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Insurance - Umpire Appraisals [s.128]
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. Sellors v. State Farm
In Sellors v. State Farm (Div Court, 2023) the Divisional Court considered the duty of a s.128 insurance umpire to provide reasons for their decision, though here where the applicant made no submissions in the appraisal process:(c) Failure to Provide Reasons
[36] The Insurance Act provides that a decision shall be an award signed by any two among the two appraisers appointed by the parties and the Umpire. The Act does not require that reasons be provided. It is not necessary for this court to consider whether reasons might ever be required in a particular circumstance as a component of a fair appraisal process. In this case, where the Applicant filed no materials and chose not to attend, a joint decision of the Respondent’s appraiser and the Umpire is sufficient and there was no requirement to give reasons. See Madhani v. Wawanesa Insurance Company, 2018 ONSC 4282, paras. 42 and 44 (Div. Ct.). . Sellors v. State Farm
In Sellors v. State Farm (Div Court, 2023) the Divisional Court considered a JR of an insurance umpire's fire insurance ruling [s.128 Insurance Act]:[1] Mr Sellors seeks judicial review of the appraisal award of Umpire Peter Volaric and the Respondent’s appraiser, D’Arcy Kinghorn, dated October 21, 2019. He argues that the Umpire overstepped or exceeded his jurisdiction, denied Mr Sellors procedural fairness, and acted in conflict of interest, giving rise to a reasonable apprehension of bias. For the reasons that follow, I would not give effect to any of these arguments and would dismiss the application.
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Jurisdiction and Standard of Review
[19] There is no appeal from an appraisal decision under s. 128(3) of the Insurance Act. This court’s jurisdiction is restricted to a judicial review of the decision: Judicial Review Procedure Act, RSO 1990, c.J.1, ss. 2(1) and 6(1).
[20] The standard of review of the appraisal award is reasonableness: Canada (Minister of Citizenship and Immigration) v. Vavilov, 219 SCC 65; Madhani v. Wawanesa Mutual Insurance Company, 2018 ONSC 4282, paras. 14-18 (Div. Ct.). Procedural issues are reviewed on a standard of fairness: Canada (Minister of Citizenship and Immigration) v. Vavilov, 219 SCC 65; Baker v. Canada (Minister of Citizenship and Immigration), 1999 CanLII 699 (SCC), [1999] 2 SCR 817, paras. 23-28; Madhani v. Wawanesa Mutual Insurance Company, 2018 ONSC 4282, para. 19 (Div. Ct.).
[21] As stated by a majority of this court in Seed v. ING Halifax Insurance (2005), 2005 CanLII 41991 (ON SCDC), 78 OR (3d) 481, para. 23:The purpose of the appraisal process under s. 128 of the Insurance Act is to provide an expeditious and easy manner for the settlement of claims for indemnity under insurance policies. It is intended to be a final and binding determination of the loss…. Courts have afforded substantial deference to an appraisal under the Insurance Act and the appraisal process, which is not subject to the Statutory Powers Procedure Act, RSO 1990, c.S.22. Unless there is proof of misconduct or that the appraisers or umpire exceeded their jurisdiction, courts have been reluctant to interfere. [22] As explained in detail below, the appraisal hearing before the Umpire was essentially unopposed. The court will be particularly reluctant to interfere with an award at the behest of a claimant who has failed or refused to participate in the process as directed by the Umpire. . Sellors v. State Farm
In Sellors v. State Farm (Div Court, 2023) the Divisional Court considered a JR of an insurance umpire's fire insurance ruling [s.128 Insurance Act]. The following extracts are a useful, albeit incompletely-attended, walk-through of the appraisal-umpire procedure which is common for fire claims:Background
[2] This case arises out of a fire at Mr Sellors’ property in Osprey, Ontario on March 30, 2012. Mr Sellors was insured under a homeowner’s insurance policy written by the Respondent, State Farm, which provided coverage as follows:(a) Dwelling: $214,900
(b) Contents: $161,175
(c) Additional Living Expenses: as incurred, subject to the terms of the policy. [3] Mr Sellors commenced an action against State Farm on March 18, 2014, and, in separate proceedings, commenced an application against State Farm invoking the appraisal process under the Insurance Act, RSO 1990, s.I.18 (the “Insurance Act”), seeking an order requiring State Farm to appoint an appraiser.
