COURT FILE NO.: CV-14-1258-00
DATE: 2019 11 14
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
EDWARD WATT
R. Kostyniuk, Counsel for the Plaintiff
Plaintiff
- and -
TD INSURANCE and TD MELOCHE MONNEX
M. Tiidus, Counsel for the Defendants
Defendants
HEARD: January 14-18, 2019
REASONS FOR DECISION
LEMAY J.
[1] On March 25, 2012, the house that the Plaintiff, Mr. Ted Watt, owned, caught fire and sustained serious damage. The house had to be rebuilt, but the Plaintiff had home insurance underwritten by the Defendants, TD Insurance and TD Meloche Monnex (“TD”).
[2] Over the next two years, Mr. Watt and TD negotiated over the amount that Mr. Watt would be paid for his house and its contents. Mr. Watt decided to replace his house with a new, larger home. TD argues that Mr. Watt has already been paid everything that he is entitled to under his policy.
[3] The Plaintiff’s policy entitled him to coverage up to $1,000,000.00. The Defendant has paid $834,442.10. The Plaintiff claims his total losses are well in excess of $1,000,000.00, but he is seeking to be paid out the remainder of the policy limits.
[4] The Plaintiff’s claims arise from the destruction of his home and its contents, as well as the work that the Plaintiff performed to build his new home. All of these issues must be resolved in this decision.
[5] In the sections that follow, I will set out the background facts and then identify and resolve the issues that the parties have raised.
Background Facts
a) The Parties
[6] Mr. Watt is a general contractor who owns a business called Watt Homes. He has worked in residential construction since he was in university more than thirty years ago. Mr. Watt owns a property at 1953 Hindhead Road in Mississauga. He purchased this property in 1996. When he purchased the property, he substantially renovated it.
[7] Those renovations include solid oak door frames, upgrades to the basement and upgrades to other parts of the house. As the house was described to me, it is clear that it had been both restored and upgraded by Mr. Watt prior to the fire. The house was a bungalow of approximately 1,100 square feet.
[8] TD underwrote a policy of insurance on Mr. Watt’s home. This policy was described as the Gold Solution Policy. I will return to the policy details in my analysis of the issues below. However, one feature of the policy that should be noted is that the policy did not have internal limits as to what was payable for each type of loss. In essence, this policy provided Mr. Watt with up to $1,000,000.00 in the event of a loss such as a fire, and the total value of the policy could be allocated to different types of losses, such as chattels, rebuilding the house, and additional living expenses (“ALE”).
[9] There is no dispute between the parties that there was an insurance policy in effect or what the terms of that policy were. The disputes between the parties relate to the facts and to the interpretation of Mr. Watt’s policy.
b) The Fire and the Claims Management
[10] A fire took place in Mr. Watt’s home on the evening of March 25, 2012. The cause of the fire is unknown, but the evidence before me suggests that it either started in the electrical panel or as a result of combustion from materials used for smoking, such as a cigarette. It is not necessary for me to resolve this question.
[11] The house was uninhabitable after the fire, and it quickly became clear that it was going to have to be rebuilt. The house was demolished in the spring of 2012, and TD then began to obtain quotes to rebuild the house, as well as to replace Mr. Watt’s possessions that had been lost in the fire. For the first part of the claim, Mr. Watt worked with Mary-Ann Hopkins, who was the TD adjuster assigned to the file.
[12] Being a contractor, Mr. Watt paid close attention to the quotes that TD obtained. In particular, the parties had a dispute over whether the foundation of the house was reusable or should be replaced, and whether it was damaged in the fire or had pre-existing damage. Ultimately, that dispute was resolved by TD agreeing to replace the foundation.
[13] TD retained Win-Mar Construction to provide them with quotes for the reconstruction of Mr. Watt’s home. Over the course of several months, Win-Mar provided three different quotes. Each of these quotes were adjusted after discussion with Ms. Hopkins and Mr. Watt.
[14] However, two larger issues emerged. First, Mr. Watt took some time to determine whether he would use TD’s contractor or his own contractor to rebuild his house. Originally, Mr. Watt told TD that he would rebuild the house he originally had with his own builder, and he received funds from TD to do that. Ultimately, Mr. Watt decided to rebuild a larger home and manage the construction himself. Mr. Watt is also advancing a claim that he is entitled to be paid for the time that he spent managing the construction of his new house.
[15] As a result of Mr. Watt’s decision to build a larger house, TD took the position at trial that it was not obligated to pay Mr. Watt for the full cost of reconstructing his house. TD submitted that the policy precludes full recovery of the cost of reconstruction when the house is not replaced with something substantially similar. However, TD has paid out the amount that it says would need to be paid in order to ensure the full reconstruction of Mr. Watt’s home, and does not seek the return of any of the money that has already been paid. TD is only seeking an offset if additional monies are found to be owing.
[16] In addition, there were some issues about whether the Win-Mar quote covered all of the items that had to be replaced. In particular, there are a number of items that had to be upgraded as a result of changes to the Building Code and/or City of Mississauga by-laws. Mr. Watt takes the position that he is entitled to be compensated for those costs. TD takes the position that those costs are excluded by the terms of Mr. Watt’s insurance policy.
[17] There are also the contents of the house. Mr. Watt prepared a list of the items he lost as a result of the fire. These included a significant art collection and a significant comic book collection. The parties were unable to agree on either the amount of depreciation to be applied to these contents or on the value of the items lost, particularly in respect of the art collection.
[18] Finally, there were the expenses that were incurred by Mr. Watt as a result of the fire, such as rent, food and various other items. TD has paid Mr. Watt for some of these expenses. However, Mr. Watt is seeking to be paid for additional expenses, some of which he states he was promised reimbursement for.
c) Settlement Negotiations and Litigation
[19] Over the period of approximately two years, the parties had various discussions in order to attempt to resolve the disputes between them. Most of the pre-litigation discussions between the parties were included in the documentation that was filed on consent at trial. There was one issue with respect to whether some of these documents should remain privileged, and I will address that issue below.
[20] TD had three claims adjusters on the file: Ms. Hopkins, Mr. Derek Francis and Mr. Ken Siu. They all had some pre-litigation resolution discussions with Mr. Watt. In addition, there were a number of meetings between Mr. Watt, Ms. Hopkins and Mr. John Parr, who was Ms. Hopkins’ supervisor. Mr. Siu was the only representative from TD who testified, although I had the entire TD file before me as a business record.
