COURT FILE NO.: CV-16-94762
DATE: 20220831
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
TAHIR QURESHI operating as ATQ FASHION
Plaintiff
– and –
ROYAL & SUN ALLIANCE INSURANCE COMPANY OF CANADA
Defendant
Angela Assuras, for the Plaintiff
Grant G. Walsh, for the Defendant
HEARD: November 29, 30, December 1, 2, 3, 10, and 13, 2021
SPEYER J.
A. Introduction
[1] Tahir Qureshi operated a retail business, ATQ Fashion, at 14 Simcoe Street South in Oshawa. His store sold clothing and shoes. He rented the building in which the store was located. The store was on the main floor. His inventory was stored on the second floor.
[2] Mr. Qureshi entered into a contract of business insurance with Royal and Sun Alliance Insurance Company of Canada (“RSA”) for the term March 27, 2014, to March 27, 2015. There is no dispute that a valid commercial property broad form policy (“the policy”) existed with respect to the commercial premises located at 14 Simcoe Street South, in Oshawa, and that damage to inventory caused by water intrusion into the premises was a covered loss under the policy.
[3] On October 7, 2014, the roof of the building leaked, and items of clothing stored in boxes on the second-floor sustained water damage. Mr. Qureshi notified RSA of the loss and submitted a claim for $53,488.84 (“the first loss”). RSA denied the claim because Mr. Qureshi did not prove the amount of his loss.
[4] Another loss was sustained on February 12, 2015, when the roof leaked again, and Mr. Qureshi’s inventory was again damaged by water (“the second loss”). He submitted a proof of loss document for this loss in the amount of $74,486.75, but erroneously put the date of the first loss and the claim number of the first loss on the proof of loss document for the second loss. RSA has not paid anything in relation to the second loss. RSA did not process the second claim because it was not aware that a proof of loss relating to the second claim had been submitted.
[5] Prior to trial, the parties agreed to litigate this matter as a Simplified Procedure trial, and Mr. Qureshi agreed to abandon his claim that exceeded $200,000.
B. The positions of the parties
[6] Mr. Qureshi claims against RSA for: 1) damages for breach of contract arising from RSA’s failure to pay benefits under the insurance policy; 2) damages for bad faith and unjust enrichment; 3) pre-judgment and post-judgment interest; and 4) costs.
[7] RSA agrees that the policy provided coverage for water damage to Mr. Qureshi’s inventory. RSA says that Mr. Qureshi failed to comply with condition six of the Commercial Property Policy Conditions because he failed to prove the actual cash value of the loss claimed. RSA says that Mr. Qureshi violated the policy by failing to comply with his obligation to produce for examination all documents in his possession or control that relate to the Proof of Loss.
[8] In addition, RSA submits that the claim in relation to the first loss is barred by condition 14 of the Commercial Property Policy Conditions, as the Statement of Claim was issued more than one year after the loss or damage occurred.
C. The issues
[9] The preliminary issue to be determined is whether the claim in relation to the first loss is barred by a one-year limitation period. The substantial issue presented on this trial is whether RSA breached its contract of insurance with the plaintiff by not paying benefits to which he was entitled under the insurance policy.
D. The evidence
(a) The first loss
[10] When Mr. Qureshi attended at his business on October 6, 2014, he discovered that the roof of the building had leaked and that inventory he stored on the second floor of his business premises was damaged by water. He called his insurer, RSA.
[11] Crawford and Company (Canada) (“Crawford”), an independent insurance adjuster, was assigned by RSA on October 9, 2014, to investigate the occurrence, evaluate the damages, and make appropriate recommendations for settlement to RSA. Linda Fitzgerald was the assigned adjuster. Her role was to move the claim along in a timely manner. She was a very experienced adjuster. She met with Mr. Qureshi at his store on October 9, 2014. She noted that it was obvious that there was a leak from the roof.
[12] Mr. Qureshi completed an interview report with Ms. Fitzgerald in relation to the first loss. He said that he noticed water leaking from the roof when he was going upstairs. He left the stock in place, so that the insurance company could see the damaged items. He said that the damage included shirts, jeans, jackets, and shoes. Ms. Fitzgerald told him that he would have to provide invoices to prove the values of the items.
[13] Ms. Fitzgerald engaged a roofing company that reported that the roof of the building leased by Mr. Qureshi needed to be replaced.
[14] Ms. Fitzgerald retained AAA Appraisal to establish an inventory list of the damaged goods. It was not AAA’s role to establish the value of the claim. Ms. Fitzgerald testified that in commercial loss cases, the insurer looks to the property owner to provide invoices to support the claim. AAA was instructed to make an inventory list, and to provide wholesale prices for the goods, and then, with the help of Mr. Qureshi and his invoices, to cross-reference anything that was on the list.
[15] In a letter to Mr. Qureshi dated October 23, 2014, Ms. Fitzgerald told him that she had been assigned by RSA to investigate the occurrence, evaluate the damages and make appropriate recommendations for settlement to the insurer. She also told him that RSA would make the final decisions as to the coverage, valuation and settlement of the loss. She told him that “[y]our policy is subject to a one-year limitation period which expires on October 7, 2015”.
