2129152 Ontario Inc. v. Aviva Insurance Company of Canada

CITATION: 2129152 Ontario Inc. v. Aviva Insurance Company of Canada, 2017 ONSC 4713 COURT FILE NO.: CV-15-540139 DATE: 20170823

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: 2129152 Ontario Inc., Plaintiff AND: Aviva Insurance Company of Canada, Defendant

BEFORE: Carole J. Brown, J.

COUNSEL: Andrew Porter, for the Plaintiff Rovena Hajderi, for the Defendant

HEARD: July 31, 2017

ENDORSEMENT

Background

[1] The moving party plaintiff, 2129152 Ontario Inc. (“the plaintiff” or “the insured”), brings this motion for summary judgment.

[2] The action arises from a fire loss which occurred during the overnight hours of November 11 and 12, 2013 in a commercial rental property of which the moving party is the landlord. The moving party seeks to enforce an indemnity under a commercial property insurance policy issued to it by the defendant, Aviva Insurance Company of Canada (“Aviva” or “the insurer”).

Facts Not In Dispute

[3] The facts which are not in dispute are as follows. A fire occurred in the overnight hours of November 11 and 12, 2013, causing extensive fire, smoke and water damage to the commercial premises of the plaintiff, which had been rented to a fitness club.

[4] The plaintiff advised the defendant insurer, through the plaintiff’s insurance agent, of the loss on November 12, 2013. It further retained its preferred contractor, Liman Enterprises Inc. (“Liman”), as well as Servicemaster Toronto (Vaughn) to provide quotes for the cleanup work required.

[5] Liman provided an estimate for the cleaning and sanitizing of the property after the fire in the amount of $763,355.54. Servicemaster Toronto also provided a quote in the amount of $820,036.85. Liman was retained to do the cleanup work. There is no evidence to suggest that this was initially communicated to Aviva.

[6] Pursuant to the insurance policy, Aviva is entitled to access the property to inspect and determine the value of the loss.

[7] Pursuant to the plaintiff landlord’s commercial lease agreement with the fitness club lessee, it was obligated to clean up any damage to the property with all reasonable speed in accordance with all applicable obligations to repair contained in the lease.

[8] Cleanup work, undertaken by Liman, began on November 13 or 14, 2013, and the bulk of the work was completed on or about November 21, 2013.

[9] David Gelbloom, in-house counsel for the plaintiff, met with the insurer’s Field Service Representative assigned to this loss, Angela Choi, on November 15, 2013 to discuss the insurance coverage for the fire damage. Ms. Choi remained on the file until it was transferred to Craig Narbey in the Large Losses Department on December 2, 2013.

[10] As regards the cleanup, the plaintiff paid its contractor, Liman Enterprises Inc. (“Liman”), $818,992.16 plus HST. This was below the quote prepared by Servicemaster Toronto in the amount of $820,036.85.

[11] Coverage is not in issue. However, Aviva has contested the amount paid for cleanup and, to date, has paid out $420,704.55, including loss of rental income in the amount of $36,000.

Facts In Dispute

[12] The facts as presented by the parties differ in certain critical areas, which I will outline below.

[13] There is a dispute as to whether the plaintiff denied access to the insured’s agent, Servicemaster, on November 13. The plaintiff maintains that Servicemaster attended on November 13 to do the actual emergency cleanup work. Mr. Gelbloom refused to authorize any work to be done by Servicemaster, indicating that the plaintiff had already retained Liman to do the cleanup work. The defendant maintains that Servicemaster attended to assess the loss and to prepare a control report for Aviva.

[14] Ms. Choi’s Claims Memorandum Notes (“the claims notes”) indicate that Aviva had sent out Servicemaster initially to do the cleanup, but their services were declined, as the plaintiff had retained its own cleanup service.

[15] Ms. Choi’s claims memorandum notes as regards the Servicemaster attendance at the plaintiff’s premises indicates that Mr. Gelbloom advised that, while the plaintiff did not wish to have Servicemaster do the cleanup, Aviva should proceed with their investigation and send out Servicemaster to quote on the job. There is no evidence to indicate that such a quote was ever obtained by Aviva. It is the position of Aviva that they intended to do a quote and were refused access to the property by the plaintiff insured, contrary to the obligation of the insured to permit the insurer access.

