Example of how the Appraisal Process and Procedures can go off the rails.

Mar 5, 2021

CITATION: Northbridge General Insurance Corp. v. Ashcroft Homes-Capital Hall Inc., 2021 ONSC 1684

COURT FILE NO.: CV-20-00645096-0000

COURT FILE NO.: CV-20-00649990-0000

DATE: 20210305

 

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

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NORTHBRIDGE GENERAL INSURANCE CORPORATION

Applicant

– and –

ASHCROFT HOMES-CAPITAL HALL INC.

Respondent

AND BETWEEN:

ASHCROFT HOMES-CAPITAL HALL INC.

Applicant

– and –

NORTHBRIDGE GENERAL INSURANCE CORPORATION

Respondent

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)

)

)

)

)

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Andrew A. Evangelista and David W. Powrie for the Applicant

Thomas G. Conway and Natalia Rodriquez for the Respondent

 

 

Thomas G. Conway and Natalia Rodriquez for the Respondent

Andrew A. Evangelista and David W. Powrie for the Applicant

APPLICATION UNDER Rule 14.05(3)(d) of the Rules of Civil Procedure and s.128(5) of the Insurance Act, R.S.O. 1990, c.I.8

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HEARD: February 11, 2021

PERELL, J.

REASONS FOR DECISION

A. Introduction

[1] Saga of a procedural shipwreck to follow.

[2] The Respondent/cross-Applicant Ashcroft Homes – Capital Hall Inc. is constructing a condominium tower in Ottawa known as Capital Hall. In April 2018, the tower, which was nearing completion, was substantially damaged in a fire. It was going to cost millions to clear the debris, repair the damage, and reconstruct the building.

[3] Ashcroft had an insurance policy with the Applicant/cross-Respondent Northbridge General Insurance Corporation. In December 2018, Northbridge initiated an appraisal process pursuant to s. 128 of the Insurance Act.[1] Northbridge and Ashcroft appointed appraisers and an umpire was selected by the appraisers.

[4] For the next almost year and a half the appraisal process continued, and in April 2020, unknown to Northbridge at the time, Ashcroft issued a Statement of Claim in the Superior Court in Ottawa alleging among other things breach of contract and breach of a duty of good faith. In its court action, Ashcroft sued Northbridge for various matters covered in the insurance policy, including recovery of insurance proceeds for reconstruction costs.

[5] The appraisal process was ultimately very dysfunctional, which as the description below will reveal can be blamed on all involved, namely, the umpire, the two appraisers, and the lawyers acting for the insured and the insurer. In May 2020, Ashcroft retained a law firm Conway Baxter Wilson LLP to replace its appraiser and that is when most of the problems began to occur.

[6] By July/August 2020, the appraisal process was totally off the rails, and in August 2020, Northbridge brought its Application to regularize the appraisal process. Northbridge sought: (a) an Order under s. 128 (5) of the Insurance Act appointing an appraiser for Ashcroft; (b) an Order directing Ashcroft to comply with s.128 of the Insurance Act and the provisions of s. 148, Statutory Condition 11; and (c) a declaration that Ashcroft was the cause of the delay in the appraisal process.

[7] In October 2020, Ashcroft served its Statement of Claim in the Ottawa action and it brought on its cross-Application. In its cross-Application, Ashcroft sought: (a) an Order declaring that the appraisal process is terminated with prejudice; (b) in the alternative, an Order declaring that the appraisal process is adjourned sine die pending the outcome of the Ottawa action; (c) in the further alternative, an Order declaring that the Umpire James Minns, be relieved of his duties as Umpire.

[8] For the reasons that follow, I dismiss Northbridge’s Application, without costs. I grant Ashcroft’s cross-Application, without costs. I terminate the appraisal process. I order the parties to pay the Umpire for his terminated services within sixty days. If there is a dispute about his charges, the Umpire and the parties may make submissions in writing to me within sixty days and I will resolve the dispute.

B. Procedural Background

[9] On August 5, 2020, Northbridge commenced its Application. It was supported by the affidavit dated October 1, 2020 of Michael S. Shuryn. He is a Claims National Field Services Representative employed by Northbridge. He was appointed Northbridge’s appraiser.

[10] Ashcroft commenced its Cross-application on October 6, 2020 supported by the affidavit dated December 9, 2020 from Emanuel DiFilippo. He is Ashcroft’s Chief Financial Officer.

[11] Ashcroft responded to Northbridge’s Application with the affidavit dated December 9, 2020 of Mr. DiFilippo.

[12] Mr. DiFilippo was cross-examined on January 22, 2021.

[13] Northbridge responded to Ashcroft’s Cross-application with the affidavit of Mr. Shuryn dated January 11, 2021.

[14] Mr. Shuryn was cross-examined on January 22, 2021.

C. The Insurance Act Appraisal Process

[15] The context for both the Application and the Cross-Application is the appraisal process mandated by s. 128 of the Insurance Act and s. 148, Statutory Condition 11. To understand why the appraisal process in the immediate case went badly awry, it is necessary to describe in some detail the case law about the appraisal process and its intersection with court proceedings.

[16] Sections 128 and 148 of the Insurance Act are an underdeveloped and disjointed area of jurisprudence, but there are several helpful decisions of the Divisional Court and a very helpful judgment by Justice M.E. Smith in Campbell v. Desjardins General Insurance Group,[2] which are discussed below.

[17] Section 128 of the Insurance Act and s. 148, Statutory Condition 11 state:

Contracts providing for appraisals.

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.

Appraisers, appointment

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

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.

Costs

(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.

Appointment by judge

(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 conditions

148(1) The conditions set forth in this section shall be deemed to be part of every contract in force in Ontario and shall be printed in English or French in every policy with the heading “Statutory Conditions” or “Conditions légales”, as may be appropriate, and no variation or omission of or addition to any statutory condition is binding on the insured.

Definition

(2) In this section,

“policy” does not include interim receipts or binders.

STATUTORY CONDITIONS

[…]

Appraisal

11. 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.

[18] Also relevant to a discussion of sections 128 and 148 is Statutory Condition 6. This contract term is relevant because the obligations it imposes remain to be performed and may be enforced in addition to observing the requirements of condition 11 (the appraisal process).

[19] Statutory Condition 6 states:

Requirements After Loss

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.

[20] Also relevant to a discussion of the appraisal process is Statutory Condition 14 which provides a limitation period for court actions for insurance proceeds. Statutory Condition 14 states:

Action

14.Every action or proceeding against the insurer for the recovery of a claim under or by virtue of this contract is absolutely barred unless commenced within one year next after the loss or damage occurs.

[21] The current version of s. 128 (2) and (3) and the current version of Statutory Condition 11 were introduced in 1966 by An Act to Amend the Insurance Act.[3] Unlike the current version of Statutory Condition 11, the previous version of the Statutory Condition 11 stipulated that both appraisers and umpires had to be competent and disinterested. It read as follows:

Appraisal

11.(1) If any difference arises as to the value of the property insured, the property saved or the amount of the loss, that value and amount shall, whether the right to recover on the contract is disputed or not, be ascertained by two competent and disinterested appraisers, the insured and the insurer each selecting one, and the two so chosen then selecting a competent and disinterested umpire.

(2) The appraisers together shall then estimate and appraise the loss or damage, stating separately the sound values and damage and, failing to agree, shall submit their differences to the umpire, and the finding in writing of any two determines the value of the property insured, the property saved and the amount of loss.

(3) The parties thereto shall pay the appraisers respectively selected by them and shall bear equally the expense of the appraisal and umpire.

[22] The appraisal process under the Insurance Act is a free-standing mandatory process that must proceed if either party requests it.[4] A proof of loss as stipulated by Statutory Condition 6 is a pre-condition to resort to the appraisal process.[5] In an insurance policy that provides that the loss is payable to all mortgagees as their interest may appear from time to time or that contains the standard mortgage clause, the mortgagee is an insured for the purposes of the mandatory appraisal process established by s. 128 of the Insurance Act.[6]

[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.[7] The appraisal process may be demanded only where there is a dispute about the valuation of the loss.[8] 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.[9]

[24] The appraisal process is intended to be a final and binding determination of the loss.[10] 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.[11] 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.[12]

[25] In 854965 Ontario Ltd. v. Dominion of Canada General Insurance Co.,[13] Justice Kennedy described the appraisal process under the Insurance Act as follows:

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. The appraisal process can take place concurrently with a lawsuit dealing with the insured’s claim to recover under the contract and an insurer’s defences to payment.

