Section 128 of the Insurance Act, RSO 1990, c I.8 (the “Act”), applies to an insurance policy containing a condition, statutory or otherwise, providing for an appraisal to determine specific matters – typically, the value of insured property – in the event of a disagreement between the insurer and the insured. More specifically, s. 128(5) of the Act, authorizes the court to appoint an appraiser where a party fails to do so within seven days of being served with notice to do so.
In addition, statutory condition 11 under the Act provides that in the event of disagreement as to the value of A) the property insured, B) the property saved, and/or C) the amount of the loss, these matters “shall be” dealt with “by appraisal as provided under the [Act] before there can be any recovery under [the policy] whether the right to recover on the [policy] is disputed or not, and independently of all other questions.” Statutory condition 11 also provides that there “shall be no right to an appraisal until a specific demand therefore is made in writing and until after proof of loss [(“POL”)] has been delivered.”
The above-noted provisions were most recently considered by the Honourable Justice F.L. Myers in 2343697 Ontario Inc. (the “plaintiff”) v. Aviva Insurance Company of Canada (“Aviva”), 2019 ONSC 3106. In this case, Aviva moved for an order under s. 128(5) of the Act requiring the plaintiff to appoint an appraiser, failing which Aviva sought relief to proceed with its own appraisal of the plaintiffs’ alleged losses.
On November 24, 2014, the plaintiffs’ cottage was damaged as a result of poor weather. The plaintiffs’ made claims under their property insurance policy which included statutory condition 11. On May 19, 2015, the plaintiffs’ delivered a form of POL, and on December 2, 2015, commenced an action against Aviva. Mediation was attempted in December 2018, and failed, and by January 2019 undertakings were answered.
On March 7, 2019, Aviva delivered notice to the plaintiffs that they had to appoint an appraiser in accordance with s. 128(5) of the Act. In response, the plaintiff refuted that an appraisal was the appropriate process and failed to appoint an appraiser. As a result, Aviva sought the contested order at issue.
The law in respect of appraisals brought while litigation is
still ongoing is well established.
In 56 King Inc. v. Aviva Canada Inc., 2017 ONCA 408, the Court of Appeal for Ontario held that appraisal is the favoured process for determining damages in property insurance cases, and that appraisals may indeed be initiated while litigation is outstanding.
Moreover, in Seed v. ING Halifax Insurance, 2005 CanLII (ON SCDC), the Honourable Justice J. Wright concluded:
 … the process of appraisal is a few standing one which is mandated by the [Act]. It must be proceeded with if either party requests it. It is quite distinct from the court action. The determination of the amount of the loss arising from property damage cannot be before the court in the action.
The Plaintiffs’ Position
Before Justice Myers, the plaintiff submitted that:
- Aviva’s request for appraisal came “very late” in the litigation process and was “designed to delay them from setting the action down for trial”;
- under statutory condition 11, “appraisal is only available when the insured has delivered its [POL]”, and that Aviva had defended on the basis that the plaintiffs had failed to provide a completed POL;
- Aviva denied all 50 facts alleged in a recent request to admit, including “the existence of the policy and the existence of a [POL]”;
- Aviva is “carrying on this litigation in an abusive way and should be held to their denial of the [POL] as disabling them from commencing an appraisal”;
- this case turns on “whether a limitation of liability in the policy applies” and how one “interprets a clause [that governs] the calculation of the plaintiffs’ losses”, and that there is “nothing to appraise” until these two preliminary issues are addressed and resolved; and
- in law, appraisal is not available where, as was alleged in this case, “the action centers on interpretation issues rather than valuation issues”.
The Appraisal Was Ordered
Ultimately, the plaintiffs’ argument failed, and for the reasons that follow, Aviva was granted its order as sought.
Specifically, Justice Myers held that:
- The plaintiff “read the pleadings and their request to admit rather generally” and that Aviva did not deny that POL had been delivered, but rather that the plaintiff had “failed to provide a completed [POL] or substantiating documentation” in respect of the claims, despite “numerous requests” from Aviva to do so;
- The plaintiff “put forward a triple-barreled fact for admission” in their request to admit, and it is “not a fair reading” of Aviva’s blanket denial of same to say that Aviva denied receiving the POL form delivered by the plaintiffs;
- The plaintiff ignored portions of the statement of defence where Aviva “expressly put in issue the existence of damages and whether the damages claimed are excessive and exaggerated”; in other words, “in no sense can it be said that there is agreement on the value of the plaintiffs’ claim”;
- The plaintiff put forward no case law in support of their position that “appraisal cannot be utilized if there are interpretive issues for trial or other issues than just the quantum of loss claimed”;
- The plaintiff’s arguments were “inconsistent with the plain wording of statutory condition 11”;
- the appraisal process is to be used “even where coverage is not admitted” and “even when there are other questions between the parties”; and
- there was no abuse of process on the part of Aviva, nor would The plaintiff be harmed “by having the expert appraisers proceed as anticipated by the statute in parallel with the action being readied for trial.”
From this decision, insurers can take comfort that the courts see little to no downside of the appraisal process if there is no abuse of process and it results in the parties having “in hand the monetary value needed for the trial.”