The Appraisal Process: How Does it Work?

Jun 2, 2021

January 2021

‘THE APPRAISAL PROCESS’

An Update …

This is the 17th iteration of this research paper that was first published in 1996.

The Statutory Conditions form part of and applies to every property insurance policy that is sold in Canada. This includes a condition for “Appraisal” if there is a dispute on the amount of the loss. This alternate dispute resolution (ADR) tool has been part of the policy conditions for decades but still there are misunderstandings about how the process works.

The various provincial legislators intended to have the Statutory Conditions to govern and guide both the insured and insurer throughout the claims process. Policyholders pay premiums for protection so that in the event of a loss they can be properly and fairly compensated. While that is the ultimate goal they should be mindful that the insurance policy is a contract. It has specific limits, conditions and exclusions that are applicable. And while most claims are handled without disputes the architects of the policy anticipated there would be disputes relating to the amount of the loss so they built in an ADR mechanism to resolve issues.

The goals of this article are to:

  1. Demonstrate how the ‘Appraisal’ process works.
  2. Provide suggestions on how the process can work effectively.
  3. Highlight key legal judgments that help frame and direct the appraisal process.

PROVINCIAL INSURANCE ACTS

All insurance contracts contain an “Appraisaf’ section in their Statutory Conditions. In recent years, several Provinces have amended their Statutory Conditions to rename “Appraisaf’ as “Dispute Resolution”. While the title may have changed the core principles have not. Each condition allows for a determination of:

  1. The value of the property insured.
  2. The value of the property saved.
  3. The amount of the loss.

Beyond this, the wordings within each Act defines the process to be followed. And for the most part it follows the historical language that has been in place for decades. Each Act should be reviewed for its own idiosyncrasies. Some differences include:

  1. In British Colombia and Alberta they renamed the Statutory Condition to– “Dispute Resolution”. Appraisers are now called “Dispute Resolution Representatives”. Additionally, the representative cannot be the named insured nor an employee of the insurer.
  2. B.C. has also built in a mandatory requirement that where there is a disagreement as to the value of the loss they must give notice to the insured within 21 days of the dispute resolution process section of the policy.
  3. Manitoba, Newfoundland, PEI and Nova Scotia have all made changes where they are requiring impartiality for both the appraisers and umpire. Their wording also requires them to be “disinterested’ parties. Several of them also go on to say the umpire must not only be “disinterested’ but “competent.
  4. Manitoba also has a curious inclusion at S. 123(3) of their Act, which seems to open the door for any party not happy with the appraisal process outcome to seek a re­ hearing. Manitoba courts have not yet had to deal with this issue.
  5. Statutes in Saskatchewan, Alberta and Manitoba specifically exclude hail insurance contracts from this process.

The more recent changes in some of the Provinces shows a clear intention that when this process is triggered their will be ‘fresh faces’ at the table.

THE SELECTION PROCESS

1. The Appraisers

In Ontario, there are no restrictions on who can be picked by either side to act as their appraiser.

The policyholder can act on their own behalf. However, it is more common to see a public adjuster or a lawyer act as the appointed appraiser for the insured party. (Campbell et al V. Desjardins Insurance Co., Smith M., Oct. 30, 2020).

More recently, despite no requirement to do so, insurers in Ontario seem to choosing to appoint an appraiser who is new to the file who also has experience in acting in this alternate dispute resolution (ADR) process.

As you move away from Ontario, other jurisdictions have different rules in place on who can and cannot be picked as an appraiser. What is interesting is that prior to legislative changes in 1966, Ontario required the appraiser appointed to be “[c]ompetent and disinterested” but for unexplained reasons they removed these qualifiers from the Act.

What should you consider when choosing an appraiser to represent your interests?…

Does the appraiser have the knowledge, skill and experience to deal with the key issues in dispute. Is the appraiser experienced in the appraisal process? What issues has he or she dealt with in the past? References? Has the appraiser acted previously as an umpire? Has the appraiser taken or given any courses on mediation / arbitration or appraisal? Has the appraiser attained any credentials on specific technical areas? Has the appraiser ever been disqualified in the past to be part of this process? And… going beyond these core questions-

  • Does your appraiser have strong advocacy skills? How well can they debate issues? There should be a marriage of good communication skills with the technical ability of the appraiser.
  • What are the issues to be resolved? If, for example, the key issue in the appraisal is a determination of the depreciation rate on a building might you be best served in this process by an appraiser who is a construction expert? Attention should be paid to the issues being argued to get the right skills matchup against the other appraiser.
  • Consider the qualifications and competencies of the other appraiser. Are you matching up strength against strength?
  • Does your appraiser have a strong knowledge of the:
    • Appraisal process- or engaging in a tribunal, mediations, arbitrations?
    • Insurance policy contract and interpreting of coverage?
    • Statutory Conditions. Requirements under Statutory Conditon #6?
    • Impact and proper use of the proof of loss document.
    • Replacement Cost Endorsement (RCE).
    • Guaranteed Rebuilding Cost Endorsement (GRE).
    • Actual Cash Value (ACV).
    • Co-insurance clauses.
    • Building construction scoping and pricing.
    • Contents remediati_on and replacement cost. Depreciation rates- ACV?
    • Equipment and machinery repairs / replacement.
    • Business interruption policies- Gross Earnings and Profit wordings.
    • H.S.T.
    • Current case law.

All of these considerations are wrapped around contractual and legal issues that can arise in an Appraisal Tribunal. It is important that an appraiser has the skill and experience to advocate and debate these points to the Tribunal.

If either party to the insurance contract elects to trigger the Appraisal condition then each side must appoint an appraiser. You cannot decide to opt out of this process. Our courts have been very consistent in deciding that if an election to trigger this process is done then each side must participate.

2. The Umpire

If both appraisers reach an impasse in their efforts to resolve issues in dispute, they need to agree on the choice of an umpire. Generally, each side proposes several names and eventually the two appraisers reach agreement on the choice of an umpire.

The process for some appraisers is to each propose two or three names simultaneously. This may result in at least one common name which would be their choice as an umpire.

If the appraiser cannot agree the matter would be brought forward to a motion court judge. Each appraiser would would have a lawyer advocate for their choice for the umpire role. There may be written submissions required with oral arguments made before the judge. Some cases where this occurred:

  1. Trudeau V. Royal Insurance Company, Ontario Court- General Division, P. Hurley, March 3 1999.
    “The applicants concern is to avoid an umpire who apparent affiliation or relationships to the other side would raise an apprehension of bias. Yet, it proposes two candidates who it would appear from reading between the lines of the correspondence, could not be said to have acted for one of the parties. The failure to agree on what, by experience, appear to be capable candidates because of the fear or reasonable apprehension of bias leaves the court with the option of appointing Mr. Gibson, whom, according to the evidence as being both an umpire on many occasions involving appraisal issues. Mr. Gibson will be named umpire …costs to the respondent’s payable forthwith …”.
  2. 2. Shinkaruk Enterprises Ltd. V. Commonwealth Insurance Co. et al, Saskatchewan Court of Appeal, June 28, 1990.
  3. 3. McPeak V. Herald Insurance Co., Alberta QB, A.J. 222, 1991.
  4. 265 Commercial Street Ltd. V. ING Insurance Co. et al, Nova Scotia S.C., Edwards F.Dec. 14, 2009.
  5. Matti V. Wawanesa Mutual, Queen’s Bench, Alberta, Sullivan W.P., May 14, 2009.
  6. Intact V. Galaxy Home Furnishings, Ont. Superior Ct., Whitten A., November 26, 2019.(** Costs were awarded against the insured for $2,500).
  7. Celan and Zamibto V. Greenclean Restoration et al. Ont. Superior Ct., Dawe J. ‘Order’­ March 12, 2020.

