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Counsel for the Plaintiffs (Appearing only on May 29, 2002):
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Paul J. Hergott |
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Appearing on their own behalf: |
Earl Ivarson Wendy Ivarson
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Counsel for the Defendant, Lloyd’s M.J. Oppenheim:
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Steven A. Wilson |
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Counsel for the Defendants, King Thomas and Associates Ltd. and Gary J. Thomas:
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Susan Sangha |
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Date and Place of Hearing/Trial: |
May 29, September 25, and October 23, 2002 |
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Kelowna, BC |
[1] In this action the plaintiffs claim against their fire insurance company, Lloyd’s Underwriters (“Lloyd’s”), and their appraiser, Gary Thomas of King Thomas and Associates Ltd., in relation to matters arising out of an insurance claim that came about following a fire in the plaintiffs’ home on March 9, 1997.
[2] There are several applications before the court. Both defendants applied pursuant to Rule 18A of the Rules of Court to have the plaintiffs’ claim dismissed. The plaintiffs were aware of the defendants’ intention to bring this application in December 2001. Just prior to the matter coming on for hearing the plaintiffs brought an application to amend their statement of claim. The hearing of the application for the summary dismissal of the plaintiffs’ claims began on May 29, 2002 and with the consent of all parties, it proceeded on the basis that the plaintiffs’ application to amend their statement of claim had been granted, although the defendants each reserved the right to argue that issue should they be unsuccessful on their application for summary dismissal.
[3] On May 29, 2002 counsel for the defendant, Lloyd’s, completed his submissions and counsel for the plaintiffs responded. In relation to Lloyd’s application all that remained was for the court to render its decision. The application of the defendants, Gary Thomas and King, Thomas and Associates, did not begin due to lack of court time.
[4] After the proceedings of May 29, 2002 the plaintiffs discharged their counsel. At a case management conference in July they advised that they wished to file additional affidavit material. The plaintiffs have filed three further affidavits of Mrs. Ivarson (numbered “6”, “7” and “8” in this litigation). Affidavit No. 6 is some 71 pages in length. It sets out the basis upon which the additional affidavit material contained in affidavits 7 and 8 is necessary. The latter two affidavits are, when account is taken of their exhibits, of similar or greater length.
[5] In addition to the foregoing, the plaintiffs filed an application on August 26, 2002 seeking, among other things, to withdraw the proposed amended statement of claim upon which the first day of argument proceeded. They also sought leave to file yet a further amended statement of claim.
[6] I will deal with the various applications in relation to each of the defendants separately. Before doing that some comment on the procedural history of this litigation is in order.
[7] As noted above the fire giving rise to this dispute occurred on March 9, 1997. The writ was filed on March 6, 1998. The plaintiffs were at the time represented by Mr. Koochin. On February 26, 1999 the plaintiffs filed a notice of intention to act in person. The writ was served on the defendant, Lloyd’s, on March 4, 1999. A statement of claim was filed by the plaintiffs acting on their own behalf on April 7, 1999. In the statement of claim the plaintiffs sought damages in contract against the insurance company for the amount of their loss and damages in negligence as against the appraiser who acted in relation to the resolution of the plaintiffs’ claim.
[8] By September 1999 Mr. Doehring was acting on behalf of the plaintiffs. On October 4, 1999 the plaintiffs filed an amended statement of claim. In it the plaintiffs detailed their claim against the defendant insurance company and pled that there were a variety of defects in the appraisal process. They sought, in addition to their claim for damages, to have the appraisal set aside.
[9] Some of the defects in the appraisal process were resolved at a summary hearing. On June 30, 2000, Madam Justice Beames dismissed certain portions of the plaintiffs’ claim as it related to the conduct of the appraisal process.
[10] On November 14, 2000, the plaintiffs caused to be filed another change of address for delivery indicating that Mr. Eichler was counsel on their behalf. Nothing further occurred in this litigation until March 19, 2001, when Mr. Hergott was appointed counsel for the plaintiffs.
[11] The writ of summons filed March 6, 1998 names as defendants Lloyd’s M.J. Oppenheim Attorney in fact in Canada for Lloyd’s Underwriters, International Specialized Risk Management (I.S.R.M.) Ltd. (“ISRM”), Debbie K. Halstead, King Thomas and Associates Ltd. and Gary J. Thomas. Lloyd’s is the insurer of the plaintiffs’ property. ISRM was engaged by the insurer to adjust the plaintiffs’ loss. Ms. Halstead is an insurance adjustor who worked for ISRM. Although not a party to this litigation, Capri Insurance, acting under an agreement that it has with the defendant, Lloyd’s, issued the plaintiffs’ insurance policy and was responsible for processing and negotiating claims made under it. Paula Garrecht is an employee of Capri Insurance and was the person with whom the plaintiffs dealt in relation to their claim. Robin Durrant was the vice-president of Capri Insurance and was the person to whom Ms. Garrecht reported. As noted above, the insurance company purported to invoke the appraisal process that is provided for in the Insurance Act, R.S.B.C. 1996, c. 226. Mr. Thomas was engaged by the plaintiffs to appraise their losses. King Thomas and Associates Ltd. is the company for whom he worked.
[12] The first amended statement of claim was filed on October 4, 1999. The amendments in that document related primarily to the claim against Lloyd’s. It alleged that Lloyd’s improperly invoked the appraisal process and “coerced” the plaintiffs into engaging King Thomas and Associates Ltd. It further alleged that Lloyd’s acted in bad faith through “lies, misrepresentation, and the withholding of pertinent information...” It alleged that Lloyd’s disregarded the plaintiffs’ legitimate concerns regarding the nature of the restoration work being done on their property by contractors engaged by Lloyd’s. It claimed that the appraisal process was flawed in that a condition precedent to its invocation (the filing of a proof of loss) had not been met; that no umpire was appointed by the appraisers as required by the Act; and that Ms. Halstead, who was appointed on behalf of the insurer’s, was in breach of her obligations to the plaintiffs in so acting. Finally, it is alleged that the appraisal process was invoked without any effort on the part of the defendant, Halstead, to negotiate a settlement.