[16] In his cross-examination on his affidavit, Mr. Gelbloom indicated that at that meeting, Ms. Choi had explained the process and indicated that Aviva required a control loss estimate and had asked Servicemaster to provide an estimate of the cleanup costs. He understood that, while he could engage any contractor he wished to do the actual cleanup work, Aviva would only reimburse the plaintiff for costs not in excess of the estimate prepared by Servicemaster, which is known as a “control report”.

[17] It appears from the cross-examination of Mr. Gelbloom that confusion as to the Servicemaster entity being discussed commenced at that time. It appears from the evidence that an employee of the plaintiff had contacted Servicemaster Toronto, as well as Liman to provide quotes for work to be done on November 12. However, the evidence suggests that Ms. Choi was, throughout, referring to Servicemaster Newmarket, Aviva’s preferred provider.

[18] There is no evidence to indicate whether anyone specified the Servicemaster entity to which each party was referring. It appears that both parties referred simply to “Servicemaster”.

[19] On November 20, Mr. Gelbloom spoke with Ms. Choi indicating that he had met with Servicemaster, which had provided an estimate for cleanup of $700,000. Her claims memorandum indicates that she was surprised by the amount and would follow-up with Servicemaster as she had not received a report from them. At that time, she indicated that the plaintiff could proceed with the work, but that they would only be reimbursed by Aviva to a maximum of the Servicemaster control quote.

[20] On November 21, Mr. Gelbloom forwarded a copy of the Servicemaster report, as well as his lease to Ms. Choi, who received it on the same day, as confirmed in her notes. Her notes indicate that she realized once she received the Servicemaster report that it was an estimate from Servicemaster Toronto and not Servicemaster Newmarket, which was Aviva’s preferred service provider. There is no evidence to suggest that there was any further contact at that time, nor that she followed up to highlight the confusion or misunderstanding.

[21] On December 2, Mr. Narbey took over the loss claim, and spoke with Mr Gelbloom on December 5, which discussion he confirmed in correspondence of December 10, 2013, when he first referred in said letter to Servicemaster Newmarket, its preferred contractor. Mr. Gelbloom, in cross-examination, indicated that this reference to “Newmarket” did not register with him at the time.

[22] In March 2014, Mr. Narbey advised Mr. Gelbloom that Aviva did not have a Servicemaster quote for the cleanup, and Mr. Gelbloom provided a copy of the Servicemaster Toronto estimate he had sent to Ms. Choi on November 21, 2013. He advised Mr. Darby that, based on Ms. Choi’s instructions, the plaintiff had retained its own contractor, Liman, to do the cleanup work, using the Servicemaster Toronto quote as the control quote.

[23] On March 23, 2014, Mr. Narbey contacted Mr. Gelbloom and advised that Servicemaster Newmarket was the preferred contractor and not Servicemaster Toronto. Mr. Gelbloom advised that he had understood that Servicemaster Toronto had been asked by Aviva to prepare the estimate.

[24] An estimate was ultimately done by Servicemaster Newmarket at the request of Aviva. However, this was after all work was done and was not based on visual inspection of the initial damage. Aviva’s estimate was in the amount of $298,523.86 plus HST.

Positions of the Parties

Position of the Plaintiff

[25] It is the position of the plaintiff that it fulfilled all of its obligations vis-à-vis the insurer, followed the insurer’s instructions and, as regards the particular factual matrix set out above, the insurer is estopped by representation and conduct from disagreeing with the value of the loss reflected in the Liman invoices due to the representations and conduct of Ms. Choi. It is the plaintiff’s position that Ms. Choi failed to follow up as regards the Servicemaster quote, failed to be specific as regards the Servicemaster entity to be used (Newmarket versus Toronto) and on November 21, when it should have been obvious to Ms. Choi that Servicemaster Toronto and not Servicemaster Newmarket had been used by the plaintiff, no action was taken on her part or on that of anyone at Aviva to raise this issue. I note that by November 21, the majority of the emergency cleanup and repair work had been completed.

