Court File and Parties
COURT FILE NO.: CV-22-281
DATE: 2022-11-08
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Aviva Insurance Company of Canada Applicant
– and –
Jonathan Cunningham and Lisa Cunningham Respondents
COUNSEL:
Peter Rollo, for the Applicant
Alfred M. Kwinter, for the Respondents
HEARD: September 13, 2022
THE HONOURABLE JUSTICE M.J. VALENTE
REASONS FOR DECISION ON APPLICATION
[1] The applicant, Aviva Insurance Company of Canada (‘Aviva’) brings its application seeking an order that:
a) Aviva and their agents (contractors, engineers) be entitled within (30) days of the order of this Court to inspect the respondents’ home for the purpose of making appraisement and/or estimating the loss or damage claimed by the respondents;
b) the respondents’ appointed appraiser, Michael Porter (‘Porter’), be removed as their appraiser and the respondents be required to appoint a new appraiser within seven (7) days of the order of this Court;
c) the newly appointed appraiser comply with the statutory appraisal process and procedure outlined by the umpire, Glenn Gibson, failing which the appraisal may proceed in the absence of the respondents.
[2] For their part, the respondents, Jonathan Cunningham and Lisa Cunningham (the ‘Cunninghams’), bring their own application requesting an order:
a) dismissing Aviva’s application to remove Porter as their appraiser and its request to inspect their home;
b) directing Aviva’s appraiser, John Valeriote (‘Valeriote’), to identify specific issues of disagreement as between himself and Porter;
c) staying the statutory appraisal process as stipulated by the Insurance Act, RSO 1990, c I.8 (the ‘Insurance Act’) if Valeriote identifies matters of disagreement relating to causation, coverage, scope, extent of damage or method of remedy; and
d) that “Actual Cash Value” cannot be determined in the statutory appraisal process without an agreement as between both appraisers respecting method of depreciation, what costs are to be depreciated and what cost components are to be depreciated.
Factual Background
[3] The Cunninghams own a home located in the City of Waterloo. Aviva issued the Cunninghams a homeowner’s policy of insurance with respect to the property (the ‘Policy’).
[4] The Cunninghams’ home sustained flooding damage in May 2019 and later in January 2020. On the first occasion, the home’s basement was damaged. The second flood is said to have caused damage to both the basement and its concrete slab.
[5] In August 2020 the Cunninghams delivered their proofs of loss to Aviva for the two separate 2019 and 2020 damage claims.
[6] The parties could not agree on the quantum of either damage claim. In January 2021 Aviva requested that the value of the property insured, the property saved, or the amount of loss as related to the May 2019 claim be determined by way of the appraisal process as prescribed by the Insurance Act. Six months later in June 2021, Aviva similarly invoked the statutory appraisal process with respect to the second flood claim of January 2020.
[7] Aviva’s letter requesting an appraisal of the second loss also raised a coverage issue; specifically, whether the cost to repair the subgrade supporting the basement concrete slab was recoverable under the Policy.
[8] In January 2021 the Cunninghams appointed Porter as their appraiser. In July 2021 Valeriote was appointed as Aviva’s appraiser for each of the two claims.
[9] As with the quantum of the loss, Aviva and the Cunninghams were unable to agree on an umpire to resolve the quantum issue. Their disagreement necessitated a motion before Justice Braid in October 2021 for the appointment of an umpire pursuant to the provisions of the Insurance Act.
[10] Aviva proposed that Gibson be appointed as umpire. The Cunninghams objected to his appointment on the basis that there was a reasonable apprehension of bias. Justice Braid dismissed the Cunninghams’ position and appointed Gibson as umpire.
[11] Since the appointment of Gibson, the appraisal process under the Insurance Act, although designed to be efficient and expeditious, has not progressed because of unresolved disputes between the parties which are the genesis of the applications before me.
Guiding Principles
[12] The context for the two applications before me is the appraisal process stipulated by s. 128 of the Insurance Act and s. 148, Statutory Condition 11, all of which I reproduce below. Section 128 of the Insurance Act and s. 148, Statutory Condition 11 provide as follows:
Contracts providing for appraisals
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.
Appraisers, appointment
(2) The insured and the insurer shall each appoint an appraiser, and the two appraisers so appointed shall appoint an umpire.
Appraisers, duties
(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 matters.
Costs
(4) Each party to the appraisal shall pay the appraiser appointed by the party and shall bear equally the expense of the appraisal and the umpire.
