Court File and Parties
Court File No.: 12-55732 Date: 2016/08/22 Superior Court of Justice - Ontario
Re: HOG HAVEN INCORPORATED, DEVON HAKVOORT and ARNIE HAKVOORT, Plaintiffs And: NORTH WATERLOO FARMER’S MUTUAL INSURANCE, Defendant
Before: Mr. Justice Calum MacLeod
Counsel: Douglas G. Menzies, for the Plaintiffs Pierre Champagne, for the Defendant
Heard: July 11, 2016
Endorsement
[1] This is a motion for summary judgment in a fire loss insurance case. To be more precise, it is the remnant of a motion for summary judgment. The plaintiff concedes that all amounts owed by the defendant under the policy have now been paid but he seeks an order for costs, for enhanced pre-judgment interest, and for certain professional fees incurred to prove his claim.
[2] I disagree with the submissions of counsel for the defendant that the court lacks jurisdiction to deal with these matters. Just because the amount owing has been paid and is no longer in dispute does not deprive the court of jurisdiction. A payment made during litigation and in advance of judgment might stop the running of interest but it would not deprive the court of the capacity to award interest up to the date of payment in an appropriate case. The residual issues of pre-judgment interest, costs or other issues contained in the pleadings and in the summary judgment motion remain before the court until the action is dismissed. In addition, of course, the court has broad remedial powers. Claims with merit are not generally to be defeated by technicalities.
[3] Jurisdiction is one thing. The merits are another. The question raised by the motion is whether the plaintiff is entitled to further compensation or whether the action should now be dismissed. Based on the evidence before me, including the procedural history of the action, I am of the view that the defendant has now discharged all of its obligations to the plaintiff and it would be unjust to grant the relief sought by the plaintiff. On the other hand, despite the outcome of the motion, it would not be just to award costs to the defendant. The appropriate disposition is to dismiss this action without costs.
Background
[4] The relevant facts may be briefly stated.
[5] Devon Hakvoort is now the only plaintiff. Originally his father, Arnie Hakvoort and the family corporation, Hog Haven Incorporated were also named. The Hakvoorts are farmers and owners of a substantial hog farming operation. At some point in time, the family had decided to develop a new farm and to transfer ownership of the original farm to Devon. In June of 2011 Devon took over the home farm and Hog Haven transferred its operation elsewhere.
[6] Just four months later, on October 16, 2011 there was a devastating fire which completely destroyed several farm buildings, equipment and livestock. The heat was so intense that the animals actually burned and it was impossible to verify the number of hogs destroyed in the fire through examination of the remains.
[7] The farm was insured under a comprehensive farm owner’s policy of insurance. The policy provided coverage for loss of buildings, equipment and livestock. For a defined period of time, the policy also provided compensation for business interruption and loss of profits. This meant that the plaintiff faced a significant time constraint since there was a limited time to rebuild and to return the farm operation to profitability. The loss was reported promptly and an adjuster was appointed. For the most part, the adjustment of the claim proceeded smoothly and the insurer readily paid approximately $1.2 million.
[8] The claim ran into some difficulty over the business interruption claim. The plaintiff concedes that the calculation of these aspects of the claim was complicated. This was partly due to the level of destruction, and partly to do with difficulty in establishing a profit history for the farm under its new ownership. This was further complicated by the moving target created by fluctuation in the price of pork. In any event, the relationship between the plaintiff and the adjuster apparently became more difficult as time went on.
The Insurance Policy
[9] The policy of insurance is a lengthy and complex document consisting of a series of “Forms” and “Endorsements”. The business interruption coverage is set out in a two page “Profits Endorsement Form” attached to the Property Insurance Policy. The policy requires careful reading because it contains various coverages, exclusions, limits and co-insurance provisions. The policy itself does not name the parties as it uses the terms “you” for the insured and “we” for the insurer. As is the usual practice with insurance policies, the document that binds the parties to the policy is set out in a separate document and the policy is incorporated by reference.
