Court File and Parties

COURT FILE NO.: CV-19-628612 DATE: 20220413 SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Lola Gray and Shomari Gray, Plaintiffs AND: Sobel Adjusting Solutions Inc. and Allstate Insurance Company of Canada, Defendants

BEFORE: Pollak J.

COUNSEL: Hershel Sahian, for the Plaintiffs George Wray, for the Defendant Sobel Adjusting Solutions Inc. Todd J. McCarthy & Richard J. Campbell, for the Defendant Allstate Insurance Co. of Canada

HEARD: October 21, 2021

Endorsement

[1] An Action was commenced by the Plaintiffs, Lola Gray (“Ms. Gray”) and Shomari Gray (“Mr. Gray”), against the Defendants, Allstate Insurance Company of Canada (“Allstate”) and Sobel Adjusting Solutions Inc. (“Sobel”).

[2] Ms. Gray is the owner of the Property and Mr. Gray lived at the Property as occupant and occupier.

[3] A fire damaged their three-bedroom detached house with a basement apartment and its contents.

[4] Ms. Gray was the policyholder of an insurance contract issued by Allstate. She retained Sobel as the public adjuster to assist and represent the Plaintiffs on their insurance claim.

[5] Around October 5, 2017, Ms. Gray signed a Full and Final Release (the “Release”) with Allstate. Mr. Gray and Sobel are not parties to the Release.

[6] In the Action, the Plaintiffs claim that the settlement and Release are grossly unfair as a result of the overwhelming imbalance in the bargaining power between the parties and claim that Sobel failed to properly manage the insurance claim and that Allstate knowingly took advantage of the Plaintiffs' vulnerability.

[7] The Defendants jointly move for Summary Judgment on the issue of liability and coverage for the claims made by the plaintiffs in this action. The Defendants take the position that there is no genuine issue requiring a trial insofar as coverage or liability are concerned.

[8] The Defendants maintain that as the Full and Final Release represents a final resolution of all claims under Ms. Gray’s insurance policy, the Plaintiffs’ claim should be dismissed on that basis alone.

[9] As an alternative argument, the Defendants submit that the Plaintiffs cannot satisfy their burden of proof that they fell below the standard of care expected as the Plaintiffs have adduced no evidence on the standard of care. The burden on this Motion rests with the Plaintiffs to establish that the standard of care raises a genuine issue for trial that cannot be addressed by the Full and Final Release.

[10] The issues on this motion are:

a. Is summary judgment appropriate in the circumstances? b. Does the Settlement settle all claims under the Policy, and therefore estop the Plaintiffs’ from bringing the within action? c. Should the Settlement be set aside? d. Does Mr. Gray have an independent claim for professional negligence against Sobel, which is not addressed by the Settlement? and, e. Are exemplary, aggravated and/or punitive damages warranted?

[11] The Plaintiffs allege that Allstate was negligent and/or breached the policy by failing to properly adjust the claim, by ignoring information and for failure to pay for covered damages.

[12] The Plaintiffs therefore seek additional payments for amounts and damages including punitive, aggravated and exemplary damages.

[13] The Defendants plead that Ms. Gray entered into the Settlement with Allstate for the total amount of $79,500, for all claims and available coverage under the Policy. The language and terms of the Full and Final Release were clear and specified that the Full and Final Release applied to “any and all known and unknown losses and damages” as well as “any future losses and damages not now known or anticipated”. They submit that the Settlement was for “the entire claim including repairs, contents and additional living expenses” and that Ms. Gray would receive $39,188.37 as the “balance owing for total $79,500”. I do not agree that the terms of the Release were clear.

[14] The Release appears to be for $39,188.37, representing part of the settlement, which was for $79,500.00. The Plaintiff’s argue that the Release does not represent a “final” settlement, but an interim settlement as further evidenced by the remediation work on the house continuing to December 18, 2017.

[15] In addition, the Release is signed by Ms. Gray to the benefit of Allstate. Mr. Gray and Sobel are not parties or signatories to the Release. More specifically, the Release does not include any language contemplating or encompassing the professional services rendered by Sobel or the damages arising out of Sobel’s failure to adequately perform the services.