Choosing the right umpire to orchestrate a resolution is critical. Things to consider includes:

The umpire must always be impartial and independent. The definition of “impartial” suggests someone who “[t]reats all rivals, or disputants equally; fair and jusf’. The dictionary definition for “independent” includes some who is “[f]ree from outside control; not depending on another’s authority; not depending on another for livelihood or subsistence …”. (Campbell et al V. Desjardins Insurance Co., Smith M., Oct 30, 2020.).

    • This process flows from insurance claims world. Therefore it is not unusual to have an umpire who has previous work experience in the insurance litigation arena- whether it’s as a loss adjuster or lawyer. Having said that, it is entirely appropriate to explore an umpire’s working life background to ensure there is not a reasonable apprehension of bias or partiality.The common dictionary definition of “bias” includes ” …[p]rejudice in favor of a person, thing or group compared with another usually in a way to be unfair; or showing an inclination or prejudice for or against someone or something.” When considering “partiality” the dictionary defines this as ” [u]nfair bias in favor or one thing or person compared with another; favoritism; a particular liking of fondness for something.”In considering these factors in selecting an umpire you may wish to inquire whether an umpire has ever had a decision overturned because of bias or partiality.
    • Does the umpire have the right knowledge, skill and experience with respect to the issues in dispute?
    • What is the umpire’s experience in leading an appraisal tribunal process?
    • Our courts provide guidance on how an appraisal should be conducted. Keeping current with our courts is important. The umpire needs to know what can and cannot be determined in this process. The umpire must stay clear of orchestrating decisions that are more properly decided in a court of law by a trier of fact. The umpire is present to bring his own experience and knowledge to bear on the issues in dispute. The umpire is the deciding vote for a majority decision that is required.
    • It is important for the umpire to be aware of new insurance contract language that might impact interpreting a situation. An example would be changes in the past 5-years in some policy definitions. (Replacement Cost Endorsements / Flood Endorsement/ Actual Cash Value etc.).
    • The umpire must be very clear of their role. The umpire is not conducting an arbitration nor are they hearing evidence in the fashion of a courtroom setting. An appraisal is a process to determine values. (Madhani v. Wawanesa Mutual Insurance Company, 2018 ONSC 4248, Divisional Court, July 10, 2018) – and – (Matti v. Wawanesa Mutual Insurance Company. 2009 ABQB 451, W.P. Sullivan).
    • During the tribunal, the umpire governs the process. Everyone should be respectful to each other during this process. Both sides should come away from a tribunal feeling they had appropriate opportunity to advocate their positon. The umpire’s role is to ensure civility governs the process. The tribunal must be conducted in a manner which ensures procedural fairness. (Campbell et al V. Desjardins Insurance Co., Smith M., Oct 30, 2020).
    • For the most part the umpire, like a trial judge, is listening to both points of view. The umpire will make their own decision on whether to take a passive or active role in asking questions and entering the debate. Usually you will see the umpire take an active role.
    • It is significant to emphasize that the umpire does not reach independent conclusions on the issues. There have to be two out of the three people in this process in agreement for any number(s) to be binding. (Campbell et al V. Desjardins Insurance Co., Smith M.• Oct 30, 2020).

3. Appraisal Costs

Once the ‘Appraisal’ mechanism is triggered, the policyholder and insurer are required to pay 100% of their own appraisers costs. In addition, each side is required to pay 50% of the umpire’s costs. This could include traveling I accommodation and the expense of renting a location to conduct the tribunal.

In the USA, on more complicated losses, it is not unusual for the umpire to engage their own expert to help guide him to an informed decision. One side or another may dispute this being necessary but if the umpire feels that bringing in an expert will assist in arriving at a fair and impartial valuation there is nothing to stop the umpire from doing this. And the costs of this would be added to the umpire’s fee and it would be split equally between both appraisers.

Lawyers acting for an insured should note that if they are appointed to act as the insured’s appraiser their legal costs are borne 100% by the policyholder.

It is not unusual for an umpire to request an ‘Agreement’ up front where both appraisers sign and agree to the payment of fees. There may also be a request for a retainer sum to be paid up front. Or, there could be an Agreement signed requiring the insurer to pay umpire fees out of any potential funds which may be released to the insured. If an umpire’s account for services is not paid the remedy the collection would be to put it into the hands of a motion court judge where not only would payment be ordered but there would likely be “costs” charged to the party failing to comply with the statutory conditions.

HOW DOES ‘APPRAISAL’ WORK?

A proof of loss form must be filed before the process can be initiated. This submission should comply with the provisions laid out in Statutory Condition #6 (Requirements of the Insured Following a Loss).

A letter (notice) by either the policyholder or the insurer is all that is required to start the ‘Appraisal’ process. In this letter, the party making the demand would formally identify who will be acting as their appraiser in this process. The other party then has 7 clear working days to appoint their chosen appraiser.

With both appraisers picked, they have 15-days to agree on their choice of an umpire. This time period can be extended by consent of both appraisers. The appointment of the umpire doesn’t mean that both appraisers cannot continue to work with each other on negotiating solutions to the issues in dispute. Settlement meetings between both appraisers can be conducted on a “Without Prejudice” basis.

If matters are not resolved quickly, the umpire will bring both appraisers together and the umpire will set out the process and timelines to be followed. There is nothing in the Act which defines a specific process.

Most appraisals will start with a conference call with the umpire. Issues will be discussed and next steps will be determined by each side. In short order, each appraiser will be requested to submit a document brief of information that will be relied upon in the face-to-face tribunal:

  • A narrative setting out the issues in dispute and the appraiser’s opinions.
  • Insurance policy details. Underwriting file if applicable.
  • Photographs / videotape.
  • Repair estimates, drawings or opinions.
  • Analytical charts comparing pricing.
  • Proofs of loss/ payment list.
  • Key correspondence / emails, if applicable. This should be limited to key points that go to determining the “amount of loss”.
  • Any expert reports or opinions to support a point of view. Engineers, surveyors, accountants etc. Curriculum vitae’s on experts should form part of any submission.
  • Relevant case law, articles, or other material that might support a point of view.

No one should underestimate the importance of this brief of documents. You are providing the umpire with a first impression of your point of view. The appraisers should make an effort to agree beforehand on the submission of common documents to avoid duplication that might lead to an increase in costs.

Neither appraiser should gain any advantage when submitting the document brief. A simultaneous exchange should be orchestrated by the umpire so all parties are getting the information at the same time. This can be done in a paper format or electronically.

