COURT OF APPEAL FOR ONTARIO

CITATION: Truscott v. Co-Operators General Insurance Company,

2023 ONCA 267

DATE: 20230419

DOCKET: C70414

Gillese, Tulloch and Roberts JJ.A.

BETWEEN

Joseph Truscott and 1215588 Ontario Ltd.[1]

 

Plaintiffs/Responding Parties

(Appellants)

and

Co-Operators General Insurance Company, Thomas Carroll and Yvonne Young & Associates Inc.

 

Defendants/Moving Parties

(Respondents)

James A. Scarfone and Jacob Sazio, for the appellants

Robert Dowhan and Matt McMahon, for the respondents

Heard: December 14, 2022

On appeal from the judgment of Justice Andrew J. Goodman of the Superior Court of Justice, dated February 4, 2022, with reasons reported at 2022 ONSC 829.

Gillese J.A.:

I.             OVERVIEW

[1]          A fire substantially destroyed a building and valuable accounting papers and records located in it. The insured submitted building and valuable papers loss claims to its insurer. Some of those claims were the subject matter of umpire appraisal awards made under the Insurance Act, R.S.O. 1990, c. I.8.

[2]          After the awards were made, the insurer refused to pay out on other building and valuable papers loss claims, including those that had been filed before the appraisals were held and which were expressly not covered by the appraisal process.

[3]          The insured brought an action against the insurer and the employee assigned as the adjuster with responsibility for handling the insured’s claims. In the statement of claim (the “Claim”), the insured alleges that, among other things, the insurer and its employee manipulated the appraisal process, delayed payment of claims to the insured, and engaged in other conduct amounting to bad faith.

[4]          The insurer and its employee moved for partial summary judgment (the “Motion”). They sought to have the insured’s loss claims relating to the building and valuable records dismissed and to have the Claim struck as against the employee.

[5]          By judgment dated February 4, 2022, the motion judge granted partial summary judgment (the “Judgment”). The Judgment: declares the insurer has paid out all amounts owing for the replacement and repair of the building and replacement of the valuable papers; dismisses the insured’s claims in respect of those matters; strikes the Claim as against the employee; and, orders the insured to pay costs.

[6]          Despite the Judgment, the action must proceed to trial on the remaining allegations, including those relating to business interruption losses, bad faith conduct, and punitive and aggravated damages.

[7]          The insured appeals all aspects of the Judgment.

[8]          For the reasons that follow, I would allow the appeal and set aside the Judgment.

II.            BACKGROUND

A.   The Parties

[9]          Joseph Truscott is a chartered professional accountant. He runs a small accounting practice in Hamilton, Ontario, through his corporations, Joseph A. Truscott Chartered Accountant, A Professional Corporation, and his numbered company, 1215588 Ontario Ltd. (together, the “appellants”). Until the fire, the business operated out of a Victorian house in Hamilton that was renovated for use as an office building. The building and its contents were severely damaged by fire on January 20, 2017.

[10]       At the time of the fire, the appellants were insured under insurance policy number 006408303 (the “Policy”) with the respondent Co-operators General Insurance Company (“Co-operators”). The respondent Thomas Carroll works for Co-operators. He was assigned as the adjuster with responsibility for handling the appellants’ claims.

[11]       The Policy provides the following all risks coverages: building loss; contents loss; business interruption loss; valuable papers loss, including repair, replacement, and reconstruction; professional fees; and, personal property engineering fee vacancy permit. The relevant Policy limits are $1,081,600 for building loss and $106,090 for contents loss. The provision for valuable papers is found within an endorsement called “Commercial Advantage Endorsement” with a limit of $250,000.

B.   The Loss Claims

[12]       The following information is drawn largely from the pleadings. They do not constitute findings of fact.

[13]       The appellants quickly notified Co-operators of the fire. Through consultant Dax Conley, they also retained the services of contractors, engineers, and other experts to assist them in formulating claims and preparing proofs of loss.

[14]       Because of fire damage, Mr. Truscott had to evacuate the building. Consequently, he was unable to continue his accounting practice until he found rental premises for him and his staff. Even then, his business was adversely affected, in part because of the amount of time he and his staff have had to spend on the recovery process.

[15]       Three heads of insurance coverage were initially engaged: building loss, contents loss, and valuable papers loss. Because it was clear that the contents loss claim would exceed the Policy limit of $106,090, Co-operators paid out the limit on February 27, 2017, without attempting a detailed cataloguing of losses under that head of coverage.

