Diperri et al v. The Wawanesa Mutual Insurance Company, 2021 ONSC 4680
COURT FILE NO.: CV-16-556064
DATE: 20210629
ONTARIO SUPERIOR COURT OF JUSTICE
RE: DIPERRI et al, Plaintiffs
-and-
THE WAWANESA MUTUAL INSURANCE COMPANY, Defendant
BEFORE: F.L. Myers J.
COUNSEL: Michael Ditkofsky, for the defendant Samy Ouanonou, for the plaintiffs
READ: June 29, 2021
ENDORSEMENT
Background
[1] The defendant moves to compel the plaintiffs to resolve by appraisal under s.128 of the Insurance Act RSO 1990, c I.8 the issues in this action concerning the plaintiffs’ property alleged to have been damaged or gone missing at Paul's Restoration.
[2] The plaintiffs submit that their claims are in tort and bailment. They are properly the subject of a lawsuit and are not insured losses that are required to be determined by appraisal.
[3] For the reasons that follow, I stay this action and require the plaintiffs to advance by way of appraisal their claims for the defendant’s failure to replace, repair, or pay for some $226,000 in goods as claimed in para. 14 of the statement of claim. Whether anything will remain of this action after the appraisal process is completed can be determined then.
Facts
[4] The plaintiffs’ house flooded on July 8, 2013. The defendant insured the plaintiffs for losses to their goods caused by the flood.
[5] The plaintiffs say that the defendant’s adjuster and its contractor Paul's Restoration took away five trailer loads of goods to be stored while repair work was done on their house.
[6] The insurance policy is subject to Statutory Condition 11 under the Insurance Act that requires parties to resolve specified disputes by appraisal under s. 128 of the statute:
Appraisal 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. [Emphasis added.]
[7] The plaintiffs filed a proof of loss. The parties used an appraisal to value some of the plaintiffs’ damaged goods The plaintiffs also claimed that the defendant or its agents lost or have simply failed to return a substantial amount of the goods taken to the warehouse for storage. The plaintiffs allege that the defendant has only had delivered to them one-half of a truckload out of the five loads taken to storage. They have sued for this loss.
[8] In para. 14 of the statement of claim, the plaintiffs claim $226,000 for these goods. The plaintiffs claim that the insurer is liable for the value of the goods lost or not returned under the law of bailment and for negligence. There is little difference as a contract of bailment is also subject to a duty to take reasonable care.
[9] The plaintiffs have other claims in the statement of claim concerning other aspects of their recovery against the defendant. They also claim aggravated and punitive damages against the insurer.
[10] It is noteworthy that the plaintiffs have not sued the adjuster or the Paul’s Restoration who actually stored the plaintiffs’ goods. The plaintiffs allege that the insurer is liable for the sub-bailment or negligent conduct of its sub-bailors, bailee, and contractor.
[11] In the appraisal decision, the umpire wrote:
In regard to the outstanding items, either damaged or items which have gone missing, the [plaintiffs] will decide if they wish to pursue those against any responsible party including Wawanesa. Wawanesa will advise if they wish to have these items appraised and if they do the Appraisal Hearing will reconvene
[12] The insurer has tried to initiate the remainder of the appraisal. The plaintiffs say that they are not seeking payment for loss by flood under their insurance policy. Their claims are based on independent causes of action that are not subject to the appraisal remedy.
ANALYSIS
[13] Neither side has found any law that is dead on point. There is no doubt that where appraisal is required, it is mandatory. It is also a preferred process because it is so quick and affordable. See: 56 King Inc. v Aviva Canada Inc., 2016 ONSC 7139 and Seed v ING Halifax Insurance, 2002 CanLII 79669 (ON SC), 2002 CarswellOnt 1663 (SCJ). Those cases do not tell me if the remedy applies in this case.
[14] In Verlysdonk v. Premier Petrenas Construction Co. Ltd. et al., 1987 CanLII 4217 (ON SC) the Divisional Court held that an appraisal to value insured loss does not prevent or preclude the insured from suing in tort the third party who caused the loss. As noted above, the plaintiffs have not sued Paul’s Restoration. I make no comment on whether they are truly third parties or if they are privies of the insurer given that the plaintiffs in this action allege that the insurer is liable for their acts.
[15] In my view, the issue comes down to the interpretation of Statutory Condition 11. It provides for appraisal to be held when there is disagreement concerning the “value of the property insured, the property saved or the amount of the loss”. The goods taken from the house were property insured. They were property saved from the effects of the flood. Damage caused to the plaintiffs by the insurer or its contractors as part of the process of determining and mitigating the plaintiffs’ insured loss is also an amount of the loss in one sense. If a contractor took down some good drywall while it was taking down damaged drywall, is there doubt that the insurer would have to cover the replacement of both? What if goods were damaged by a worker instead of being allegedly lost by a warehouse operator? I expect that there is law somewhere in the books and memory chips to deal with the obligations of an insurer for losses it causes to the insured while in the process of adjusting, mitigating, fixing, and paying for insured loss and damage.
[16] It is apparent that the umpire believed that this matter was one that could be brought in the process already commenced. He ruled that the insurer could unilaterally engage the process to deal with these losses.
[17] As long as the plaintiffs’ rights remain able to claim in these proceedings any heads of damages that are not part of the valuation of the lost goods, I do not see how the plaintiffs are prejudiced by being required to resolve the valuation more quickly and far more affordably than if that process was left to this proceeding.
[18] Appraisal will be required to value disagreements of the type set out in Statutory Condition 11 even where there are other issues between the parties in litigation. See: Bnei Akiva School v Sovereign Insurance Co., 2016 ONSC 383 and 2343697 Ontario Inc. v. Aviva Insurance Company of Canada, 2019 ONSC 3106,
[19] In my view, the claim against the insurer for losses caused to insured property removed from the house to allow insured restoration to be undertaken falls with in the statutory condition language quoted above.
[20] As far as I can tell, there is another issue about a further claim of $30,000 plus HST that the plaintiffs say has not been paid by the insurer. As this is an amount within the jurisdiction of the Small Claims Court, in my view, it is more appropriate to stay this action in full while the appraisal runs its course. Once it is done, the plaintiffs can re-evaluate any remaining claims that they may wish to advance. The $30,000 issue may settle. Or it may be best resolved before the Small Claims Court. Whether the plaintiffs will wish to invest in litigation for claims for aggravated and punitive damages alone against the insurer will also await the outcome of the appraisal.
[21] The costs sought by the successful defendant are below the costs sought by the plaintiffs. Accordingly, I see no access to justice issue and order the plaintiffs to pay the defendant its costs on a partial indemnity basis fixed at $3,000 all-in within 30 days.
F.L. Myers J.
Date: June 29, 2021