COURT FILE NO.: CV-12-00000042-0000

DATE: 2023-06-27

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

PETER JAMES STEWART, Estate Trustee of the late DENNIS LYNCH

Plaintiff

– and –

BAY OF QUINTE MUTUAL INSURANCE CO. and DAVID BOWDEN

Defendants

Counsel:

Robert J. Reynolds, for the Plaintiff

R. Steven Baldwin for the Defendants

HEARD: March 9-11, 2020 and February 21, 23-24, 27-28 and March 1-2, 2023

REASONS FOR DECISION

HURLEY, J.

Introduction

[1] On February 26, 2011, Dennis Lynch’s home at 1596 County Road 64, Carrying Place was severely damaged by fire.

[2] Mr. Lynch had bought the property in June 2010 for $165,000. He purchased insurance for it from the defendant Bay of Quinte Mutual Insurance Co. (“BOQ”) through a broker, Doug Whitley Ins. Brokers Ltd. (“Whitley”).

[3] BOQ paid the policy limit of $220,000 for the building loss and $60,000 on account of the contents. The policy limit for the contents was $111,000.

[4] This lawsuit was started in February 2012 shortly before the expiry of the limitation period. Mr. Lynch alleged that BOQ was negligent and as a result, he suffered a loss of $93,000 in respect of the building and $74,000 on the contents.

[5] Unfortunately, Mr. Lynch died in 2015. The litigation has been continued by his estate trustee Peter Stewart.

[6] The trial began in March 2020 but for reasons which I will explain, it was adjourned and did not resume until February 2023. The parties agreed, before the trial resumed, to deliver affidavits from witnesses other than the two principal ones – Mr. Stewart and Suzanne Lyons, the Claims Manager of BOQ. It was also agreed that the affidavits would constitute their evidence-in-chief and they would be subject to cross-examination by opposing counsel. These witnesses were David McDonald, Stephen White, Kelly Gilbert, John Van Huizen, David LeBlanc, Boyd Sullivan and Tom Streek.

[7] Mr. Lynch was examined for discovery in July 2013 and the parties agreed that, under rule 31.11 (6) of the Rules of Civil Procedure, portions of his evidence could be read in at trial.

[8] In addition to being his estate trustee, Mr. Stewart assisted Mr. Lynch in his dealings with BOQ after the fire. When reviewing their evidence, I will refer to them by name but in my analysis of the legal issues I will collectively identify them as the plaintiff.

[9] The defendant David Bowden was an employee of BOQ and it was agreed at trial that he does not have any personal liability.

Overview of the facts

[10] Mr. Lynch was 58 years old in 2010 and a millwright by trade. He owned a home in Corbyville where he had lived for about 22 years. He was unmarried.

[11] He was a real estate investor and had bought and sold several properties over the years. When he did, Whitley acted as his insurance broker. He dealt with an employee named Debbie Bailey.

[12] After he agreed to purchase 1596 County Road 64 (the “Property”), he contacted Ms. Bailey to arrange for insurance on it. The Property was in a rural area and approximately 26 acres in size. There was a two-storey house and some outbuildings. There was some dispute at trial whether the house was properly described as a 1.5 or 2 storey dwelling; it consisted of a main floor living area and an upper level with a sloping roof.

[13] In order to finance the purchase, Mr. Lynch secured a mortgage from the Royal Bank of Canada. It required an appraisal. According to the appraisal, which was prepared by Prince Edward Appraisal Services Limited (the “Prince Edward Appraisal”), the estimated value of the property was $149,000-$177,000. The estimated replacement cost was $177,700.

[14] The Prince Edward Appraisal identified the total square footage of the house as 1,777. The main floor was 1,057 and the upper, 722.

[15] Mr. Lynch’s home in Corbyville was insured by BOQ. Ms. Bailey submitted an application for insurance on the Property to BOQ. The replacement cost coverage for the building was stated to be $220,071. There was no specific amount for contents, but the word “Limit” was written in a column entitled “Personal Property”.

[16] Ms. Bailey did not testify at trial. However, documents contained in Whitley’s file were made a collective exhibit on consent.

[17] One of the documents was a memo from Ms. Bailey which read in part:

As discussed & OK’d by Sheila on June 8/10 – add a secondary home insured has purchased effective June 15, 2010. Attached find new application, ezITV, copy of Bank Appraisal, photos & my quote. Please indicate Royal Bank of Canada as 1st mortgagee. If you need any further info feel free to call.

[18] The person referred to as “Sheila” was an employee of BOQ.

[19] The document identified as ezITV was dated June 8, 2010, and indicates that it was prepared by Ms. Bailey.[^1] In a category entitled “Evaluation Summary”, it identified the replacement cost as $206,000. There was also a figure for “Additives” in the amount of $5,771 and “Debris Removal” with an amount of $10,300. The total was $222,071. It also recorded the main dwelling as being “2 Storey” and the square footage as 1,777.

[20] There was another typewritten document identified as the quote by Ms. Bailey. The replacement cost value (the “RCV”) for the residence was $222,071; for the outbuildings $22,207; and for contents $177,657. The premium was $862.92.

[21] BOQ issued a policy effective June 15, 2010. The policy period was June 15, 2010 to April 6, 2011. The latter date was the renewal date of the policy on Mr. Lynch’s Corbyville home.

[22] The Declaration Page stated the policy limits for the dwelling, detached private structures and personal property were, respectively, $222,000, $22,200 and $111,000. The premium was $707. The deductible was $500.

[23] The amount for personal property was based on the RCV of the dwelling – it was automatically 50%. There was no separate valuation for it.

[24] On page 8 of the policy, under the heading “Basis of Claim Payment”, it stated:

We will pay the actual cash value, (unless otherwise stated on the Policy Declaration Page and/or in the coverage) for the insured loss or damage up to your financial interest in the property, but not exceeding the applicable amount(s) of insurance for any loss or damage arising out of one occurrence. Any loss or damage shall not reduce the amounts of insurance provided by this policy. If you qualify for the H.S.T. credit, the loss payment will be reduced by that amount.

If you repair or replace the damaged or destroyed dwelling or detached private structure on the same location with materials of similar quality within a reasonable time after the damage, you may choose as the basis of loss settlement either (a) or (b) below; otherwise, settlement will be as in (b).

(a) The cost of repairs or replacement (whichever is less) without deduction for depreciation, in which case we will pay in proportion that the applicable amount of insurance bears to 80% of the replacement cost of the damaged dwelling or detached private structure at the date of damage, but not exceeding the actual cost incurred;

(b) The actual cash value of the damage at the date of the occurrence.

In determining the cost of repairs or replacement under (a) or in the amount payable under (b) above, we will not pay or include the increased cost of repair or replacement due to the operation of any law regulating the zoning, demolition, repair or construction of dwellings or detached private structures and their related services.

If the Policy Declaration Page indicates you have replacement cost, we agree to pay any loss insured by Coverage C – Personal Property, on the basis of replacement cost provided that:

(a) the property at the time of the loss was used for its original purpose; and is not obsolete;

(b) you have repaired or replaced the property promptly;

(c) the property was not specifically or otherwise insured.

Otherwise, we will pay the actual cash value of the loss or damage up to the applicable amount of insurance.

The actual cash value is the current monetary value of the property and takes into account such things as the cost of replacement, less any depreciation and obsolescence, or plus appreciation if applicable (any increase in value). In determining depreciation, we will consider the condition immediately before the loss or damage, the resale value and the normal life expectancy.

Fine Arts, Paintings, and similar articles which by their inherent nature cannot be replaced with a comparable article, are insured only for their actual cash value.

Replacement Cost means the cost, at the time of loss, of repairs or replacement (whichever is lower), with new property of similar kind and quality without deduction for depreciation.

This coverage does not apply to articles such as fine arts, paintings, etc. which by their inherent nature, cannot be replaced with a comparable article.

[25] Mr. Lynch moved from his Corbyville home to the Property in June, 2010. He rented out the Corbyville house.

[26] On June 28, Mr. Bowden attended at the Property. Mr. Lynch did not know the purpose of his visit other than he was there to look at the house and outbuildings. They spoke briefly. Mr. Lynch gave Mr. Bowden access to the house but did not talk to him again before he left the Property.

[27] Mr. Bowden had been employed by BOQ for about 4 years. His official title was “Loss Prevention Officer”. He did not have any specific qualifications in calculating RCV for buildings but had received what he described as “on-the-job training” from other employees.

[28] Mr. Bowden completed a document entitled “Inspection Checklist” and prepared a sketch of the house and a detached garage. He gave these documents to another BOQ employee who inputted the information into a software program called RSMeans Costworks Valuator Manual (“RSMeans Manual”).

[29] This program generated a RCV for the dwelling of $206,000. BOQ advised Whitley of this and indicated that, when the policy came up for renewal, the new RCV would be this amount.

