Canada: All In Good Time: No Time Limit On Appraisals Under The Insurance Act

Last Updated: December 13 2016
Article by Alexandra Wilkins

The Ontario Superior Court of Justice has recently found that there is no time limit to elect to proceed with an appraisal pursuant to Section 148 of the Insurance Act.

Recall that Section 148 of the Insurance Act gives insurers and insureds the right to elect appraisal when there is a disagreement as to the value of the property insured, the value of the property saved, and the amount of the loss. In the practical course, a proof of loss is submitted. If quantum is disputed, either the Insurer or Insured can invoke the appraisal process in writing. Each party has seven days to appoint an appraiser. The two appraisers then appoint an umpire. An agreement by any two of the parties resolves the quantum dispute.

An often contentious issue is whether the elect to proceed with appraisal is time sensitive.

In 56 King Inc. v. Aviva Canada Inc., the Plaintiff sought payment of insurance funds from Aviva for the costs of repairing structural damage, accounting costs, and damages for bad faith and punitive damages, allegedly due to Aviva's denial of the claim under the policy. 

The structural damage was reported to Aviva on August 3, 2013 and coverage was denied on August 19, 2013. The Statement of Claim was issued on February 14, 2014 and the Statement of Defence was served on April 8, 2014. In August 2015, documentation in support of the Plaintiff's claim for damages under the policy was received. By Request to Admit, dated January 7, 2016, Aviva agreed there was coverage under the policy.

By letter, dated January 25, 2016, Aviva elected to proceed with an appraisal.

The Plaintiff took the position that the appraisal process was not available to Aviva and refused to appoint an appraiser on its behalf. Aviva brought a motion for a declaration that the losses regarding structural damage and accounting were capable of being determined by appraisal. Aviva did not seek to have the claims related to bad faith and punitive damages determined by way of appraisal.

The main issue in 56 King was whether the appraisal process was not available due to the stage of the proceeding.  Ultimately, Justice Lofchik held that the appraisal process remained available to Aviva.

In coming to his decision, he emphasized that the appraisal wording in the Insurance Act is mandatory – "those questions shall be determined by appraisal." Section 148 reads as follows:

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.

Justice Lofchik did not find Aviva's "undue delay" argument pursuant to the Rules of Civil Procedure compelling, commenting that the Rules have no application to the mandatory procedure mandated by the provisions of the Insurance Act and that the appraisal process must be continually available, despite the commencement of an action. Justice Lofchik highlighted that there was no timeline in either the relevant policy or the Insurance Act that stipulates a deadline for which an election for appraisal must be made.

Similarly, Justice Lofchik found no prejudice on the Plaintiff by having the value of the covered loss adjudicated by the appraisal process. He commented that, in his view, the appraisal process may enable a determination to be made more expeditiously and allows for selection of an umpire that is well-versed in the matter.

Justice Lofchik also found that the Plaintiff's allegation related to bad faith and punitive damages did not bar the right to an appraisal. He noted that the thrust of the appraisal process is taken out of the jurisdiction of the Court, but the Plaintiff's right to have the other issues tried at trial is not.

This decision flies in the face of prior decisions of the Court which dismissed Insurers' requests for appraisal due to the requests being brought too late. (see 1633092 Ontario Ltd and Ouellette Estate v. North Waterloo Farmers Mutual Insurance Company)

See 56 King Inc. v Aviva Canada Inc., 2016 ONSC 7139 (CanLII)

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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