COURT FILE NO.: CV-22-78192 DATE: January 4, 2023
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: Jason Scott Marsden, Applicant AND: Desjardins Home Insurance, Respondent
BEFORE: MacNeil J.
COUNSEL: J. Marsden, Self-represented – Applicant M. Marantz – Lawyer for the Respondent
HEARD: October 6, 2022 (by videoconference)
REASONS FOR DECISION
OVERVIEW
[1] The Applicant, Jason Scott Marsden (“the Applicant”), commenced this application seeking an order requiring the Respondent, Desjardins Home Insurance (“the Respondent”), to proceed with the statutory appraisal process under the Insurance Act, R.S.O. 1990, c. I.8, as it pertains to property insurance claims he submitted following roof damage to his residence located on Centre Road in Hamilton (“the Property”) and to pay additional living expenses so that he and his family can move out of the Property while repairs are completed.
[2] Desjardins seeks a dismissal of the application. It acknowledges that the statutory appraisal process is mandatory in the circumstances of this case and it does not object to the appraisal process in principle. However, it argues that the Applicant must still provide a valid Proof of Loss form in order for the parties to move forward with the process.
[3] The parties filed affidavits in support of their positions. There were no cross-examinations on those affidavits.
BACKGROUND
[4] The Applicant purchased property insurance with the Respondent for the Property for the period September 12, 2019 to September 12, 2020 (“the Policy”). The Policy was renewed for the period September 12, 2020 to September 12, 2021.
[5] On or about April 28, 2021, the Applicant submitted his first claim relating to damage to the back slope of the Property’s roof. The Respondent responded and made arrangements for a certified contractor to attend at and inspect the Property and to make emergency repairs. The Applicant had concerns about signing an authorization form required by that contractor and so he refused to sign it. The contractor would not perform the work without the signed form.
[6] By email sent on May 5, 2021, the claims adjuster, M. Brcan (“Ms. Brcan”), reiterated to the Applicant that emergency work needed to be done as soon as possible in order to stop further damage to the home and to get the roof properly covered. She advised that the Applicant could let her know if he wanted the Respondent’s contractor to do the work, or have the work reassigned to another certified contractor, or use his own contractor. The Applicant responded by advising that he would use his own contractor for the work. Ms. Brcan confirmed that she would cancel the services of the Respondent’s contractor.
[7] On or about May 7, 2021, the Applicant provided an invoice for emergency work done to the Property’s roof. Ms. Brcan paid this invoice on May 10, 2021.
[8] On May 10, 2021, Ms. Brcan also asked the Applicant to provide his contractor’s repair estimate, measurements, photos and sketch for review. She followed up to request similar information on May 13, 2021.
[9] On or about May 18, 2021, Ms. Brcan and the Applicant exchanged emails. Ms. Brcan confirmed that he had been advised that the Policy does not cover mould or rot due to the exclusions set out in the Policy. She further stated that the Respondent would cover repairing the roof, attic insulation, bedroom ceiling and hardwood damage, but would not cover mould remediation. She referred the Applicant to the Common Exclusions section of the Policy and, specifically, Common Exclusion 11 – “Gradual Damage” which states that the Respondent does not insure “loss or damage caused by … dampness … wet or dry rot, fungi or spores”.
[10] From June 14 to June 16, 2021, Ms. Brcan and the Applicant exchanged emails regarding the Respondent’s approval of the estimate for direct damages in the total amount of $10,839.07 for the First Claim. Ms. Brcan also advised that there would be no compensation for any additional living expenses since the Respondent considered the Applicant’s home to be habitable as it had “running water, usable bathrooms, kitchen”.
[11] On June 17, 2021, the Applicant emailed Ms. Brcan and indicated for the Respondent to “dispatch your contractor to make the repairs”. The next day, June 18th, Ms. Brcan responded and asked the Applicant to confirm that he now wanted the Respondent’s contractor to do the work. The Applicant replied that he had been unable to find a contractor who could complete the repairs based on the price list approved by the Respondent. He confirmed that he wanted the Respondent to assign its contractor.
[12] On or about June 21, 2021, the Applicant emailed Ms. Brcan to advise that water had entered the master bedroom and that the problem was getting worse. Ms. Brcan inquired if it was the same back slope of the roof or a different area that was affected. The Applicant advised that it was the front slope of the roof now. As a result, Ms. Brcan opened a new claim (“the Second Claim”).
[13] On June 23, 2021, Ms. Brcan advised the Applicant by email that she had assigned a contractor to complete the repair work for both claims but that the Applicant would first have to complete the necessary mould remediation before the repairs could start.