[30] According to Mr. Lynch, Whitley never communicated this to him. He did not have any contact or communication with BOQ after Mr. Bowden’s visit until after the fire.[^2]

[31] Mr. Lynch and Mr. Stewart were longtime friends. They had known each other since childhood. Mr. Stewart had operated a residential construction business for many years and later became a real estate agent. Sometime in early 2011, Mr. Lynch contacted him about selling the Property.

[32] Mr. Lynch put the Property up for sale on February 25, 2011. Mr. Stewart was the listing agent. The list price was $234,900.

[33] The listing agreement indicated that the house was 2 storey dwelling with an in-law suite and that the square footage was 2001- 2500. It identified the living space on the main and upper levels and the dimensions of each room or area. These dimensions translated to square footage of 822.5 on the main level and 713.65 on the second level. [^3]

[34] The fire happened either in the late evening of February 26 or in the early morning hours of February 27,2011. Mr. Lynch was sleeping at the time. Some passersby alerted him to the fire and he was able to get out of the house safely.

[35] He reported the fire to Whitley on February 28 which immediately notified BOQ. Steve Raymond, a licensed adjuster employed by BOQ, attended at the Property that day and met with Mr. Lynch.

[36] Mr. Lynch and Mr. Raymond discussed the insurance claim several times in March. BOQ made two advances of $5,000 each to Mr. Lynch in relation to the personal property claim, the first one on February 28 and the second on March 21.

[37] As a result of the fire, the house was uninhabitable. The contents were destroyed or damaged beyond repair with the exception of a few items. Mr. Lynch went to live at his Corbyville home.[^4]

[38] Mr. Stewart learned about the fire soon after it happened and attended at the Property a few days later. After finding out the amount of insurance coverage, he became concerned that the Property was underinsured. He communicated this concern to both Mr. Lynch and Mr. Raymond.

[39] Mr. Stewart became involved in the insurance claim, advising Mr. Lynch and composing letters for him that were sent to BOQ. In the first letter dated March 10, 2011, which was sent to both Whitley and BOQ, Mr. Lynch advised them that Mr. Stewart was his “authorized agent” and he requested “Copies and information from your file and notes with respect to any site visits, and site and property inspections, and information relating to insurance placement by insured. Descriptions, measurements and details of the property insured. A full copy of the policy including the Declarations page.”

[40] In the first week of April, Mr. Lynch told Mr. Raymond that he did not intend to rebuild. Mr. Raymond said he would obtain cheques for the payout of the building insurance amount which he did. Mr. Lynch signed a preprinted form entitled “Proof of Loss” on April 6. Mr. Raymond’s signature is directly below his. The document was not sworn or notarized.

[41] BOQ made three payments totaling $222,000 – $128,629.26 to the Royal Bank of Canada to discharge the mortgage; $10,735 to Steve Crowe for debris removal; and $82,635.74 to Mr. Lynch. These sums were recorded in the Proof of Loss.

[42] This document contained the following paragraph on the first page:

Payment of this claim to Insured’s Portion $82,635.74 is hereby authorized and in consideration of such payment the Insurer is discharged forever from all further claim by reason of the said loss or damage. All rights to recovery from any other person are hereby transferred to the Insurer which is authorized to bring action in the insured’s name to enforce such rights. All right, title and interest in any salvage is hereby assigned to the insurer.[^5]

[43] Mr. Raymond sent the Proof of Loss together with a seven-page document entitled “Items Lost in house fire” to Ms. Lyons. This latter document had been prepared by Mr. Lynch at Mr. Raymond’s request. It contained a list of approximately 250 items of personal property together with the amount ascribed to the item. The total was $139,766.

[44] Ms. Lyons sent a letter to Mr. Lynch dated the same day which stated:

We wish to confirm that a fire occurred at your premises on February 2 [sic], 2011

As per your agreement with your adjuster, Mr. Steve Raymond enclosed you will find our cheque in the amount of $82,635.74 for the remaining balance of your dwelling portion of your claim.

This represents the full and final settlement for the balance of your dwelling for a total amount of $222,000.

[45] Mr. Stewart was away at the time and not aware that Mr. Lynch had reached this agreement with Mr. Raymond. He learned about it a few days later and wrote a lengthy letter to BOQ on April 15. Mr. Stewart complained of inadequate insurance coverage for both the building and personal property and outlined what errors he believed both Whitley and BOQ had made in calculating the dimensions of the dwelling. The letter was not addressed to a specific person at BOQ or Whitley but the covering facsimile transmission page indicated “Susanne” for BOQ and “Debbie” for Whitley.

[46] Mr. Stewart wrote that “the insured did decide to accept settlement for the dwelling only” and that Mr. Lynch was “taking a firm position on the matter of a fair and appropriate settlement of the content loss”.

[47] The letter concluded:

In the spirit of cooperation already displayed by both the insurer and the insured in this matter, the insured is requesting a cash payout for contents without discounting in the amount of $150,000. We shall look forward to your earliest and favourable response.

[48] Mr. Stewart and Ms. Lyons exchange more letters in June and July, 2011. Some were signed by Mr. Lynch but they were composed by Mr. Stewart. In summary, BOQ took the position that the building loss had been paid in full and requested that Mr. Lynch submit a notarized proof of loss in relation to the contents claim. Ms. Lyons enclosed a blank document entitled “Proof of Loss” with a letter dated June 7. In a letter dated July 6, she wrote: “We require your delivery of a sworn Proof of Loss if you are in disagreement with the Bay of Quinte Mutual Insurance Company concerning the quantification of loss of your contents.”

[49] Notwithstanding the request for a notarized proof of loss, Ms. Lyons enclosed a cheque for $50,000 on account of the contents claim and stated that no further advance payments would be made without a sworn proof of loss and that the insurer “reserves its rights pursuant to the provisions of the policy of insurance and the Insurance Act of Ontario so far as its entitlements to assess, adjust and appraise the loss of contents is concerned.”

[50] Neither Mr. Lynch nor Mr. Stewart replied to this letter.

[51] In September 2011, Mr. Lynch sold the property for $97,000. The purchaser was a company owned by a local homebuilder, David McDonald, who built a new house there and sold it in the spring 2012 for $308,000.

[52] Ms. Lyons next communicated with Mr. Lynch by letter on April 26, 2012, asking if he intended to pursue a claim for personal property. She wrote: “When we spoke last on the telephone, I had indicated to you that we had advanced you $60,000 for personal property replacement, I also indicated that receipts for those items replaced were required so that further money could be advanced. You indicated that there was more personal property to replace. As of today, no receipts have been received at our office.” She did not state in this letter that he had to submit a proof of loss.

[53] Mr. Reynolds replied to her the following month on Mr. Lynch’s behalf, advising her that Mr. Lynch had commenced a lawsuit and he was “now taking the steps necessary to have a properly documented proof of loss assembled whether with the assistance of a public adjuster or otherwise” and hoped to have it to her in the next few weeks.

[54] Mr. Reynolds followed up this letter with another one in June, 2012 which set out in detail the legal claims that Mr. Lynch was going to pursue with respect to both the building and contents claims. Although this letter was introduced into evidence, Ms. Lyons’ response, if any, was not. A statement of defence was delivered in September of that year.

[55] With Mr. Reynolds assistance, Mr. Lynch retained a public adjuster, National Fire Adjustment (“NFA”) to assist him with the contents claim in June 2012. NFA delivered what it called a “Schedule of Loss” to Mr. Reynolds in May 2013. Mr. Reynolds, in turn, prepared a supplementary affidavit of documents which included the Schedule of Loss and sent it to Mr. Baldwin on July 17, 2013.

[56] Mr. Lynch and Ms. Lyons were examined for discovery on July 29. The Schedule of Loss was marked as an exhibit at Mr. Lynch’s examination and Mr. Baldwin asked him questions about it.

[57] During the course of his examination, the following exchange occurred:

Q. Okay. And did you, for this contents that was prepared, the schedule of loss of 17 pages, that was prepared between yourself and Ms. Gilbert of NFA, were you asked to sign or swear a proof of loss with that document?

A. Yes, I was, yeah.

Q. Okay. It’s that I don’t see a sworn proof of loss with it.

A. Well, I, I think I signed one.

Mr. Reynolds: Okay, I think he’s confused. He did sign one or two proofs of loss, but this thing was done at our request. We only received it back in May.

Mr. Baldwin: Okay.

Mr. Reynolds: I don’t believe Mr. Lynch has been presented with or signed a proof of loss to go with us yet because we haven’t even – because I was hurt and off for all of May – we haven’t even reviewed this thing with NFA yet. What I’m expecting to happen once we’ve done that is we will have it in next to a sworn proof of loss and send it in to you so you can do whatever you propose to do with it.

Mr. Baldwin: Okay.

Mr. Reynolds: But I don’t believe he signed a proof of loss to go with this.

[58] Mr. Baldwin then resumed questioning Mr. Lynch about the Schedule of Loss. His examination on the contents claim, at least based on the discovery read-ins, was relatively brief. Mr. Lynch said the following about the condition of the personal property:

“Q: So you didn’t have any discussion about ACV or depreciated value or the condition of the item of furniture or contents? That wasn’t part of the discussion?