[26] Where there is a dispute about the value of the insured’s loss, s. 148 of the Insurance Act requires that the determination of the loss must be resolved before there can be any recovery on the insurance contract, and a court action may in appropriate circumstances be stayed pending the completion of the appraisal process.[14] However, the appraisal process is typically available while the court proceedings are proceeding, and the appraisal process and the court proceeding may run concurrently, especially when there are issues outside the province of the appraisal process.[15] The court will decide the interpretation and coverage issues and the interpretation can then be applied to the values as appraised.[16]

[27] The appraisal process is not an arbitration or an adjudication but is considered to be a binding valuation that determines the value of loss before there can be any recovery on the insurance contract.[17] The procedure for the appraisal process is not set out in s. 128 of the Insurance Act. The Rules of Civil Procedure have no application to the procedure mandated by the provisions of the Insurance Act.[18] The appraisal process is subject to judicial review but is not subject to the provisions of the Statutory Powers Procedure Act.[19],[20] The umpire decides the procedure for the appraisal process on a case-by-case basis.

[28] The appraisal process envisioned by s. 128 of the Insurance Act has a sequence to it.

a. First the appraisers are appointed. As noted above, the prerequisite that appraisers be competent and disinterested was removed from the Insurance Act. Thus, the appraiser, but not the umpire, may be a partisan advocate for the insured or the insurer that appointed the appraiser.[21] A review of the cases reveals that sometimes lawyers act as appraisers and other times experts with subject matter expertise are the appraisers. In Madhani v. Wawanesa Mutual Insurance Company,[22] the insured had one appraiser for the building loss and a different appraiser for the contents loss and the insurer had one appraiser for both losses. Sometimes the insured acts as his or her own appraiser and sometimes an employee of the insurer acts as its appraiser. In Letts v. Aviva Canada Inc.,[23] there were concurrent court proceedings and an appraisal process, and the court appointed the articling student for the insured’s lawyers as appraiser.

b. Second, the appraisers appoint an umpire. A properly appointed umpire must be impartial and much like an expert at trial might be an expert in the field at issue between the parties either from special training or experience.[24]

c. Third, the appraisers determine the matters in disagreement.

d. Fourth, if the appraisers do not agree, then they submit their differences to the umpire, and the finding in writing of any two determines the matter.[25] The decision of the two appointed appraisers and/or the umpire is determinative and is a binding valuation of the insured property that is damaged or lost.[26]

[29] The appraisal process is designed to be collaborative and not adjudicative, and the process, which does not require a hearing with evidence, contemplates that the appraisers and the umpire will arrive at a binding decision based on their own knowledge and expertise.[27] The umpire is the ultimate impartial decision-maker that makes a binding determination that removes the quantification of the loss from the court.[28] As for procedure, the umpire may permit viva voce testimony under oath and may receive affidavit evidence but he or she is not required to do so.[29]

[30] The court is empowered to appoint appraisers and the umpire. The court may order the appraisers to meet to begin the appraisal process about the valuation of the loss.[30] The court may order that if a party refuses to appoint an appraiser that the umpire be authorized to proceed in the absence of that party.[31] When the insured’s appraiser and the insurer’s appraiser cannot agree on an umpire, s. 128 (5) of the Insurance Act empowers the court to choose an umpire who would be best suited to be umpire by reviewing their resumés and the evidence on the application.[32]

[31] The court has inherent jurisdiction to make such procedural orders as are necessary to give effect to the statutory appraisal scheme in the Insurance Act and to prevent adjudication by ambush, to promote efficient and meaningful discovery as a means of reaching a just result, and to equip both sides as well as the umpire with the information needed to present a full answer and defence.[33] If there is an appraisal process, the insurer does not lose its right to require the insured to be examined under oath, and the appraisal process does not negate the insured’s obligation to give details of the amount of loss claimed.[34] As noted above, Statutory Condition 6 applies in addition to Statutory Condition 11 (appraisal process).

[32] In Campbell v. Desjardins General Insurance Group,[35] Justice M.E. Smith described the appraisal process and the roles of the appraisers and the umpire as follows:

84. Each appraisal process is different, dependent upon the complexities of the loss or the manner upon which the umpire chooses to proceed. There is no requirement for a hearing, nor is there a prohibition that one takes place. If oral evidence is presented, contractors and/or insureds can be called to testify, and cross-examinations can occur. Experts can also be asked to attend a hearing and provide his/her opinion. The hearing can last a few hours, one day or span over many days. The valuation can also be entirely based upon written documentation. In sum, the appraisal is an informal valuation process, and it is run entirely by the umpire, as he/she sees fit.

85. I accept that the appraisal process is a valuation and not an arbitration. However, practically speaking, I find that the umpire acts as the sole decision maker when he/she is called upon to resolve a dispute between the appraisers. After hearing and considering all of the evidence (oral and/or documentary), as presented by the appraisers, it is the umpire alone that shall decide between two competing valuations (insurer or insured) and his/her selection will determine the value of the loss in question. It is the umpire’s choice, and nothing else, that creates the majority decision that determines the value of the loss.

[…]

88. Once the umpire has been appointed and the hearing is underway, I find that the appraiser’s role is to present the evidence that supports his/her valuation of the loss. The appraiser does not give evidence. The appraiser will merely plead the case on behalf of the client and present the evidence in a manner that is meant to persuade the umpire that his/her valuation of the loss is reasonable and appropriate in the circumstances. The ultimate goal is to convince the umpire that the appraiser’s assessment of the loss is the correct one. To me, that can only be described as advocacy. I find that the appraisers are invariably advocates, while the umpire is the sole decision maker who must remain neutral.

[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[36] in accordance with the principles set out by the Supreme Court of Canada in Canada (Minister of Citizenship and Immigration) v. Vavilov.[37] 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.[38]

[34] Courts afford substantial deference to an appraisal under the Insurance Act, and courts are reluctant to interfere with the appraisal process unless there is proof of bias, misconduct, or the appraisers or umpire will exceed or have exceeded their jurisdiction, for example, by purporting to act as an arbitrator.[39] Whether the court will intervene on judicial review depends on the facts of the particular case, but, generally speaking, the case law reveals that courts show considerable deference and are reluctant to intervene and that the standards of procedural fairness are modest for the appraisal process, a scheme that does not require a formal hearing; visualize:

• In Gorieu v. Simonot,[40] an appraisal award was set aside where the umpire proceeded in the absence of an appraiser who had not been given notice of the time of the appraisal.

• In Rilkoff v. Portage La Prairie Mutual Insurance Co.,[41] the court refused to appoint an umpire when the difference between the parties was about how much of the mold damage was caused by a pre-existing condition of the property or caused by water damage from a severe storm.

• In Peace Hills General Insurance Company v. Doolaege, the court held that in the circumstances of the case, the duty of fairness included the right of a party to know of and respond to representation made to the umpire by the other party to the appraisal.[42]

• In Seed v. ING Halifax Insurance,[43] the Divisional Court held that there was no denial of natural justice when the umpire refused an adjournment.[44]

• In Agro’s Food Inc. v. Economical Mutual Insurance Co.,[45] the court refused an insurer’s request for the appraisal process where two windstorms damaged buildings and property and interrupted the insured’s agricultural business where the cause and scope of the loss and coverage issues were involved and not simply the valuation of the loss and where it would be unfair to permit an inquiry that has no right to counsel and no right to cross-examine.

• In Madhani v. Wawanesa Mutual Insurance Company,[46] the Divisional Court held that the appraisal decision had to be in writing, but there did not have to be written reasons for decision.

• In New Dawn Enterprises Ltd. v. Northbridge General Insurance,[47] an umpire’s appraisal decision was set aside because there was a breach of procedural fairness and a reasonable apprehension of bias when the umpire contacted consultants working for the insurer for additional information and clarifications without sharing the information with the insured’s appraiser and without providing an opportunity to respond before releasing the appraisal decision.

D. Facts

[35] In 2018, Ashcroft was building a condominium development known as Capital Hall in Ottawa, Ontario. The project was a 26-storey building of 338 units.

[36] Northbridge, an insurance company under the Insurance Act, issued a Course of Construction Policy in which Ashcroft was the first named insured. The policy was effective from September 2016 to September 2018. The Policy contained an appraisal clause at Section IV – General Conditions, article 15 whereby they agreed to have the quantum of loss determined by appraisal.