[21] The discussions between the parties were ultimately unsuccessful, and Mr. Watt filed a Statement of Claim very shortly before the limitations period expired. As part of his claim, Mr. Watt seeks general damages, as well as additional payments under the policy.
[22] Since commencing litigation, Mr. Watt has replaced his house with a 3,200 square foot home.
[23] The matter was originally scheduled to proceed before a jury commencing January 14, 2019. The jury had been selected the previous week at the commencement of the January blitz sittings.
[24] However, on the Thursday before the trial was due to start, the parties agreed to dispense with the jury and the matter proceeded before me alone.
Issues
[25] Based on the foregoing summary, the following issues must be resolved:
Should any additional amounts be paid by TD on account of construction costs to replace Mr. Watt’s home? Alternatively, is TD entitled to a set-off from any further amounts that would be owed as a result of my findings because Mr. Watt decided not to rebuild his house?
Should Mr. Watt be paid administrative compensation for having to do the general contractor’s work himself?
Should Mr. Watt be paid additional amounts for the contents of his house?
Should Mr. Watt be paid additional living expenses associated with the fire?
Is Mr. Watt entitled to general damages in this case?
[26] In considering these issues, it must be remembered that a significant amount has already been paid out on account of the policy. The policy was for a total indemnity of $1,000,000.00. Mr. Watt acknowledges that all but approximately $165,000.00 has been paid out. TD states that the precise amount that remains available under the policy is $165,557.90. I am of the view that the number provided by TD is correct.
[27] As a result, in considering the issues above, I cannot award the Plaintiff more than a total of $165,557.90, inclusive of HST. I also note that even if TD was successful on all of the issues, they are not seeking any repayment from Mr. Watt.
[28] I will address my credibility findings on a case-by-case basis. I also note that some of the facts are undisputed or unprovable simply because of the destruction of the house and most of its contents. However, I have approached Mr. Watt’s evidence with some caution as there was a tendency to exaggerate that permeated his testimony.
[29] One example of this tendency will suffice at this point. In his examination-in-chief, Mr. Watt claimed to have been a general contractor for 35 years. That would have made him seventeen when he was first a “general contractor”. When the evidence is looked at more closely, it is clear that Mr. Watt started working in construction while he was in university, but describing himself as a general contractor at seventeen is a stretch.
Issue #1 - The Reconstruction of the House
[30] In considering the damages for the reconstruction of the house, there are two separate questions that have to be addressed:
a) Were items omitted from the Win-Mar quote, such that it needed to be increased?
b) Is TD entitled to a deduction from the amount of the Win-Mar quote, as adjusted, because Mr. Watt chose to build a new house that was not substantially similar?
[31] I will deal with each issue in turn.
[32] At the outset, it should be noted that the parties were close, but not precisely in agreement on the amount that was paid under this head of damages. The Win-Mar quote was for $494,678.54, but Mr. Watt alleges that he was only paid $493,857.87. TD alleges that a total of $501,756.83 was paid for the building to Mr. Watt.
[33] When the TD payments history for the building is reviewed, it reveals that there were payments of $493,706.83 made on account of the building itself, and a related building permit fee of $8,050.00. As a result, the TD number (when the permit is included) is correct. I note that Mr. Watt’s reconciliation states that the contract does not include any fees or permits, which supports my conclusions as to what has been paid. Finally, on cross-examination, Mr. Watt acknowledged that TD paid the full amount of the final Win-Mar quote.
[34] The fact that the parties have placed these costs in different sections of the claim complicates the final reconciliation that I am required to do. However, it must be remembered that the parties are ad idem on the total amount paid under the claim.
a) The Win-Mar Quote
[35] Win-Mar provided four different quotes for the reconstruction of the house on the basis of a substantially similar property. The final quote was for $494,678.54, inclusive of HST and profit. The first quote provided by Win-Mar was substantially lower, but it did not include a significant number of items, so I have not considered it.
[36] In his evidence, Mr. Watt pointed to the following alleged deficiencies in the final Win-Mar quote:
a) 40-foot steel beam and three supporting posts for $4,600.00
b) Underground plumbing from stack to street for $11,000.00
c) 60-amp service to shed for $1,600.00
d) Mandatory water upgrade to a one inch pipe for $3,000.00.
e) Basement concrete floor for $4,000.00
f) Sprinkler supply line to the shed for $480.00
g) Four items where amounts were “arbitrarily removed” from the line item price on the quotation for a total of approximately $22,000.00. None of the items were removed from the quote. It was only the amounts for the items that were adjusted downwards.
[37] Mr. Watt argues that these upgrades were all required in order to replace the house that he had before the fire. TD argues that Mr. Watt was simply trying to get the Win-Mar quote as high as possible because he had every intention of using the money to build a different house. I will return to these competing theories in the second part of this section. First, however, I have to determine whether the Win-Mar quote is appropriate.
The Amounts Arbitrarily Removed
[38] The “amounts arbitrarily removed” from the Win-Mar quotation can be resolved with reference to two facts. First, I heard evidence from Michael White. He was the owner of the Win-Mar franchise in Oakville, and it was his company that was retained to provide the quotes. Mr. White reviewed the quotations that were provided by his company.
[39] The Plaintiff argues that Mr. White’s evidence is not particularly helpful in resolving disputes over the quotations because of the fact that the actual quotes were prepared by Randy Shea, who worked for the Win-Mar franchise in Oakville. At the time of trial, Mr. Shea was working for another Win-Mar location and was flying out of the country on the day that Mr. White testified.
[40] The fact that I did not hear evidence from Mr. Shea is not significant. I reach this conclusion because when questioned about the final quote, Mr. White confirmed that his company was prepared to build the house for the amount in the quote. The amounts arbitrarily removed are of no moment because the house would have been built to the specifications. The precise costs were not important, as Win-Mar had agreed to replace Mr. Watt’s home.
[41] This has been TD’s position throughout this litigation. For example, in an e-mail dated January 18, 2013, Mary-Ann Hopkins stated:
Cheque was mailed to the address of Gerardo’s invoice. Curious he would say he had been on project for so long if only hired in December.