A: No

Q: So if it was brand spanking new in appearance or it was old and ratty in appearance, you didn’t have any that discussion with Ms. Gilbert?

A: I don’t own old ratty things.

Q: Okay. Well, you didn’t have any – I was using an example, Mr. Lynch, between in excellent condition and in poor condition – you had no discussion with Ms. Lynch [sic] about your contents as to whether it was excellent condition or old condition.

Mr. Reynolds: I don’t know. I don’t think you’ve asked him that question. Did you have any discussion with her about the condition of the lost items?

A: I told her everything that I had was stand up good. I don’t own, I don’t own and never have owned junk.”

[59] As I indicated earlier, Mr. Lynch died in 2015 and an Order to Continue under rule 9.03 of the Rules of Civil Procedure was obtained permitting Mr. Stewart to continue the litigation as the estate trustee of Mr. Lynch’s estate.

[60] On January 11, 2017, Mr. Reynolds wrote to Mr. Baldwin concerning one of the undertakings given at Mr. Lynch’s examination which was to provide proof of replacement of items for which Mr. Lynch was claiming RCV. As a result of Mr. Lynch’s death, this aspect of the claim was abandoned and Mr. Reynolds confirmed that it would be confined to actual cash value (“ACV”). He enclosed more information that he had obtained from NFA.

[61] The letter continued:

The contents claim, as you will note, exceeds the policy limit for contents by a substantial margin. Accordingly, Mr. Lynch’s entitlement to at least that much seems clear, at least unless there is a major disagreement over values. As you know, the limit for contents under the policy is tied to the building limit, so that, if we are correct in saying that your client is liable in negligence because of the limit being too low, Mr. Lynch will also be entitled to the ACV contents loss up to the amount of the limit as it should have been.

I would think that it would make sense for the parties to determine whether they can reach agreement on the quantum of the ACV contents claim, so that we know whether and to what extent that issue has to be litigated. To the extent that the quantum can be resolved, it would seem appropriate that the insurer pay out the claim up to at least acknowledged policy limit (less the amount already paid towards that loss). The insurer’s responsibility for the further amount up to the policy limit we say should have been in place will await the outcome of the negligence issue.

I would ask that you consult with your client and let us know its position on the ACV quantum. We can presumably go from there.

[62] I do not know what, if any, response Mr. Baldwin made to this letter. There was no evidence that BOQ made another request for a sworn proof of loss after Ms. Lyons’ letter of July 6 nor if counsel had reiterated this request during the litigation.

The trial

[63] The trial commenced before me on March 9, 2020. Mr. Stewart was the first witness for the plaintiff. It became apparent to me during his examination-in-chief that there were significant issues concerning the pleadings and the evidence to be called about the contents claim. Mr. Baldwin took the position that I had no jurisdiction to adjudicate the contents claim because the plaintiff had not delivered a sworn proof of loss and there had not been an appraisal under the Insurance Act. Mr. Reynolds submitted that the defendant had not pleaded these alleged defences.

[64] Mr. Baldwin argued that paragraphs 12 and 25 of the statement of defence did plead these defences. They read:

The Defendant, Bay of Quinte Mutual Insurance Co., paid the Plaintiff the sum of $60,000.00 as an advance in respect of personal contents under the policy subject to any further entitlements for contents for which the Plaintiff did not satisfy the requirements for any further consideration in respect of contents.

The defendants plead and rely upon the provisions of the Insurance Act, R.S.O., 1990 c. I.8, the Negligence Act, R.S.O. 1990, c. N.1 and the Courts of Justice Act, R.S.O. 1990,c. C.43.

[65] Counsel argued this issue on March 10. I found that the defendant had not properly pleaded these purported defences. I wrote at paras. 13 –15 of my decision:

Paragraph 12 of the statement of defence does not meet this requirement. There is no reference to the statutory conditions that the defendants are now relying upon in defence of the plaintiff’s claim.

Moreover, at the examination for discovery of the insurer’s representative, Mr. Reynolds asked Mr. Baldwin to identify what provisions of the Insurance Act the defendants were relying upon. This was the exchange:

Mr. Reynolds: Okay. You pleaded the provisions of the Insurance Act, the Negligence Act, the Courts of Justice Act, without specifying anything. What provisions of the Insurance Act in particular are you pleading and in what respect, if any? I realize sometimes that’s just thrown in for boilerplate.

Mr. Baldwin: If there are particular provisions of the Insurance Act that we rely upon, I will advise you.

Mr. Reynolds: Okay

Mr. Baldwin: It occurs to me, as I sit here, that there may not be particular statutory provisions.

The defendants did not fulfil this undertaking. The failure to answer an undertaking within 60 days is deemed a refusal under rule 31.07(1)(c).

[66] Following my decision, the defendant sought leave to amend the statement of defence which I granted on terms and adjourned the trial. The trial resumed on February 21, 2023. In his reply, which the plaintiff delivered after the statement of defence was amended, he pleaded waiver, estoppel and relief from forfeiture.

The Issues

[67] The plaintiff alleges that he was not paid the amount owed to him under the policy and that he is entitled to additional compensation, beyond the policy limits, due to the defendant’s negligence. To determine liability and damages, there are several issues which I have to address. They are:

a. What, if any, duty of care did the defendant owe to the plaintiff?

b. If there was a duty of care, did the defendant breach it?

c. Is the plaintiff entitled to damages based on RCV in respect of the building loss claim?

d. Did the plaintiff settle the building loss claim?

e. What was the RCV of the house?

f. Does the plaintiff’s failure to deliver a sworn proof of loss in relation to the contents claim preclude him from receiving damages on account of this claim?

g. Can the court award damages in relation to the contents claim in the absence of an appraisal under the Insurance Act?

h. Has the plaintiff proven that he is entitled to any damages on account of the contents claim and, if so, what is the amount?

Issue One: The duty of care owed by the defendant

[68] It is settled law that an insurance broker owes a duty of care to its clients to advise them about the available insurance, the insurance coverage required to meet their needs and the adequacy of that coverage. They are “more than mere salespeople”. In Fletcher v. Manitoba Public Insurance Company, 3 S.C.R. 191, Wilson, J. stated at p. 217:

In my view, it is entirely appropriate to hold private insurance agents and brokers to a stringent duty to provide both information and advice to their customers. They are, after all, licensed professionals who specialize in helping clients with risk assessment and in tailoring insurance policies to fit the particular needs of their customers. Their service is highly personalized, concentrating on the specific circumstances of each client. Subtle differences in the forms of coverage available are frequently difficult for the average person to understand. Agents and brokers are trained to understand these differences and to provide individualized insurance advice. It is both reasonable and appropriate to impose upon them a duty not only to convey information but also to provide counsel and advice.

[69] In 2049390 Ontario Inc. v. Leung, 2020 ONCA 164, the Court upheld the trial judge’s determination that an insurance broker must advise clients of the importance of having insurance to protect the full value of the property; tell them that the broker is not qualified to provide advice on the value of the property; and recommend that they retain a reconstruction cost consultant qualified to provide an accurate estimate.

[70] Whitley did not fulfil this obligation. Mr. Lynch’s evidence at his examination for discovery was that he sent the information he had (the appraisal and photos) to Ms. Bailey and relied upon her to obtain the proper coverage. He testified that he had dealt with her in relation to other properties and trusted her.

[71] The plaintiff argues that the defendant had the same duty of care and, in effect, displaced the broker because it assumed the function of determining RCV to the exclusion of Whitley. The defendant submits that it did not assume any such duty of care to the plaintiff; all it did was arrange for an employee to attend at the property after the policy was issued to determine if it was an acceptable risk. One consideration would be the RCV stated in the application.

[72] The plaintiff relies on the following evidence from Ms. Lyons’ examination for discovery:

Q: Okay. And I’ll be asking you some of these questions, and if you can answer them, fine; if not, it sounds as if you may have to undertake the others. I suppose the first question, just picking upon what we were going to ask Mr. Bowden, are you aware of the understanding between Bay of Quinte and brokers like Whitley as to the fact that Bay of Quinte does its own inspections, if you like, rather than the brokers doing it?

A: Yes.

Q: Okay. So the brokers like Whitley’s are aware that that’s how Bay of Quinte wants to do it, that it wants to do…

A: It’s an understanding with all of our agents and brokers.

Q: Okay. So they know that the inspection’s going to be done by Bay of Quinte.

A: On any new business that comes into our office, Bay of Quinte does their own inspection.

Q: Okay. And I take it from looking at this inspection memo at your tab 45, that’s prepared by your underwriting department, is it then?

A: The memo would have been, yes.

Q: But it’s based on information provided to it by the inspection department?

A: Correct

Q: Okay which would be this valuation report.

A: Correct.