[4] In response to Mr Sellors’ application, State Farm appointed an appraiser (Mr Kinghorn). Mr Sellors appointed Steven Sobel as his appraiser.
[5] The appraisers appointed Peter Volaric as the Umpire for the appraisal in late 2014.
[6] The two appraisers apparently worked together to try to appraise outstanding claims until the spring of 2015, at which time the Umpire scheduled the appraisal hearing for July 20, 2015. He directed the appraisers to provide him with their appraisal briefs, in duplicate, by July 7, 2015. He directed that he would provide each side with the other side’s brief after he received them.
[7] State Farm’s appraiser sent his appraisal brief to the Umpire, in duplicate, on June 29, 2015. As of July 13, 2015, Mr Sellors’ appraiser had not delivered his appraisal brief.
[8] The Umpire conducted a conference call with the appraisers on July 13, 2015. On that call, Mr Sellors’ appraiser advised that the appraisal hearing would have to be postponed. Thereafter, Mr Sellors’ appraiser did not deliver an appraisal brief and took no steps to reschedule the appraisal hearing. At the end of 2015, Mr Sobel ceased to be Mr Sellors’ appraiser.[1]
[9] From the cessation of Mr Sobel’s involvement in late 2015 until early 2019, Mr Sellors did not appoint a replacement appraiser and no further progress was made in the appraisal process.[2]
[10] Mr Sellors commenced a separate action against 1659311 Ontario Ltd. related to claims respecting construction work done on his dwelling. Counsel for the defendant in that action moved for an order providing (among other things) that this separate action proceed together with Mr Sellors’ claims against State Farm. State Farm consented in principle to an order that the two actions proceed together, conditional on the appraisal process being completed before other steps were taken in the litigation. Mr Sellors agreed that the legal proceedings should proceed together but opposed the requirement that the appraisal be completed before further steps in the actions.
[11] By handwritten endorsement on December 13, 2018, Sproat J. ordered (among other things), that (i) Mr Sellors appoint an appraiser; (ii) that the appraisal be completed before the actions proceed further; and (iii) that the schedule for the remainder of the actions be negotiated among the parties after completion of the appraisal process. Sproat J. ordered costs against Mr Sellors of $5,000 in the aggregate.
[12] Following the order of Sproat J., Mr Sellors appointed his current solicitor, Ms Sung, as his appraiser.
[13] The Umpire scheduled a teleconference for August 20, 2019, to schedule the appraisal hearing.[3] State Farm’s appraiser attended the conference call. Mr Sellors’ appraiser, Ms Sung, did not attend the conference call. Instead, Mr Sellors attended the conference call himself.
[14] During the conference call, the Umpire scheduled the appraisal for either October 18, 2019, or October 21, 2019, depending on Ms Sung’s availability, with appraisal briefs to be provided to the Umpire in advance. Neither Mr Sellors nor Ms Sung got back to the Umpire respecting Ms Sung’s availability, so on August 27, 2019, the Umpire set October 21, 2019 as the date for the appraisal hearing.
[15] On October 8, 2019, the Umpire wrote to Ms Sung, confirming again the appraisal date of October 21, 2019, and reminding Ms Sung that appraisal briefs were to be provided to the Umpire by October 15, 2019. Ms Sung responded that she would not be providing an appraisal brief and would not be attending the scheduled appraisal hearing.
[16] State Farm’s appraiser updated his appraisal brief and sent it to the Umpire the week of October 7, 2019. A copy of this brief was provided to Ms Sung on October 11, 2019.
[17] The appraisal hearing proceeded, as scheduled, on October 21, 2019, at the Umpire offices. State Farm’s appraiser attended with two other persons. No one attended on Mr Sellors’ behalf. Mr Sellors did “call in” to the appraisal hearing by telephone. He asked permission to record the call. The Umpire denied this request, after which Mr Sellors terminated the call.