[26] The plaintiff maintains that all evidence necessary to conclude that estoppel applies is in the paper record before the Court, such that all facts and inferences may be drawn therefrom.

[27] As regards the evidence, the plaintiff maintains that the defendant has failed to put its best foot forward and provide an affidavit from Ms. Choi, who served as Aviva’s agent in the first days and weeks after the fire loss when the initial instructions were being given to the insured, and the initial communications occurred.

[28] The plaintiff further takes the position that there was a breach of duty of good faith in the performance of Aviva’s contractual obligations under the policy and, particularly, as regards Aviva’s Code of Customer Rights and Responsibilities and the customer’s right to be fully informed with clear information. While the plaintiff concedes that this is not a case like Whitten v Pilot, it nevertheless maintains that the manner in which it was treated involved bad faith, meriting damages.

[29] Finally, on the basis of the circumstances of this case, it maintains that it is entitled to enhanced prejudgment interest in the amount of 13% on the basis that, if it had not been for Aviva’s breach of obligations under the policy, the plaintiff could have had the benefit of the damages to which it is entitled available to be invested in its business, earning at least 13% interest.

[30] As regards the defendant’s demand that the dispute regarding the value of the loss be determined through the appraisal process pursuant to the Insurance Act, sections 128 and 148, the plaintiff maintains that this is a coverage dispute, which is properly the subject of an action. Further, due to the conduct and representations of Ms. Choi, the insurer is estopped from availing itself of the assessment procedure under section 128 of the Insurance Act, which the insurer seeks to invoke.

Position of the Defendant

[31] It is the position of the defendant that the plaintiff breached its obligations under the insurance policy by failing to permit the agent of the insurer, Servicemaster, to inspect the premises for purposes of providing Aviva with a control report when it attended on November 13. It maintains that, unbeknownst to Aviva, the insured had already retained Liman and Servicemaster Toronto to provide estimates. It takes the position that the insured should have known that Aviva required its own control report, which would represent the maximum payable to the insured for cleanup and repairs. The defendant maintains that the plaintiff failed to provide any evidence as to why the plaintiff retained Servicemaster Toronto on November 12 or on whose instruction and authorization.

[32] It is Aviva’s position that it was clear in indicating to the insured that Aviva would have to obtain a control quote and would pay for cleanup and repairs only to the maximum of that control quote.

[33] Aviva maintains that the plaintiff failed to put its best foot forward and provide all necessary information to establish a case for summary judgment. It states that a lawyer’s affidavit, namely that of Mr Gelbloom, should not have been used and should be cautiously relied upon by this Court.

[34] Aviva further takes the position that the plaintiff has failed to provide all necessary documentation in support of the expenses claimed.

[35] It is the position of the insurer, Aviva, that summary judgment is not appropriate in the circumstances of this case. Rather, Aviva maintains that it is entitled statutorily to an appraisal, pursuant to sections 128 and 148 of the Insurance Act.

[36] As regards an Insurance Act appraisal, the parties have agreed and confirmed at the time of the hearing of this motion that in the event that the summary judgment motion is not successful, the plaintiff will proceed to an appraisal under the Insurance Act. Given this agreement, I do not propose to make any ruling as regards the applicability pursuant to the Insurance Act of an appraisal, as originally requested by Aviva in its cross-motion.

Summary Judgment

The Law

[37] Pursuant to Rule 20, summary judgment shall be granted where there is no genuine issue requiring a trial.

[38] In Hryniak v Mauldin, 2014 SCC 7, [2014] S.C.J. No. 7, the Supreme Court of Canada determined that there would be no genuine issue requiring a trial where a judge is able to reach a “fair and just determination on the merits” of the case. This will be the case when the process: (1) permits the judge to make the necessary findings of fact on the basis of the evidence adduced, (2) allows the judge to apply the law to the facts, and (3) is a proportionate, more expeditious and less expensive means to achieve a just result.