Q: Okay. So the normal process at Bay of Quinte is the broker indicates here’s the application; it’s the understanding between broker and Bay of Quinte that Bay of Quinte will then inspect the property; Bay of Quinte inspect; the inspection department runs a valuation report and advises the underwriting department who then advises the broker.

A: Correct.

Q: Okay. And I take it then that it’s inherent in this entire process that Bay of Quinte and its inspector are going to inspect the property determine the appropriate replacement value to be put on the property.

A: That and insurability, to make sure that it meets our underwriting conditions.

Q: Right, the two things that Mr. Bowden mentioned …

A: Correct.

Q: … the risk functions and the value function.

A: Correct.

[73] Ms. Lyons testified at trial that one of the purposes of the inspection was to take measurements of the dwelling and identify other features of it. This information was then inputted into the RSMeans Manual which produced a RCV that, if different than the one specified in the policy, is communicated to the broker. In this case, because the RCV was lower, the defendant advised Whitley that the policy limit would be changed if the plaintiff renewed the policy. She also testified that if the defendant concluded that the risk was unacceptable after the inspection, it would notify the broker that the policy would be cancelled in 15 days’ time.[^6] In cross-examination, she reiterated that valuation was only one of the purposes of the inspection.

[74] At his examination for discovery, Mr. Lynch testified that he had no discussion with Ms. Bailey about the amount of $222,000 for RCV. When asked if he thought it was sufficient, he replied: “I, I, I tend to agree with professional people, so when I go to deal with the doctor I take his word for it; when I deal with an insurance broker, I take their word for it.” He would have only made inquiries of Ms. Bailey if the RCV was below the purchase price of $165,000. He confirmed that he relied upon Whitley to determine the appropriate amount of insurance to apply for.

[75] In describing his interaction with Mr. Bowden, Mr. Lynch testified that Mr. Bowden told him that he wanted to “look around” the Property; that he had no discussion with Mr. Bowden about his insurance needs; and that Mr. Bowden did not give him any advice or direction in this regard. Whitley never contacted him about BOQ’s communication with it about the reduction of the RCV to $206,000 if he renewed the policy.

[76] I find that there was no duty of care between the plaintiff and defendant because it is clear that the plaintiff did not rely on anything that the defendant did in its calculation of the RCV. He relied solely on Whitley. This resolves the issue of the duty of care: Kalkinis (Litigation Guardian of) v. Allstate Insurance Co. of Canada, (1998), 1998 CanLII 6879 (ON CA), 41 O.R.(3d) 528 (C.A.) at pp.535-537.

[77] I also find that the defendant did not, as claimed by the plaintiff, supplant Whitley in doing what a broker is supposed to do – properly advise a person about their insurance needs. The defendant had no authority to change the RCV nor did it attempt to do so. It communicated its calculation of the RCV to Whitley after the inspection and left it up to the broker to notify its client.

[78] The plaintiff’s position that BOQ assumed an important legal responsibility simply by conducting an inspection of this nature runs contrary to a well-established line of authority. Accepting the plaintiff’s position would introduce uncertainty into the current legal framework by imposing an additional legal duty on an insurer (and relieving a broker of that obligation). Of course, an insurer could take on this legal responsibility but there was no evidence that it did so in this case.

[79] The testimony of the plaintiff’s expert, Mr. White, does not change my conclusion because his opinion was based on his understanding that the issue was “whether an insurer who takes on the role of determining replacement value for the purposes of a policy becomes subject to a duty of care to the insured.” Although a RCV calculation was part of the inspection process, it was not done for the purpose of determining the RCV for the policy. Rather, the RCV calculation, along with other findings made during the inspection, would guide the insurer’s decision in whether the existing policy should be cancelled and, potentially, the terms of a future policy if the plaintiff chose to renew the existing policy. I accept Ms. Lyons’ evidence on this point.

Issue Two: Breach of the duty of care

[80] Because I have found there was no duty of care, it is not strictly necessary to decide whether there was a breach of that duty. But, for the sake of completeness, I will set out my findings because evidence was lead on this issue and both sides made submissions on it.

[81] The plaintiff contended that the defendant fell below the standard of care in two ways. One was not following the instructions in the RSMeans Manual and the second was based on Mr. White’s opinion that BOQ did not retain a qualified person to estimate the RCV.

[82] Although the decision in Leung involved a commercial property, it is equally applicable to residential property. Most homebuyers will need to secure insurance in order to obtain mortgage financing and many will choose a broker to obtain that insurance in a timely manner. A broker can go into the market and likely find a suitable policy relatively quickly. The broker is also in a position to inform its client about the available methods to determine RCV for the house in advance of the closing of the transaction.

[83] The insurer is in a different position. It does not have an opportunity to investigate the proposed RCV. If it accepts an application, the policy is deemed to be in accordance with the terms of the application under s. 146 of the Insurance Act.

[84] If the insurer decides, after the policy has been issued, to inspect the insured property and do its own calculation of RCV, it should communicate any material findings to the broker so that the broker can review them with their client. In this case, that is what BOQ did. This is, in my view, the appropriate standard of care for an insurer that issues a policy to an insured who has retained a broker.

[85] This standard of care does not create any unfairness to the insured. The primary obligation remains on the broker to protect the insured’s interests. The broker remains liable if it turns out that there was inadequate insurance. The plaintiff’s position in this case is that the RCV should have been at least $320,000. Whitley determined that the RCV should be $222,000, knowing that if the application was accepted by the defendant, this would be the RCV in the policy. If the plaintiff is correct about what the RCV should have been, this was an actionable error but the legal responsibility lies with Whitley, not the defendant.

Issue Three: The alleged settlement of the building loss claim

[86] The defendant asserts that the plaintiff settled the building portion of the claim by accepting the payout of $222,000 in April 2011. It places substantial reliance on Mr. Stewart’s letter of April 15 in which he expressly confirmed that “the insured did decide to accept settlement for the dwelling only” and explained the reasons for that decision which included “the desire to avoid a prolonged and litigious action.” The document signed by the plaintiff on April 7, 2011 included wording which made it clear that the plaintiff was releasing the defendant from any further claim in relation to the building loss.

[87] The plaintiff submits that the defendant has misconceived the nature of his claim. It is not based on a breach of the policy but rather it is a claim in negligence based on the defendant’s breach of its duty of care to him. This was apparent from the plaintiff’s correspondence at the time and he did not agree to settle it. Moreover, the document which the defendant requested the plaintiff to sign contained the following sentence at the top of it in bold type: “This form is provided to comply with the Insurance Act and without prejudice to the liability of the insurer.”

[88] I find that the defendant has failed to establish that the plaintiff settled his negligence claim. Mr. Stewart’s letter of April 15, 2011 could reasonably be interpreted as an acknowledgement of a final resolution of the building loss portion of the plaintiff’s claim but it is a single piece of evidence and I must consider the entirety of the evidence on this issue. Mr. Lynch was not asked at his examination for discovery if he had settled the claim. Nor was Mr. Raymond asked if the payment was made by the defendant in order to settle all potential legal claims of the plaintiff. What I can conclude with certainty is that, after some discussions between them in March and early April 2011, the defendant offered to pay out the policy limit and the plaintiff accepted this offer. There was no evidence about why the defendant made this offer. Mr. Baldwin argued that it was a “generous” offer because the ACV of the building was substantially less and that I should infer that the defendant paid more in order to finally resolve any potential legal dispute. If that was the case, Mr. Raymond or Ms. Lyons could have said so when they testified and they did not. I would be reluctant to interpret a standard form proof of loss as including a release of all legal claims that an insured has or may have against the insurer, especially when it states that it is “without prejudice to the liability of the insurer”.

Issue Four: The plaintiff’s entitlement to RCV in respect of the building

[89] The plaintiff did not rebuild or replace the house. Ordinarily, this must be done in order to obtain RCV under an insurance policy: see Carter v. Intact Insurance Company, 2016 ONCA 917. The plaintiff argues that, once he learned that the insurance coverage was inadequate to rebuild or replace, he was no longer legally required to do so and remains entitled to compensation on this basis. The defendant submits that the plaintiff made an informed and prudent economic decision in accepting the payout offered by the defendant instead of rebuilding.

[90] The resolution of this issue hinges on the specific facts of this case. I accept that there may be circumstances in which an insured does not have to actually rebuild or replace in order to obtain the RCV. One example is an impecunious insured who evinces an abiding intention to rebuild the family home but does not do so because, until they receive an award of damages, they cannot afford to rebuild. That is not this case.