The quote I have for Winmar is adequate as it is. We do not require anything different. YOU want to see it printed out differently which I why I suggested you contact them. You raised a point about the value of a door. If he is saying the door is X dollars, and you hire him to do the work, then he is providing a door at that cost. If you are not hiring him then I need to know. This does not mean the price will be amended. What are you basing the fact that it is not sufficient on? I have asked you for your contractors quotes and you tell me they have not given you anything.
[42] In that respect, I also note that although there were amounts that were arbitrarily removed from some line items, others had their amounts arbitrarily increased. As an example, the total for the deck repairs between the third and final quote went from $18,097.00 to $21,822.00.
[43] Other than the evidence that amounts were “arbitrarily” removed, I had no explanation from another quotation or other evidence as to why the amounts that were proposed by Win-Mar were unreasonable. Given Win-Mar’s willingness to build the house for the quoted amount and the absence of any concrete evidence to establish that the amounts were unreasonable, I accept them as reasonable.
[44] The same conclusion applies to the 40-foot steel beam and the basement concrete floor. The reconstruction of the home was covered by the quote that was provided. Win-Mar was prepared to do the work on the foundation, and more money for it is not required.
[45] This brings me to Mr. Watt’s evidence on the steel beam. His assertion, in cross-examination, was that the house had to be the same. That is not what the policy says. The policy says that it has to be substantially similar. The 40-foot beam does not have to be replaced in order for the house to be substantially similar. The fact that Mr. Watt believes that the 40-foot steel beam was required does not mean that it actually was required. Win-Mar was prepared to rebuild the house in a substantially similar way for the quoted price.
By-Law Related Deficiencies
[46] Mr. Watt claims approximately $14,000.00 for underground plumbing and a mandatory water pipe upgrade. On both of these items, Mr. Watt acknowledged in cross-examination that they were required by the Region of Peel. Mr. Watt also acknowledged that the underground plumbing from the stack to the street was not destroyed during the fire.
[47] Based on the evidence, the upgrades were required by Regional by-laws, and were not as a result of damage from the fire.
[48] In terms of by-laws, the policy states as follows:
PERILS EXCLUDED
We do not insure loss or damage:
- By-laws
Caused directly or indirectly, proximately or remotely, arising in consequence of or contributed to by enforcement of any by-law, regulation, ordinance or law regulating zoning or the demolition, repair or construction of building or structures, which by-law, regulation, ordinance or law makes it impossible to repair or reinstate the property as it was immediately prior to the loss.
[49] I acknowledge that exclusions in insurance policies should be construed narrowly against the insurer (see Amos v. Insurance Corp. of British Columbia, 1995 66 (SCC), [1995] 3 S.C.R. 405, at para. 16). However, the exclusion in this policy is clear. Upgrades required by by-laws are not something that the policy covers.
[50] As a result, these claims for additional reimbursement also fail.
The Shed Related Claims
[51] The remaining two claims are related to the shed. In my view, neither claim is compensable. I reach that conclusion on the evidence that I heard. The shed was not destroyed and neither was the piping or the wiring in the shed. As a result, the work in the shed was not required as a result of the fire.
[52] Further, as I have set out above, the quotation for the house provided by Win-Mar covered all of the reconstruction required for the house. As a result, there is no justification for additional funds to fix issues that have already been identified. Any damage to the systems that took place at the house end of the electrical and plumbing systems to the shed would have been covered by Win-Mar’s quote.
[53] No further adjustments for any of these items will be made.
b) Is TD Entitled to a Deduction?
[54] TD is not seeking a refund of any of the monies that it has already paid to Mr. Watt. However, in the event that I find that additional amounts are owing on account of omissions from the Win-Mar quote or any of the other claimed heads of damages, TD is seeking a deduction for the depreciation on Mr. Watt’s house.
[55] That deduction is based on the following clause contained in Mr. Watt’s policy:
Dwelling and detached private structures
For loss or damage to dwelling or detached private structures we will take into account the inflation rate, since the date of the last renewal or the date of the last modification to your policy, as per “New Housing Price Indexes” published by Statistics Canada.
The loss settlement will be based on one of the following:
- The cost of repairs or reconstruction:
The cost of reconstruction, at the time of the loss, of the dwelling or detached private structures or, if less, the cost of repairs without deduction for depreciation. This loss settlement is subject to the following conditions:
a. repairs of reconstruction must be effected on the same premises with materials of similar quality within a reasonable time after the loss or damage;
b. the dwelling occupancy must be the same as prior to the loss.
- The Guaranteed Reconstruction Cost (if mentioned on the Declarations Page):
The cost of repairs or reconstruction. This loss settlement is subject to the following conditions:
a. repairs or reconstruction must be effected on the same premises with materials of similar quality within a reasonable time after the loss or damage;
b. the dwelling occupancy must be the same as prior to the loss.
If the conditions set out are not met, the settlement will be based on actual cash value.
- The Actual Cash Value:
The actual cash value will be based on the cost of replacement less any depreciation. Depreciation being based on, but not limited to, the condition of the property immediately before the damage, the resale value and the normal life expectancy.
[56] Under Mr. Watt’s policy, if the house was rebuilt in the same form, then he was entitled to the cost of reconstruction. However, if Mr. Watt did not meet the conditions, which included that the “repairs or reconstruction must be effected on the same premises with materials of similar quality”, then he was only entitled to the actual cash value.
[57] Given the events in this case, although Mr. Watt was paid the replacement value, he was only entitled to the actual cash value of the property. I reach that conclusion based on the interpretation of the policy.
[58] The phrase “repairs or reconstruction must be effected on the same premises with materials of similar quality” suggests that Mr. Watt was entitled to have an 1,100 square foot bungalow rebuilt on his property. He was not entitled to receive the replacement value of that building and use the funds to build himself a 3,200 square foot home.
[59] This conclusion is also supported in the case law. First, there is the purpose behind the term “actual cash value” in insurance contracts. As noted in Carter v. Intact Insurance Co. (2016 ONCA 917), a key objective of property insurance is indemnity. As a result, actual cash value, which is replacement cost less depreciation, puts insured people in the position that they would have been in before the loss. It prevents them from benefitting from the loss.
[60] Since many insured people would not be able to cover the depreciation in their property out of their own funds, the insurance company will pay the replacement cost if an insured person actually replaces “like” with “like”. However, there is a moral hazard associated with these types of provisions in that insured people could either intentionally destroy their property or be negligent in caring for it. This is why the clause does not require the insurance company to pay the replacement cost when “like” is replaced with “better”.