[14] By other correspondence dated June 23, 2021, Ms. Brcan wrote to the Applicant that the Respondent’s investigation into the First Claim was completed. She advised that the damage did not occur suddenly but over an extended period and the opening on the back slope was caused by a tree branch which resulted in mould and rot developing in the attic space. She confirmed that the Respondent would cover the portion of the claim for the loss or damage that occurred as a result of sudden and accidental damage but that, pursuant to the Policy and applicable exclusions, mould remediation was not covered. Ms. Brcan enclosed a Proof of Loss form with her letter.
[15] On or about July 2, 2021, the Applicant wrote to Ms. Brcan alleging delays with work at the Property.
[16] On July 5, 2021, Ms. Brcan responded to the Applicant advising him again that he had to complete the mould remediation first before the Respondent’s contractor could start its work. She again advised the Applicant that mould remediation was not covered by the Policy. Ms. Brcan and the Applicant subsequently exchanged additional emails regarding their positions on what repair work was needed to be done to the Property.
[17] On or about August 12, 2021, the Applicant submitted an estimate for repair work at the Property that he had received in the amount of $78,406.18 (“the First Estimate”).
[18] On or about August 19, 2021, Ms. Brcan wrote to the Applicant about his submitted estimate and explained what the Policy covered and what was excluded. She confirmed that the approved repair estimate for direct damages was $10,839.07, plus an additional approved amount of $1,760.03 for insulation replacement, less the applicable deductible. Ms. Brcan described the Applicant’s repair settlement options, including proceeding with the Respondent’s contractor to complete the repairs, proceeding with his own contractor, or cashing out on the repairs. She repeated that no additional living expenses would be covered.
[19] On or about October 21, 2021, Ms. Brcan wrote to the Applicant confirming that she had issued payment for the First Claim following approval of a cash out on the repairs of $7,791.37. She advised the Applicant to submit invoices in relation to his repairs which the Respondent would review for payment difference up to the approved amount of the claim.
[20] In response, by email sent October 21, 2021, the Applicant wrote to Ms. Brcan advising that he would be providing her with an “Interim Proof of Loss” and seeking “the customary 50% advance on the cost of repairs so that we can go forward with repairs”. He advised that he was accepting the payments made by the Respondent as interim payments only without prejudice to his ability to claim the entirety of his losses. He requested that the Respondent not close its file. Ms. Brcan responded by reiterating the Respondent’s position on what the Policy covered and excluded, and the approved estimates for direct damages related to the loss.
[21] By email sent October 26, 2021, the Applicant wrote to Ms. Brcan enclosing his “Interim” Proof of Loss form in the amount of $55,262.70 and supporting documentation for her review. He again requested an advance of 50% of the estimated cost of the repairs and set out his position on various issues relating to his insurance claim and the Respondent’s response to same.
[22] Ms. Brcan replied to the Applicant, by email sent on November 3, 2021. She advised, among other things: “Your modified proof of loss based on your estimate $, unfortunately this is not valid and will not be accepted. Proof of loss form was sent automatically, after 60 days of claim date. We don’t need this form.” Ms. Brcan repeated that the Respondent had already paid 70% on both claims as a cash out settlement, and that the remaining 30% based on approved estimates could be paid once the Applicant submitted final invoices.
[23] On January 27, 2022, the Applicant emailed Ms. Brcan attaching a “full quote done for repairs needed, including new damages found and photographed during roof removal”, in the amount of $148,342.31 (“the Second Estimate”). He advised that he would be acting as his own appraiser for the claims and that the parties could “move to umpire if needed”.
[24] On or about February 4, 2022, Ms. Brcan emailed the Applicant confirming his intention to proceed with the statutory appraisal process. She advised that in order to proceed with appraisal, the Respondent would require him to complete a Proof of Loss, have it notarized, and returned to her. She enclosed a blank Proof of Loss form.
[25] By email sent on February 16, 2022, Ms. Brcan advised the Applicant that the Respondent agreed to proceed with appraisal as requested and its appraiser would be appointed. She asked him to send his choice of preferred umpires. She also asked if the Applicant would agree to the Respondent sending a field appraiser to re-inspect the Property “in order to validate your contractors quote for $148k”.
[26] On February 16, 2022, the Applicant responded by email asking that the Respondent appoint its appraiser by 5 p.m. that day. Further emails were exchanged between the parties. Ms. Brcan provided the names of three umpires whom she recommended and asked the Applicant to advise which one he preferred so that the appraisal process could be started. The Applicant replied that he could not agree to a re-inspection by the Respondent’s field appraiser when Ms. Brcan would not provide him with the appraiser’s name. Ms. Brcan responded that she needed the Applicant’s agreement first and then she would be able to assign a field appraiser who would contact the Applicant about the re-inspection.
