware that despite binding authorities instructing otherwise, FSCO Arbitrator Wilson has once again ordered an insurer to disclose “forthwith” whether or not it has any surveillance in its possession. And if it does have any, it “shall have 60 days from the date of this decision to make its election as to whether it intends to rely upon any of the surveillance, in which case it shall immediately disclose all surveillance in accordance with Rule 40 of the Dispute Resolution Practice Code.”

Let’s look at Rule 40 of the Code:

40.1 If a party intends to rely on any portion of surveillance or investigative evidence, including videotapes, photographs, reports, notes and summaries of surveillance observations or investigations, at least 30 days before the hearing, the party shall provide:
(a) the names and qualifications of the persons who secured the investigative or surveillance evidence, the dates, times and places where any surveillance or investigation was undertaken; and
(b) copies of all videotapes, photographs, investigative reports, notes and summaries taken or prepared in connection with the issues in dispute. [emphasis added]

The Rule is clear: the insurer must comply with (a) and (b) – but only if it intends to rely upon the surveillance. And if it chooses to do so, it must exercise that right at least 30 days before the hearing by providing the required disclosure.

In Security National v. Morgan, (FSCO App. 2007), Director’s Delegate Evans held that the whole point of Rule 40.1 is to avoid the difficulties that occur in the court system by setting out a simple rule regarding surveillance. He held that Rule 40.1 governs:

… it is determinative of when the insurer's obligation to disclose arises, and that the context in the DRPC 4th is identical to that in the DRPC 3rd. Accordingly, the arbitrator was bound by Puljic [another appeal decision]. Finally, Rule 81 does not give an arbitrator carte blanche to simply ignore the rules.

In Puljic v. Zurich (FSCO App. 2000), Director’s Delegate Draper considered the opening of the first paragraph of the rule, which reads: "If a party intends to rely on any portion of surveillance or investigative evidence...." He stated:

In my opinion, the clear implication of Rule 37.1 [now Rule 40.1] is that the insurer's production obligation only arises when it decides 'to rely on any portion of surveillance or investigative evidence.'"

Director’s Delegate Evans quoted this passage from Puljic and agreed with it.

How then does a FSCO Arbitrator clothe himself with the jurisdiction to sidestep the “rules”’ and issue an order requiring “forthwith” disclosure of surveillance, and then a requirement to produce within 60 days from a preliminary issue hearing instead of at least 30 days before the hearing?

It is a perplexing issue.

Let’s look at the decision, called Dewing v. Unifund.

First off, Arbitrator Wilson relied in part on one of his own decisions (Suhanic-Knox v. Economical, 2008, also on a surveillance disclosure issue) wherein he refused to be bound by the appeal decision in Security National to bolster his view that FSCO arbitrators are not bound by appeal decisions from FSCO. According to Arbitrator Wilson, Stare decisis has no place at FSCO.

Having found that the concept of stare decisis does not apply at FSCO, he cited section 22 of the Insurance Act and various provisions of the Statutory Powers Procedure Act to arrive at the conclusion that he had the same powers as a Superior Court judge to order various productions and to make orders dealing with disclosure at various stages of the proceedings.

With respect to the wording of Rule 40.1, he said:

On the face of it, the use of “at least” before 30 days in Rule 40.1 would suggest that the Director contemplated situations where the disclosure would take place more than 30 days prior to the hearing. Otherwise the insertion of “at least” would be redundant.

But let’s have a look at Rule 40.1 without the phrase “at least” in its proper context:

If a party intends to rely on any portion of surveillance or investigative evidence, 30 days before the hearing, the party shall provide …

Without the phrase “at least” an insurer would be allowed to use surveillance only if it was disclosed on the 30th day before the hearing. It would not be allowed to use surveillance if it was disclosed 35 days before a hearing or six months before the hearing. Further, the timing of the disclosure is at the discretion of the party possessing the information. It can make the determination to rely on the surveillance and disclose it at anytime, subject to the ‘drop dead’ 30 day period.

With respect to the Code, he stated:

The Dispute Resolution Practice Code, which is “a user’s guide to resolving disputes between consumers and insurers involving statutory accident benefits claims under the Insurance Act and the Statutory Accident Benefits Schedule”, is published by the Director of Arbitrations. It is neither law nor subsidiary law (regulation). It is in the words of the Insurance Act to provide for rules for “the practice and procedure” in arbitrations.

How many insurers have been reprimanded for not complying with the timelines or other procedural requirements in the Dispute Resolution Practice “User's Guide”? For example, in Hotchkiss v. Kingsway (2011, FSCO Arb.), the insurer tried to rely upon surveillance despite failing to disclose it at least 30 days before the hearing. Arbitrator Wilson wrote:

Rule 40.1 of the Practice Code deals with surveillance evidence. Its terms are clear and mandatory. Unlike Rule 39.2, there is no relief provision in the event of "extraordinary circumstances."

He also wrote:

The time limits set out in the Practice Code are the default time limits that are set for this hearing. Until now there has been no request to amend the time limits. Whether extraordinary circumstances are specifically a named criterion in any relief or not, it is incumbent upon those who would have us deviate from the Rules to demonstrate cogent reasons to justify their requests.

This would appear to be a very narrow reading of a “user guide”, to the prejudice of the consumer at large (those who have to pay insurance premiums).

Finally, from Dewing:

Mr. Wynperle [claimant’s lawyer] is right. Ms. Dewing is expected to provide all her evidence to the Insurer, whether she intends to rely upon it or not, quite early in the hearing process. She must obtain the opinions of doctors or other experts to support her claim without knowing until almost the eve of the hearing whether there is photographic or other surveillance evidence that should have been shown to those experts for their comment. It is unbalanced. It is unfair. It is also unnecessary.

Does this mean that a claimant must produce an unfavourable medicolegal report to the insurer, even if she does not intend to rely upon it? If so I would gladly trade some surveillance tapes for such unfavourable reports.

And if 30 days before a hearing is “almost the eve of the hearing”, which somehow prejudices the claimant’s questionable right to have her doctors see the surveillance, when will an insurer ever be able to rely upon Rule 40.1 to serve surveillance on the 30th day? Where is the balance? Is there a concern that an insured may not be being forthright with their own experts, such that the insurer’s surveillance can ‘upset the applecart’? Presumably if an insured was being forthright, there would be no concern with a picture telling a thousand words.

Perhaps a FSCO appeal decision will confirm one day that FSCO arbitrators are bound by FSCO appeal decisions. We will then have to wait and see whether the arbitrator feels bound to follow such decision.