[16] Ms. Fitzgerald testified that she told Mr. Qureshi that he would have to provide documentation to prove his cost of the damaged items. She also advised him to make sure that stock was removed from the area where water had entered to prevent any further damage. She advised him that AAA Appraisal was retained to assist with the listing of the damaged items. She told him to ensure that only current stock, not dead stock, was included in the claim. She told him that Kim Clarke, from AAA, was retained to assist with the listing of the damaged items.
[17] On November 17, 2014, Kim Clarke advised Ms. Fitzgerald that she was waiting for additional information. She had prepared the inventory list, met with Mr. Qureshi several times, and had received invoices from him. Ms. Fitzgerald advised Mr. Qureshi on November 18 that that AAA was waiting for him to provide further information
[18] AAA prepared an inventory damage report, which was stated to be “an estimate of the recorded damages…subject to review and final approval by the insurance carrier”. The report noted the manufacturer’s suggested retail price where the damaged item had a tag. Mr. Qureshi provided invoices for some of the items, and the report recorded Mr. Qureshi’s cost of those items in accordance with the information contained in those invoices. Where no invoice was provided, AAA noted that on their report. The report was provided to Crawford on about November 18, 2014. At that time, AAA was still waiting for further information from Mr. Qureshi about his cost for some of the items.
[19] Mr. Qureshi completed a commissioned Interim Proof of Loss document on December 16, 2014. The amount claimed was $53,488.84. This was the amount that AAA calculated, based on the information received from Mr. Qureshi as to the wholesale price of the damaged items.
[20] In an email dated January 13, 2015, Daniel Hébert, a claims examiner with RSA, advised Mr. Qureshi that his proof of loss was rejected as it was not completed properly, such that RSA did not know how much he was claiming under his policy. A blank Proof of Loss and blank Statutory Declaration were provided to Mr. Qureshi, and Mr. Hébert asked Mr. Qureshi to complete those documents. Mr. Hébert asked Mr. Qureshi to call him if he had any questions.
[21] A further Proof of Loss document was received by Crawford on January 14, 2015. A Statutory Declaration by Mr. Qureshi was received by Crawford the same day.
[22] While Mr. Qureshi had difficulty completing the paperwork in relation to the first loss in a form that was acceptable to RSA, that is not why RSA rejected his claim. RSA rejected his claim because Mr. Qureshi did not provide reliable information to RSA as to the quantification of his loss.
[23] Mr. Qureshi provided several invoices to AAA to substantiate his loss. These were given to Crawford, and then to RSA The invoices are contained in Exhibit 6. The invoices appeared odd to Ms. Fitzgerald. They contained spelling errors. Notably, one contained a business address on “Young” Street in Toronto, rather than “Yonge” Street. Ms. Fitzgerald explained that this was unusual because a business would take care to provide a correct address on its invoice, so that it could receive payment. She further noted that all the product costs were in rounded numbers, which based on her considerable experience in the industry appeared odd. She noted that the fonts on the invoices were the same. She searched the addresses on-line and learned that the address for a clothing supplier named “U&U” was the address of a UHaul store, and that the address for a clothing supplier named “Linx” was the location of a Linx cellphone distributor. In her searches, she was unable to verify the existence of any of the companies listed on the invoices. She forwarded the documents to Daniel Hébert, an examiner at RSA. She was advised by RSA to stand down and she did nothing further to investigate the first loss.
[24] The invoices were also investigated by Bradley Weber, an investigator with RSA, at the request of Mr. Hébert. Mr. Weber received the invoices provided by Mr. Qureshi. Mr. Weber noted that the formatting on the invoices was similar. An invoice from “U+U International” contained an address on “Brimely Rd” in Toronto, a mis-spelled reference to “Brimley Road”. An invoice from “Apparel Deals” mis-spelled “Yonge Street” as “Young St.”. A business by that name did exist at the specified address on Yonge Street. Mr. Weber could find no on-line reference to “Ajmair Inc.” in Pakistan, or anywhere else. The invoice of “Linx Hollywood Fashion” indicated that its “adress” was “653 Victoria park Ave, Toronto”. Mr. Weber conducted a corporate search that confirmed that a company by that named existed, and he spoke with someone at the company. He did not receive any information that permitted him to authenticate the invoice and did not receive any documentation from the company. Mr. Weber testified that he was unable to verify that the invoices were genuine.
[25] Mr. Qureshi produced no evidence at trial to authenticate the invoices. He called no witnesses from his purported suppliers to verify their invoices. He produced no records to show that the invoices were paid. The “invoices” are replete with irregularities. On the totality of the evidence, I am satisfied that the invoices are not authentic and were created for the purpose of supporting Mr. Qureshi’s insurance claim.
[26] Mr. Qureshi has never provided invoices for a substantial amount of the claimed loss.
[27] Mr. Hébert was not available to testify at trial because he is deceased. Charles Lindner, a senior technical consultant for RSA, assumed responsibility for Mr. Hébert ’s files in 2019, after the litigation had commenced. Mr. Hébert’s email correspondence with Mr. Qureshi was filed in evidence.
