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Insurance - Umpire Appraisals [s.128] (4). Stewart v. Bay of Quinte Mutual Insurance Co.
In Stewart v. Bay of Quinte Mutual Insurance Co. (Ont CA, 2024) the Ontario Court of Appeal dismissed a property insurance appeal, here where the appellant alleges that the insurer paid "considerably less than the value of items that [were] lost in the fire".
Here the court considers 'umpire appraisal' issues [under IA s.128] in contrast with the 'actual cash value' (ACV) determination of value:The trial judge did not err in declining to order an appraisal under s. 128 of the Act
[12] The trial judge declined to order an appraisal under s. 128 of the Act, concluding that it was preferable in the circumstances for the court to assess the actual cash value (ACV) of the personal property that Mr. Lynch claimed to have lost in the fire. BOQ contends that this is a reversible error because the statutory appraisal process was mandatory but could not be undertaken, given the insured’s failure to deliver a sworn proof of loss.
[13] An appraisal mechanism is set out in s. 128 of the Act. Under s. 128(2) the insured and the insurer each appoint an appraiser, and the two appraisers so appointed appoint an umpire. Subsection (5) provides for a court order to give effect to the appraisal mechanism:(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. [14] A judge has the discretion to decline to appoint an appraiser under s. 128(5), based on the permissive language (“may” rather than “shall”) and the interpretation of the provision by this court. In 56 King Inc. v. Aviva Canada Inc., 2017 ONCA 408, the court held that s. 128 “signals a decided preference for appraisal, as the authorities note, but the language of s. 128 gives the court discretion to curb abuse”.
[15] BOQ relies on The Dominion of Canada General Insurance Company v. Nelson, 2023 ONSC 386 (Div. Ct.). In that case, the parties engaged in an appraisal process to determine an insured’s loss in a fire. Following the appraisal process, the insured brought a civil action against the insurer seeking damages for alleged breach of contract for insurance coverage. The insurer sought the dismissal of the action through a summary judgment motion. The motion was dismissed at first instance but granted on appeal. The Divisional Court held that “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”.
[16] Nelson involves the jurisdiction of the Superior Court to assess a fire loss claim that has already been subject to a s. 128 appraisal process. It does not address the discretion of a Superior Court judge to compel a party to submit to such a process and does not supersede this court’s determination in 56 King Inc. that a judge has the discretion to refuse to order an appraisal.
[17] BOQ argues alternatively that the trial judge’s refusal of an order for an appraisal in this case was unwarranted. We disagree.
[18] Having found that the insured’s failure to provide a sworn proof of loss was not fatal to its claim, Justice Hurley found the appellant waived its right to an appraisal. As he noted:Neither side expressed any interest in [an appraisal]. 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. [19] The trial judge found that ordering an appraisal would not save any money or time, as he had all the information necessary to assess the value of Mr. Lynch’s lost property: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. 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. [20] We see no basis to interfere with the trial judge’s exercise of discretion under s. 128(5). As he observed, the purpose of the appraisal mechanism in the Act is to provide an expeditious and easy means for the settlement of claims for indemnity under insurance policies. By the time BOQ took the position that the ACV could only be decided through an appraisal, nine years had passed since the fire. Mr. Lynch’s claim that BOQ had negligently under-insured his property would have had to proceed to trial anyway. In the circumstances, the trial judge’s conclusion that an appraisal would result in additional delay and expense was eminently reasonable.
The trial judge did not err in assessing the ACV of the lost personal property
[21] BOQ contends that there was no reliable evidence on which the trial judge could determine the ACV of Mr. Lynch’s lost personal property. We disagree.
[22] As the trial judge correctly noted, there is no single or right way to calculate the ACV under an insurance policy. As already mentioned, BOQ had an opportunity to examine Mr. Lynch on the Schedule of Loss prepared by an adjuster he retained, NFA. At trial, an NFA adjuster, David LeBlanc, testified as an expert witness. He calculated the ACV of the items on the Schedule at $134,053; this was lower than the original total as Mr. Leblanc acknowledged that some items should not have been included on the Schedule. BOQ’s expert was an auctioneer, Boyd Sullivan. He valued the items at $20,000-$25,000 based solely on his experience as an auctioneer. He acknowledged on cross-examination that he was not familiar with the term ACV or the value of certain items on the Schedule.
[23] The trial judge accepted Mr. Leblanc’s evidence, concluding that his opinion was based on information that the trial judge deemed credible and reliable, and that the depreciation factors applied were reasonable. The trial judge found Mr. Sullivan’s evidence of no assistance.
