FSCO Arbitrator upholds Leone decision: 60 day time limit for mediation elapsed

On February 10, 2012, FSCO Arbitrator Jeffrey Rogers released a decision, Leone v. State Farm stating that mediation was deemed to have failed because it did not occur within 60 days of the application being filed and the parties could not extend the time limit on consent once the 60 days had expired.

Director’s Delegate David Evans upheld the decision and dismissed State Farm’s appeal, and found that mediation was deemed to have failed.

Leone had submitted an Application for Mediation, which was received by FSCO on October 8, 2010 and no mediator had been appointed by March 14, 2011. Leone then submitted an Application for Arbitration. State Farm argued that he needed to attach the Report of Mediator to his application.

Arbitrator Evans states “I agree with the arbitrator 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…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.”

S.280(8) is the requirement to issue a Report of Mediator if the mediation fails.

What is the impact of the decision?

FSCO has notified all lawyers, law clerks and paralegals who have submitted applications for mediations of the decision, provided them with a mediation file number and stated that the following two options continue to be available for those files waiting in the queue:

1. Complete a Consent To Fail Form

2. Complete an Extension Form

Both forms must be completed jointly with the insurer, and require the signature of the client.

The appeal of several court decisions,  Cornie v. Security National (and the other 3 cases heard with it) and Younis v. State Farm regarding the 60-day time limit issue was heard on July 19, 2012 at the Court of Appeal.

The Court of Appeal has reserved judgment and as a result, FSCO felt it was not yet time to change the dispute resolution processes without having heard the results of the Court of Appeal decision.

For those Applications for Arbitration where no Report of Mediator was issued, FSCO is holding them in abeyance pending the Court of Appeal decisions.

According to the FSCO website the current wait time for a pre-hearing date is 6-8 months.

FSCO is looking at outsourcing its mediations to private mediators to assist with clearing up the mediation backlog. It is hoping to have a contract in place by early September. FSCO hopes to hand off 2,000 mediation files monthly to private mediators.

The mediation backlog is frustrating for claimants. By the time the mediation takes place, their circumstances may have changed dramatically. They may have been forced to find work due to financial stress, or their condition may have worsened due to lack of treatment. Treatment needs to be delivered in a timely fashion, in order to be beneficial.

It is not in an insurer’s best interest to have a continued backlog in mediations. Insurers pay 2% interest on claims per month. The longer an application sits in the queue, the more interest accrues.

There are various consequences of Leone v. State Farm and Cornie v. Security National if the original decision is upheld.

In Leone, the arbitrator noted that State Farm did not receive an Application for Mediation from FSCO until a mediator had been appointed. Generally, plaintiff’s counsel sends 2 copies of the application to FSCO, the second copy to distribute to the insurer. If FSCO is backlogged, the insurer does not know until months down the road that there is a pending application.

If the Court of Appeal upholds the decisions in Cornie and finds that 60 days begins to run when the application has been filed, insurers may not know about the application or the dispute until they receive a statement of claim.