[16]       The building and valuable papers loss claims proved problematic, however.

1. Building Loss Claims

[17]       In May 2017, the appellants received their expert’s report which stated that, due to fire and smoke damage, the building was a “total gut”.

[18]       The respondents flatly rejected that the building was a total gut. Despite having been served with the expert report, the respondents did not undertake their own report relating to smoke damage and migration of the building. They instructed their contractor, Terra Belfor Restorations (“Terra”), to provide its quote, knowing that its assessment did not include smoke damage.

[19]       Because of the respondents’ intransigence around the issues of smoke damage and whether the building was a total gut, the appellants had to go through an elaborate, complicated consultation with engineering experts and contractors to quantify the amount of money it would take to repair the building.

[20]       The appellants then submitted a sworn interim proof of building loss, dated August 17, 2017, because they needed insurance money to fund the demolition/repair process. It was known to all that process was likely to reveal that other additional repairs would be needed.

[21]       Mr. Carroll refused to accept the interim proof of loss, stating that Co‑operators would not pay any money under the Policy until a final proof of loss was submitted. In a letter dated August 28, 2017, Mr. Carroll advised the appellants that they were “free to submit [their] full and complete building proof and if need be, amend that proof at a later date”. In response, the appellants deleted the word “interim” from the proof of loss claim, dated it August 31, 2017, and resubmitted it. The claim was not labelled “final”. In their claim, the appellants gave a building replacement cost value of $615,952.53 and an actual cash value of $523,559.

[22]       On September 5, 2017, Co-operators shared Terra’s estimate of the costs of building repairs that it had received approximately four months earlier and that was based on a proposed scope of work that was not a “total gut”. Co-operators made a payment of $296,694.30 to the appellants, based on the replacement cost value shown in its estimate.

[23]       Because of the significant difference between the amount Co-operators paid for the building loss claim and the appellants’ estimate of their building losses, the appellants engaged the appraisal process provided for in s. 128 of the Insurance Act. Steve Agnew was nominated by the parties and appointed as umpire under that process.

[24]       An appraisal of the appellants’ August 31, 2017 building loss claim took place. On November 24, 2017, Mr. Agnew issued an award appraising the building loss at $507,130.09 (replacement cost value) and $431,060.58 (actual cash value) (“Award #1”).

[25]       The following words appear on the face of Award #1: “Building by-law issues have not been considered within this award.” Building by-law issues were not in dispute at the appraisal and neither party’s estimates considered such issues.

[26]       The umpire accepted that the building was a total gut, in that Award #1 effectively found in favour of the appellants with minor deductions.

[27]       Co-operators then paid the appellants $134,366.28, which was the difference between what it had already paid the appellants for building loss costs and the actual cash value in Award #1.

[28]       Before the appraisal process began, the respondents arbitrarily set a “period of indemnity” that ended on September 30, 2017, for claiming “Extra Expenses” under the Policy. “Extra Expenses” refers to “the excess … of the total costs during the ‘Period of Restoration’ for the purposes of continuing the insured’s business over and above the total cost that would normally have been incurred to conduct the business during the same period had no loss occurred”. The Policy defines the Period of Restoration as “such length of time, commencing with the date of the loss and not limited by the date of expiration of this insurance, as shall be required with the exercise of due diligence and dispatch to repair, rebuild, or replace such property at the ‘Premises’ as may be destroyed or damaged”.

[29]       After the indemnity period expired, Co-operators ceased to pay for the Extra Expenses the appellants incurred. Accordingly, the appellants were required to personally pay the rent and other costs associated with running the business out of the temporary premises.

[30]       The respondents set the September 30, 2017 indemnity date despite the fact that Co-operators’ delay in funding postponed the commencement of the repair of the building. Building demolition began on January 20, 2018.

[31]       Once construction of the building began, issues arose from by-law building code compliance with the City of Hamilton.

[32]       On June 4 and November 7, 2018, the appellants submitted two new proofs of loss for building costs relating to by-law compliance. Co-operators refused to consider these proofs of loss on the basis that the appraisal had taken place, and Award #1 had been granted and paid. These two building loss claims have never been appraised or paid.

[33]       The appellants allege that the respondents’ unreasonable positions in respect of the building loss led to unnecessary delay, further expenses and business losses, and were used as a strategy to take advantage of Mr. Truscott.

2. Valuable Papers Loss Claims

[34]       A similar saga took place with respect to the claims for valuable papers. As more missing documents were discovered, the appellants submitted three proofs of loss for valuable papers loss claims. These claims were dated April 17, September 28, and October 31, 2017.

