CITATION: Madhani v. Wawanesa Mutual Insurance Company, 2018 ONSC 4282
DIVISIONAL COURT FILE NO.: DC-17-468-JR DATE: 2018/07/10
ONTARIO SUPERIOR COURT OF JUSTICE DIVISIONAL COURT
Swinton, Sachs, and Corthorn JJ.
B E T W E E N:
KARIM MADHANI
Applicant
– and –
THE WAWANESA MUTUAL INSURANCE COMPANY
Respondent
Tanya C. Walker, for the Applicant
Ryan D. Truax, for the Respondent
HEARD at Toronto: March 22, 2018
THE COURT
Nature of the Proceeding
[1] The Applicant Karim Madhani suffered losses as a result of a house fire that occurred on November 6, 2014. The Respondent is the Applicant’s home insurer. The Applicant seeks judicial review of certain findings in an Appraisal dated July 12, 2017 conducted by Umpire Roger Chown and appraisers appointed by each of the parties to this application for judicial review. The Applicant submits that the majority finding with respect to the valuation of the lost contents was made without jurisdiction, and the failure to provide written reasons for the finding on the depreciation with respect to the building was a denial of procedural fairness.
[2] For the reasons that follow, we would dismiss the application for judicial review.
Factual Background
[3] The Applicant’s home and the contents of the home were destroyed in the fire. The parties were unable to agree upon the amount owed pursuant to a homeowner’s insurance policy under each of the following headings (a) additional living expenses, (b) loss of household contents, and (c) the building.
[4] The policy of insurance issued by the Respondent to the Applicant includes a statutory condition that deals with the appraisal process prescribed by s. 128 of the Insurance Act, R.S.O. 1990, c. I.8 (the “Act”). Statutory Condition 11 of the policy says:
In the event of disagreement as to the value of the property insured, the property saved or the amount of the loss, those questions shall be determined by appraisal as provided under the Insurance Act before there can be any recovery under this contract whether the right to recover on the contract is disputed or not and independently of all other questions. There shall be no right to an appraisal until a specific demand therefor is made in writing and until after a proof of loss has been delivered.
[5] On the consent of the parties, the valuation disputes were referred to an appraisal process before an Umpire. The referral order was made by Belobaba J. in October 2016.
[6] The appraisal was conducted pursuant to s. 128 of the Act. Each of the parties appointed an appraiser. In turn, the appraisers appointed the umpire (s. 128(2)). The specific valuations about which the appraisers were unable to agree were submitted to the umpire for determination (s. 128(3)). The umpire considered the submissions made by each party’s appraiser. The finding in writing of any two of the umpire and the appraisers determined the matter (s. 128(3)).
Appraisal Findings
[7] The Appraisal Findings are set out in a two-page document. Two of the eight findings made are not in issue on this application. The parties (and their respective appraisers and the Umpire) are in agreement (a) that the replacement cost value (“RCV”) of the building is $539,078; and (b) as to certain figures with respect to the claim for additional living expenses.
[8] The issues raised by the Applicant on this application for judicial review are with respect to the following Appraisal Findings:
a) The actual cash value (“ACV”) of the building;
b) The percentage depreciation (20 per cent) applied to the RCV of the building to arrive at the ACV of the building ($430,000); and
c) The RCV of the contents ($100,000).
[9] For each of those issues the Umpire and the Respondent’s appraiser were in agreement and the Applicant’s appraisers disagreed. The Applicant had one appraiser for the building loss and another for the contents loss and ACE. The agreement of the Respondent’s appraiser with the Umpire’s finding constitutes the finding in writing of any two of the appraisers and the Umpire required pursuant to s. 128(3) of the Act.
[10] With respect to the contents loss, the Umpire determined that the contents’ RCV is $100,000, and the Respondent’s appraiser agreed. The Applicant’s appraiser had suggested a value of $239,000. In support of the $100,000 figure, the Umpire stated:
With respect to the contents, no comprehensive proof of loss has been submitted but the insured provided in his appraisal brief extensive schedules listing contents items. These were supported by: the insured’s verbal information provided today; the insured’s written statement; extensive printouts identifying similar items to those the insured claims were lost in the fire; photographs which in some cases show the remnants of items listed in the schedules. No receipts were available today for either original (pre-loss) purchases or for replacement purchases. The extent of the contents items claimed to be present in the premises is not accepted. We have not identified which specific items did not exist.