[13] The specific relief sought was damages against all of the defendants in the amount of $63,888.76, presumably representing the difference between what the plaintiffs have received and what they claim is due them. In addition, the plaintiffs sought an order that the appraisal be set aside.
[14] The “amended amended statement of claim” which the plaintiffs sought leave to file in May 2002 is a completely new pleading. It was filed on the basis that it clarified and better described the nature of the claims being advanced. To a degree it does that. I recognize that the plaintiffs now take the position that they do not want this matter to be decided on the basis of that pleading. Their position is, as I understand it, contingent on the court allowing their application to file yet a further amended statement of claim.
[15] In the statement of claim filed in May the plaintiffs assert that the defendant, Lloyd’s, owed them a duty of good faith. The statement of claim also details various shortcomings relating to the appointment and conduct of Ms. Halstead who was appointed to replace Mr. Ruhr, the initial adjustor on this claim, near the end of July 1997. The statement of claim then essentially reiterates the claims made in the earlier pleadings to the effect that the appraisal process was prematurely invoked without any effort on the part of the defendant, Lloyd’s, or Ms. Halstead to attempt to resolve the claim. It is alleged that Ms. Halstead who was appointed as the defendant’s appraiser was biased (this claim was abandoned by the plaintiffs’ counsel in argument).
[16] The most recent statement of claim, the one that the plaintiffs sought leave to file by their motion of August 26, 2002, is again an entirely new pleading. It is some 58 paragraphs in length and is in excess of 23 singled spaced typewritten pages. Dealing with the relief sought, the plaintiffs seek “a declaration that ISRM and Debbie Halstead remain in this proceeding”. On September 13, 1999, Master Bolton ordered, with the consent of the plaintiffs’ counsel, that the action as against Ms. Halstead and ISRM be dismissed. It is not now open to the plaintiffs to renew that action absent an appeal of Master Bolton’s order, which they have not done.
[17] The other relief sought includes a request for a:
...Motion to exclude all the evidence, including actions, that were done by the Plaintiffs’ past solicitors that would or have prejudice [sic] the Plaintiffs [sic] claim and/or in the alternative an order that these solicitors be added to these proceeding [sic] in aiding and abetting and/or assisting the Defendants in their case against the Plaintiffs.
The plaintiffs are, in effect, seeking to start over without being bound by any of the steps taken on their behalf by their various previous lawyers. In her affidavit No. 6, Mrs. Ivarson painstakingly reviews the manner in which she alleges that all of her previous lawyers have failed her. If the plaintiffs wish to pursue a claim against their previous lawyers, they are liberty to do that. Such a claim, however, has nothing to do with the existing defendants and to accede to the plaintiffs’ request in this regard would, among other things, prejudice the existing defendants by delaying the resolution of this litigation.
[18] It is also pled that the “defendants and their agents conspired to defraud the Plaintiffs by intentional and wilful acts setting forth false statements and misrepresentations of material facts”. Conspiracy is an entirely new basis of alleged liability. There is no mention of it in any of the three earlier statements of claim filed over the past four years in this action. Further there are no facts pled which would support a claim for conspiracy.
[19] One of the new allegations pled is that the plaintiffs’ insurance policy did not, in fact, contain a “replacement cost endorsement”. How this advances the plaintiffs’ claim is difficult to fathom. Indeed to allow this amendment would, it seems to me, defeat a substantial portion of the plaintiffs’ other claims. In any event it is inconsistent with the entirety of their dealings with the defendants to this point and with the manner in which they have structured this litigation. I would not permit an amendment to include this allegation. Another new allegation is that Ms. Garrecht, an agent of the defendant, Lloyd’s, deliberately altered one of the documents upon which the plaintiffs intended to rely in this process. This is, in effect, but an aspect of the broader bad faith claim that the plaintiffs are advancing. I would not permit an amendment at this stage to include this allegation, although I will address the substance of it in the context of the general claim of bad faith.
[20] With the exception of the claim for aggravated, punitive and exemplary damages in the amount of $1,000,000 as against all current and former defendants, the balance of the relief claimed is not materially different from that which was proposed in the “amended amended statement of claim” upon which the application proceeded in May 2002.
[21] An application to amend a statement of claim is governed by Rule 24 of the Rules of Court, which provides that a party may amend a pleading once without leave of the court; thereafter it is necessary, absent the consent of the opposing party, to obtain leave.
[22] In Teal Cedar Products (1977) Ltd. v. Dale Intermediaries Ltd. (1996), 19 B.C.L.R. (3d) 282, Finch J.A. said this about the discretionary power conferred by the rule:
Discretionary powers are, of course, always to be exercised judicially. It would clearly be unjudicial to permit an amendment to pleadings under Rule 24(1) if it appeared to be either unjust or inconvenient to do so. So, even though the words "just and convenient" are not found in Rule 24, justice and convenience would, in my view, be relevant criteria for the exercise of the discretion found in that rule.
Amendments are to be allowed provided that there is no undue prejudice, including delay, caused to the opposite party. As noted above, the application of the defendant, Lloyd’s, was complete but for the court’s decision at the time of the plaintiffs’ application to further amend its statement of claim.
[23] To allow an amendment to the statement of claim would unnecessarily delay this proceeding further. Further, the amendments are being sought following the completion of the evidence and argument. Finally, the proposed amendments are themselves objectionable on a number of grounds as set out above. In these circumstances it would be both inconvenient and unjust to allow the amendments, and accordingly I dismiss the plaintiffs’ application to amend as against the defendant, Lloyd’s.
[24] The plaintiffs seek to file two further voluminous affidavits. The relevant rules relating to the introduction of new affidavit evidence in the context of a summary trial are Rules 44(6), (7), (8) and (9). Rules 44(6), (7) and (8) provide generally that a person who wishes to respond to an application for summary judgment must file and serve copies of all affidavits upon which he or she seeks to rely at least eight days prior to the date on which the matter has been set for hearing. Rule 44(9) provides that unless “all parties of record consent or the court otherwise orders, a party must not deliver any affidavits additional to those delivered under subrules (5), (6) and (8)”.