[28] Mr. Qureshi called and emailed Mr. Hébert frequently, urging him to approve the claim. Throughout his email correspondence in relation to the first loss, Mr. Qureshi refers to AAA’s “appraisal” of his damaged goods and asserts his reliance on AAA’s assessment of the value of his loss to prove his loss.
[29] On January 26, 2015, Mr. Hébert told Mr. Tahir that RSA had not yet finished its review.
[30] By email dated February 5, 2015, Mr. Hébert told Mr. Qureshi that “we discovered during our investigation some alarming information for which we would like to give you the opportunity to provide further insight into the information that we have uncovered. If you are agreeable to providing us with a signed statement … please let me know”. Mr. Qureshi responded asking to know what the alarming information was. After several emails back and forth, in which Mr. Hébert indicated that the information related to the supporting documentation and invoicing for the stock purchases, Mr. Qureshi said on February 9, 2015, that he did not “have any problem to see anyone from insurance company”.
[31] Mr. Qureshi did not provide any additional information to prove the value of his loss. During the next few months, Mr. Qureshi regularly emailed Mr. Hébert, to ask whether a decision had been made in relation to his claim for his October 7, 2014, loss.
[32] On June 18, 2015, Mr. Hébert emailed Mr. Qureshi to provide an update in relation to his claim. Mr. Hébert told Mr. Qureshi that it was RSA’s position that he had not proven his loss of October 7, 2014. In an attached letter, Mr. Hébert advised Mr. Qureshi:
We are following up with you with regards to the status of our investigation. At this time we have not been able to independently verify the supporting invoicing for your damaged stock you had previously provided to us. RSA’s position is that you have not proven your loss to us. If you have further supporting documentation (credit card receipts, banking transaction records, bank draft records, etc…) please provide them to RSA without delay.
[33] In the same letter, Mr. Hébert reminded Mr. Qureshi that he had one year from the date of loss to make a claim for damages, failing which the claim would be statute barred.
[34] Mr. Qureshi did not provide Mr. Hébert with any supporting documentation in response to his June 18, 2015, letter.
[35] RSA’s investigation of Mr. Qureshi’s claim was complicated by concerns that some of his stock was counterfeit. At the request of RSA, Ms. Fitzgerald sent photographs of items that displayed branding purporting to be that of Lacoste and Timberland to Brad Weber, the investigator with RSA.
[36] Paola Piccoli, the head of brand enforcement at Lacoste, testified. She described several markers that identify an item of clothing as a genuine Lacoste product. She noted discrepancies between the garments displayed in photographs sent to her and genuine Lacoste products. Notably, labels on garments in the photographs indicated that they were made in “Morroco”. Lacoste products are manufactured in “Morocco”. Genuine Lacoste products are identified by an embroidered crocodile emblem of high quality. The crocodiles in the photographs of the garments are of poor quality.
[37] Kristine Scholtz-Ohlund works in the brand protection department of Timberland. She is very familiar with Timberland’s hallmarks of authenticity. She explained that unlike the “Timberland” garment depicted in photographs sent to her, a genuine neck label would be a woven, embroidered branded label, with a sizing label next to or below the neck label. The label would show the Timberland word mark or tree mark and be in an earth tone colour. The neck label shown in the photographs does not have these features.
(b) The second loss
[38] On February 12, 2015, Mr. Qureshi discovered that a second incident of water intrusion through the leaking roof into his second-floor stockroom had occurred.
[39] Mr. Qureshi provided an interview report on February 24, 2015, in relation to his second loss. In that report, he stated that he disposed of the items damaged in the first loss by discarding those items at the garbage dump. He stated that the items damaged in the second loss were current stock, purchased in January 2014 and November 2014. He stated that he could obtain invoices for those items when he sees what exactly was damaged. Some of the items were from Pakistan, some from China, and some were purchased locally.
[40] On February 25, 2015, Ms. Fitzgerald wrote to Mr. Qureshi to inform him about the process involved in the assessment of his claim for his second loss. She provided a blank Proof of Loss form and a blank Statutory Declaration form. She also told him that Complete Restoration Cleaning Services (“CRCS”) would pick up the damaged items from his shop as Crawford was unable to complete an inspection in the stock room given the amount of product and the limited space. CRCS is a restoration contractor. Ms. Fitzgerald provided Mr. Qureshi with a copy of the Statutory Conditions applicable to his claim. Condition 6 deals with the requirements after loss. These include a requirement that “if required and if practicable, produce books of account, warehouse receipts and stock lists, and furnish invoices and other vouchers verified by statutory declaration”.
[41] Also on February 25, 2015, Andrew Cormack, the Senior Project Manager for CRCS, wrote to Mr. Qureshi and told him that while the insurance company would pay for most of CRCS’s invoices, Mr. Qureshi was responsible for paying the HST portion of the invoices. Mr. Cormack told Mr. Qureshi that he could claim those amounts as an Input Tax Credit on his HST returns.
[42] An authorization for emergency services and cleaning permitting CRCS to enter Mr. Qureshi’s store and remove the damaged goods was signed by someone at his store. A document headed “Authorization for Content Disposal” was also signed February 26, 2015, by which ATQ Fashions authorized CRCS to dispose of the contents damaged by water on or about February 17, 2015, at 14 Simcoe St. S., Oshawa that was the subject of RSA claim #2990820. By that document, ATQ relinquished all rights to the damaged contents. At trial, Mr. Qureshi testified that he believed that the document may have been signed by an employee, but he was not able to be specific about that.
