CITATION: Mann-Bentley v. North Kent Mutual Insurance Co., 2024 ONSC 4021
DIVISIONAL COURT FILE NO.: DC-23-16 (London)
DATE: 20240718
ONTARIO
SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
Lococo, Fregeau and Trimble JJ.
BETWEEN:
Patricia Mann-Bentley
Applicant
– and –
North Kent Mutual Insurance Company
Respondent
Catherine M. Patterson, for the Applicant
Tino Kasi, for the Respondent
HEARD at London: 23 April 2024
J. K. TRIMBLE J.
REASONS FOR JUDGMENT
NATURE OF PROCEEDING
[1] This is an application for judicial review pursuant to s. 2(1) of the Judicial Review Procedure Act, R.S.O. 1990, c. J.1 (“JRPA”) of an appraisal award made under s. 128 of the Insurance Act, R.S.O. 1990, c. I.8 (the “Act”), with respect to the value of the damage to the applicant’s cottage property following a fire.
[2] The applicant seeks an order in the nature of certiorari quashing or setting aside the appraisal award and remitting the matter for a fresh appraisal before a new umpire. The respondent requests that the application be dismissed.
BACKGROUND
[3] In 2019, the applicant, Patricia Mann-Bentley, purchased a cottage at 6195 London Road, Lambton Shores, Ontario and insured it through their insurance agent, Marianne Hope, with the respondent, North Kent Mutual Insurance Company, under a property policy, Policy No. 56646P01.
[4] The cottage was completely destroyed by fire on January 20, 2022, which was ultimately ruled to be criminal arson by someone other than the applicant and her husband. The respondent retained Paul Davis of Chatham-Kent to provide it with a “total loss repair estimate” for the cottage. Paul Davis produced two estimates dated February 7, 2022 and May 20, 2022.
[5] The applicant and her husband, Barry Bentley, sued the respondent in 2022 for damages in breach of contract. On January 27, 2023, the respondent invoked the appraisal process in s. 128 of the Act to determine the value of the cottage fire loss.
[6] Under s. 128 of the Insurance Act’s arbitration process, each party retains an appraiser who provides an assessment of the value of the loss. The two appraisers select an umpire to decide the value of the loss. In this case, the respondent appointed John Valeriote, a veteran insurance appraiser as its appraiser, and the applicant, Thomas Hanrahan, a veteran insurance lawyer. The appraisers appointed James Minns as umpire.
[7] The appraisers agreed that the replacement cost of the cottage was $256.26 per sq. ft. They differed, however, on the size of the cottage. For the respondent, Mr. Valeriote argued that the cottage was 1,140 sq ft., based on the two estimates prepared by Mr. Scott of Paul Davis after the fire. Mr. Scott went to the property and measured what remained of the building. For the applicant, Mr. Hanrahan submitted that the cottage was 1,341 sq ft., based on an iClarify valuation report that had been prepared in 2019 at the request of the insurance broker, Ms. Hope, when the applicant purchased the home. After it received the iClarify report, the insurer issued the policy.
[8] Umpire Minns found that the Replacement Cost of the cottage at $285,785.27 based on the agreed replacement cost price per square foot and, implicitly, a total cottage size of 1,140 sq ft.
RESULT
[9] For the reasons that follow, the Application for Judicial Review is dismissed with costs to the respondent fixed at the agreed sum of $9,000.
ISSUES
[10] The Notice of Application for Judicial Review states that the arbitration award of umpire Minns should be quashed, and the matter be remitted for a fresh appraisal since the appraisal award was procedurally flawed in that the applicant was denied a fair hearing, and the decision was patently unreasonable. In her Factum and oral argument, however, the applicant argued only on the basis of the unreasonableness of the decision.
JURISDICTION
[11] The court has jurisdiction to hear this application for judicial review pursuant to ss. 2(1) and 6(1) of the JRPA. This Court has ruled, however, that its jurisdiction to review an appraisal award is narrow, limiting intervention only to when there has been misconduct, or where the appraiser or umpire has exceeded his or her jurisdiction: Sellors v. State Farm Fire and Casualty Co., 2023 ONSC 645 (Div. Ct.), at para. 21; Seed v. ING Halifax Insurance (2005), 2005 41991 (ON SCDC), 78 O.R. (3d) 481 (Div. Ct.), at para. 23. Although an umpire is not required to give reasons, the failure to do so may also be grounds for intervention: Intact Insurance Co. v. Laporte (c.o.b. Warrior Gear), 2023 ONSC 1828 (Div. Ct.), at paras. 78-79, Leiper J. dissenting, at paras. 133-135, rev’d on other grounds 2024 ONCA 454.