[61] In this case, Mr. Watt has replaced his old home with something significantly larger. The actual cash value clause prevents Mr. Watt from benefitting from his loss and receiving the full replacement value to build a bigger house.
[62] The underlying facts in Carter are also important to remember. In that case, the property that was insured was a mix of one, two and three story buildings containing residential and commercial units. The Plaintiffs proposed to demolish the site and build an eight and a half story condominium. The Court of Appeal for Ontario concluded that this was not a building of “like kind and quality”.
[63] The same conclusion applies in this case. A 3,200 square foot home is not the same premises as the 1,100 square foot bungalow that existed on the site prior to the fire. In this regard, I reject Mr. Watt’s argument that you replace a house with a house and a car with a car. The expectation under Carter is that houses would be replaced with similar houses. The actual cash value clause seems to apply in this case.
[64] However, Mr. Watt argued that the doctrine of estoppel prevented TD from enforcing the actual cash value clause. If the claim had been fully resolved and TD had subsequently sought to obtain monies back from Mr. Watt, this argument might have merit. However, the facts of this case are different.
[65] I start with the definition of estoppel. Promissory estoppel requires two elements to be established:
a) TD must have, by either words or by conduct, made a promise that was intended to affect its legal relationship with Mr. Watt, and intended Mr. Watt to act on it.
b) Mr. Watt must have relied on TD’s representation by either acting on this representation or changing his positon.
[66] For a discussion of these principles, see, for example, Nasr Hospitality Services Inc. v. Intact Insurance (2018 ONCA 725, at paras. 52-60).
[67] In this case, I do not see how either requirement for estoppel is met. TD paid the money to Mr. Watt on the understanding that Mr. Watt was using his own builder to rebuild the same (or a substantially similar) home. I see no promise that TD made that they would pay the full replacement value even if Mr. Watt built a different home, or chose not to rebuild his home.
[68] Further, Mr. Watt did not testify about any detrimental reliance. I heard no evidence about any change in position that Mr. Watt may have undertaken as a result of TD’s positions. I also did not hear any evidence about any representations that TD made that Mr. Watt relied upon.
[69] The doctrine of promissory estoppel does not apply in this case. Mr. Watt would only have been entitled to the actual cash value of the house given what he rebuilt. The question becomes what is the difference between the replacement cost and the actual cash value?
[70] As part of the evidence on file, I had a market value assessment from Hudson Appraisal and Consulting Services. No one testified about this appraisal in the course of the evidence before me. There are two features to this report that should be noted:
a) It valued the reconstruction of the building (exclusive of demolition costs) at $351,900.00, which was considerably less than the Win-Mar quote.
b) It determined that a reasonable amount of depreciation for the building would be twenty percent (20%).
[71] Given the value of the Win-Mar quote, the Hudson quote is of limited use to me. I accept that the value of the home is what is in the Win-Mar quotation. The question is what depreciation amount should be attached to the home?
[72] The Hudson report suggests depreciation at a value of 20%. I am of the view that this value is too high. I reach that conclusion because the Hudson report does not address the significant upgrades and renovations that Mr. Watt made to the home between the time he purchased it and the time of the fire.
[73] As a result, the depreciation allowance in this case should be substantially less than 20%. It is up to TD to prove the depreciation. However, it is clear that there should be some depreciation.
[74] In the circumstances, I have come to the conclusion that the depreciation should be 10%. This is a number that represents reasonable wear and tear on a house that is approximately 50 years old, but that has had significant work performed on it. As a result, if there are any other amounts owing to Mr. Watt under this agreement, then TD will be entitled to a deduction of $49,467.85 on account of depreciation in order to reflect the actual cash value of Mr. Watt’s home.
Issue #2 - Administrative Expenses
[75] Mr. Watt is making a claim for $91,500.00 in administrative expenses. A detailed list of activities that Mr. Watt says he is entitled to be compensated for was entered into evidence. This list includes contact with the city, contact with various contractors, as well as providing TD with documentation.
[76] Mr. Watt reached his $91,500.00 amount by claiming an hourly rate of $50.00 for all work performed, for a total of 1,839 hours of time spent on the home reconstruction.
[77] In my view, Mr. Watt should not be compensated for any of this time or any of the administrative expenses that have not already been paid for four reasons.
[78] First, Mr. White, the representative of Win-Mar, testified that his company was prepared to perform substantially all of these contractor type functions for the quoted price, and this fact is reflected in some of the allowances in the quote. Given that testimony, allowing Mr. Watt to recover for items that were part of the Win-Mar quote would be permitting double recovery. Mr. Watt has already been compensated for this time in the payments that TD has made to rebuild his home. This reason alone is sufficient to deny most, if not all, of Mr. Watt’s claim under this head of damages.
[79] Second, many of the things on the list do not relate to a reconstruction of Mr. Watt’s home. Instead, they relate to Mr. Watt’s decision to build a bigger home. For example, attending at the Committee of Adjustments to have variances passed and contracting with a topographical engineer are not work that would have to have been done in order to restore Mr. Watt’s pre-existing home. This reason is sufficient to deny any of Mr. Watt’s claims that remain after accounting for what was included in the Win-Mar quotation.
[80] Third, some of the tasks that Mr. Watt is seeking compensation for involve pursuing his claim with TD. For example, Mr. Watt seeks compensation for providing TD with photocopies of all of the payments that were made, and having his general contractor assess the Win-Mar quote. These are both tasks associated with managing his claim and are not compensable under TD’s policy.
[81] Finally, the quantum that Mr. Watt seeks is unreasonable. He is seeking to be paid for nearly a full year’s work in order to manage the construction of one single family home. In my view, this is an unreasonably long amount of time to have spent on this project. In addition, Mr. Watt did not provide any records to support when, or why, this time was incurred.
[82] As a result, Mr. Watt’s claim for administrative compensation fails.
Issue #3 - The Contents of the House
[83] As I have noted above, the contents of the house fall into three separate categories:
a) The general household contents;
b) The artwork; and
c) The comic books.
[84] Mr. Watt has been paid a total of $225,647.52 on account of the loss of the contents of his house. In the aggregate, he seeks an additional $144,310.36.
[85] I will address each of the individual issues in turn and provide my conclusions about the additional payments that Mr. Watt seeks at the end of this section.
a) The General Contents
[86] Most of Mr. Watt’s personal possessions were burned in the course of the fire. As a result, he was required to reconstruct a list of the items that he owned and provide it to TD for evaluation. TD retained the services of Mr. Robin Demeter to review the list of contents that was provided by Mr. Watt, and place values on those items.