[43] The damaged goods were removed from Mr. Qureshi’s store on February 26 and 27, 2015, and taken to CRCS’s warehouse. After Mr. Qureshi advised Ms. Fitzgerald that not all of the damaged goods were removed, CRCS attended again on April 7, 2015, and removed more damaged stock. The damaged stock was dried and hung by CRCS, and then placed in secure storage.
[44] Ms. Fitzgerald retained AAA Appraisals to attend at CRCS and prepare damaged inventory reports in relation to the goods damaged in the second loss. AAA’s retainer was limited to creating a list of the damaged inventory. AAA was not to do any pricing. RSA directed that the list be provided to Mr. Qureshi and that he provide the cost of the damaged goods.
[45] On March 9, 2015, Ms. Fitzgerald told Mr. Qureshi, by email, that AAA would be used to list the items that had been removed from his shop and hung to dry at CRCS on an inventory sheet. She told Mr. Qureshi that the list would be sent to him for pricing and that he should submit invoices for the items when he returned the list with the prices included. Ms. Fitzgerald’s email was very clear as to what Mr. Qureshi was to do.
[46] Mr. Qureshi responded on March 19, 2015. Rather than addressing her directions, Mr. Qureshi asked Ms. Fitzgerald when she could do the appraisal.
[47] On March 19, 2015, Ms. Fitzgerald emailed Mr. Qureshi and told him that AAA had attended at CRCS three days earlier to begin working on the list of damaged items. She told him she would send the list to him as soon as she received it.
[48] On April 29, 2015, Ms. Fitzgerald advised Mr. Qureshi that AAA had been instructed to attend at CRCS and inventory the balance of the items. She told him that she would send him a list of the items when she received it.
[49] On May 13, 2015, Ms. Fitzgerald emailed Mr. Qureshi, attaching the list from AAA. She also said: “Please submit all that has been requested, Proof of Loss, Invoices, Declaration, etc. These have all been requested previously. I await your submission, you can just drop it off at the office when it is ready.”
[50] In addition to emailing the list to Mr. Qureshi, Ms. Fitzgerald also left a copy of the list for him at her office, and advised him on May 21, 2015, that he could pick up the list there.
[51] Ms. Fitzgerald did not receive any documents from Mr. Qureshi in relation to the second loss. She did not receive a Proof of Loss form or Statutory Declaration. She did not receive any invoices.
[52] Mr. Hébert emailed Mr. Qureshi on June 18, 2015, about the second loss. He attached a copy of Ms. Fitzgerald’s letter to Mr. Qureshi of February 25, 2015, that requested information and documentation. Mr. Hébert noted that Mr. Qureshi had not sent the required documents to Ms. Fitzgerald. Mr. Qureshi did not submit any documentation in response.
[53] On October 15, 2015, Mr. Qureshi and Ms. Fitzgerald exchanged emails. Mr. Qureshi advised her that he misplaced the inventory list. He also demanded to know what was happening with his second claim. Ms. Fitzgerald emailed the supplementary list to him again on October 16, 2015.
[54] On October 20, 2015, Ms. Fitzgerald emailed Mr. Qureshi reminding him of his obligations:
You have not yet sent in any claim forms or supporting documents for the second claim. I sent you a letter on June 12, 2015 to the store to followup with you on your claim submission and it was returned. … Daniel is not able to make any claim decisions until you actually submit a claim. All the paperwork was sent to you originally and needs to be completed and returned.
[55] By email dated October 26, 2015, Mr. Qureshi told Ms. Fitzgerald that he needed assistance in filling out the proof of loss because Mr. Hébert had rejected his proof of loss forms, an apparent reference to his claim in relation to the first loss. He offered to come and pick up his mail.
[56] On November 2, 2015, Ms. Fitzgerald told Mr. Qureshi that she was not sure she could help him with the proof of loss. She told him that he would have to provide all supporting invoices, and that he would have to complete the statutory declaration and have the proof notarized. She asked what part he wanted assistance with. He responded that he had filled out the proof of loss in relation to the first claim properly, that Mr. Hébert had denied the claim without any reason, and that he was not sure where he made his mistake. This was false. Mr. Hébert told Mr. Qureshi that RSA had been unable to independently verify the supporting invoices that Mr. Qureshi had provided for the damaged stock and invited Mr. Qureshi to submit further supporting documentation. Mr. Qureshi did not submit further supporting documentation.
[57] Ms. Fitzgerald, on November 3, 2015, knew that Mr. Qureshi had a lawyer, and she advised him to seek legal advice regarding the submission of his claim form. She told him that he would not get any money until he submitted that claim with supporting purchase invoices.
[58] By letter dated January 10, 2016, sent by email and registered mail, Ms. Fitzgerald wrote to Mr. Qureshi: “Further to our conversation of November 3, 2015, this letter serves to confirm that we have not yet received your claim submission as requested previously for this loss.” She told him that the claim would be barred by the limitation period on February 12, 2016, and that to protect the limitation period he would have to issue a statement of claim before that date. She recommended that he consult with counsel. She told him: “As requested previously, you will need to submit your Proof of Loss, your statutory declaration, all supporting documents to provide accurate pricing on the items being claimed. These can be invoices or bank statements showing payments to providers.”