[18] The Umpire then conducted the appraisal hearing and released the award. In the award, the Umpire and State Farm’s appraiser made global findings of the total replacement cost and total cash value for each of the claims for the Dwelling and the Contents, and a global finding of additional living expenses based on a period of indemnity of eleven months, to January 28, 2013. . The Dominion of Canada General Insurance Company v. Nelson
In The Dominion of Canada General Insurance Company v. Nelson (Div Court, 2023) the Divisional Court considers the Insurance Act s.128 umpire appraisal procedure:[28] The nature of the appraisal process for property damage valuation disputes arising under a policy of insurance is set out in s.128 of the Act, as follows:128 (1) This section applies to a contract containing a condition, statutory or otherwise, providing for an appraisal to determine specified matters in the event of a disagreement between the insured and the insurer. R.S.O. 1990, c. I.8, s. 128 (1).
Appraisers, appointment
(2) The insured and the insurer shall each appoint an appraiser, and the two appraisers so appointed shall appoint an umpire. R.S.O. 1990, c. I.8, s. 128 (2).
Appraisers, duties
(3) The appraisers shall determine the matters in disagreement and, if they fail to agree, they shall submit their differences to the umpire, and the finding in writing of any two determines the matters. R.S.O. 1990, c. I.8, s. 128 (3). [29] In this case, statutory condition 11 under s. 148 of the Act provided for such an appraisal:In the event of disagreement as to the value of the property insured, the property saved or the amount of the loss, those questions shall be determined by appraisal as provided under the Insurance Act before there can be any recovery under this contract whether the right to recover on the contract is disputed or not, and independently of all other questions. There shall be no right to an appraisal until a specific demand therefor is made in writing and until after proof of loss has been delivered. [30] The appraisal process is a fundamental tool in the resolution of these kinds of insurance disputes. In essence, the Act provides a comprehensive process for determining the amount of insurance to be paid for property damage caused by fire. Both parties had engaged this process as provided by the insurance contract and the governing legislation and administrative framework.
[31] In 854965 Ontario Ltd. v. Dominion of Canada General Insurance Co 2003 CanLII 42670 (ON SC) the appraisal process under the Act was described as follows (at para. 25):The appraisal process is contemplated, by the terms of statutory condition # 11, to take place prior to any recovery under the contract, whether there is any dispute as to the ability to recover on the contract, and independently of all other questions. The appraisal process commonly determines value but leaves question[s] of entitlement and defences to recovery under the contract to a lawsuit under the contract of insurance. [32] The appraisal process under the Act has been described as unique. As summarized by the Divisional Court in its decision in Birmingham Business Centre Inc. v. Intact Insurance Company, 2018 ONSC 6174 (CanLII):There have been a number of cases that have commented upon the unique statutory scheme and context that govern the award under review see Krofchick et al and Provincial Insurance Co. Ltd. et al, 1978 CanLII 1304 (ONSC); Barrett et al and Elite Insurance Co. et al, 1987 CanLII 4160 (ONCA); Seed v. ING Halifax Insurance et al, 2005 CanLII 41991 (Div. Ct); Madhani v. Wawanesa Mutual Insurance Company, 2018 ONSC 4282 (Div. Ct.)
What emerges from these cases is the following:(1) The purpose of this appraisal process is to provide an expeditious and easy manner for the settlement of claims for indemnity under insurance policies. It is intended to be a final and binding determination of the loss.
(2) Courts have afforded substantial deference to an appraisal under the Insurance Act and the appraisal process. Unless there is proof of misconduct or that the appraisers or umpire exceeded their jurisdiction courts have been reluctant to interfere.
(3) The appraisal process established by the Insurance Act is considered to be a valuation not an arbitration.
(4) The appraisal process is not adjudicative in nature. The process is based on discussion and on the sharing of expertise in valuation. Appraisers can arrive at a decision based on their own knowledge and expertise.