Appointment by judge
(5) Where,
(a) a party fails to appoint an appraiser within seven clear days after being served with written notice to do so;
(b) the appraisers fail to agree upon an umpire within fifteen days after their appointment; or
(c) an appraiser or umpire refuses to act or is incapable of acting or dies,
a judge of the Superior Court of Justice may appoint an appraiser or umpire, as the case may be, upon the application of the insured or of the insurer.
Statutory conditions
148 (1) The conditions set forth in this section shall be deemed to be part of every contract in force in Ontario and shall be printed in English or French in every policy with the heading “Statutory Conditions” or “Conditions légales”, as maybe appropriate, and no variation or omission of or addition to any statutory condition is binding on the insured.
Definition
(2) In This section,
“policy” does not include interim receipts or binders.
STATUTORY CONDITIONS
Appraisal
- 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 note, and independently of all other questions. There shall be no right to an appraisal until a specific demand therefore is made in writing and until after proof of loss has been delivered.
[13] I have considered and adopt as instructive for purposes of my decision on these applications the observations and comments of Justice Perell in Northbridge General Insurance Corp. v. Ashcroft Homes–Capital Hall Inc., 2021 ONSC 1684 and those of Justice M.E. Smith in Campbell v. Desjardins General Insurance Group, 2020 ONSC 6630.
[14] In particular, I note that the appraisal process as prescribed by the Insurance Act is a free-standing mandatory process that must be undertaken if either party requests it (see Northbridge at para. 22 and Campbell at para. 74).
[15] The purpose of the appraisal process is to facilitate an easy and expeditious means to resolve indemnity claims under insurance policies. The appraisal process may be demanded only where there is a dispute about the valuation of the loss (see Northbridge at para. 23).
[16] The appraisal process is intended to be a final and binding determination of the loss. The appraisal process is mandatory and there must be an appraisal before there can be recovery under the policy (see Northbridge at para. 24).
[17] The appraisal process is intended to facilitate a quick resolution of a dispute concerning the value of the insured property, the value of the salvage as well as the quantification of the damage to the property but its purpose is not to resolve all the issues between the parties; all non-valuation issues are outside the jurisdiction of the appraisal process (see Northbridge at para. 24 and Campbell at para. 74).
[18] Justice Kennedy in 854965 Ontario Ltd. v. Dominion of Canada General Insurance Co., (2003), 2003 CanLII 42670 (ON SC), 64 OR (3d) 234 at para. 25, describes the appraisal process under the Insurance Act in the following way:
The appraisal process is contemplated, by the terms of statutory condition #11, to take place prior to any recovery under the contract, whether there is any dispute as to the ability to recover on the contract, and independently of all other questions. The appraisal process commonly determines value but leaves question[s] of entitlement and defences to recovery under that contract to a lawsuit under the contract of insurance. The appraisal process can take place concurrently with a lawsuit dealing with the insured’s claim to recover under the contract and an insurer’s defences to payment.
[19] The appraisal process is neither an arbitration nor an adjudication but is rather a binding valuation that determines the value of the loss. The procedure for the appraisal process is not stipulated in the Insurance Act and nor do the Rules of Civil Procedure, RRO 1990, Reg 194 have application. The appraisal process is subject to judicial review but is not subject to the Statutory Powers Procedure Act, RSO 1990 c S.22 (see Northbridge at para. 27).
[20] It is entirely for the umpire to determine the manner in which the appraisal process is conducted (Northbridge at para. 27). The umpire may permit viva voce testimony under oath and may receive affidavit evidence, but the umpire is not required to do so (see Northbridge at para. 29).
[21] Because, however, the appraisal process is not subject to the Statutory Powers Procedure Act, the umpire has no authority to enforce his or her procedural orders or otherwise. On the other hand, the Court has inherent jurisdiction to make such procedural orders as are necessary to give effect to the statutory appraisal scheme and to promote efficient and meaningful discovery as a path of reaching a just resolution (Northbridge at para. 31; Campbell at para. 74).
[22] Unlike the expert who must be impartial, the appraiser may be a partisan advocate for the insured or the insurer that appointed the appraiser (see Campbell at para. 88). A review of the case law confirms that indeed sometimes lawyers act as appraisers (see Northbridge at para. 28).