[37] On April 30, 2018, there was a fire at the Capital Hall building as the building was nearing completion.

[38] On May 25, 2018, Northbridge confirmed coverage for emergency work and for repair subject to the terms, limitations, and conditions set out in the policy.

[39] After the fire, Northbridge and Ashcroft retained engineers and others to determine what emergency repairs were immediately required. Northbridge engaged Bassi Construction to remove the debris.

[40] Northbridge turned to the matter of the valuation of the loss. Once again various experts were retained. Northbridge impressed on Ashcroft that its cooperation and information were required to avoid a delay in valuing the loss.

[41] On August 8, 2018, Bourret Appraisals provided an estimate of $7.7 million for cost of completing the repair work to the property. On August 30, 2018, Bassi Construction LP provided an estimate of $8.4 million for the cost of completing the repair work to the property.

[42] Ashcroft rejected the repair cost estimates, and in September 2018, it retained EllisDon Construction to provide an estimate. Northbridge says that the understanding was that EllisDon would work with Bourret to revise its estimate but that did not occur and as it happened it took some time for EllisDon to deliver its report.

[43] On November 30, 2018, not having received a report from EllisDon Construction, Northbridge advised Steve Sobel of Sobel Adjusting Solutions, Ashcroft’s public adjuster that the valuation was $19.1 million for the reconstruction of the property. By this time, Northbridge had made payments of approximately $19.3 million. Ashcroft, however, disagreed that these payments were sufficient for its losses from the fire.

[44] Because of the substantial divide between the parties, on December 13, 2018, Northbridge elected to have the amount of loss determined by the appraisal process and it appointed Michael S. Shuryn as its appraiser. Mr. Shuryn is an employee of Northbridge.

[45] Problem, as provided for in statutory condition 11, there shall be no right to an appraisal until after proof of loss has been delivered. Ashcroft had not filed a proof of loss. Ashcroft, however, being a neophyte about the appraisal process did not object, and it would go ahead and appoint an appraiser.

[46] The emergency repair work was completed and paid for by Northbridge. However, Bassi Construction’s work was not completed until early January 2019, which in turn was delaying obtaining a report from EllisDon Construction. Ashcroft was waiting for Bassi Construction to complete its remediation work before determining the total cost of reconstruction.

[47] In early 2019, EllisDon Corporation began its assessment and after several months of work, it reported that the cost to rebuild including direct and consequential damages, was $28.9 million exclusive of HST. There was a huge gap about the costs of reconstruction between the insured and the insurer and that gap was going to widen.

[48] On January 8, 2019, Ashcroft appointed Mr. Sobel, who had been acting as its public adjuster, as its appraiser. At Mr. Sobel’s suggestion, he and Appraiser Shuryn agreed to appoint James Minns, FCIArb., Q. Med., Q. Arb., LL.B, MBA, LL.M, as the umpire, and Mr. Minns was appointed on March 20, 2019. The well credentialed Umpire Minns is a lawyer, mediator, arbitrator, adjudicator, and appraisal umpire with Global Resolutions Inc.

[49] On March 21, 2019, Umpire Minns and Appraisers Shuryn and Sobel held their first case conference. At the conference, it was agreed that Ashcroft would provide Northbridge with documentation including the report from EllisDon Construction and with a Proof of Loss.

[50] On May 23, 2019, Ashcroft submitted a Proof of Loss for reconstruction costs. On July 10, 2019, Ashcroft submitted a Proof of Loss with respect to the Delay in Start Up Coverage ($9 million) which requires payment within one month. In its Proofs of Loss, Ashcroft claimed $53 million.

[51] Northbridge has never formally responded to the Proofs of Loss and payment is overdue. The gap between the parties is considerable. There is a $21.7 million difference just on the cost of reconstruction.

[52] Thirteen appraisal case conferences followed, and, as will be seen from the description below, the progress, such as it was, was glacial in moving forward. Northbridge blames Ashcroft and Ashcroft’s appraiser for the problems. Northbridge says that Mr. Sobel missed timelines, withdrew submissions, and frequently requested adjournments. Northbridge says that Ashcroft did not provide the information that it promised to provide. Ashcroft blames Northbridge and the umpire for the delays and the lack of progress.

[53] My review of the record indicates that there was nothing unusual about the pace of progress between the Conference Call #1 and the Conference Call #5 that took place on August 30, 2019 when consulting reports were exchanged by the appraisers, and there was normative progress through Conference Call #6, which took place on September 4, 2019 and Conference Call #7, which took place on September 12, 2019, after there had been settlement discussions between the appraisers. There was an in-person appraisal hearing on September 24 and 25, 2019. Progress in defining and narrowing the dispute was made when Conference Call #8 took place on October 9, 2019, at which time the appraisers indicated that they were continuing their investigations and anticipated the delivery of further reports. Conference Call #10 proceeded on November 18, 2019, at which time the continuation of the appraisal hearing scheduled for November 20 and 21, 2019 was adjourned at Appraiser Sobel’s request and tentatively rescheduled for January 15, 2020.

[54] On November 22, 2019, at Conference Call #11, Appraiser Sobel said that that he would be submitting a new brief from Lakeland Consulting Inc. The parties appear to differ on whether this was to replace or to supplement the work already done by EllisDon Construction. The parties also differ as to the state of the appraisal process. Northbridge would have it that there were areas of agreement and that constructive discussions were ongoing in other areas. Ashcroft would have that little to nothing had been agreed to and that the parties could not even agree about what matters to place before the umpire for a binding decision.

[55] Case Conference Call #12 took place as scheduled on January 16, 2020 for the purpose of addressing scheduling issues and to set a date for the continuation of the appraisal hearing. In the next several months there were exchanges between the appraisers and the umpire about the delivery of the Lakeland Consulting Report. There were also some actual delays caused by the Covid-19 pandemic. On April 23, 2020, Umpire Minns wrote to the appraisers and asked if the Lakeland Consulting Report had been delivered.

[56] From my perspective, throughout the appraisal process, which included several hearing days and a dozen conferences, there is no evidence of intentional delay or obstructiveness but some evidence of a process that was taking some time to resolve.

[57] What does emerge is that there is evidence of impatience, and, in April 2020, Ashcroft retained the law firm Conway Baxter Wilson LLP to advise it on the appraisal process and to assist in recovery of other insured losses not subject to the appraisal process. Ashcroft was troubled by what it perceived to be a lack of progress and it sought legal advice and someone to accelerate the process.

[58] Conway Baxter Wilson LLP got busy. On April 28, 2020, unknown to Northbridge at the time, Ashcroft issued a Notice of Action in the Superior Court in Ottawa. Conway Baxter Wilson LLP was lawyer of record. Ashcroft sued Northbridge for insurance proceeds for various matters covered in the insurance policy, including the subject of the appraisal process. Ashcroft, however, held off filing and serving a Statement of Claim and Northbridge was not aware of the court action.

[59] In May 2020, Ashcroft instructed Conway Baxter Wilson LLP to assist Appraiser Sobel and to get involved in the appraisal process.

[60] With the law firm now involved what followed between May and October 2020, as described below, was: (a) a flood of correspondence among the appraisers, the umpire, the lawyers for the insured and insurer, including nasty correspondence between Thomas Conway and Natalia Rodriquez of Conway Baxter Wilson LLP and Andrew A. Evangelista and David W. Powrie of Evangelista Barristers & Solicitors, who were the legal counsel for Northbridge; (b) a brouhaha about whether a law firm could participate as counsel for an appraisal process; (c) a brouhaha about whether a law firm could be appointed appraiser; (d) inconsistent and incorrect procedural decisions by the beleaguered and bullied Umpire Minns; and (e) abortive conference meetings of the appraisers and the umpire.