Most umpires require that the appraisers do not communicate one-on-one with the umpire. Both appraisers and the umpire should be dealing with the same information flow. There is, however, no hard rule on this and there may be occasions when the umpire feels it is appropriate to speak to one side or the other in the same fashion you might see in an arbitration or mediation. This is, however, an area for caution. (New Dawn Enterprise V. Northbridge et al, S.C.N.S., J. Arnold, Jan. 17, 2020) and (Birmingham Business Centre v. Intact, Ont. Superior Court- Divisional Court (Appeal}. Oct. 15, 2018).

While the document brief deadline might be set for several weeks before the tribunal the umpire may request the early release of some documents that both appraisers have on hand in order to allow the umpire suitable time to properly review material.

The appraisal process can be very dynamic. For the umpire to be the majority decision-maker it may be important to:

  • Attend and complete a site inspection. This visit might include the policyholder and/or experts from either side. A visual examination might be very important to truly understanding the issues in dispute.
  • Site visits might also involve inspecting contents, equipment or machinery.
  • There could be situations where, in order to determine the amount of loss, additional experts might have to be involved with the process. That decision is made in tandem with both appraisers and the umpire.
  • The umpire does NOT issue ‘Orders’ in their role. The umpire cannot force either side to obtain new information or produce information from their files. They are left with the information in the briefs, interviews of witnesses in the tribunal and arguments from both appraisers to sway their opinion.
  • On occasion, there are arguments raised about disclosure of evidence. This could relate to arguments that the insured has not complied with what’s required under Statutory Condtion #6. These are arguments for a trier of fact to decide. If an appraiser is seeking more complete disclosure their remedy is to go to a motion court judge.
  • An umpire is alive to the quality of the evidence that is being disclosed. Is it the best evidence? Is there something missing? All these type of things can be a factor when the umpire is weighting his decision.

In advance of the Appraisal, appraisers should determine a witness list. This can include fact or expert witnesses. This can include:

  • The policyholder to provide information on the claim that has been submitted. Allowing the insured into the process at the front end of a tribunal can be quite liberating for the insured. This can be their ‘day in court’ and they can bring key information into the process.
  • ‘Fact’ witnesses. These may be individuals who can give factual background to support a particular point of view. They do not express opinions.
  • An “expert witness” who would provide their opinion. This may be an engineer or a quantity surveyor. Or perhaps a general contractor? This witness will be assessed by the umpire in the same fashion a trier of fact may do in qualifying an expert witness in a trial. Would the witness meet the test of Rule 53 in Ontario? Key thoughts:
    a. Is the information being offered relevant to the case at hand?
    b. Is the information necessary to assist the umpire in his or her decision-making?
    c. Does the witness have the necessary qualifications to render an opinion?
    d. Is the witness fair, objective and non-partisan?
  • Experts are not HIRED GUNS. They must show independence and impartiality. Their opinions must be objective and unbiased. If the witness / expert does not follow these principles the umpire will take this into account when assigning ‘weight’ to what they are hearing.
  • An umpire will apply weight to what they are hearing. Do they believe all, some or nothing of what they are hearing? Are they hearing best evidence? Sometimes it’s not so much what you are hearing that counts but- what is missing?

The umpire should lead the creation of an Agenda for the tribunal. Who are going to be the witnesses? What order should they be allowed to speak? There should be no surprises at the tribunal in terms of who is going to be a witness or what documents are going to be relied upon to deliver their evidence. The umpire can set a cut-off date for the witnesses and reports so each side has ample opportuntiy to properly prepare for the tribunal. Usually, this date is 7-10 days prior to the tribunal date.

The only people with authority in this process are the two appraisers and the umpire. On a case­ by-case basis, witnesses can be brought into the tribunal and then asked to leave. Or, all the witnesses can be in the room and the umpire can lead a dynamic process of information being given and questions coming from multiple people in the room. The key is to ensure a structured, orderly process.

In assessing the role and actions of the umpire, consideration might be given to the often quoted wording in Regina V. Sussex Justice: Ex Parte McCarthy, 1924, 1 Kings Bench:

“It is of fundamental importance that justice should not only be done, but should manifestly and undoubtedly be seen to be done.”

This concept is reinforced in Kane V. Board of Governors for USC, Supreme Court of Canada, 1980 where our top court analyzed the fairness of a tribunal and sets out some guiding principles.

At the start of a session the umpire will outline how the session will be conducted. These opening remarks set the ground rules for everyone who may be in the room.

After opening remarks, many umpires take a mediation approach to resolving the issues. Both sides are given appropriate, uninterrupted time to present their arguments. The umpire will then control a debate between both appraisers. For those familiar with mediation procedures, this is an interest-based approach. As the discussion unwinds, most umpires will then gradually move to a “rights-based” approach in which the umpire will provide an opinion on an issue. The umpire’s opinions may stimulate further discussion to see if some common ground can be developed with everyone or with one of the two appraisers. This part of the process is usually held with just the umpire and appraisers present in the room.

The umpire must ensure the process stays within the limits of their authority and does not drift into areas that should properly be addressed in a court of law by a trier of fact. Example- an appraiser for the insured might ask the umpire to agree with them that some goods were destroyed in a fire. The appraiser for the insurer argues the goods were not in the premises destroyed. An umpire can drive the process to reach a conclusion as to the value of the loss but cannot reach a conclusion as to whether the property was on the site or not when the fire happened. Any conclusion on that type of thing has to be left to a court of law. (Gebara V. Economical Insurance Company, Ont.S.C, Feb 1, 2017, ONSC 801.)

Usually, an Appraisal tribunal is concluded in one session. Sometimes, more than one session is required, and the umpire also can adjourn the session while an appraiser develops and submits further documentation. This would be done on very rare occasions.

Most Appraisals cover many separate issues in dispute. The umpire might choose to try and settle the issues one-by-one. As each item is debated, situations may occur where:

  • Both appraisers and the umpire reach unanimous agreement.
  • The appraiser for the insurer and umpire agree.
  • The appraiser for the insured and the umpire agree.

When two out of three parties agree on an issue the “majority” rules and the issue is deemed to be resolved. The Award Document that is created can reflect individual items or, by consent, the parties can use the issues they have resolved to arrive at a macro settlement number whereby at least two of the three parties agree on the figures. There is some flexibility as to how the Award Document can be constructed but the final numbers are absolutely binding on both parties.

Each umpire brings with them their own ‘style’ of managing / directing the process. Some umpires listen to the separate points of view and read briefs before writing lengthy “Reasons” as to how they arrived at certain numbers. If one of the two parties agrees with the Umpire’s conclusions the matter is deemed to be concluded. This process is seen frequently in Nova Scotia and Alberta but not in Ontario. (New Dawn Enterprise V. Northbridge et al. S.C.N.S., J. Arnold, Jan. 17, 2020). and (Campbell et al V. Desjardins Insurance Co., Smith M., Oct 30, 2020).

The appraisers and umpire do wish to be judicious with their time. If the quality of the briefs is strong with lots of documents this allows the process to get immediately down to the issues at hand. Each tribunal takes on its own dynamics. In mediations, its common for breaks to be built into the process to caucus with experts. This also can form part of an appraisal tribunal. It can take on any form the umpire wishes to achieve the goal of reaching a “reasonable solution” to the issues at hand.