[16] Sobel’s defence is that it had no reason to believe, and did not believe, that the Plaintiffs were vulnerable, nor had any reason to believe the Plaintiffs were not satisfied with the Settlement. Neither Plaintiff expressed any concern about the Settlement or asked for any clarification about the terms of the Settlement at the time to Sobel. Ms. Gray gave her testimonial stating that she was pleased with the Settlement. Neither Plaintiff was pressured into agreeing to the Settlement or the Full and Final Release. The Settlement is not unconscionable as it was approximately double the initial offer by Allstate. Further, there was no material fact known to Allstate or Sobel that was not known to or withheld from the Plaintiffs.

[17] As well, it is submitted that as Mr. Gray did not have a contract with Sobel, it owed no duty to him.

[18] Further, it is submitted that the Plaintiffs have not proven any negligence, breach of contract or bad faith by Sobel, and the only evidence indicates that Sobel successfully acted on behalf of Ms. Gray to obtain a substantially larger settlement than what was initially offered by Allstate. The Settlement Sobel negotiated was fair.

[19] There is evidence that the Plaintiffs’ suffered some emotional distress due to the unnecessary and undue pressure that Allstate and Sobel exerted.

[20] The Court has discretion to refuse to enforce a settlement.

[21] The Plaintiffs also claim that they lacked the capacity to enter into the settlement due to their stress and exhaustion and that the settlement is unconscionable.

[22] The Plaintiff’s claim that the inequality of the bargaining position arises out of ignorance, need and distress as the weaker party. The Plaintiffs were ignorant of the values of their damages and their rights.

[23] The Plaintiffs submit that this Court should determine that Sobel is not protected by the Release, the court should find that there is a genuine issue requiring a trial.

[24] The Plaintiffs claim that there is a lack of evidence that any breakdowns, calculations or valuations were used by Sobel during negotiations with Allstate. There is no evidence that Sobel adequately, or at all, enumerated or assessed the Plaintiffs’ claimed damages, including replacement costs for personal contents damaged or destroyed as a result of the fire and the additional living expenses associated with having to secure new living accommodations while remediation to the Property was ongoing to December 2017.

[25] Sobel’s witness’s Affidavit evidence is that he explained to Ms. Gray that the Release would settle all claims under the policy, “... including Dwelling, Building, Personal Property (on a Replacement Cost basis) and Additional Living Expenses”. At his Cross-Examination, however, the witness admitted that he did not give Ms. Gray a breakdown of the damages of the settlement. He did not explain what a “replacement cost basis” was. He did not tell her that she would not receive any money whatsoever for her additional living expenses.

[26] There is no evidence that Sobel advised either of the Plaintiffs that the October 5, 2017, $79,500.00 figure in the Release was inclusive of the August 28, 2017, $35,374.01 figure that Allstate negotiated with the Plaintiffs directly for the building repairs.

[27] As of the date of the Release, the remediation of the contents involved in the fire was not completed. The Plaintiffs’ evidence is that they therefore, assumed the Release was to settle the building repairs and that there were matters still outstanding that would be negotiated at a later date. They submit that there is no evidence that Sobel made clear to the Plaintiffs that the Release purported to settle the entirety of the claim, including the contents and additional living expenses.

[28] The Plaintiffs submit that the Release is deficient, as:

(a) The Release states that the “consideration” is $39,188.37. (b) The Release states that $39,188.37 … (this is the balance owing for a total of $79,500). (c) $39,188.37 is not explained. (d) $39,188.37 is not the sum of $35,374.01, which is the sum of the August 28, 2017 “settlement” claimed by Allstate. (e) It does not refer to “what the parties bargained for”, the total settlement (approximately $120,000.00), which according to the No. 57, October 24, 2021, entry by R. Hertner in Allstate’s Log is comprised of: (i) DW $80,694.07 (ii) CO $32,300.00 and (iii) ALE $7, 328.65

[29] There is no evidence that Allstate or Sobel explained the settlement to the Plaintiffs. Sobel’s cross-examination evidence is that the breakdown of the October 5, 2017, settlement and Release includes $65,500.00 for the building losses and $14,000.00 for the content losses. This evidence is inconsistent with the evidence referred to in paragraph 27 above.