[27] On or about February 28, 2022, Ms. Brcan received a Notice of Application, issued on February 25, 2022, from the Applicant.
[28] On or about March 1, 2022, counsel for the Respondent served a Notice of Appearance. Counsel also requested that the Applicant provide a Proof of Loss form verified by a statutory declaration and advised that there is no right to an appraisal until specific conditions were met. The Applicant responded on March 1st stating that a Proof of Loss form had already been provided to the Respondent and confirming that the appraisal process had been initiated in writing on January 27, 2022.
[29] By further correspondence sent to the Applicant, on March 3, 2022 and March 8, 2022, counsel for the Respondent referred the Applicant to the requirements set out in Statutory Condition 6 (s. 148 of the Insurance Act) and requested that he provide a sworn and notarized Proof of Loss form with the notarial seal affixed. She explained why the Proof of Loss form previously submitted was not accepted and that it had to meet the statutory requirements.
[30] On March 11, 2022, counsel for the Respondent followed up again with the Applicant asking for a sworn and notarized Proof of Loss form.
[31] On or about April 8, 2022, the Applicant served an Application Record on the Respondent’s counsel. Counsel for the Respondent wrote to the Applicant about the application materials and proposed a timeline to have the application heard. Again, counsel requested a valid Proof of Loss form.
[32] On or about August 17, 2022, the Applicant provided counsel for the Respondent with the Application Record and Factum. Further correspondence was exchanged between the parties.
[33] On or about September 13, 2022, the Applicant delivered to the Respondent a revised copy of his October 26, 2021 “Interim” Proof of Loss form that now included the commissioner’s office stamp. (Previously, this form had contained the commissioner’s signature only.) The Respondent accepted this revised Proof of Loss form as meeting the requirements of the Insurance Act in terms of the statutory declaration aspect.
ISSUES
[34] The following are the issues to be determined on the application:
a. Is the Applicant precluded from seeking payment of $46,400.05 under Statutory Condition 12 in the within application given the mandatory statutory appraisal process? b. Has the Applicant submitted a valid Proof of Loss form that complies with the Statutory Conditions set out in the Insurance Act? c. Has the Applicant met his onus of demonstrating entitlement to the Additional Living Expense? d. Should the Court appoint an appraiser? e. Should the Court order the Respondent to move forward in good faith in the appraisal process?
[35] Each of these issues is addressed, in turn, below.
ANALYSIS
(a) Is the Applicant precluded from seeking payment of $46,400.05 under Statutory Condition 12 in the within application given the mandatory statutory appraisal process?
[36] As required by the Insurance Act, the Policy incorporates all of the Statutory Conditions set out in s. 148 of the Act, including Statutory Conditions 9, 12 and 13 which read:
9. Salvage (1) The insured, in the event of any loss or damage to any property insured under the contract, shall take all reasonable steps to prevent further damage to such property so damaged and to prevent damage to other property insured hereunder including, if necessary, its removal to prevent damage or further damage thereto. (2) The insurer shall contribute proportionately towards any reasonable and proper expenses in connection with steps taken by the insured and required under subcondition (1) of this condition according to the respective interests of the parties.
12. When Loss Payable The loss is payable within sixty days after completion of the proof of loss, unless the contract provides for a shorter period.
13. Replacement (1) The insurer, instead of making payment, may repair, rebuild, or replace the property damaged or lost, giving written notice of its intention so to do within thirty days after receipt of the proofs of loss. (2) In that event the insurer shall commence to so repair, rebuild, or replace the property within forty-five days after receipt of the proofs of loss, and shall thereafter proceed with all due diligence to the completion thereof.
Position of the Applicant
[37] The Applicant contends that he is not seeking damages by the within application, only that the Respondent comply with its obligations under the Policy and the Insurance Act. Among the relief he seeks is an order that the Respondent pay $55,262.70 as required by Statutory Condition 12, less the cheques he received of $7,791.37 and $1,071.28 for a total deposit received of $8,862.65, making for a current remaining balance of $46,400.05 (“the Statutory Condition 12 Payment”).
[38] At the hearing before me, the Applicant revised the amount he was claiming for the Statutory Condition 12 Payment to be 55% of $155,000.00, so as to reflect the Second Estimate.
