Court File and Parties

Court File No.: CV-15-541763 Date: 2019-05-21 Ontario Superior Court of Justice

Between: 2343697 ONTARIO INC., ZBIGNIEW MARCINIAK, and AGNES TROCZYNSKA, Plaintiffs – and – AVIVA INSURANCE COMPANY OF CANADA, TRADERS GENERAL INSURANCE COMPANY, SCOTTISH & YORK INSURANCE COMPANY LIMITED and WILLIS CANADA INC., Defendants

Counsel: P. Michael Rotondo, for the plaintiffs J. Keenan Sprague, for the defendants other than Willis Canada Inc.

Heard: May 21, 2019

Before: F.L. Myers J.

Reasons for Decision

The Motion

[1] The defendant insurers move for an order that the plaintiffs appoint an appraiser pursuant to s. 128(5) of the Insurance Act, RSO 1990, c I.18 within seven days of this order failing which the defendant insurers may proceed with an appraisal of the plaintiffs’ alleged losses in accordance with the statutory appraisal process.

[2] For the reasons that follow, the order is granted as sought.

The Background Facts

[3] On November 24, 2014, the plaintiffs suffered a loss of property or property damage at their cottage as a result of inclement weather conditions. They made claims under their insurance policies. The only policy that is in issue in this motion is a property insurance policy covering the plaintiffs’ cottage where the damage occurred.

[4] The plaintiffs delivered a form of proof of loss dated May 19, 2015. They commenced this action on December 2, 2015. Examinations for discovery have been held. Mediation was attempted and failed last December. Undertakings were answered in January.

[5] The policy of insurance includes statutory condition 11 under the Insurance Act that provides:

11. 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.

[6] On March 7, 2019, the defendant insurers gave notice to the plaintiffs under s. 128 of the Insurance Act that they had appointed an appraiser. The plaintiffs argue that appraisal is not an appropriate process for this claim and they have declined to date to appoint their own appraiser. Under subsection 128(5), the court is authorized to appoint an appraiser where a party fails to do so within seven days of being served with notice to do so.

The Law

[7] In 56 King Inc. v. Aviva Canada Inc., 2017 ONCA 408, the Court of Appeal held that an appraisal process may be brought while litigation is outstanding. In fact, at para. 5 of the decision, the court found that appraisal is the preferred process for quantifying damages in property insurance cases:

…The legislation signals a decided preference for appraisal, as the authorities note, but the language of s. 128 gives the court discretion to curb abuse. However, there was no abuse on the part of the respondent in this case. On the facts, the appraisal was requested within three weeks of the respondent’s admission of coverage. Therefore, in any event, there was no delay.

[6] Third, we do not agree that the effect of the order is to impermissibly bifurcate the trial. The independent operation of the Insurance Act appraisal process will simply limit and narrow the issues left for the trial, which will continue.

[8] In Seed v. ING Halifax Insurance, 2005 41991 (ON SCDC), Mr. Justice J. Wright was even more pointed in holding:

[13] I have concluded that the process of appraisal is a free standing one which is mandated by the Insurance Act. It must be proceeded with if either party requests it. It is quite distinct from the court action. The determination of the amount of the loss arising from property damage cannot be before the court in the action. (Duncan v. Guardian Insurance Company of Canada, 67 B.C.L.R. 397, [1986] I.L.R. 7932). [Emphasis added.]

Analysis

[9] The plaintiffs argue that the request for appraisal is an abuse of process as it is designed to delay them from setting the action down for trial. It comes very late in the process. Moreover, under the concluding words of statutory condition 11 quoted above, appraisal is only available when the insured has delivered its proof of loss. The plaintiffs argue that the insurers have defended this claim on the merits principally on the basis that the plaintiffs have failed to provide a completed proof of loss. Moreover, in response to a recent request to admit, the insurers denied every single one of the 50 facts alleged including the existence of the policy and the existence of a proof of loss. The plaintiffs argue that the defendants are carrying on this litigation in an abusive way and should be held to their denial of the proof of loss as disabling them from commencing an appraisal.