[25] I consider it appropriate to have regard to the principles which govern the exercise of a similar discretion conferred in relation to trials under Rule 40(7). It provides as follows:
(7) Where a party omits or fails to prove some fact material to the party’s case, the court may proceed with the trial, subject to that fact being afterwards proved as the court shall direct, and,
(a) if the case is being tried by a jury, the court may direct the jury to find a verdict as if that fact had been proved, and,
(b) unless the court otherwise orders, judgment shall be entered according to whether or not that fact is or is not afterwards proved as directed.
In Mandzuk v. Vieira (1983), 43 B.C.L.R. 347 at para. 6 (S.C.) Madam Justice McLachlin, as she then was, set out the principles that ought to guide the exercise of the discretion conferred by this rule. In summary, she held that the rule ought to be used sparingly, and then only in clearly meritorious cases, where to exclude the evidence would result in a substantial injustice. Further, the rule is not intended and should not be used to allow a party to split its case. It should not be used to permit the introduction of a substantial amount of new evidence. In determining whether to permit the introduction of new evidence, the court should consider the reasons for the failure to include it initially in order to avoid the potential abuses to which the rule is susceptible.
[26] Given the parallels that exist between the summary trial process and trials conducted under Rule 40, it is my view that the principles distilled in Mandzuk v. Vieira, supra, ought to guide the exercise of the discretion conferred by Rule 44(9).
[27] The plaintiffs argue that they have been poorly served by their lawyers and because of that the additional material they now seek to introduce was omitted. They have had, by my count, five different lawyers representing them in this process, in addition to two that they consulted prior to launching the litigation. Mrs. Ivarson argued that in the five years she has been involved in this litigation she has yet to find "an honest lawyer”. She states further that all of her lawyers have not only failed to represent her interests but, in fact, were advocates for the insurance company. This is an application made four years after the litigation was commenced, eight months after the initial application for summary judgment was filed, and three months after the claim against Lloyds’ was argued. Much of the new material is really an attempt by the plaintiffs to argue their case again. The volume of material is substantial even though the bulk of it is already before the court in other affidavits. In short the application to adduce new affidavit material offends virtually all of the relevant guidelines set out in Mandzuk v. Vieira, supra. In relation to the defendant, Lloyd’s, I dismiss the application to adduce further evidence.
[28] The plaintiffs’ claim against Lloyd’s is grounded upon the allegation that Lloyd’s acted in bad faith in dealing with the plaintiffs’ fire insurance claim. The plaintiffs also argue that the appraisal process that was engaged was flawed or otherwise does not bind them in relation to their claim against Lloyd’s. I will deal with each of these claims separately.
[29] There are several bases upon which the plaintiffs argue that Lloyd’s, acted in bad faith. In particular, they claim that Lloyd’s failed to provide them with both the financial assistance and the advice necessary to enable them to make their claim; that Lloyd’s failed to promptly assess their claim and failed to promptly reimburse them as portions of the claim were settled; that Lloyd’s failed to properly supervise the contractors they hired to repair or restore the plaintiffs’ property; that Ms. Halstead, an employee of the adjusting firm that Lloyd’s hired, deliberately falsified a document during the course resolving the claim; and finally, that Lloyd’s failed to negotiate a reasonable settlement.
[30] There is an implied term in every insurance policy that the insurer will deal with claims by an insured in good faith. In 702535 Ontario Inc. et al. v. Non-Marine Underwriters Members of Lloyd’s London, England (Lloyd’s Open Market) et al. (2000), 184 D.L.R. (4th) 687 at p. 694, O’Connor J.A. on behalf of the Ontario Court of Appeal said that the duty of good faith requires an insurer to act both promptly and fairly when investigating, assessing and attempting to resolve claims made by its insureds. He elaborated on the nature of the duty as follows at pp. 694 and 695:
The first part of this duty speaks to the timeliness in which a claim is processed by the insurer. Although an insurer may be responsible to pay interest on a claim paid after delay, delay in payment may nevertheless operate to the disadvantage of an insured. The insured, having suffered a loss, will frequently be under financial pressure to settle the claim as soon as possible in order to redress the situation that underlies the claim. The duty of good faith obliges the insurer to act with reasonable promptness during each step of the claims process. Included in this duty is the obligation to pay a claim in a timely manner when there is no reasonable basis to contest coverage or to withhold payment. [authorities omitted]
The duty of good faith also requires an insurer to deal with its insured's claim fairly. The duty to act fairly applies both to the manner in which the insurer investigates and assesses the claim and to the decision whether or not to pay the claim. In making a decision whether to refuse payment of a claim from its insured, an insurer must assess the merits of the claim in a balanced and reasonable manner. It must not deny coverage or delay payment in order to take advantage of the insured's economic vulnerability or to gain bargaining leverage in negotiating a settlement. A decision by an insurer to refuse payment should be based on a reasonable interpretation of its obligations under the policy. This duty of fairness, however, does not require that an insurer necessarily be correct in making a decision to dispute its obligation to pay a claim. Mere denial of a claim that ultimately succeeds is not, in itself, an act of bad faith: [authorities omitted].
What constitutes bad faith will depend on the circumstances in each case. A court considering whether the duty has been breached will look at the conduct of the insurer throughout the claims process to determine whether in light of the circumstances, as they then existed, the insurer acted fairly and promptly in responding to the claim.
[31] I will deal with the individual allegations of bad faith in the course of reviewing the overall manner in which the plaintiffs’ insurance claim was dealt with.
[32] The fire occurred on March 9, 1997. The plaintiffs operated a home-based business and some of the computer equipment necessary to run that business was damaged. In addition the plaintiffs relied, for part of their income, on the rent that they received from the tenant that occupied the basement of their house. As a result of the fire, the plaintiffs had to move into their basement and they lost the rental income that they would otherwise have received. Their home was not destroyed but there was considerable smoke damage to it and to the plaintiffs’ possessions within it.