[39] It is the Applicant’s position that the Respondent has failed to: make payment of the Proof of Loss amount pursuant to Statutory Condition 12; make arrangements to repair the Property pursuant to Statutory Condition 13; and contribute proportionately towards any reasonable and proper expenses in connection with steps taken by the Applicant pursuant to Statutory Condition 9.
Position of the Respondent
[40] The Respondent submits that the quantum portion of the Applicant’s claim falls outside of the court’s jurisdiction and is to be determined solely through the statutory appraisal process. In support of its position in this regard, it relies on 56 King Inc v. Aviva Canada Inc., 2016 ONSC 7139, at para. 29; Seed v. ING Halifax Insurance, 2002 CarswellOnt 1663, at paras. 8-9; Diperri v. The Wawanesa Mutual Insurance Company, 2021 ONSC 4680, at para. 18; and Campbell v. Desjardins General Insurance, 2020 ONSC 6630, at paras. 79-96 and 74.
Discussion
[41] The Policy incorporates Statutory Condition 11, which reads:
11. 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.
[42] Section 128 of the Insurance Act provides 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.
[43] In Seed v. ING Halifax Insurance, 2002 CarswellOnt 1663, 38 C.C.L.I. (3d) 257 (Ont. S.C.J.), the insured sought payment for damages arising out of a flood in her home. The parties agreed to appraisal proceedings under the Insurance Act but the insured also commenced an action against the insurer claiming, among other things, damages for loss of property under the policy. The insured made a motion for an order staying the appraisal and directing the insurer to deliver its statement of defence in the action. The insurer brought an application asking the court to require the parties to proceed with the appraisal process. Wright J. held that the appraisal process was mandatory and that “[n]o action for recovery under the policy may be taken until the issues in dispute as to damages are settled by the process of appraisal.” The insured was concerned that the appraisal umpire would not consider the issue of mould in the home, which she alleged developed as a result of the flood, and so her claims for personal injury arising from exposure to mould and for property damage caused by mould would not be appropriately considered in the action. In dismissing the insured’s motion to stay the appraisal, Wright J. held, at para. 13:
I have concluded that the process of appraisal is a free standing one which is mandated by the Insurance Act. It must be proceeded with if either party requests it. It is quite distinct from the court action. The determination of the amount of the loss arising from property damage cannot be before the court in the action. (Duncan v. Guardian Insurance Co. of Canada (1985), [1986] I.L.R. 1-2054 (B.C. Co. Ct.)).
[44] And, in 56 King Inc v. Aviva Canada Inc., 2016 ONSC 7139; aff’d 2017 ONCA 408, Lofchik J. explained the effect of the statutory appraisal process as follows, at para. 29:
Plaintiff’s counsel argues that what is being attempted by the defendant is a bifurcation of the trial as contemplated by the Rules. In my view, this is not a bifurcation where the same trier of fact is being asked to determine both parts of the claim, albeit at different times. The thrust of the appraisal process is that the quantum portion of the claim falls outside the jurisdiction of the court and is rightly held by the umpire in the appraisal process. The plaintiff’s right to have the issue of quantum payable under the policy be determined by a jury has been taken away by statute by virtue of the provisions of the Insurance Act. However, the plaintiff’s right to proceed to have the other issues tried by a jury are not affected.
[45] Here, the Applicant delivered an “Interim” Proof of Loss, dated October 26, 2021, and, on January 27, 2022, he wrote to the Respondent confirming that he wished to proceed by way of appraisal. By correspondence dated February 16, 2022, the Respondent confirmed its agreement to proceed with the appraisal process. Thus, the statutory appraisal process has been triggered and this means that, by virtue of Statutory Condition 11 and s. 128 of the Insurance Act, the amount of the Applicant’s loss – including any amount to be paid pursuant to Statutory Condition 12 – must first be determined by appraisal.
[46] Accordingly, I have no authority to order that the Respondent pay any loss amount under the Policy at this point in time since the value of any loss amounts that may be recoverable by the Applicant have not yet been determined by appraisal.
[47] The parties must complete the appraisal process first. To this end, I will exercise my discretion under s. 106 of the Courts of Justice Act, R.S.O. 1990, c. C.43, and stay the application until the completion of the appraisal: see 56 King Inc., at para. 32; and Diperri, at paras. 3 and 20. Once the appraisal process has been concluded, the Applicant can re-assess whether he wishes to continue to seek recovery of any payments under the Policy by way of the within application.
(b) Has the Applicant submitted a valid Proof of Loss form that complies with the statutory conditions set out in the Insurance Act?
