CITATION: 56 King Inc. v. Aviva Canada Inc., 2016 ONSC 7139
COURT FILE NO.: (Kitchener) C-165-14
DATE: 2016-11-21
ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N:
56 KING INC.
J. Sebastian Winny, for the Plaintiff/Respondent
Plaintiff/Respondent
- and -
AVIVA CANADA INC.
Elizabeth Bowker, for Defendant/Moving Party
Defendant/Moving Party
HEARD: October 24, 2016 in Kitchener
REASONS FOR JUDGMENT
The Honourable Mr. Justice T. Lofchik
[1] In this action the plaintiff, 56 King Inc., seeks payment of funds from its insurer, Aviva Insurance Company of Canada (hereinafter referred to as “Aviva”), for the costs of repairing structural damage caused by a windstorm, accounting costs and for an alleged loss of rental income while the insured building was undergoing reconstruction. The plaintiff also seeks damages for bad faith and punitive damages, reportedly resulting from Aviva’s initial denial of the claim under the policy.
[2] The structural damage was reported to Aviva on August 3, 2013. Coverage was denied August 19, 2013.
[3] The statement of claim in the within action was issued on February 14, 2014. Aviva’s statement of defence was served on April 8, 2014. Aviva’s draft affidavit of documents was served December 18, 2014 and its Schedule “A” documents provided to the plaintiff January 6, 2015.
[4] Documentation in support of the plaintiff’s claim for damages under the policy was not received until August, 2015. Upon receipt of these documents, settlement discussions were initiated in November, 2015 but did not result in resolution.
[5] By way of response to a Request to Admit dated January 7, 2016, Aviva agreed that there was coverage under the policy. After receiving Aviva’s response to a Request to Admit, the plaintiff elected not to conduct an examination for discovery of Aviva and has indicated its intention to proceed straight to trial.
[6] By letter dated January 25, 2016, Aviva elected to proceed with an appraisal pursuant to s. 148, Statutory Condition 11 of the Insurance Act with respect to the quantum of monies recoverable under the policy. The same letter advised that Stephen Agnew was appointed as the appraiser on behalf of Aviva.
[7] Aviva does not seek to have the claims related to bad faith and punitive damages determined by way of appraisal process.
[8] The plaintiff’s counsel was also advised on January 25, 2016 that, pursuant to s. 128 of the Insurance Act, the plaintiff was required to provide Aviva with the name of its appointed appraiser within seven clear days after being served with written notice.
[9] The plaintiff has not appointed an appraiser on its behalf, nor has it shown any cause that an appraiser cannot be appointed in a timely fashion. Instead the plaintiff has taken the position that the appraisal process is not available to Aviva.
[10] As a result of the position taken by the plaintiff, Aviva has brought this motion claiming the following relief:
a) A declaration that the value of losses regarding structural damage, accounting costs, and for any loss of rental income while the building was undergoing reconstruction is capable of being determined by appraisal;
b) If the requested declaration regarding appraisal is granted,
i) An Order under s. 128(5) of the Insurance Act requiring the plaintiff to appoint an appraiser on its behalf and at its expense, within seven (7) days of the date of this Order, and requiring the parties to comply with the provisions of s. 148, Statutory Condition 11 and s. 128 of the Insurance Act with respect to the plaintiff’s claim for recompense for amounts covered by Insurance Policy Number CMPS1265277;
ii) If the plaintiff fails to appoint an appraiser of its choosing within seven (7) days of the date of this Order, an Order appointing Sebastian Winny as the appraiser for the plaintiff;
iii) An Order requiring the appraisers appointed on behalf of the parties to elect an umpire within 15 days of the appointment of an appraiser on behalf of the plaintiff;
iv) If the plaintiff’s appraiser fails to propose an umpire within 15 days of his/her appointment, an Order providing that the appraiser appointed on behalf of Aviva is able to appoint an individual of his choosing as the umpire;
v) An Order that the parties attend mediation with respect to the remaining allegations and damages claimed in the Statement of Claim, namely the allegations against Aviva involving bad faith and punitive damages (the “Bad Faith Allegations”);
vi) An Order granting a stay of this action (relating to the allegations against Aviva involving bad faith and punitive damages (the “Bad Faith Allegations”) until such time as the appraisal has been concluded;
d) If this Honourable Court finds that the appraisal process does not apply to this action, an Order granting leave to Aviva to conduct the examination for discovery of the plaintiff despite the action being set down for trial;
e) Costs of this motion on a substantial indemnity scale if opposed; and
f) Such further and other relief as counsel may advise and this Honourable Court may deem just.
Issues and the Law
[11] The following issues are to be determined on this motion:
a) Whether the quantum of loss covered under the policy should be dealt with by way of appraisal; and
b) If so, setting out the timelines and processes by which the parties should proceed to ensure an appraiser on behalf of the plaintiff and an umpire are both appointed in a timely manner.
[12] Pursuant to the statutory conditions articulated at s. 148 of the Insurance Act, each contract of insurance made in Ontario must contain the following condition:
- 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 proof of loss has been delivered.