[87] The final list includes several thousand items. There is no dispute between the parties that the listing of items lost by Mr. Watt is accurate and complete. There is also no dispute between the parties that the replacement values that Mr. Demeter has recorded for each of the items is correct. Finally, there is no dispute that Mr. Watt has not replaced the bulk of these items. The replacement value of the general contents is $332,472.42, inclusive of HST.
[88] The dispute between the parties is over the issue of depreciation. In other words, what discount should be applied to the items in order to account for the fact that they were used at the time the fire occurred? Under TD’s policy, if an item is not replaced, the insured is only entitled to the actual cash value of the item, not the replacement cost.
[89] Mr. Demeter testified that he had been told by Ms. Hopkins to use 50% as the appropriate amount of depreciation. In other words, TD sought to discount the value of the household chattels by half. Counsel for TD argued that I should not accept this evidence, as not everything on the list of household chattels was depreciated by 50%. I do not agree. A close inspection of the list reveals that more than 90% of the items were discounted at 50%. The items that were not discounted at 50% include such things as china, furniture and binoculars. In short, the default position appears to have been that 50% was the appropriate amount of depreciation to apply to the bulk of Mr. Watt’s assets.
[90] Mr. Watt did not accept depreciation of 50%, and attempted to obtain additional amounts for his household chattels.
[91] Mr. Watt testified that he and Ms. Hopkins had reached an agreement that he would be reimbursed 78% for the value of all of his household expenses. In support of this position, Mr. Watt provided a document that was marked as Exhibit 4. This purports to show that TD was prepared to pay 78% of the replacement value of Mr. Watt’s household chattels to settle this issue. Mr. Watt alleges that this document came to him from Ms. Hopkins when they had a meeting at his house, and supports his assertion that the parties had reached an agreement.
[92] TD denies that this document was provided by Ms. Hopkins, or that they agreed to settle the value of the household chattels for 78% of the replacement cost. I accept TD’s submission on this issue for three reasons:
a) The document that Mr. Watt seeks to tender from TD is not on their letterhead or recorded anywhere in their claim file. The documents in the claim file were placed there contemporaneously, and it would be a remarkable omission for this document not to have been included if it had been prepared by Ms. Hopkins. It must be remembered that Mr. Watt’s interactions with Ms. Hopkins were well before litigation started.
b) The structure of the document is similar to the type of document that Mr. Watt has provided in his analysis of the claim. Indeed, the first page of the document is in exactly the same font and pattern as Mr. Watt’s other documents.
c) The contents of the document suggest that it was not prepared by TD. Two examples will suffice. First, on the notes and observations section on the first page, it states that “the main payments made by TD…”. This is language that suggests that Mr. Watt is reporting on what TD has done. Second, and more critical, on the second page of the document, it states “Info Source- TD Letter dated Dec 12 – rec’d Dec 20”. There is no reason why Ms. Hopkins would have listed the date that Mr. Watt received the letter on an offer sheet. It is far more likely that this document was prepared by Mr. Watt, and that he was recording the date that he received correspondence from TD.
[93] For the foregoing reasons, I reject Mr. Watt’s evidence that there was an agreement that the actual cash value of his household chattels would be 78% of the replacement value of those chattels. I also conclude that the document that Mr. Watt tendered as proof of TD’s intentions to pay him 78% was actually created by Mr. Watt.
[94] This brings me to the question of what should have been paid as the actual cash value of Mr. Watt’s household chattels. The policy defines the actual cash value as follows:
- The Actual Cash Value:
The actual cash value will be based on the cost of replacement less any depreciation. Depreciation being based on, but not limited to, the condition of the property immediately before the damage, the resale value and the normal life expectancy.
[95] There is no evidence before me to suggest that Mr. Watt replaced these chattels. As a result, he is only entitled to the actual cash value of these items. The question is what should that amount be?
[96] There should obviously be some depreciation of the value of these assets. They were all used. However, there was no evidence before me as to how much the items had been used or what the standard practices were for depreciation.
[97] I only have two pieces of evidence to assist me in resolving this point. First, there is Mr. Demeter’s evidence that he had been told by Ms. Hopkins to apply 50% depreciation to everything. Second, there is the evidence as to what TD’s own staff believed was a reasonable amount of depreciation.
[98] One of the documents that I ruled was not privileged was pre-litigation discussions over what amount should be paid as depreciation. In particular, in internal, pre-litigation documents, TD determined that it was prepared to pay up to 75% of the replacement value for these chattels.
[99] That evidence must be considered in light of the case law. In Feist v. Gore Mutual Insurance Co. ([1991] O.J. No. 67 (Gen. Div.)), Cosgrove J. concluded that the phrase “actual cash value” has universally involved a deduction factor. However, Cosgrove J. went on to point out that the onus is on the defendant insurer to make a live issue out of the area, and it is incumbent on the defendant to establish a mechanism to arrive at a specific amount.
[100] In this case, TD has demonstrated that some depreciation is necessary as the chattels were used. The problem that exists in this case is that the items were all destroyed or damaged in the fire and there are, unsurprisingly, no receipts for the original purchases. As a result, it is difficult to determine what actual level of depreciation should be applied to the chattels. Ultimately, whatever number is chosen will be at least somewhat arbitrary.
[101] I have concluded that depreciation to 78% of the replacement value should be applied to the household chattels. I have reached this conclusion for two reasons. First, TD was prepared to offer between 70% and 75%. Second, it is up to TD to prove both the mechanism and the amount of depreciation. In the circumstances, it is almost impossible to see the difference between a 75% factor and a 78% factor.
[102] As a result, the total amount owing for general chattels is 78% of $332,472.42, or $259,328.48.
b) The Artwork
[103] The parties have a significant dispute over the value of the artwork that was destroyed in Mr. Watt’s home. Mr. Watt states that it is worth approximately $120,000.00, while TD states that the value is only approximately $9,000.00. It is common ground between the parties that TD paid $20,000.00 on account of the artwork. This payment was part of the global total of approximately $225,000.00.
[104] Mr. Watt’s art collection consisted of different types of works. He had some lithographs, which were exact reproductions of the originals. In addition, there were artists proofs, as well as framed pictures.