[48] Statutory Condition 6 reads, in part:
6. (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, (a) forthwith give notice thereof in writing to the insurer; (b) deliver as soon as practicable to the insurer a proof of loss verified by a statutory declaration, (i) 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,
Position of the Applicant
[49] The Applicant argues that Statutory Condition 6 does not reference the requirements relied upon by the Respondent to be a valid Proof of Loss form. He submits that the Proof of Loss he submitted back on October 26, 2021 was properly commissioned by a lawyer and contained the required signature. There is no requirement that a signed form contain a commissioner’s stamp.
[50] In the alternative, the Applicant relies on s. 129 of the Insurance Act which provides:
129. Where there has been imperfect compliance with a statutory condition as to the proof of loss to be given by the insured or other matter or thing required to be done or omitted by the insured with respect to the loss and a consequent forfeiture or avoidance of the insurance in whole or in part and the court considers it inequitable that the insurance should be forfeited or avoided on that ground, the court may relieve against the forfeiture or avoidance on such terms as it considers just.
[51] The Applicant further relies on s. 46 of the Evidence Act, R.S.O. 1990, c. E.23, which states:
46. No informality in the heading or other formal requisites to any affidavit, declaration or affirmation made or taken before a commissioner or other person authorized to take affidavits under the Commissioners for Taking Affidavits Act, or under this Act, is any objection to its reception in evidence if the court or judge before whom it is tendered thinks proper to receive it.
[52] The Applicant believes that the Respondent wants him to file a new Proof of Loss in order to “reset” the timelines. He argues that, by her correspondence of February 16, 2022, Ms. Brcan, on behalf of the Respondent, agreed to the appraisal process and the Respondent accepted his “Interim” Proof of Loss form delivered on October 26, 2021. He submits that the parties should proceed to appraisal based on this “Interim” Proof of Loss and that the Respondent should pay 50% of the repairs amount claimed therein and then, once the repairs have been fully completed and the final invoices have been received from his contractor, the parties can negotiate the remaining amount to be paid out under the Policy. The Applicant contends that he can only know the true amount of his final loss or damage once the Property has been fully repaired but he requires payment of some of the insurance monies now in order to be able to undertake the repairs needed to be made.
Position of the Respondent
[53] The Respondent submits that there is to be only one appraisal process which, once initiated, is intended to be a binding contractual process available to settle valuation disputes between the insured and the insurer.
[54] It is the Respondent’s position that the Applicant’s Proof of Loss form, dated October 26, 2021, remains deficient with respect to Statutory Condition 6(1) as it was modified to be described as “Interim” and to include the note “final to include ALE [additional living expense] and possible contingencies”. The Respondent submits that, since this Proof of Loss is an “interim” form, it does not give 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”.
[55] The Respondent submits that the parties need to have a clear understanding of the amount in dispute in order for the appraisal process to be effective. It argues that the Applicant has submitted at least three different requests for payment based on different estimates and that it does not know what final amount the Applicant is actually relying on for valuation purposes: one is a request for payment of $78,406.18 submitted on or about August 12, 2021, without a Proof of Loss form; the second is the request for payment of $55,262.70 set out in the “Interim” Proof of Loss; and the third is the estimate submitted on January 27, 2022, in the amount of $148,342.31.
[56] The Respondent argues that the Applicant must deliver a new Proof of Loss form, verified by statutory declaration, setting out the full and final valuation amount he intends to claim. It contends that the appraisal can proceed based on values set out in estimates of the repairs needed, and that this is commonly done and the parties do not have to wait until final invoices are available.
Discussion
[57] In Campbell v. Desjardins, 2020 ONSC 6630, aff’d 2022 ONCA 128, the insurer brought a motion seeking to stay three separate actions arising from claims for tornado damage to the plaintiffs’ homes, pending the completion of the appraisal process pursuant to s. 128 of the Insurance Act. Desjardins had already advanced funds to the three insureds for dwelling, content and additional living expense coverages. The parties could not agree on the valuation of the costs to rebuild the insureds’ homes. One insured, the Campbell family, demanded an appraisal and submitted an interim proof of loss estimating their damages based on quotes received. While two appraisers and an umpire were appointed, the Campbells subsequently advised Desjardins that, for the purposes of the appraisal, they wanted to rely on the actual costs incurred in rebuilding their home and they would deliver a final proof of loss once the rebuild was completed. The other two insureds, the Blazejewski family and the van Gaal family, advised Desjardins that they would deliver a sworn proof of loss after their homes had been rebuilt and the full costs were known. Desjardins argued that it was common practice in the appraisal process to establish the loss on the basis of estimates, that the insureds were required to file a proof of loss as soon as practicable, that the insureds had sufficient information to make “intelligent estimates” of the value of their losses, and that the insureds should not be permitted to frustrate the appraisal process when it has been properly invoked.