[30] The evidence is sufficient, in my view, to raise several genuine issues for trial. The finality of whether the Release was clear to the Plaintiff’s is a genuine issue requiring a trial as there is conflicting evidence. Further, in the court’s view, it would not be appropriate to use the court’s enhanced powers as referred to in Hryniak as there are other genuine issues for trial.

[31] As well, Mr. Gray did not settle with Sobel and/or Allstate or execute the Release. For the reasons below, it is not necessary for the court to dwell on this issue.

[32] The Defendants rely on Krawchuk v. Scherbak, 2011 ONCA 352, 106 O.R. (3d) 598, wherein the Ontario Court of Appeal confirmed that “[t]he jurisprudence indicates that, in general, it is inappropriate for a trial court to determine the standard of care in a professional negligence case in the absence of expert evidence.”

[33] There are two exceptions to that general rule: 1) “where the court is faced with “nontechnical matters or those of which an ordinary person may be expected to have knowledge”; and 2) “cases in which the impugned actions of the defendant are so egregious that it is obvious that his or her conduct has fallen short of the standard of care, even without knowing precisely the parameters of that standard”.

[34] In this motion for summary judgment, the Defendants submit that expert evidence is required on the standard of care expected of Sobel, as neither exception to the rule in Krawchuk applies. They rely on the case of Seiler v. Mutual fire Insurance Co. of British Columbia, 2003 BCCA 696, 31 C.L.R. (3d) 262, which made clear that the standard of care of insurance adjusters does not fall within the ordinary knowledge of the lay person.

[35] As well, in Midas Investment Corp. v. Dominion of Canada General Insurance Co., 2013 ONSC 4827, 25 C.C.L.I. (5th) 140, a defendant insurance company and defendant insurance agent brought a motion for summary judgment to dismiss the plaintiff’s claim for negligence. The Court granted the defendants’ motion, and noted that

18. … the plaintiff has put forward no expert evidence to raise a triable issue with respect to the breach of the standard of care of an insurance agent. While counsel submitted that expert evidence would not be required to establish negligence, in my view, such evidence is required.

[36] Further, it is submitted that this is not a case of egregious conduct under the second exception to the Krawchuk rule. Mr. Sobel retained Rory MacKinnon (“Mr. MacKinnon”), an expert, to help quantify the building loss, had the Plaintiffs complete a schedule of contents loss and reviewed that schedule with the Plaintiffs, and further consulted with Mr. MacKinnon in arriving at an estimate of additional living expense costs, which was taken into account when negotiating the settlement with Allstate.

[37] As the Plaintiffs have not adduced any evidence on the standard of care expected, the Plaintiffs cannot meet their burden to show a genuine issue for trial regarding the standard of care. It is the Plaintiffs who must prove negligence. The Plaintiffs have failed to put their best foot forward, and cannot meet their burden of proof to establish the standard of care.

[38] The Plaintiffs position is that the actions of the Defendants are so egregious that it is obvious that his or her conduct has fallen short of the standard of care, even without knowing precisely the parameters of that standard. Most importantly, the evidence is that Allstate did not explain the alleged August 28, 2017 “settlement” of the repairs of the building for $35,374.01 (i.e., prior to the September 6, 2017 retainer of Sobel) or Allstate’s ongoing reliance on the settlement. Similarly, Sobel did not explain the October 5, 2018 settlement, the October 5, 2018 Release, ongoing expenses (i.e., October 13, 2017 dry-cleaning and rug cleaning) and/or continuing remediation, which only concluded on December 18, 2017.

[39] There are no notes, records, emails or correspondence evidencing any explanation of the foregoing by Allstate or Sobel to the Plaintiff’s.

[40] The Plaintiff’s submit that the evidence should be obvious to the Court. An expert witness is not better placed than the Court in assessing the settlement and the Release in the context of the obligations owed by the Defendant’s to the Plaintiff’s.

[41] Without proper communication with the Plaintiffs, Allstate cannot satisfy its duty of good faith to the Plaintiffs. The Plaintiffs submit that as their agent, contractor and fiduciary, Sobel owed them a duty to provide complete advice and warn. Encompassed in this duty is the duty to disclose to the client all information relevant to the matter for which Sobel was retained. The evidence is that it failed to provide complete advice and/or warn the Plaintiffs as to the terms of the proposed Settlement and/or Release.

