Court File and Parties

COURT FILE NO.: CV-22-3522 CV-23-97

DATE: 20230224

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: WAWANESA MUTUAL INSURANCE COMPANY, Applicant AND: SHIVA FALAHATPARVAR, Respondent

RE: SHIVA FALAHATPARVAR, Applicant AND: WAWANESA MUTUAL INSURANCE COMPANY, Respondent

BEFORE: J. Speyer J.

COUNSEL: Daniel M. Himelfarb, for the Applicant/Respondent, Wawanesa Mutual Insurance Company Rory Barnable, for the Respondent /Applicant, Shiva Falahatparvar

HEARD: February 8, 2023

ENDORSEMENT

(a) Introduction

[1] A fire at Ms. Falahatparvar’s house on July 18, 2021, caused substantial damage to the property and contents.

[2] Wawanesa insured the house against fire loss. The parties disagree about the value of the loss. Pursuant to Section 128 of the Insurance Act, RSO 1990, c I.8, the parties are proceeding to have their disagreement settled by an appraisal process.

[3] The process prescribed by s. 128 of the Insurance Act requires that the insured and the insurer shall each appoint an appraiser, and the two appraisers so appointed shall appoint an umpire. Wawanesa nominated a single candidate for appointment as umpire – Mr. Gibson. Ms. Falahatparvar is not agreeable to Mr. Gibson’s appointment as umpire. She has submitted a list of eight nominees for appointment as umpire.

[4] Since the parties cannot agree on an umpire, Wawanesa moves for an order appointing Mr. Gibson as umpire. Ms. Falahatparvar has moved for an order that the umpire be agreed upon between the parties within fifteen days of this Court’s decision, failing which an umpire shall be selected by the insurer from the list of: Stephen Agnew, Kevin Carroll, George R. Milnes, Pete Volaric, Tom Donnelly, Steve Atkinson, Justice Douglas Cunningham (ret.), or Justice David Orsborn (ret.)

(b) The facts

[5] Because the parties disagree as to the value of Ms. Falahatparvar’s loss, both parties elected to proceed with an appraisal under s. 128 of the Insurance Act. Ms. Falahatparvar appointed her public adjuster, Mr. Dax Conley of National Fire Adjustment Company, as her appraiser. Wawanesa appointed Mr. Valeriote, who was the adjuster assigned to Ms. Falahatparvar’s file, as its appraiser.

[6] Mr. Valeriote proposed Glenn Gibson as Wawanesa’s sole nominee for umpire for the appraisal process. Mr. Conley responded that he was not agreeable to appointing Mr. Gibson as umpire, and he put forth two other candidates. There ensued a series of emails wherein Mr. Valeriote sought to have Mr. Conley justify why he would not agree to Mr. Gibson’s appointment as umpire. Mr. Conley suggested that they choose someone else from a pool of umpires they had agreed on for past appraisals. Mr. Valeriote responded that he would agree only to Mr. Gibson’s appointment, and that if Mr. Conley did not agree, Wawanesa was prepared to move forward to have an umpire appointed, and to seek costs against the insured. Mr. Conley, in response, expanded his list of proposed umpires to include eight nominees. Mr. Conley emailed Mr. Valeriote on September 6, 2022, September 27, 2022, and October 24, 2022, in an effort to secure Mr. Valeriote’s agreement to an umpire other than Mr. Gibson. Mr. Valeriote did not respond to any of these emails. At no time has Mr. Valeriote engaged in any discussion with Mr. Conley as to the suitability of any of Mr. Conley’s nominees for umpire.

[7] On October 24, 2022, Mr. Conley and Mr. Valeriote spoke by telephone. Mr. Valeriote stated that Mr. Gibson was well qualified, and also added that he wanted to get Mr. Gibson “into the rotation”, or words to that effect. Mr. Valeriote also suggested that if Mr. Conley accepted Mr. Gibson for this appraisal, that he would provide Mr. Conley with his choice of umpire in relation to a future claim. Mr. Conley confirmed these discussions in an email sent to Mr. Valeriote the following day. In his response to that email, Mr. Valeriote did not dispute that he made the statements described in Mr. Conley’s email. Mr. Valeriote said that he wanted Mr. Gibson for this large and complicated residential fire because he was best qualified for that appraisal.

[8] On November 3, 2022, Wawanesa brought this application for a court order appointing Mr. Gibson as umpire.

[9] Mr. Gibson was examined as a witness pursuant to rule 39.03 of the Rules of Civil Procedure.

[10] In his examination, Mr. Gibson stated that Mr. Valeriote is a “professional friend” whom he has known for a “long time”. He and Mr. Valeriote worked together to design and present seminars about the appraisal process.

[11] Mr. Conley provided an affidavit. He was cross-examined on his affidavit.