And what is “reasonable”? A dictionary definition of this includes:

….having sound judgment; fair and sensible. As in “no reasonable person could have objected”. Sensible, rational, logical, fair-minded, just, equitable, intelligent, wise, le vel-headed, practical, realistic; sound, we/1- reasoned, valid, commonsensical, plausible, credible, believable.”

The umpire and appraisers do not have to explain how they came up with final numbers to anyone. They embark on a process that does not have formal rules to it. They follow this journey and arrive at a result when two of the three parties agree. It’s not the singular decision of one person.

The award document should seek to add as much clarity as it can. For example- adding in that the agreement of amounts does include advance payments already made by the insurer. The appraisers and the umpire should seek clarity by working together in preparing this document.

Most sessions result in a one-page document showing final numbers. That is alt that is required. But if alt parties agree to having written reasons then that can also form part of the “findings” of the Tribunal. In Ontario, this is rarely going to happen.

During the course of a tribunal it can be difficult to keep track of all the issues and numbers. The umpire should consider a process to ensure one version of the truth is being calculated and both appraiser sign off on the math before the award document is signed.

Finally, the tribunal is a confidential process. Witnesses are not sworn in. There is no transcript by a court reporter. There is no expectation by the parties that anything said or presented in this process will be disclosed in any subsequent legal proceeding.

LEGAL CASE REVIEW

As always we receive guidance from our courts regarding how an appraisal matter is to be conducted. There have been a growing number of cases in the past five years which have clarified or emphasized a number of key points. ·

The policy of insurance is a contract. It is binding on both parties. When the insured buys the policy they agree that in the event of a dispute as to the amount of the loss there is a mechanism that can be triggered by both sides that is designed to provide a quick, efficient method to resolve the matter without going to a court of law. While some of the decisions might seem difficult to reconcile, the courts have kept this guiding principle at the forefront of their decisions.

Frequently Asked Questions?

