Category: TGP Decisions

The plaintiff’s underlying action arose from a fire that occurred at his property on March 30, 2012 (the “fire”). In the action, the plaintiff is seeking coverage from the defendant insurer, Desjardins General Insurance Group (formerly State Farm Fire and Casualty Company), for alleged losses suffered from the fire. On October 21, 2019, the appraisal hearing for the matter proceeded and the Umpire released the appraisal award.

The plaintiff disputed the Umpire’s award on several grounds. His position included claims that the Umpire had lacked jurisdiction, that there was a conflict of interest, and that the Umpire had not provided reasons behind the appraisal award.

The Divisional Court noted that the defendant had adequately addressed the numerous issues raised by the plaintiff. The court rejected the plaintiff’s arguments and dismissed his application for judicial review, awarding $25,000.00 in costs to the defendant.

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FSRA recently announced the 2023 deductibles for general damage awards and Family Law Act damages awards in auto claims.

The Insurance Act and its regulations delegate the authority to FSRA to update the deductibles on an annual basis. The increase is tied to the change in the Consumer Price Index. Because of the high levels of inflation over the past year, the 2023 deductibles increased by 6.9 percent over the 2022 deductibles.

The new deductibles for 2023 are:

• General Damages – $44,367.24 (increased from $41,503.50)
• FLA s. 61(2) Damages – $22,183.63 (increased from $20,751.76)

The value at which the deductible no longer apply (sometimes called the “vanishing deductible limit”) for 2023 are:

• General Damages – $147,889.59 (increased from $138,343.86)
• FLA s. 61(2) Damages – $73,944.18 (increased from $69,171.36)

The updated deductibles will be welcome news for insurers, particularly in light of rising damages awards and social inflation.

TGP was pleased to host its annual Accident Benefits Fall Forum on October 22, 2021, and its annual Insurance Law Symposium on November 5, 2021. Both presentations are available for viewing, and can be found at http://tgp.lawcast.tv/

The Accident Benefits Forum discussed recent case law from the LAT and Superior Court, and included a panel discussion of the adjuster’s role in a LAT hearing.

The Insurance Law Symposium included multiple panels, covering topics: common issues facing insurers in FLA claims; additional insureds; municipal claims; COVID related class actions; legal issues arising in property claims; and a review of the top five cases from the past year.

TGP thanks everyone who took the time to view and participate in both forums. We look forward to seeing everyone again in 2022!

Tim Crljenica was successful in a motion to compel the plaintiff to participate in an appraisal of his property damage claims, pursuant to the Insurance Act.

The plaintiff sustained three distinct property losses at his home in 2010. He commenced litigation in 2011, suing his insurer under his homeowner’s policy in relation to two of the losses. In 2018, the plaintiff was granted leave to amend his claim to add the third loss to the statement of claim. Following further examinations for discovery of the plaintiff and the insurer, Economical requested that the plaintiff participate in an appraisal by appointing his own appraiser and jointly agreeing on the appointment of an umpire. The plaintiff refused to comply, arguing that the request was made too late in the process.

Justice Carey granted the relief requested by Economical, that the plaintiff provide a sworn proof of

• loss within 14 days; that the plaintiff appoint an appraiser
• seven days thereafter, failing which Economical may proceed with appraisal
• in his absence; that the plaintiff’s appointed an appraiser, jointly agree with Economical’s appraiser as to an umpire within 15 days; and that if the parties fail to
• agree on an umpire within 15 days, Glenn Gibson shall be appointed as umpire

The first issue Justice Carey had to address was whether leave should be granted to Economical to bring the motion. The matter had been set down prior to the 2018 amendment to add the third water loss, and a six-week trial had been scheduled. The trial was adjourned upon the amendments and no new trial had yet been scheduled due to COVID.

Justice Carey accepted that leave ought to be granted due to a substantial change in circumstances. He wrote that the COVID-19 pandemic had substantially interfered with the Court’s ability to deal with trials. The need for finite judicial resources to deal with criminal matters left less availability for civil matters to proceed in a timely fashion. This met the requirements to grant leave, in Justice Carey’s opinion.

The ongoing effect of the pandemic also weighed on Justice Carey’s decision to order the plaintiff to proceed with appraisal. The plaintiff insisted that he was entitled to his “day in Court” in arguing against the appraisal. Justice Carey reasoned that it would be “an egregious misuse of the Court’s resources” to schedule a six week trial for the plaintiff’s property damages claim when there was a legislated alternative in the form of an appraisal. Moreover, the appraisal process would permit for an expeditious result and utilize appraisers with expertise in the valuation of the property damage loss. The expertise available from the appraisal was greater than the Court’s experience in valuing a person’s home contents.

Justice Carey also addressed the plaintiff’s request for his litigation costs incurred to date. Economical argued that because the appraisal did not end the litigation, the plaintiff’s right to seek costs was not extinguished. Justice Carey agreed and was satisfied that the plaintiff could pursue costs from the trial judge at the end of a trial (if the matter continued following appraisal), which would be necessary to address the limitations defence raised by Economical.