[35]       According to the appellants, the September 28, 2017 claim was for files that Terra had missed in the main storage area, as well as files in the storage room that Terra had categorized as “to be shredded” when they needed to be retained. The October 31, 2017 claim related to the replacement of professional reference books lost in the fire. Co-operators disputed this claim on the basis that the books fell within contents loss coverage.

[36]       Despite the fact that all three of these valuable papers loss claims were filed prior to the appraisal that concluded on March 9, 2018, the appraisal proceeded only on the April 17, 2017 proof of loss. It is not clear why the appraisal did not include the September 28 or October 31 valuable papers loss claims. The appellants contend that Co-operators would only consent to the appraisal of the April proof of loss and told them that the other claims would be dealt with “at a later mutually convenient date”. The respondents say that Mr. Agnew refused to consider the September 28 and October 31 claims.

[37]       On March 22, 2018, Mr. Agnew awarded the full amount claimed by the appellants in their April 17, 2017 claim of $157,639 (“Award #2”). Award #2 states:

Commercial Advantage Endorsement (valuable papers, reproduction and repair, based on the fire proof of loss, April 17, 2017). No other items under the commercial advantage endorsement have been considered in this award.

Commercial Advantage Endorsement (Partial Award as listed above) $157,639.00. [Emphasis added.]

[38]       Co-operators sought judicial review of Award #2 on the basis that the indemnity principle had been breached and Mr. Agnew exceeded his jurisdiction. The appellants resisted the application on the basis that Mr. Agnew had jurisdiction pursuant to the appraisal agreement dated November 24, 2017. The Divisional Court dismissed the judicial review application on November 2, 2018, saying: (a) the umpire had jurisdiction under the appraisal agreement; (b) Co-operators had an opportunity to contest the appellants’ appraisal methodology for calculating the valuable papers loss claim but chose not to do so; and (c) Award #2 was limited to the quantification of loss and did not address the appellants’ entitlement under the Policy.

[39]       Co-operators refused to consider the appellants’ other valuable papers loss claims, including the two that had been filed and not considered by Mr. Agnew at the appraisal.

C.   The Statement of Claim

[40]       On January 18, 2018, the appellants issued the Claim against Co-operators and Mr. Carroll seeking entitlements under the Policy, damages for breach of contract, negligence, defamation, procurement of breach of contract, interference with economic relations, and bad faith, as well as aggravated and punitive damages. The Claim was issued to protect the limitation period while the claims process was ongoing.[2]

[41]       After allowing for the payments made by Co-operators to the appellants, there are considerable sums available under the Policy limits for building and valuable papers loss claims.

[42]       The building loss limit is $1,081,600. Co-operators made payments totalling $507,130.09 for the building losses, leaving a further $574,469.91 available under the Policy building loss limit. The June 4 and November 2, 2018 building loss claims were for $80,096.79 and $35,989.71 respectively. Together, these claims are for substantially less than the amount still available under the building loss limit.

[43]       The coverage under the Commercial Advantage Endorsement, which includes valuable papers claims, is $250,000. Award #2 gave the appellants $157,639, leaving potentially $92,361 of coverage for unpaid valuable papers losses. The September 28, 2017 valuable papers loss claim is for $41,613.90 and the October 31, 2017 claim is for $63,062.34.

D.   The Partial Summary Judgment Motion

[44]       On the Motion, Co-operators took the position that the appraisal process finally determined the appellants’ entitlement to payments for losses in respect of the building and valuable papers. It contended that once the umpire released his appraisal decisions, the appellants were not entitled to submit further loss claims in respect of the building and valuable papers. Co-operators asked that the appellants’ claims for building and valuable papers losses be dismissed and declared to no longer form part of the litigation.

[45]       The respondents also sought an order dismissing the Claim against Mr. Carroll in his personal capacity, pursuant to r. 21.01(1)(b) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194.

[46]       The motion judge accepted Co-operators’ position on the effect of the appraisal process under the Insurance Act and dismissed the appellants’ building and valuable papers loss claims. He declared that Co-operators had paid the appellants all amounts owing for building loss and valuable papers loss claims and dismissed any further such claims.

[47]       The motion judge struck the Claim as against Mr. Carroll, pursuant to r. 21.01(1)(b), on the basis that it disclosed no reasonable cause of action. He said that, when interacting with the appellants, Mr. Carroll was acting within the course of his employment with Co-operators and, because Co-operators was vicariously liable for Mr. Carroll’s conduct, there was no independent action available against him.