  1. What is the intent of Appraisal? The intention is to provide a quick, cost-effective resolution to a claim dispute on the amount of a toss.
    a. Shinkaruk Enterprises Ltd. V. Commonwealth Insurance Co. et at. Saskatchewan Court of Appeal, June 28, 1990.
    b. O’Brien et al V. Lloyds et at. Alberta Queen’s Bench, Dec. 23, 1991.
    c. What is appraisal?- Black’s Law, Tenth Edition, Thomson Reuters, 2009.
    d. Madhani v. Wawanesa Mutual, 2018 ONSC 4282, Ontario Superior Court, Divisional Court (appeal), July 10, 2018.
    e. Birmingham Business Centre v. Intact, Ont. Superior Court- Divisional Court (Judicial Review), Oct. 15, 2018).
    In this decision the judicial revew stated in part:
    -The award is intended to be a “final and binding determination of the loss.”
    -The Courts have afforded this process “substantial deference” . Unless there is proof of some sort of misconduct or the appraisers exceeded their jurisdiction the award is going to stand.
    -The appraisal requires, “neither a hearing, a consideration of evidence, nor reasons.”
    f. Campbell et al V. Desjardins Insurance Company, Smith M., Oct 30, 2020.
  2. Is a final release or a final proof of loss required after a decision is reached? No. The appraisal tribunal is triggered by a statutory condition. It requires a determination on the “amount of loss”. Once that is completed an Award Document should be all that is required to finalize the amount of loss. There may, however, be ancillary issues that are not part of the appraisal process. These could included coverage disputes, allowances for interest, uninsured losses etc. Anything negotiated outside this process may require a final release to conclude all legal actions.
  3. An Appraisal is not an arbitration. There is no duty in this process to conduct a hearing. It is an appraisement of value. The function of the appraisers and/or umpire is not to hear evidence but to arrive at a decision that is based on using their own skill and experience. Legal issues or broader issues between the parties in the action are resolved in a court of law.
    a. Krofchick et al V. Provincial Insurance Co., Ontario High Court- Divisional Ct.­ Southey, Steele & Craig, November 9, 1978.
    b. Shinkaruk Enterprises Ltd. V. Commonwealth Insurance Co. et al, Saskatchewan Court of Appeal, June 28. 1990.
    c.Matti V. Wawaneesa Mutual Insurance Co., Queen’s Bench of Alberta, Justice W.P. Sullivan, May 14, 2009.
    d. Winnipeg Regional Health et al V. Temple Insurance Co., Queen’s Bench of Manitoba, McCaulay J., April 21, 2011.
    e. Madhani v. Wawanesa Mutual Insurance Company, 2018 ONSC 4282, Ontario Superior Court of Justice- Divisional Court- Judicial Review- July 8, 2018.
    f. (Birmingham Business Centre v. Intact, Ont. Superior Court- Divisional Court (Judicial Review), Oct. 15, 2018).
  4. Can an appraisal session turn into arbitration? Yes. But there must be clear consent of both parties. They must understand that in moving from one ADR mechanism to another the governance also changes. The applicable Insurance Acts governs the appraisal session whereas the arbitration process is ruled by the Arbitration Act.
    a. Andrews V. General Accident Assurance Co. of Canada, Alberta Queen’s Bench, Fruman J., Nov. 22, 1993.
  5. Can either side elect ‘Appraisal’ if there are policy coverage issues at play? Yes and No. Each case must be judged on it’s own merits. If there are many issues at play a trial may be the preferred solution. For the most part our courts will put the matter into appraisal to determine the amount of loss. Can this extend to situations where the insurer claims the insurance policy is void? Yes. Interpretation of coverage and policy term is for a ‘trier of fact’ and not the ‘Appraisal’ venue. There should be no delays in the process to determine the amount of loss.
    a. Viam Construction Ltd. V. Zurich Insurance Company, British Columbia Court of Appeal, 1984, 6 C.C.L.I.)
    b. David V. Canadian Northern Shield, British Columbia Supreme Court, I.LR. 1306, 1994.
    c. Bnei Akiva Schools V. Sovereign General Insurance Company, Ont. S.C., Justice M.D. Faieta, Jan. 14, 2016, ONSC 383.
    d. Aqro’s Foods Inc v. Economical Mutual Insurance Co., 216 ONSC, 1169 S.C, March 24, 2016, Justice C. Braid.
    e. 2343697 Ontario Inc, Z. Marciniak et al V. Aviva Canada et al, Ontario S.C., Myers F.L., May 21, 2019.
    f. Celan & Zambito V. Greenclean Restoration et al., Ont. S.C., Dawe J., March 12, 2020.
  6. If a legal proceeding is underway does this preclude the matter from going to appraisal? No. The fact that litigation is underway cannot stop this proces from being initiated. There are some arguments that appraisal is being selected “too late” in the litigation process but usually the courts will require the matter to go through appraisal if notice is given.
    a. A. Seed V. ING Halifax, Ont. Court of Appeal, Nov. 10, 2005.
    b. Canadian Northern Shield V. Edwards International, B.C. S.C., Affleck J., August 11,2011.
    c. GreerV. Co-Operators General Insurance, (1999} O.J. No 3118.
    d. 56 King Inc. V. Aviva Canada, Ont. S.C., Lefchik T., 2016 ONSC 7139 Can. LIi. This decision was appealed. Ont. Court of Appeal decided May 16, 2017. Motion judge did have jurisdiction to make an order to send this matter to appraisal. The Statutory Conditions impose no time limit on the insurer’s right to invoke appraisal. The wording of the Act shows a clear preference to use appraisal to resolve issues on the amount of loss. The fact a judge “may appoint an appraiser or umpire” was simply to allow the court to ensure there was no abuse of the process.
    e. 2343697 Ontario Inc, Z. Marciniak et al V. Aviva Canada et al, Ontario S.C., Myers F.L., May 21, 2019. This matter had already gone through Examination for Discoveries and a failed mediation. Appraisal remains the ” [p]referred process for quantifying damages in property loss cases.” Using appraisal to “[l]imit and narrow the issues left for the trial..”
    f. Celan & Zambito V. Greenclean Restoration et al., Ont. S.C., Dawe J., March 12, 2020.
  7. Does a proof of loss have to be filed before ‘Appraisal’ can be triggered? Yes! Arguments have also been raised as to whether an incomplete proof of loss can still trigger the process. The cases cited below speak to the proof of loss being “complete” but the reality is this entire area is a ‘gray zone’ that the umpire can deal with prior to the ‘Appraisal’ session. Remember that the goal of the process is to provide a quick and efficient outcome.
    a. LeBlanc V. The Co-Operators, Ontario District Court, 1993.
    b. Gerballa V. State Farm, Ont. S.C., Spence J., June 30, 2000.
    c. Dumitrascu V. State Farm, Ont. S.C., Healey J., April 9, 2014.
    d. Lauzon V. Axa Insurance, Ontario S.C., Glithero J., Nov. 27, 2012
    e. Hale V. Peel Maryborough Mutual, Ontario S.C., DiTomaso G., May 13, 2014.
    f. Campbell et al V. Desjardins Insurance Co., Smith M., Oct 30, 2020.
    The insured delayed submitting a proof of loss until reconstruction was completed. On a motion, a judge the submission was within the control of the insured. “As soon as practical” would have a wide interpretation.
  8. Can the insured file more than one proof of loss? Yes. Statutory Condition no. 6 does not prevent the filing of more than one proof of loss.
    a. R. Hale V. Peel Maryborough Mutual, Ontario S.C., DiTomaso G., May 13, 2014.
    b. Gerballa V. State Farm, Ont. S.C., Spence J., June 30, 2000.
  9. Can the insured delay the proceedings if they are demanding a response to a proof of loss they have filed? No.
    a. Letts V. Aviva, Ontario Superior Court, James M., November 19, 2010.
    The insured had filed an extensive list of damaged items. The insured refused to move forward in the appraisal process until the insurer had responded with a position on items submitted. The fact the insurer had not responded did NOT allow the insured to delay entering the process.
  10. Does the “allegation of fraud” abort the ability of either side to embark on the ‘Appraisal’ process? No! If an election is made the matter must go forward keeping strictly in mind the process that is to be followed. Many insurers who are involved with a possible fraud defense on a file resist ‘Appraisal’ as this ADR mechanism may confuse strategy on the file. This creates interesting dynamics for the umpire but there is no choice but to go the ‘Appraisal’ route if the process is triggered.
    a. Arlington Investments Vs. Commonwealth Insurance Company, B.C. Court of Appeal, 1.L.R.,1-1901, 1985.
    b. Shinkaruk Enterprises Ltd. Vs. Commonwealth Insurance Co. et al, Sask. Ct. of Appeal, June 28, 1990.
    c. Lauzon V. Axa Insurance Co., Ontario S.C., Glithero J., November 27, 2012.
    d. Pinder V. Farmers Mutual lnsce. Co {Lindsay), Ont.S.C. Vallee J., January 25, 2019.
  11. After an award is made by an Appraisal Tribunal does that end the process requiring compliance with Statutory Condition #6- Requirements of an Insured After a Loss? No. Are there genuine issues relating to this condition that require a trier of fact to make a determination? Is this a situation where a judge needs to weigh evidence, evaluate the credibility of a witness or draw reasonable inferences from the evidence.
    This might happen if there is a question about the existence of items.
    Statutory Condition #6 is very clear on the requirements of the insured after a loss. There should be best efforts here by the insured to comply. Where an umpire feels there has been an incomplete effort to comply this can go towards ‘weighing’ which way the umpire might ‘lean’ in the debate on the amount of loss. Or, the insurer may decide to go to a motion court judge to order compliance.
    a. Gebara V. Economical Mutual Insurance Co., Madame Justice A. Doyle, Ont. , Feb.1, 2017,S.C., ONSC 801
    In the Gebara decision several quotes from the trial judge are noteworthy:
    ”As stated in Sagi v. Cosbum, Griffiths and Brandham Insurance Brokers Ltd.•2009 ONCA 388 (CanL/1), [2009) O.J. No. 1879. the Ontario Court of Appeal stated, that the onus to recover for Joss is on the insured, on a balance of probabilities, that the loss occurred and the amount of the loss. “The onus does not shiff to the insurer merely because the insurer raises the defence of fraud”. (para. 15.) See also Shakurv. Pilot Insurance Co. (1990) 1990 CanL/1 6671 (ON CA).74 O.R. (2d) 673 (Ont. C.A.). At para. 76, the Court stated:
    It is common ground that in the preparation of the proof of loss, an insured owes a duty to the insurer of honesty and accuracy. Indeed, the policy in this case, reproduced above at para. 30, expressly states that the policy is void if the insured “intentionally concealed or misrepresented any material fact relating to this policy before or after a loss.” Once fraud is established, no matter the amount, the entire claim under the proof of loss is forfeited: Britton v. Royal Insurance (1866), 4 F&F 905 at p. 909; Alavie v. Chubb Insurance Co. of Canada (2005), 2005 CanL/1 5331 (ON CA), 195 O.A.C. 7 (C.A.), at para. 5; Dimario v. Royal Insurance Canada, (1987) 26 O.A.C. 370 (Ont. Div. Ct.), at para. 7. This rule follows from the general principle that a contract of insurance is one of utmost good faith: see Insurance Law in Canada at p. 9-16.”