Case Law
[23] Justice M.E. Smith in his 2020 decision of Campbell v. Desjardins General Insurance Group described the appraisal process and the respective roles of the umpire and the appraisers as follows:
Each appraisal process is different, dependent upon the complexities of the loss or the manner upon which the umpire chooses to proceed. There is no requirement for a hearing, nor is there a prohibition that one takes place. If oral evidence is presented, contractors and/or insureds can be called to testify, and cross-examinations can occur. Experts can also be asked to attend a hearing and provide his/her opinion. The hearing can last a few hours, one day or span over many days. The valuation can also be entirely based upon written documentation. In sum, the appraisal is an informal valuation process, and it is run entirely by the umpire, as he/she sees fit.
I accept that the appraisal process is a valuation and not an arbitration. However, practically speaking, I find that the umpire acts as the sole decision maker when he/she is called upon to resolve a dispute between the appraisers. After hearing and considering all of the evidence (oral and/or documentary), as presented by the appraisers, it is the umpire alone that shall decide between two competing valuations (insurer or insured) and his/her selection will determine the value of the loss in question. It is the umpire’s choice, and nothing else, that created the majority decision that determines the value of the loss.
Once the umpire has been appointed and the hearing is underway, I find that the appraiser’s role is to present the evidence that supports his/her valuation of the loss. The appraiser does not give evidence. The appraiser will merely plead the case on behalf of the client and present the evidence in a manner that is meant to persuade the umpire that his/her valuation of the loss is reasonable and appropriate in the circumstances. The ultimate goal is to convince the umpire that the appraiser’s assessment of the loss is the correct one. To me, that can only be described as advocacy. I find that the appraisers are invariably advocates, while the umpire is the sole decision maker who must remain neutral.
Discussion and Analysis
(a) Aviva’s Inspection of the Cunninghams’ Home
[24] Aviva’s request for itself and its agents to inspect the Cunninghams’ home is made pursuant to its contractual rights under the Policy and an earlier direction by Gibson in his capacity as umpire.
[25] The relevant Policy provision is an incorporation of Statutory Condition 10 from section 148 of the Insurance Act and reads as follows:
Entry, Control, Abandonment
- After loss or damage to insured property, the insurer has an immediate right of access and entry by accredited agents sufficient to enable them to survey and examine the property, and to make an estimate of the loss or damage, and, after the insured has secured the property, a further right of access and entry sufficient to enable them to make appraisement or particular estimate of the loss or damage, but the insurer is not entitled to the control or possession of the insured property, and without the consent of the insurer there can be no abandonment to it of insured property.
[26] Aviva submits, and I accept, that the above noted provision is included in the Policy as a matter of contract so as to bind the parties under then normal rules of contract law (see International Movie Conversions Ltd v. ITT Harford Canada, 2002 CanLII 23581 (ONCA) paras. 24 to 28).
[27] Aviva also argues that this contractual term does not expire and nor is it suspended while the appraisal process under the Insurance Act is underway.
[28] On the other hand, the Cunninghams argue in the first instance that Aviva and its agents cannot inspect the property once the appraisal process has been triggered under the Insurance Act, and in the alternative, should there continue to be a right to inspect, the inspection right is limited to Aviva but does not include its agents. The Cunninghams’ alternative submission is founded in the argument that once the appraisal process has been triggered, the purpose of Aviva’s experts attending the property is to address such issues as causation and coverage, both of which are outside of the scope of any appraisal under the Insurance Act.
[29] I disagree with the Cunninghams’ position. Aviva has an unambiguous contractual right to inspect the property both immediately upon learning of the loss, and later, after the insured has secured the property. Furthermore, there is no contractual term that limits this inspection right once the appraisal process is underway.
[30] Although I agree that there is no decided case on point that supports Aviva’s position, I am guided by the Court of Appeal’s decision in Lauzon v. Axa Insurance (Canada), 2013 ONCA 664 (at paras. 9-11), affirming the lower Court’s decision which found that resort to the appraisal process does not negate the insurer’s contractual right to examine the insured under oath thereby insulating the insured from having the quantum of the claim scrutinized. The Court of Appeal’s decision in Lauzon is instructive as it related to Aviva’s contractual right to inspect the Cunninghams’ home once the appraisal process is initiated.
[31] Furthermore, while I fail to appreciate the logic in the conclusion that once the appraisal is in process, the purpose of any inspection by the insurer’s expert is to determine issues of causation and coverage, I also fail to understand on what reasonable basis these issues cannot be considered by both insurer and insured during the appraisal process. There is certainly no such limitation pursuant to the parties’ contract.
[32] I am also of this opinion notwithstanding that the issues of causation and coverage are not for the umpire to decide but rather are matters for this Court to determine. In my opinion, the insurer’s contractual right to inspect the property may be undertaken parallel to the appraisal process without influencing the sole issues to be decided by the umpire: the value of the insured property, the value of the salvage and the quantification of the damage.