[105] Again, the evidence on this point is limited. TD sought to tender expert evidence from Douglas Payne, who works for Waddington’s. Mr. Watt’s counsel challenged Mr. Payne’s qualifications as an expert. In addition, Mr. Watt sought to tender evidence from an art valuator. Before setting out my conclusions on the question of the art valuation, I will review the evidence from the purported expert as well as the evidence tendered by Mr. Watt.
The Expert Evidence
[106] TD sought to qualify Mr. Payne as an expert in the valuation of Canadian and international art for fair market value for auction purposes.
[107] In the course of argument, I advised the parties that I would consider the decisions of White Burgess Langille Inman v. Abbott and Halliburton Co. (2015 SCC 23) and Bruff-Murphy v. Gunawardena (2017 ONCA 502). My purpose in reviewing those cases was to assess the evidence tendered through Mr. Payne to determine whether it was admissible as expert opinion evidence.
[108] However, in discussions with the parties, I also determined that it was appropriate to hear Mr. Payne’s evidence once, rather than hearing the evidence twice. As a result, I heard Mr. Payne’s evidence on a blended voir dire. To the extent that his evidence is admissible, I will use it in finding facts on the trial of this matter.
[109] In the circumstances, I do not view the evidence provided by Mr. Payne to be expert evidence in that I am not prepared to accept Mr. Payne’s opinion as an expert witness on the subject of art valuation. I have reached that conclusion based on the application of the principles in White Burgess, and in particular the application of the principles of necessity and reliability.
[110] First, in terms of necessity, Mr. Payne’s evidence amounts to evidence as to what each item might sell for at auction. This evidence is simply based on records and information about past sales and the history of each artist. This is not evidence that is peculiarly within Mr. Payne’s knowledge. It is evidence that is easily ascertainable by looking at the records.
[111] Second, in terms of reliability, Mr. Payne testified that there is a difference between how much something might cost if it was purchased at an art store or at the Art Gallery of Ontario, and if it was auctioned off. With respect to some of the artwork that Mr. Watt owned, Mr. Payne testified that it would cost more if purchased at the AGO than if it was sold at auction. This evidence points out the somewhat arbitrary nature of the “value” of a particular piece of art, especially art that is commercially available. It also suggests that the final conclusions about what the “value” of the art is will have to be made by me.
[112] Finally, I did have questions about Mr. Payne’s expertise. In particular, as pointed out in cross-examination, he has no qualifications in art appreciation, art valuation or fine arts. He also acknowledged that he did not look up the items in the list of artwork piece by piece.
[113] I am not prepared to qualify Mr. Payne as an expert in this case. His evidence is not necessary to me as expert evidence to resolve this case. In addition, the reliability of the evidence is based on accepting Mr. Payne’s underlying assumptions of value. Given my observations about value, I am not persuaded that Mr. Payne can provide me with an expert valuation.
[114] However, Mr. Payne can testify about the value that particular artwork would obtain at auction as a matter of fact, as well as whether the work of particular artists had ever been auctioned off by Waddington’s (or other auction houses) before.
[115] In this case, the factual information about what would be obtained at auction for particular artwork is of some relevance in assessing the value to be ascribed to the various pieces of art that Mr. Watt owned. I will return to this evidence below.
The Reports Provided by Mr. Watt
[116] In the joint book of documents, there are a series of reports that Mr. Watt has provided. They originate from his father, who had them in his files. These reports are all valuations of artwork prepared by Robert C. Parks. None of these valuations relate to Mr. Watt’s art, and none of them were performed for Mr. Watt. In addition, the author of the reports did not testify.
[117] As a result, these appraisals are of almost no value. I have reviewed the list of artists whose work has been appraised by Mr. Parks and determined that, with one exception, Mr Parks did not appraise the work of any of the artists whose prints and paintings Mr. Watt owned.
[118] The one exception was the work of Les Tait. Mr. Tait was the brother of Mr. Watt’s ex-girlfriend, and was also known to Mr. Payne. From the reports that were filed from both sides, there was some intrinsic value to the works completed by Mr. Tait.
Conclusions from the Evidence
[119] I start with the observation that Mr. Watt bears the onus of establishing the value of his art collection. Other than the works of Les Tait that were covered in the evidence of both sides, there was very limited evidence in terms of the value of Mr. Watt’s artwork.
[120] The evidence I do have is that the artwork would have fetched very little in the way of proceeds at an auction. However, this is not necessarily the replacement cost of the artwork. In my view, the replacement cost within the meaning of Mr. Watt’s policy should be more reflective of what it would cost to replace certain prints at the AGO, or to purchase frames for the artwork than what the pieces would fetch at auction. Mr. Watt testified that some of this artwork was framed, and the frames were destroyed along with the art.
[121] Based on the limited evidence I do have, the question becomes what do I accept the value to be?
[122] Mr. Demeter testified that he had prepared a listing of the artwork. Mr. Watt seeks to rely on Mr. Demeter’s listing as evidence in this case. The problem is that Mr. Demeter fairly acknowledged that he obtained the listing of the value of this artwork from Mr. Watt. Mr. Demeter’s evidence is based solely on information he obtained from Mr. Watt, and on this issue is no more reliable than Mr. Watt’s evidence.
[123] This brings me back to Mr. Watt’s evidence. Mr. Watt has provided a list of the pieces of art and the claimed value for these pieces of art. However, other than for the Les Tait pieces, there is no substantiation for the values that Mr. Watt has claimed. The evidence that could have been provided by Mr. Watt to substantiate the replacement cost of the artwork includes:
a) Receipts from the purchase of this artwork. None were provided.
b) Price listings from catalogues or other art guides. None were provided.
c) Listings for the purchase/sale of this artwork from art galleries, websites, or any other source. Again, none were provided.
[124] Mr. Watt has the burden of proving the value of the items lost, and there were other sources of evidence that could have been provided to the court, but were not. As a result, I am not prepared to accept Mr. Watt’s valuation of his art collection. This is particularly true given Mr. Payne’s evidence that most of Mr. Watt’s collection would not have fetched anything at all at auction.
[125] That being said, the collection (particularly the works of Les Tait) must be worth something. The frames have a replacement value, as do the prints, even if that value is not large.