[10] The “Declaration Page” which contains a summary of coverage is itself an 11 page document to which is attached a “subscription form”. Although all of the declaration pages contain the logo and name of North Waterloo Farmers Mutual Insurance Company, the subscription form sets out a list of subscribing insurers indicating that North Waterloo is providing 100% of liability insurance and 50% of the property insurance. AXA Insurance (London) – which is now part of Intact Insurance [1] – is providing the remaining 50% of the property insurance. The latter includes the “Profits Endorsement”. It is the subscription page that contains the signature lines and the signatures of the authorized representatives of the insurers. Careful reading of the signature page would have shown that there was more than one insurer.
[11] Though the plaintiff’s counsel attempted to describe the relationship between North Waterloo and Intact as “reinsurance”, that is not accurate. The subscription page makes it clear that there are two insurers. Notwithstanding this fact, it appears that the plaintiff always dealt with North Waterloo and appears not to have been aware of the exact nature of Intact’s involvement until quite recently. It appears that the insurance claim was submitted and processed through North Waterloo. For purposes of adjusting the claim, it may be that North Waterloo was acting as agent for Intact, but that is not conceded by counsel for the defendant and it is not necessary to determine that question for purposes of the motion. When litigation was commenced, only North Waterloo was named as a defendant.
The Litigation
[12] The litigation was commenced on October 12th, 2012 just prior to the first anniversary of the loss. The claim was evidently issued to protect against a potential one year limitation period. I will not say much about the original pleading other than to observe that it was a document completely lacking in particulars. In fact it was not really a statement of claim at all. It was a short document of a few paragraphs including one which stated “As the parties are still negotiating as of the date of this claim”, this is a “pro forma claim in case the limitation period is October 16, 2012” and would be “amended if the action proceeds”. It also stated “While to the plaintiff’s knowledge the policy is with NW only, the plaintiffs state that the litigation finger points at any other insurer who unbeknownst to them owes indemnity under the insurance contract”. Obviously this document does not comply with Rule 25 of the Rules of Civil Procedure and “the litigation finger” language strongly suggests that the plaintiff had some inkling about there being more than one insurer.
[13] The reality is that North Waterloo was not aware of the litigation and adjusting of the claim simply continued. The document was not served on North Waterloo until 7 months after it was issued. Pursuant to the former Rule 48.15 of the Rules of Civil Procedure the action was administratively dismissed on June 6th, 2013. North Waterloo than consented to an order reinstating the action and permitting the defendant until January 31, 2014 to deliver a defence.
[14] In the latter part of 2013 North Waterloo appointed counsel and a demand for particulars was served. When no particulars were forthcoming, North Waterloo launched a motion to strike out the statement of claim because it failed to comply with the requirements of a proper pleading under Rule 25 of the Rules of Civil Procedure. In the face of that motion, the plaintiff served a much more compendious “amended claim”. Counsel for North Waterloo believed the new pleading was also improper. Finally on the eve of the pleadings motion, agreement was reached concerning the form of an “amended amended statement of claim”. North Waterloo was awarded $1,000.00 costs “in the cause”. That occurred on July 24th, 2014.
[15] By the time the pleading was finalized, the plaintiff had received approximately $1.4 million under the policy. The plaintiff continued to work on finalizing the business interruption claim and certain other heads of damage. It should be noted that the “amended amended statement of claim” was a lengthy document which was primarily a claim for bad faith damages. The bad faith claim has subsequently been abandoned and in retrospect it was ill conceived.
[16] In September of 2014 for the first time, the plaintiff sought to move forward to mediation under Rule 24.1 of the Rules of Civil Procedure but the defendant resisted this. Affidavits of documents had not been exchanged. The defendant sought production and also the delivery of a sworn proof of loss.
[17] A sworn proof of loss is required under contracts of fire insurance pursuant to s. 148, Statutory Condition no. 6 of the Insurance Act [2]. While the Act requires the proof of loss as soon as practicable, it is not uncommon when the parties are having difficulty quantifying a business loss such as this for the statutory declaration to be deferred. Apparently both parties had engaged accountants and had been trying to come to some consensus on the loss but to no avail. In any event, at a case conference in February of 2015, Master Roger [3] made an order permitting a further pleading amendment to remove Arne Hakvoort and Hog Haven as plaintiffs. He ordered Devon Hakvoort to provide a sworn proof of loss.