[33] The Cunninghams further submit that Aviva and its agents should not be entitled to inspect their home because the insurer’s right to inspect is not without limitation of the number of inspection visits, and in any event, once the insurer has estimated the loss or damage, its right of inspection expires.
[34] The Cunninghams point out that Aviva and its agents (appraisers, engineers, adjusters and contractors) attended their home on at least ten (10) different occasions to assess the loss.
[35] Moreover, the Cunninghams submit that in two (2) separate written communications Aviva confirmed that it had determined its position on value:
a) In its letter of October 6, 2020 Aviva stats:
“Based on our inspections we have evaluated what loss is related. We have calculated the replacement cost of the repairs in the amount of $63,708.81 as per the estimate attached.”
b) In its June 15, 2021 communication, Aviva further states to the Cunninghams lawyers:
“We will now turn your attention to the Dispute Resolution Process currently underway regarding claim 34610133 (waster damage to the basement – the “Water Damage” claim). As you are aware, the appraisal process is being used to sort out the quantum of this claim as there is a large discrepancy in the estimates provided by your client and the ones obtained by Aviva. The appraisers are currently in the process of appointing an umpire.
We believe that the appraisal process should also be used to confirm the quantum of the Slab claim. There is, once again, a large discrepancy in the estimates provided by your client and those obtained by Aviva. This email will hereby advise that we are involving appraisal under the Insurance Act for claim 34950224 – the Slab claim.”
[36] The Cunninghams rely on Aviva’s June 15, 2021 correspondence in which it confirms that it has estimates of the concrete slab claim. This acknowledgment, according to the Cunninghams, is particularly important in the face of Avia’s request of this Court to inspect the property with the particular purpose of estimating the damage to the slab.
[37] Simply put, the Cunninghams’ position is that with more than ten (10) site visits and Aviva’s confirmation that it has what it needs to estimate the loss, the insurer has no further rights of inspection.
[38] I agree with the Cunninghams that there must be a limit on the number of the insurer’s site inspections. What that commercially reasonable limit may be is to be decided on a case-by-case basis and is fact dependant.
[39] Furthermore, while I do not find that Aviva unequivocally confirmed that it has all the information it needs to estimate the loss, its communication of June 15, 2021 does cause me to conclude that at a minimum it has been able to estimate the damage to the concrete slab. I am also unmoved by the insurer’s attempt in these proceedings to suggest that its June correspondence is misinterpreted by the Cunninghams. The only explanation Aviva offers is its counsel’s law clerk who attests that she was advised by Valeriote that “Aviva is currently not in possession of any estimate for the slab at the property and that an inspection of the property would facilitate making a particular estimate of the damage claim.” It is troubling to me that Aviva chose not to proffer in evidence the affidavit of Valeriote or that of the author of the June 15, 2021 correspondence with a further and better explanation for the need of a site inspection to assess the slab claim.
[40] Were it not for the umpire’s request that the parties together with their respective inspectors and engineers attend the home for a further site inspection, I would have denied Aviva’s request to further inspect the Cunninghams’ home.
[41] However, I am mindful that it is the umpire who determines the manner in which the appraisal process is to proceed. It is Gibson, and not this Court, who sets the appraisal procedure.
[42] On two (2) occasions in November 20921 the umpire requested the parties and their agents attend a site visit. Not only does Gibson describe himself as a “visual learner” in his November 11, 2021 correspondence to the parties but in the same correspondence he describes the purpose of the site visit so that he can “lead a discussion on site to see for [himself] where the gaps are on the damage issues.”
[43] Given the umpire’s jurisdiction to establish the procedure for the appraisal undertaking and Gibson’s expressed rationalized need to inspect the property with the parties and their agents, I am prepared to make a procedural order to give effect to the site inspection mandated by the umpire. Specifically, that parties together with their respective appraisers and engineering experts will attend the Cunninghams’ home for a site inspection on a date and time to be decided by the umpire for purposes of determining the loss as claimed by the Cunninghams.
(b) Removal of Porter as the Cunninghams’ Appraiser
[44] Aviva seeks the removal of Porter for two reasons. Firstly, Aviva submits Porter should be removed because of his refusal to act.
[45] Pursuant to s. 128(5) c of the Insurance Act, where an appraiser refuses or is incapable of acting or dies, this Court may appoint an appraiser upon application of the insurer or the insured. Unfortunately, there is no established test to guide me in exercising my discretion with respect to the appointment of a replacement appraiser and I have been directed to only one prior decision on the issue, discussed later in these Reasons.