[39] Pursuant to Hryniak, the motion judge should first determine if there is a genuine issue requiring a trial based only on the evidence before the court, without using the new fact-finding powers set forth in Rule 20.04. There will be no genuine issue requiring a trial if the summary judgment process provides the court with the evidence required to fairly and justly adjudicate the dispute and is a timely, affordable and proportional procedure. If there appears to be a genuine issue requiring a trial, the motion judge should determine if a trial can be avoided by using the new powers under Rules 20.04(2.1) and (2.2). The judge may, at his or her discretion, use those powers, provided that doing so does not offend the interest of justice, i.e., that it will lead to a fair and just result and will serve the goals of timeliness, affordability and proportionality in light of the litigation as a whole.

[40] The moving party bears the onus of establishing that there is no triable issue. However, a responding party must “lead trump or risk losing”: 1061590 Ontario Limited v Ontario Jockey Club, 1995 CanLII 1686 (ON CA), [1995] O.J. No. 132, 21 O.R. (3d) 547 (Ont.C.A.). The responding party may not rest on the allegations or denials in the pleadings, but must present by way of affidavit or other evidence, specific facts and coherent, organized evidence demonstrating a genuine issue. The motions judge is entitled to assume that the record contains all evidence that the parties will present if there is a trial. It is not sufficient for the responding party to say that more and better evidence will be available at trial. The court must take a “hard look” at the evidence to determine whether there is a genuine issue requiring a trial.

[41] In the circumstances of this case, based on all of the evidence before me, I find that there are genuine issues requiring a trial. I am not satisfied that I am able to make a fair and just determination of the issues on the merits and to make the necessary findings of fact on the basis of the record before the Court, nor using the new powers available to the Court pursuant to Rules 20.04(2.1) and (2.2). I am of the view that in the circumstances of this case and based on the evidence before me, a fair and just determination of the issues before the Court can only be made on a full evidentiary record, with viva voce evidence and, potentially, assessments of credibility as necessary, in order to reach a fair and just determination of the issues on the merits. I do not find that summary judgment, in the circumstances of this case, is a proportionate, more expeditious and less expensive means to achieve a just result.

[42] It would appear in this case that there was a significant amount of confusion, and miscommunication on the part of both parties as regards the use of Servicemaster, or who the preferred service provider for Aviva was. There was clearly a misunderstanding and a lack of communication on the parts of both parties. While the plaintiff was referring to Servicemaster Toronto, Aviva was referring to Servicemaster Newmarket.

[43] There remains a significant dispute as regards whether there was a breach of the policy provisions on the part of the plaintiff by failing or refusing to provide access to the agent of the insurer, Servicemaster, to inspect the property for purposes of a control report, whether anyone from the insured realized that the Servicemaster that they had retained on November 12 and the Servicemaster that attended the plaintiff’s premises on November 13 were different entities, or whether there was an error on the part of Servicemaster as regards the reasons for attendance at the property as maintained by the plaintiff.

[44] Further, there remains a dispute as to whether there were any breaches of its obligations under the policy on the part of Aviva.

[45] These issues in turn affect the outcomes of the other issues raised.

[46] As regards the allegations of both sides regarding the evidence put before the Court by each party, the plaintiff’s lawyer’s affidavit is appropriate as he was the one involved in the communications with Aviva. In this regard, I do not accept the defendant’s submissions. As regards the defendant’s evidence, Ms. Choi did not provide an affidavit. The defendant argued that Mr. Narbey, the affiant, read all of her claims notes, such that her affidavit evidence was not necessary. However, upon questioning by the Court, Counsel for the defendant conceded that the evidence of Ms. Choi would have been valuable given that it was she who had the critical discussions with Mr. Gelbloom in the initial days after the loss.

[47] In this case, as set forth above, there are genuine issues requiring a trial which cannot be determined on the evidence before this Court.

[48] Accordingly, the motion is dismissed. I understand that the parties wish to proceed on the basis of their agreement in this regard to an appraisal pursuant to the Insurance Act, sections 128 and 148. Otherwise, the action is to proceed expeditiously to trial.

Costs

[49] I would urge the parties to agree upon costs, failing which I would invite the parties to provide any costs submissions in writing, to be limited to three pages, including the costs outline. The submissions may be forwarded to my attention, through Judges’ Administration at 361 University Avenue, within thirty days of the release of this Endorsement.

Carole J. Brown, J.

Date: August 23, 2017