[11] With respect to the depreciation of the building, the Umpire and the Respondent’s appraiser agreed on an actual cash value of the building of $430,000, which demonstrates that a 20 per cent depreciation figure was applied to the RCV.
Issues Raised on this Application
[12] The Applicant raises two issues:
Did the Umpire exceed his jurisdiction when he declined to accept the extent of the contents claimed?
Was the Applicant denied procedural fairness because the Umpire did not include, as part of the Appraisal Findings, reasons for applying a depreciation of 20 per cent to the RCV of the building?
[13] During oral argument, counsel also attacked the 25 per cent depreciation applied to the RCV of the contents. That issue is not raised in the Notice of Application for Judicial Review, and we declined to deal with it.
Standard of Review
[14] The Applicant describes the errors as being those of the Umpire. In fact, the Umpire does not act alone, and the aspects of the appraisal attacked by the Applicant are decisions of the majority and were made in accordance with the appraisal process prescribed by the Act.
[15] Courts afford substantial deference to an appraisal under the Act and to the appraisal process. In Seed v. ING Halifax Insurance (2005), 2005 41991 (ON SCDC), 78 O.R. (3d) 481, the Divisional Court stated that courts are reluctant to interfere unless there is proof (a) of misconduct, or (b) the appraisers and Umpire exceeded their jurisdiction. That case dealt with an allegation that there was a denial of natural justice because of the denial of an adjournment. To the extent that Lax J. for the majority spoke of intervening because of a lack of jurisdiction, it appears that she is speaking of a loss of jurisdiction arising from a denial of procedural fairness.
[16] The Applicant argues that the standard of review to be applied with respect to the first issue is correctness because he raises an issue of jurisdiction. We disagree.
[17] The Supreme Court of Canada made it clear in Dunsmuir v. New Brunswick, 2008 SCC 9 that the standard of correctness applies only in limited situations—for example, where there are “true questions of jurisdiction or vires”. By that, the Court means the authority of the decision-maker to embark on the inquiry (at para. 59). The Court has, on many occasions, and again recently, cautioned that true questions of jurisdiction are extremely rare (Canada (Canadian Human Rights Commission) v. Canada (Attorney General), 2018 SCC 31 at paras. 31-41).
[18] Here, the Umpire and the appraisers had jurisdiction to consider the appraisal of the contents. Thus, this application for judicial review does not raise a true jurisdictional question. Given the nature of the task before them—valuation of loss—and their expertise in conducting such an evaluation, the standard of review on the first issue is reasonableness, not correctness. The task of this Court is to determine whether the finding of the majority with respect to the contents valuation is reasonable.
[19] With respect to the procedural fairness issue, there is no need to conduct a standard of review analysis. The task of this Court is to determine whether the appropriate level of procedural fairness has been provided.
Issue No. 1 – The Contents Claim
[20] The appraisal process created by s. 128 of the Act is meant to provide cost-effectiveness and efficiency to the parties in resolving issues of valuation. Issues such as legal entitlement under the policy and the validity of the claim—for example, where there is a question of fraud—do not form part of the appraisal process; those issues, if not resolved through negotiation, are determined at trial (Agro’s Foods Inc. v. Economical Mutual Insurance Co., 2016 ONSC 1169, [2016] I.L.R. I-5869 (S.C.J.), at paras. 56, 58 and 59).
[21] The Applicant submits that the majority acted outside the scope of their authority by determining which contents were present in the premises.
[22] The uncontradicted evidence on this application is that the appraisers made their respective submissions to the Umpire on the issue of valuation of the contents. The appraiser appointed by the Applicant submitted that the contents had an RCV of $239,000. The submission by the appraiser appointed by the Respondent was that the contents had an RCV of $100,000.