[46] Aviva submits that Porter has refused to act unless the appraisal process addresses the issues of causation and coverage and Valeriote identifies specific matters in disagreement supported by the production of all relevant documents.
[47] Certainly, Porter’s November 2021 correspondence suggests that unless causation and coverage are addressed prior to the appraisal process being undertaken, the process contemplated by the Insurance Act will be ineffective. Porter goes so far as to say in an email dated November 8, 2021 that unless the umpire deals with “both causation and extent of damages… this is no longer in my control – the client and their lawyers will determine the direction of this claim…”.
[48] Apart from the statement from the Cunninghams’ counsel in January 2022 that:
“we are not attempting to interject coverage, causation or other legal issues into the appraisal process, but they must be addressed and made clear so that ONLY valuation can be addressed by the umpire”,
I do not interpret Porter’s statements as a refusal to act. Rather, he is addressing issues which in his opinion may affect the appraisal process and are for counsel to resolve.
[49] Aviva makes much of Porter’s position in his November 7, 2021 email that:
“No timelines can be set until the insured and their counsel have time to consider all the above options – this matter is no longer in appraisal or my control until further notice by the insured and their counsel.”
[50] In his cross-examination respecting the statement, however, Porter:
a) denied that he was making a decision to end the appraisal process but instead was suggesting the process was in the hands of counsel; and
b) denied that he was refusing to act and move matters forward but was looking for clarity on certain unresolved issues.
[51] In my opinion, Porter’s conduct supports his cross-examination interpretation of his November email statement. For example, not only did Porter respond promptly to Aviva’s former appraiser’s request for a joint property inspection, but he also delivered certain documents to the appraiser within a matter of days of his request.
[52] There is little doubt there were and continue to be matters in dispute between Porter and Valeriote as well as between Porter and Gibson which necessitated these applications. However, I agree with the Cunninghams’ submission that these disagreements are not sufficient reason to replace Porter.
[53] I am particularly of this opinion given that early in the appraisal process, Porter reached out to Valeriote in an attempt to avoid Court proceedings. In addition, Porter authored an “Appraisal Memorandum Agreement” on November 5, 2021 with the purpose of settling the two appraisers’ differences. Gibson described the attempt as creative and demonstrative of the Cunninghams’ desire to move forward.
[54] Aviva relies on the decision of Justice Schabas in Arvanitopoulos v. The Wawanesa Mutual Insurance Co., 2019 ONSC 6912, in support of its request that Porter be replaced. In that case the Court replaced the insureds’ appraiser in the face of his refusal to act on two (2) occasions because the insurer was not prepared to agree to waive the policy limits and pay the appraisal award.
[55] I view the position of Porter differently from that of the insureds’ appraiser before Justice Schabas in Arvanitopoulos. Unlike that appraiser, Porter is not refusing to act but is ready and willing to act once this Court addresses the issues before it and provides direction. The umpire, himself, in his December 5, 2021 communication confirmed that each of the parties has the “right to go to Court and seek guidance”, and in the meantime, he was prepared to “stand down on this file until further direction is given.”
[56] Aviva also submits that Porter has refused to act because he has little respect for Gibson in his capacity as an umpire. In a November 22. 2021 email to Gibson, Porter states: “I don’t agree with your 30-year approach of appraisal.”
[57] I have already found based on the facts as I currently know them that Porter has not refused to act but the appraiser’s attitude towards the umpire requires comment from this Court.
[58] The record before me demonstrates that on more than one occassion, Porter’s communications with Gibson have been both unprofessional and intemperate. For example, even before the appraisers had an initial call with the umpire, Porter sent an email to Gibson on October 28, 2021 which provides in part as follows:
“The perception of your partnership with John conducting industry appraisal workshops reminds me of the movie Mississippi Burning – were [sic] the old boys club sticks together. The public perception of this partnership of educating the insurance sector only and NOT the public sector… is viewed by the public that you, as an umpire, are not independent from the insurers or, in this particular case, the insurer appraiser. This public perception of lack of independence calls into question your impartiality in assuring fair and reasonable procedures will be followed… “
“I have a reasonable apprehension of bias that you will not conduct your self [sic] independently and impartially in this appraisal. This apprehension of bias is based on our last appraisal… The only reason why this was not subjected to judicial review is the client did not have the means – but I still have the detailed notes of that appraisal award verbatim…”
“… I wanted it to be stated for the record that I don’t believe my client will receive a fair and impartial appraisal…
Later in a May 11, 2022 email to Gibson when no appraisal steps had yet to be taken, Porter comments:
“That is the problem. This appraisal is dealing with matters that are independent of appraisal and outside the jurisdiction of the appraisal. How do I know that? I’ve been privy to how Glenn Gibson conducts his appraisals from past experience.”