[33] Lloyd’s has never disputed the plaintiffs’ entitlement to coverage under their insurance policy. They have, to date, paid out approximately $84,636 on this claim. The plaintiffs received, almost immediately after the fire, an advance of $2,000. Two days after the fire the plaintiffs replaced the office equipment that they needed to continue with their business. They say (and it is not disputed) that David Ruhr, the adjustor at that time, promised them that they would be reimbursed for this expense within days. In fact, it took almost a month. They did, however, receive the entire amount claimed on April 12, 1997. The plaintiffs argue that this delay constitutes bad faith. I find that the payment was made reasonably promptly. It was made within a month of the loss. The delay did not prevent the plaintiffs from replacing the property nor did it force them in any way to otherwise compromise their claim. It does not constitute bad faith.
[34] The plaintiffs lost rental income for March and April 1997. Their losses, as I understand it, extended beyond this period but there is a dispute as to whether they are entitled to recover for those losses. For the losses for which there is no dispute the plaintiffs were reimbursed on May 14, 1997. On that day they also received a further payment of $699.84, which was in partial satisfaction of a list of losses the plaintiffs had submitted by that time. This was the last money paid directly to the plaintiffs before the appraisal process was engaged. The plaintiffs argue that Lloyd’s, or more accurately the adjustor, Mr. Ruhr, arbitrarily took the position that the amount of rental income lost to the plaintiffs was limited to two months. There is no dispute that the plaintiffs were promptly paid for the rental income that the adjustor agreed should be paid. There is, however, a difference of opinion as to the extent of the plaintiffs’ recoverable loss. The duty of good faith does not require that an insurer agree with an insured’s view of the amount of entitlement. Indeed, even if an insurer disagrees and is later proven wrong, that does not necessarily amount to bad faith. The duty to act in good faith requires simply that the insurer act in a reasonable and balanced manner. There is no evidence before me to suggest that the position taken by the adjustor on this issue was wrong, never mind unreasonable.
[35] The plaintiffs also received the benefit of various services under the insurance contract. Their clothing, bedding and drapes were dry cleaned within days of the fire. On March 15, 1997, Mrs. Ivarson put on a sweater that had been dry cleaned. She maintains that she suffered an allergic reaction from it. She obtained a note from her doctor to that effect and called the adjustor, Mr. Ruhr. He advised her to go to the dry cleaners and determine what cleaning agents they had used. She did that and was told by the dry cleaners that they used the very same detergent that she typically used at home. Lloyd’s paid the dry cleaning bill in the amount of $4,932 and in a meeting with Mrs. Ivarson on April 4, 1997, the adjustor took the position that the clothing had been restored to its pre-fire condition. He told them he would not recommend that anything further be paid on this account. Mrs. Ivarson disagreed with this decision. Mrs. Ivarson also raised, at that meeting, a concern that the dry cleaners had physically damaged some of the clothing by creating small holes in them and putting spots on them. She showed some of the clothes to the adjustor. He advised that she could submit a claim for that damage but that he doubted it would be paid. She did that on May 12, 1997. She has not been paid for that claim. Again, while it is clear there was a disagreement, there is no evidence to support the notion that the position of the adjustor in relation to this aspect of the claim was unreasonable.
[36] In addition to the difficulties with the dry cleaners, problems arose in relation to the restoration work undertaken by Okanagan Restoration Services Ltd., a company engaged by the adjustor to restore those items that could be restored. Among other things they cleaned the kitchen appliances but not to the plaintiffs’ satisfaction. A meeting took place between Mrs. Ivarson, the adjustor, and a representative of Okanagan Restoration on March 21, 1997 at the plaintiffs’ residence. At that meeting the adjustor agreed that a mechanical cleaning of the appliances was necessary. At the end of April “Jiri” from Jiri’s Appliance Repair went to the plaintiffs’ residence and examined the appliances. The plaintiffs contend that Jiri told them that Lloyd’s was attempting to influence him by encouraging him to provide unreasonably low estimates. There is no evidence from Jiri on this point. Nothing further was done in relation to the appliances until May 5 or 6, 1997 when the restoration company arranged to pick up the appliances. Prior to the appliances being picked up Mrs. Ivarson called the insurance company to complain that the restoration company did not do the kind of cleaning that needed to be done. Ms. Garrecht, of Capri Insurance, went to the plaintiffs’ residence on May 7, 1997 at Mrs. Ivarson’s request and looked at the appliances. She later told Mrs. Ivarson that if she did not want the appliances cleaned in the manner that was being suggested then Lloyd’s was prepared to pay her $185 and she could clean them herself or have them cleaned by any cleaner she chose. Mrs. Ivarson felt that, on the basis of opinions and other estimates that she had received, this was inadequate. One of the estimates that Mrs. Ivarson herself obtained was from J.D. Appliance Repairs and it was in the amount of $904. A further meeting was held on this issue on July 18, 1997. Mr. Ruhr maintained that he did not agree that the appliances required the kind of work that the plaintiffs were demanding and if they had them cleaned in that fashion he would recommend against paying the bill.
[37] Because of the disagreements that arose between Mr. Ruhr and Mrs. Ivarson as to the manner in which the claim was being handled, Mrs. Ivarson demanded on May 5, 1997, that Ms. Garrecht appoint a new adjustor. Ms. Garrecht felt that Mr. Ruhr had been dealing with the matter appropriately and rather than appoint a new adjustor she offered to attempt to mediate their differences. Ultimately that proved unsuccessful. The plaintiffs and Mr. Ruhr continued to deal with one another initially. On July 18, 1997 however there was a meeting between Mrs. Ivarson and Mr. Ruhr which signalled the end of their relationship. Mrs. Ivarson’s notes of that meeting demonstrate the level to which their relationship had deteriorated. In that meeting, Mrs. Ivarson outlined her complaints regarding the manner in which her claim had been addressed, her notes of these complaints run to some eight handwritten pages. Among other things, she accused Mr. Ruhr on two occasions of having deliberately attempted to influence repair companies by telling them to conclude that various items did not require repairing or cleaning when clearly they did. She accused him of being biased. By the end of the meeting, on her own notes, she was continuing to make accusations and he had stopped responding. On July 21 or July 23, 1997, Ms. Garrecht sensibly concluded that the relationship between Mr. Ruhr and Mrs. Ivarson was beyond repair and the only alternative was to appoint a different adjustor. She called Mrs. Ivarson and advised her that she had approval to have a new adjustor appointed in order that the matter might be looked at afresh. Mrs. Ivarson was not happy with this decision notwithstanding that it was taken at her request. In her affidavit, she said “Having another adjustor appointed at that point just seemed like another delay”. She does not disagree that relations with Mr. Ruhr were beyond repair nor does she suggest what else might have been done by the insurer to resolve this problem. She says, in essence, that by not acting to replace the adjustor when she demanded, the insurance company was acting in bad faith. Again, it appears that there was a difference of opinion between Ms. Garrecht and Mrs. Ivarson as to whether they could overcome the difficulties that had arisen in relation to Mr. Ruhr’s attempts to adjust this claim. Ms. Garrecht did not ignore the problem, rather she offered to assist. There is no evidence that she did not follow through on her offer of assistance. I find that the insurance company’s response to the Ivarsons on this issue is not an instance of bad faith; rather it was reasonable, in the circumstances, although it did not ultimately prove successful.