[12] Mr. Conley states that his employer is a leading public adjusting firm in Canada, and its adjusters have conducted hundreds, if not thousands of appraisals pursuant to section 128 of the Insurance Act. He has acted as a public adjuster for over seven years and has conducted many appraisals in this role since 2015. He has participated with numerous appraisers, including Mr. Valeriote, in the selection of umpires for hundreds of other appraisals. He can recall no other instance where an appraiser for either an insurer or an insured nominated only one person for umpire, and then insisted upon imposing that sole nominee as umpire against the wishes of the insured, and sought a court order endorsing that sole nominee as umpire.

(c) The positions of the parties

[13] Wawanesa submits that it nominated Mr. Gibson and seeks his appointment as umpire because this is a high value, complex claim, and it believes Mr. Gibson is the most qualified, experienced and appropriate choice to be umpire. Wawanesa says that Mr. Gibson is the best choice because he is impartial, he has relevant experience in the field of home and fire loss valuation and has been an umpire in similar cases. Wawanesa argues that none of the candidates proposed by Ms. Falahatparvar have as much expertise and experience as an umpire as does Mr. Gibson.

[14] Ms. Falahatparvar submits that Wawanesa’s insistence on its sole nominee deprives her of any choice or meaningful input as to the umpire appointment, and thereby undermines the collaborative nature of the appraisal process. Ms. Falahatparvar says that Wawanesa’s actions justify a finding that she reasonably apprehends that Wawanesa’s sole nominee is biased in favour of Wawanesa. Ms. Falahatparvar has advised Mr. Conley that Mr. Valeriote’s insistence that Mr. Gibson be the umpire in her case causes her to apprehend that Mr. Gibson will be biased in favour of the insurer. She has instructed Mr. Conley not to accept Mr. Gibson as umpire.

(d) Analysis

[15] The purpose of the appraisal process under the Insurance Act is to provide an easy, expeditious, and cost-effective means for the settlement of claims for indemnity under insurance policies: Desjardins General Insurance Group v. Campbell, 2022 ONCA 128 at para 27.

[16] The process is designed to be collaborative and not adjudicative. In Desjardins General Insurance Group v. Campbell, at para. 29, the Ontario Court of Appeal approved Perell J.’s description of the process in Northbridge General Insurance Corp. v. Ashcroft Homes-Capital Hall Inc., 2021 ONSC 1684, at para. 29:

The appraisal process is designed to be collaborative and not adjudicative, and the process, which does not require a hearing with evidence, contemplates that the appraisers and the umpire will arrive at a binding decision based on their own knowledge and expertise. The umpire is the ultimate impartial decision-maker that makes a binding determination that removes the quantification of the loss from the court. As for procedure, the umpire may permit viva voce testimony under oath and may receive affidavit evidence but he or she is not required to do so. [Footnotes omitted.]

[17] In Desjardins General Insurance Group v. Campbell, at para. 36, the Ontario Court of Appeal described the approach that appraisers should bring to the appraisal process:

To fulfil the purposes of the appraisal scheme outlined above and to facilitate a collaborative process, an appraiser must attempt, in good faith, to reach a compromise with their fellow appraiser. That does not preclude the appointment of one party’s lawyer as their appraiser as well, but the appraisal process presupposes that each appraiser work collaboratively. While this involves advocacy in the sense that each side may be expected to advocate their valuation to the other, their overall role within the appraisal process is more collaborative and less adversarial. The umpire will ultimately choose one side or the other. That places a premium on each side to be reasonable and also to reach agreement with the other side if possible. [Emphasis added.]

While the Court of Appeal was discussing the role of the appraiser in the valuation of a loss, this characterization of the appraiser’s approach should apply equally to the selection of an umpire. The governing legislation requires the two appraisers to appoint an umpire. This necessarily requires collaboration and compromise.

[18] Section 128 of the Insurance Act, RSO 1990, c I.8, allows a judge to appoint an umpire if the appraisers fail to agree upon one within fifteen days. Section 128 provides that:

(1) This section applies to a contract containing the condition, statutory or otherwise, providing for an appraisal to determine specified matters in the event of disagreement between the insured and the insurer.

(2) The insured and the insurer shall each appoint an appraiser, and the two appraisers so appointed shall appoint an umpire.

(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.

(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.

[19] Section 128(5)(b) of the Insurance Act permits this court to appoint an umpire in the event the appraisers cannot agree on the selection of an umpire:

(5) Where,

(b) the appraisers fail to agree upon an umpire within 15 days after their appointment;

a judge of the Superior Court of Justice may appoint an … umpire, … upon the application of the insured or of the insurer.

[20] The qualities of an appropriate umpire include:

(i) Expertise: Giammaria v. Economical Mutual Insurance Company, 2021 ONSC 963, at para. 12.

(ii) Experience: Giammaria, at para. 16.

(iii) Impartiality: Desjardins General Insurance Group v. Campbell, at para. 37: “The integrity of the process depends on the impartiality of the umpire.” It is important that an umpire not only be impartial, but also that the parties do not reasonably apprehend bias on the part of the umpire.