[59] Mr. Qureshi responded by email on January 11, 2016: “I did not get the value of my goods from you. I will present you with the paperwork once you give me an assessment of my goods”. Ms. Fitzgerald had repeatedly told Mr. Qureshi that he would have to provide supporting documentation in relation to the value of the goods. He never provided her with any documents to support the amount of the second loss.
[60] Mr. Qureshi did submit a proof of loss form dated February 2, 2016, that was received by Ms. Fitzgerald on that date, that he intended to relate to the second loss. It claimed a total loss of $74,486.75. However, that proof of loss stated that it was in relation to Claim 2939299 and a loss that occurred on October 7, 2014. Ms. Fitzgerald understandably attributed that document to the first loss. By then, her file in relation to the first loss was closed, as it was prescribed by the expiration of the limitation period. She did not take any action on the February 2, 2016, proof of loss. I do not find any bad faith on her part. She relied on the document provided to her by Mr. Qureshi, which referenced the claim number for the first loss and the date of loss of the first loss. She wrote to Mr. Qureshi on February 3, 2016, and in that communication documented her understanding that the Proof of Loss she received on February 2, 2016, related to the first loss.
[61] Counsel for RSA, in closing submissions, accepted that the proof of loss received by Ms. Fitzgerald on February 2, 2016, was an attempt by Mr. Qureshi to file a proof of loss in relation to the second claim. However, it was not accompanied by a statutory declaration. It was not commissioned. It did not include any proof of the value of the damaged items.
[62] Accepting that Mr. Qureshi submitted a proof of loss for the second loss on February 2, 2016 and included therewith a handwritten list of property damaged in the second loss, it remains the case that he provided no supporting documentation as to the value of his loss. He did not indicate where the property was purchased or how he determined the claimed replacement cost. To date, he has not provided any evidence as to the value of the second loss either to the insurance company or at this trial.
[63] On October 20, 2015, by email, Ms. Fitzgerald told Mr. Qureshi that CRCS had been trying to get hold of him regarding outstanding HST payments that he owed to them. Mr. Qureshi responded that he had received an email from CRCS and that he would contact them.
[64] CRCS kept the damaged property for at least three years. Mr. Cormack testified that retail products that are damaged by water are deemed to be unsalvageable and cannot be resold. CRCS destroyed the property, all of which was damaged and unsalvageable, in the fall of 2019. It needed the space for other clients. Mr. Qureshi had not made any of the HST payments that he was required to make. CRCS did not advise Mr. Qureshi that it intended to destroy the damaged merchandise.
E. Analysis
(a) Is the claim for the first loss barred by the expiration of the limitation period?
[65] Condition 14 of Mr. Qureshi’s insurance policy with RSA, contained in the part of the insurance contract headed “Commercial Property Policy Conditions”, provides:
- Action
Every action or proceeding against the insurer for the recovery of any claim shall be absolutely barred unless commenced within one (1) year after the loss or damage occurs, unless legislation provides otherwise.
[66] It is the position of the plaintiff that legislation provides otherwise. The plaintiff says that the 2-year limitation period provided in the Limitations Act, 2002, SO 2002, C. 24, provides otherwise. The plaintiff relies on s. 4 and s. 22(1) of that statute:
Basic limitation period
- Unless this Act provides otherwise, a proceeding shall not be commenced in respect of a claim after the second anniversary of the day on which the claim was discovered. 2002, c. 24, Sched. B, s. 4.
Limitation periods apply despite agreements
22 (1) A limitation period under this Act applies despite any agreement to vary or exclude it, subject only to the exceptions in subsections (2) to (6). 2006, c. 21, Sched. D, s. 2.
[67] The plaintiff’s position founders on the shoals of subsections (5) and (6) of s. 22:
(5) The following exceptions apply only in respect of business agreements:
A limitation period under this Act, other than one established by section 15, may be varied or excluded by an agreement made on or after October 19, 2006.
A limitation period established by section 15 may be varied by an agreement made on or after October 19,2006, except that it may be suspended or extended only in accordance with subsection (4). 2006, c. 21,Sched. D, s. 2; 2008, c. 19, Sched. L, s. 4 (1).
(6) In this section,
“business agreement” means an agreement made by parties none of whom is a consumer as defined in the Consumer Protection Act, 2002;
“vary” includes extend, shorten and suspend.
[68] Mr. Qureshi was not a “consumer” as defined in the Consumer Protection Act, 2002 because the policy of insurance in this case was a commercial policy of insurance. The policy of insurance was a business agreement, and the limitation period could be varied by agreement. In this case, the limitation period was varied by Clause 14 of the Commercial Property Policy Conditions.