[38] In August, Lloyd’s, through the new adjustor Ms. Halstead, agreed with the plaintiffs’ earlier request to have the appliances cleaned in accordance with the J.D. Appliance Repair estimate that the plaintiffs had obtained. When Mrs. Ivarson was advised of this on August 25, 1997, she refused the offer insisting that the appliances be replaced instead. Her correspondence in that regard dated August 25, 1997, is telling:
If now, you think we will accept getting them cleaned. You are absolutely wrong. As we told Dave Ruhr and Paula Garrecht, we are now accepting nothing but REPLACEMENT ON ALL THE APPLIANCES. Changing Adjustors now, absolutely does not change this. If now, Capri Insurance, thinks they can get away with cleaning them, when we repeatedly asked them months ago, THEY ARE WRONG.
(emphasis in the original)
[39] I am not prepared to conclude that because Lloyd’s changed its position in relation to the cleaning of the appliances that their initial position was taken in bad faith. I do, however, find that their decision to have the appliances cleaned, as requested by the plaintiffs, indicates an effort to resolve the claim in good faith.
[40] The appliance issue was but one of several outstanding disputes between the parties. The dry cleaning remained an issue, as well as other aspects of the claim. On August 19, 1997, Mrs. Ivarson sent a five-page typed letter to Capri Insurance outlining her concerns regarding the manner in which her claim had been handled. Among other things she wrote:
We are now requesting the opportunity to please be given the name of one PROFESSIONAL, HONEST person we can work with from Capri Insurance. Paula Garrecht is not that person. She has put us through enough, on behalf of Capri Insurance. Capri Insurance, Your Immediate attention would be appreciated.
(emphasis in the original)
[41] On August 27, 1997, after receiving Mrs. Ivarson’s correspondence of August 19 and 25, 1997 Robin Durrant, the vice-president of Capri Insurance, wrote to the plaintiffs explaining to them the appraisal process and inviting them to submit a proof of loss in order that the process might be engaged. On September 4, 1997, after formally rejecting the proof of loss that had been submitted, because it was not signed, the insurance company formally notified the plaintiffs of their intention to invoke the appraisal process.
[42] There was, between the date of the fire and September 4, 1997, substantial correspondence and telephone communication between the parties. Moreover, there were a number of face-to-face meetings. There is no merit, in light of this history, in the suggestion that the defendant, Lloyd’s, prematurely invoked the appraisal process. Indeed by the end of August, it would have been apparent to any reasonable observer that the plaintiffs’ claim was not going to be settled. Invoking the appraisal process was a reasonable step to take.
[43] The plaintiffs have also claimed that Lloyd’s did not make any reasonable attempt to settle this dispute. Again to the extent that assertion is based on the history as set out above, I find no merit in it. Lloyd’s did not agree with the plaintiffs’ contentions about some aspects of their claim. However, I am satisfied that they did attempt to resolve the dispute. On some occasions, they reversed themselves in an effort to bring the matter to a conclusion. That they were not successful does not mean that they were unreasonable in their attempts, nor does it mean that they were acting in bad faith.
[44] The plaintiffs also contend that the insurer was under a duty to advance them funds so that they could replace those items which required replacement but which they could not otherwise afford to replace. A similar issue arose in Carlyle v. Elite Insurance Co., [1986] B.C.J. No. 135 (C.A.). There the chambers judge held that the insurer had an obligation to fund the replacement of items. Esson J.A. observed at p. 5, in relation to that conclusion:
It is sufficient to say that no authority is referred to which provides any real support for the view that the insurer must fund the replacement. In this court counsel for the respondent did not seek to support that view of the law and, in my view, with all respect, on the plain reading of the policy it is unsupportable.
He continued at p. 6 to hold that:
The trial judge expressed the view that the object of the policy would be frustrated if that interpretation were not given to it. No doubt the clause creates a less desirable situation for an insured than would be created if the insurer was required to make payment in advance, but that does not support the conclusion that the contract is frustrated; it simply means that it is somewhat less favourable to the insured than another form of wording might be.
The language of the plaintiffs’ policy is identical to that which was under consideration in Carlyle v. Elite Insurance Co., supra. The plaintiffs’ claim, to the extent that it is founded on this proposition, cannot be sustained.
[45] Before leaving this point, it is appropriate to note that the defendant, Lloyd’s, did offer the plaintiffs some assistance in this regard notwithstanding that it was under no duty to do so. They advised the plaintiffs that they could bring in estimates of the cost of items that they proposed to replace and Lloyd’s would indicate to them in advance whether they would fund those purchases. I appreciate that while this would not directly alleviate the plaintiffs’ financial predicament, it would nevertheless be of assistance to them.
[46] The plaintiffs argue that Lloyd’s was under a duty to promptly reimburse them for expenditures they incurred by way of replacing or repairing items for which the defendant was liable. They assert, and it is not denied, that they submitted a claim for a variety of items totalling over $15,000 that they wished replaced or repaired in April or early May. They were paid only $2,399 against that claim. It is entirely unclear how much of this claim by the plaintiffs related to items that they were seeking to have replaced and which they had not replaced, and how much related to items that they simply wanted restored. Absent this evidence, I am not prepared to find Lloyd’s was acting in bad faith in not paying this aspect of the claim.