[18] Statutory Condition no. 11 applicable to fire insurance provides that in the event of disagreement over the value of the property insured … or the amount of the loss, those questions “shall be determined by appraisal” under s. 128 of the Insurance Act if demanded by either party following delivery of a proof of loss. At the case conference, North Waterloo indicated its intention to invoke this process and Master Roger ordered that if it was proceeding in that manner, it do so by March 31, 2015. It was obvious that if this process was engaged, the quantum of the loss would be determined in a manner binding on both parties.
[19] The appraisal process involves each party selecting an appraiser and the two appraisers selecting an umpire. The appraisers are to try to resolve the issues in dispute and if they cannot do so then they are to submit their disagreement to the umpire for determination. North Waterloo invoked the process and after an initial delay involving a threatened motion and a further case conference, it ultimately unfolded as provided by the legislation. The appraisers were able to reach agreement and on September 3rd, 2015 the tribunal rendered an award quantifying the loss. That was not the end of the matter because the quantification of the loss did not take into account all of the payments previously made and it was also necessary to allocate those payments to the different heads of coverage which each had limits. North Waterloo and Intact each had to make their own calculations.
[20] North Waterloo was able to undertake its side of the process fairly quickly and it paid the balance of its obligation on October 1st, 2015. Intact was not as quick. It only satisfied its obligation on January 5th, 2016. In the meantime, the plaintiff had launched the summary judgment motion. The motion materials are dated November 27th, 2015.
[21] The plaintiff concedes that the insurers have now paid all that they are obligated to pay under the terms of the policy of insurance. Nevertheless, the plaintiff has not been made whole. The plaintiff states that he has incurred the following expenses:
a) Professional fees of $42,742.25 paid to Collins Barrow in attempting to quantify his losses; b) $9,455.28 paid to the plaintiff’s appraiser, Francois Allard and $3,379.83 to Bill Neville for his half of the umpire’s fee; c) Interest costs of $22,588.07 in additional carrying costs on his line of credit as a result of the length of time it took to finalize this claim; and, d) Legal costs incurred in pursuing the litigation and the appraisal process.
[22] The plaintiff feels deeply aggrieved by this process. In the view of the plaintiff, it should not have taken five years for the insurers to completely satisfy their obligations. The plaintiff should not have had to spend over $100,000.00 in legal and accounting fees to satisfy the insurers. Had the matter proceeded to mediation at an earlier date instead of through an expensive appraisal procedure, the plaintiff believes the matter might have been resolved. Finally, the insurer should have paid promptly following the appraisal and it should not have been necessary to launch a summary judgment motion.
[23] I have some sympathy for this position. I can understand why the plaintiff who was the innocent victim of a fire loss may feel that he has not been fully compensated as the result of a difficult process. The question before the court however is not a question of sympathy but one of legal entitlement. In the absence of the bad faith claim, the only question is whether the insurer has now paid all that it is contractually obligated to pay. Flowing from that would be the question of pre-judgment interest and costs. As I set out at the beginning of these reasons, I decline to make any further order against the defendant.
Analysis and Rationale
[24] Without attempting to record all of the minutiae set out in the motion material, I have summarized the salient facts and litigation history. I do not think it fruitful to engage in a detailed analysis of every piece of correspondence nor to unnecessarily make findings of fault. The litigation could easily have been avoided.
[25] Firstly, the need to commence litigation because of the limitation period could have been avoided by a tolling agreement. Neither side sought this nor proposed it. Secondly, the appraisal process was always available. Under the Insurance Act where the only question is the value of the loss, the statutory process is specifically designed to avoid the need for litigation. Thirdly, the litigation itself was not actively or properly pursued. The only real litigation activity was the battle over the pleadings. Finally, Intact was never made a party to the proceeding and any delay on the part of Intact in making the final payment cannot be visited on North Waterloo. There is nothing in the record to indicate that for litigation purposes, North Waterloo could bind Intact nor that counsel for North Waterloo was also acting for the other insurer.
[26] I will elaborate on these points briefly. Though I indicated that I would not be unnecessarily ascribing fault and I do not wish to criticize the plaintiff’s previous lawyers unduly [4], it is hard to avoid the impression that the initial steps in the litigation were taken with very little attention to the intricacies of either fire loss claims or of farm insurance. It does not appear that counsel carefully reviewed the declaration pages. Had they done so, the involvement of AXA / Intact would have been apparent.