[42] The requirements for summary judgement were recently set out by the Court of Appeal for Ontario in Royal Bank of Canada v. 1643937 Ontario Inc., 2021 ONCA 98, 154 O.R. (3d) 561. In this case, I find that the requirements for summary judgment have not been met. In particular, I find that the concerns raised by the Court of Appeal with respect to partial summary judgment are applicable on this motion.

[43] In Hamilton (City) v. Thier and Curran Architects Inc., 2015 ONCA 64, 45 C.L.R. (4th) 1 and Butera v. Chown, Cairns LLP, 2017 ONCA 783, 137 O.R. (3d) 561, the Court of Appeal held that courts should exercise caution when it comes to granting partial summary judgment, particularly in circumstances where there is a risk of creating duplicative proceedings or inconsistent findings of fact.

[44] In Butera, the Court of Appeal noted that, in addition to the danger of duplicative and inconsistent findings, partial summary judgment motions may have several additional detrimental effects. At paras. 30-33, it identified the following four problems:

a. Partial summary judgment motions delay the resolution of the main action (para. 30):

Typically, an action does not progress in the face of a motion for partial summary judgment. A delay tactic, dressed as a request for partial summary judgment, may be used, albeit improperly, to cause an opposing party to expend time and legal fees on a motion that will not finally determine the action and, at best, will only resolve one element of the action. At worst, the result is only increased fees and delay. There is also always the possibility of an appeal.

b. Partial summary judgment motions may be very expensive (para. 31):

The provision for a presumptive cost award for an unsuccessful summary judgment motion that existed under the former summary judgment rule has been repealed, thereby removing a disincentive for bringing partial summary judgment motions.

c. Partial summary judgment motions may result in a waste of judicial resources (para. 32):

[J]udges, who already face a significant responsibility addressing the increase in summary judgment motions that have flowed since Hryniak v. Mauldin, 2014 SCC 7, [2014] 1 S.C.R. 87, the case that promoted the use of summary judgment in appropriate circumstances] are required to spend time hearing partial summary judgment motions and writing comprehensive reasons on an issue that does not dispose of the action.

d. Partial summary judgment motions carry a higher risk of inconsistent findings (para. 33):

[T]he record available at the hearing of a partial summary judgment motion will likely not be as expansive as the record at trial, therefore increasing the danger of inconsistent findings.

[45] Any motion that may result in partial summary judgment should only be granted in the clearest of cases, where the issues on the judgment sought are “easily severable” from the balance of the case. Otherwise, “there is a very real possibility of a trial result that is inconsistent with the result of the summary judgment motion on essentially the same claim.”: Butera, at para. 26, quoting Corchis v. KPMG Peat Marwick Thorne, [2002] O.T.C. 475 (C.A.), at para. 3.

[46] Recently, Nordheimer J.A. stated in Way v. Schembri, 2020 ONCA 691, 8 B.L.R. (6th) 158, at paras. 13-18:

The respondents contend that summary judgment is appropriate because the only issue before [the] motion judge was the enforceability of clause 13. That argument might have gained some traction if there had been agreement that the only issue to be decided was the meaning of clause 13 based on its wording alone, without the need for any factual context. That was not the case, however. The factual matrix was a necessary consideration of any decision regarding the application and enforceability of clause 13 because “[c]onsideration of the surrounding circumstances recognizes that ascertaining contractual intention can be difficult when looking at words on their own, because words alone do not have an immutable or absolute meaning”: Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53, [2014] 2 S.C.R. 633, at para. 47.

In any event, it is difficult to see what saving of time and expense was accomplished by dealing with this issue separately, when the main parties are locked in other litigation that is still ongoing and has been for some time. The issue of the enforceability of [the contractual] clause, by itself, could have been easily dealt with at the trial, if the issue was as narrow as the respondents contend. Purporting to deal with it through a summary judgment motion has only caused further delay, distraction, and expense, all in the context of litigation that has been going on for far too long as it is.

On this point, the appellants say that the motion judge effectively granted partial summary judgment because of the existence of the other action and the factual linkage between the two. The respondents reply that the motion judge granted full summary judgment because it disposed of the appellants’ action.