[47] The plaintiffs also express concern about the position taken by the adjustor, Mr. Ruhr, in relation to paying their claim generally. Mrs. Ivarson deposed as follows in her fourth affidavit:
I did not want to wait until the end of the process of obtaining written quotes for the repair or replacement of our furnishings and belongings to request financial assistance from the insurer to assist in repairing or replacing them. Periodically, as I obtained quotes, I contacted Dave Ruhr and asked for funding. His consistent response was that the insurer would not compensate us for our contents until the end of the process because the claim was in excess of $25,000.00.
[48] This allegation is somewhat ambiguous. If the complaint is that Lloyd’s would not provide funding in advance for items that the plaintiffs wished to replace, then I have dealt with that elsewhere. If the complaint is that Lloyd’s would not provide an indication on a piecemeal basis of whether they would pay for the replacement of items, that is not a basis upon which to found a claim of bad faith. If that is the concern, it is a complaint about the manner in which Lloyd’s was providing the plaintiffs with assistance absent any obligation to do so.
[49] As to the claim that Okanagan Restoration Services were not appropriately supervised by the defendant, Lloyd’s, there is no basis upon which to sustain a claim of bad faith. If the restoration company did an inadequate job and the insurance company unreasonably concluded otherwise, that is one thing. But the fact that the company did a poor job is not in and of itself evidence of bad faith. I should point out that the awards paid out by the insurer do not approach the limits of the coverage available. In this case, it has not been established that the insurance company was not prepared to pay for items that were notionally or inadequately repaired. Lloyd’s paid the appraisal award, which included an assessment of this issue.
[50] Finally, it is argued that Ms. Garrecht deliberately falsified an invoice from Okanagan Restoration Services by faxing only a portion of it to Mrs. Ivarson for sign off. The evidence to support this claim is in the additional material that the plaintiffs wish to file. Although I have not allowed it, I can state that I have reviewed it; and had I allowed it, I would dismiss the claim to the extent that it is based on this assertion. There was a fax sent by Ms. Garrecht to the plaintiffs. I accept for the sake of argument that part of one page of the four-page invoice from Okanagan Restoration Services did not fully transmit. The cover sheet for the fax indicates how many pages were being faxed. The pages of the bill are all numbered. It would have been obvious to Mrs. Ivarson or anyone else not only that a page was missing but specifically which page was missing. Further, the missing page contains nothing extraordinary. There would be no reason to deliberately omit it as opposed to any or all of the other pages. On any reasonable assessment of this circumstance, the failure to receive the full fax transmission was attributable to shortcomings with the fax machine and nothing else.
[51] In summary, whether the plaintiffs’ concerns are viewed individually or collectively, I am not satisfied that they establish that Lloyd’s acted in breach of its duty of good faith and I dismiss this aspect of the plaintiffs’ claim.
[52] Even if Lloyd’s did not act in bad faith, the plaintiffs’ claim that the appraisal that was conducted is not determinative of the dispute. They seek a declaration that the appraisal award, which was made primarily on the basis of the actual cash value of the items appraised, does not preclude the plaintiffs from pursuing a claim based on the replacement cost of those same items. Lloyd’s argues that the appraisal award constitutes a binding resolution of the outstanding issues between the parties.
[53] Section 9 of the Insurance Act provides, in its material parts, as follows:
9 (1) This section applies to a contract that
(a) provides insurance against loss or damage
(i) by fire...
...
(2) An insurer must give notice to an insured of the availability of the appraisal process established by this Act within 21 days after the insurer becomes aware that,
(a) in respect of a contract referred to in subsection (1)(a) or (b), there is a disagreement between the insurer and the insured as to the value of the property insured, the value of the property saved or the amount of the loss, or
...
(3) The value or amount in dispute in a disagreement referred to in subsection (2)(a)...must, unless the insurer and the insured are able to resolve their disagreement, be determined by an appraisal under this section.
(4) An appraisal under this section must not be conducted until
(a) the insured has delivered to the insurer a proof of loss, and
(b) one of the parties to the disagreement has delivered to the other a written demand for an appraisal.
(5) An appraisal must be conducted under this section
(a) before any recovery is made under the contract,
(b) independently of any other question, and
(c) whether or not the right to recover on the contract is disputed.
(6) For an appraisal under this section, the insured and the insurer must each appoint an appraiser, and the 2 appraisers appointed must appoint an umpire.
(7) The appraisers must determine the matters in disagreement and, if they fail to agree, they must submit their differences to the umpire, and the finding in writing of any 2 determines the matters.
The statutory conditions found in s. 126 of the Insurance Act, and applicable to all insurance contracts, include the following:
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 must 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; but there is no right to an appraisal until a specific demand for it is made in writing and until after proof of loss has been delivered.
[54] The issue in this case, as framed by the plaintiffs, is whether the findings reached through the appraisal process bind the parties only as to quantum or also as to the method of valuation. Subject to the concerns they have about the conduct of Mr. Thomas in the appraisal process, the plaintiffs concede that they are bound by the appraisal conclusions relating to quantum. They argue, however, that the appraisal process does not determine the method by which their loss is to be quantified. In other words, if they are, by the terms of their contract of insurance, only entitled to actual cash value for their loss, the appraisal award is binding. On the other hand, if they are entitled to something else, in particular replacement cost, then the appraisal award, which does not address that method of valuing their loss, is not binding.
[55] In support of its position that the award is binding both as to quantum and method of valuation, Lloyd’s relies on Pfeil v. Simcoe & Erie General Insurance Co. et al. (1986), 24 D.L.R. (4th) 752 (Sask.C.A.) and O’Brien v. Non-Marine Underwriters, Lloyd’s, London (1991), 6 C.C.L.I. (2d) 229 (Alta.Q.B.).
[56] Pfeil v. Simcoe & Erie General Insurance Co., supra, involved a claim under a contract of insurance that indemnified the plaintiff for damages caused to his crops by hail. The contract, at p. 753, provided that:
In the event of a disagreement as to the percentage of damage by hail to any of the crops insured, whether the right to recover on the policy is disputed or not, such percentage shall, when so required by either party, be ascertained by an appraisal...
