The Ontario Court of Appeal’s decision in Stewart v. Bay of Quinte Mutual Insurance Co., 2024 ONCA 730 (“Stewart v. Bay of Quinte”), offers insights into the responsibilities of insurers, particularly in assessing the value of lost property, and managing risk.
Stewart v. Bay of Quinte arose out of a dispute with respect to the coverage of a property and its contents that were severely damaged in a fire. The respondent, the Estate of Mr. Dennis Lynch, claimed that the Bay of Quinte Mutual Insurance Co. (“Bay of Quinte”) had negligently under-insured the property and its contents.
One of salient issues on appeal concerned whether the court has jurisdiction to evaluate the value of the lost personal property even where the appraisal process set out in s. 128 of the Insurance Act, R.S.O. 1990, c. 1-8 (the “Act”) is not followed.
The Court of Appeal decided that the failure by Mr. Lynch to comply with the statutory requirements did not amount to prejudice to Bay of Quinte, or impact its approach to litigation. Therefore, the circumstances warranted a discretionary approach to assessing the value of lost property and the statutory requirements therein. The appeal was dismissed.
Facts of the Case
This case emerged from a fire at Mr. Lynch’s home that caused serious damage. [1] The property was insured by Bay of Quinte. The policy limit of $220,000 for the building loss and $60,000 on account of the contents were paid out.[2] The policy limit for the contents was $111,000.[3]
The action was commenced in 2012, alleging that Bay of Quinte was negligent and as a result, Mr. Lynch suffered a loss of $93,000 in respect of the building and $74,000 in respect of the contents.[4]
The trial judge rejected the estate’s argument that Bay of Quinte had negligently under-insured the property and its contents. As a result, the estate could only recover the difference between what had been paid out and the policy limit for lost contents.
The Appeal
Bay of Quinte appealed the decision on three grounds:[5]
- The trial judge erred in allowing the claim for lost contents despite the insured’s failure to deliver a sworn proof of loss;
- It was entitled to an order for an appraisal process under the Act; and
- The trial judge erred in assessing the value of Mr. Lynch’s lost personal property.
On the first issue, the Court of Appeal noted that the statutory condition under s. 148 of the Act requiring an insured to “deliver a proof of loss verified by a statutory declaration… giving a complete inventory of the destroyed and damaged property” does not require a specific form.[6]
The Court of Appeal noted that the condition, as incorporated into every property insurance contract in Ontario, must be interpreted consistently with the Act’s consumer protection purpose.[7] The Court’s failure to examine Mr. Lynch on the basis of the incomplete proof of loss amounted to a waiver of strict compliance with the proof of loss requirements.[8]
On the second issue, the Court of Appeal found that the trial judge did not err in declining to order an appraisal.[9] The permissive language of the appraisal provision provides for discretion and allows for expeditious and easy means for the settlement of claims for indemnity.[10] Therefore, where appraisal will cause increased delay, the court will not order its use.
On the final issue, the Court of Appeal determined that in circumstances where an appraisal would result in additional delay and expenses, the court can rely on an expert witness’ assessment of the value of lost personal property.[11] There is no single or right way to calculate the actual cost value of personal property under an insurance policy.[12]
Take Aways
This decision highlights the discretion held by courts in allocating value to lost property, and the underlying public policy considerations in insurance contracts. In essence, the court is ensuring fairness in contractual relationships between the insured and insurer so as to reject inequitable forfeiture of insurance on the basis of imperfect compliance.
It is important for insurers to take the necessary steps to ensure perfect compliance with contractual obligations, otherwise may be deemed to waive that right pursuant to s. 131 of the Act. All the while, the insured is unharmed by their failure to comply.
[1] Stewart v Bay of Quinte Mutual Insurance Co, 2024 ONCA 730 at para 1 [“Stewart ONCA”].
[2] Stewart et al v Bay of Quinte Mutual Insurance et al, 2023 ONSC 3855 at para 3 [“Stewart ONSC”].
[5] Stewart ONCA, supra note 1 at para 3.
[6] Stewart ONCA, supra note 1 at para 7.
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