COURT FILE NO.: CV-18-64207
DATE: 2022/02/04
ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N:
JOSEPH TRUSCOTT AND 1215588 ONTARIO LTD.
J. Scarfone and L. Grimaldi, on behalf of the Plaintiffs
Plaintiffs
- and -
CO-OPERATORS GENERAL INSURANCE COMPANY, THOMAS CARROLL AND YVONNE YOUNG & ASSOCIATES INC.
R. Dowhan, for the Defendants
Defendants
HEARD: November 23, 2021
ENDORSEMENT
A.J. GOODMAN J.:
[1] Several motions are brought by both parties each seeking various forms of relief. At the outset of the hearing, counsel advised that the issues of any outstanding productions and leave for the plaintiffs to amend their pleadings had been resolved, subject to costs. A revised affidavit of documents is to be prepared.
[2] The remaining matters for this motion are the defendants’ (“Co-operators”) entreaty for a declaration and dismissal of the plaintiffs’ (“Truscott” or “Insured”) request to file and have due consideration to a further Proof of Loss claim, including the scope and legal effect of an umpire’s decision, and an order to dismiss the action as against the named party, Thomas Carroll (“Carroll”).
[3] For the following reasons, the defendants’ motions are granted.
Background:
[4] In or around 2010, Truscott incorporated an entity known as Joseph A Truscott Chartered Accountant A Professional Corporation (the “Professional Corporation”). At all material times, the Professional Corporation was in the business of conducting accounting and tax work.
[5] The Professional Corporation operated out of an old Victorian house which had been converted into office space located at 812 King Street East, Hamilton, Ontario (the “Property”). At all material times the Property was owned by 121588 Ontario Ltd. (“121”).
[6] Co-operators is a corporation incorporated pursuant to the laws of the Dominion of Canada. Co-operators is a duly licensed insurer in accordance with the Insurance Act of the Province of Ontario, R.S.O. 1990 c.I.8.
[7] On April 26, 2016, the Professional Corporation and 121 obtained a policy of insurance from Co-operators bearing policy number 006408303 (the “Policy”). Both the Professional Corporation and 121 were named insureds pursuant to the Policy. The contractual relationship between Co-operators and the Professional Corporation and 121 (the “Insureds”), was governed by the terms of the Policy.
[8] On or about January 20, 2017, a fire occurred at the Property. Co-operators conducted an investigation and determined that the fire was incendiary in nature and had been intentionally set. Co-operators was unable to determine who was responsible for setting the fire. The cause of the fire and the circumstances giving rise to the loss are not at issue in this litigation. Co-operators has not made any denials for coverage under the Policy. The Policy has fully responded to the Insureds’ claims.
[9] At all material times, Carrol was an employee of Co-operators. After the fire, Co-operators assigned Carroll as the adjuster on the claim. Carroll is a large loss adjuster with over 20 years of experience.
[10] Co-operators is aware of the actions undertaken by Carroll during the adjustment of this claim and accepts that any and all actions taken by Carroll were carried out in furtherance of his employment duties and has advised that it will assume any and all liability for Carroll in relation to this litigation.
[11] Shortly after the fire, the plaintiffs retained the services of National Fire Adjusters (“NFA”), a public adjusting firm, to assist with the adjustment of the loss.
[12] The Policy was a multi-peril Policy, providing insurance coverage for the building owned by 121 and providing additional coverages to the business owned and operated by the Professional Corporation. The Policy did not provide coverage to Truscott in his personal capacity. The Policy contains a Declaration Page which specifies the coverages afforded by Policy, the applicable limits for each type of coverage offered under the Policy along with any deductible or co-insurance requirement. The Policy covered reimbursement for property damages to the specific type of coverage, areas or items including those types described as “Building”, “Contents” and “Valuable Papers”.
[13] The Policy provided the Insureds with coverage for lost Contents. The Policy limit for Contents was $106,090.00. A significant number of Contents were destroyed by the fire. As such, Co-operators abandoned their attempts at cataloguing the Contents once it became clear that the value of the loss would exceed the coverage limits provided for under the Policy. On February 27, 2017, prior to the commencement of litigation, Co-operators paid out the Insureds the policy limits for Contents in the amount of $106,090.00.
[14] On August 28, 2017, Co-operators advised the plaintiffs that they would not accept interim proofs of loss. The Insureds submitted a fully executed and properly compiled Proof of Loss sworn August 31, 2017. The Proof of Loss claimed that the amount owing for the building (“Building Loss”) amounted to $615,952.53 (Replacement Cost) or $523,559.00 (Actual Cash Value). Co-operators disagreed with the amounts claimed in the Proof of Loss for the Building Loss. Co-operators made payment to the Insureds in the amount of $296,694.30, which is the amount Co-operators determined the loss to be upon receipt of the Proof of Loss.
[15] On September 12, 2017, the Insureds notified Co-operators that they were triggering the formal process for valuating the Building Loss via the Appraisal process provided for under the Insurance Act.