[48]       At para. 1 of his reasons, the motion judge stated, “At the outset of the hearing, counsel advised that the issues of any outstanding productions and leave for the plaintiffs to amend their pleadings had been resolved, subject to costs”. As I explain below, this statement is relevant to the resolution of the third issue raised on this appeal.

III.          THE ISSUES

[49]       The appellants submit that the motion judge erred in:

1.     determining that this was an appropriate case for partial summary judgment;

2.     determining that the Awards finally settled the full amount of the appellants’ entitlements under the Policy; and

3.     striking the claims against Mr. Carroll personally.

ISSUE #1    THIS WAS NOT AN APPROPRIATE CASE FOR PARTIAL SUMMARY JUDGMENT

A.   The Parties’ Positions

[50]       The appellants submit that partial summary judgment was not appropriate in the circumstances of this case. They point to the fact that it took over two and a half years for the Motion to be heard, causing delay and “incredible” legal expense to the parties. They also point out that a trial on the remaining issues is still required, the trial will involve the same evidence as that adduced on the Motion, and the trial may result in inconsistent findings.

[51]       Co-operators submits that the motion judge made no extricable errors in principle and, thus, this court must defer to his decision to grant partial summary judgment.

B.   The Standard of Review

[52]       The exercise of powers under the summary judgment rule attracts appellate deference: Hryniak v. Mauldin, 2014 SCC 7, [2014] 1 S.C.R. 87, at para. 81. Whether partial summary judgment is appropriate is a question of mixed fact and law, and appellate intervention is warranted only where there is an extricable error in principle or a palpable and overriding error: Baywood Homes Partnership v. Haditaghi, 2014 ONCA 450, 120 O.R. (3d) 438, at para. 30.

C.   Analysis

[53]       I accept the appellants’ submission that partial summary judgment was not appropriate in this case.

[54]       The motion judge correctly articulated the following legal principles governing partial summary judgment motions, at paras. 42-43 of his reasons. Partial summary judgment is a rare procedure, reserved for an issue or issues that may be readily bifurcated from those in the main action, and that may be dealt with expeditiously and in a cost-effective manner: Butera v. Chown, Cairns LLP, 2017 ONCA 783, 137 O.R. (3d) 561, at para. 34. Partial summary judgment should be granted only in the clearest of cases and only if doing so does not give rise to any of the associated risks of delay, expense, inefficiency, and inconsistent findings.

[55]       However, in my view, the motion judge made an extricable error in principle in granting partial summary judgment: he failed to consider whether partial summary judgment was appropriate in the context of the litigation as a whole. The issues decided by the motion judge on the Motion cannot be readily bifurcated from those left for determination at trial. Because the issues are inextricably intertwined, deciding them on the Motion leads to the possibility of inconsistent findings and substantive injustice.

[56]       The motion judge concluded that, as a result of having gone through the appraisal process, the appellants were barred from having other of their building and valuable papers loss claims considered. As I explain below in my analysis of Issue #2, he erred in law in that conclusion. The motion judge also concluded that the appellants had been paid all they were entitled to under the Policy for building loss and valuable papers loss. The difficulty with these conclusions is they rest on factual findings that are inextricably intertwined with the matters in the Claim that will proceed to trial, including claims relating to business interruption losses, bad faith, and punitive and aggravated damages.

[57]       The appellants allege that Co-operators and Mr. Carroll manipulated the appraisal process and delayed payment of their loss claims in ways that amount to bad faith. To decide the appellants’ bad faith allegations, the trial judge will need to consider and make credibility findings on, among other things: the events surrounding the appellants’ claims for building and valuable papers losses; what happened in the lead up to the appraisals; the parties’ understandings of the intended scope of the appraisals that took place; the basis on which the appraisals were conducted; the appraisal procedures to be followed; what occurred during the appraisal processes; and, the timing and amounts of payments that were made. However, those determinations are inextricably intertwined with the motion judge’s factual findings that led him to conclude that the Awards finally settled the appellants’ claims and their entitlements under the Policy. Accordingly, partial summary judgment was not available.