Section 148 of the Insurance Act, R.S.O. 1990, c. 1.8, as amended
[13] Section 128 of the Insurance Act stipulates as follows:
Contracts providing for appraisals
- (1) This section applies to a contract containing a condition, statutory or otherwise, providing for an appraisal to determine specified matters in the event of a disagreement between the insured and the insurer. R.S.O. 1990, c. I.8, s. 128 (1).
Appraisers, appointment
(2) The insured and the insurer shall each appoint an appraiser, and the two appraisers so appointed shall appoint an umpire. R.S.O. 1990, c. I.8, s. 128 (2).
Appraisers, duties
(3) The appraisers shall determine the matters in disagreement and, if they fail to agree, they shall submit their differences to the umpire, and the finding in writing of any two determines the matters. R.S.O. 1990, c. I.8, s. 128 (3).
Costs
(4) Each party to the appraisal shall pay the appraiser appointed by the party and shall bear equally the expense of the appraisal and the umpire. R.S.O. 1990, c. I.8, s. 128 (4).
Appointment by judge
(5) Where,
(a) a party fails to appoint an appraiser within seven clear days after being served with written notice to do so;
(b) the appraisers fail to agree upon an umpire within fifteen days after their appointment; or
(c) an appraiser or umpire refuses to act or is incapable of acting or dies, a judge of the Superior Court of Justice may appoint an appraiser or umpire, as the case may be, upon the application of the insured or of the insurer. R.S.O. 1990, c. I.8, s. 128 (5); 2006, c. 19, Sched. C, s. 1 (1).
Section 128 of the Insurance Act, R.S.O. 1990, c. 1.8, as amended
[14] The above wording has been incorporated into the policy in question in this action and it is expressly applicable to all perils insured by the policy. A specific demand for appraisal has been made in writing by Aviva and the plaintiff has delivered a proof of loss.
[15] The plaintiff takes the position that the appraisal process is not available to Aviva and that Aviva’s election for appraisal is too late. Aviva’s motion was not brought until two and-a-half years after the loss, two years after the action was commenced, and after the action was set down for trial and in the face of assignment court when the pretrial conference and trial would otherwise be scheduled.
[16] The plaintiff also argues that the process being sought by Aviva, namely determination of the compensatory damages by appraisal and determination of the punitive damages issues via jury trial amounts to a bifurcation of the trial.
[17] The plaintiff also argues that the court has no jurisdiction to grant the requested relief because it is a matter which should have been brought by way of an application and not by motion.
Analysis
[18] Counsel for the plaintiff argues that this court has no jurisdiction to grant declaratory relief and other related relief because the defendant has not pleaded s. 148 of the Insurance Act in the action. S. 148(1) of the Insurance Act does not contemplate the matter of appraisal to be raised in pleadings, but rather by demand made in writing. There has been a demand made in writing and the plaintiff has failed to proceed as required by the provisions of the Insurance Act. It is therefore appropriate for the defendant to bring a motion in the action which claims recovery under the policy for insured losses to have the quantum of recovery determined by appraisal pursuant to the provisions of s. 128 and s. 148 of the Insurance Act effectively staying that part of the claim for relief in the action and requesting a stay of the balance of the claim as pending the completion of the appraisal.
[19] The plaintiff relies upon provisions of the Rules of Civil Procedure intended to avoid undue delay, the fact that the defendant has taken fresh steps in the action by delivering a statement of defence, demanding and receiving documentary discovery, and providing documentary discovery to the plaintiff, and the fact that this motion was not brought until two and-a-half years after the loss and two years after the action was commenced, to argue the delay has precluded the defendant from requiring the appraisal process mandated by the Insurance Act to determine the quantum of recovery under the policy.
[20] The Rules of Civil Procedure have no application to the procedure mandated by the provisions of the Insurance Act.
[21] So far as delay is concerned, the plaintiff’s counsel argues that s. 128 assumes that recourse to the appraisal process will be had without delay and relies on the decision in 1633092 Ontario Ltd., [2009] O.J. No. 2628 (SCJ) where the court dismissed the insurer’s request for an appraisal more than one year after the insurer filed an amended defence. That decision was followed in Ouellette Estate v. North Waterloo Farmers Mutual Insurance Company, 2015 ONSC 1651, where a motion for appraisal brought in February, 2015 in an action scheduled for trial in October, 2015 was dismissed as having been brought too late.
[22] These decisions fly in the face of the mandatory wording of Statutory Condition 11 and s. 148 of the Insurance Act that the matter of value of property insured, property saved, and the amount of loss shall be determined by appraisal as provided in the Insurance Act.
[23] A determination of the disputed value of loss is mandated in an appraisal mechanism under the Insurance Act. S. 148, Statutory Condition 11 of the Insurance Act provides that in the event of a disagreement as to the value of the property insured, that issue shall be determined by appraisal. The very terms of s. 148, Statutory Condition 11, evidence is a legislative intent that the determination of the disputed value of the loss must be resolved by appraisal before there can be any recovery on the contract. This necessarily implies a continued availability of the appraisal process despite the commencement of any action. The same section provides that all disputed questions of value are to be determined by appraisal independently of all other questions arising under the insurance contract.
