Director’s Delegate Evans has upheld the February 10, 2012 decision of Arbitrator Rogers in State Farm vs. Leonewhich found that a mediation was deemed to have failed because it did not take place within 60 days of an application being filed with FSCO.

The facts before Arbitrator Rogers were as follows:

Mr. Leone was injured in a motor vehicle accident on September 11, 2009. Disputes arose about his claims for statutory accident benefits from his insurer, State Farm. On September 28, 2010, he submitted an application for the appointment of a mediator to the Financial Services Commission of Ontario (FSCO).

FSCO’s Mediation Support Unit assigned a mediation file number. Its October 8, 2010 letter confirmed receipt of the application on September 30, 2010.

On March 14, 2011, with no mediator yet appointed to his case, Mr. Leone submitted an Application for Arbitration to FSCO. From that point on he reiterated his position that the prescribed 60 days had elapsed since the filing of the Application for Mediation and therefore mediation had failed, entitling him to seek arbitration.

FSCO initially rejected the Application for Arbitration at intake on the basis that there had not been a failed mediation as required under s. 281(2) of the Act. However, in August 2011, both the mediation and arbitration applications were processed.

With respect to mediation, on August 18, 2011, Mr. Leone was advised by a mediator that his Application for Mediation had been assigned to her. She indicated that she would try and resolve the issues in dispute within 60 days from the date of her appointment, namely by October 17, 2011.

On October 28, 2011, the mediator issued a report that she had “determined that mediation did not take place” and was closing the file.

With respect to arbitration, on August 16, 2011, Mr. Leone’s Application for Arbitration, even though it had initially been rejected by FSCO at intake, was registered and served on State Farm. In its response to the application, State Farm raised the jurisdictional issue that as there had been no mediation Mr. Leone was barred under s. 281(2) of the Act from proceeding to arbitration. By letters dated September 19, 2011 and November 1, 2011, Mr. Leone requested a hearing to deal with this jurisdictional issue on a preliminary basis. Arbitrator Rogers heard the matter on January 16, 2012.

In his decision dated February 10, 2012, the Arbitrator found that Mr. Leone had filed a completed Application for Mediation by September 30, 2010. Therefore, he found that mediation was deemed to have failed before Mr. Leone commenced arbitration.

The Arbitrator also exercised his discretion under the DRPC to excuse Mr. Leone from having to file a report of mediator as the DRPC requires.

On appeal Mr. Leone submits that his application was filed when he delivered his completed application to FSCO in September 2010. State Farm submits that his application was not filed until the mediator was appointed 11 months later.

Director’s Delegate Evans agreed with Arbitrator Rogers that filing an application for the appointment of a mediator and appointing a mediator are separate events. Therefore, he agreed that the sixty days started to run when Mr. Leone filed a completed application and not when the mediator was appointed. The Arbitrator found that the Application for Mediation was complete and was filed by September 30, 2010. Therefore, mediation was deemed failed by November 29, 2010, unless the parties could agree to extend the time for completion of mediation and did so.

However, with respect to the parties being able to extend the time for mediation on agreement beyond the 60 day period, Director’s Delegate Evans found that those parties who have filed completed Applications for Mediation where the 60 days have passed may continue to seek mediation if they so desire. Otherwise, it would mean that such parties would be unable to do so and would have to proceed to arbitration or the courts. This would be contrary to the intent of the legislation to encourage mediation and discourage litigation.

Finally, Director’s Delegate Evans dealt with the issue of whether or not Leone had to attach a failed report of mediator to his Application for Arbitration by finding that Mr. Leone did not need to attach the report of mediator to his Application for Arbitration where mediation has failed by statutory definition but no report of mediator is available. Subsection 280(8) of the Insurance Act (the requirement for a report of mediator to be prepared for failed mediations) can still be complied with, but it is up to FSCO to comply. Mr. Leone should not be prevented from proceeding to arbitration where through no fault of his own s. 280(8) has not been complied with.

Accordingly, the Director’s Delegate dismissed State Farm’s Appeal.

While it seems FSCO is willing to allow insured’s to proceed to Arbitration without having engaged in the mediation process, we continue to await the Court of Appeal decision on the same issue heard earlier this summer.

From a practical perspective, these deemed failed decisions may just be allowing insured’s to move their claims from one backlogged unit at FSCO to another.

Meanwhile, FSCO responded to this appeal decision by advising that it was reviewing its options.