Court of Appeal for Ontario
Date: October 22, 2019 Docket: C66624 Judges: Feldman, Fairburn and Jamal JJ.A.
Between
James Demetriou Plaintiff (Respondent)
and
AIG Insurance Company of Canada Defendant (Appellant)
Counsel
For the Appellant: Alan D'Silva and Alexandra Urbanski
For the Respondent: Brian Brock and Stephen Libin
Heard and Released Orally: October 22, 2019
On Appeal From: The judgment of Justice Gray of the Superior Court of Justice, dated January 24, 2019.
Reasons for Decision
The Facts and Lower Court Decision
[1] The respondent insured a ring appraised at over $500,000, took that ring to a resort in the Dominican Republic, wore it on a gold chain around his neck on a late night walk on the beach, where he claimed it was stolen from him by a man who approached him and demanded his jewellery. The insurer denied the claim on the basis that the circumstances were suspicious and the insurer was not prepared to pay unless the respondent proved the loss. The respondent had lost another very valuable ring and recovered from another insurer the year before.
[2] On summary judgment, the motion judge ordered the insurer to pay the claim. He also awarded punitive damages against the insurer for bad faith dealing and substantial indemnity costs.
Issues on Appeal
[3] The main issue on the appeal is whether the motion judge erred in law in two ways: 1) by failing to allow the insurer to amend its pleadings to rely on provisions of the policy that exclude coverage for deliberate acts or fraud, and 2) having disallowed the amendment, by granting summary judgment on the claim without giving any consideration to the many suspicious circumstances raised on the record, on the basis that they were not relevant without a plea of fraud.
[4] The appellant submits that had the motion judge considered the entire record he would have concluded that the credibility of the insured was in issue and that a trial was required.
The Court's Analysis
Burden of Proof and Credibility
[5] We agree with the submission of the appellant. In paragraph 48 of the reasons, the motion judge stated: "The suspicious circumstances raised in the affidavit material would certainly be relevant to whether or not the claim is fraudulent, if fraud were being relied on." Although those "suspicious circumstances" may have been relevant to a plea of fraud, had one been made or allowed, they were also directly relevant to whether the respondent could prove his loss.
[6] The motion judge reversed the burden of proof by ignoring those "suspicious circumstances" in relation to whether the respondent had proven his claim. In Shakur v. Pilot Insurance Co. (1990), 74 O.R. (2d) 673 (C.A.), a similar case where the insurer did not accept that the insured had proved that her jewellery was stolen, this court stated at p. 681:
It is fundamental insurance law that the burden of proof rests on the insured to establish a right to recover under the terms of the policy. In this case, the burden rested on the respondent and remained on the respondent to prove on the balance of probabilities that a theft of her jewellery had occurred. That the appellant, in denying the allegation of theft, impliedly alleged that the respondent was fraudulent in putting forward the claim in no way shifted the basic burden of proof resting on the respondent.
Application of Shakur
[7] The motion judge in this case found that Shakur did not apply and was distinguishable because in this case the insurer had disclaimed reliance on fraud. He erred in so doing. While the appellant did not invoke the policy exclusions relating to fraud, the appellant was clearly challenging the respondent's version of events. Shakur is binding and applies to this case. The primary issue was not whether the insurer had established fraud, but whether the insured had proved on a balance of probabilities that theft of the ring had "occurred within the meaning of the policy": Shakur, at pp. 681-682.
Pleading Amendments
[8] In fact, the factum of the insurer asked for the amendment to plead fraud "if it is deemed necessary to have done so to have the evidence regarding the plaintiff's credibility admitted." Rule 26.01 provides that the court shall grant leave to amend a pleading "at any stage of an action", unless there is prejudice that cannot be compensated by costs or an adjournment. In our view, there was no such prejudice in this case. The motion judge thus erred by denying the amendment and then excluding from his consideration the evidence that raised the credibility issues and concerns regarding the insured's claim.
Summary Judgment Standard
[9] In our view, the motion judge was required to take a hard look at the entire record on the summary judgment motion in order to determine whether there was a genuine issue requiring a trial or whether he could decide the case on summary judgment. Because he did not do so, it is up to this court to do so on the record. In our view, it is clear that the credibility of the claim and of the claimant was squarely in issue and requires a trial.
Disposition
[10] We also allow the amendment of the respondent's pleading, if desired.
[11] The order is set aside including the punitive damages and costs. The costs of the motion shall be left to the trial judge to determine.
[12] Costs of the appeal to the appellant in the agreed amount of $25,000, inclusive of disbursements and HST.
"K. Feldman J.A."
"Fairburn J.A."
"M. Jamal J.A."