[10] The plaintiffs also allege that as a matter of law an appraisal is not available where, as here, the action centres on interpretation issues rather than valuation issues. The plaintiffs argue that the case turns on whether a limitation of liability in the policy applies and how one interprets a clause in the policy governing the calculation of the plaintiffs’ losses. Until those issues are resolved, the plaintiffs argue that there is nothing to appraise as the applicable valuation process will not be known.

[11] I do not agree with either argument. The plaintiffs read the pleadings and their request to admit rather generally in making their submissions. The defendants do not deny that proof of loss has been delivered for the purposes of statutory condition 11. What they plead in para. 10 of their statement of defence is that the plaintiffs:

…failed to provide a completed Proof of Loss or substantiating documentation with respect to the Property Claims, despite numerous requests from these defendants.

[12] The defendants take issue with the quality of the proof of loss and substantiation provided or not provided by the plaintiffs. Similarly, in the response to the plaintiffs’ request to admit, the fact denied is:

The Plaintiffs have provided the Defendants with a sworn proof of loss form, dated October 16, 2005, and particulars of the Plaintiffs’ destroyed property, in accordance with the Cottage Property Policy…

[13] The plaintiffs’ put forward a triple-barreled fact for admission: that the plaintiffs provided a sworn proof of loss; that the plaintiffs provided particulars of the property destroyed; and they did so all in accordance with the applicable insurance policy. While I am not to be taken to be approving of blanket denials in response to requests to admit, it is not a fair reading of the denial to say that the insurers deny receiving the proof of loss form delivered by the plaintiffs such as it was.

[14] Whether the response to the other 49 questions was appropriate will be a question for costs after trial under Rule 51.04.

[15] The plaintiffs also ignore paras. 4 and 18 of the statement of defence in which the defendants expressly put in issue the existence of damages and whether the damages claimed are excessive and exaggerated. The plaintiff says that these are just boilerplate pleadings. That is true. But the effect of the boilerplate is to put the quantum of the claim in issue until it is resolved. While the main issues discussed among the parties to date may be interpretive ones under the policy, in no sense can it be said that there is agreement on the value of the plaintiffs’ claims. The appraisers can value the quantum of the plaintiffs’ losses and their investments to replace their allegedly lost or damaged property so that at trial whatever the judge holds to be the applicable interpretation can then be applied to the values as appraised.

[16] The plaintiffs have found no cases saying that appraisal cannot be utilized if there are interpretive issues for trial or other issues than just the quantum of loss claimed. In Bnei Akiva School v Sovereign Insurance Co., 2016 ONSC 383, Faieta J. refused to stay a claim when an appraisal had been commenced. Coverage was not admitted in that case and Faieta J. found that there were many other issues that were not properly the subject of appraisal that should continue to trial.

[17] Moreover, the plaintiffs’ argument is inconsistent with the plain wording of statutory condition 11. Appraisal applies “whether the right to recover on the contract is disputed or not, and independently of all other questions.” That is, the appraisal process is to be used even where coverage is not admitted and even when there are other questions between the parties.

[18] The only real issue is whether the defendants are committing an abuse of process or causing undue prejudice to the plaintiffs by invoking the appraisal now. The plaintiffs argue that they cannot set the action down for trial while the appraisal is outstanding. That does not strike me as necessarily true under Rule 48.01. But, even if so, under statutory condition 11, appraisal is required “before there can be any recovery under [the] contract.” The defendant insurers moved within weeks of receiving the plaintiffs’ answers to undertakings. As Justice J. Wright discussed above, it is the intention of the statute that the issue of proof of the quantum of damages in a property case will not be before the court. Appraisal is a quicker, expert process designed to control costs and to provide efficiency. It was as much incumbent on the plaintiffs to commence the appraisal process as the defendants. I do not see any abuse of process on the facts. The sooner it is done, the sooner the trial can be held. Moreover, I do not see how the plaintiffs will be harmed at all by having the expert appraisers proceed as anticipated by the statute in parallel with the action being readied for trial. At the end of the process the parties will have in hand the monetary values needed for the trial. I see no downside in that.

[19] The motion is therefore granted. The parties agreed that costs of $7,000 all-in should be ordered payable to the successful party and I so order.

F.L. Myers Released: May 21, 2019