[24] The trial judge was entitled to accept the respondent’s evidence and to prefer it to BOQ’s evidence. BOQ has not identified any palpable and overriding error in the ACV determination. . Mann-Bentley v. North Kent Mutual Insurance Co.
In Mann-Bentley v. North Kent Mutual Insurance Co. (Div Court, 2024) the Divisional Court dismisses a JR by the insured against an Insurance Act (IA) s.128 umpire appraisal award, here regarding a fire claim.
Here the court considered the JR approach where few or no 'reasons for decision' are provided, here by the s.128 umpire:[14] In Laporte (Div. Ct.), at para. 28, D. Edwards J. cited the Supreme Court’s guidance on how to approach on appeal where no reasons are required or given:There will nonetheless be situations in which no reasons have been provided and neither the record nor the larger context sheds light on the basis for the decision. In such a case, the reviewing court must still examine the decision in light of the relevant constraints on the decision maker in order to determine whether the decision is reasonable. But it is perhaps inevitable that without reasons, the analysis will then focus on the outcome rather than on the decision maker’s reasoning process. This does not mean that reasonableness review is less robust in such circumstances, only that it takes a different shape: Vavilov, at para. 138. [15] Accordingly, appraisal awards should generally be afforded significant deference.
THE APPRAISAL AWARD
[16] The umpire’s award is very short. He clearly preferred the insurer’s appraiser’s opinion on the size of the cottage but did not provide any reasons stating why.
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PRELIMINARY EVIDENTIARY ISSUE
[20] Where an umpire does not give reasons, it is appropriate to re-create the record of what was before the umpire, as the parties did here. The applicant, however, argued that the Court should ignore appraiser Valeriote’s 10 April 2024 affidavit. Alternately, she argues that we should ignore paragraphs 6-13, 15-22, and 25-31 of that affidavit. She gives two bases for this submission: 1) it was late filed, and 2) it contains evidence that is not properly before the Court, namely, information Mr. Valeriote received from others, but which Mr. Valeriote does not say he believes is true. Further, that evidence is not on non-controversial matters and violates r. 39.01(5).
[21] We accept the 10 April Affidavit as it contains necessary information such as emails and Mr. Valeriote’s memory, which clarifies evidence arising out of the affidavits filed before 10 April, and to understand what transpired at the appraisal hearing. The applicant does not argue that this information in it is not true nor did she seek an adjournment to consider and respond to it. To exclude that affidavit in its entirety would allow form to triumph over substance.
[22] We accept the applicant’s position, however, that those portions of the 10 April affidavit which are on information and belief are improper as those portions of the affidavit do not deal with non-controversial matters. We have ignored them. Even had we excluded the affidavit in its entirety, the outcome of this application would have remained the same. . Mann-Bentley v. North Kent Mutual Insurance Co.
In Mann-Bentley v. North Kent Mutual Insurance Co. (Div Court, 2024) the Divisional Court noted a limited JR jurisdiction for Insurance Act s.128 umpire appraisal cases.
Here the court reviews the JR SOR and the JR jurisdiction bearing on such cases, where there is higher deference due to the decider's (or tribunal's) expertise:JURISDICTION
[11] The court has jurisdiction to hear this application for judicial review pursuant to ss. 2(1) and 6(1) of the JRPA. This Court has ruled, however, that its jurisdiction to review an appraisal award is narrow, limiting intervention only to when there has been misconduct, or where the appraiser or umpire has exceeded his or her jurisdiction: Sellors v. State Farm Fire and Casualty Co., 2023 ONSC 645 (Div. Ct.), at para. 21; Seed v. ING Halifax Insurance (2005), 2005 CanLII 41991 (ON SCDC), 78 O.R. (3d) 481 (Div. Ct.), at para. 23. Although an umpire is not required to give reasons, the failure to do so may also be grounds for intervention: Intact Insurance Co. v. Laporte (c.o.b. Warrior Gear), 2023 ONSC 1828 (Div. Ct.), at paras. 78-79, Leiper J. dissenting, at paras. 133-135, rev’d on other grounds 2024 ONCA 454.
STANDARD OF REVIEW
[12] The applicant and the respondent agree that the appropriate standard of review on this application is reasonableness: Canada (Minister of Citizenship and Immigration) v. Vavilov, 2019 SCC 65, [2019] 4 S.C.R. 653. Under Vavilov, the court must only determine whether the decision bears the “hallmarks of reasonableness – justification, transparency and intelligibility – and whether it is justified in the relevant factual and legal constraints that bear on the decision.” Unreasonable decisions are those that contain at least one of two fundamental flaws: 1) a failure of rationality internal to the reasoning process; and/or 2) is in some respect untenable in light of relevant factual and legal constraints: Vavilov, at paras. 99-101.