[16] Steve Agnew (“Agnew”) an Executive General Adjuster, National Property Specialist with Claims Pro, a public adjusting service, was appointed by the parties as Umpire and the Appraisal hearing to decide the Building Loss. On November 24, 2017, Agnew issued an Appraisal award (the “Building Award”) for the Insureds’ claim for the Building loss, in the amount of $507,130.09 (Replacement Cost) and $431,060.58 (Actual Cash Value).
[17] Shortly after the Building Award was issued, Co-operators paid to the Insureds the amount of $134,366.28 representing the balance of the Actual Cash Value of the Building, as determined by the Building Award.
[18] By May 2019, the building had been repaired and as such, Co-operators issued a cheque to the Insureds in the amount of $76,069.51 for the remaining portion of the Building Award. In total, Co-operators paid the Insureds the amount of $507,130.09 for the Building claim, representing the full Replacement Cost awarded in the Building Award.
[19] On June 4, 2018, more than 6 months after Agnew issued the Building Award, the Insureds submitted a new Proof of Loss for the Building Loss for additional expenses they allege that they are entitled to under the Policy.
[20] Valuable Papers is a form of coverage provided by Co-operators. The coverage is designed to provide an insured with coverage so that special, unique and original documents that are vital to the operation of a business, which are damaged in the course of a fire, can be reproduced. The coverage provides indemnity for the costs of having the document copied, recreated or restored.
[21] Coverage for “Valuable Papers and Records” and the associated provisions are found within the Commercial Advantage Endorsement designated as form B-1(9). Valuable Papers and Records are defined as: “Written, printed or otherwise inscribed documents and records, including books, maps, films, drawings, abstracts, deeds, mortgagees and manuscripts, but does not mean money or securities”. See para. 13 of the Commercial Advantage Endorsement.
[22] As a result of the fire, the Insureds advanced a claim that boxes of client materials had been damaged by the fire and that the papers contained in those boxes had to be replaced for the business to continue to operate. The plaintiffs indicated that they had 43 files that needed to be created. The Insureds’ submitted the claim for Valuable Papers to Co-operators via a Proof of Loss, dated April 17, 2017. The Insureds indicated that the methodology for recreating the lost Valuable Papers would require many hours of contacting various third parties to collate and collect new copies.
[23] The Appraisal for the Valuable Papers claim was adjourned until February 9, 2018. The hearing took place and Agnew refused to consider the October 31, 2017 Proof of Loss.
[24] On or about March 22, 2018, Agnew issued the Appraisal award for the Valuable Papers claim (the “Valuable Papers Award”). The Valuable Papers Award provided compensation to the Insureds for the cost of repair and replacement of Valuable Papers in the amount of $157,639.00. Co-operators has paid to the Insureds the amount of $157,639.00 in full satisfaction of the Award.
[25] On January 18, 2018, the Plaintiffs issued a Statement of Claim naming Co-operators and Carroll along with Yvonne Young & Associates Inc. (“Young”) as Defendants. This action has since been discontinued against Young. The Insureds have not sought to have the Building Award set aside or altered and have not sought judicial review of the Building Award.
Issues:
[26] Whether the defendants entitled to (1) a declaration that Co-operators has paid all amounts due and owing for the repair and replacement of Valuable Papers and Records and for the repair and replacement of the Building, in accordance with the Proof of Loss filed and the Umpire’s ruling; and (2) dismissal of claims advanced by the plaintiff related to reimbursement of costs or expenses associated with the repair or replacement of Valuable Papers and of the Building.
[27] Whether the Court should grant an order for partial summary judgment and the dismissal of all claims as advanced against Carroll, in his personal capacity.
Positions of the Parties:
[28] The moving party defendants submit that the Appraisal process contemplated by the Insurance Act was triggered and engaged by the plaintiffs with the assistance and representation of a private adjuster and counsel. Co-operators agreed to the Appraisal process.
[29] The defendants contend that the plaintiffs’ claim for the Building Loss and claim for the reproduction of valuable papers, as set out in the sworn Proof of Loss provided in advance of and in anticipation of such appraisal, were scrutinized in relation to the amounts they were entitled to recover under the Policy.
[30] The defendants says that Agnew heard the Appraisals and ultimately came to a final decision. Appraisal awards were rendered, and Co-operators has paid both the Building Award and the Valuable Papers Awards in full, as determined by the Umpire.
[31] No proceedings were commenced by the plaintiffs seeking to challenge those awards and the defendants argue that it is too late to do so. As a result, the plaintiffs’ entitlement to payment under the Policy for their claims for building loss and valuable papers has been determined in proceedings that are final and binding. As such, the defendants seek a declaration that the Building Loss and the Valuable Papers and Records Loss have been settled and are no longer live issues in this litigation.
[32] The defendants also submit that there is no independent cause of action framed by the pleadings as against Carroll, an employee or agent of Co-operators.