[58] In deciding whether the insureds could wait until their rebuilds were complete before delivering their proofs of loss for the purposes of the appraisal process, M. Smith J. in Campbell held, at paras. 106-112:
106 One must be reminded that the main objective with insurance law legislation is consumer protection (Smith v. Co-operators General Insurance Co., 2002 SCC 30, [2002] 2 SCR 129). With this in mind, an appraisal process cannot be undertaken if it is done to the detriment of the consumer. If an insured wishes to rely upon actual costs incurred and the insured has acted diligently and in good faith throughout, with full transparency to the insurer, I am of the view that requiring that an appraisal proceed on the basis of estimates only would be contrary to the objective of consumer protection.
107 I accept the proposition that the appraisal process has been historically based upon estimates. However, that does not mean that it is appropriate in each case nor that it should be a steadfast rule. Some insureds will be satisfied to proceed to an appraisal on the basis of estimates and if they so desire, they should not be precluded from doing so. For those insureds that believe that it is more prudent to proceed to an appraisal with better evidence (i.e. the actual expenses incurred) should they be prohibited from relying upon this type of evidence? I think not.
108 I find that there is no statutory prohibition in delivering a sworn proof of loss that is based upon actual expenses incurred. There is no doubt that the insured has a duty to provide a sworn proof of loss. The statute requires that it be delivered “as soon as practicable” and as mentioned earlier, the determination of whether the insured has met this requirement is fact based. If an insured chooses to deliver a proof of loss on the basis of actual expenses incurred, he/she may do so but it cannot be done in a manner that frustrates the appraisal process or promotes abuse.
109 The insured must act diligently and in good faith. The insured must not engage in unjustified conduct that has the effect of unreasonably delaying the repair and/or rebuild of the property.
110 The insured has a duty to cooperate. The insured cannot act in a manner that impedes the insurer’s ability to investigate, monitor and assess the progress of the repair and/or rebuild of the property. In other words, the insurer cannot be prejudiced by the insured’s choice of relying upon actual expenses for the purposes of the appraisal process.
111 Once the repair and/or rebuild of the property has been completed, the insured must deliver his/her sworn proof of loss to the insurer forthwith. That means that the insured must deliver it promptly upon the completion of the repair and/or rebuild and without any further delays.
112 If an insured chooses to rely upon actual costs incurred, there is no doubt that this will delay the triggering of the appraisal process because it cannot be commenced until the last condition is met, namely the delivery of the proof of loss. In my view, this delay does not offend the principle enunciated by the Court that the appraisal mechanism is an efficient and cost saving measure available to the parties to effectively resolve the dispute. Once the final proof of loss is delivered and the appraisal process is officially triggered, there is no reason that the determination of the value of the loss cannot be dealt with in an efficient, expeditious and cost saving manner.
[59] M. Smith J. concluded that the appraisal process should begin, or continue in the case of the Campbell family, within thirty days of the delivery of the proofs of loss following the completion of the insureds’ rebuilds.
[60] As things currently stand, I find that the Applicant has not submitted a valid Proof of Loss that complies with Statutory Condition 6 because he is insisting that the valuation set out in the “Interim” Proof of Loss is an interim value only, and that he intends to claim additional amounts once the full costs of repairing the Property are known to him. I agree with the Respondent that there is to be only one appraisal and that the Respondent is entitled to know the final valuation(s) the Applicant is claiming before that appraisal process gets under way. The Respondent’s right in this regard is set out in Statutory Condition 6(1)(b)(i) which provides that the insurer is entitled to receive “a proof of loss … 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”.
[61] Having said that, I accept and adopt the approach taken by the Court in Campbell in terms of giving an insured the option of delaying the appraisal process until repairs or a rebuild are completed so that s/he can rely on full and final invoices received. I am of the opinion that the Applicant has not acted in a manner that warrants the Court requiring him to proceed to appraisal on the basis of estimates if he does not wish to.
[62] This means, though, that the Applicant must make a choice. He must decide to either:
a. proceed with the appraisal now, based on an estimated cost of repairs to the Property; or b. wait until all of the repairs to the Property are done and he has obtained final invoices upon which to base his appraisal.
[63] If the Applicant chooses the first option, the estimated amount of $55,262.70 set out in the “Interim” Proof of Loss, dated October 26, 2021, which has been verified by statutory declaration and accepted by the Respondent, will be the basis for the Applicant’s appraisal; alternatively, the Applicant can deliver a new Proof of Loss, verified by statutory declaration, based on the estimated amount of $148,342.31 as set out in the Second Estimate. Either way, the estimated repair amounts will be deemed to be the final valuation for the purposes of the appraisal; the Applicant cannot augment or increase this valuation with any additional amounts to be claimed, including after the repairs are completed.