    b. Pinder V. Farmer’s Mutual Insurance Co. (Lindsay). Ont. S.C., Vallee J.• January 25. 2019.
    The ‘reasons’ in this citation come from a cost order following a jury trial that concluded in Dec. 2018. The amount of loss was directed to a tribunal process. The insurer had resisted going through the process as they believed the insured had committed fraud on her proof of loss forms and they believed that Statutory Condition #7 allowed them to invitiate the entire claim. The jury trial agreed with the insurer and the entire claim of the insured was denied.
    c. Pinder V. Farmer’s Mutual Insurance Co. (Lindsay), Ontario Court of Appeal. June 25, 2020.
    This was an appeal from a trial of judge and jury. The trial resulted in a denial of the entire claim of the insured based on Statutory Condition #4 (Material Change in Risk) and Statutory Condition #7 (willful false statements). The Appeal Court upheld the appeal on the material change issue but remained firm on the impact of the insured swearing a proof of loss where a significant number of content items were either not owned or did not exist. A “partial indemnity” cost award of $430,000 was awarded against the insured in this case.
  12. When a party elects to go through the Appraisal process does it change the normal limitation period that might exist on the policy? The simple answer is “No“. Most property policies contain a one year limitation period on fire losses. Someone electing Appraisal or perhaps filing a proof of loss at the last minute does not extend the prescription date. An insurer may consider granting an extension to avoid either party incurring unnecessary legal costs but any waiver or extension in this area should be clearly communicated between both parties.
    a. Sadema Lumber Products Limited V. Hanover Insurance Company. Ontario Supreme Court. 1-1381• April 27. 1981.
    b. Feist V. Gore Mutual Insurance Company, Ont. Ct.-Gen. Div., Jan. 10, 1991.
    c. Terraco lndustrites V. Sovereign General Insurance Company, Alberta Queen’s Bench, March 1, 2006.
    d. DK Manufacturing V. Cooperators General Insurance Co., Ont. S.C., Stinson J., June 20, 2016, ONSC 3983.
  13. Can this process be used to handle multiple claims? Yes. The motion court judge has the discretion to utilize the process to handle a number of claims for the same insured that had similar losses.
    a. Malholtra V. State Farm, Supreme Court of Canada, March 27, 2014.
    b. S.W.H. Investment Inc. et al V. Lloyd’s Underwriters, Ontario Superior Court of Justice, Nishikawa J., July 31, 2018.
    c. Campbell et al V. Desjardins Insurance Co., Smith M., Oct 30, 2020.
    A tornado damaged three dwellings. Three actions were started and bundled together to seek advice from a motion court judge on how the appraisal process was to proceed.
  14. What happens if one party does not agree to participate in the process? In these situations, the party initiating the process would apply to the court for the appointment of an appraiser to act for the other side. If the two appraisers could not reach a mutual agreement on the choice of umpires, it’s back to the judge to have an umpire appointed.
    a. Trentmar Holdings Ltd. et al V. St. Paul Fire and Marine Company, Ontario Supreme Court, 1984. The policyholder’s court-appointed appraiser refused to show up for the Appraisal session with the umpire. This appraiser felt he had “no instructions” so he was not prepared to participate. The ‘Appraisal’ went ahead and when the umpire and appraiser for the insurer reached consensus of opinion on damage issues, they executed an award document effectively concluding these issues as “two out of three” appraisers/ umpire had agreed. So, in spite of the lack of cooperation by one appraiser this matter concluded in a way that precluded further costs of litigation on damage issues.
    b. Saskatchewan Government lnsce. V. Town of Nipawin et al, Sasktatchewan Court of Appeal, Dec. 31, 1998.
    c. A. Seed V. ING Halifax, Ontario Court of Appeal. Nov. 10, 2005. A number of delays led into the start of the appraisal process. When the appraiser for the insured was not granted an adjournment he walked out on the hearing. The Umpire and appraiser for the insurer reached an agreement on the amount of loss. The Court of Appeal upheld that decision in spite of an argument raised at appeal that a failure to grant an adjournment created judicial unfairness.
    d. S.W.H. Investment Inc. et al V. Lloyd’s Underwriters, Ontario Superior Court of Justice, Nishikawa J., July 31, 2018. The insured had three residential properties all burned in one fire. The insurer determined only two of the properties were insured. They were suing their insurance broker for coverage on property #3. The insured refused to go to appraisal. The judge ordered them into the process to determine the amount of loss on the insured properties. He also ordered the appointment of an appraiser within 30 days of his decision.
    e. Celan & Zambito V. Greenclean Restoration et al., Ont. S.C., Dawe J., March 12, 2020. The insured had their house repaired following a fire. They sued the contractors and the insurer. They refused to go to Appraisal. Judge ordered appointment of an appraiser by the insured in 7-days. A failure to do so meant the appraiser for the insurer could make the appointment of an appraiser for the insured. He then gave 30-days for an umpire appointment.
  15. Can you argue about whom the either side picks as an appraiser? Generally No. Either side can pick whomever they like. There was a novel case noted below where the insurer argued about the insured’s choice of appraiser. It was a Manitoba case where selection must be a “disinterested” party. This meant to the judge someone who was “absent of bias, influence, impartial” etc. The end result was that the judge did not interfere with the insured’s choice of an appraiser.
    a. Matti V. Wawanesa Mutual Insurance Co., Queen’s Bench of Alberta, W.P. Sullivan, May 14, 2009.
    b. Ice Pork Genetics V. Lombard Canada et al, Menzies J., Court of the Queen’s Bench of Manitoba, April 1, 2010
    c. Campbell et al V. Desjardins Insurance Co., Smith M., Oct 30, 2020.
    The umpire felt that both appraisers being appointed in a matter were not disinterested parties and this did not create an independent panel. A motion court judge ruled that in Ontario either side could pick whomever they wished to serve as appraisers. The umpire has no authority over who is chosen to be an appraiser.
  16. Can you change your appraiser after the process has started? Yes. But if the intention is to manipulate the process the umpire is not likely to agree to it. The umpire could seek court guidance on this, if needed.
    a. A. Seed V. ING Halifax, Ontario Court of Appeal, Nov. 10, 2005.
  17. How does a court choose an umpire? Choosing an umpire should be given a wide definition. Some courts have leaned towards choosing someone who has expertise on the issues in dispute. For example, if it’s a business interruption issue the lean might be towards appointing an accountant as the umpire. Cases have examined the 4 part test of our Supreme Court that relates to the qualifying as an expert witness. There are elements in this test that are helpful in examining an umpire’s qualifications.
    a. Regina V. Mohan, Supreme Court of Canada, 1994 (expert test)
    b. Trudeau V. Royal Insurance Company, Ont. Court- General Division, Hurly P., March 3, 1999:
    c. Matti V. Wawanesa Mutual, Court of Queen’s Bench, Alberta- Sullivan W.P., July 4, 2009.
    d. 265 Commercial Ltd. V. ING Insurance Co., Nova Scotia Supreme Court, Edwards F., Dec. 14, 2009.
    e. Intact V. Galaxy Home Furnishing Corporation, Ont. S.C., Whitten A., November 26, 2019.
    The appraiser for the insured failed to appear in motion court to argue the appointment of an umpire. The judge appointed the umpire and awarded costs against the insured of $2,500. The judge also issued an order ensuring both parties were going to pay 50% each of the umpire’s fee for services.
  18. Does an umpire have to declare any previous dealings or relationships with either party to the appraisal process? Usually, the appraisers directly ask the umpire to name any conflicts they may have in being appointed. And, specific questions can be directed at the umpire to clarify any questions the appraisers may have on anything that might impugn the ability of the umpire to serve.
  19. Can a motion court judge’s appointment of an umpire be challenged? Yes. But in the cases noted the appeals were not successful.
    a. Malholtra V. State Farm, Supreme Court of Canada, March 27, 2014.
    b. Phyllum Corporation V. Dominion of Canada Insurance Co., Ontario Court of Appeal, Dec. 9, 2014.
  20. Can a motion court judge over-rule a request for Appraisal? Yes. Rule 20 allows for a motion court judge to grant a summary judgment where there is NO genuine issue(s) that might require a trial. But a judge can decide that the best process would be a full trial where assessements of credibilty might be required to reach a fair and just determination. Of interest, in the case at hand, the parties agreed that if the motion was not granted they would go to Appraisal to determine the amount of loss.
    a. 2129152 Ontario Inc. V Aviva Insurance Co.• Ont. ONSC 4713, Justice C. Brown, Aug 23. 2017.
    b. Agro’s Foods Inc v. Economical Mutual Insurance Co., 216 ONSC, 1169 S.C, March 23, 2016, Justice C. Braid.
  21. Can an umpire hear “evidence” in an Appraisal session? Generally speaking No! As mentioned in this article, the umpire can allow certain people into the room to provide information or assist in clarifying a point but usually there is no testimony under oath. An exception did take place in one of the cases noted below. In that case, the court determined that the appraisers could hear testimony under oath and receive evidence by way of sworn affidavits.
    a. Royal Insurance Co. of Canada V. Brown (unreported), B.C. County Court, April 28, 1985.
    b. Peak V. Herald Insurance Company, 48 C.C.L.I., 210, 1991.
    In a decision of Agro’s Foods Inc. et al V. Economical Mutual, Justice D.C. Braid, Ont., March 24, 2016, S.C. 2016 ONSC 1169 there was a motion brought forward including to stop the appraisal process. There were significant issues of coverage relating to wind damage on a barn structure. Did the “wear and tear exclusion” apply? During the motion, the judge heard conflicting expert evidence. And with the two sides being so far apart on the replacement cost the judge challenged whether the Appraisal process would achieve a quick settlement. The judge went on to order the matter to a trial in front of him and put together instructions and timelines for both counsel. In his decision the judge commented:
    “The umpire in an appraisal process is not required to hold a fair hearing and hear evidence, argument of counsel or any of the trappings that one would associate with an arbitration process: Krofchick v. Provincial Insurance Company (1978), 1978 CanL/11304 (ON SC), 21 O.R. (2d) 805 (Div. Ct.).
    They are permitted to hear ‘viva voce’ testimony under oath and receive affidavit evidence, but they are not required to do so.”
  22. Can a public adjuster’s fees to a policyholder form part of the insured’s claim? This will depend, of course on the policy wording if the claim is being made via a ‘professional fee’s endorsement’. Many insurance contracts do allow for certain fees to be paid but they exclude public adjuster fees.