[69] In Boyce v. The Co-Operators General Insurance Co., 2013 ONCA 298, at para. 20, the court described the approach to be taken to a term in a contract that purports to shorten a statutory limitation period:
A court faced with a contractual term that purports to shorten a statutory limitation period must consider whether that provision in "clear language" describes a limitation period, identifies the scope of the application of that limitation period, and excludes the operation of other limitation periods. A term in a contract which meets those requirements will be sufficient for s. 22 purposes, assuming, of course, it meets any of the other requirements specifically identified in s. 22.
[70] The insurance contract in Boyce covered damage to the inventory of a woman’s fashion boutique. The issue in Boyce was whether a term in the insurance contract that imposed a one-year limitation period on claims was capable of overriding the otherwise applicable two-year limitation period set out in the Limitations Act, 2002, and if so, whether the contract was a “business agreement”. The Court of Appeal, at para. 25, concluded that the language in the term was clear enough for s. 22 purposes and that the contract fell within the definition of a “business agreement” in s. 22(6) because the respondents contracted with Co-Operators for insurance covering various risks related to the operation of their business. The contract was not "for personal, family or household purposes”.
[71] This case is indistinguishable from the decision of the Ontario Court of Appeal in Boyce. The limitation clause, in clear language, describes a one-year limitation period and excludes the operation of other limitation periods. The insurance contract in this case is a business agreement.
[72] The plaintiff’s claim for his first loss is subject to Clause 14 of the Commercial Property Policy Conditions and is subject to a one-year limitation period from the date of loss. The loss occurred on October 7, 2014. The statement of claim was issued on February 10, 2016, four months after the limitation period in relation to the first loss expired. Therefore, the action is dismissed in relation to the first loss.
(b) Did the plaintiff fail to prove his losses so that the defendant was not obligated to pay the claims?
[73] Despite my decision in relation to the limitation period, I will consider the merits of the claim in relation to the first loss, because it provides context for the claim in relation to the second loss.
[74] The defendant relies on Clause 6 of the Commercial Property Policy Considerations in the insurance contract, which sets out the requirements after a loss. The defendant submits that the plaintiff did not comply with Clause 6. The material provisions are:
- Requirements after Loss
Upon the occurrence of any loss of or damage to the insured property, the Insured shall, if the loss or damage is covered by the contract, in addition to observing the requirements of conditions 9, 10 and 11:
(i) immediately give notice of the loss or damage in writing to the insurer;
(ii) deliver as soon a practicable to the insurer a proof of loss verified by a statutory declaration:
Giving a complete inventory of the lost or damaged property and showing in detail quantities, costs, actual cash value and particulars of the loss claimed;
(iv) if required and if practicable, produce accounts, warehouse receipts, stock lists, invoices and other pertinent records, verified by statutory declaration, as well as any relevant contracts or agreements with others.
[75] The plaintiff accepts that it is his burden to prove the value of his loss on a balance of probabilities. In support of his position that he has proved the value of his loss, he relies on the reports prepared by AAA and his evidence that the values in the reports are correct. The plaintiff also points out that RSA set a $50,000 reserve for the first loss and submits this is evidence of the amount of the loss.
[76] The plaintiff leans heavily on the AAA report. The plaintiff submits that Ms. Clarke appraised the damaged goods, and that she did her research and double-checked her work as an appraiser. This position does not accord with the evidence.
[77] Ms. Clarke was not retained by Crawford to “appraise” the damaged property. In relation to the first loss, she was retained to create an inventory list, with pricing based on information provided by Mr. Qureshi. Ms. Clarke was clear in her evidence that her report was an estimate of recorded damages and that it was subject to review and final approval by the insurance carrier.
[78] Significantly, Ms. Clarke did not undertake any critical examination of the invoices provided to her by Mr. Qureshi. That is because her job was to inventory the damaged items and to assign values based on information provided by Mr. Qureshi. Some of that information came from the invoices which I find do not provide reliable information as to the value of Mr. Qureshi’s loss. Some of that information came from Mr. Qureshi verbally. Ms. Clarke testified that AAA did not provide an independent opinion as to the value of the first loss. It relied on information provided by Mr. Qureshi. In relation to the second loss, Ms. Clarke was retained to create a list of items at the CRCS warehouse, and not to attribute a price to the damaged items. The plaintiff’s reliance on what it asserts to be the “valuations” done by AAA is misplaced. Quite simply, AAA did not undertake any valuation or appraisal of the damaged items.
[79] The plaintiff also relies on his evidence at trial. Unfortunately, it is not evidence on which I am able to rely. I found Mr. Qureshi’s evidence to be vague and confusing. At times it was incoherent, particularly after his counsel was cautioned not to ask leading questions. At times, his answers varied from sentence to sentence, as when he attempted to explain the spelling errors and anomalies in the invoices he provided. It appeared that he was making up these answers as he went along. He was very unsure of some of his answers and appeared to be guessing about what he submitted to RSA or to Ms. Fitzgerald and when. His evidence that the amounts assigned by AAA for damaged merchandise in relation to the first claim were correct is of no value, given that those amounts were based on invoices that I have found not to provide reliable information as to the value of Mr. Qureshi’s loss, or from information provided by Mr. Qureshi that I find to be unreliable.