[57] The issues to be resolved included whether the appraisal process was properly to be likened to an arbitration or a valuation. The court held that it was the latter. Secondly, the court was required to determine whether the finding of the umpire was binding. It held that it was. This case does not, in my view, assist the defendant. All it decides is that that appraisal award is binding in relation to matters that are properly before it. There was no doubt, given the wording of the contract in Pfeil, that the question of the percentage of loss was properly before the appraiser. The issue in the matter at bar is whether the method of valuation was a matter that the appraisers could properly settle.
[58] In O’Brien v. Non-Marine Underwriters, Lloyd’s London, supra, the plaintiff had made a claim under his homeowner’s insurance policy for damage he said was caused to the roof of his home by a hail storm. The defendant rejected the plaintiff’s claim and made a written demand for an appraisal of the roof damage. The statutory conditions relating to appraisals are the same in Alberta as they are in British Columbia. The appraisal resulted in a determination that there was no damage to the plaintiff’s roof from the hail storm. The issue before the court was whether the appraisal award was “final, binding and conclusive with respect to the quantum of the loss” (at p. 3).
[59] Wachowich J. concluded, after reviewing the limited authorities on the point but including Pfeil, supra, that absent fraud, bias, collusion, partiality or some other similar matter, the appraisal process is binding. He said at p. 7 of his Reasons:
To conclude that the decision of an umpire is binding and conclusive upon the parties does not deprive the [plaintiffs] of a cause of action. The action remains; it is the valuation of the loss which has been determined.
To conclude that the appraisal process is binding is not inconsistent with the use of the word "determine" in s. 204(3). The Insurance Act does not define "determine". The Oxford English Dictionary defines "determine" as: "to put an end or limit to"; "to settle or decide". The legislation is clear. The appraisal process is final and binding.
Again, this case is of only limited assistance in resolving the issue in the case at bar. The appraiser’s decision in O’Brien, supra, involved assessing the value of the loss. He concluded that by any method of valuation there was no loss. Given that finding, the method of calculating the loss became irrelevant. In summary, the appraiser did not purport to fix the method by which that loss was to be valued.
[60] In Shinkaruk Enterprises Ltd. et al. v. Commonwealth Insurance Co. et al., [1990] 71 D.L.R. (4th) 681 at p. 689, Bayda C.J.S. said the intent and purpose of the appraisal process is twofold, namely, “to encourage a quick settlement of the insured’s loss and to facilitate the use of the expertise of an appraiser (or an umpire) in the sphere of property values”.
[61] The facts in Shinkaruk, supra, are instructive. The statutory regime there under consideration is indistinguishable from the regime in place in this province. In Shinkaruk, supra, the plaintiff owned a building that was damaged, but not destroyed, by fire. The parties were unable to agree on the amount of the loss and the appraisal process was engaged to resolve that issue. Ultimately an umpire was appointed and it was from his award that the plaintiff sought relief. At trial the attack on the umpire’s award was limited to unreasonableness. On appeal it was expanded to include an assertion that the award made was beyond the authority of the umpire.
[62] The umpire’s award in Shinkaruk, supra, was based on the following assessment by the umpire (at pp. 689 and 690):
The basis of loss settlement as set out in paragraph 12(c) [sic] of The All Risk Property Insurance is the cost to repair, replace, construct or reconstruct (whichever is least) on the same site with new materials of like kind and quality but the liability of the insurer shall be limited to the actual cash value of the damaged or destroyed property at the time of the loss unless and until the damaged or destroyed property is repaired, replaced, constructed or reconstructed and unless repair, replacement, construction or reconstruction is executed with due diligence and dispatch.
The insured has not repaired, replaced, constructed of [sic] reconstructed the building, nor have any steps whatever been taken to do so to date. In my opinion, the insurer’s liability is limited to the actual cash value of the building at the time of loss, since it would have taken about 12 months to repair or reconstruct the building as mentioned above.
[63] In Shinkaruk, supra, the insured was entitled to recover the actual cash value of the it’s loss or the replacement cost of the damaged portion of the building assuming that certain preconditions were met. In order to be eligible to recover on the latter basis the repairs to the building had to have been completed and completed with due diligence.
[64] Bayda C.J.S. described the task that the umpire performed, as reflected in the excerpt from his decision set out above, as follows:
...the umpire first examined the insurance policy and selected the one clause in the policy that he thought governed the circumstances and presumably any dispute that could potentially arise out of those circumstances. He then construed that clause and made a legal determination (i.e., a finding of law) respecting its meaning. He subsequently made two findings of fact, namely, that the "insured [had] not repaired, replaced, constructed or reconstructed the building, etc.", and that "it would have taken about 12 months to repair or reconstruct the building". Based on these findings of fact and findings of law, he formed the opinion that the insurer's liability is limited to the actual cash value of the building at the time of the loss. (p. 690)
[65] Bayda C.J.S. set aside the umpire’s findings on the basis that he had exceeded the jurisdiction that was reposed in him by the governing statute. He said at p. 691, in coming to his conclusion:
He should have left to the trial judge the function of resolving all legal questions. Instead, he appears to have resolved whatever legal questions arose from an examination of the Saskatchewan Insurance Act, an application of the appropriate jurisprudence and a construction of the insurance policy. He appears to have resolved, impliedly if not expressly, whether the insured's loss as contemplated by the policy consisted of the loss of the entire building or only the loss of that portion that was actually damaged. He appears to have determined, impliedly if not expressly, whether in the light of the terms of the policy (which are quoted below), the statute law and the common law, the insured was entitled to recover as his loss the value placed on the "insured property" immediately before the fire (i.e., the market value before the fire), the cost of replacing the entire building with an allowance for depreciation, the cost of replacing the entire building without an allowance for depreciation, or the cost of repairing only that portion that was damaged with an allowance for depreciation, or the cost of repairing the damaged portion without an allowance for depreciation. These are all legal questions not within the umpire's province.
[66] I find the reasoning of Bayda C.J.S. compelling. It was approved of in Ferrier v. Maplex General Insurance Co. (1991), 5 C.C.L.I. (2d) 150 (B.C.S.C.). Given the absence of any proof of fraud, collusion, bias or disqualification by reason of interest or lack of impartiality, I find that the appraisal process binds the plaintiff as it relates to the question of the actual cash value of the losses. It does not, however, resolve the question of replacement cost.
