COURT FILE NO.: CV-20-642355
DATE: 20210707
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
EUTICE NELSON, a.k.a. JANET ROSS
Plaintiff
– and –
THE DOMINION OF CANADA GENERAL INSURANCE COMPANY
Defendant
Osborne G. Barnwell, for the Plaintiff
Christopher I.R. Morrison, for the Defendant
HEARD: June 7, 2021
J. Steele J.
The Motion
[1] This is a Rule 21 motion brought by the defendant, The Dominion of Canada General Insurance Company (“Dominion Insurance”).
[2] The defendant requests that the plaintiff, Eutice Nelson, be required to elect (i) whether she is challenging the appraisal, and if so, stay the within proceeding pending judicial review of the order; or (ii) to clearly indicate that she is not challenging the appraisal as written or the interpretive ruling of the Umpire.
[3] For the reasons that follow, the defendant’s motion is dismissed.
Overview
[4] This matter involves an insurance dispute. The plaintiff lost her home in a fire and the defendant was the insurer of the property at the time of the loss. Being unable to agree on the value of the property, the parties agreed to an appraisal under section 128 of the Insurance Act, R.S.O. 1990, c. I.8.
[5] Immediately following the appraisal, the appraiser appointed by the plaintiff raised an interpretation issue, which was then ruled on by the Umpire. The plaintiff subsequently brought this action against the defendant.
[6] The defendant seeks clarification on what the plaintiff seeks in the action. The defendant states that the plaintiff skirts the issue of whether she is attacking the valuation itself or is bringing an action based on the valuation. The defendant takes the position that if the plaintiff is challenging the valuation itself, then the proper course is to seek judicial review of the appraisal at the Divisional Court. No judicial review has been initiated by the plaintiff.
Background
[7] The plaintiff lost her home in a fire on October 13, 2017. She was insured by Dominion Insurance at the time of the loss.
[8] The parties were unable to agree on the value of the insured loss. They agreed to an appraisal under section 128 of the Insurance Act for the purpose of determining the value of the insured loss.
[9] An Assessment was made on or about March 2, 2020, which assessed the loss of the plaintiff’s dwelling at $465,000 (replacement cost value) and $372,000 (actual cash value). The Assessment stated that “all amounts are subject to amounts previously paid to the Insured by the Insurer”. Immediately following the appraisal, a dispute arose regarding the deductibility of payments that Dominion Insurance had paid to Ms. Nelson prior to the appraisal for emergency repairs to the damaged building and asbestos removal.
[10] The plaintiff’s appraiser asked the Umpire to rule that the assessed amount was to reflect “new money”, not subject to indemnity payments that had been made to the date of the Appraisal. However, the Assessment was agreed to by two of the three appointed appraisers and was clarified by an email from the Umpire of the appraisal tribunal. In that email, dated March 6, 2020, the Umpire stated:
“Dealing with the issue of the quantification of the loss, I believe that the Assessment at Appraisal document speaks for itself. The Dwelling Building amounts that have been specified represent to [sic] total amounts of the assessed value of the loss, subject to indemnity payments that were made to the date of the Appraisal. The amounts stipulated in the Assessment at Appraisal document are not “new”, or “additional” amounts; rather, they are subject to indemnity payments, if any, that have been made to the date of the Appraisal.”
[11] On or about June 12, 2020, the plaintiff brought the within action against the defendant. In this action, the plaintiff seeks, inter alia: “All amounts Ordered by the Insurance Umpire dated March 2, 2020, namely $465,000 for building replacement…”.
[12] On or about August 11, 2020, the plaintiff brought a motion for summary judgment seeking, among other things, damages for breach of contract in the amount of $465,000, which was dismissed on or about December 1, 2020. The defendant brought a motion to strike certain paragraphs in the statement of claim and reply on or about August 12, 2020, which was granted in part.
[13] The plaintiff requested the appointment of a case management judge “to ensure that this issue is adjudicated on an urgent basis”. I was assigned as the case management judge.
The Appraisal Process
[14] As set out above, the valuation of the plaintiff’s loss was determined through the appraisal process. The foundation for the appraisal process is section 128 of the Insurance Act, which provides:
128(1) This section applies to a contract containing a condition, statutory or otherwise, providing for an appraisal to determine specified matters in the event of a disagreement between the insured and the insurer.