[61] After the retainer of Conway Baxter Wilson LLP, the appraisal process stalled, floundered, and was shipwrecked. This was a jointly and severally caused procedural fiasco.

a. On May 28, 2020, Mr. Conway wrote Mr. Evangelista, suggested that the parties meet for an initial without prejudice discussion, and on June 1, 2020, Mr. Powrie responded and accepted the invitation to meet.

b. On June 5, 2020, without copying Mr. Evangelista or Mr. Powrie, Mr. Conway wrote Umpire Minns and Appraiser Shuryn, with a copy to Appraiser Sobel. Mr. Conway advised that his law firm would be assisting Appraiser Sobel. Mr. Conway suggested a meeting to discuss the lack of progress and the need to establish a procedural framework for the appraisal process.

c. On June 5, 2020, Umpire Minns sent an email message to Appraiser Shuryn, Appraiser Sobel, Mr. Conway, and Ms. Rodriguez that there would be a conference call on June 16, 2020. However, Umpire Minns spoke to Appraiser Shuryn, who indicated that he did not intend to participate in the conference call scheduled for June 16, 2020 and preferred that legal counsel for Northbridge respond. The June 16, 2020 conference call was cancelled pending the meeting of the lawyers.

d. On June 12, 2020, there was a meeting between Mr. Conway and Mr. Powrie. Nothing appears to have been resolved.

e. On June 16, 2020, Mr. Conway wrote to Mr. Evangelista and Mr. Powrie outlining his concerns about the lack of a procedural structure for the appraisal process and the lack of progress. He suggested the substitution of an arbitration in which Umpire Minns could be the arbitrator or a focused appraisal process that did not raise coverage or interpretation issues.

f. On June 26, 2020, Umpire Minns sent an email message to Appraiser Sobel copied to Appraiser Shuryn asking when the report from Lakeland Consulting would be delivered. Umpire Minns suggests July 9, 2020 for the resumption of the appraisal process.

g. On June 30, 2020, Mr. Conway, who had obtained a copy of Umpire Minns email message of June 26, 2020 wrote Umpire Minns and Appraiser Shuryn with a copy to Appraiser Sobel but without a copy to Mr. Evangelista to ask that there be no meeting of the umpire and the appraisers on July 9, 2020 and until after the law firm reviewed the file and had discussions with Mr. Evangelista. Mr. Conway is critical of the lack of progress being made in the appraisal process. (Pausing here, as noted by Umpire Minns, Mr. Conway was being critical of the appraisal process without having completed his review of a process of which he and his firm had not participated.)

h. On July 7, 2020, Umpire Minns sent an email message to Mr. Conway, Ms. Rodriquez, Appraiser Shuryn and Appraiser Sobel. The message said:

Dear Mr. Conway

Thank you for your letter of June 30, 2020. […] Going forward there should be no difficulty including counsel for the parties in correspondence. I would however point out that the Mr. Sobel is the appraisal representative for Ashcroft Homes and Mr. Shuryn is the appraisal representative for Northbridge and that I am the appraisal umpire. Collectively we are the Appraisal Tribunal. From time to time the Appraisal Tribunal may need to confer privately amongst themselves as part of the appraisal process. I would also point out that at no time has there ever been inappropriate communications regarding the appraisal to the exclusion of one of the representatives. You have commented that the appraisal process has been ongoing for over a year with few results. You have also noted that you require time to review the file and “untangle the various issues that have arisen prior to our engagement”. In fairness perhaps you might suspend your judgment of the appraisal process until after you have reviewed the file and we begin to resume the appraisal hearing. The conference call scheduled for Thursday July 9th, 2020 was intended as a call exclusively with the members of the Appraisal Tribunal. I am more than prepared to agree to an adjournment. May I hear from Mr. Sabol and Mr. Shuryn as to their preference.

i. On July 8, 2020, Mr. Evangelista wrote Mr. Conway by email with copies to Umpire Minns and Appraiser Shuryn but not to Appraiser Sobel to object to Mr. Conway “interfering” with the “Appraisal Tribunal” and demanding that correspondence stop. The letter stated:

As you are aware, our firm is counsel to Northbridge Insurance (“Northbridge”) on matters arising from the claim made by Ashcroft Homes relating to the fire at Capital Hall on April 30, 2018. Our firm is not, however, part of the Appraisal Tribunal. […] As our firm is not involved in the Appraisal, we were surprised to learn that your office has been corresponding with the Appraisal Tribunal, including your correspondence of June 30, 2020. The Appraisal Tribunal has been properly initiated and it must be allowed to fulfill its mandate without interference. Therefore, any correspondence from your firm to the Appraisal Tribunal must cease immediately and permanently. There is absolutely no basis or juristic reason for you to be corresponding directly with the Appraisal Tribunal on any matter. If you have any questions or concerns about proceedings before the Appraisal Tribunal may direct them to either Mr. Sobel, as Ashcroft’s appraiser, or to our firm. We trust that this is clear and that we will not need to take any further steps to prevent your interference in the appraisal process.

j. On July 8, 2020, Mr. Evangelista wrote a second letter by email with copies only to Mr. Powrie of Mr. Evangelista’s firm. The letter repeated the ultimatum of the first letter and rejected Mr. Conway’s suggestions for the substitution of an arbitration process. The letter stated:

This correspondence follows the earlier correspondence to you today insisting that your firm have no further involvement in the Appraisal Process. We trust that correspondence and the ultimatum of our client to be clear. In response to your correspondence of June 16, 2020, we have discussed the contents of that correspondence with Northbridge, including the two options that you cited in that correspondence. Neither of the two options that you have proposed are agreeable to Northbridge. Northbridge has initiated the appraisal process and intends to continue with that process through to a conclusion. […] Our client is of the firm view that any perceived inefficiencies in this appraisal process is the direct and sole result of delay by Ashcroft and its representatives. To the extent that your correspondence of June 16, 2020 suggests anything to the contrary such assertions are erroneous. […] The Appraisal Process must continue, it must remain without interference, and Ashcroft must cease its continued delay and frustration of that process. We trust all the foregoing to be satisfactory. Finally, and trusting this requires no further elaboration, we require any further correspondence from your office to be directed to the undersigned and not Northbridge Insurance or the Umpire.

k. On July 13, 2020, by email, Mr. Conway wrote Mr. Evangelista, Umpire Minns, and Appraiser Shuryn without copy to Appraiser Sobel. In his letter, Mr. Conway advised that Mr. Sobel had been discharged by Ashcroft and that his law firm had been appointed sole representative at the appraisal. The letter stated:

We write to inform you that, effectively immediately, Steve Sobel is no longer representing Ashcroft Homes-Capital Hall Inc. (“Ashcroft”) as appraiser in the above-noted matter. Ashcroft has revoked Mr. Sobel’s authority to act on its behalf and Mr. Sobel no longer has any authority to engage in the appraisal process on behalf of Ashcroft. No further correspondence should be directed to him. Ashcroft has appointed Conway Baxter Wilson LLP to be its sole representative at the appraisal. […] We are in receipt of Mr. Evangelista’s two letters, dated July 8, 2020, as well as Mr. Minns’ email, dated July 7, 2020, in which our involvement in the appraisal was raised. We trust this notice of change in Ashcroft’s representation will clarify the nature of our involvement. […] Our understanding was that Mr. Evangelista’s office was not involved in the appraisal, which Mr. Evangelista has confirmed in his letter of July 8. We will therefore not communicate with Mr. Evangelista’s office regarding the appraisal beyond this letter. In order to continue the process without delay, we suggest a case conference on Tuesday July 14 or Wednesday July 15. We would like to discuss implementing a procedural framework to provide the parties with a reasonable amount of certainty in the appraisal process […]

l. On July 13, 2020, Umpire Minns immediately responded with an email message to Mr. Conway, copied to Mr. Evangelista, Mr. Powrie, and Ms. Rodriquez indicating that an appraiser could not be replaced with a law firm and asking Mr. Conway to identify the individual replacing Mr. Sobel.

m. In turn, Mr. Conway did a reply-all email message indicating that a law firm could be an appraiser but that he and Ms. Rodriguez would be the lawyers principally involved in representing Ashcroft.

n. On July 14, 2020, the email chain continued with an email message from Mr. Minns raising his concerns about the appointment of a law firm as opposed to an individual as appraiser and inviting comments from Northbridge. The email message stated:

I am the Umpire appointed pursuant to the Insurance Act, s. 128(2). I am not a representative or advocate for either party. […] There is no definition of an “appraiser” under the Insurance Act or the Arbitration Act. The Insurance Act, s. 128(3) contemplates a decision-making process involving two appraisers and an umpire. My first concern is that there should be clarity when members of your firm are speaking in the role of advocate as opposed to the decision-making role of an appraiser. […] My second concern is to establish that the Appraisal Tribunal remains properly constituted. Therefore, if Northbridge Insurance objects to the appointment of your firm, as opposed to an individual, as the appraiser representative of Ashcroft Homes then now is the time to speak up. […]

o. On July 14, 2020, Appraiser Shuryn sent an email message to Umpire Minns, Mr. Evangelista, and Mr. Powrie indicating that the appraisal process could not go forward until the matter of Ashcroft’s appraiser was resolved.