[58]       Further, in my view the motion judge erred when he stated, at para. 81 of his reasons, that credibility was not a critical issue in the matters before him. On the contrary, his factual findings were dependent on making credibility determinations. A single example will demonstrate this. At para. 23 of his reasons, the motion judge states the umpire “refused to consider the October 31, 2017 [valuable papers] proof of loss”. As I explain above, while that is Co‑operators/Mr. Carroll’s position, the appellants’ version as to why the umpire did not consider that valuable papers loss claim in the second appraisal is fundamentally different. The scope of the umpire’s jurisdiction in the second appraisal process is significant when deciding Award #2’s effect on the appellants’ right to have its other two valuable papers loss claims considered by Co-operators – a matter that could not be decided in the absence of credibility findings.

[59]       In short, there is significant overlap on the facts relating to the issues for trial and those underlying the motion judge’s determinations. The factual findings must be left to the trial judge who, with the benefit of hearing all the trial testimony and further productions, will have a fuller appreciation of what transpired and the relationships among the parties, an appreciation that is crucial to fairly decide the allegations in the Claim.

[60]       Moreover, the summary judgment process did not serve the objectives of proportionality, efficiency, and cost effectiveness. It was not cheaper, faster, or more efficient. Co-operators and Mr. Carroll brought the partial summary judgment motion on September 26, 2019. The record is voluminous. Cross-examinations of the affiants took place, as did cross-examination of witnesses under r. 39.02. The Motion was eventually argued on November 23, 2021, over two years after it was brought. There has been extensive delay and expense caused by the use of the partial summary judgment procedure.

[61]       In my view, it is readily apparent that this was not one of those “clearest” of cases in which partial summary judgment was appropriate.

ISSUE #2    THE AWARDS DID NOT FINALLY SETTLE THE APPELLANTS’ ENTITLEMENTS UNDER THE POLICY

A.   The Parties’ Positions

[62]       The appellants submit that the motion judge erred in law in concluding that, having invoked the appraisal process under s. 128 of the Insurance Act, Co‑operators is immunized from considering, adjusting in good faith, and paying, any claims for building loss and valuable papers loss not before the umpire at the appraisals. They point to the unfairness created by the Judgment, which allows Co-operators to refuse to consider almost $240,000 of otherwise valid insurance claims, some of which predated the appraisals. The appellants acknowledge that they would still need to prove the subsequent claims in the regular course.

[63]       The respondents submit that the motion judge correctly interpreted the Insurance Act provisions as barring, after the appraisals, any claims the appellants made under the same head of coverage. They argue that the Awards are final and binding and cannot be challenged except on narrow grounds through the judicial review process. They say the appellants are essentially disputing the two Awards and seeking to challenge them impermissibly.

B.   The Standard of Review

[64]       The parties are agreed that the interpretation of the relevant provisions in the Insurance Act is a question of law and the standard of appellate review is correctness. Consequently, this court owes no deference to the motion judge’s interpretation of those provisions.

C.   The Relevant Statutory Provisions

[65]       Sections 128 and 148 of the Insurance Act are the only legislative provisions dealing with appraisals.

[66]       Section 128 provides for appraisals. The relevant subsections of s. 128 read as follows:

Contracts providing for appraisals

128 (1) This section applies to a contract containing a condition, statutory or otherwise, providing for an appraisal to determine specified matters in the event of a disagreement between the insured and the insurer.

Appraisers, appointment

(2) The insured and the insurer shall each appoint an appraiser, and the two appraisers so appointed shall appoint an umpire.

Appraisers, duties

(3) The appraisers shall determine the matters in disagreement and, if they fail to agree, they shall submit their differences to the umpire, and the finding in writing of any two determines the matters.

 

[67]       Section 148(1) prescribes certain statutory conditions that are deemed to be part of every fire insurance contract in force in Ontario. It reads as follows:

Statutory Conditions

148 (1) The conditions set forth in this section shall be deemed to be part of every contract in force in Ontario and shall be printed in English or French in every policy with the heading “Statutory Conditions” or “Conditions légales”, as may be appropriate, and no variation or omission of or addition to any statutory condition is binding on the insured.