(2) The insured and the insurer shall each appoint an appraiser, and the two appraisers so appointed shall appoint an umpire.
(3) The appraisers shall determine the matters in disagreement and, if they fail to agree, they shall submit their differences to the umpire, and the finding in writing of any two determines the matter.
[15] Statutory condition 11 under section 148 of the Insurance Act provided for the appraisal in this case. It provides:
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.
[16] The process of appraisal under the Insurance Act is summarized by the Divisional Court in Birmingham Business Centre Inc. v. Intact Insurance Company, 2018 ONSC 6174 (at paras. 4 and 5):
There have been a number of cases that have commented upon the unique statutory scheme and context that govern the award under review see Krofchick et al and Provincial Insurance Co. Ltd. et al, 1978 CanLII 1304 (ONSC); Barrett et al and Elite Insurance Co. et al, 1987 CanLII 4160 (ONCA); Seed v. ING Halifax Insurance et al, 2005 CanLII 41991 (Div. Ct.); Madhani v. Wawanesa Mutual Insurance Company, 2018 ONSC 4282 (Div. Ct.)
What emerges from these cases is the following:
(1) The purpose of this appraisal process is to provide an expeditious and easy manner for the settlement of claims for indemnity under insurance policies. It is intended to be a final and binding determination of the loss.
(2) Courts have afforded substantial deference to an appraisal under the Insurance Act and the appraisal process. Unless there is proof of misconduct or that the appraisers or umpire exceeded their jurisdiction, courts have been reluctant to interfere.
(3) The appraisal process established by the Insurance Act is considered to be a valuation not an arbitration.
(4) The appraisal process is not adjudicative in nature. The process is based on discussion and on the sharing of expertise in valuation. Appraisers can arrive at a decision based on their own knowledge and expertise.
(5) An appraisal is not subject to the provisions of the Statutory Powers Procedure Act, R.S.O. 1990 c. S.22.
(6) An appraisal under s. 128 of the Insurance Act requires neither a hearing, a consideration of evidence nor reasons.
Analysis
[17] The plaintiff raised two preliminary issues that I will address first, as they are relevant to my findings.
[18] First, the plaintiff argues that the Court should not hear this motion due to delay by the defendant. The plaintiff points to Rules 2.02 and 21.02.
[19] Rule 2.02 provides:
2.02 A motion to attack a proceeding or a step, document or order in a proceeding for irregularity shall not be made, except with leave of the court,
(a) after the expiry of a reasonable time after the moving party knows or ought reasonably to have known of the irregularity; or
(b) if the moving party has taken any further step in the proceeding after obtaining knowledge of the irregularity.
[20] Rule 21.02 states that a motion under Rule 21.01 shall be made promptly. The plaintiff referred to Schellenberg v. International Brotherhood of Electrical Workers Local 303, [2014] O.J. No. 6084 as an example of a case where a plaintiff’s Rule 21 motion was dismissed as it was not brought promptly and there was no compelling reason to explain the delay.
[21] Dominion Insurance argues that there was no delay and the Court ought to consider the Rule 21 motion. The action was commenced June 12, 2020, and shortly thereafter the plaintiff brought her summary judgment motion on an expedited timeline, which was consented to by the defendant. The defendant’s motion to strike certain paragraphs in the pleadings was heard at the same time. Following the release of the dismissal of the summary judgment motion, the defendant advised that they would be bringing a Rule 21 motion. This motion was brought pre-discovery and pre-document disclosure. Subsequently, the matter was scheduled for trial.
[22] If the defendant sought to challenge whether this Court is the appropriate forum as it relates to the Assessment, they ought to have brought a Rule 21 motion at an earlier stage in this proceeding. As discussed below, it was evident from the pleadings that the Assessment was in issue. That has not changed. Further, this Court addressed the jurisdictional issue in the summary judgment motion (as discussed below).
[23] Second, the plaintiff argues that the Court ought to dismiss the motion on the basis that it is frivolous, vexatious or an abuse of process of the Court. The plaintiff submits that the Court took jurisdiction over this matter as it heard the summary judgment motion. The plaintiff argues that if the defendant wished to challenge the fact that this Court has taken jurisdiction, this should be done by an appeal to the Ontario Court of Appeal.