[64] If the Applicant chooses the latter option, as held by the Court in Campbell, he must deliver a new, final Proof of Loss “forthwith” once the repairs have been completed. After delivery of that new Proof of Loss, verified by statutory declaration, then the appraisal proceeding can commence.
(c) Has the Applicant met his onus of demonstrating entitlement to the Additional Living Expense?
[65] Endorsement 41 to the Policy, “Additional Living Expense and Loss of Fair Rental Value”, provides, in part:
This endorsement amends the insurance policy to which it is attached. The location to which this endorsement applies is indicated on the Coverage Summary.
Property Damage Coverages Coverage D – Additional Living Expense and Fair Rental Value The above coverage in the insurance policy is replaced by the following, but solely for the purpose of this endorsement:
Amounts of Insurance The blanket amount of insurance or, as the case may be, the amount of insurance for Coverage D, which is written on the Coverage Summary, is the maximum that we will pay per occurrence for all of coverages (1) and (2) below.
Insured Perils (1) Additional Living Expense We insure the additional living expense that you have to incur: (a) When your dwelling is made unfit for occupancy as a result of loss or damage caused to your insured property by an insured occurrence.
Payment will be made solely for the reasonable time required to repair or rebuild the dwelling or, if you permanently relocate, the reasonable time required for you to permanently settle into a new dwelling.
Position of the Applicant
[66] It is the Applicant’s position that the Respondent has failed to provide additional living expenses or provide suitable temporary housing as it is required to do by Endorsement 41. He further submits that the Respondent has not been candid throughout the claims process and has displayed “zero regard” for the health and safety of him and his family.
[67] The Applicant advises that the mould remediation work has been completed at the Property but that the remaining repair work cannot be undertaken unless and until the family can move out of the Property for the period of time it takes to do the repairs. He submits that the bedrooms and the kitchen need repairs and they will not be habitable during the required work and so this satisfies that the Property will be “unfit for occupancy”. He argues that the Respondent should be ordered to make alternative living arrangements or provide additional living expenses so that the repairs he seeks can happen.
Position of the Respondent
[68] It is the position of the Respondent that the Applicant’s claim for additional living expenses is not payable under the Policy or Endorsement 41, and that Common Exclusion 11 – “Gradual Damage” applies. The Respondent contends that it was confirmed the home would be habitable during the repairs that were approved at the material time and, if time out of the home was required during the mould remediation process, this was not something that the policy covered.
[69] The Respondent submits that the Applicant has not demonstrated that the dwelling is unfit for occupancy as a result of the insured loss or damage to the Property. First, the SafeTech Environmental Limited “Mould and Water Damage Assessment Report”, dated July 16, 2021, concluded that “the mould growth detected in the residence did not appear to be significantly impacting on the quality of air on the second floor of the residence at the time of our assessment”. The Property remained fit for occupation and the Applicant has continued to occupy the Property since the initial claim was submitted. Second and alternatively, the Respondent submits that, if the dwelling is unfit for occupancy, the unfit condition was not caused by an “insured occurrence” but rather by the Applicant’s lack of cooperation with the Respondent and his failure to mitigate the damage to the Property. The Respondent argues that the Applicant failed to perform mould remediation as required and failed to take all reasonable steps to prevent further damage to the Property as required by Statutory Condition 9. It further submits that gradual loss or damage caused by mould is specifically excluded by the Policy.
[70] Finally, the Respondent argues that the Applicant has not provided any evidence that he has incurred any additional living expenses. And, while he seeks that the Respondent make arrangements for temporary housing, this is not something that is contemplated by the Policy and is not a right under the Policy.
Discussion
[71] It is clear that the Applicant believes that he and his family must move out of the Property in order for the repairs to the bedrooms and kitchen he says are needed can be done. However, I find that there is no probative evidence in the record before me that establishes that the Property is “unfit for occupancy” so as to entitle the Applicant to additional living expenses under the Policy.
[72] Based on the evidentiary record, I also find that it is not possible for me to conclude that the repairs the Applicant argues must be made were caused by an occurrence that is covered by the Policy.
[73] The Applicant has not met his onus of demonstrating entitlement to the Additional Living Expense coverage. I therefore decline to order the Respondent to pay additional living expenses in the circumstances.
(d) Should the Court appoint an appraiser?