[59] Aviva submits that Porter’s attitude towards the umpire is nothing less than ignorant. Given Porter’s disparaging allegations of the Court appointed umpire, I do not disagree. To my mind, at a minimum, Porter’s comments demonstrate an extreme lack of professionalism.
[60] While I accept that as the Cunninghams’ appraiser, Porter is the insureds’ advocate, I would not tolerate such a base and demeaning level of ‘advocacy’ in my Court.
[61] I also agree with Aviva’s position that at no time should an umpire be under constant threat of judicial review or be distracted by unsubstantiated criticism, and certainly not before the appraisal hearing takes place.
[62] It seems to me that the primary reason that Aviva is looking to have Porter replaced as the insureds’ appraiser is his unchecked, overly aggressive and at this stage of the proceedings, unfounded criticism of Gibson all of which have the potential of disrupting the efficient appraisal process envisaged by the Insurance Act. Indeed, one might say this is today’s reality for the parties for a variety of reasons.
[63] Having considered all of the evidence, while I do find that Porter’s conduct respecting the umpire is less than laudable, I do not find it so egregious as to justify his removal at this time.
[64] I remind Porter of his responsibility to act professionally in advancing the Cunninghams’ interests and that his clients have the remedy of judicial review should the umpire demonstrate bias, commit some misconduct or exceed his jurisdiction.
[65] I also caution Porter that in the event that his unchecked and derogatory criticisms of the umpire continue, this Court may indeed find at some future date that his conduct is equivalent to a refusal to fulfill his role as the insureds’ appraiser.
[66] In the end, Aviva’s request to have Porter removed as the Cunninghams’ appraiser is dismissed without prejudice to the insured renewing its request at a future date based on fresh evidence.
(c) Aviva’s Appraiser to Identify Specific Matters in Disagreement
[67] The Cunninghams submit that Valeriote has frustrated the appraisal process. Notwithstanding Porter’s several requests for Aviva’s appraiser to identify the matters in dispute, he has failed to do so. Instead Valeriote states that he disagrees “[w]ith the totality of the insured’s claim and all amounts” … “The entire claim as presented and all amounts are disputed by the insurer.”
[68] The Cunninghams submit that Valeriote’s approach is contrary to the specific provisions of s. 128(3) of the Insurance Act which provides that the appraisers “shall determine the matters in disagreement.” In addition to turning his back to this mandatory direction of the Insurance Act, the Cunninghams also assert that Valeriote’s response fails to promote the goal of the appraisal process which is designed to be an efficient and collaborative means of valuing the loss. Simply put, by refusing to provide the details of the issues in dispute, the Aviva appraiser has done nothing to assist the parties in resolving their differences.
[69] In support of their request that Valeriote identify the specific issues of disagreement as between he and Porter, the Cunninghams rely in part on the decision of Justice Norton of the Nova Scotia Supreme Court in Kenney v. Johnson Inc., 2020 NSSC 196. The Cunninghams submit that just as in their case, so too in the matter before Justice Norton there was a difference of approximately $400,000 between the parties’ repair estimates. In order to assist each of the parties to understand the reason for the significant disparity in their respective positions, the Court not only ordered the appraisers to meet and compare their respective appraisals but also directed them to address a variety of issues specific to the matters to be determined.
[70] The Cunninghams also rely on the December 16, 2021 case conference endorsement of Justice Chalmers of this Court in Furtado v. Economical Mutual Insurance Company bearing file number CV-21-0062769-0000, where the Court directed each of the appraisers to meet to review the “list of items in the proofs of loss and to identify which items are not in dispute” in an effort to assist the parties to resolve some of the items claimed.
[71] For its part, Aviva asserts that the Cunninghams’ claim that Valeriote has failed to identify matters in disagreement is in reality a claim that its appraiser has not identified the matters in dispute “to their satisfaction.”
[72] Aviva submits there is no obligation on its appraiser to deliver a detailed breakdown of all valuation items in disagreement. Likewise, there is no basis to require that Valeriote agree to matters in disagreement before those differences are submitted to the umpire. By confirming to Porter on more than one occasion that “the value of the property insured, the property saved or the amount of loss” remain matters of disagreement, Aviva argues that its appraiser has complied with the requirements of the Insurance Act.