[80] Mr. Qureshi’s evidence was also contradicted by the written record of his communications with Ms. Fitzgerald and RSA. He testified that he provided all the invoices requested “later on”. He testified that he provided invoices in relation to the second loss. This flies in the face of the repeated requests made by the adjuster and the insurer. Mr. Qureshi testified that Mr. Hébert did not tell him what information he was required to provide, and that Ms. Fitzgerald “maybe” asked him for something. This evidence contradicts the email communications that are in evidence. When confronted with the letter written to him by Mr. Hébert in relation to the first loss, Mr. Qureshi testified that he did not have credit card receipts, bank transaction records or bank draft records showing his payments for the damaged items because he normally pays cash for the items. If that were so, there would be a record of the large cash withdrawals he would have needed to make to pay those suppliers. He did not testify that he kept tens of thousands of dollars on hand. I reject his evidence that the invoices that were entered in evidence were provided to him by his suppliers. I also reject his evidence that he paid for items from Pakistan by Moneygram or Western Union because I found Mr. Qureshi’s evidence to be unreliable generally, and because there was no documentary evidence provided to support that evidence.
[81] RSA tried to verify the invoices but was unable to do so. RSA provided Mr. Qureshi with multiple opportunities to provide supporting information as to the cost of his inventory, but he did not do so. In relation to the second loss, he has provided no documentary proof of the cost of his damaged inventory at all. Not to RSA. Not to this court.
[82] In conclusion, I find that the plaintiff failed to prove his loss to RSA. He breached Clause 6 of the Commercial Property Policy Considerations in the contract of insurance. RSA was not obliged to pay the claim.
(c) Spoliation
[83] The plaintiff claims that CRCS’s actions in disposing of his stock that was removed to their premises should work against RSA and that an inference should be drawn against the defendant because the plaintiff was deprived of the opportunity to look at his stock. The plaintiffs do not ask for damages, but rather ask that an inference be drawn that the destroyed products would somehow have provided evidence unfavourable to the defence and would have supported the plaintiff’s claim against RSA.
[84] The defendant responds that spoliation requires an intentional destruction of litigation property, and that RSA did not cause the stock to be destroyed. CRCS was not an agent of RSA.
[85] Spoliation occurs where a party has intentionally destroyed evidence relevant to ongoing or contemplated litigation in circumstances where a reasonable inference can be drawn that the evidence was destroyed to affect the litigation. It does not follow that spoliation has occurred merely because evidence has been destroyed: Nova Growth Corp. et al v. Andrzej Roman Kepinski et al., 2014 ONSC 2763, at para. 295. In Nova Growth Corp., at para. 296, the preconditions to a finding of spoliation were identified:
Thus, a finding of spoliation requires four elements to be established on a balance of probabilities, namely:
(1) the missing evidence must be relevant;
(2) the missing evidence must have been destroyed intentionally;
(3) at the time of destruction, litigation must have been ongoing or contemplated; and
(4) it must be reasonable to infer that the evidence was destroyed in order to affect the outcome of the litigation.
[86] The plaintiff’s invocation of the doctrine of spoliation fails to meet the requirements of elements 1, 2 and 4. First, if the damaged merchandise was relevant to the proper determination of this litigation, I would have expected the plaintiff to tender such merchandise in relation to the first loss. The plaintiff did not do so. Instead, the plaintiff relied on the inventory list created by AAA to prove what stock was damaged in the first loss, just as the plaintiff relied on the inventory list created by AAA to prove what stock was damaged in the second loss. The plaintiff asserted that those lists were accurate, and the defendant did not dispute that. The fact that the plaintiff destroyed his damaged inventory in relation to the first loss indicated that he did not consider it to be relevant evidence to prove his claim. Second, it was not RSA that destroyed the items. To the contrary, the evidence is clear that CRCS destroyed non-salvageable items after storing them for many years. Finally, there is no evidence at all that the damaged items were destroyed to affect the outcome of the litigation.
[87] The doctrine of spoliation has no application in this case.
(d) Relief from forfeiture
[88] The plaintiff submits that he should be granted relief from forfeiture. He submits that relief from forfeiture is available either under s. 98 of the Courts of Justice Act, or under the Insurance Act. He submits that he did provide a proof of loss in relation to the second loss that was in error as to the date of the loss and the claim number but did attach the correct AAA inventory. He further submits that as RSA did not request a statutory declaration appending invoices to prove the amount of the loss, he did not fail to comply with statutory condition 6.
[89] In Monk v. Farmers’ Mutual Insurance Company (Lindsay), 2019 ONCA 616, at para. 77, leave to appeal refused, [2019] S.C.C.A. No. 384, the Court of Appeal explained the purpose of allowing relief from forfeiture in insurance cases. The purpose is:
to prevent hardship to policy beneficiaries where there has been a failure to comply with a condition for receipt of insurance proceeds and where leniency in respect of strict compliance with the condition will not result in prejudice to the insurer: Falk Bros. Industries Ltd. v. Elance Steel Fabricating Co., 1989 38 (SCC), [1989] 2 S.C.R. 778, at p. 783.
[90] The power to grant relief from forfeiture is a discretionary one: Monk, at para. 78.