[126] TD paid $20,000.00 on account of the artwork. This was part of the global payment for chattels. I am of the view that a larger amount is required. I reach this conclusion for three reasons:
a) Mr. Payne’s evidence that the collection would not have fetched anything significant at auction must be considered in light of his evidence that many of the items would have been more expensive to replace at an art shop or at the AGO.
b) Mr. Payne’s evidence does not consider the fact that many of these items were framed, and that frames have a cost. I did not have any direct evidence on what a frame actually costs, but I accept that there is a cost to replace a frame.
c) On the evidence of both sides, the works of Mr. Tait had some value over and above the value ascribed to the works of other artists. I am not persuaded that this value was considered in the assessment by TD.
[127] Given all of these points, I am left to determine a value of the artwork. Given the paucity of evidence from both sides, my determination is, of necessity, somewhat arbitrary. However, I conclude that a value of $30,000.00 for Mr. Watt’s artwork, inclusive of HST, is appropriate.
[128] I agree with counsel for Mr. Watt that this amount should not be depreciated, as art generally does not tend to depreciate.
c) The Comic Books
[129] Mr. Demeter testified that he had a fair knowledge of the value of the comic book collection. He came to a value of $8,441.65 for the three boxes of comic books that he considered. Mr. Watt testified that there was a fourth box of comic books that was lost after the fire.
[130] No one disputes the value that Mr. Demeter ascribes to the comic books.
[131] I start with the question of whether comic books depreciate. They are collectibles, so unless there was evidence that they had been damaged prior to the fire, it is unlikely that they had depreciated. As a result, I conclude that no depreciation should be applied to the comic book collection.
[132] This brings me to the question of whether there was a fourth box of comic books. Mr. Watt testified that there was, and that it was lost after the fire. Although I have had some problems with Mr. Watt’s evidence, I am prepared to accept this evidence because it was not seriously challenged on cross-examination and because Mr. Watt would be the only person who knew what the contents of his house were.
[133] I agree that the appropriate way to value this fourth box of comics is to apply the same average value as the first three boxes. Absent any evidence as to what was actually in the fourth box, this averaging produces a reasonable proxy of what the items would have been worth.
[134] When I do that, I obtain a sum of $2,813.88. I then add that to the value of the comic books as calculated by Mr. Demeter. I conclude that the replacement value of the comic book collection was $11,255.53. As I have noted above, depreciation should not be applied to that amount.
[135] Based on the records that I have, the payment for chattels includes some payments for the comic books, but it is part of the global number on chattels.
d) Conclusion on Household Chattels
[136] Based on the foregoing, TD owed Mr. Watt the following amounts on account of his lost chattels:
a) For the general household chattels, $259,328.48.
b) For the artwork, $30,000.00.
c) For the comic book collection, $11,255.53.
[137] In total, TD owed Mr. Watt $300,584.01 on account of his household effects. TD paid the sum of $225,647.52. Therefore, the amount that remains owing is $74,936.49.
Issue #4 - Should Mr. Watt be Paid Additional Expenses on Account of the Fire?
[138] This question requires a consideration of whether the additional living expenses (“ALE’s”) are reasonable.
[139] In assessing whether the additional ALE’s claimed by Mr. Watt are reasonable, the first step is to consider the delays in the construction of the house. Most of the ALE’s that are unpaid are as a result of the fact that Mr. Watt’s replacement house was not built until several years after the fire.
[140] I start with the evidence of Mr. White from Win-Mar. He testified that the permitting process would take six to eight weeks. Given the other evidence I heard during the course of the trial about building permits, I am of the view that eight weeks is a more realistic estimate, and it may even have taken longer. Mr. White then testified that Win-Mar would have been able to finish the building within six months after receiving the permits.
[141] The first Win-Mar quote was prepared at the end of September of 2012. The second one, which included some reimbursement for the foundation, was prepared in October of 2012. Had that quote been accepted by Mr. Watt, there would then have been approximately two months to obtain the permits. Allowing for the fact that construction is more difficult in the winter in Canada, I am of the view that the latest the house would have been finished would have been the end of August in 2013.
[142] On that score, I note that even if the third Win-Mar quotation had been accepted, the permitting process would have been completed by the spring of 2013, and the construction would have been completed by the fall of 2013. The fourth Win-Mar quote was prepared immediately before litigation commenced.
[143] Many of Mr. Watt’s claims for the reimbursement of ALE’s go well beyond the end of August of 2013. Some examples are as follows:
a) Mr. Watt claimed builder’s risk insurance to April of 2015.
b) Mr. Watt claimed power for the trailer that he had on site to January of 2015.
c) Mr. Watt claimed winter heating to November of 2015.
[144] In support of his position, Mr. Watt argues that TD was the source of the delays in this case. I disagree. I am of the view that most, if not all, of the delays in this case were the responsibility of Mr. Watt. I reach that conclusion for the following reasons:
a) There were significant negotiations over whether the foundation should be replaced. In spite of the engineering report from Brown and Beattie which suggested that the foundation did not need to be replaced, TD ultimately agreed to replace the foundation at Mr. Watt’s insistence. The delay as a result of this issue included two months when Mr. Watt was considering whether to accept TD’s position that the cost of the foundation should be split 50/50.
b) Mr. Watt made the decision that he was going to rebuild the house himself approximately nine months after the fire, but did not communicate that decision to TD until the spring of 2013.
c) Mr. Watt decided to build a much larger house on the property, and this of necessity made the construction process longer.
[145] In terms of the delays, one example will suffice to illustrate my concerns. On October 23, 2012, Mr. Watt wrote a detailed letter to Mary-Ann Hopkins at TD. In that letter, he stated, in part:
In the letter it suggests that your contractor was available to begin repairs immediately after our meeting in September and he gave you a time line of 6 months to complete them starting on that date. At no time was I informed of this or that any clock was ticking. What I was told at the meeting was that your contractor would be getting back to you with the 9 pages of changes and omissions. I provided you. I have been waiting six weeks for them since then and have received nothing. How is it, as stated in the letter, that your contractor can begin work without even finalizing the full scope of what they are contracting to do?
[146] Based on that letter, one might conclude that TD had been dragging its heels in the adjudication of Mr. Watt’s claim. However, the e-mail that was sent to Mr. Watt by Ms. Hopkins the next day, on October 24, 2012, states as follows:
I have had the revised estimate for a week or so- have been waiting on your engineers reports which I have still not received.
This is the estimate TD Insurance has approved for your repairs.
The Structural Engineers report that we have on file indicates the current foundation can be utilized for the rebuild.