    a. 854965 Ontario Ltd. V. Dominion of Canada Insurance Co., Ontario Superior Court. Kennedy J., March 17, 2003.
    b. Hog Haven Inc. V. North Waterloo Farmer’s Mutual. Ontario Superior Court. Macleod C., Aug.22.2016.
    c. Welland Brethren et al V. Intact Insurance Co., Ontario Superior Court. Edwards D.L.. December 17, 2019.
    This case involves arguments about professional fees incurred by the insured to prove their loss. The insured paid a premium for this coverage. Was the policy wording ambiguous? The judge concluded that the endorsement was intended for the insured to have some money available to hire their own professionals to assist th m in complying with the statutory conditions. This was the insured’s reasonable expectation. The judge’s language interpretation followed the guidance provided in Ledcor v. Northbridge, 2016 Supreme Court of Canada.
  23. Can restrictions be placed on the umpire as to what methods might be used to determine the “amount of loss”? For example, on an ACV argument can the umpire be instructed on what method (i.e. market value; RC less depreciation; income approach) to be used to arrive at the “amount of loss”? “No“!
    a. Barrett et al Vs. Elite Insurance Company. B.C. Court of Appeal, March 27. 1987.
    b. Greer V. Co-Operators, Ont. Superior Ct. of Justice. J. Shawghnessy, August 12,1999. In this decision the judge said:
    “There is no clause in the insurance contract which must be interpreted by this court. I am satisfied that qualified appraisers are quite capable of making that determination or in the event of a dispute an umpire chosen by the appraisers can properly determine the matter. There is no question of law for this court to decide and there is no need to provide directions.”
    c. Sehdev Vs. State Farm, Ont. Court of AppeaL Feb. 20, 1991. This case affirmed the umpire’s authority to choose the valuation he preferred in determining actual cash value.
    d. Madhani v. Wawanesa Mutual Insurance Co., Ont. Superior Court of Justice: Divisional Appeal Court- July 10, 2018.
  24. How important is the role “experts” have in this process? The intention of each appraiser is to get the umpire to agree with them on some or all of the issues. Umpires, like judges, are influenced by the “best evidence” that is brought before them. You cannot underestimate how important it is to back up your opinions with the right “experts”.
    However, the Umpire has to be alive to the qualifications of a so-called expert. Does that person have the necessary knowledge, skill and experience to be deemed an “expert” in a court of law? Would the person pass the test before a trier of fact? Close attention and weight needs to be given to this area. And, experts who do appear at the tribunal should be cautioned about their role to be a ‘friend’ of the tribunal and ensure the they are providing unbiased opinions and information. This would be on a parallel track to the testing that a trier of fact might apply.
  25. Does the Appraisal process provide the authority to direct an insurer to take salvage? No! This is not something the ‘Appraisal’ section of the Act provides the power to determine.
    a. I.C.B.C. V. Dawd Holdings Ltd., B.C.S.C., Nov. 15,1988
  26. Is the finding of the process binding on everyone? Yes! The process can be subject to judicial review but the courts have consistently held that in the absence of “fraud, collusion or bias”, the decision will stand. There can be situations, however, where the decision in appraisal can be subject to judicial review if the decision reached was “unreasonable”. This would be an unusual situation.
    a. Trentmar Holdings Ltd. et al V. St. Paul Fire & Marine, Rosenburg J., Ont. High Court of Justice, May 14, 1984.
    b. Pfeil Vs. Simcoe & Erie Insurance Co., Sask. Ct. of AppeaL 1986 also affirmed an umpire’s award was binding and could not be set aside except for “fraud, collusion or bias”.
    c. Shinkaruk Enterprises Ltd. Vs. Commonwealth Insurance Co. et al, Sask. Ct. of Appeal, June 28, 1990.
    d. Parslow V. Pilot Insurance Co., Ont. Ct. (Gen. Div.). Feb. 5, 1999 is a case where two appraisers resolved the ACV on a building and contents without using an umpire. A lawyer for the policyholder challenged the result. A judicial review of the decision was demanded. A panel of three Ontario Court justices concluded: “Wrongdoing by the appraisers has not been alleged or proved. We can see no reason to go behind the appraisal. The application is dismissed with costs… “
    e. Barrett V. Elite Insurance Co”I Ontario Court of Appeal, March 1997.
    f. Peace Hills V. Doolaege, Alberta Queen’s Bench, Lovecchio S., March 23, 2005. This case DID result in an appraisal award being set aside. The judge explored the process that was followed in this matter and did not feel that it resulted in judicial fairness. The decision of Kane V. Board of Governors for UBC, Supreme Court of Canada, 1980 was used to test whether this case met the test of fairness and in this instance the judge felt it had failed.
    g. DK Manufacturing V. Cooperators Insurance Company, Ont. S.C., J. Stinson, June 20, 206, ONSC 3983. A motion was filed to strike two actions filed against the insurer after an appraisal award had been issued. Reference to the Seed V. ING Halifax case, (2002) O.J. No. 1976 (SC) where “.. .the case Jaw is clear that an Umpire’s ruling constitutes a final determination of the issue and is binding on all parties”. Once the award had been given no further sums were recoverable by the insured.
    h. K. Madhani v. Wawanesa Mutual Insurance Co., Ont. Superior Court: Divisional Appeal Court, July 10, 2018. An Appraisal award was agreed upon by the majority in a tribunal. The insured appealed the award on two counts-
    1. That the umpire did not provide written reasons on how the process arrived at a building depreciation rate.
    2. The contents loss was made without jurisdiction.
    The Appeal Court dismissed the application. There was no requirement for written reasons so there were no issues on judicial fairness. Secondly, there was no finding on legal entitlement or any determination relating to legal issues with respect to the contents loss.
    i. New Dawn Ent. V. Northbridge, SCNS, Arnold J., January 17. 2020. This was an application for “judicial review” of an appraisal award. The decision was struck as it was found by the judge that the umpire should not have had directly contacted a property estimator and the loss adjuster without the other side having an opportunity to have had a “meaningful opportunity to present their case fully and fairly.”
    j. LeTeport Wedding & Convention Centre Ltd. V. Cooperators General Insurance Co., Ontario Court of Appeal, July 29, 2020. An appraisal was conducted to determine the amount of a flood & sewer back-up claim. There were coverage issues which went to trial after the appraisal tribunal determined the amount of loss. The award was based on the umpire and appraiser for the insured signing the document. At the trial, the trial judge commented, “the insurer co/laterally attacked the appraisal award as a means of challenging the credibility of witnesses [T]he purpose of appraisal is a valuation. It does not determine liability, which is the court’s function.”
    In Ontario, there is no mechanism to “appeal” an appraisal result. But because the Umpire’s decision involves the exercise of power granted under statute, it is subject to judicial review under the Judicial Review Procedure Act, RSO 1990, c. J.1 (“JRPA”). Under the JRPA, the Ontario Superior Court of Justice has jurisdiction to:
    “….grant any relief that the applicant would be entitled to in… proceedings in relation to the exercise, refusal to exercise, or proposed or purported exercise of a statutory power.”
    Under section 2(4) of the JRPA, the court has the power to set aside an appraisal decision on an application for judicial review. While most of us might consider this process an “appeal” of an appraisal decision, it is technically a judicial review which is a very fine distinction which one should be mindful of throughout the process.
    It is important to note that the judicial review application is heard in the Divisional Court which is made up of three Ontario Superior Court judges.
    Having said all of this there was a judical review in Ontario Divisional Court- Groupone Insurance Services (Lloyds) V. W. Li and D. Strukan, June 3 ,2019. It is a short decision which leaves lots of questions but the three judges felt the outcome of an appraisal was “unreasonable”. Both appraisers went into the appraisal debating the amount of loss in the $150-200,000 range. End result was an award of $338,000. This was challenged and the review court ordered the matter back to another umpire to come up with a decision. This decision is an outlyer and lends itself to many questions.
  27. Once an award has been signed, can it be re-opened? Usually- No. But when there have been mathematical errors or an obvious mistake the umpire should be in a position to reopen the award to ensure judicial fairness. If a trier of fact was to make an error like this there is a remedy to reopen the reasons for judgment. The same would apply here- in my opinion.
  28. If there is a subrogation action against a tortfeasor is the appraisal award considered valid proof of the amount of loss in that action? Not necessarily so. There is no contract of insurance between the wrongdoer and the insured. The question of damages in a third party proceeding is not within the appraisal process.
    a. Verlysdonk V. Premier Petrenas Construction et al, Ontario High Court- Divisional Appeal -Saunders. Hollingworth & Sutherland, June 5, 1987
    It would be my view, however, that if the matter of the “amount of loss” has been subject to an appraisal tribunal it is unlikely in a subsequent action that a trier of fact is likely to interfere with an award. But, efforts should be made in the initial tribunal to ensure you can document a thorough, rigorous scrutiny was done on the damages issue.
  29. Can an appraiser refuse to produce a document? The umpire has no authority to ‘order’ production. If the other appraiser feels that something should be produced they can go to motion court judge and obtain an ‘Order’. If one of the appraisers is seeking some advantage in not producing a document the umpire can take this into consideration when he’s weighing the evidence in forming his or her opinion.
  30. Can a tribunal be done by teleconference or video-conferencing? Yes. There is nothing that would prevent this from taking place. It creates a few more logistical problems but there is nothing wrong with utilizing modern technology. (Arconti V. Smith, Ont. S.C.• Myers F.L., May 21, 2020).
  31. What is success? The clear goal should be to have both appraisers sign the award document and agree on the overall result. This process has some give and take to it. Negotiations take place. Each side in the process may not win on every point but they may be satisfied with the overall result. Still- there are occasions where neither side is terribly happy with the result but a majority decision does bring matters to a conclusion.