[73] Aviva also relies on the decision of Justice Sutherland in 7174721 Canada Inc v. Kase Insurance Inc. et al, 2022 ONSC 1815, where the Court considered the meaning of “disagreement” in the Insurance Act, a non-defined term. Citing Letts v. Aviva Canada Inc., 2010 ONSC 6999, the Court ruled that “disagreement” is the failure to agree and refusal to pay on the proof of loss without any requirement to provide a detailed response with an appraisal before electing to use the appraisal process (see Letts paras. 6-9).
[74] I favour the position that in general terms more information is better than less information to assist in narrowing or resolving disagreements. In this case, however, I am mindful of the guiding jurisprudence which without exception has held that it is entirely for the umpire to determine the manner in which the appraisal process is to be conducted and that the appraisal process is not an arbitration but rather a sui generis and malleable procedure to be determined by the umpire (see Arvanitopoulos, 2022 ONSC 2613 at para. 58). Furthermore, as stated by Justice Perell in his 2022 decision of Arvanitopoulos, the umpire, and not this Court, should be afforded the opportunity to determine the procedure and decide the appraisal, and should the umpire err, the error is subject to judicial review (at para. 59).
[75] Given the umpire’s authority to establish the procedure in which the appraisal process is to be undertaken, I am not prepared on the facts of this case to limit Gibson’s authority by making the procedural order requested by the Cunninghams. Should the umpire decide as a part of the appraisal process to direct the type of disclosure that is requested of this Court, as a part of the appraisal process and his direction is not followed, there are remedies before this Court. But at this time, in my view the Court’s involvement is premature.
[76] I would also dismiss this relief sought by the Cunninghams for other reasons. Firstly, I disagree with the Cunninghams’ submission that Justice Sutherland’s definition of “disagreement” in 7174721 Canada Inc. is limited to its application in Statutory Condition 10. In my view the same definition applies to the use of the term in s. 128(3) of the Insurance Act save and except that the appraisers must identify which of the three (3) issues enumerated in Statutory Condition 11 upon which they cannot agree. In my opinion, however, there is no obligation to deliver an explanation, detailed or otherwise, of the appraiser’s decision prior to submitting the matter to the umpire and the ultimate hearing.
[77] I am also not persuaded by the Kenney decision. Apart from the obvious that Justice Norton’s decision is not binding on this Court, unlike the case before me, the facts in Kenney were such that an umpire had yet to be appointed. Furthermore, my reading of the decision is that in making the procedural order that he did, Justice Norton was attempting to spare the parties the additional time and expense of the appraisal process as contemplated by the Insurance Act.
[78] Finally, I am of the opinion that the case conference endorsement of Justice Chalmers in Furtado is of little assistance. Justice Chalmers’ December 16, 2021 order is based on a November 18, 2021 agreement between the parties whereby they agreed that the insurer’s appraiser would review each item claimed by the insured to identify the matters in dispute and provide the list of disputed items to the insured. There is no such agreement in the record before me.
(d) Request for a Stay of the Appraisal Process
[79] The Cunninghams’ request for a stay of the appraisal process is premised on my granting their request that Valeriote identify specific issues of disagreement and his identifying causation, coverage and related issues as one or more of the issues in dispute. Given my finding that Aviva’s appraisal has met his obligations under the Insurance Act and my dismissal of this specific relief sought by the Cunninghams, I need not address the request for a stay.
(e) Actual Cash Value
[80] The Cunninghams seek a declaratory order that “actual cash value” cannot be determined by the umpire unless there is an agreement by both appraisers as to the method of depreciation and what costs are to be depreciated. The determination of actual cash value is important because the Policy provides that Aviva will pay actual cash value when the Cunninghams’ insured property is not replaced and the Policy definition of “actual cash value” contemplates that:
“various factors shall be considered in the determination of actual cash value. Such factors shall include but are not limited to replacement cost less any depreciation and market value. In determining depreciation consideration shall be given to the condition of the property immediately before the loss or damage, the resale value, the normal life expectancy of the property and obsolescence.”
[81] The Cunninghams rely upon the decision of Justice McKinnon in Ferrier v. Maplex General Insurance Company et al, 1991 CanLII 170 (BCSC), where the Court determined that the umpire is not entitled to determine the meaning or method by which “actual cash value” or “replacement value” is to be determined because any dispute with respect to “value” is a legal issue within the exclusive jurisdiction of this Court (see Shin Karuk v. Enterprises Ltd. v. Commonwealth Insurance Co., [1990] S.J. No. 318 (CA).