[91] The principles that govern relief from forfeiture in cases of claims under insurance policies are well established. They were described in Monk, at para. 79:
Relief from forfeiture under s. 129 of the Insurance Act is available where there has been “imperfect compliance with a statutory condition as to the proof of loss to be given by the insured or other matter or thing required to be done or omitted by the insured with respect to the loss”, thereby restricting the availability of the section to instances of imperfect compliance with terms of a policy after a loss;
Relief from forfeiture pursuant to s. 98 of the Courts of Justice Act, R.S.O. 1990, c. C.43, is available to contracts regulated by the Insurance Act;
CJA s. 98 generally operates where the breach of the policy occurred before the loss took place;
Although relief under the Insurance Act s. 129 and CJA s. 98 are not available where the breach consists of non-compliance with a condition precedent to coverage, a court should find that an insured’s breach “constitutes noncompliance with a condition precedent only in rare cases where the breach is substantial and prejudices the insurer. In all other instances, the breach will be deemed imperfect compliance, and relief against forfeiture will be available”;
Where relief from forfeiture is available, an insured “must still make three showings – that his or her conduct was reasonable, that the breach was not grave, and that there is a disparity between the value of the property forfeited and the damage caused by the breach – in order to prevail”.
[92] Section 98 of the CJA is a general provision: “A court may grant relief against penalties and forfeitures, on such terms as to compensation or otherwise as are considered just.” As noted in Monk, while s. 98 of the Courts of Justice Act is available to contracts regulated by the Insurance Act, it generally operates where the breach of policy occurred before the loss took place. However, even if it could operate in relation to post-loss deficiencies in the proof of loss, as the Court of Appeal was prepared to assume in Pinder Estate v. Farmers Mutual Insurance Company (Lindsay), 2020 ONCA 413, at para. 121, that would not change my analysis of whether relief from forfeiture should be granted in this case.
[93] Section 129 of the Insurance Act deals specifically with relief from forfeiture where an insured has not complied with a statutory condition as to the proof of loss. Section 129 of the Insurance Act, R.S.O. 1990, c. I.8, provides:
Where there has been imperfect compliance with a statutory condition as to the proof of loss to be given by the insured or other matter or thing required to be done or omitted by the insured with respect to the loss and a consequent forfeiture or avoidance of the insurance in whole or in part and the court considers it inequitable that the insurance should be forfeited or avoided on that ground, the court may relieve against the forfeiture or avoidance on such terms as it considers just.
(i) Was Mr. Qureshi’s conduct reasonable?
[94] As noted in Pinder Estate, at para. 122, while the three elements described in Monk:
must be considered and balanced by the court in determining whether the insured is entitled to relief from forfeiture in the circumstances of each case, the reasonableness of the insured’s conduct “lies at the heart of the relief from forfeiture analysis”: Monk, at para. 93. Accordingly, a “party whose conduct is not seen as reasonable will face great difficulty in obtaining relief from forfeiture”: Monk, at para. 93.
[95] Mr. Qureshi’s conduct was not reasonable. It is reasonable to expect that, as a businessman who was obliged to keep records of his business expenses, Mr. Qureshi would be able to produce reliable records as to his cost of acquiring his stock. It was unreasonable of him not to provide those records to the defendant. He has provided no credible explanation as to why he did not or can not provide any reliable documentation. To characterize his conduct in providing invoices that were not genuine as unreasonable is generous.
(ii) Was the breach grave?
[96] The breach in relation to the second loss was particularly grave. Mr. Qureshi provided no supporting documentation for his loss, and therefore the insurance company was deprived of the opportunity to investigate that loss.
(iii) Was there is a disparity between the value of the property forfeited and the damage caused by the breach?
[97] It is not possible in this case to answer this question in favour of the plaintiff because the value of his lost property is unknown. It is unknown because he has not provided reliable proof of its value.
(iv) Conclusion
[98] This is not a case of imperfect compliance with a statutory condition as to the proof of loss to be given by the insured, such that relief against forfeiture should be granted because it would be inequitable that the insurance should be avoided on that ground. This is a case where the plaintiff failed to prove his loss to the insurance company and also failed to prove it on this trial.
F. Conclusion
[99] Mr. Qureshi’s claim is dismissed.
[100] The claim in relation to the first loss is barred by the expiration of the contractual limitation period.
[101] In relation to the claims for both losses, Mr. Qureshi has failed to prove his loss on a balance of probabilities. While he suffered a loss that was covered by his policy of insurance, he had provided no reliable evidence as to the value of his loss.
[102] Mr. Qureshi is not entitled to relief from forfeiture.
[103] If the parties are not able to agree as to costs, I will receive written submissions, not to exceed three pages, in addition to a bill of costs and any offers to settle. Such submissions are to be sent to my assistant at caitlyne.parsons@ontario.ca. The defendant’s submissions are to be received within three weeks of the release of this judgment. The plaintiff’s submissions are to be received within five weeks of the receipt of this judgment.
Justice J. Speyer
Released: August 31, 2022
COURT FILE NO.: CV-16-94762
DATE: 20220831
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
TAHIR QURESHI operating as ATQ FASHION
Plaintiff
– and –
ROYAL & SUN ALLIANCE INSURANCE COMPANY OF CANADA
Defendant
REASONS FOR JUDGMENT
Justice J. Speyer
Released: August 31, 2022