[23] The Respondent filed an affidavit provided by the Respondent’s appraiser Neville Bussell, which described the process undertaken by the Umpire. The process included a request for the submission of briefs in advance and discussion between the appraisers and the Umpire during the appraisal. In the Appraisal Findings document, the Umpire indicates that he received and considered material from the Applicant, albeit there was no proof of loss, as required by the Statutory Condition in the insurance policy.
[24] The Applicant has failed to provide the Court with a record of the material that was before the Umpire. Clearly it was available to his counsel, as she acted as the appraiser for contents on his behalf. Indeed, she is now acting to attack the validity of a decision in which she participated and ended up dissenting. The inappropriateness of her appearance as counsel in this proceeding was commented on by this panel during the oral argument.
[25] The appraisers and the Umpire were required, pursuant to the Act, to determine the value of the property lost. On the part of the majority there was no finding of legal entitlement or any determination of disputed legal issues, which would likely lead to court intervention (see Shinkaruk Enterprises Ltd. v. Commonwealth Insurance Co., 1990 7738 (SK CA), [1990] S.J. No. 317 (Sask. C.A.) at paras. 16-17).
[26] The Applicant submits that the majority improperly made a determination of fact. Yet the Appraisal Findings expressly state that the majority has not made findings about items that did not exist. The appraisal process determines the value of the property lost or damaged, the value of the property saved, and the extent of the property damage. Here, the majority was not satisfied with the extent of the contents items claimed to be present; that factor was considered in the valuation of the contents on a global basis. That valuation is entitled to deference.
[27] Had the Court been provided with the record before the appraisers and the Umpire, this Court would be better situated to assess the Applicant’s argument. Given the material before us, we cannot find that the determination of value was unreasonable or that the majority acted improperly.
[28] The Applicant relies on Agro, above, as authority for the proposition that an appraisal process cannot determine quantities in dispute. That case arose out of a motion for summary judgment, not an application for judicial review. The motions judge was asked to determine that the appraisal process should occur before a civil trial. The motions judge rejected that argument, noting that the process was not suitable in the circumstances, in part because there were policy interpretation issues in play.
[29] The Applicant also relies on Ferrier v. Maplex General Insurance Co., [1992] I.L.R. 1-2806 (B.C.S.C.), again a case that was not a judicial review. Rather, a party brought a motion for directions to give guidance to an appraisal process. In that case there was a serious dispute about the quantities of the loss, and the insurer had alleged fraud. There was also a serious dispute about the interpretation of the contract. At para. 12, the motions judge stated that the determination of quantity and the interpretation of the contract should be left to the trial judge.
[30] Ferrier is not binding on us, and we would not follow it. In our view, the better authority to assist is Shinkaruk, above; it states that the appraisers/Umpire are not to determine legal questions. They are to engage in a property valuation. Such a valuation requires an assessment of the loss, using the expertise of the individuals as valuators.
[31] The Applicant has not demonstrated that the majority strayed outside their role as valuators here. No determination of entitlement was made. That issue remains to be determined in the pending civil action.
[32] The Applicant has not demonstrated that the valuation of the contents was unreasonable. Accordingly, we would not give effect to this ground of judicial review.
Issue No. 2 – Procedural Fairness
[33] The Umpire concluded, and the Respondent’s appraiser agreed, that the depreciation applied to the RCV of the building is 20 per cent. The Appraisal Findings do not include any reasons or explanation from the Umpire for the percentage depreciation chosen.
[34] The evidence on this Application is that the Applicant’s appraiser submitted to the Umpire that depreciation of 6 to 10 per cent should be applied to the materials portion only of the RCV of the building. The submission of the Respondent’s appraiser in that regard was 25 to 40 per cent depreciation, to be applied to the entire RCV.
[35] The evidence, found in an affidavit from the Respondent’s appraiser, Mr. Bussell, is that there was a discussion among the appraisers and the Umpire with respect to all the issues, and at the appraisal hearing the Umpire provided an oral explanation as to how he determined the ACV for the building. Mr. Bussell stated that the Umpire was not asked to provide written reasons for his findings.
[36] The Applicant submits that procedural fairness in the circumstances requires that the Umpire include in the Appraisal Findings the reasons for the percentage depreciation figure used in calculating the ACV of the building.