This result was in line with case law addressing section 128 of the Insurance Act and the appraisal process. As the law currently stands, appraisal under the Insurance Act is a mandatory process if requested by either the insurer or the insured following the submission of a Proof of Loss. There is little recognized leeway by the Courts in rejecting the request for appraisal. As seen in Justice Carey’s decision, the passage of years does not eliminate the right to request appraisal. The Courts recognize that appraisal is a much more convenient and expedient manner to value a property damage claim, and allows the Court to focus its limited resources on matters it is required to hear or where it has the appropriate expertise.

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Tom Donnelly and Joyce Tam were successful in the Ontario Superior Court in The Corporation of the City of Belleville v. Gore Mutual Insurance Company, 2021 ONSC 3854.

This case arises out of a coverage dispute between the Plaintiff, City of Belleville and the Defendants, the Insurers. The Defendants brought a Rule 21 Motion against the Plaintiff in front of the Ontario Superior Court of Justice. Justice Kershman held that the Defendants were successful on the motion.

A Director’s Order was issued by the Ontario Ministry of the Environment and Climate change on August 31, 2015, against several individuals and entities, including the City of Belleville. The Director’s Order found pollution and contamination on the Belleville Gas Plant site and required the remediation of the contaminated site. Belleville appealed the Director’s Order and sought relief at the Environmental Review Tribunal. The City of Belleville sought to have the Insurers defend the regulatory proceeding that it had appealed at the Environmental Review Tribunal. The Defendants contended that the Director’s Order was not a “civil action” and therefore, the Insurers did not have the duty to defend the City of Belleville.

Motion Hearing Issues
The Court was asked to consider whether the Director’s Order, an environmental regulatory proceeding, is a “civil action” within the meaning of the insurers’ liability policies, and in the affirmative, whether the insurers had the duty to defend the City of Belleville.

Motion Judge’s Decision
In the case before the Court, the insurance policies insured against civil actions and civil actions for damages. Therefore, the Court had to determine whether the Director’s Order was a “civil action” within the meaning of the insuring policies. In defining “action”, Justice Kershman relied on the definitions provided in the Rules of Civil Procedure and the Courts of Justice Act. In defining “civil action for damages”, the Court relied on the reasoning of Justice Caswell in Brockton (Municipality) v. Frank Cowan Co Ltd., who stated, in relevant part, that: “legal fees associated with responses to regulatory and investigative authorities […] including the [Ministry of the Environment] and the Public Inquiry, engineering expenses and remediation expenses are all outside the limits of the contractual risks undertaken by the Insurers”[1].

The Court relied on Justice Penny’s reasoning in General Electric Canada Company v. Aviva Canada, Inc.[2], who noted that the precision of policies is a relevant consideration. By way of contrast, in the General Electric Canada Company v. Aviva Canada, Inc. case, the insurance policies provided that the insurer would defend “suits” and “claims” against the insured. In the case at bar, the Court found that the wording and terms of the Defendants’ policies were specific, and therefore, it was reasonable to conclude that the insurance policies only provided coverage for civil actions, as defined by the Rules of Civil Procedure and the Courts of Justice Act. Accordingly, Justice Kershman held that a “civil action” or an “action” is not the same or equivalent to a “suit”.

Therefore, on the issue of whether the Director’s Order against the City of Belleville is a “civil action” within the meaning of the Insurers’ liability policies, Justice Kershman found that the City of Belleville’s regulatory appeal of the Director’s Order was not captured within the meaning of the words “civil action” or “action” in the insurance policies presented before the Court. Justice Kershman held that in appealing the Director’s Order, the City of Belleville entered an administrative appeal process as opposed to a civil litigation process.

Therefore, the City of Belleville’s regulatory proceedings were excluded from coverage.

Accordingly, the Court found that the Insurers did not have the duty to defend the City of Belleville. The duty to defend is a contractual obligation government by the terms of the insurance policy. The duty to defend refers to the insurer’s obligation to defend claims against an insured which are potentially covered by the insurance policy. In this case, the City of Belleville’s administrative appeal process was excluded from coverage under the insurance policies since the regulatory proceedings did not meet the definition of “civil action”. Justice Kershman followed the Court of Appeal’s position in Brockton (Municipality) v. Frank Cowan Co Ltd. [3] in holding that the duty to defend did not include legal fees incurred in response to regulatory and investigative authorities. Therefore, the insurers’ duty to defend the City of Belleville was not triggered.

[1] Brockton (Municipality) v. Frank Cowan Co Ltd.[2000] O.J. No. 4455 (S.C.), para. 91
[2] General Electric Canada Company v. Aviva Canada, Inc., 2010 ONSC 6806, 10 C.C.K.I. (5th) 16

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Key Takeaways

• A regulatory clean up order is not a “civil action” and does not trigger coverage under a CGL policy.
• This precedential decision provides guidance to Canadian courts, policyholders, and insurers in claims involving regulatory orders and the duty to defend and will be an important precedent for Canadian insurers facing pollution liability claims.

For more information on our Insurance Coverage practice, please contact Tom Donnelly or Joyce Tam.