[91] I find that the plaintiff decided soon after the fire, when it became apparent to him that the defendant would pay the policy limit of $222,000, not to rebuild. I reach this conclusion for the following reasons:

i. Mr. Lynch listed the Property for sale before the fire. The list price was $234,900 but Mr. Stewart testified that Mr. Lynch would have taken a lesser amount, one in the range of the amount that he received from the defendant. Mr. Stewart, as his long-time friend and real estate agent, was particularly well-placed to know what Mr. Lynch’s intentions were in relation to the Property.

ii. Mr. Lynch testified at his examination for discovery that he was hoping to make between $70,000 and $80,000 from the sale of the Property. He ended up receiving a much greater amount from the defendant. When asked if he was going to “flip it”, he replied “I flip houses, yes”.

iii. Mr. Lynch had a history of buying and selling properties.

iv. Mr. Lynch had another home which he could, and did, move to.

v. The fire was a traumatic experience. When asked why he did not attempt to rebuild, he replied “Would you build a house on your gravesite?”. After repeating a couple of times that he would not build another house there, he was asked “So you weren’t intending to rebuild after a traumatic fire?” he replied “Not there. Not there, no. That’s why I wouldn’t live in a trailer there.”

vi. Mr. Lynch took no steps to retain a contractor or obtain a building estimate until much later, well after he had received the payout from the defendant.

vii. He did not do anything which manifested an intention to rebuild or replace the dwelling. For example, he did not make any inquiries of the Royal Bank to find out if he could refinance in order to secure funds for the construction of a new house.

viii. There was little evidence about his financial situation at the time of the fire. However, he had received a total of $142,635.74 from the defendant by July 2011. The mortgage had been discharged and the Property cleared. He had sufficient funds to begin rebuilding. There was no evidence he was indebted and unable to afford the rebuilding.

ix. A reasonable interpretation of Mr. Stewart’s letter of April 15, 2011 to Ms. Lyons is that Mr. Lynch did not intend to rebuild or replace the dwelling but was interested in negotiating a better settlement of the contents claim.

x. Mr. Lynch had told Mr. Raymond in the first week April 2011 that he did not intend to rebuild. Mr. Raymond’s evidence on this point was unchallenged.

xi. Mr. Lynch’s decision to accept the defendant’s payout on the building claim was a prudent one. Given his age, his second home and his aversion to the Property because of the fire, it was, objectively speaking, a more reasonable decision than taking the risk of rebuilding a house whose sale would be subject to market fluctuations in price.

[92] The plaintiff also submits that Carter is distinguishable because the issue in that case was different (whether the insured was entitled to RCV when he did not replace the structure with one of “like kind and quality”) and that the Court’s discussion of moral hazard was only a review of the general legal principles underlying property insurance. The plaintiff contends that he need only show that he would more likely than not have replaced the home if there had been no breach and adequate coverage had been in place. However, this ignores the specific wording of the policy which imposes an obligation on the insured to repair or replace before the insurer is required to pay RCV.

[93] Further, even if the plaintiff is right, there was no evidence to support the assertion that he would have likely rebuilt had there been more insurance coverage in place. Mr. Lynch did not say to Mr. Raymond after the fire nor at his examination for discovery that he would have rebuilt or replaced the house if the policy limit was $320,000 rather than $220,000. And Mr. Stewart testified that he did not know whether Mr. Lynch would have done so.[^7]

Issue Five: The RCV of the building

[94] Because I have concluded that the plaintiff is not entitled to the RCV, I do not have to, strictly speaking, decide this issue. However, because both sides adduced evidence in relation to it, I will set out my findings on the appropriate amount.

[95] Two witnesses, David McDonald and Tom Streek, testified about the cost to build a new house. Both are experienced homebuilders. Mr. McDonald, as I noted earlier, purchased the Property from the plaintiff in September 2011 for $97,000. In January 2012, he provided a written estimate to the plaintiff. It was based on information from Mr. Stewart about the house and construction plans that Mr. Stewart had obtained from a company called ID Technologies. The price was $294,646.45 plus HST. He revised this amount in an affidavit sworn January 20, 2023 to $278,955.22 to reflect construction costs in 2010. Mr. Streek opined that the RCV would have been $216,350 plus HST. Mr. McDonald described the house as a two-storey dwelling; Mr. Streek referred to it as a 1.5 storey home.

[96] The main differences between them were based on the square footage of the upper floor (Mr. McDonald assumed 1,035 square feet at a cost of $114.74 per sq.ft and Mr Streek’s was 780 feet at $85 per sq. ft. resulting in a difference of $52,455.90), a woodshed enclosure (Mr. McDonald’s price was $5,104.44 and Mr. Streek’s was $2,500) and a septic system (Mr. McDonald’s price was $8,300; Mr. Street did not include a septic system in his quote). There was also a disagreement with respect to the square footage of the main floor and the price per square foot (Mr. McDonald’s was 1,146 sq. ft at $138.89/sq. ft. and Mr. Streek’s was 1,035 sq. ft. at $130/sq. ft. with the difference being $24,617.94).

[97] Mr. McDonald swore a second affidavit dated February 15, 2023 in response to the opinion of Mr. Streek. He took issue with Mr. Streek’s assumptions of the square footage of the main and upper floors. He also noted that Mr. Streek had not included a second kitchen on the upper floor and deposed: “That adds considerably to the cost of the home as compared to the typical dwelling, since typical house pricing does not include two kitchens (electrical, plumbing, ventilation, cabinets/tops).”

[98] An expert is like any other witness. I can accept some, none or all of their evidence. In assessing their testimony, I also need to consider the evidence which they relied upon in forming their opinion. One salient fact is the square footage of the upper level. Mr. McDonald based his estimate on what Mr. Stewart told him which was 1085 sq. ft. Mr. Streek assumed 780 sq. ft. which, in turn, was based on the Prince Edward Appraisal. That was the same square footage calculated by Mr. Bowden. In the listing agreement he prepared in February 2011, Mr. Stewart identified the total square footage as 2100-2400.

[99] I find that 780 sq. ft. for the upper floor is the most reliable number. Although a representative of Prince Edward Appraisal did not testify nor did Mr. Bowden, the appraisal report and Mr. Bowden’s contemporaneous notes were made exhibits on consent and relevant excerpts from Mr. Bowden’s examination for discovery were read in. Although Mr. Bowden was an employee of the defendant, he would have no interest for or against the plaintiff; he was just performing his assigned duty when he attended at the property in 2010. Mr. Stewart, on the other hand, did have an interest in the litigation because the only reason he sought Mr. McDonald’s assistance was for the purpose of obtaining an opinion which would support the plaintiff’s claims. The combination of the appraisal and Mr. Bowden’s evidence lead me to prefer their calculations over Mr. Stewart’s calculation. I accept Mr. Streek’s evidence on the cost of rebuilding the upper floor.

[100] In addition to the differential in the square footage, I also find, based on the photographs and Mr. Stewart’s testimony, that the kitchen was a bare-bones one and that a kitchen of “like kind and quality” could have been built for a lesser price than proposed by Mr. McDonald. I also deduct the price of a new septic system from Mr. McDonald’s estimate; there was no independent evidence to support Mr. McDonald’s assertion that the municipality would have required a new system. This reduces Mr. McDonald’s estimate to $233,890.55 which I find was the likely RCV in 2011.

Issue Six: The plaintiff’s failure to deliver a sworn proof of loss

[101] The defendant has linked the requirement of a sworn proof of loss with the appraisal process under the Insurance Act. As I understand its argument, a sworn proof of loss is a mandatory requirement for an appraisal. Without it, an appraisal cannot be conducted. And without an appraisal (more properly, an umpire’s award), the court does not have the jurisdiction to determine the value of the insured property in a fire loss claim.

[102] Despite the defendant’s linkage of the two, I will consider them separately because they involve different evidentiary aspects and legal considerations. The defendant’s position for both is substantially the same: They are technical defences and I should conclude that the doctrines of waiver, estoppel and relief from forfeiture apply in the circumstances.

[103] Statutory condition 6 under Part IV of the Insurance Act provides as follows:

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,

(ii) 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,

(iii) stating that the loss did not occur through any wilful act or neglect or the procurement, means or connivance of the insured,

(iv) showing the amount of other insurances and the names of other insurers,

(v) 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,

(vi) showing any changes in title, use, occupation, location, possession or exposures of the property since the issue of the contract,

(vii) showing the place where the property insured was at the time of loss;

(c) if required, give a complete inventory of undamaged property and showing in detail quantities, cost, actual cash value;

(d) 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.

(2) The evidence furnished under clauses (1) (c) and (d) of this condition shall not be considered proofs of loss within the meaning of conditions 12 and 13.

[104] One of the main objectives of insurance law legislation is consumer protection: Smith v. Co-operators General Insurance Co., 2022 SCC 20 at para. 11 and Truscott v. Co-operators General Insurance Company, 2023 ONCA 267 at para. 86. The statutory conditions further the objective of consumer protection. In Insurance Law in Canada (Thomson, Reuters 2021) Craig Brown states the following at ¶ 20:5:

The purpose of the statutory conditions applicable to fire insurance is remedial. This notion was captured by the Privy Council in the following terms: “The primary object of the statutory conditions is to prevent the insurer by means of exceptions skillfully worded and not particularly brought to the notice of the assured, avoiding liability which it is only just and reasonable he should undertake in a fire policy. Their Lordships agree with the arguments of the appellant’s counsel that these conditions, if there is doubt, should be held rather as amplifying than as cutting down the insurer’s liability.