[67] Whether the plaintiffs have a claim based on replacement cost depends on the provisions of that endorsement in their insurance policy. The preconditions to recovery under that endorsement are, among other things, that they must first replace the item in question. Further, they must do that “with due diligence and promptly”. The plaintiffs in this case received an award in December 1997 as a result of the appraisal process in the amount of $29,667. There is no evidence that they replaced anything either before or after completion of the appraisal process for which they have not been reimbursed. The question remains whether now, some 5 1/2 years after the fire, they can replace any items and still be found to have acted promptly. In my view they cannot and in the result they have no further claim under the replacement cost endorsement on their policy.
[68] In summary, the Ivarsons’ entitlement under the policy is for the actual cash value of their loss, except for those items that have already been replaced and paid for by Lloyd’s. The cash value of their loss has been determined by the appraisal and Lloyd’s has paid that amount. There is nothing in the material before me to indicate that the appraisal is wanting (subject to the issues involving the appraiser, Mr. Thomas) and I therefore conclude that it is binding. The plaintiffs’ claim against Lloyd’s is therefore dismissed with costs.
[69] Because I am of the view that this aspect of the claim ought not to be resolved in the context of a summary trial application, I will not address the question of the additional evidence that the plaintiffs seek to file.
[70] With respect to the plaintiffs’ application to amend their statement of claim, I will permit them to renew that application keeping in mind the following limitations. Because their claim as against the defendant, Lloyd’s, has been dismissed, the amended statement of claim need not address those aspects of their concerns. Similarly as pointed out above, the statement of claim cannot properly contain claims against Ms. Halstead or ISRM. Finally, the first nine prayers for relief are not appropriate again for the reasons noted above and should be excised from any further proposed pleading.
[71] Turning to the plaintiffs’ claims against Mr. Thomas and his company, they seek to recover damages on the basis that he was negligent in the manner that he conducted the appraisal on their behalf. Alternatively, they allege that he was in breach of his contract with them for largely the same reasons that they assert he was negligent. They also seek to have the appraisal set aside.
[72] I am satisfied that even if Mr. Thomas was negligent or in breach of his contractual obligations to the plaintiffs, the appraisal award is still binding on the parties. Absent bad faith, collusion, fraud, bias or other similar wrongdoing, an appraisal award made under the statutory regime set out in the Insurance Act is binding on the parties (O’Brien v. Non-Marine Underwriters, Lloyd’s London, supra, and Trentmar Holdings Ltd. (c.o.b. Athena Restaurant) v. Williams, [1984] O.J. No. 356 (Ont.S.C.), per Rosenberg J.). I am not satisfied that the plaintiffs have proven bad faith, fraud, collusion or any of the other bases upon which an appraisal award might be set aside.
[73] The issue as to whether an appraiser performing the statutory appraisal power conferred under the Insurance Act may be liable in negligence or contract for the manner in which that power was discharged is less clear.
[74] The defendant cites O’Brien, supra; Hudye Farms Inc. v. Mennonite Mutual Hail Insurance Co. (Liquidator of) (1987), 26 C.C.L.I. 28 (Sask.Q.B.); Trentmar Holdings Ltd., supra; Searle v. Alliance Ins. Co., [1926] 4 D.L.R. 1173 (Man.C.A.); and Falconer v. Sun Alliance Insurance Co., [1994] N.B.J. No. 334 (N.B.Q.B.) in support of its position that appraisers enjoy immunity from claims in negligence and contract for actions taken by them in the discharge of the statutory power conferred upon them. In my view the foregoing authorities do not resolve this issue.
[75] O’Brien, supra, did not involve an allegation against the appraiser. It was rather an attempt to have the appraisal set aside. Huyde Farms Inc., supra, dealt with a similar issue. Trentmar Holdings Inc., supra, also involved an attempt by an insured to have an appraisal award set aside; no question of negligence or breach of contract was raised. Searle, supra, is to like effect. Falconer, supra, arose in the context of an application to have an appraisal award judicially reviewed. Again, neither negligence nor breach of contract were at issue.
[76] It may be that an appraiser does enjoy immunity against a claim for damages in negligence or breach of contract for his or her actions in an appraisal process. I am not satisfied, on the basis of that which has been argued before me, that that is the case. I recognize the basic administrative law principle upon which the defendant’s contention rests, namely that negligence in the exercise of a quasi-judicial statutory power will not generally give rise to liability. I do not understand that principle to be immutable. The more the quasi-judicial power being exercised resembles the discharge of a public law function, the less likely it is that those who discharge such a power will be liable for damages based on negligence or breach of contract. On the other hand, the more the quasi-judicial statutory power resembles a private activity, the less likely it is that immunity from suit will follow. It appears to be settled law that an appraiser acting under the Insurance Act is not performing as an arbitrator but rather is performing the function of a valuer (Pfeil v. Simcoe, supra, and Shinkaruk Enterprises et al. v. Commonwealth Insurance Co. et al., supra). The distinctions between arbitrators and valuators and the impact those distinctions have on their liability was canvassed by the Supreme Court of Canada in Sport Maska Inc. v. Zitter [1988] 1 S.C.R. 564. While that case is not decisive of the issue before me, it does serve to highlight the competing interests that are at play.
[77] There are a number of factual disputes between the plaintiffs and Mr. Thomas, which I am unable to resolve and which may be of significance to the plaintiffs’ claim. By way of example, Mr. Thomas maintains that he was told by the plaintiffs that they wanted him to value their claim on a cash value basis. The plaintiffs vigorously deny that, saying instead that they were seeking replacement cost in relation to a number of their possessions and that they made that clear to Mr. Thomas. There are other conflicts in the affidavits as well.
[78] It is my view that it would be unjust to attempt to resolve the subtle legal questions raised by the circumstances of this case against the backdrop of contested allegations of fact in the context of an application of this nature. Accordingly, I dismiss the defendants’ application for summary dismissal of the plaintiffs’ claims. Costs of this application are left to the discretion of the trial judge.
“G.M. Barrow, J.”
The Honourable Mr. Justice G.M. Barrow