p. On July 16, 2020, Mr. Evangelista sent a letter by email to Mr. Conway, accusing him of frustrating the appraisal process, which he noted was mandatory and the process preferred by the courts. He said that Northbridge agreed with the umpire that only an individual could be appraiser. The letter stated:

[…] An appraisal must proceed if either party requests it; the determination of the amount of the loss arising from property damage cannot be before the court in the action. We are in firm agreement with the objection raised by Umpire Minns to your request that your entire firm be appointed as appraiser on behalf of Ashcroft. The statutory process makes clear that a single person needs to be identified as the appraiser. […] The umpire must control who is allowed into the session and the input that they have in the process; those permitted into the session being the two appraisers and the umpire. […] Your attempt to name your entire firm as appraiser will serve no other purpose than to create uncertainly on numerous levels, including even the most basic function of who is permitted to make decisions on behalf of Ashcroft within the Appraisal Process. This appears to be a further attempt by Ashcroft to delay and frustrate the statutory appraisal process. Any attempts to delay this process further will not be tolerated. We require that Ashcroft now name a single person as appraiser as has been reasonably and properly requested by Umpire Minns. Should this not take place immediately, we will bring an Application for direction, including the appointment of an appraiser for Ashcroft. We look forward to your anticipated compliance in this regard.

q. On July 20, 2020, Mr. Conway sent an email message to Umpire Minns copied to Ms. Rodriguez, Appraiser Shuryn, Mr. Evangelista, and Mr. Powrie suggesting a meeting of all concerned to discuss the appraisal process and next steps. A few hours later, Umpire Minns did a reply-all email message indicating that a meeting was premature until the matter of the firm being an appraiser was resolved. He stated that this was a matter to be resolved by the parties or by the court but not by the umpire who must remain impartial.

r. Still on July 20, 2020, Mr. Conway continued the email chain by asking Umpire Minns to reconsider his position about the appointment of a law firm as appraiser and to have a hearing to resolve the matter of whether a law firm could be an appraiser under the Insurance Act. The next day, Umpire Minns responded by email pointing out that the authority to appoint an appraiser lies with a judge of the Superior Court pursuant to s. 128 (5) of the Insurance Act.

s. On July 30, 2020, Lakeland Consulting released its report. Northbridge says that the report was long past its promised delivery date and came to be delivered without a revised appraisal brief.

t. On August 4, 2020, by email Mr. Conway wrote Umpire Minns a lengthy vitriolic lawyer’s letter that begins by accusing Umpire Minns of not being even-handed in allowing Northbridge to have representation by both an appraiser and Mr. Evangelista’s law firm. Mr. Conway insisted that for the appraisal process to be fair that his firm be allowed to represent Ashcroft. Mr. Conway submitted that Umpire Minns was wrong in not addressing the issue of law firm representation, which he submitted was not an issue to be determined by s. 128 (5) of the Insurance Act and was a matter Mr. Conway insisted should be resolved by the umpire. After commenting about the use to be made of the Lakeland Consulting report, Mr. Conway said that the circumstances cried out for a more structured approach appraisal process and he suggested a schedule for next steps. His email message stated:

[…] This leads us to our next point regarding process. If Northbridge is relying on the MBC report, there must be a process by which experts can be called to give evidence and may be cross examined. The Lakeland report makes clear that one of these experts is plainly wrong in its assessment. It is simply not possible to fairly evaluate the merits of each party’s position based on inadequate evidence absent rigorous probing and questioning. Furthermore, the amounts at stake and the gulf between the parties in this case cry out for a more structured and predictable process to accord with the higher degree of procedural fairness required when large amounts are in dispute. We therefore put forward the following process we consider will give each side a fair opportunity to present its position and to probe the other side’s evidence. […] We believe the process set out above will provide you, as umpire, with the tools you need to make a fair and informed decision which accords with the degree of procedural fairness required in this case. Given our position regarding the umpire’s duty to decide the issue of Northbridge’s opposition to our firm’s representation of Ashcroft, we again request that all parties convene on a call to canvass our respective positions. We can make ourselves available in short order to move this matter forward. We look forward to hearing from you with your availability.

u. On August 5, 2020, Umpire Minns sent an email message to Mr. Conway acknowledging receipt of his letter of August 4, 2020. The message was copied to Ms. Rodriguez, and Appraiser Shuryn. Umpire Minns indicated that he would have a case conference call to address, among other things, the issues of:

1. Does the Umpire have the jurisdiction to decide the issue of Northbridge’s opposition to the Conway Baxter Wilson LLP law firm representation of Ashcroft?

2. Assuming the Umpire does have jurisdiction to decide issue #1 above, should Ashcroft be permitted to appoint the Conway Baxter Wilson LLP law firm as appraisal representative. For clarity, the issue is narrowly limited to the question of whether an appraisal party can be represented simultaneously by multiple individuals as appraisal representative(s) or must the representative be a sole individual?

3. The review of the procedural process and timetable as proposed in Mr. Conway’s letter of August 4, 2020 for the purpose of establishing a Procedural Order.

v. On August 13, 2020, Northbridge served its Notice of Application on Ashcroft Homes.

w. On August 14, 2020, Umpire Minns suggested a conference call in the appraisal process, and Appraiser Shuryn sent an email message to Umpire Minns and another to Mr. Conway indicating that the appraisal is at a standstill and that he would not participate in the conference call scheduled for August 20, 2020.

x. On August 18, 2020, by email Mr. Conway wrote another even longer caustic lawyer’s letter to Umpire Minns. The letter was copied to Appraiser Shuryn but not copied to the Evangelista law firm. Mr. Conway expressed serious concerns about Northbridge’s conduct and accusing it and the Evangelista law firm of undermining the appraisal process and the umpire’s authority. He suggested that Northbridge’s recently served Application “reeks of bad faith” and provided seven lamentations including burdening the court straining to provide judicial resources during the Covid-19 pandemic. The letter concluded by Mr. Conway requesting the scheduling of a case conference. Mr. Conway stated:

We again urge you to exercise your authority to determine these preliminary procedural matters. We again reiterate our concern that by allowing Northbridge to undermine your inherent authority to determine process and to delay the appraisal process to its advantage, you are jeopardizing the Umpire’s appearance of neutrality and even-handedness. You have already determined a process by which the matters raised in the Notice of Application are to be decided. That is the process that should be followed. Northbridge should not have the ability to singlehandedly override the decision of the Umpire and determine its own process.

y. On August 20, 2020, Umpire Minns responded to Mr. Conway’s letter of August 18, 2020 in an email message copied to Appraiser Shuryn. He said that to avoid allowing the appraisal process to drift aimlessly, he would schedule a case conference for September 3, 2020.

z. On September 1, 2020, Appraiser Shuryn sent two email messages to Umpire Minns copied to Mr. Conway, Ms. Rodriguez, Mr. Evangelista, and Mr. Powrie advising that he would not participate in the September 3, 2020 conference call “as this does not form part of the appraisal process” but that Mr. Powrie would attend to represent Northbridge.

aa. The case conference (Case Conference Call #14) proceeded on September 3, 2020. Before the case conference, Ashcroft delivered a lengthy memorandum of argument. Northbridge delivered no materials. At the conference, Appraiser Shuryn refused to participate. Mr. Powrie attended but made no submissions other than agreeing with Appraiser Shuryn that the conference was outside the authority of the umpire.

bb. On September 14, 2020, Umpire Minns released a 170-paragraph, 37-page single-spaced document that was a combination of a diary of all the other case conferences, a transcript, a report, an analysis, a memorandum of law and a decision. For present purposes I shall just set out the statement of issues found in paragraph 108 of the document and the decision at paragraphs 168-170:

108. The purpose of the Case Conference Call was to address the following issues:

1. Does the Umpire have the jurisdiction to decide the issue of Northbridge’s opposition to the Conway Baxter Wilson LLP law firm representation of Ashcroft?