[24] The defendant argues that there was no determination of the jurisdictional issue at the summary judgment motion and accordingly the defendant could not appeal to the Court of Appeal. The plaintiff’s summary judgment motion was dismissed: Eutice Nelson v. Dominion of Canada General Insurance, 2020 ONSC 7260 (the “Summary Judgment Reasons”). Justice Papageorgiou discussed the Assessment and the Umpire’s ruling in her decision. However, at paragraph 50 of her decision, she stated:
“In accordance with Skunk v. Ketash, 2016 ONCA 841, 135 O.R. (3d) 180, at para. 62, I have specifically considered to what extent I have made determinations of law that are intended to be binding on the parties at trial. I do no intend to make any such determinations. In particular, I have made no findings on whether the Umpire was functus. I therefore do not invoke subrule 20.04(4). In accordance with Hryniak, at para. 78, I seize myself of this matter subject to my availability on the civil list, which may be determined through the Toronto civil motion/trial office as needed.”
[25] Justice Papageorgiou has been transferred to another judicial team. As mentioned, I was assigned as the case management judge for this matter.
[26] I agree with the defendant’s submission that because the summary judgment motion judge did not make a finding on the jurisdictional issue, there was no route of appeal for the defendant on this issue.
[27] Dominion Insurance moves under Rule 21.01(1) for the determination of a question of law. Rule 21.01(1) provides:
(1) A party may move before a judge,
a. for the determination, before trial, of a question of law raised by a pleading in an action where the determination of the question may dispose of all or part of the action, substantially shorten the trial or result in a substantial saving of costs; or
b. to strike out a pleading on the ground that it discloses no reasonable cause of action or defence,
and the judge may make an order or grant judgment accordingly.
[28] No evidence is permissible on a motion under Rule 21.01(1)(b), and evidence is only permissible under Rule 21.01(1)(a) with leave of the Court or on consent. Both parties filed affidavits on this motion, which I considered.
[29] The defendant seeks clarity as to what the plaintiff seeks in this action and whether the plaintiff has selected the appropriate forum. In particular, the defendant submits that it is concerned that the plaintiff is trying to introduce a back door into the appropriate review of the appraisal process and is seeking to re-argue the Assessment and the appraisal process before this Court.
[30] However, in reviewing the pleadings and the Summary Judgment Reasons, the plaintiff has made it clear from the outset that aspects of the Assessment are in issue. I note that the Statement of Claim includes the following:
• Reference to the fact that the plaintiff was seeking the replacement value of $465,000 (see, for example, sections 1(a), 23, 26)
• Reference to the plaintiff’s position that the payments for the prior work related to asbestos removal and emergency repairs should not have been deducted (see, for example, section 25, 27, 36, 39, 41)
• Allegations regarding the appraiser appointed by the defendant (see, for example, section 30)
• Allegations that the amount determined at the Assessment was not sufficient (see, for example, section 29, 50)
[31] I also note that the defendant raised the jurisdictional issue in the statement of defence at section 16: “The Dominion pleads that the Plaintiff is attempting to engage in a collateral attack on the appraisal award to which the court lacks jurisdiction”.
[32] The summary judgment motion judge was also live to the potential jurisdictional issue and heard the summary judgment motion. At paragraph 24 of the Summary Judgment Reasons, Justice Papageorgiou stated:
“The dispute is as follows:
a) First, the defendant says that the plaintiff is not entitled to the RCV because she has not attempted to rebuild her home as soon as possible as required under the Policy. The defendant says that she is only entitled to the ACV set out in the Assessment at Appraisal Report in the amount of $372,000.
b) The defendant also seeks to deduct $201,587.37 in respect of previous payments made by the defendant for asbestos remediation, clean up and the cost of architectural drawings. In accordance with the defendant’s interpretation of the Assessment at Appraisal Report, it issued the plaintiff a cheque in the amount of $170,412.63 which she has not cashed.
[33] Justice Papageorgiou further stated at paragraphs 30, 31 and 32:
“There is a clear dispute as to the purpose of the Appraisal, as well as what occurred at the Appraisal which I am unable to resolve on this record. I note that both parties filed evidence as to what occurred prior to and during the Appraisal, and neither party took the position that the Appraisers’ evidence as to what was discussed was inadmissible.