CONCLUSIONS

The general insurance market in Canada is a $55 billion business. It is an important part of our financial system.

The value proposition of “insurance” is that a policyholder pays a premium which goes into a large ‘pot’ where every year the losses of the few are paid. Insurance is a grudge purchase. The policyholder is buying something they hope that they are never going to have to use. But, when something does happen there is a high expectation the insurer will be there to help them at one of the worst moments of their lives.

The Canadian insurance market settles a large volume of claims each year in an amicable fashion. But, there are always going to be situations where there is a difference of opinion on the amount of the loss. And these differences can play out at a highly-charged, emotional time for the policyholder.

The Appraisal or Dispute Resolution process is a right that can be triggered by both sides to the insurance contract. It can provide a quick, cost-effective solution to differences of opinion. It is now gaining more popularity to be triggered earlier in the journey of a claim dispute. Many of the legal cases cited in this article are the ultimate stopping point to a dispute. And the courts have consistently ruled that the appraisal process as being the preferred solution for a dispute on the amount of loss.

To reinforce this viewpoint consider these recent appeal decisions of our Ontario courts:

a. Madhani v. Wawanesa Mutual, 2018 ONSC 4282 Ontario Superior Court- Divisional Court
*Appeal/ Review*, July 10, 2018.
b. Birmingham Business Centre Inc. v. Intact Insurance Company, ONSC 6174, Ontario Superior Court- Divisional Court *Appeal/ Review*, Oct. 15, 2018.)

The appeal courts afford “substantial deference” to using “Appraisal” as an effective ADR tool. These recent appeal court decisions serve to reinforce the preference of the courts to put issues dealing with the “amount of loss” into the hands of the appraisal process.

At this point, my article has now be cited twice by judge’s as an ‘authority’ on the appraisal process.

Glenn Gibson

ICD.D, CIP, FCLA, FCIAA, CFE
President & CEO The GTG Group
E- glenngibson@gtggroup.ca
C- 1.289. 683.9534

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