2. Assuming the Umpire does have jurisdiction to decide issue #1 above, should Ashcroft be permitted to appoint the Conway Baxter Wilson LLP law firm as appraisal representative. For clarity, the issue is narrowly limited to the question of whether an appraisal party can be represented simultaneously by multiple individuals as appraisal representative(s) or must the representative be a sole individual?

3. The review of the procedural process and timetable as proposed in Mr. Conway’s letter of August 4, 2020 for the purposes of establishing a Procedural Order. Both parties are invited to submit modifications or alternative procedural and timetable proposals.

[…]

DECISION

168. I find that Issue #1 and Issue #2 are substantive legal issues and well beyond the scope of my mandate as Umpire and the mandate of the Appraisal Tribunal.

169. I find that Issue #3 is a mixed procedural and substantive issue. The question of a procedural process and procedural timetable are clearly proper questions by an Umpire and Appraisal Tribunal. To the extent that the procedure process proposed by Conway Baxter Wilson LLP calls for the qualification of experts, the examination in chief and cross-examination of the same experts, we start to bleed over into substantive legal issues. The procedure begins to sound like a fact-finding mission and an exercise in finding, interpreting, and applying the law, which as I have said is beyond the mandate of an Appraisal.

170. Given my finding with respect to Issue #1 and Issue #2, I find that the procedural aspects of Issue #3 should be put over to a later date once the parties and their counsel have resolved or other dealt with Issues #1 and #2.

cc. On September 28, 2020, Mr. Conway wrote Umpire Minns and in an intemperate and aggressive letter asked him to recuse himself on the grounds of a reasonable apprehension of bias. Umpire Minns did not reply to the letter.

dd. In October 2020, Ashcroft served its Statement of Claim in the Ottawa action, and it brought on its cross-Application. The claim is for $53 million for breach of contract, plus damages for breach of the duty of good faith, plus $500,000 in punitive damages. The claim alleges that Northbridge has failed or refused to pay soft costs, professional fees, extra expenses, expediting expenses, by-law expenses, escalation clause expenses as defined in the insurance policy.

ee. Northbridge advised Ashcroft that it intended to move to have the Ottawa action stayed, and in response Ashcroft threated to note Northbridge in default for failing to deliver a Statement of Defence in the Ottawa action.

ff. In what I regard as a sharp practice, Ashcroft carried out its threat and since then the parties have been bargaining about the terms for setting aside the notice of default. It appears that Ashcroft is requiring a procedural ransom to be paid for consenting to the reopening of pleadings notwithstanding that Northbridge has a Statement of Defence ready for delivery. Not nice.

[62] Meanwhile the rebuilding of the condominium project has continued at Ashcroft’s expense and financial strain. It is expected that construction work will be completed by the summer of 2021. At that time, actual reconstruction costs will be known, possibly obviating the need for an appraisal process. What will be left to determine is whether the cost falls within coverage and a slew of issues that are clearly beyond the province of an umpire under the Insurance Act.

E. Discussion and Analysis

[63] As I shall explain below, I shall permanently terminate the appraisal hearing, which I can do as a matter of judicial review and against a standard of reasonableness and the flexible standards of procedural fairness.

[64] I order the parties to pay the Umpire for his terminated services within sixty days. If there is a dispute about his charges, then the Umpire and the parties may make submissions in writing to me within sixty days and I will resolve the dispute.

[65] In the discussion below, I shall have some criticisms of Umpire Minns’ choice of procedure and of his handling of the appraisal process, but the criticisms of him advanced by Ashcroft’s counsel were unwarranted, unfair, and ignorant.

[66] I say ignorant because coming late to the appraisal process, Conway Baxter Wilson LLP were not in a position to pass judgment on what had happened when their client’s chosen appraiser was representing Ashcroft for the eighteen months from January 2019 to June 2020, and Mr. Conway’s criticisms were all of an ill-informed, partisan, tactical prejudgment. At the September 4, 2020 conference, Mr. Conway and Ms. Rodriguez indicated that they had not reviewed the complete appraisal file and had not reviewed the prior Case Conference Call Memorandums. Many of the criticisms of Umpire Minns, particularly the allegations of impartiality were unfair and unwarranted bullying by a litigant who was not getting its own way or who may have been attempting to withdraw the concessions made by its appraiser.

[67] Unfortunately, the Evangelista law firm’s defence of the umpire and the appraisal process and Mr. Evangelista’s reaction to the involvement of Conway Baxter Wilson LLP was also uninformed, misinformed, and intemperate. As I shall explain below, the cause of the dysfunctionality of the appraisal process is a joint and several fault and everyone involved had a role to play in the procedural fiasco.

[68] As noted above, the Rules of Civil Procedure do not apply to the appraisal process and the Insurance Act does not specify a procedure. The case law reveals that this lack of a rigid structure is by design. The flexibility of the appraisal process provides insureds and insurers an expeditious and easy means for the settlement of claims for indemnity under insurance policies. It is designed to remove a valuation issue from the court’s jurisdiction if either party invokes the appraisal process.

[69] I agree with Justice M.E. Smith’s very helpful analysis in Campbell v. Desjardins General Insurance Group, supra that each appraisal process is different and that the appraisal process depends upon the particular facts of the loss and upon how the umpire chooses to proceed.

[70] I agree with Justice Smith that the procedure for the appraisal process can range from a very informal debate with the debate winner selected by the umpire to something approaching the procedure that might be used in an arbitration or an adjudication with the examination of witnesses.

[71] There are four subtle points to note about how the umpire chooses the procedure for the appraisal process that are significant to the immediate case of Ashcroft and Northbridge.

a. The first point to note is that although the appraisal process is not an arbitration or an adjudication, nevertheless, depending on the exigencies of the particular case, the umpire may choose a procedure that resembles an arbitration or an adjudication.

b. The second point is that although the appraisal process is not an arbitration or an adjudication, keeping in mind that the appraisal process does lead to a binding determination that removes the valuation issue from a court’s determination, and also keeping in mind that the exigencies of the particular case are important, the umpire’s choice of procedure is not an unbridled choice. The appraisal process is subject to judicial review and the appraisal process is subject to the principles of procedural fairness, which, in turn, are flexible and depend upon the exigencies of the particular case.

c. The third point, which is a corollary to the second, is that while the appraisal process is designed to afford insureds and insurers an expeditious and easy means for the settlement of claims for indemnity under insurance policies, depending on the exigencies of the particular case, the procedure may not be a cheap and cheerful procedure. It may approach a stern and expensive adjudicative procedure.

d. The fourth point is whether the procedure is casually informal or is strictly formal akin to an adjudication, the roles of the appraisers is to be partisans and the role of the umpire is to be an impartial decision-maker.

[72] These four points provide much, but not all, of the reasons why the appraisal process in the immediate case was a procedural shipwreck and why it should be terminated.

[73] In the immediate case, the exigencies of the case did require a more structured and formal appraisal process to provide the insured and the insurer procedural fairness having regard to the substantial amount of money involved and the difficulties of determining the costs of repairing and reconstructing a 25-storey building that had suffered substantial damages in a fire. The umpire’s decision was to be a binding decision, and the decision was of considerable importance to both the insured and the insurer. A formal process was not precluded by the statutory scheme and a formal process would have been in the reasonable expectations of both the insured and the insurer and it was within the umpire’s discretion to choose a more formal procedure given his expertise as a lawyer, arbitrator, and umpire who also had business school credentials.

[74] The correspondence between the parties reveals that all of the participants did not understand their roles or the nuances of the appraisal process under the Insurance Act. With respect to the umpire, however, there is the oddity that he seems to have misunderstood the nuances of the process while still acting appropriately. In other words, his misunderstandings did not necessary lead to procedural misdeeds or violations of procedural fairness. Thus, Umpire Minns was wrong in apparently thinking that he and the appraisers formed an “Appraisal Tribunal” with some sort of privilege or deliberative secrecy for private communications, but he was right in saying that at no time had there ever been inappropriate communications regarding the appraisal to the exclusion of one of the representatives.

[75] With respect to Mr. Evangelista and Mr. Powrie, they were wrong in issuing ultimatums and thinking that Mr. Conway and his firm were interfering with the “Appraisal Tribunal.” There is no appraisal tribunal. What there is, is a process in which the ultimate decision-maker is not a tribunal but an umpire who decides between the partisan submissions of the appraisers and makes a legally binding decision. There is possible judicial review of the umpire but that is not judicial review of a tribunal.