[105] There is no statutorily prescribed form for a proof of loss. In this case, the defendant used a form disseminated by the Insurance Bureau of Canada.[^8] The one prepared by NFA was called a Schedule of Loss. The title of the document is immaterial; what matters are the contents, not what it is called.

[106] What is also important is that the insured confirm the accuracy or truth of the contents, whether that be by a sworn document or in an examination under oath.

[107] I find that the plaintiff complied with statutory condition 6 in the circumstances of this case. To hold otherwise would permit form to triumph over substance which should not happen when the statutory objective is consumer protection. Mr. Lynch gave notice of the claim forthwith and cooperated with the defendant’s adjuster, Mr. Raymond, who attended at the property within a day of the fire. Mr. Raymond investigated the claim over the next month. The defendant was evidently satisfied with the information it received because it paid an advance that was more than half the policy limit. Mr. Lynch subsequently provided more information to the defendant which allowed it to evaluate the contents claim in full and its counsel had the opportunity to examine Mr. Lynch about the Schedule of Loss under oath.[^9]

[108] I now turn the issue of waiver. Section131 of the Insurance Act provides:

(1) The obligation of an insured to comply with a requirement under a contract is excused to the extent that,

(a) the insurer has given notice in writing that the insured’s compliance with the requirement is excused in whole or in part, subject to the terms specified in the notice, if any; or

(b) the insurer’s conduct reasonably causes the insured to believe that the insured’s compliance with the requirement is excused in whole or in part, and the insured acts on that belief to the insured’s detriment.

(2) Neither the insurer nor the insured shall be deemed to have waived any term or condition of a contract by any act relating to the appraisal of the amount of loss or to the delivery and completion of proofs or to the investigation or adjustment of any claim under the contract.

[109] In Bradfield v. Royal Sun Alliance Insurance Co. of Canada, 2019 ONCA 800, Thorburn, J.A. stated at paras. 30-33:

Waiver and promissory estoppel are closely related the principle underlying both doctrines is that a party should not be allowed to resile from a choice when it would be unfair to the other party to do so. Both require "knowledge" of the policy breach.

Waiver will be found where "the party waiving had (1) full knowledge of the deficiency that might be relied upon; and (2) the unequivocal and conscious intention to relinquish the right to rely on the contract or obligation. The creation of such a stringent test reflects the fact that no consideration moves from the party in whose favour a waiver operates. An overly broad interpretation of waiver would undermine the requirement of contractual consideration".

Knowledge can be inferred from conduct, but "that conduct must give evidence of an unequivocal intention to abandon rights known to the party waiving the right". [Citations omitted]

[110] I find that the defendant, through its conduct, waived the requirement of a sworn proof of loss. According to the defendant, Ms. Lyons’ letters dated June 7 and July 6, 2011 were clear and unequivocal: without a signed and notarized proof of loss, no payment on account of the contents would be forthcoming. Yet, despite stating in her June 7 letter that no payment would be made, she directly contradicted that by making a payment of $50,000 on July 6 without any such proof of loss. In her letter of April 26, 2012, the first (and only) one after her July 6 correspondence, Ms. Lyons makes no mention of the absence of a proof of loss but only requests receipts as a condition of any further payment. Following that date, the defendant does not raise the lack of a sworn proof of loss as an emergent issue in correspondence, the statement of defence or at the examinations for discovery.

[111] I also find that the plaintiff is entitled to relief from forfeiture. Section 129 of the Insurance Act permits the court to grant relief from forfeiture in the event of an insured’s imperfect compliance with the statutory condition as to proof of loss. It provides:

Where there has been imperfect compliance with a statutory condition as to the proof of loss to be given by the insured or other matter or thing required to be done or omitted by the insured with respect to the loss and a consequent forfeiture or avoidance of the insurance in whole or in part and the court considers it inequitable that the insurance should be forfeited or avoided on that ground, the court may relieve against the forfeiture or avoidance on such terms as it considers just.

[112] In Monk v. Farmers Mutual Insurance Company (Lindsay), 2019 ONCA 616, Brown, J.A. stated at paras. 77 and 79:

The purpose of allowing relief from forfeiture in insurance cases is to prevent hardship to policy beneficiaries where there has been a failure to comply with a condition for receipt of insurance proceeds and where leniency in respect of strict compliance with the condition will not result in prejudice to the insurer: Falk Bros. Industries Ltd. v. Elance Steel Fabricating Co. 1989 CanLII 38 (SCC), [1989] 2 S.C.R. 778, at p. 783.

The principles regarding relief from forfeiture in the circumstances of a claim under an insurance policy were canvassed at length by this court in Kozel v. The Personal Insurance Company, 2014 ONCA 130. Kozel summarized the principles as follows:

(i) Relief from forfeiture under s. 129 of the Insurance Act is available where there has been “imperfect compliance with a statutory condition as to the proof of loss to be given by the insured or other matter or thing required to be done or omitted by the insured with respect to the loss”, thereby restricting the availability of the section to instances of imperfect compliance with terms of a policy after a loss: at p. 58;

(ii) Relief from forfeiture pursuant to s. 98 of the Courts of Justice Act, R.S.O. 1990, c. C.43, is available to contracts regulated by the Insurance Act: at para. 57;

(iii) CJA s. 98 generally operates where the breach of the policy occurred before the loss took place: at para. 58;

(iv) Although relief under the Insurance Act s. 129 and CJA s. 98 are not available where the breach consists of non-compliance with a condition precedent to coverage, a court should find that an insured’s breach “constitutes noncompliance with a condition precedent only in rare cases where the breach is substantial and prejudices the insurer. In all other instances, the breach will be deemed imperfect compliance, and relief against forfeiture will be available”: at paras. 33 and 50;

(v) Where relief from forfeiture is available, an insured “must still make three showings – that his or her conduct was reasonable, that the breach was not grave, and that there is a disparity between the value of the property forfeited and the damage caused by the breach – in order to prevail”: at paras. 51 and 59. This three-element test often is referred to as the “Saskatchewan River” or “Liscumb” test, from two of the cases in which it was articulated, Saskatchewan River Bungalows Ltd. v. Maritime Life Assurance Co., 1994 CanLII 100 (SCC), [1994] 2 S.C.R. 490 and Liscumb v. Provenzano (1985), 1985 CanLII 2051 (ON SC), 51 O.R. (2d) 129, at p. 137, affirmed (1986), 1986 CanLII 2595 (ON CA), 55 O.R. (2d) 404n (C.A.).

[113] In this case, the plaintiff’s conduct was reasonable, the breach was not grave and there is a disparity between the value of the property forfeited and the damage caused by the breach. The claim was reported immediately. The plaintiff cooperated with the defendant in its investigation of the claim and provided a detailed list of contents soon after the fire. The plaintiff delivered additional information about his contents claim as the litigation progressed and submitted to an examination under oath after the delivery of the material that he was relying upon. The defendant did not lead any evidence of prejudice.

[114] The absence of a single sworn document would not have affected, in any way, the defence of this action; clearly, if the lack of it was important, the defendant would have expressly raised this issue in its statement of defence in September 2012.[^10] I find that, if it had, the plaintiff would have delivered a sworn proof of loss. Further, based on the record before me, the defendant’s counsel did not even advert to this issue in correspondence at any time after the lawsuit was commenced. Mr. Reynolds’ failure to later deliver a sworn proof of loss, despite his comment at the examination for discovery that he would do so at a future date, does not change my view. There was no evidence that this omission had any impact on the defendant’s approach to the litigation.

[115] Finally, I note that the defendant paid the much larger building loss claim without a sworn proof of loss. An insurer, like the insured, can insist on strict compliance with the statutory conditions but here the defendant departed from such abidance in some aspects of the claim and did not bring home to the plaintiff or his counsel that noncompliance with the statutory conditions would be treated as fatal to his claim.

Issue Seven: The failure to conduct an appraisal

[116] Section 128 of the Insurance Act provides:

(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.

(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.

(5) Where,

(a) a party fails to appoint an appraiser within seven clear days after being served with written notice to do so;

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

(c) an appraiser or umpire refuses to act or is incapable of acting or dies, a judge of the Superior Court of Justice may appoint an appraiser or umpire, as the case may be, upon the application of the insured or of the insurer.

Statutory Condition 11 provides:

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.

[117] As the case law demonstrates, the requirement of an appraisal is almost always litigated at the interlocutory stage of the proceeding. Either the insured or the insurer can choose this dispute resolution mechanism to resolve the question of valuation of the building loss or the contents claim. It can happen at any stage of the litigation; the appraisal and the action can proceed concurrently; there can be successive appraisals; and the existence of liability or coverage disputes does not preclude an appraisal. As Perell, J. stated in Northbridge General Insurance Corp. v. Ashcroft Homes-Capital Hall Inc., 2021 ONSC 1684 at para. 24:

The appraisal process is intended to 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.

