Imperfect Compliance? No Problem!

This Ontario Court of Appeal decision highlights an insurer’s responsibility in assessing the value of lost property and the Court’s discretion in allocating value to that lost property.

Insurance law – Homeowner’s insurance – Duty to defend – Valuation of property – Premium payment – Negligence of insured – Statutory provisions – Duties and liabilities of insurer – Practice – Appeal

Lynch Estate v. Bay of Quinte Mutual Insurance Co., [2024] O.J. No. 4479, Ontario Court of Appeal, October 3, 2024, C.W. Hourigan, G.T. Trotter and S.A. Gomery JJ.A.

The insured’s property was severely damaged by fire. The insurer paid out the policy limits for the dwelling but only $60,000 for contents. The insured argued this was considerably less than the value of items lost in the fire, resulting in the lawsuit.

The trial judge valued the insured’s contents at just over $134,000. The insurer argued that the insured’s failure to submit a sworn proof of loss was fatal to the action and the Court had no jurisdiction to assess the value of the contents as the appraisal process set out in s. 128 of the Insurance Act, R.S.O. 1990, c. I-8 (the “Act”) was not followed. The trial judge rejected this argument.

The insurer appealed the decision on three grounds, namely that 1) the trial judge erred in allowing the claim for lost contents because of the insured’s failure to deliver a sworn proof of loss, 2) the insurer was entitled to an order for an appraisal process under the Act, and 3) the trial judge erred in assessing the value of contents. The appeal was dismissed with costs.

On the first ground, the Court of Appeal found the statutory condition under s. 148 of the Act requires an insured to “deliver a proof of loss verified by a statutory declaration… giving a complete inventory of the destroyed and damaged property” but does not require a specific form. The Court of Appeal held that this condition must be interpreted consistently with the Act’s consumer protection purpose and the insurer had waived strict compliance with the proof of loss requirement.

On the second ground, the Court of Appeal found that the trial judge did not err in declining to order an appraisal. The permissive language of the appraisal provision provides for discretion and allows for expeditious and easy means for the settlement of claims for indemnity. Therefore, where appraisal will cause increased delay, the court will not order its use.

On the third ground, the Court of Appeal determined that in circumstances where an appraisal would result in additional delay and expense, the court can rely on an expert witness’s assessment of the value of lost personal property. There is no single or right way to calculate the actual cost value of personal property under an insurance policy.

This case was digested by Jaeda Lee and edited by Steven W. Abramson of Harper Grey LLP and first published in the LexisNexis® Harper Grey Insurance Law Netletter and the Harper Grey Insurance Law Newsletter. If you would like to discuss this case further, please feel free to contact them directly at [email protected] or [email protected].