The mechanism of appraisal and dispute resolution under s. 148 and s. 128 of the Insurance Act is an efficient and cost-saving measure available to the parties to effectively resolve their dispute.
Greer v. Co-Operators General Insurance Co. [1999] O.J. No. 3118, per Shaughnessy J. at paras. 8 and 10.
[24] In Seed v. ING Halifax Insurance, 2002 CanLII 79669 (ON SC), [2002] O.J. No. 1976 (S.C.J.), Wright J. held at paras. 8 and 9:
[8] By Statutory Condition No. 11 of s. 148 of the Insurance Act and s. 128 of the Insurance Act, the legislature has removed from the court the assessment of damages arising under these polices of insurance and has left damages to be determined by the longstanding procedure of “appraisal”.
[9] This process is mandatory. No action for recovery under the policy may be taken until the issues in dispute as to damages are settled by the process of appraisal. The intention of Statutory 11 is unambiguous and cannot be unilaterally waived either by the insurer or the insured in the event of a disagreement. The statutory condition to which both parties agree is clear. There must be an appraisal before there can be any recovery under the policy.
[25] Counsel for the plaintiff argues that the use of the word “may” in subsection (c) of subsection (5) of s. 128 suggests that a judge of the Superior Court of Justice has the discretion to appoint an appraiser or umpire in a situation where one party fails to appoint an appraiser ((a)), the appraisers fail to agree on an umpire ((b)) or an umpire refuses to act ((c)). I find this argument to be without merit considering the use of the word “shall” in s. 148 of the Act and in subsections (2), (3), and (4) of s. 128.
[26] There is no timeline in either the policy or the Insurance Act that stipulates a deadline by which an election for appraisal must be made and after which the right to same is lost. The only conditions set out in either the policy or the statute are that:
(a) There be a disagreement as to the value of the property insured, the property saved or the amount of the loss,
(b) A specific demand for appraisal is made in writing, and
(c) The appraisal cannot proceed until after proof of loss has been delivered.
[27] All of these conditions have been met. Further, there is no prejudice that may arise for the plaintiff by having the value of the covered loss adjudicated by the appraisal process. It is in my view likely that the appraisal process may enable a determination to be made more expeditiously than determination of the issue by a jury and allows for a selection of an umpire who is well-versed in matters of this kind. It has been held that the appraisal process is an “efficient and cost-saving measure available to the parties to effectively resolve their dispute.”
Greer supra, para. 10.
[28] The fact that the plaintiff’s claim includes allegations other than those that centre on coverage is not a bar to the right to an appraisal. Ontario courts have explicitly recognized that the right to invoke the appraisal process continues to exist despite the commencement of an action including claims other than the issue of quantum of recovery under the policy.
[29] Plaintiff’s counsel argues that what is being attempted by the defendant is a bifurcation of the trial as contemplated by the Rules. In my view, this is not a bifurcation where the same trier of fact is being asked to determine both parts of the claim, albeit at different times. The thrust of the appraisal process is that the quantum portion of the claim falls outside the jurisdiction of the court and is rightly held by the umpire in the appraisal process. The plaintiff’s right to have the issue of quantum payable under the policy be determined by a jury has been taken away by statute by virtue of the provisions of the Insurance Act. However, the plaintiff’s right to proceed to have the other issues tried by a jury are not affected.
[30] It is not a novel concept to have the issue of damages under an insurance policy determined by way of the Insurance Act appraisal, and putting to a jury the questions of liability and damages relating to bad faith allegations in the adjustment of the insurance claim (including punitive damages for breach of good faith and the handling of the insurance claim). See DiBattista v. Wawanesa Mutual Insurance Co., 2006 CanLII 33544 (ON CA), 2006 83 O.R. (3d) 302 (ON CA).
[31] Accordingly, it is ordered that the quantum of the insured plaintiff’s claim for damages under the provisions of the policy be determined by appraisal and that the parties comply with the provisions of s. 148, Statutory Condition 1 and s. 128 of the Insurance Act.
[32] It is further ordered that the claims made in this action for recompense for the amounts covered by insurance policy no. CMPS1265277 be stayed.
[33] If the plaintiff fails to comply with the provisions of subsections (2), (3), or (4) of s. 128 of the Insurance Act, the defendant may move under (5) for any relief required.
[34] All other claims for relief contained in the amended notice of motion are dismissed.
[35] If the parties cannot agree on costs, they may make written submissions consisting of no more than five pages in the font size required by the Rules of Civil Procedure, with the moving party defendant to provide submissions within 15 days of this order, the plaintiff’s response to be within 10 days of receipt of the defendant’s submissions and reply by the defendant within 10 days following receipt of the plaintiff’s submissions.
Lofchik J.
Released: November 21, 2016
CITATION: 56 King Inc. v. Aviva Canada Inc., 2016 ONSC 7139
COURT FILE NO.: (Kitchener) C-165-14
DATE: 2016-11-21
ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N:
56 KING INC.
Plaintiff/Respondent
- and -
AVIVA CANADA INC.
Defendant/Moving Party
REASONS FOR JUDGMENT
TRL:mw/co
Released: November 21, 2016