[82] I accept without reservation that any dispute respecting the definition of actual cash value is for this Court to decide.
[83] The genesis of the Cunninghams’ concern is that in response to their appraiser’s enquiry as to how actual cash value is to be addressed during the appraisal process, the umpire advised that “any ACV debates are to be done ‘at the table’ in the tribunal.” The insureds submit that unless the appraisers agree as to how actual cash value is to be defined, the umpire risks determining legal issues that fall outside of his jurisdiction.
[84] In response to the Cunninghams’ requested order, Aviva submits that the relief sought by the insureds does not fall within the scope of relief permitted by way of application pursuant to Rule 14.05(3) of the Rules of Civil Procedure, Although the Cunninghams may rely on Rule 14.05(3)(d), which provides for the determination of rights that depend on the interpretation of a contract or statute, they are asking the Court to determine a question of law and to otherwise opine generally on what an umpire can and cannot do within the appraisal process. Aviva also submits that applications are not designed for “open-ended invitations to the Court to rewrite a regulation of general application” or to grant declaratory relief on the basis of a “free-standing challenge to the wisdom or fairness” of legislation (see Grain Farmers of Ontario v. Ontario (Environment and Climate Change), 2016 ONCA 283 at paras. 18, 19, 22 and 23).
[85] While I am not convinced that the Cunninghams are not seeking a determination of rights as between themselves and Aviva, I dismiss the requested relief because they have failed to establish why in the circumstances of this case the Court ought to exercise its discretion to decide the issue (see Solosky v. The Queen, 1979 CanLII 9 (SCC), [1980] 1 SCR 821 at pages 830 to 833).
[86] In my opinion, the insureds’ application is premature. There is nothing in the record before me to suggest that if the appraisers are unable to reach an agreement as to how “actual cash value” is to be defined, Gibson will determine that issue. There is also no evidence to suggest that should the appraisers disagree, the umpire will not stipulate in his award two actual cash value amounts: one based on the insurer’s determination of the value and a second premised on that of the insureds’.
[87] I can only conclude that in the heat of this unfortunate high conflict appraisal process, the Cunninghams had a knee jerk reaction to Aviva’s application and precipitously requested the Court’s intervention. The Court is available to intervene should the umpire exceed his jurisdiction but based on the record before me, Gibson has not done so and a mere risk that he may exceed his jurisdiction is no reason, in my view, for this Court to respond positively to the insureds’ request.
Disposition
[88] Accordingly, for these reasons, I make the following orders:
a) the parties together with their respective inspectors and engineers will attend the Cunninghams’ home for a site inspection on a date and time to be decided by the umpire for purposes of determining the loss as claimed by the insureds;
b) Aviva’s application to remove the Cunninghams’ appraiser together with corollary relief is dismissed without prejudice to the insured renewing its request based on fresh evidence;
c) the Cunninghams’ application to require Aviva’s appraiser to identify specific issues of disagreement together with related relief is dismissed; and
d) the Cunninghams’ declaratory relief respecting the determination of “Actual Cash Value” is dismissed.
Costs
[89] I encourage the parties to make best efforts to agree on the issue of costs. In the event that they are unable to do so, the party seeking costs is to deliver its written submissions as to costs within 15 days of the release of these Reasons. The responding party has 10 days after receipt of the submissions to respond and the party seeking costs has a further 5 days to reply. Each party’s initial written submissions shall not exceed three double-spaced pages, exclusive of offers to settle, cost outlines and authorities while the moving parties reply submissions, if any, shall not exceed two double-spaced pages. Costs submissions shall be forwarded to my attention by way of email to my judicial assistant, Kelly Flanders, at kelly.flanders@ontario.ca with a copy to Kitchener.SCJJA@ontario.ca. If no submissions are received within this timeframe, the parties will be deemed to have settled the issue of costs as between themselves.
[90] Finally, I encourage the parties to move forward in co-operation and with common sense. A needless amount of time and money has been wasted to date.
M.J. Valente J.
Released: November 8, 2022
COURT FILE NO.: CV-22-281
DATE: 2022-11-08
ONTARIO
SUPERIOR COURT OF JUSTICE
Aviva Insurance Company of Canada Applicant
– and –
Jonathan Cunningham and Lisa Cunningham Respondents
REASONS FOR DECISION ON APPLICATION
M.J. Valente J.
Released: November 8, 2022