[33] The plaintiffs’ respond that Truscott was not in a position to personally fund the Building repair, and the defendants used this to force Truscott to submit a sworn final, rather than interim, Proof of Loss. The plaintiffs say that Co-Operators acknowledges that it is “absolutely aware” that insureds need the insurance proceeds to start the process of demolition and rebuilding, but refused to provide any advance payment without a sworn Proof of Loss. A Proof of Loss for the Building repairs, was sworn August 31, 2017, and submitted to the Co-Operators. Truscott’s Proof of Loss was submitted with the caveat that, once demolition began, further issues may be uncovered, and the costs to remediate the Building may change. The difference in the scope of repair necessary between the “total gut” and “non total gut” estimates was $226,864.70.
[34] Due to the significant difference between the cost estimates of Truscott and Co-Operators, the plaintiffs argue that Truscott had no choice but to invoke the appraisal process pursuant to the Insurance Act. When he did, the defendants pre-emptively advised that, should the Umpire’s Appraisal Award be in excess of the estimate, the award would not be honoured and would “need to be litigated”.
[35] The plaintiffs say that all parties knew that the price estimates were likely to increase once demolition of the building actually began. The plaintiffs’ quote contained a page with various disclaimers, outlining many uncertainties that could not be resolved until the commencement of the construction. At the time of the appraisal hearing, the parties had clearly contemplated that construction costs would change once the City became involved and code and by-law issues surfaced. The Appraisal Award explicitly states that “Building by-law issues have not been considered within this award,”. The plaintiffs say that this is a matter that requires findings of credibility by a trier of fact at trial.
[36] The plaintiffs argue that the defendants have abused their power over the plaintiffs, forcing the plaintiffs to submit a sworn Proof of Loss and attend an appraisal, when they knew all along that the numbers would change; presumably planning to use the Appraisal Award as a shield against any further claims. The plaintiffs submit that it is also bad faith conduct for the defendants to pick and choose which Proofs of Loss could be heard at appraisal, and fail to abide by the mandatory language in the Insurance Act. It would be unconscionable for the defendants to be permitted to take advantage of this situation to the detriment of the Insureds.
[37] The plaintiffs submit that the Umpire is restricted to assessments of “valuation” and not determinations of “coverage” as defined in the Policy, and hence, a further and better Proof of Loss can be submitted for consideration.
[38] With regards to Valuable Papers, the plaintiffs submit that the defendants refused to attend appraisal on the September 28, 2017 and October 31, 2017 Proofs of Loss, and that they only agreed to proceed on a Proof of Loss from April 17, 2017 which the plaintiffs claim was inaccurate or incomplete due to malfeasance on the part of Carroll. The plaintiffs submit that at no time prior to the Appraisal did the defendants take the position that the Appraisal would preclude the plaintiffs from recovering their claims on the September and October 2017 Proofs of Loss.
[39] The plaintiffs also submit that although they were successful at Appraisal, the defendants have not paid the Valuable Papers Award. They submit that although the defendants did write a cheque for the award, this cheque was returned to the Co-operators. The plaintiffs submit that the Co-operators representative gave evidence on discovery that the cheque had been intended to prevent the plaintiffs from pursuing their September and October 2017 Proofs of Loss.
[40] The plaintiffs contend that Carroll is a necessary party to the action pursuant to Rule 5.03(1), and all of the same evidence on this motion, plus more, in relation to his involvement in this claim will be necessary to be considered at trial.
[41] In this action, the plaintiffs have claimed punitive damages against both Carroll and Co-Operators for conduct that the plaintiff has alleged was reprehensive, harsh, offensive, and high-handed. The plaintiffs say that only the trial judge can determine whether an award for punitive damages is appropriate against one, or both, of the defendants, and therefore the motions ought to be dismissed.
Legal Principles:
[42] A motion for partial summary judgment should be considered to be a rare procedure that is reserved for an issue or issues that may be readily bifurcated from those in the main action and that may be dealt with expeditiously and in a cost effective manner: Butera v. Chown Cairns LLP, 2017 ONCA 783, 137 O.R. (3d) 561, at para. 34. The Court of Appeal has cautioned against partial summary judgment where it is possible that the trial judge will develop a fuller appreciation of the relationships and the transactional context than the motions judge,” which could risk “inconsistent findings and substantive injustice.
[43] Partial summary judgment should only be granted in the clearest cases, and only if doing so does not give rise to any of the associated risks—delay, expense, inefficiency, and inconsistent findings: Fullerton v. Comella, 2021 ONSC 2110, at para. 66.
[44] Section 148 of the Insurance Act, sets out a series of “Statutory Conditions” for every policy of insurance concerning the peril of fire.
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 not, and independently of all other questions. There shall be no right to an Appraisal until a specific demand therefor is made in writing and until after proof of loss has been delivered.
Action
- Every action or proceeding against the insurer for the recovery of a claim under or by virtue of this contract is absolutely barred unless commenced within one year next after the loss or damage occurs.
[45] Co-operators incorporated the Statutory Conditions into policy Form AB, which is applicable to all subsets of property coverage (including Stock, Profits, Building and Gross Rentals). Form AB expands the applicability of the Statutory Conditions from “the peril of fire” (as stated in the Insurance Act) to “all other perils insured by property coverage on this policy.”