[118] Although courts have referred to the appraisal process as mandatory, that has been in the context of one party resisting their opponent’s request for it. An appraisal can be waived: Arvanitopoulos v. The Wawanesa Mutual Insurance Co., 2022 ONSC 2613 at para. 52 and Brandiferri v Wawanesa Mutual Insurance, et al, 2012 ONSC 2206 at paras. 12-23. The court has a residual discretion to forgo an appraisal. In 56 King Inc. v. Aviva Canada Inc., 2017 ONCA 408, the Court observed at para. 5: “The legislation signals a decided preference for appraisal, as the authorities note, but the language of s.128 gives the court discretion to curb abuse.” Excessive or unreasonable delay can be a reason to dispense with compliance with the valuation process contained in a fire insurance policy: 1633092 Ontario Ltd. (Re) [2009] O.J. No. 2628 (S.C.J.) at paras. 13-15.

[119] Neither side invoked the appraisal process in this case during the course of the litigation. Mr. Reynolds proposed an appraisal in January 2020 when Mr. Baldwin alerted him to the position he would be taking at trial about the necessity of an appraisal in respect of the personal property claim. Mr. Baldwin’s position after the trial commenced was that a sworn proof of loss was a prerequisite to an appraisal and because the plaintiff did not deliver one, an appraisal could not take place. And it is only through the appraisal process that the contents can be valued: I do not have the jurisdiction to do that. This position was not, as I ruled in March 2020, pleaded.

[120] I find that the defendant waived its right to an appraisal. Neither side expressed any interest in one. They focused on other factual and legal issues. Not only was the defendant’s position not pleaded, there was no evidence that the defendant even raised the issue of an appraisal except for the brief reference to it in Ms. Lyons letter of July 6, 2011- not when the claim was being adjusted; at the examinations for discovery; in correspondence between counsel; or in the pretrial conference report under rule 50.08. I conclude that both parties were content to proceed with the litigation in the ordinary way and it was not until the trial was imminent that the defendant first asserted that an appraisal was a necessary precondition to the adjudication of the contents claim.

[121] This is a case in which I should exercise my residual discretion to dispense with an appraisal. I considered whether to direct an appraisal, as was done in Brandifferi. There, Lauwers, J. (as he then was) concluded it was “the appropriate and feasible remedy” (para. 153). Here, I can justly adjudicate the contents claim. I have a comprehensive evidentiary record. I am in as good a position as an umpire would be at an appraisal to decide the ACV of the contents claim.[^11] An appraisal would only result in additional delay and expense. I bear in mind the important goals of affordability, timeliness and proportionality: Hryniak v. Maudlin, 2014 SCC 7.

Issue Eight: The ACV of the personal property

[122] In Carter, Laskin, J. A. stated at paras. 20-21:

The insurance industry has marketed two types of protection for residential and commercial properties: actual cash value coverage and replacement cost coverage. Under actual cash value coverage, property is insured to the extent of its actual cash value. This coverage recognizes that the insurer is entitled to deduct reasonable depreciation from the value of the loss. Under replacement cost coverage, the insured is entitled to the full cost of repair or replacement without any deduction for depreciation.

A main objective of property insurance is indemnity, and a policy providing for actual cash value coverage is a pure indemnity contract. Actual cash value recovery puts insureds in the position they were in before the loss. Since most property depreciates over time, actual cash value is equivalent to replacement cost less depreciation. So actual cash value recovery prevents insureds from profiting or benefiting from their loss.

[123] As Vella, J. noted in Lalani Properties et al v. Intact Insurance, 2022 ONSC 6883 at para. 238, “there is no single or right way to calculate the ACV under an insurance policy”. One reason is that the definition can vary from one policy to another. In this case, it is “the current monetary value of the property and takes into account such things as the cost of replacement, less any depreciation and obsolescence, or plus appreciation if applicable. Further, in determining depreciation, “the condition immediately before the loss or damage, the resale value and the normal life expectancy” are to be considered.

[124] Another reason there is no single or right way to calculate the ACV is the jurisprudence. In Carter, Laskin, J.A. did not set out the definition of ACV in the policy at issue but it can be inferred that it was replacement cost less depreciation. That was the definition in Watt v. TD Insurance, 2019 ONSC 6454 where, in deciding the ACV of household contents in a fire loss claim, Lemay, J. wrote at paras. 95-101:

There is no evidence before me to suggest that Mr. Watt replaced these chattels. As a result, he is only entitled to the actual cash value of these items. The question is what should that amount be?

There should obviously be some depreciation of the value of these assets. They were all used. However, there was no evidence before me as to how much the items had been used or what the standard practices were for depreciation.

I only have two pieces of evidence to assist me in resolving this point. First, there is Mr. Demeter’s evidence that he had been told by Ms. Hopkins to apply 50% depreciation to everything. Second, there is the evidence as to what TD’s own staff believed was a reasonable amount of depreciation.

One of the documents that I ruled was not privileged was pre-litigation discussions over what amount should be paid as depreciation. In particular, in internal, pre-litigation documents, TD determined that it was prepared to pay up to 75% of the replacement value for these chattels.

That evidence must be considered in light of the case law. In Feist v. Gore Mutual Insurance Co. ([1991] O.J. No. 67 (Gen. Div.)), Cosgrove J. concluded that the phrase “actual cash value” has universally involved a deduction factor. However, Cosgrove J. went on to point out that the onus is on the defendant insurer to make a live issue out of the area, and it is incumbent on the defendant to establish a mechanism to arrive at a specific amount.

In this case, TD has demonstrated that some depreciation is necessary as the chattels were used. The problem that exists in this case is that the items were all destroyed or damaged in the fire and there are, unsurprisingly, no receipts for the original purchases. As a result, it is difficult to determine what actual level of depreciation should be applied to the chattels. Ultimately, whatever number is chosen will be at least somewhat arbitrary.

I have concluded that depreciation to 78% of the replacement value should be applied to the household chattels. I have reached this conclusion for two reasons. First, TD was prepared to offer between 70% and 75%. Second, it is up to TD to prove both the mechanism and the amount of depreciation. In the circumstances, it is almost impossible to see the difference between a 75% factor and a 78% factor.[^12]

[125] Arguably, the definition of ACV in the plaintiff’s policy in this case is more nuanced because it allowed for an increase in value and not simply replacement cost less depreciation. However, there was no evidence adduced by the plaintiff that he owned goods which appreciated in value beyond their current market value. Rather, he relied on an approach similar to that considered in Watt.

[126] ACV is the actual value of the property to the insured at the time of loss but I also take into account the overriding principle of indemnity: The insured must not receive a windfall.[^13]

[127] I now turn to the evidence. After the plaintiff submitted the document entitled “Items Lost in house fire”, Mr. Raymond spoke to Ms. Lyons who told him that the defendant would pay 50% on the household contents with no receipts, which Mr. Raymond calculated to be $70,000. He subsequently spoke to Ms. Lyons again who initially told him that he could go to $80,000. He communicated this to Mr. Lynch who said he would consider it. Before Mr. Lynch responded, Mr. Raymond told him that $80,000 was “off table”. Mr. Raymond next received instructions from Ms. Lyons that the defendant would pay “$55,000 no receipts”. Mr. Raymond and Mr. Lynch had a further discussion in which Mr. Lynch proposed $100,000 on account of the contents and Mr. Raymond told him the defendant would pay “$55,000 no receipts.” Mr. Raymond was not cross-examined on his notes but in his affidavit sworn February 27, 2023, he stated that the notes were “an accurate description of what happened in terms of the dates indicated and the communication recorded.” The conclusion I draw from his evidence is that the defendant was applying a depreciation rate of 50% to the contents claim.[^14]

[128] With the assistance of NFA, the plaintiff completed the document entitled “Schedule of Loss”. Mr. Lynch supplied the list of household contents and NFA collected evidence of the replacement cost of these items. This work was done by Kelly Gilbert, an employee of NFA who held the position of “Estimator”. Her role was to meet with Mr. Lynch, explain to him what he needed to do to compile the list of contents and later review it with him. Ms. Gilbert emphasized to Mr. Lynch that he had to be truthful in all aspects of the contents claim and, if he was not, the whole claim could be denied.

[129] After Mr. Lynch completed the list of contents, Ms. Gilbert did an online search to determine the replacement cost of the specific item or one of like kind and quality. There were additional discussions and email exchanges over the contents claim. At the end of this collaborative process, a final Schedule of Loss was turned over to the plaintiff’s lawyer, included in a supplementary affidavit of documents and sent to defendant’s counsel before the examinations for discovery.

[130] David LeBlanc, a Vice President of NFA and a very experienced public adjuster testified as an expert witness for the plaintiff at trial. He was not involved in preparing the original Schedule of Loss. He reviewed NFA’s file, photographs taken of the house after the fire and the insurance policy. He calculated the ACV to be $134,053.23. There were 335 items which he went through item by item, applying depreciation rates that ranged from 15% to 40%. The average depreciation rate was 24%. His calculation lowered the ACV from the amount of $158,350.85 originally submitted in 2013.