[76] Mr. Evangelista and Mr. Powrie were also wrong in thinking that Ashcroft could not be represented at the appraisal hearing to assist Ashcroft’s appraiser. Northbridge could have instructed the Evangelista law firm to represent and assist its appraiser and it was wrong for Mr. Evangelista to express outrage that Mr. Conway wished to participate.

[77] Mr. Evangelista may also have been wrong, as may Mr. Conway have been wrong in concluding that the delays in the appraisal process were caused by the other side. Neither party had any reason to delay and the determination of the value of the loss was contentious and not a simple matter. Sometimes the resolution of a dispute takes as long as it takes because the parties need the time to prove their case and meet the case of the other side. And, as I have noted, there was nothing to substantiate the allegation of delay up to the firing of Appraiser Sobel. Impatience is not delay.

[78] Mr. Conway was part correct and part wrong in his demands for a more formal process involving a higher degree of procedural fairness. He was part correct because the exigencies of the case did require a better testing of the information being provided by the appraiser for the insured and by the appraiser for the insurer, but he was wrong in thinking there had to be something akin to the standard of a trial.

[79] What was appropriate in terms of the procedure was something for the umpire to decide and would depend upon the nature of the appraisers’ disagreement. It seems in the immediate case that there was more agreement than Mr. Conway would acknowledge and some consultation between the experts and consultants for both sides might have resolved the matter if that had been allowed to occur.

[80] As for the appointment of Conway Baxter Wilson LLP as an appraiser, this was bungled by all concerned. All the parties treated the qualifications of an appraiser as a matter of statutory interpretation. In their factums for the Application and the Cross-application, Ashcroft and Northbridge made elaborate arguments of statutory interpretation. Ashcroft made elaborate arguments of statutory interpretation to persuade Umpire Minns that a law firm could be appointed appraiser. Umpire Minns ultimately decided this was a legal issue beyond the province of an umpire.

[81] This was all wrong. While for the court the appointment of appraisers under s. 128 (5) of the Insurance Act may be a matter of statutory interpretation about the exercise of the court’s jurisdiction, for an umpire the appointment of appraisers to represent the insured and the insurer during the appraisal process is a matter of common sense.

[82] The case law shows that there can be more than one appraiser and that lawyers and even articling students can be appraisers. While there is no precedent in the case law, had Umpire Minns permitted a law firm to act as an appraiser, his decision would have been reviewable against a standard of reasonableness not correctness. Although Umpire Minns declined to make the decision, he could have made the decision and if he had concluded that in the circumstances of this case, a law firm could not be an appraiser that decision would also be measured against the standard of reasonableness.

[83] Since I am ultimately terminating the appraisal process in the immediate case, I need not and will not answer the question whether the court could appoint a law firm as an appraiser. The question is moot. I simply point out that the court’s jurisdiction is not commensurate with the commonsense authority of the umpire as to how to conduct the appraisal process. Any decision I would have made would be measured on the standard of correctness not reasonableness.

[84] In the immediate case, the parties’ handling of the issue of whether a law firm can be appointed appraiser was abysmal, particularly miserable by Mr. Conway who made what I regard as an unfounded and intemperate request that Umpire Minns recuse himself. My review of the record is that Umpire Minns was trying his best to address the issue fairly. He may have even been prepared to allow the law firm to be the appraiser, but Northbridge’s appraiser and Mr. Evangelista objected.

[85] As a matter of common sense, Umpire Minns could not imagine how the appraisal process would work with a law firm being appraiser when the other appraiser objected, and, unfortunately, he misunderstood that he did have the authority to decide the issue of representation for the appraisal process. These are discretionary matters for the umpire who should design a procedure appropriate for the exigencies of the particular case and a procedure that could be adapted and changed as the appraisal process progressed.

[86] Also, unfortunately, the parties’ bungling of the matter of representation and presentation was a compound problem because of the misunderstanding that there is an appraisal tribunal and that the appraisers are not entitled to be advocates for the insured and the insurer respectively but form some sort of administrative tribunal with deliberative secrecy.

[87] In my opinion, the damage caused by the bungling and the associated animosity is beyond repairing, save for starting all over again with new appraisers, which would offend the principle that the insured and the insurer have the right to choose their own appraiser.

[88] Pragmatically, the parties can still use the information they have gathered for the court process and there will be evidence of experienced costs as opposed to estimated costs to work with. I doubt that the court proceedings will move along faster than the aborted appraisal process, but the parties will have some certainty about the procedure and assured of procedural fairness but not the flexibility and adaptability of the appraisal process.

[89] There was enough bad conduct in the immediate case to terminate the appraisal process, and the non-decisions of the umpire and the decisions about the procedure for this appraisal process do not meet the standard of reasonableness. Ordering a restart or issuing directions would be futile. Thus, I have decided to permanently terminate the appraisal process.

F. Conclusion

[90] For the above reasons, I dismiss Northbridge’s Application without costs. I grant Ashcroft’s cross-Application, without costs. I terminate the appraisal process. I order the parties to pay the Umpire for his terminated services within sixty days. If there is a dispute about his charges, the Umpire and the parties may make submissions in writing to me within sixty days and I will resolve the dispute.

 

Perell, J.

Released: March 5, 2021

 


[3] S.O. 1966, c. 71.

[4] Campbell v. Desjardins General Insurance Group, 2020 ONSC 6630 at para. 74; Arvanitopoulos v. Wawanesa Mutual Insurance Co., 2019 ONSC 6912; S.H.W. Investment Inc. v. Lloyd’s Underwriters, 2018 ONSC 5697; 56 King Inc. v. Aviva Canada Inc. 2016 ONSC 7139, affd. 2017 ONCA 408, leave to appeal to the S.C.C. refd. [2017] S.C.C.A. No. 298; Chateau Insurance Co. v. Rocca (1986), 1986 CanLII 2628 (ON SC), 53 O.R. (2d) 316 (H.C.J.); M & P Enterprises Ltd. v. London & Lancashire Guarantee & Accident of Canada, [1965] M.J. No. 65 (Q.B.).

[5] Campbell v. Desjardins General Insurance Group, 2020 ONSC 6630 at para. 74; Lauzon v. AXA Insurance (Canada), 2012 ONSC 6730 at para. 51, affd. 2013 ONCA 664.

[6] 790180 Ontario Ltd. v. St. Paul Fire &Marine Insurance Co. (2004), 2004 CanLII 66341 (ON SC), 73 O.R. (3d) 280 (S.C.J.); Sholidis v. Economical Mutual Insurance Co., [2003] O.J. No. 2242 (S.C.J.).

[7] Birmingham Business Centre Inc. v. Intact Insurance Co., 2018 ONSC 6174 at para. 5. (Div. Ct.).

[8] Viljo Pyhtila Sand & Gravel Inc. v. Gerling Global General Insurance Co., [1996] O.J. No. 2904 at para. 12 (Gen. Div.); Margeson v. Guardian Fire and Life Assurance Co. (1898) 31 N.S.R. 35.

[9] S.H.W. Investment Inc. v. Lloyd’s Underwriters, 2018 ONSC 5697 at para 24; 56 King Inc. v. Aviva Canada Inc. 2016 ONSC 7139 at paras. 26-27, affd. 2017 ONCA 408, leave to appeal to the S.C.C. refd. [2017] S.C.C.A. No. 298; Winnipeg Regional Health Authority v. Temple Insurance Co. Inc., 2011 MBQB 92 at paras. 16-21.

[10] S.H.W. Investment Inc. v. Lloyd’s Underwriters, 2018 ONSC 5697 at para. 5; Seed v. ING Halifax Insurance (2005), 2005 CanLII 41991 (ON SCDC), 78 O.R. (3d) 481 at para. 23 (Div. Ct.).

[11] Saskatchewan Government Insurance v. Nipawin (Town), 1998 CanLII 12414 (SK CA), [1998] S.J. 883 (Sask. C.A.); Pankiw v. Saskatchewan Government Insurance, [1986] S.J. No. 334 (Sask. Q.B.); M & P Enterprises v. London & Lancashire Guarantee & Accident Co. of Canada, [1965] M.J. No. 65 (Man. Q.B.)