(5) An appraisal is not subject to the provisions of the Statutory Powers Procedure Act, R.S.O. 1990 c. S.22. (6) An appraisal under s. 128 of the Insurance Act requires neither a hearing, a consideration of evidence nor reasons. [33] Similarly, as noted in DK Manufacturing Group Ltd. v. Co-operators General Insurance Co. 2016 ONSC 3983, at paragraph 45:Importantly, as a matter of law the appraisal process provided for under a policy pursuant to s.128 of the Insurance Act is not optional once it is invoked; rather, it is mandatory: Seed v. ING Halifax Insurance, [2002] O.J. No. 1976 (Ont. S.C.J.). Moreover, the case law is clear that an Umpire’s ruling constitutes a final determination of the issue and is binding on all parties. If a party wishes to dispute the ruling of an Umpire, that party must bring an application for judicial review to the Divisional Court. Even then, the courts are cautioned against “lightly interfering” with an Umpire’s ruling. This has been interpreted as requiring misconduct on the part of the Umpire. Seed v. ING Halifax Insurance, 2005 CanLII 41991 (ON SCDC), [2005] O.J. No. 4870 (Ont. Div. Ct.) at para. 23; Barrett v. Elite Insurance Co. (1987), 1987 CanLII 4160 (ON CA), 59 O.R. (2d) 186 (Ont. C.A.) at para. 13. [34] Again, as noted by Perell J. in Northbridge General Insurance Corp. v. Ashcroft Homes-Capital Hall Inc., 2021 ONSC 1684 (CanLII) (at paras 22-23):The purpose of the appraisal process under the Insurance Act is to provide an expeditious and easy means for the settlement of claims for indemnity under insurance policies. The appraisal process may be demanded only where there is a dispute about the valuation of the loss. There is no time limit within which to request the appraisal process, and absent proof of prejudice, delay in invoking the appraisal process is not a factor in the right to an appraisal.
The appraisal process is intended to be a final and binding determination of the loss. The appraisal process is mandatory, and unless waived by both parties or unless impossible to perform, there must be an appraisal before there can be recovery under the policy. The appraisal process is intended to a facilitate a quick resolution of a dispute about the value of the property insured, the value of the salvage, or the quantification of the damage to the property, but it is not intended to be an arbitration or an alternative dispute resolution method that will resolve all the issues between the parties; all other non-valuation issues are outside the province of the appraisers and umpire to resolve. [35] In Northbridge General Insurance Corp. v. Ashcroft Homes-Capital Hall Inc., supra, Perell J. further stated (at para 33):As noted above, the appraisal process is subject to judicial review, but the appraisal process is not subject to the provisions of the Statutory Powers Procedure Act. On a judicial review application, reasonableness is the applicable standard of review in accordance with the principles set out by the Supreme Court of Canada in Canada (Minister of Citizenship and Immigration) v. Vavilov. On a judicial review application, the court may determine on a case-by-case basis whether there was procedural fairness in the appraisal process having regard to: (a) the nature of the decision being made and the process followed in making it; (b) the nature of the statutory scheme being administered; (c) the importance of the decision to the affected individual; (d) the legitimate expectations of the person challenging the decision; and (e) respect for the choice of the procedures made by the administrative agency itself. [36] The appraisal process is not necessarily exhaustive of all potential disputes between the parties who engage it. For example, there may be a dispute about the scope of coverage such as whether landscaping restoration is covered under the policy of insurance. While the value of such a loss might be determined as part of the appraisal process, that process does not address entitlement to indemnity for it (see: Desjardins General Insurance Group v. Campbell, 2022 ONCA 128). In the present case, however, the Respondent’s action as pleaded challenges the valuation presented to and accepted by the Insurance Umpire.
[37] The results of an appraisal are therefore final, binding and subject only to an application for judicial review in the Divisional Court, generally on a standard of reasonableness. In such cases the remedy available, if the application is successful, is an order setting aside or varying the valuation.
[38] Accordingly, the Superior Court does not have jurisdiction to hear and decide a claim relating to an appraisal of fire insurance damages under an insurance policy that has already been the subject of an appraisal process and determination by an Insurance Umpire under the Act. In failing to so find, the motion judge erred in law.
[39] Apart from the specific statutory provisions and the case law referred to above, there are good policy reasons for this approach to the issue. Permitting the parties to expend their own and court resources on pursuing and defending a civil action in such circumstances runs contrary to the statutory scheme under the Act which is designed to be simple and cost-effective. Moreover, allowing a trial judge to set aside or vary an appraisal in the absence of statutory authorization to do so undermines the appraisal process. Insureds and insurers could sidestep the standard of review and the deference expected to be afforded to the appraisal process and the Insurance Umpire. . Senator Real Estate v. Intact Insurance
In Senator Real Estate v. Intact Insurance (Div Ct, 2021) the Divisional Court considered a judicial review application by an insured of a decision of an umpire appointed under s.128 of the Insurance Act (umpires appointed for appraisals under a policy). The whole case is a useful sample of the procedure used under s.128.
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