[13] The standard of review for Insurance Act appraisal awards must be viewed in the context of the appraisal mechanism under that Act. An appraisal is not adjudicative or quasi judicial process. It is a process based on discussion between those with knowledge and expertise. It is intended to be collaborative, not adversarial. Where the appraisers cannot agree on the value of the property lost, the umpire decides using a process of his or her design: Northbridge General Insurance Corp. v. Ashcroft Homes-Capital Hall Inc., 2021 ONSC 1684 (Div. Ct.), at para. 29. Since an appraisal under s. 128 is not an arbitration, it does not require a hearing, evidence, or reasons: Campbell v. Desjardins General Insurance Group, 2022 ONCA 128, 467 D.L.R. (4th) 480, at para. 47.
[14] In Laporte (Div. Ct.), at para. 28, D. Edwards J. cited the Supreme Court’s guidance on how to approach on appeal where no reasons are required or given:There will nonetheless be situations in which no reasons have been provided and neither the record nor the larger context sheds light on the basis for the decision. In such a case, the reviewing court must still examine the decision in light of the relevant constraints on the decision maker in order to determine whether the decision is reasonable. But it is perhaps inevitable that without reasons, the analysis will then focus on the outcome rather than on the decision maker’s reasoning process. This does not mean that reasonableness review is less robust in such circumstances, only that it takes a different shape: Vavilov, at para. 138. [15] Accordingly, appraisal awards should generally be afforded significant deference. . Mann-Bentley v. North Kent Mutual Insurance Co. [illustration]
In Mann-Bentley v. North Kent Mutual Insurance Co. (Div Court, 2024) the Divisional Court dismisses a JR by the insured against an Insurance Act (IA) s.128 umpire appraisal award, here regarding a fire claim.
Here the court illustrates some typical IA s.128 procedures:[1] This is an application for judicial review pursuant to s. 2(1) of the Judicial Review Procedure Act, R.S.O. 1990, c. J.1 (“JRPA”) of an appraisal award made under s. 128 of the Insurance Act, R.S.O. 1990, c. I.8 (the “Act”), with respect to the value of the damage to the applicant’s cottage property following a fire.
[2] The applicant seeks an order in the nature of certiorari quashing or setting aside the appraisal award and remitting the matter for a fresh appraisal before a new umpire. The respondent requests that the application be dismissed.
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[3] In 2019, the applicant, Patricia Mann-Bentley, purchased a cottage at 6195 London Road, Lambton Shores, Ontario and insured it through their insurance agent, Marianne Hope, with the respondent, North Kent Mutual Insurance Company, under a property policy, Policy No. 56646P01.
[4] The cottage was completely destroyed by fire on January 20, 2022, which was ultimately ruled to be criminal arson by someone other than the applicant and her husband. The respondent retained Paul Davis of Chatham-Kent to provide it with a “total loss repair estimate” for the cottage. Paul Davis produced two estimates dated February 7, 2022 and May 20, 2022.
[5] The applicant and her husband, Barry Bentley, sued the respondent in 2022 for damages in breach of contract. On January 27, 2023, the respondent invoked the appraisal process in s. 128 of the Act to determine the value of the cottage fire loss.
[6] Under s. 128 of the Insurance Act’s arbitration process, each party retains an appraiser who provides an assessment of the value of the loss. The two appraisers select an umpire to decide the value of the loss. In this case, the respondent appointed John Valeriote, a veteran insurance appraiser as its appraiser, and the applicant, Thomas Hanrahan, a veteran insurance lawyer. The appraisers appointed James Minns as umpire.
[7] The appraisers agreed that the replacement cost of the cottage was $256.26 per sq. ft. They differed, however, on the size of the cottage. For the respondent, Mr. Valeriote argued that the cottage was 1,140 sq ft., based on the two estimates prepared by Mr. Scott of Paul Davis after the fire. Mr. Scott went to the property and measured what remained of the building. For the applicant, Mr. Hanrahan submitted that the cottage was 1,341 sq ft., based on an iClarify valuation report that had been prepared in 2019 at the request of the insurance broker, Ms. Hope, when the applicant purchased the home. After it received the iClarify report, the insurer issued the policy.
[8] Umpire Minns found that the Replacement Cost of the cottage at $285,785.27 based on the agreed replacement cost price per square foot and, implicitly, a total cottage size of 1,140 sq ft.
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