[131] The defendant’s expert witness on the issue of valuation was an auctioneer, Boyd Sullivan. He opined that, at a public auction, the items listed in the Schedule of Loss would fetch a total of $20,000-$25,000. In cross-examination, he acknowledged that he was not familiar with the term ACV, had not reviewed the definition of it in the insurance policy and had never been asked to give an opinion about ACV in a legal case. His valuation was based solely on his experience as an auctioneer and specifically in respect of estate sales or auctions arising from marital separations. He did not ascribe any value to “clothes and personal items” because they are “very rarely ever sold at an auction”.

[132] As I stated earlier, the Schedule of Loss was marked as an exhibit at Mr. Lynch’s examination for discovery and he was asked questions about it. He testified that the items were in good condition. He did not attempt to calculate an ACV. I would not expect an insured to determine the ACV in a fire loss claim. Evidence of the specific age or condition of each item would be helpful in calculating the appropriate depreciation factor but the absence of it does not prevent me from deciding the value. Probably most insureds would only be able to guess the exact age or condition of most personal property lost in a fire. In this case, I have expert evidence from a public adjuster which I accept. His opinion was based on information from Mr. Lynch and Ms. Gilbert that was credible and reliable. I find that the depreciation factors that Mr. Leblanc applied were reasonable.

[133] Mr. Sullivan’s evidence was of no assistance – he was not determining ACV in an insurance claim but rather opining on what an estate trustee or separated spouses could reasonably expect to receive at a public auction from the sale of household contents. Moreover, he excluded from consideration what would often be a significant portion of insured property in a fire loss claim – clothing and personal items.

[134] This leaves the question of whether the plaintiff has proven that he owned the personal property listed in the Schedule of Loss and that it was destroyed or damaged beyond repair in the fire. I find that he has.

[135] His evidence from his examination for discovery was admissible under rr. 31.11(6) and (7) of the Rules of Civil Procedure. It was untested by cross-examination at trial but the defendant had sufficient documentary evidence before the examinations for discovery to question Mr. Lynch thoroughly about the contents claim. Nothing Mr. Lynch said at his examination about the personal property causes me to doubt the truth of his testimony. The photographs and video taken of the interior of the house after the fire and Mr. Stewart’s testimony confirm to some extent that there was substantial personal property in it. The Schedule of Loss was not identical to the list which Mr. Lynch provided to Mr. Raymond but that is unsurprising given that the list was prepared within a few weeks of a traumatic experience. The fact that Mr. Lynch recalled at a later date other personal property which he owned does not detract from my assessment of his credibility or the reliability of the evidence concerning the contents claim.

[136] The defendant did not present any evidence at trial to contradict the plaintiff’s evidence about what he owned on the date of the fire. Mr. Raymond was an experienced adjuster who had the opportunity to fully investigate the claim and he clearly believed that Mr. Lynch had lost a substantial amount of personal property in the fire. Given his direct knowledge of the plaintiff’s claim, he was the most likely witness to oppugn the claim but did not.

[137] Finally, I note that some of Mr. Lynch’s testimony was helpful to the defendant, particularly his frank answers about why he did not rebuild the home. I appreciate that someone may be truthful about one issue and not another but one of the hallmarks of a credible witness is giving testimony that is unfavourable to his case.

[138] The defendant submitted that the claim should be reduced because there was evidence that some of the contents were salvaged, at least to the extent that they were removed from the house after the fire and placed in the garage. They were later stolen by an unidentified person. The defendant argues that the property should not be considered lost or damaged beyond repair because of the fire. However, there was no reliable evidence about the specific items, their value or their condition. Mr. Raymond was aware of what happened and there is no suggestion that he thought this property should be excluded from the fire loss claim. In light of these facts, I will not make the deduction requested by the defendant.

[139] The plaintiff also relied, in his closing submissions, on various exceptions to the hearsay rule to substantiate his claim – that the entries in the Schedule of Loss constituted business records admissible for the truth of the contents under s. 35 of the Evidence Act, R.S.O. 1990, c.E.23; they were admissible under the common law exception for business records established in Ares v. Venner, 1970 CanLII 5 (SCC), [1970] S.C.R. 608; and the information provided by Mr. Lynch is admissible under the principled exception to the hearsay rule. It is not necessary to consider these legal arguments given my findings on the evidence presented by the plaintiff.

[140] In summary, I have applied the same onus and standard of proof as I would in any damages claim. But I also recognize that there will almost invariably be a degree of imprecision in both the proof of what was owned at the time of a fire and its value. There is bound to be some guesswork in identifying the contents of a house destroyed by fire. ACV is a flexible concept requiring an exercise of judgment about which reasonable people can disagree. I do not hold the plaintiff to a standard of perfection; the insured has to do the best they can in the circumstances which is what the plaintiff did in this case.

[141] I find that the plaintiff has proven on a balance of probabilities that the ACV of the contents claim was $134,053.23. He received $60,000 from the defendant. The policy limit was $111,000. He is therefore entitled to an additional payment of $51,000. I do not allow the additional claim of $23,000 in view of my earlier finding that the defendant is not liable in negligence.

Conclusion

[142] Judgment is granted to the plaintiff in the amount of $51,000 plus interest and costs.

[143] If the parties cannot agree on interest and costs after making reasonable efforts to do so, the plaintiff shall deliver written submissions, not to exceed 5 pages, exclusive of a costs outline and any written settlement offers, within 20 days release of this decision. The defendant shall deliver submissions of the same length within 10 days of receipt of the plaintiff’s submissions. The plaintiff can deliver a reply, if necessary, within three days and it is not to exceed 2 pages. The submissions should also be uploaded to Caselines and counsel should notify my judicial assistant at violet.kocevski-theriault@ontario.ca once that is done.

HURLEY, J

Released: June 27 2023

COURT FILE NO.: CV-12-00000042-0000

DATE: 2023-06-27

SUPERIOR COURT OF JUSTICE

PETER JAMES STEWART, Estate trustee of the late DENNIS LYNCH

Plaintiff

– and –

BAY OF QUINTE MUTUAL INSURANCE CO. and DAVID BOWDEN

Defendants

REASONS FOR DECISION

HURLEY, J

Released: June 27 2023

[^1]: I can infer from the documents that ezITV was a software program which was used by Ms. Bailey to calculate the replacement cost based on information contained in the Prince Edward Appraisal.

[^2]: There was some evidence about Mr. Lynch contacting BOQ about a plumbing problem but that was unrelated to the issues in this lawsuit.

[^3]: This is my arithmetical calculation based on the dimensions stated in the listing agreement. It identified seven rooms on the main level and four on the upper level. There was a dimension recorded for each room.

[^4]: The evidence about when he did so and under what circumstances was not entirely clear but I infer it was soon after the fire.

[^5]: The words “Insured’s Portion $82,635.75” is handwritten.

[^6]: The insurer is entitled to do so under Statutory Condition 5, s.148 of the Insurance Act.

[^7]: The letters which Mr. Stewart sent to Ms. Lyons in 2010 also do not assist the plaintiff in this regard. Mr. Stewart does not suggest in any of them that Mr. Lynch will apply the additional money, should it be paid by the defendant, to building a new house. Nor does he assert that, with the additional funds, Mr. Lynch will rebuild or, without the money, he is financially unable to rebuild.

[^8]: I base this on the testimony of David LeBlanc.

[^9]: The requirement that a proof of loss be delivered “as soon as practicable” was not an issue; Mr. Baldwin acknowledged in final submissions that the time would run to Mr. Lynch’s date of death in 2015.

[^10]: As the defendant did in Monk.

[^11]: I recognize that the ultimate award at an appraisal is, in effect, a majority decision because the umpire decides, after considering the evidence, which appraiser’s valuation is the preferable one but functionally this is what a judge also does in deciding whose evidence to accept at the trial.

[^12]: See also Re Barrett et al and Elite Insurance Co. et al, (1987) 1987 CanLII 4160 (ON CA), 59 O.R. (2nd) 186. In that case, ACV was not defined in the policy. After reviewing the jurisprudence, Grange, J.A. adopted the following statement from the headnote in Canadian National Fire Ins. Co. v. Colonsay Hotel Co., 1923 CanLII 49 (SCC), [1923] S.C.R. 688: “The actual cash value is not or is not necessarily replacement value nor the market value. The value to the insured may depend on many factors; there may be a value in use by the insured much higher than its market value; at the same time its value to the owner may be much less than the cost of replacement even allowing for physical and functional depreciation.”

[^13]: See Intact Insurance Company v. Laporte et al., 2023 ONSC 1828 at para.58; Groupone Insurance Services v. Li, ONSC 3428 at para. 7

[^14]: Although the figure of 50% remained consistent, it appears the defendant decided it would not be 50% of replacement value of the items initially submitted (which totaled $140,000) but rather 50% of the policy limit of $110,000