[68]       Statutory Conditions 6 and 11 are relevant to this case. Statutory Condition 6 – Requirements After Loss – prescribes how an insured is to give notice of loss or damage to the insurer. The relevant parts of Statutory Condition 6 read as follows:

6. (1) Upon the occurrence of any loss of or damage to the insured property, the insured shall, if the loss or damage is covered by the contract, in addition to observing the requirements of conditions 9, 10 and 11,

(a) forthwith give notice thereof in writing to the insurer;

(b) deliver as soon as practicable to the insurer a proof of loss verified by a statutory declaration,

(i) giving a complete inventory of the destroyed and damaged property and showing in detail quantities, costs, actual cash value and particulars of amount of loss claimed,

(ii) stating when and how the loss occurred, and if caused by fire or explosion due to ignition, how the fire or explosion originated, so far as the insured knows or believes,

(iii) stating that the loss did not occur through any wilful act or neglect or the procurement, means or connivance of the insured,

(iv) showing the amount of other insurances and the names of other insurers,

(v) showing the interest of the insured and of all others in the property with particulars of all liens, encumbrances and other charges upon the property,

(vi) showing any changes in title, use, occupation, location, possession or exposures of the property since the issue of the contract,

(vii) showing the place where the property insured was at the time of loss;

(c) if required, give a complete inventory of undamaged property and showing in detail quantities, cost, actual cash value;

(d) if required and if practicable, produce books of account, warehouse receipts and stock lists, and furnish invoices and other vouchers verified by statutory declaration, and furnish a copy of the written portion of any other contract.

[69]       Statutory Condition 11 reads as follows:

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 shall 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. There shall be no right to an appraisal until a specific demand therefor is made in writing and until after proof of loss has been delivered.

D.   A Preliminary Point

[70]       The motion judge made a palpable and overriding error at para. 68 of his reasons when he found that the appellants had submitted their claims to the umpire for a determination, were “not content” with the Awards, and impermissibly sought to challenge the Awards through the courts, rather than by way of judicial review.

[71]       The appellants are content with the Awards; they are not seeking to challenge them; and, the courts are the appropriate venue for the adjudication of the appellants’ claims.

[72]       The appellants accept the finality of the Awards and do not challenge them. Indeed, there is no reason for the appellants to challenge the Awards. At the appraisals, the appellants’ claims were substantially or wholly accepted. In this regard, it is worthy of note that it was Co-operators that challenged the validity of Award #2 through a judicial review application and it was the appellants who successfully argued that Award #2 should be upheld.

[73]       Rather than seeking to have the claims decided in the appraisals reheard, the appellants seek to be heard on their proofs of loss not covered by the two appraisals.

[74]       Award #1 states, “Building by-law issues have not been considered within this award.” It appears that both the June 4, 2018 and the November 2, 2018 building loss claims, submitted after Award #1 was issued, arose from compliance with building by-laws. If that is the case, on its express terms, Award #1 did not cover those two building loss claims.

[75]       Award #2 states that it is based only on the appellants’ April 17, 2017 proof of loss. At the time of the second appraisal, all parties were aware of the two additional valuable papers loss claims (dated September 28, 2017, and October 31, 2017) the appellants had filed prior to the second appraisal. On the express wording of Award #2, it appears that neither of those two claims were considered or adjudicated.

[76]       Because the appellants are not challenging the Awards, judicial review is not the appropriate route for them to follow. It is for the courts to determine the validity of their Claim.

E.   Analysis

(1)         Overview

[77]       I see nothing in the legislation or the jurisprudence to suggest that interim proofs of loss are impermissible or that the appraisal process contemplated by the Insurance Act is a “one-shot” valuation, as Co-operators contends. In my view, correctly interpreted, the legislation permits an umpire to specifically confine an appraisal award to identified loss claims known at the time of the appraisal. In such circumstances, the insured has the right to submit, after an appraisal, further proofs of loss under a given head of coverage regarding different expenses.

[78]       Interpreting the legislation in this way respects the wide latitude given to an umpire to determine the manner in which the appraisal process is conducted: see e.g., Northbridge General Insurance Corp. v. Ashcroft Homes-Capital Hill Inc., 2021 ONSC 1684, at para. 27, and Aviva Insurance v. Cunningham et al., 2022 ONSC 6331, at para. 20. It also respects the intention underlying the appraisal scheme in the Insurance Act, namely, to provide an easy, expeditious, and cost‑effective means of settling claims for indemnity under insurance policies: Desjardins General Insurance Group v. Campbell, 2022 ONCA 128, 467 D.L.R. (4th) 480, at para. 27.

(2)         The Relevant Legislation

[79]       I begin by considering the relevant legislative provisions in accordance with the modern approach to statutory interpretation: “the words of an Act are to be read in their entire context and in their grammatical and ordinary sense harmoniously with the scheme of the Act, the object of the Act, and the intention of Parliament”: Rizzo & Rizzo Shoes Ltd. (Re), [1998] 1 S.C.R. 27, at para. 21.