[74] The Applicant seeks an order that Ms. Brcan be appointed as appraiser, pursuant to the court’s authority under s. 128(5) of the Insurance Act.
[75] A review of the emails exchanged between the parties in February 2022 shows that the Respondent refused to provide the Applicant with the name of its appraiser until after he agreed to a re-inspection of the Property by a field appraiser to consider his $148k repair estimate. The Applicant responded that he would not agree until the appraiser’s name had been provided to him.
[76] Given that s. 128(5)(a) of the Insurance Act sets out a 7-day deadline for a party to appoint an appraiser after being served with written notice to do so, the Respondent should have provided the Applicant with the name of its appraiser as he requested. While the Respondent first wished to obtain the Applicant’s agreement to re-inspection of the Property, this appears to have been a preference and not a requirement. There is no evidence establishing that the Respondent could not have assigned an appraiser in the absence of the Applicant approving the re-inspection.
[77] I am not persuaded that it is necessary for me to appoint an appraiser for the Respondent, however. I do not find that the Respondent was refusing to actually appoint an appraiser. It clearly had field appraisers available to it and it had agreed to proceed to appraisal. I also accept the Respondent’s submission that Ms. Brcan is an adjuster and not an appraiser so I am of the view that it would not be appropriate for me to appoint her as the appraiser, in any event. I also have nothing before me to indicate that she has agreed to act as an appraiser in this matter or that she has the appropriate experience to act in that capacity.
[78] The Applicant’s request for this court to appoint Ms. Brcan as appraiser is therefore denied.
(e) Should the Court order the Respondent to move forward in good faith in the appraisal process?
[79] Both parties have mutual obligations to each other to act in good faith and in accordance with the terms of the Policy and the Insurance Act.
[80] In my opinion, it is not necessary for me to order the Respondent to move forward in good faith in the appraisal process. However, I am of the view that the Respondent cannot make the naming of its appraiser contingent on the Applicant agreeing to a re-inspection. The Respondent’s refusal to provide a name appears to have been “the last straw” and catalyst for the within application. The Applicant did not refuse re-inspection in principle and, in any event, the Respondent has certain rights of entry under the Policy which it could otherwise invoke. Thus, it appears that the situation deteriorated over something that was not necessary.
DISPOSITION
[81] Based on the foregoing, I order as follows:
a. Within 14 days of the release of this decision to the parties, the Applicant shall advise the Respondent in writing whether: (i) he will be proceeding to appraisal now, relying on the estimated valuation set out in the already delivered and verified “Interim” Proof of Loss, dated October 26, 2021, as his final valuation; or (ii) he will be proceeding to appraisal now, relying on the estimated valuation set out in a new Proof of Loss based on the Second Estimate – which new Proof of Loss must be verified by statutory declaration and delivered to the Respondent within the same 14 day time period – as his final valuation; or (iii) he will wait until the completion of the repair of the Property before proceeding to appraisal so that he can rely on the final invoices received from the contractor(s).
b. If the Applicant chooses to proceed with Options (a)(i) or (ii) set out in paragraph 81 above, using an estimated valuation as his appraisal valuation: (i) Within 7 days of the date the Applicant advises the Respondent of his choice and/or delivers a new Proof of Loss based on the Second Estimate, the parties shall each appoint an appraiser. (ii) Each party shall pay the costs, if any, of their own individual appraiser. (iii) Within 15 days after the appointments of their respective appraisers, the parties shall agree on an umpire. (iv) The appraisal shall be completed in as timely a manner as possible. (v) The parties shall bear equally the expense of the appraisal and the umpire.
c. If the Applicant chooses Option (a)(iii) set out in paragraph 81 above and delays the appraisal until the completion of the repair of the Property: (i) The Applicant shall deliver his new final Proof of Loss, verified by statutory declaration, forthwith upon the completion of the repair of the Property. (ii) Within 7 days of the Applicant’s delivery of his Proof of Loss, the parties shall each appoint an appraiser. (iii) Each party shall pay the costs, if any, of their own individual appraiser. (iv) Within 15 days after the appointments of their respective appraisers, the parties shall agree on an umpire. (v) The appraisal shall be completed in as timely a manner as possible. (vi) The parties shall bear equally the expense of the appraisal and the umpire.
d. The claims for payment under the Policy made in the Amended, Amended Notice of Application are hereby stayed.
e. The remainder of the application is dismissed.
COSTS
[82] I am of the view that success on the application was divided. Accordingly, I find that it is fair and reasonable for each of the parties to bear their own costs.
MacNEIL J.
Released: January 4, 2023