[12] Campbell v. Desjardins General Insurance Group, 2020 ONSC 6630 at para. 74; Madhani v. Wawanesa Mutual Insurance Company 2018 ONSC 4282 at para. 20 (Div. Ct.); Agro’s Food Inc. v. Economical Mutual Insurance Co.2015 ONSC 1169 at para. 56; Saskatchewan Government Insurance v. Nipawin (Town), 1998 CanLII 12414 (SK CA), [1998] S.J. 883 ( Sask. C.A.); Shinkaruk Enterprises v. Commonwealth Insurance Co., (1990), 1990 CanLII 7738 (SK CA), 85 Sask. R. 54 (Sask. C.A.); Pfeil v. Simcoe & Erie General Insurance Company (1986), 1986 CanLII 2922 (SK CA), 45 Sask. R. 241 (Sask. C.A.); Re Krofchick and Provincial Insurance Co. Ltd. (1978) 1978 CanLII 1304 (ON SC), 21 O.R. (2d) 805 (Ont. Div. Ct.).

[13] (2003), 2003 CanLII 42670 (ON SC), 64 O.R. (3d) 234 at para. 25 (S.C.J.).

[14] Brandiferri v. Wawanesa Mutual Insurance Co., 2012 ONSC 2206, on appeal, on consent, judgment set [2013] O.J. No. 6412 (C.A.); Seon v. Gref’s Delivery 1979 Ltd. 2000 SKQB 11; Greer v. Co-operators General Insurance Co., [1999] O.J. No. 3118 at para. 8 (S.C.J.); Saskatchewan Government Insurance v. Nipawin (Town) 1998 CanLII 12414 (SK CA), [1998] S.J. No. 883 (Sask. C.A.); Pankiw v. Saskatchewan Government Insurance, [1986] S.J. No. 334 (Sask. Q.B.).

[15] Campbell v. Desjardins General Insurance Group, 2020 ONSC 6630; Kenney v. Johnson Inc. 2020 NSSC 196; 2343697 Ontario Inc. v. Aviva Insurance Co. of Canada, 2019 ONSC 3106; 56 King Inc. v. Aviva Canada Inc. 2016 ONSC 7139, affd. 2017 ONCA 408, leave to appeal to the S.C.C. refd. [2017] S.C.C.A. No. 298; Bnei Akiva Schools v. Sovereign General Insurance Co., 2016 ONSC 38; Letts v. Aviva Canada Inc., 2010 ONSC 6999; Kent v. Allstate Insurance Co. of Canada, [2009] O.J. No. 5460 (S.C.J.); Commonwealth Insurance Co. v. Canadian Imperial Bank of Commerce [2005] O.J. No. 1167 (S.C.J.).

[16] 2343697 Ontario Inc. v. Aviva Insurance Co. of Canada, 2019 ONSC 3106 at para. 15.

[17] Birmingham Business Centre Inc. v. Intact Insurance Co., 2018 ONSC 6174 at para. 5. (Div. Ct.).

[18] 56 King Inc. v. Aviva Canada Inc. 2016 ONSC 7139 at para. 20, affd. 2017 ONCA 408, leave to appeal to the S.C.C. refd. [2017] S.C.C.A. No. 298.

[20] Birmingham Business Centre Inc. v. Intact Insurance Co., 2018 ONSC 6174 at para. 5. (Div. Ct.); Madhani v. Wawanesa Mutual Insurance Company 2018 ONSC 4282 at para. 37 (Div. Ct.); Seed v. Ing Halifax Insurance, (2005), 2005 CanLII 41991 (ON SCDC), 78 O.R. (3d) 481 at para. 23 (Div. Ct.); Trentmar Holdings Ltd. (c.o.b. Athena Restaurant v. Williams

[1984] O.J. No. 356 (H.C.J.).

[21] Campbell v. Desjardins General Insurance Group, 2020 ONSC 6630; Letts v. Aviva Canada Inc., 2010 ONSC 6999.

[22] 2018 ONSC 4282 (Div. Ct.)

[24] Giammaria v. Economical Mutual Insurance Co., 2021 ONSC 963; State Farm Fire and Casualty Co., 2018 ABCA 150; Matti v. Wawanesa Mutual Insurance Co., 2009 ABQB 451.

[25] Greer v. Co-operators General Insurance Co., [1999] O.J. No. 3118 at para. 9 (S.C.J.).

[26] Seed v. Ing Halifax Insurance, (2005), 2005 CanLII 41991 (ON SCDC), 78 O.R. (3d) 481 at para. 23 (Div. Ct.); Greer v. Co-operators General Insurance Co., [1999] O.J. No. 3118 at para. 8 (S.C.J.); Trentmar Holdings Ltd. (c.o.b. Athena Restaurant) v. Williams, [1984] O.J. No. 356 (H.C.J.); Re Krofchick and Provincial Insurance Co. Ltd. (1978), 1978 CanLII 1304 (ON SC), 21 O.R. (2d) 805 (Div. Ct.).

[27] Birmingham Business Centre Inc. v. Intact Insurance Co., 2018 ONSC 6174 (Div. Ct.); Madhani v. Wawanesa Mutual Insurance Company 2018 ONSC 4282 at para. 42 (Div. Ct.); Agro’s Food Inc. v. Economical Mutual Insurance Co., 2015 ONSC 1169 at para. 57; Seed v. Ing Halifax Insurance, (2005), 2005 CanLII 41991 (ON SCDC), 78 O.R. (3d) 481 at para. 24 (Div. Ct.); Re Krofchick and Provincial Insurance Co. Ltd. (1978), 1978 CanLII 1304 (ON SC), 21 O.R. (2d) 805 (Div. Ct.).

[28] Campbell v. Desjardins General Insurance Group, 2020 ONSC 6630 at para. 79-96.

[29] Agro’s Food Inc. v. Economical Mutual Insurance Co.2015 ONSC 1169 at para. 57.

[30] Viljo Pyhtila Sand & Gravel Inc. v. Gerling Global General Insurance Co., [1996] O.J. No. 2904 (Gen. Div.)

[31] Seed v. Ing Halifax Insurance, (2005), 2005 CanLII 41991 (ON SCDC), 78 O.R. (3d) 481 (Div. Ct.); Seed v. Ing Halifax Insurance, [2002] O.J. No. 1976 (S.C.J.).

[33] Campbell v. Desjardins General Insurance Group, 2020 ONSC 6630 at para. 74; Kenney v. Johnson Inc. 2020 NSSC 196; Lauzon v. AXA Insurance (Canada), 2012 ONSC 6730, affd. 2013 ONCA 664.

[34] Lauzon v. AXA Insurance (Canada), 2012 ONSC 6730, affd. 2013 ONCA 664.

[35] 2020 ONSC 6630 at paras. 84-85, 88.

[36] Senator Real Estate Holdings Lid. v. Intact Insurance Co.., 2021 ONSC 200 (Div. Ct.).

[38] New Dawn Enterprises Ltd. v. Northbridge General Insurance, 2020 NSSC 150; Madhani v. Wawanesa Mutual Insurance Company 2018 ONSC 4282 (Div. Ct.); Baker v. Canada, 1999 CanLII 699 (SCC), [1999] 2 S.C.R. 817

[39] Campbell v. Desjardins General Insurance Group, 2020 ONSC 6630 at para. 74; Birmingham Business Centre Inc. v. Intact Insurance Co., 2018 ONSC 6174 at para. 5. (Div. Ct.); Madhani v. Wawanesa Mutual Insurance Company 2018 ONSC 4282 at para. 15 (Div. Ct.); Seed v. Ing Halifax Insurance, (2005), 2005 CanLII 41991 (ON SCDC), 78 O.R. (3d) 481 at para. 23 (Div. Ct.); Shinkaruk Enterprises Ltd. v. Commonwealth Insurance Co. 1990 CanLII 7738 (SK CA), [1990] S.J. 317 (Sask. C.A.); Barrett and Elite Insurance Co. (1987), 1987 CanLII 4160 (ON CA), 59 O.R. (2d) 186 (C.A.), leave to appeal to S.C.C. refused.

[40] [1986] S.J. No. 108 (C.A.).

[43] (2005), 2005 CanLII 41991 (ON SCDC), 78 O.R. (3d) 481 (Div. Ct.)

[44] See also Senator Real Estate Holdings Lid. v. Intact Insurance Co.., 2021 ONSC 200 (Div. Ct.)

[46] 2018 ONSC 4282 (Div. Ct.)

[47] New Dawn Enterprises Ltd. v. Northbridge General Insurance, 2020 NSSC 150.

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