[27] As discussed, the appraisal process could have been invoked by the plaintiff or the defendant at any time. All that was required as a precondition was a proof of loss. When a proof of loss was finally provided and appraisal invoked, the quantum of the loss was completely resolved within five months. I recognize that the parties had both been diligently working on quantifying the claim outside of this process for several years beforehand but it was always open to the parties to advise each other that this would be the mechanism they would pursue rather than litigation.
[28] Given that the insurer had already paid out almost $1.4 million and was still in the process of adjusting the claim, that no proof of loss had been sworn, and that the insurer had consented to setting aside the administrative dismissal of the action notwithstanding a “pro-forma” statement of claim that had not been served within six months, suing the insurer for bad faith was an excessive and unnecessary step. I will not deal with costs arising from the various iterations of the pleadings however because they were to a large extent dealt with by Justice Toscano Roccamo when she awarded costs of the pleadings motion. This claim was never denied. When a proof of loss was finally served, the insurer simply invoked assessment and paid the amount agreed upon by the assessors less credit for the amounts already paid.
[29] The plaintiff cannot succeed in obtaining compensation for the carrying cost of the line of credit. Nowhere in the pleading is there a claim for pre-judgment interest at anything other than the rate set out in the Courts of Justice Act. Although the claim does purport to seek aggravated damages, the basis for such a claim is not clearly articulated nor is it tied to loan interest. I could award pre-judgment interest under the CJA but in my view there is no basis for doing so. North Waterloo’s obligation to pay the remaining amount in dispute did not arise until the proof of loss was provided and it paid promptly following the completion of the appraisal process. Any delay in the appraisal process was the fault of the plaintiff who initially declined to name an appraiser. While pre-judgment interest against Intact might have been appropriate at least from the date of the appraisal until final payment in January, Intact is not a party to the litigation.
[30] Despite the fact that the involvement of another insurer was apparent by reading the declaration pages and the involvement of Intact must have been apparent once payments were received, Intact was not named as a defendant. While North Waterloo may well have appeared to act as agent of Intact for the purpose of investigating, adjusting and administering the claim, there is no basis for believing that Mr. Champagne was also counsel for Intact.
[31] The plaintiff may have felt compelled to start litigation because of the pending limitation period. This would not have been unreasonable had the statement of claim been properly drafted and if no tolling agreement could be obtained. On the other hand, it cannot be said that the plaintiff was successful in the claim as ultimately drafted. The bad faith claim was abandoned and I have found that there is no further entitlement. Ultimately the plaintiff has been paid all that he is entitled to be paid for this loss under this policy. There would of course have been liability for the balance due under the policy when the claim was commenced so it is also impossible to describe the result as a win for the defendant. In the final analysis, the litigation proved to be largely irrelevant.
[32] The plaintiff spent a great deal on accounting and legal fees but the policy contains limits. One of those limits was $5,000 for professional fees incurred by the insured in proving his loss. The insured could have purchased additional coverage but this was the limit under the policy as drafted. There is nothing in the evidence to suggest that the insurer acted unreasonably. To the contrary, the plaintiff concedes that the combined effect of the change in ownership, extraordinary expenses by Hog Haven in the years prior to the fire, the extent of the destruction and the short period of new ownership made it extremely difficult to quantify the loss of profit.
[33] It is not appropriate to award further compensation to the plaintiff.
[34] On the other hand, I cannot see the justice in awarding costs to the defendant. The plaintiff is limited in his recovery by the terms of the policy but there is no doubt that he has incurred substantial and legitimate costs in proving the loss. If that is a cost of doing business for the plaintiff, then under all of the circumstances, the same can be said of the cost of adjusting the claim and resisting this litigation. The insurer could have advised the plaintiff at an early stage of its intention to invoke assessment and it could have offered at an early stage to waive the benefit of any limitation period until after a proof of loss was filed and the claim was denied. It is true that the final amount paid out to the plaintiff was almost five years after the fire.
[35] Summary judgment is granted only to this extent. The action is dismissed without costs and there will be no costs of the motion. The plaintiff is to pay the defendant the $1,000.00 ordered by Justice Toscano Roccamo.
Mr. Justice Calum MacLeod Date: August 22, 2016