[46] The language of a one-year limitation period set out in the Policy very closely tracks the language of the insurance contracts at issue in Boyce v The Co-operators General Insurance Company, 2013 ONCA 298, 116 O.R. (3d) 56, and in International Movie Conversions Ltd. V ITT Hartford Canada (2002), 2002 CanLII 23581 (ON CA), 57 O.R. (3d) 652 (C.A.). The Court of Appeal in Boyce relied on the findings of Cronk J.A. in International Movies Conversions in stating: “Clause 14 is clear and unambiguous. Indeed, in my view, it is difficult to conceive how it could have been made more explicit”: at para. 11.
[47] The Appraisal requirement is a condition of Form AB, provides that Appraisal cannot be invoked until a “specific demand for one is made in writing and until after proof of loss has been delivered.” In Letts v. Aviva Canada Inc., 2010 ONSC 6999, at paras. 8-9, the court rejected the insured’s argument that this precondition is onerous:
While this may make sense in an appropriate case, I do not agree with the insureds that the insurer must provide a detailed response to the claim of the insureds before being able to invoke the Appraisal mechanism contemplated by Section 128 of the Insurance Act.
There is no reason why the appraisers cannot themselves “determine the matters in disagreement” (Section 128(3)). In addition, the statutory condition regarding Appraisals at Section 148 of the Act sets out what needs to be done prior to invoking the Appraisal process where it provides: “there shall be no right to an Appraisal until a specific demand therefor is made in writing and until after the proof of loss has been delivered”. In my view, nothing else is required.
[48] Once invoked, the Appraisal process is governed by s. 128 of the Insurance Act, which provides in relevant part 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.
[49] Apart from s. 128, the Insurance Act provides little guidance with respect to the Appraisal process.
[50] In Seed v. ING Halifax Insurance, 2005 CanLII 41991 (ON SCDC), [2005] O.J. No. 4870, at para. 23, the Divisional Court dismissed the insured’s application for judicial review of an umpire’s decision. In doing so, the Divisional Court referred to s. 128 Appraisals as “final and binding” and subject to review only where there is misconduct on the part of the Umpire or lack of jurisdiction:
The purpose of the Appraisal process under s. 128 of the Insurance Act is to provide an expeditious and easy manner for the settlement of claims for indemnity under insurance policies. It is intended to be a final and binding determination of the loss: Krofchick v. Provincial Insurance Co. (1978), 1978 CanLII 1304 (ON SC), 21 O.R. (2d) 805 (Ont. Div. Ct.); Trentmar Holdings Ltd. (Athena Restaurant) v. Williams (1984), 1984 CanLII 6003 (ON SC), 6 C.C.L.I. 180 (Ont. H.C.) at para. 10. Courts have afforded substantial deference to an Appraisal under the Insurance Act and the Appraisal process, which is not subject to the provisions of the Statutory Powers Procedure Act, R.S.O. 1990, c.22. Unless there is proof of misconduct or that the appraisers or Umpire exceeded their jurisdiction, courts have been reluctant to interfere.
[51] In Barrett v. Elite Insurance Co., 1987 CanLII 4160 (ON CA), [1987] 59 O.R. (2d) 186 (Ont. C.A.), the Court of Appeal dealt with an appeal from an order of the Divisional Court setting aside the decision of an umpire appointed under s. 105 (the predecessor of s. 128) of the Insurance Act. The Court of Appeal decided that the umpire applied his expertise and chose between two opposing valuations and determined that there was no basis upon which the Courts should interfere with that decision. The appeal was allowed and the decision of the umpire was restored, with the Court of Appeal providing the following commentary at para. 12:
There is a clear intention apparent in the legislation to reach an expeditious resolution of questions of value for insurance purposes. The umpire applied his expertise and chose between two opposing valuations. The Courts should not lightly interfere and I can find no ground for interference here.
[52] Judicial review is the appropriate legal method for disputing an Appraisal. This was the explicit finding of the court in Trentmar Holdings Ltd. v. Williams, 1984 CanLII 6003 (ON SC), [1984] O.J. No. 356 at para. 15:
... It is my view that if the plaintiffs wish to allege wrongdoing on behalf of the appraisers, they should do so in the form of a judicial review of the Appraisal so that if the Court finds in their favour, they can order a new Appraisal and the findings under the new Appraisal can be applied in the action against St. Paul.
Analysis:
A. DECLARATION AND DISMISSAL OF CLAIMS FOR BUILDING LOSS AND VALUABLE PAPERS
[53] I accept the defendants’ claim that the Building Loss has been dealt with and resolved. It was determined that coverage was offered under the Policy. Co-operators and the Insureds entered into arbitration in regard to the claim for the repair and replacement of the building. Agnew scrutinized the Insureds’ claim and made an award. The plaintiffs did not commence proceedings to challenge the Building Award and Co-operators has paid out the Building Award in full.
