Replacement‑Cost Coverage and the Challenges of Summary Judgment
In Dutremble et al. v. Heartland Farm Mutual Inc., 2026 ONSC 5741, a motion for summary judgment and for leave to amend a Statement of Claim was brought by insured homeowners whose home was destroyed by fire during the early months of the Covid‑19 pandemic. The plaintiffs alleged the defendant insurer, Heartland Farm Mutual, failed to indemnify them for the true cost of rebuilding their home, and acted in bad faith by refusing to reconsider the appraisal in light of pandemic‑driven construction cost volatility. The plaintiffs sought damages based on present‑day reconstruction costs, together with aggravated and punitive damages.
The decision shows how summary judgment can fall short in insurance cases where the value of the loss is disputed, the evidence is contested, and key questions about what caused the shortfall or whether it could have been avoided remain unresolved.
Background
The plaintiffs’ home was under construction when it was destroyed by a fire on August 5, 2020. The defendant retained an independent adjuster and obtained a replacement‑cost appraisal from an independent property appraisal firm, MBC, which assessed the rebuilding cost at approximately $477,000. The defendant paid that amount to the plaintiffs and later issued additional payments for omitted items.
The plaintiffs disputed the adequacy of the appraisal, arguing that contractors were unwilling to rebuild for the amount quoted and that pandemic‑era construction cost increases made the estimate far too low. Throughout 2021 and 2022, they provided the defendant with updated quotes and information showing rising material and labour costs.
The motion record of the defence contained internal communications between the defendant and their independent adjuster acknowledging a lot of volatility in the construction market now due to Covid‑19 and noting that certain quotes may represent an actual Covid‑19 related construction cost increase. Despite this, the defendant maintained its position that the appraisal reflected the extent of its obligation to the plaintiffs.
The plaintiffs commenced an action alleging breach of contract and breach of the insurer’s duty of good faith. The defendant denied the allegations and argued that the plaintiffs failed to invoke the appraisal mechanism under Statutory Condition 11. This is an appraisal condition found in a standard fire insurance policy under the Insurance Act. Statutory Condition 11 is a mandatory dispute‑resolution clause that governs disagreements about the value of the property, the amount of the loss, or the value of property saved.
Before the summary judgment motion, the defendant brought a motion to stay the action and move to compel an appraisal under Statutory Condition 11. That motion was dismissed because the judge found that the parties’ disagreement wasn’t just about how much the loss was worth, but also which point in time should be used to calculate that value, an issue that falls outside what the appraisal process is allowed to decide.
Analysis
1. Leave to Amend the Pleadings to Claim Punitive Damages
The plaintiffs sought leave to amend their claim to expressly plead punitive damages. Justice Kaufman granted the amendment, finding no non‑compensable prejudice under Rule 26.01 because the factual foundation for punitive damages, including the alleged bad faith from the defendant, had been pleaded from the outset and fully addressed in the plaintiffs’ motion materials.
2. Principles Governing Summary Judgment
Justice Kaufman followed the framework from Hryniak v. Mauldin, 2014 SCC 7, emphasizing that summary judgment is appropriate only where the motion record permits the Court to make necessary findings of fact and law in a fair, just, and proportionate manner. Where credibility issues, disputed expert evidence, or causation questions arise, summary judgment is not suitable.
3. Genuine Issues Requiring a Trial
The Court concluded that the record disclosed multiple genuine issues requiring a trial.
First, the parties’ evidence showed a substantial dispute over whether the MBC appraisal was accurate. The defendant’s independent adjuster raised concerns about the actual cost of rebuilding, and the plaintiffs obtained contractor estimates of $697,991 plus HST in March 2021 and $748,997.73 in April 2023, inclusive of HST, both well above the defendant’s original appraisal and the $671,000 policy limit. Although the plaintiffs repeatedly raised these issues, the defendant’s adjuster advised that the insurer was not interested in any inflationary increases in costs.
Second, the parties’ supporting affidavit evidence was insufficiently developed. Neither the defendant’s adjuster nor the plaintiffs’ contractor explained the methodology underlying their opinions, and neither was cross‑examined on their affidavits. Therefore, the Court could not determine whether the amount paid by the defendant was sufficient to rebuild the home or whether the plaintiffs’ estimates accurately reflected reconstruction costs.
Third, the plaintiffs’ failure to invoke the appraisal process under Statutory Condition 11 raised issues of causation and mitigation. Justice Kaufman noted that had the appraisal been invoked when the dispute arose, the amount of the loss could have been determined years before this motion was heard. The plaintiffs had not established that present‑day cost increases were caused solely by the defendant’s conduct.
Fourth, the plaintiffs’ personal contents claim depended on whether the inability to replace items was caused by the defendant’s alleged failure to pay sufficient funds to rebuild. This issue also required factual findings unsuitable for summary judgment.
Finally, the plaintiffs’ claims for aggravated and punitive damages could not be determined without resolving the underlying factual disputes concerning the insurer’s conduct.
Disposition
Justice Kaufman granted leave to amend the plaintiffs’ Statement of Claim but dismissed the motion for summary judgment. The Court ordered costs in the cause, meaning the ultimate trial judge will determine who pays costs once the action is finally resolved.
Take Away
Dutremble v. Heartland Farm Mutual underscores the evidentiary demands of summary judgment in insurance litigation. Where valuation evidence is contested, supporting affidavits lack methodological clarity, and causation and mitigation issues intertwine with contractual and statutory mechanisms such as appraisal, the motion record will rarely permit a fair and just determination.
This decision also highlights the importance of invoking the dispute‑resolution tools promptly under Statutory Condition 11. Failure to do so may complicate the causation analysis and undermine claims for consequential damages.
For insurers and insureds alike, the case is a reminder that disputes over replacement‑cost coverage, particularly during periods of market volatility, requires careful documentation, and timely use of the policy’s appraisal process. It also highlights that a summary judgment motion cannot replace the full fact‑finding that happens at trial when the evidence is complex or contested.