STANDARD OF REVIEW
[12] The applicant and the respondent agree that the appropriate standard of review on this application is reasonableness: Canada (Minister of Citizenship and Immigration) v. Vavilov, 2019 SCC 65, [2019] 4 S.C.R. 653. Under Vavilov, the court must only determine whether the decision bears the “hallmarks of reasonableness – justification, transparency and intelligibility – and whether it is justified in the relevant factual and legal constraints that bear on the decision.” Unreasonable decisions are those that contain at least one of two fundamental flaws: 1) a failure of rationality internal to the reasoning process; and/or 2) is in some respect untenable in light of relevant factual and legal constraints: Vavilov, at paras. 99-101.
[13] The standard of review for Insurance Act appraisal awards must be viewed in the context of the appraisal mechanism under that Act. An appraisal is not adjudicative or quasi judicial process. It is a process based on discussion between those with knowledge and expertise. It is intended to be collaborative, not adversarial. Where the appraisers cannot agree on the value of the property lost, the umpire decides using a process of his or her design: Northbridge General Insurance Corp. v. Ashcroft Homes-Capital Hall Inc., 2021 ONSC 1684 (Div. Ct.), at para. 29. Since an appraisal under s. 128 is not an arbitration, it does not require a hearing, evidence, or reasons: Campbell v. Desjardins General Insurance Group, 2022 ONCA 128, 467 D.L.R. (4th) 480, at para. 47.
[14] In Laporte (Div. Ct.), at para. 28, D. Edwards J. cited the Supreme Court’s guidance on how to approach on appeal where no reasons are required or given:
There will nonetheless be situations in which no reasons have been provided and neither the record nor the larger context sheds light on the basis for the decision. In such a case, the reviewing court must still examine the decision in light of the relevant constraints on the decision maker in order to determine whether the decision is reasonable. But it is perhaps inevitable that without reasons, the analysis will then focus on the outcome rather than on the decision maker’s reasoning process. This does not mean that reasonableness review is less robust in such circumstances, only that it takes a different shape: Vavilov, at para. 138.
[15] Accordingly, appraisal awards should generally be afforded significant deference.
THE APPRAISAL AWARD
[16] The umpire’s award is very short. He clearly preferred the insurer’s appraiser’s opinion on the size of the cottage but did not provide any reasons stating why.
POSITIONS OF THE PARTIES
The Applicant
[17] The applicant’s position is that the insurer, having insured the property based on the iClarify report, could not now resile from it. Therefore, the umpire’s decision, which did not adopt the iClarify report, was unreasonable on all the evidence. The applicant submitted that the insurer advocated for a smaller size in order to reduce the size of the insurance claim. Further, absent reasons from the umpire, it is impossible to determine why the umpire found the cottage to be of 1,140 sq ft.
The Respondent
[18] The Application should be dismissed. The matter was resolved according to the process set out in the Insurance Act. There is no evidence of misconduct or that either the appraisers nr the umpire exceeded their jurisdiction. The umpire is due deference.
[19] The respondent argues that even applying more substantive review, the case should be dismissed. The umpire’s decision is reasonable. The iClarify valuation report did not indicate how it arrived at its estimate of the size of the cottage either in 2019 or that it was correct at the time of loss. Paul Davis estimates, on the other hand, are based on measurements he took on his field visits to the cottage after the loss. The property policy entitles the applicant to the replacement cost of the building as it existed at the time of the loss.
PRELIMINARY EVIDENTIARY ISSUE
[20] Where an umpire does not give reasons, it is appropriate to re-create the record of what was before the umpire, as the parties did here. The applicant, however, argued that the Court should ignore appraiser Valeriote’s 10 April 2024 affidavit. Alternately, she argues that we should ignore paragraphs 6-13, 15-22, and 25-31 of that affidavit. She gives two bases for this submission: 1) it was late filed, and 2) it contains evidence that is not properly before the Court, namely, information Mr. Valeriote received from others, but which Mr. Valeriote does not say he believes is true. Further, that evidence is not on non-controversial matters and violates r. 39.01(5).