[54] Section 128 of the Insurance Act, governs the appointment of an appraiser in the event of a disagreement between the parties. Section 148 governs the statutory conditions that must be part of every insurance contract in Ontario. The Statutory Conditions govern the insured’s obligations following a loss:
Requirements After Loss
- (1) 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,
forthwith give notice thereof in writing to the insurer; deliver as soon as practicable to the insurer a proof of loss verified by a statutory declaration; giving a complete inventory of the destroyed and damaged property and showing in detail quantities, costs, actual cash value and particulars of amount of loss claimed, stating when and how the loss occurred, and if caused by fire or explosion due to ignition, how the fire or explosion originated, so far as the insured knows or believes, stating that the loss did not occur through any wilful act or neglect or the procurement, means or connivance of the insured, showing the amount of other insurances and the names of other insurers, showing the interest of the insured and of all others in the property with particulars of all liens, encumbrances and other charges upon the property, showing any changes in title, use, occupation, location, possession or exposures of the property since the issue of the contract, showing the place where the property insured was at the time of loss; if required, give a complete inventory of undamaged property and showing in detail quantities, cost, actual cash value; if required and if practicable, produce books of account, warehouse receipts and stock lists, and furnish invoices and other vouchers verified by statutory declaration, and furnish a copy of the written portion of any other contract.
[55] The contract provides that “In the event of disagreement as to the value of the property insured, the property saved or the amount of the loss, those questions shall be determined by appraisal as provided under the Insurance Act before there can be any recovery under this contract whether the right to recover on the contract is disputed or not, and independently of all other questions. There shall be no right to an appraisal until a specific demand therefor is made in writing and until after proof of loss has been delivered.”
[56] There is a significant amount of case law interpreting these provisions. The recent Superior Court decision of Campbell v. Desjardins, 2020 ONSC 6630 provides a helpful and comprehensive summary, at para. 74:
The appraisal process under section 128 of the Act has been in existence for quite some time and it has been the subject of many disputes before the Courts in the Province of Ontario. The legal principles that have emerged include the following:
The determination of the disputed value of the loss is mandated in an appraisal mechanism under section 148, Statutory Condition 11 of the Act (Greer v. Co-operators General Insurance Co., [1999] O.J. No. 3118);
The appraisal process is triggered when the following conditions are met: (1) a specific demand for appraisal is made in writing; and (2) the insured has delivered a proof of loss (56 King Inc. v. Aviva Canada Inc., 2016 ONSC 7139);
Statutory Condition 6 provides that the insured must deliver a proof of loss as soon as practicable. The Court’s assessment of whether the insured has complied with this requirement of delivery “as soon as practicable” is a question of fact, to be decided under the circumstances of each case (Regal Films Corporation (1941) Limited v. Glen Falls Insurance Company, 1946 CanLII 60 (ONCA));
Statutory Condition 6 requires that the insured give a complete inventory of the destroyed and damaged property and provides the details associated with the amount of loss claimed (Lauzon v. AXA Insurance (Canada), 2013 ONCA 664);
Statutory Condition 11 is unambiguous and cannot be unilaterally waived by either party in the event of a disagreement (Seed v. ING Halifax Insurance, 2002 CanLII 79669 (ON SC), [2002] O.J. No. 1976 (S.C.J.));
The appraisal process is an efficient and cost saving measure available to the parties to effectively resolve their dispute (Greer v. Co-operators General Insurance Co.);
There are no stipulated timelines in the Act upon which an election for appraisal must be made (56 King Inc. v. Aviva Canada Inc., 2016 ONSC 7139);
The appraisal process is not an arbitration but rather a property valuation process. It is designed to provide the parties with a valuation of the loss and not a determination of legal rights (Madhani v. Wawanesa Mutual Insurance Company, 2018 ONSC 4282);
The appraisers and the umpire are not to determine legal questions. They are valuators who are to use their expertise in assessing the loss (Madhani v. Wawanesa Mutual Insurance Company);
The Act does not set out the training, knowledge or experience that is needed for an appraiser to carry out his/her functions as set out in section 128 of the Act (Letts v. Aviva Canada Inc., 2010 ONSC 6999);
Substantial deference to an appraisal under the Act and the appraisal process is given by the Court, unless there is evidence of misconduct or jurisdiction has been exceeded (Birmingham Business Centre v. Intact Insurance Company, 2018 ONSC 6174 (Div. Ct));
An appraisal does not require a hearing, a consideration of evidence or reasons to be given in the determination of the value of the loss (Birmingham Business Centre v. Intact Insurance Company);
The decision is final and a binding determination of the loss (Birmingham Business Centre v. Intact Insurance Company);
Section 128 of the Act gives the Court the discretion to curb abuse (56 King Inc. v. Aviva Canada Inc., 2017 ONCA 408); and
The Court has inherent jurisdiction to make such procedural orders as are necessary to give effect to the statutory appraisal scheme in the Act, including equipping the appraisers and the umpire with the information needed to present a full answer and defence (Lauzon v. AXA Insurance (Canada)). [emphasis added]
[57] In Campbell, M.E. Smith J. heard three insurance claims, arising from the same tornado. All three of the plaintiff families were insured by Desjardins. The Campbell family had triggered the appraisal mechanism to determine the amount of loss for their home. Their home was completely destroyed by the tornado. The Campbells has advised Desjardins that they would be rebuilding their home. They submitted an interim proof of loss and qualified the proof of loss as “estimated damage and indemnity based on quotes received”. The Campbells informed Desjardins that the proof of loss was interim, and a final one was yet to be provided. The Court had to consider whether this met the insured’s statutory obligation to submit a proof of loss “as soon as practicable”.