[21] The umpire in this case must be both impartial in fact and seen by the parties to be impartial. Ms. Falahatparvar submits that she apprehends Mr. Gibson to be biased in favour of Wawanesa. The question then arises whether her claimed apprehension of bias is reasonable.

[22] The test for determining whether a reasonable apprehension of bias exists is well established and not in dispute. The Supreme Court of Canada established the test for determining whether a reasonable apprehension of bias exists in Committee for Justice and Liberty et al. v. National Energy Board et al., 1976 CanLII 2 (SCC), [1978] 1 SCR 369, at p. 394:

[T]he apprehension of bias must be a reasonable one, held by reasonable and right minded persons, applying themselves to the question and obtaining thereon the required information. … [T]hat test is “what would an informed person, viewing the matter realistically and practically - and having thought the matter through - conclude.”

[23] A reasonable, right minded, and informed person would know that Wawanesa cites Mr. Gibson’s authorship of a paper entitled “The Appraisal Process, an Update” as evidence of his significant experience as an umpire. In that article, Mr. Gibson writes: “If both appraisers reach an impasse in their efforts to resolve issues in dispute, they need to agree on the choice of an umpire. Each side proposes several names and the two appraisers push to reach an agreement on the choice of an umpire.”

[24] A reasonable, right minded, and informed person would know that Wawanesa has not brought to the court’s attention any case where a party sought to appoint its only nominee as umpire where another party did not agree to the appointment of that person and put forward multiple qualified alternatives.

[25] A reasonable, right minded, and informed person would know that Wawanesa and its appraiser, Mr. Valeriote, have failed to comply with the Court of Appeal’s direction that an appraiser must attempt, in good faith, to reach a compromise with their fellow appraiser, but rather seeks a result that would effectively strip the insured of any involvement in the umpire selection process.

[26] A reasonable, right minded, and informed person would know that Wawanesa’s appraiser did not engage in any collaborative dialogue with the insured’s appraiser, and instead threatened court action with costs consequences if the insured’s appraiser did not accept Wawanesa’s single nominee. That person would also know that when the insured’s appraiser proposed eight other persons for umpire, Wawanesa’s appraiser did not afford the insured’s appraiser the courtesy of a response.

[27] A reasonable, right minded, and informed person would know that Wawanesa’s appraiser expressed his wish to put Mr. Gibson “into the rotation”, or words to that effect, and that he offered to provide the insured’s appraiser with his choice of umpire in the appraisal of a future claim. Such statements may be appropriate in the management and trading of baseball players. Such statements are inappropriate in selection of a person who will participate in a process that has been created by the legislature to resolve disputes that involves significant consequences for the parties.

[28] An insured person, being informed of all of this, viewing the matter realistically and practically, and having thought the matter through, would reasonably conclude that Wawanesa’s insistence that Mr. Gibson be the umpire in this case reflects an assessment by Wawanesa that Mr. Gibson will be favourably disposed to Wawanesa’s position. That amounts to a reasonable apprehension of bias.

[29] There is no dispute that Mr. Gibson has an appropriate level of experience to be an umpire in this case. My decision does not, and should not be taken to, reflect any negative assessment of Mr. Gibson’s abilities as an umpire. But does not answer Ms. Falahatparvar’s concerns.

[30] Ms. Falahatparvar apprehends Mr. Gibson to be biased in favour of insurers, and her apprehension is reasonable in light of Wawanesa and Mr. Valeriote’s approach to the selection of an umpire.

[31] Additionally, I accept Ms. Falahatparvar’s position that if I were to rule in Wawanesa’s favour, such a precedent would increase disputes about umpire selection, and that in turn would have the potential to increase litigation surrounding the appraisal process. Such a result would undermine the purpose of the appraisal process.

[32] As a result, Wawanesa’s motion for an order appointing Mr. Gibson to be the umpire in this case is dismissed.

[33] Ms. Falahatparvar’s proposed order on her application in court file CV-23-00000097-0000 that the umpire be agreed upon between the parties within fifteen days of this Court’s decision, failing which an umpire shall be selected by Wawanesa from the list provided by her, is the best way to select an umpire. Such an order ensures that each party has a choice in the selection of the umpire, as the legislation contemplates. Therefore, it is ordered that the umpire be agreed upon between the parties within fifteen days of this Court’s decision, failing which an umpire shall be selected by Wawanesa from the list provided by the insured.

[34] If the parties cannot agree as to the cost of this motion, I will receive written submissions, not to exceed 3 pages in addition to any bill of costs. Any written submissions are to be sent to my assistant at Joanna.Skalko@ontario.ca by March 17, 2023. If no submissions are received by the, it will be assumed that the parties have reached an agreement on costs.

The Honourable Madam Justice Jocelyn Speyer

Date: February 24, 2023