[80]       Section 128 establishes an appraisal process. On a plain reading of s. 128(1), the appraisal process is intended to “determine specified matters” over which the insured and the insurer disagree:

128 (1) This section applies to a contract containing a condition, statutory or otherwise, providing for an appraisal to determine specified matters in the event of a disagreement between the insured and the insurer. [Emphasis added.]

[81]       A plain reading of s. 128(1) does not support an interpretation that an appraisal is a “one-time only” final determination of all claims under a head of coverage, including those not before the umpire.

[82]       Section 128(3) refers to “the” matters in dispute, reinforcing that the umpire is to determine the specific matters in disagreement. Again, nothing in its wording supports an interpretation that an insured is limited to a single appraisal for any given head of coverage:

(3) The appraisers shall determine the matters in disagreement and, if they fail to agree, they shall submit their differences to the umpire, and the finding in writing of any two determines the matters. [Emphasis added.]

[83]       Section 148 also gives no indication that an award is intended to finally settle an insured’s entitlement under a head of coverage. As we have seen, it simply prescribes certain statutory conditions that are deemed to be part of every fire insurance contract in Ontario.

[84]       The motion judge relied on Statutory Condition 6 to conclude that the Awards were final and binding, and operated to bar the appellants from having their other loss claims related to the building and valuable papers considered. At para. 56 of his reasons, he noted that Statutory Condition 6 provides that the insured must deliver a proof of loss “as soon as practicable” and give a “complete inventory of the destroyed and damaged property” and provide the details associated with the amount of loss claimed.

[85]       Co-operators also relies on Statutory Condition 11 as support for the motion judge’s interpretation. For ease of reference, I repeat the text of Statutory Condition 11 here:

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 shall 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. There shall be no right to an appraisal until a specific demand therefor is made in writing and until after proof of loss has been delivered.

[86]        Nothing in the plain wording of these conditions indicates that, following an appraisal, an insured is automatically precluded from filing other proofs of loss under the same head of coverage. To interpret the requirements in Statutory Condition 6, alone or in conjunction with those in Statutory Condition 11, in that manner would run afoul of the main objective of insurance law legislation, which is consumer protection: Smith v. Co-operators General Insurance Co., 2002 SCC 30, [2002] 2 S.C.R. 129, at para. 11. As this case demonstrates, such an interpretation is inconsistent with the objective of consumer protection because it works to the detriment of the insured.

[87]       The appellants needed to rebuild so they could get back to operating their business in appropriate premises. They did not have the means to finance the rebuild. The respondents allegedly refused to make a payment on an interim building loss claim so the appellants removed the word “interim” from their building loss claim and submitted it. They knew that their building loss estimate was incomplete because the cost of by-law compliance was unknown. But, according to them, all parties knew this and so too did the umpire – hence his notation on Award #1 that “Building by-law issues have not been considered within this award”. Now that the costs of by-law compliance are known – and with hundreds of thousands of dollars of space in the building coverage – it would work to the detriment of the appellants if their further building loss claims were not considered.

[88]       The respondents make factual assertions to support their submission that the appellants are prohibited from submitting further claims, given that the appraisals have taken place. Those assertions are based on controverted matters of fact about the lead up to the appraisals, the respondents’ handling of the appellants’ loss claims, and what happened during the appraisal processes. As I explain in my analysis of Issue #1, above, those matters must be left for the trial judge to decide, because they are inextricably intertwined with the appellants’ bad faith allegations in the Claim. In any event, such assertions do not assist in interpreting the relevant legislative provisions.

(3)         Some Relevant Jurisprudence

[89]       Neither the court below nor this court were pointed to any caselaw directly addressing whether appraisals under the Insurance Act can proceed in a successive fashion. However, in two first instance decisions, interim proofs of loss were permitted: Campbell v. Desjardins, 2020 ONSC 6630, aff’d in part, 2022 ONCA 128, and Senator Real Estate v. Intact Insurance, 2021 ONSC 200 (Div. Ct.). I hasten to add that in neither case was the court asked to interpret the legislation to determine the validity of successive claims following an appraisal.

[90]       In Campbell, one group of plaintiffs triggered the appraisal process with an interim proof of loss. The amount claimed was qualified as “estimated damages and indemnity based on quotes received” and the plaintiffs advised the insurer that a final and further proof of loss would be submitted once the rebuild was complete. The insurer took the position that an insured cannot wait until the rebuild is complete to submit its final proof of loss. The motion judge in Campbell rejected this argument. He said the insured’s approach enhances efficiency and creates a more complete record before the umpire: at para. 113. I note that if the insurer refuses to provide interim funding and the insured does not have the funds to finance the rebuilding, as the appellants allege is the case in this proceeding, such an approach is unavailable to the insured.