[37] The appraisal process is not subject to the Statutory Powers Procedures Act, R.S.O. 1990, c. S.22. Subsection 17(1) of that Act provides that a tribunal shall give its final decision and order, if any, in writing and “shall give reasons in writing therefor if requested by a party” (Re Krofchik and Provincial Insurance Co. Ltd. (1978), 1978 1304 (ON SC), 21 O.R. (2d) 805 (Div. Ct.)).
[38] Therefore, the question is whether the failure to give written reasons here is a denial of procedural fairness at common law. In Baker v. Canada (Minister of Citizenship & Immigration), 1999 699 (SCC), [1999] 2 S.C.R. 817 (at paras. 23-28), the Supreme Court of Canada identified five factors to be considered in determining the requirements of procedural fairness:
The nature of the decision being made and the process followed in making it;
The nature of the statutory scheme being administered;
The importance of the decision to the affected individual;
The legitimate expectations of the person challenging the decision; and
Respect for the choice of the procedures made by the administrative agency itself.
[39] When the courts evaluate whether the duty of procedural fairness has been complied with, they must recognize “the day-to-day realities of administrative agencies and the many ways in which the values underlying procedural fairness can be assured” (Baker, at para. 44).
[40] Applying those factors, we find that there was no denial of procedural fairness here. First, the applicable statutory scheme is a property valuation process. It is not an arbitration, and there is no requirement to hold a hearing and to hear evidence (Krofchik; Shinkaruk, above at para. 13). The appraisal process is designed to provide the parties to the dispute with a valuation of loss, and not the determination of legal rights. Moreover, it is meant “to encourage a quick settlement of the insured’s loss and to facilitate the use of the expertise of an appraiser (or an umpire) in the sphere of property values” (Shinkaruk at para. 16).
[41] Second, s. 128 of the Act requires that the findings be reduced to writing. It does not state that reasons must be given.
[42] Third, the process is not adjudicative in nature. The appraisers for the parties are intended to agree, where they are able to do so, on valuation issues. According to Mr. Bussell’s affidavit, which was not contradicted on the description of the process, the appraisers and the Umpire engaged in a discussion of the issues in an attempt to reach a consensus. Clearly, the process is based on discussion and the sharing of expertise in valuation.
[43] It is true that the decision is important to the Applicant, and is binding with respect to a valuation of the loss. However, the Appraisal has not resulted in a determination of the Applicant’s rights under the insurance policy—in particular, no determination was made as to specific items that were or were not lost.
[44] While the affidavit in the Applicant’s Record, submitted by a student-at-law, states that the Applicant had legitimate expectations that he would receive reasons, that statement is not evidence. Rather, it is a conclusion of law. In fact, applying the legal principles correctly, there is nothing in the record to suggest that there was anything said by the Umpire or any past practice that would give rise to an expectation that written reasons would be required.
[45] With respect to depreciation, Mr. Bussell states that there was a discussion, following which the Umpire gave his view and oral reasons for that view. Mr. Bussell then changed his position and agreed with the Umpire, signing off on the ACV, which included a 20 per cent depreciation figure. No written reasons were requested by the appraiser for the Applicant.
[46] In our view, the requirements of procedural fairness were met. The appraisal scheme is meant to be expeditious and cost-effective. Oral reasons were given, and no request for written reasons was made. The process followed was satisfactory in the circumstances.
Disposition
[47] Accordingly, the application for judicial review is dismissed. Costs to the Respondent on a partial indemnity basis are fixed at $4,000.00 all inclusive.
Swinton J.
_______________________________ Sachs J.
Corthorn J.
Released: July 10, 2018
CITATION: Madhani v. Wawanesa Mutual Insurance Company, 2018 ONSC 4282
DIVISIONAL COURT FILE NO.: DC-17-468-JR DATE: 2018/07/10
ONTARIO
SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
Swinton, Sachs, and Corthorn JJ.
B E T W E E N:
KARIM MADHANI
Applicant
– and –
THE WAWANESA MUTUAL INSURANCE COMPANY
Respondent
The Court
Released: July 10, 2018