The defendant did argue that the plaintiff’s claim is not justiciable because s. 128 of the Insurance Act says that if the two appraisers do not agree, then the agreement of one appraiser and the umpire determines the matter. Both the plaintiff and defendant made inquiries with the Umpire who wrote an email and a letter confirming his understanding and agreement with the Defendant’s Appraiser’s interpretation…
Apart from the fact that the plaintiff objected to the Umpire’s subsequent communications for a number of reasons, including the argument that he may have been functus, and was allegedly too friendly with the Defendant’s Appraiser, I do not find the Umpire’s communications determinative”
[34] The plaintiff submits that the Court has taken jurisdiction over this proceeding. Among other things, the Court heard the plaintiff’s summary judgment motion, which was dismissed. The Court also considered matters related to the Assessment. The plaintiff argues that it would be most efficient to continue this action in this Court. I agree.
[35] The plaintiff also points to the urgency inherent in this case, which involves an elderly woman who lost her sister and her home in the fire and needs to get back into her home as soon as possible.
[36] The defendant submits that if the plaintiff is challenging the underlying Assessment, that ought to be by way of judicial review to the Divisional Court. As noted by Stinson J. in DK Manufacturing Group Ltd. v. Co-operators General Insurance Co., 2016 ONSC 3983 at paragraph 45:
“Importantly, as a matter of law the appraisal process provided for under a policy pursuant to s.128 of the Insurance Act is not optional once it is invoked; rather it is mandatory: Seed v. ING Halifax Insurance, 2002 CanLII 79669 (ON SC), [2002] O.J. No. 1976 (Ont. S.C.J.). Moreover, the case law is clear that an Umpire’s ruling constitutes a final determination of the issue and is binding on all parties. If a party wishes to dispute the ruling of an Umpire, that party must bring an application for judicial review to the Divisional Court. Even then, the courts are cautioned against “lightly interfering” with an Umpire’s ruling. This has been interpreted as requiring misconduct on the part of the Umpire. Seed v. ING Halifax Insurance, 2005 CanLII 41991 (ON SCDC), [2005] O.J. No. 4870 (Ont. Div. Ct.) at para. 23; Barrett v. Elite Insurance Co. (1987), 1987 CanLII 4160 (ON CA), 59 O.R. (2d) 186 (Ont. C.A.) at para. 13.
[37] Based on the jurisprudence, generally a challenge to the Assessment would be done through judicial review to the Divisional Court. However, I am cognizant of Rule 1.04, which provides that the Rules “shall be liberally construed to secure the just, most expeditious and least expensive determination of every civil proceeding on its merits”. This proceeding was started by the plaintiff over a year ago and clearly raised issues regarding the Assessment in the statement of claim. The defendant was aware of these issues and the potential jurisdictional issues, as evidenced in the statement of defence. The defendant could have taken steps much sooner to advance its jurisdictional concerns. It would be highly prejudicial, more costly and take significantly more time if at this stage of the proceedings the action were to be stayed and the plaintiff required to first seek judicial review at the Divisional Court.
Disposition and Costs
[38] Given the Summary Judgment Reasons, the fact that the defendant has been live to this issue since the outset (as evidenced by the pleadings), and the further delay that would result if this matter were stayed pending judicial review, I decline to hear this motion under Rule 2.02. For similar reasons, I would also dismiss the motion under Rule 21 as not being brought promptly and there not being a compelling reason or evidence of any change in circumstances.
[39] The parties filed their costs outlines. As the successful party on this motion, the plaintiff is entitled to costs. Having reviewed the costs outlines filed by the parties, and having regard to the factors set out in Rule 57.01, including the amount of costs that an unsuccessful party could reasonably expect to pay in relation to the step in the proceeding, the complexity of the proceeding, and the importance of the issues, the defendant shall pay the plaintiff’s partial indemnity costs fixed in the amount of $13,000.00 (inclusive of taxes and disbursements) within 30 days.
J. Steele J.
Released: July 7, 2021
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
EUTICE NELSON, a.k.a. JANET ROSS
Plaintiff
– and –
THE DOMINION OF CANADA GENERAL INSURANCE COMPANY
Defendant
REASONS FOR JUDGMENT
J. Steele J.
Released: July 7, 2021