[58] The court acknowledged that the insured is required to deliver a proof of loss as soon as is practicable, while also requiring the insured to provide a complete inventory of destroyed and damaged property. Desjardins argued that there was no jurisprudence which allows an insured to wait until a rebuild is complete to submit the proof of loss. The insured, on the other hand, argued it was not unreasonable to wait until all costs were known. At para. 108, M.E. Smith J. ultimately held that there was no statutory prohibition on delivering a proof of claim based on actual expenses incurred. He directed the Campbells to submit the final proof of loss once the home rebuild was complete and actual expenses were quantified.
[59] Thus, in Campbell, multiple proofs of loss were permitted. However, that case is not analogous to this matter. Firstly, the umpire in Campbell had not reached a determination. The appraisal process, although triggered by the “interim” proof of loss, was suspended by the umpire. Secondly, this is not a case where an insured disagreed with an umpire’s determination and sought to deliver further proofs of loss. Rather, the Campbell family qualified their interim proof of loss by stating a further and final proof of loss would be submitted once the rebuild was complete.
[60] In Senator Real Estate v. Intact Insurance, 2021 ONSC 200, the insured also submitted interim proofs of loss. For example, regarding the replacement cost value of the insured building, the Court found:
On May 24, 2019 [insured’s adjuster] advised [insurer’s adjuster] that he was not in agreement with the [replacement cost value] of the building and provided [insurer’s adjuster] with an interim and not a final proof of loss, which kept the claim open and unresolved. The interim proof of loss dated May 24, 2019 was drafted by [insured’s adjuster] and stated that the replacement cost and cash value of the building were “TBD” (to be determined). At the end of May 2019, Intact provided Senator with an additional cheque in the amount of $277,624.60. [emphasis added]
[61] The case of Campbell was cited and applied in Northbridge General Insurance Corp. v. Ashcroft Homes-Capital Hall Inc., 2021 ONSC 1684. In Northbridge, Perell J. at paras. 24-33 also discussed the application of s. 128 of the Insurance Act and the finality of an umpire’s determination.
The appraisal process is intended to be a final and binding determination of the loss. The appraisal process is mandatory, and unless waived by both parties or unless impossible to perform, there must be an appraisal before there can be recovery under the policy. The appraisal process is intended to a facilitate a quick resolution of a dispute about the value of the property insured, the value of the salvage, or the quantification of the damage to the property, but it is not intended to be an arbitration or an alternative dispute resolution method that will resolve all the issues between the parties; all other non-valuation issues are outside the province of the appraisers and umpire to resolve.
The appraisal process is not an arbitration or an adjudication but is considered to be a binding valuation that determines the value of loss before there can be any recovery on the insurance contract. The procedure for the appraisal process is not set out in s. 128 of the Insurance Act. The Rules of Civil Procedure have no application to the procedure mandated by the provisions of the Insurance Act. The appraisal process is subject to judicial review but is not subject to the provisions of the Statutory Powers Procedure Act.The umpire decides the procedure for the appraisal process on a case-by-case basis.
As noted above, the appraisal process is subject to judicial review, but the appraisal process is not subject to the provisions of the Statutory Powers Procedure Act. On a judicial review application, reasonableness is the applicable standard of review in accordance with the principles set out by the Supreme Court of Canada in Canada (Minister of Citizenship and Immigration) v. Vavilov…
Courts afford substantial deference to an appraisal under the Insurance Act, and courts are reluctant to interfere with the appraisal process unless there is proof of bias, misconduct, or the appraisers or umpire will exceed or have exceeded their jurisdiction, for example, by purporting to act as an arbitrator…[emphasis added]
[62] I observe that Perell J.’s decision of Northbridge was cited and followed with approval by other Ontario Superior Court jurists and the Alberta Court of Appeal. While the comments from Northbridge do not directly apply whether an insured is permitted to submit multiple proofs of loss, it is evident that an umpire’s determination is final. If an insured is dissatisfied with an umpire’s determination, the proper route is judicial review. This is reflected in the comments made by Stinson J. in DK Manufacturing Group Ltd. v. Co-operators General Insurance Co., 2016 ONSC 3983 at para. 45, in which he notes that courts are cautioned against even “lightly interfering” with an umpire’s ruling outside of a judicial review.
[63] In DK Manufacturing, the plaintiff insureds disagreed with the appraised amount of their losses. They argued that they did not agree to the appraisal procedure and that they were not bound with the appraisal decisions. The Court rejected this argument as the plaintiffs had not sought judicial review.
[64] In this case, the plaintiffs’ filed a sworn, final Proof of Loss. I do not accept that there are clearly triable issues as to whether or not the appraisals on two Proofs of Losses should bar the plaintiffs’ other claims under specific headings of coverage (Building and Valuable Papers and Records). On this record, I am not persuaded that the plaintiffs were compelled to file a sworn final Proof of Loss or that Co-operators forced the plaintiffs to acquiesce. The language of the Policy is clear.