The respondents are correct, but only in the most technical sense. More importantly, the principles surrounding partial summary judgment are not to be so narrowly construed nor applied. Partial summary judgment is a rare procedure that should be sparingly invoked: Butera, at para. 34. The reasons for that approach are enunciated by Paciocco J.A. in Service Mold + Aerospace Inc. v. Khalaf, 2019 ONCA 369, 146 O.R. (3d) 135, at para. 14:

There is also the risk that partial summary judgment can frustrate the Hryniak objective of using summary judgment to achieve proportionate, timely and affordable justice. If used imprudently, partial summary judgment can cause delay, increase expense, and increase the danger of inconsistent findings at trial made on a more complete record.

Those concerns regarding partial summary judgment are fully engaged in this case because, as the appellants correctly point out, the two actions are factually intertwined. Indeed, the motion judge acknowledged the overlap in the facts of the two cases numerous times in the course of his reasons. The motion judge also relied on that overlap in reaching the costs decision that he did.

As a result, there is the very real possibility that conclusions reached by the trial judge could conflict with the result reached by the motion judge. There is also the possibility that the trial judge will reach a better understanding of the relationships between the parties that would give a more informed view of the meaning and purpose of [the lease]. This was the very concern that Lauwers J.A. expressed in Baywood Homes Partnership v. Haditaghi, 2014 ONCA 450, 120 O.R. (3d) 438, when he said, at para. 37:

In the complex situation in this case, it is therefore entirely possible that the trial judge who hears the trial of the issue on the validity of the promissory notes will develop a fuller appreciation of the relationships and the transactional context than the motion judge. That could force a trial decision on the promissory notes that would be implicitly inconsistent with the motion judge's finding that the third release is fully valid and effective, even though the parties would be bound by that finding. The process, in this context, risks inconsistent findings and substantive injustice.

[47] In the case of Correct Group Inc. v. Cameron, 2019 ONSC 3901, the court ruled on the issue of the necessity to introduce expert evidence on a motion for summary judgment. The Court held, at paras. 104-106:

I have concluded that the defendants have failed to meet the threshold evidentiary burden to adduce evidence going to the merits of their defence. On that basis their motion fails with respect to the argument as to the absence of expert evidence on the duty and standard of care.

Furthermore, and alternatively, given that at this stage in the action, there has been no documentary disclosure by the defendants, nor any oral discoveries, it would be entirely unfair to accelerate the delivery of expert reports by truncating the timelines established in r. 53.03(1).

While the defendants’ may have considered their early summary judgment motion strategically advantageous, the overarching principles in Hryniak calling for a “fair and just adjudication” require me to reject summary judgment.

[48] I agree with the approach taken by the court in Cameron. I find that the Defendants have not met their burden of proving the necessary evidence with respect to their summary judgment motions to have this claim dismissed. It should also be noted that as in the Cameron case, these motions are brought at a very early stage of the litigation.

[49] I find that the Plaintiffs have met their burden of establishing a genuine issue for trial with respect to the validity of the Release, and on the standard of care the Defendants were expected to meet and whether they have done so. The requirements of our courts, which I have set out above, have not been met. For all the above noted reasons, I dismiss the motion for summary judgment of the Defendants.

[50] There is one further practical issue. The Supreme Court of Canada in Hryniak also held, at para. 78, that:

Where a motion judge dismisses a motion for summary judgment, in the absence of compelling reasons to the contrary, they should also seize themselves of the matter as the trial judge.

[51] In my view, this is an appropriate case for me to follow the Supreme Court’s direction. I must, however, qualify this to be subject to the practical reality of our court’s ability to schedule trials in a timely and expeditious manner. I will not be seized of this trial if the effect of my unavailability would be to delay the hearing of the trial between the parties. If it is possible to do so without adverse delay or consequences to the parties, I seize myself of the trial of this matter as directed in Hryniak.

Costs

[52] The successful parties, the Plaintiffs are entitled to their costs. If the parties are unable to agree on costs, the Plaintiffs may file, serve and upload to caselines, their cost submissions of no more than two pages double spaced by 12 p.m. on April 20, 2022. The Defendants may then serve, file and upload to caselines, their cost submissions of no more than two pages, double spaced by 12 p.m. on April 29, 2022, with copies of both sent to my assistant Roxanne Johnson at Roxanne.johnson@ontario.ca. No reply cost submissions will be accepted.

Pollak J. Date: April 13, 2022