At our weekly firm meeting, Athina Ionita addressed the decision in Campbell v Desjardins, 2020 ONSC 6630. The court discusses the appraisal process, highlighting several key points. These points are:
- Appraisals are valuation decisions where two appraisers argue the property loss value before an impartial umpire
- Appraisers act like advocates and do not have a duty of impartiality or independence
- For this reason, it is appropriate to have counsel acting as an appraiser
- Further, actual costs incurred is an appropriate method to measure loss in the appraisal process, and estimates of the amount of loss do not have to be used
This case stems from tornados that struck Ottawa in 2018, causing destruction to multiple areas of the region.
Three families make claims as part of this case: the Campbell family, the Blazejewski family and the Van Gaal family. These three families had their homes extensively damaged in the tornado. All three families had their respective homes insured by Desjardins.
The appraisal process had been triggered for the Campbell family while Desjardins had requested an appraisal in the Blazejewski Family and Van Gaal Family matters, but proofs of loss have yet been delivered.
The insureds issued a statement of claim against Desjardins, an adjuster and the insurer’s preferred vendors alleging breach of its duty of good faith, fraud and conspiracy.
These matters have halted for a number of reasons, ranging from an umpire’s ruling on a conflict of interest, the selection of the appraiser, the timing for the filing of a proof of loss, the evidence to be relied upon at an appraisal, and the interplay between the appraisal and the claim.
One of the issues is that the Campbell family wishes to have their lawyer act as their appraiser. The umpire however contested the lawyer’s appointment, citing concerns that the lawyer’s appointment was a conflict of interest. The umpire believed that the appraiser had to be impartial and, therefore, it would be inappropriate to have counsel acting as an appraiser.
In considering the issues of the appraisal process and the valuation process, the court considers sections 128 and 148 of the Insurance Act, and statutory condition 6 and 11. Section 128 provides for an appraisal while section 148 deems that statutory conditions are part of the policy. Statutory condition 6 provides for notice of loss and statutory condition 11 states that there is an appraisal where there is a disagreement on the value of the loss.
The judge, reviewing the caselaw on the appraisal process, notes that there are two areas of concern that have not yet been considered in Ontario courts: 1) A party’s right to choose an appraiser of his/her choice; and 2) The insured’s right to rely upon actual costs incurred as opposed to estimates. These two points become the focus of the judge’s analysis.
On the question of the party’s right to choose an appraiser, the judge reasons that the appraisal process is a valuation and not an arbitration. The court notes that the umpire acts as the sole decision maker when he or she is called upon to resolve a dispute between the appraisers. Because the umpire takes on the role of a decision maker, the umpire must be impartial and independent.
On the other hand, appraisers do not have a duty of impartiality or independence. Their role is to present the evidence that supports their valuation of the loss. Appraisers do not give evidence. Appraisers thus act as advocates.
Turning to the second issue of whether it is appropriate to rely on actual costs incurred as opposed to estimates, the judge concludes that sworn proof can be based on actual expenses incurred.
There are certain conditions however if insureds choose to rely on actual costs incurred. Actual costs cannot be used if it frustrates the appraisal process or promotes abuse. The insured must act diligently and in good faith. The insured must not engage in unjustified conduct that has the effect of unreasonably delaying the repair or rebuild of the property. The insured has a duty to cooperate.
Once the repair or rebuild of the property has been completed, the insured must deliver their sworn proof of loss to the insurer forthwith. The judge mentions that relying upon actual expenses incurred actually enhances the efficiency of the appraisal process and eliminates most of the guessing and estimating in quantifying losses and equips the parties with the best possible evidence.
Ultimately, the judge concludes that the families can rely on the appraisers they wish. It is appropriate for counsel to act as an appraiser for the insureds. Further, the families can rely on actual costs in making their assessments as there would be no prejudice towards the insurers, and the insureds had otherwise met the conditions outlined above.