I will respond to your letter submitted via email on Tuesday Oct 23 by the end of the week.
[147] When this correspondence is viewed as a whole, it is clear that the significant delays in this matter were, in large part, because Mr. Watt was challenging the line items in the Win-Mar quotation. That line-by-line challenge must be considered in the context of what actually happened in this case. Ultimately, what Mr. Watt did was use the money from TD in order to build a new, substantially different house. It is clear that he was attempting to maximize the value of the payout from TD to assist with the construction of a completely new house. As a result, the delays in the processing of this claim were mostly the responsibility of Mr. Watt, and not of TD.
[148] Based on these findings, I am of the view that expenses incurred after December 31, 2013 should not be compensated unless there is some other reason for incurring them.
[149] This brings me to the list of expenses that Mr. Watt is claiming. This list was contained in Schedule “D” of Exhibit 2, and simply sets out the amounts of the expenses. For the most part, it does not identify either the time period nor the source document to support the expense.
[150] As a result, I start by considering that evidence in light of my findings regarding Mr. Watt’s credibility and reliability as a witness. First, as I noted at paragraphs 28 and 29, Mr. Watt tended to exaggerate his evidence. Second, as set out in the discussion about the “missing” items from the Win-Mar quote, Mr. Watt has, on a number of occasions, firmly advanced claims for reimbursement for items that he was clearly not entitled to receive. As a result, Mr. Watt’s claims for additional reimbursement should be approached with some caution.
[151] There was also the trailer that Mr. Watt used during the construction. Mr. Watt lived in that trailer during the construction, and had TD pay for some of the costs of that trailer. In addition, Mr. Watt sought reimbursement for rent for living with a friend for time when he was unable to access his house. In other words, accepting Mr. Watt’s claim for ALE’s would likely result in there being some double dipping.
[152] For all of these reasons, I have concluded that Mr. Watt is not entitled to any additional payments on account of ALE’s.
Issue #5 - General Damages
[153] Mr. Watt seeks general damages from TD in the amount of $150,000.00. There was also a claim for punitive damages in the Statement of Claim, but this was not pursued at trial. In my view, the claim for general damages is without merit.
[154] The purpose of general damages (as opposed to other types of damages) was explained by the Court of Appeal for Ontario in Hockley v. Riley (2007 ONCA 804) where Cronk J.A. stated (at para. 24):
General damages are compensatory damages. They are awarded primarily to compensate a plaintiff for pecuniary and non-pecuniary losses suffered as a result of a defendant's conduct. Punishment is not a principal aim of general damages. In contrast, punitive or exemplary damages are designed to punish the defendant and to deter both the defendant and other potential wrongdoers by addressing the objectives of retribution, deterrence and denunciation. See Fidler v. Sun Life Assurance Co. of Canada, 2006 SCC 30, [2006] 2 S.C.R. 3, [2006] S.C.J. No. 30, at para. 61 and Whiten v. Pilot Insurance Co., 2002 SCC 18, [2002] 1 S.C.R. 595, [2002] S.C.J. No. 19, at para. 43. As Binnie J. put it in Whiten at para. 36, "Because their objective is to punish the defendant rather than compensate a plaintiff (whose just compensation will already have been assessed), punitive damages straddle the frontier between civil law (compensation) and criminal law (punishment)."
[155] It should be apparent from my factual findings and legal conclusions in relation to the first four issues that there was nothing in TD’s adjudication of this case that would justify an award of general damages to Mr. Watt.
[156] To summarize, however, I would make the following observations:
a) TD was responsive to Mr. Watt’s inquiries and demands throughout the litigation. The contemporaneous case notes make that fact clear.
b) Mr. Watt was the source of much, if not all, of the delay in this case. As was his right, he pursued hard positions with TD on the foundation, on the Win-Mar quotation and on other administrative costs. However, Mr. Watt cannot then seek compensation from TD for “general damages” as a result of his delays.
c) TD was more than reasonable in the adjudication of Mr. Watt’s claim. Two examples of this will suffice to illustrate this reasonableness. First, the foundation. On the materials that I reviewed at trial, it was an open question as to whether the foundation had been damaged in the fire. However, TD was originally willing to pay for half of the foundation, and ultimately settled on paying for the whole foundation. Second, the artwork. TD’s position that the artwork was worth less than $10,000.00 was more than reasonable. However, TD was willing to pay $20,000.00 on account of the artwork, and I have found that it was only worth $30,000.00
d) Even in litigation, TD was more than reasonable. Although entitled to under its policy, TD did not seek repayment when Mr. Watt decided to build a house that was substantially different from the one that had been on the property beforehand. TD simply sought a set-off on the basis of the amounts that it had already paid.
[157] As I said, these are merely examples of TD’s reasonable conduct. I see nothing that would support an award of general damages in this case. As a result, Mr. Watt’s claim in this regard is dismissed.
Conclusion and Costs
[158] Based on the foregoing reasons, I order as follows:
a) TD is entitled to a set-off of $49,467.85 on account of any amounts owing under this judgment.
b) Mr. Watt is entitled to be compensated an additional sum of $74,936.49 on account of the chattels that he lost in the fire.
c) Mr. Watt is not entitled to be compensated for any of the work he performed in building his new house, or for any additional ALE’s.
d) The claim for general damages is dismissed.
e) In the result, Mr. Watt is entitled to judgment in the sum of $25,468.64 over and above the amounts that have already been paid to him by TD.
[159] If the parties have any concerns about the mathematical calculations in my reasons for judgment, they may provide written submissions of no more than two (2) double spaced pages within fourteen (14) calendar days of the release of these reasons, and I retain jurisdiction to address any concerns. This is not an opportunity to relitigate the case, and no reply submissions from any party are required unless and until I request them.
[160] The parties are encouraged to attempt to resolve the issue of costs. If the parties are unable to do so, then each party will provide their costs submissions within fourteen (14) days of the release of these reasons. Those submissions are to be no longer than four (4) single-spaced pages, exclusive of bills of cost and case law.
[161] Reply submissions are due within seven (7) days thereafter, and those submissions are to be no longer than two (2) single-spaced pages, exclusive of bills of cost and case law.
[162] If costs submissions are not received in accordance with this timetable, I will presume that the parties have resolved the issue of costs, and I will make no order as to costs.
LEMAY J.
Released: November 14, 2019