[65] I am not persuaded by the plaintiffs that the defendants’ conduct in relation to these appraisals is relevant to the extent that requires a trial, especially with respect to the Valuable Papers coverage. I do not accept that the defendants were permitted to pick and choose which of the three Proofs of Loss for Valuable Papers and Records could be heard at appraisal, and then use their own refusal to attend appraisal on two of the Proofs of Loss as a shield against the very claims they refused to have adjudicated. On this record, the plaintiffs’ arguments with respect to the defendants’ actions are without merit.
[66] Further, the plaintiffs stress that the defendants have not produced any case law that an insured is restricted to one Proof of Loss for any one heading of coverage. Or that an appraisal forecloses any and all further, unknown claims or entitlement under the “heading of coverage”, which limits the umpire’s jurisdiction.
[67] Ever mindful of the onus on this motion, it is not lost on me that neither have the plaintiffs provided any support for their stance. There are no cases to sustain the plaintiffs’ position, including when a party submits a further proof of loss after the umpire has made his or her award. Moreover, the argument related to interpreting an award as restricted to “valuation” versus “entitlement to coverage under the policy”, while novel, does not resonate with me. I am not prepared to interpret the law or the Umpire’s prerogative as suggested by the plaintiffs. In effect, this could order to open the door to facilitate further sworn, Proofs of Loss being filed by an insured when there is a disagreement as to the award. In my view, the plaintiff’s suggested interpretation and approach to this issue appears to circumvent the language and intent for finality as outlined in the Insurance Act.
[68] In sum, an umpire’s decision regarding a sworn and final Proof of Loss is final and binding. In this case, the parties submitted their claims and materials to the umpire for a determination. Clearly, the plaintiffs are not content with the Umpire’s decision. The only route through which a party may challenge the umpire’s decision is through judicial review. Even so, I am reluctant to interfere with an umpire’s decision absent bias, misconduct, or proof that an umpire overstepped his or her jurisdiction. Such is not the case here. The defendants have satisfied their onus with respect to this issue.
B. DISMISSAL OF ALL CLAIMS AS ADVANCED AGAINST THOMAS CARROLL, PERSONALLY
[69] Rule 21.01(1)(b) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, allows a party to move to strike a pleading on the basis that the pleading discloses no reasonable cause of action.
[70] Where the essence of allegations made against individual defendants in their personal capacity arises as a result of the employer/employee relationship of the individual corporate defendant, various courts have found that the claim should not proceed and a pleading in such regard should be struck: Islington Village Inc. v Canadian Imperial Bank of Commerce, 1992 CarswellOnt 368 (Gen. Div.) at para. 9.
[71] Absent exceptional circumstances such as where the actions of an insurance adjuster clearly go beyond the scope of their employment, an insurance adjuster ought not to be held personally liable for carrying out their duties of employment. The Ontario Court of Appeal has held that, “in the absence of findings of fraud, deceit, dishonesty or want of authority on the part of employees or officers [and/or] absent allegations which fit within the categories above, officers or employees of limited companies are protected from personal liability unless it can be shown that their actions are themselves tortious or exhibit a separate identity or interest from that of the company so as to make the act or conduct complained of their own”: Montreal Trust Co. of Canada v. ScotiaMcLeod Inc., 1995 CanLII 1301 (ON CA), 1995 CarswellOnt 1203 (Ont. C.A.) at para. 25.
[72] In Nguyen v. Economical Mutual Insurance Co., 2015 ONSC 2646, the plaintiff Nguyen was injured in a motor vehicle accident and brought a claim for accident benefits against Economical Insurance Co. (“Economical”). The claim sought additional benefits after she was cut off by Economical. The claim was denied. Nguyen commenced an action against Economical and three of its employees, including the adjuster on the file. The claims against the employees were based solely on the fact that they acted on behalf of Economical in the adjustment and denial of her claim. The court in Nguyen at para. 10 found that the Statement of Claim failed to set out a cause of action against the defendant employees, stating:
Given their status as employees and acting within the course of their employment (in the absence of any allegations any of them contracted to pay the $157,500 to the plaintiff personally), the action as against them is dismissed. I am reinforced in this conclusion given the admission by the defendants they were acting in the course of their employment.
[73] At para. 5 of the Statement of Claim, the plaintiffs expressly allege that “the Defendant, Co-operators, is vicariously liable for the actions of its employees, including the actions of Carroll.” In the Statement of Claim, the plaintiffs have made several broad and vague claims against Carroll, such as claims that he took an adversarial approach in adjusting the loss, that he was negligent and that he breached contract. The only support for the claim that Carroll took an adversarial approach is that he requested the Insured’s telephone records. The request for telephone records was made by Co-operators’ Special Investigations Unit and was merely repeated and communicated by Carroll. Requesting telephone records is a standard and reasonable step taken in circumstances where a fire is caused by arson. There is nothing tortious about this request, nor does such a request give rise to a cause of action against Carroll.