[21] We accept the 10 April Affidavit as it contains necessary information such as emails and Mr. Valeriote’s memory, which clarifies evidence arising out of the affidavits filed before 10 April, and to understand what transpired at the appraisal hearing. The applicant does not argue that this information in it is not true nor did she seek an adjournment to consider and respond to it. To exclude that affidavit in its entirety would allow form to triumph over substance.
[22] We accept the applicant’s position, however, that those portions of the 10 April affidavit which are on information and belief are improper as those portions of the affidavit do not deal with non-controversial matters. We have ignored them. Even had we excluded the affidavit in its entirety, the outcome of this application would have remained the same.
ANALYSIS
[23] We find the umpire’s decision reasonable. It bears the hallmarks of reasonableness within the framework of s. 128 Insurance Act appraisals. On the record as reconstituted by the parties and the result, the decision is intelligible. Within the s. 128 process, it is transparent. Finally, it is justified in that the umpire applied the relevant facts and legal framework and principles when reaching his decision. There is a clear line of reasoning implicit in the decision.
[24] Paul Davis’ Estimate of the Size of the Cottage was based on Mr. Scott’s Measurements. The evidence is uncontradicted that Mr. Scott, went to the property after the fire and measured the floor plate of the cottage. His estimate of 1,140 sq. ft. was based on those measurements.
[25] By contrast, the iClarify report does not give the basis upon which it calculated its estimate of 1,341 sq. ft. Mr. Hanrahan, who attached the iClarify report to his affidavit, did not provide any further information as to the basis of iClarify’s estimation of the size of the cottage. The author of the iClarify report did not provide an affidavit.
[26] The applicant’s husband attached information about iClarify to his affidavit, on which the applicant relied when submitting that the iClarify report’s estimate of square footage should be accepted. The evidence about iClarify, however, comprises screen shots or other material downloaded from the internet concerning iClarify. That evidence is not properly before the court.
[27] The applicant argued that the insurer, having insured the cottage based on the iClarify report and its estimate of the size of the cottage, having calculated premiums on that basis, and having accepted the insureds’ payment of those premiums, cannot now reject iClarify’s estimation of the size of the cottage merely because it is asked to pay a claim.
[28] We disagree for two reasons. First, the argument is not supported by the nature of the insurance policy. The property insurance policy the respondent issued to the applicant is an indemnity policy; that is, one that pays to replace the loss the insured person actually sustained, up to the limits contained in the policy. It does not to allow the insured to reap a profit or windfall: Laporte (C.A.), at para. 17.
[29] Second, the policy wording does not support the applicant’s argument.
[30] The policy included a “Guaranteed Rebuilding Costs Endorsement” which provided that the insured could elect to accept the actual cash value of the “dwelling building” after depreciation if she did not want to rebuild or repair, or the cost of replacing or repairing the damaged “dwelling building” if she chose to do so. “Dwelling building” is defined ion the policy as “…the building described on the ‘Declarations Page” occupied by “you” as a private resident” (emphasis added). The definition of “dwelling building” does not refer to the building as that described on the iClarify report or similar wording.
[31] In any event, there is no evidence that the premium was based on the iClarify report, as the applicant submitted.
COSTS
[32] The parties agreed that the winner should receive $9,000 in costs from the unsuccessful party. Therefore, the applicant shall pay the respondent’s costs fixed at $9,000.
Trimble J.
Lococo J.
Fregeau J.
Released: July 18, 2024
CITATION: Mann-Bentley v. North Kent Mutual Insurance Co., 2024 ONSC 4021
DIVISIONAL COURT FILE NO.: DC-23-16 (London)
DATE: 20240718
ONTARIO
SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
Lococo, Fregeau and Trimble JJ.
BETWEEN:
Patricia Mann-Bentley
Applicant
– and –
North Kent Mutual Insurance Company
Respondent
reasons for JUDGMENT
J. K. TRIMBLE J.
Released: July 18, 2024