[74] The plaintiffs neither provide any further detail regarding the claims of Carroll’s negligence, nor do they explain how such a cause of action would give rise to damages in this matter.
[75] In para. 45 of the Statement of Claim, the plaintiffs attempt to advance a bad faith claim against Carroll personally. However each and every one of the allegations are about the conduct of Co-operators’ and not Carroll. For instance, the settlement offers proposed, the evaluation of the loss, the investigation into the incendiary nature of the fire, the fact that the claim went to the Appraisal process, the denial of the Insured’s claims and denying “supplementary” Proofs of Loss, were all decisions made by Co-operators and merely communicated to the Insureds by Carroll.
[76] Again, any comments, denials, delays, requests or communications made by Carroll to the Insureds were made at the direction or with the approval of Co-operators. Each of the actions listed in para. 45, describe Carroll acting within the scope of his employment and at the direction and in the interest of Co-operators. Individuals who are acting in the scope of their employment of a corporate defendant do not attract liability where “the allegations made against each in pith and substance relate to decisions made within their ostensible authority as [Defendant’s] employees”: See Lobo v Carleton University, 2012 ONSC 254 (Ont. SCJ) at para. 32.
[77] I accept that it is not sufficient to simply add the individual employee’s name, or to combine it with the phrase “and/or” with every claim made against the corporate defendant. Throughout Carroll’s involvement with the claim, each and every action Carroll took was at the direction of or approved by Co-operators. There are no allegations within the Statement of Claim that elevate Carroll’s conduct to exhibit a separate identity or separate interest from Co-operators’.
[78] In fact, Co-operators fully and completely support the actions taken by Carroll throughout the adjustment of this claim, and that the actions of Carroll were, at all times, either expressly directed by Co-operators or done with the full oversight and approval of Co-operators.
[79] If an employer is vicariously liable for the conduct of its employees (who are acting in the course of their duties) there is no independent action against the employees.
[80] Thus, in deciding a partial summary judgment motion, the court must consider whether: i) there is a risk of duplicative or inconsistent findings at trial; and whether ii) granting partial summary judgment is advisable in the context of the litigation as a whole. Where there is a real possibility of inconsistent findings, including on matters of credibility, the Court of Appeal for Ontario has held that partial summary judgment is inappropriate.
[81] In my view, partial summary judgment is appropriate on this motion. There is not a significant overlap on the facts that will lead to inefficient duplication, and there is no material risk of inconsistent findings. The narrow issues before me are legal interpretations as it applies to the first question and mixed fact and law as it pertains to Carroll. Credibility is not a critical issue. The issue can be readily bifurcated from the main action. There is no substantial risk that that my rulings could conflict with those of the trial judge.
[82] In sum, I find that the plaintiffs have not alleged any conduct on the part of Carroll personally, which gives rise to an independent, actionable wrong or for which the plaintiffs may be entitled to recovery, separate and apart from the underlying claims made against Co-operators. At no time during the adjustment of the loss on behalf of Co-operators did Carroll ever deal with any party in his personal capacity. Carroll was acting solely in the capacity of his employment as a large loss adjuster under the supervision and on behalf of Co-operators. He did not stray out of his sphere of his employment or in any way act in contravention of any policies or directions given to him by Co-operators.
[83] At trial, any alleged punitive or aggravated damages can be considered against the defendant Co-Operators for an alleged tort that was committed by Carroll, as employee or agent of the company.
[84] The defendant has met his onus under rule 21.01, for an order dismissing all claims as against Carroll in his personal capacity.
Conclusion:
[85] The defendants’ motions are granted.
[86] A declaration is made to the effect that the defendants have paid all amounts due and owing for the replacement and repair of the Building, more particularly described as 812 King Street, Hamilton, Ontario, pursuant to the Policy of Insurance and the Appraisal award of the Umpire.
[87] A declaration is made to the effect that the defendants have paid all amounts due and owing for the replacement of Valuable Papers and Records pursuant to the Policy of Insurance and the Appraisal award of the Umpire. Further, I dismiss claims advanced by the plaintiffs related to reimbursement of costs or expenses associated with the repair or replacement of Valuable Papers and Record and for the repair or replacement of the Building.
[88] It is ordered that all claims advanced against Carroll, in his personal capacity, are hereby dismissed.
[89] Nothing in this ruling precludes the plaintiffs from continuing the action to trial for alleged claims of negligence, breach of contract, along with aggravated and punitive damages.
Costs:
[90] If the parties cannot agree on the issue of costs, I will consider brief written submissions. As the successful party, the defendants are presumptively entitled to costs. The cost materials shall not exceed five pages in length, (not including any Bill of Costs or Offers to Settle). The defendants shall file their costs submissions within 15 days of today’s date. The plaintiffs shall file their costs submissions within 15 days of the receipt of the plaintiff’s materials. The defendants may file a brief reply within five days thereafter. If submissions are not received by March 11, 2022, the file will be closed and the issue of costs considered settled.
A.J. Goodman J.
Released: February 4, 2022