[91]       The motion judge in this case distinguished Campbell on the basis that, in Campbell, the proofs of loss never purported to be final.

[92]       In Senator Real Estate, the insured had submitted a proof of loss marked “interim” which stated that the replacement cost and cash value of the building were “TBD” (to be determined). No party disputed the plaintiff’s right to submit an interim proof of loss. The issue in that case was the rate of depreciation the umpire used for the replacement cost value of the building.

[93]       The motion judge did not explicitly distinguish this case from Senator Real Estate. However, in his reasons he underlined and bolded the words “interim” and “TBD”. From that, it appears that the motion judge saw as significant that the proof of loss in Senator Real Estate explicitly reserved the right to submit a final proof of loss.

[94]       The issue in this case is whether, following an appraisal, the relevant legislative provisions preclude the insured from submitting further proofs of loss under a given head of coverage regarding different expenses. On that issue, I see no valid distinction between this case and Campbell or Senator Real Estate. It is correct that in both Campbell and Senator Real Estate the proofs of loss were explicitly marked as “interim”. In this regard, it is significant to note that the word “final” is not found on the appellants’ building proof of loss that was before the umpire on the first appraisal. Further, on the face of both Awards, it is clear that the appraisals were limited. Award #1 states that it did not include building by‑law issues and Award #2 states it was limited to the April 17, 2017 proof of loss.

(4)         Conclusion

[95]       For these reasons, in my view, the motion judge erred when he interpreted the relevant provisions of the Insurance Act as barring the appellants from submitting, after the appraisals, further proofs of loss regarding different expenses, under the building loss and valuable papers loss heads of coverage. On a plain reading of the relevant legislative provisions, the appraisal process contemplated by the Insurance Act is not a “one-shot” valuation. Rather, it permits an umpire to specifically confine an appraisal award to identified loss claims known at the time of the appraisal. In this case, the Awards were expressly confined.

[96]       Interpreting the legislation in this way respects: the wide latitude given to an umpire to determine how the appraisal process is conducted; the intention underlying the appraisal scheme to provide an easy, expeditious, and cost‑effective means of settling claims for indemnity under insurance policies; and, that this is consumer protection legislation.

[97]       In this case, the umpire did not purport to adjudicate an entire head of coverage in either Award #1 or #2: both awards were restricted to specified claims of the appellants. Accordingly, the legislation does not preclude the appellants from submitting other claims for building loss or valuable papers loss. It will be for the trial judge to make the necessary factual findings to determine whether, as Co‑operators contends, the parties agreed that the appraisals finally determined the appellants’ rights to make claims under the building loss and valuable papers loss heads of coverage.

ISSUE #3    THE CLAIM AS AGAINST MR. CARROLL WAS ERRONEOUSLY STRUCK

A.   The Parties’ Positions

[98]       In striking the Claim as against Mr. Carroll, pursuant to r. 21.01(1)(b), the appellants contend that the motion judge “misapplied” the law on whether they could sue Mr. Carroll personally, regardless of whether he was acting in the course of his employment with Co-operators or whether Co-operators is vicariously liable for his conduct. They also submit that the motion judge erred by considering evidence when, under r. 21.01, the pleadings are deemed to be true.

[99]       The respondents submit that the motion judge conducted the proper analysis and considered all the relevant factors before determining that the claims against Mr. Carroll personally had no reasonable prospect of success. They point to the motion judge’s finding that Mr. Carroll only ever dealt with the appellants in the capacity of his employment with Co-operators, during which he was under the supervision of, and acted on behalf of, Co-operators.

B.   The Standard of Review

[100]   A claim may be struck under r. 21.01(1)(b) of the Rules only where it is “plain and obvious” that it has no reasonable prospect of success: Addison Chevrolet Buick GMC Ltd. v. General Motors of Canada Ltd., 2016 ONCA 324, 130 O.R. (3d) 161, at para. 21, leave to appeal refused, [2016] S.C.C.A. No. 317. The standard of appellate review of a motion judge’s order striking out a claim under r. 21.01(1)(b) is correctness: Kang v. Sun Life Assurance Company of Canada, 2013 ONCA 118, 303 O.A.C. 64, at para. 27.

C.   Analysis

[101]   In my view, the motion judge erred in two ways in striking the Claim, as against Mr. Carroll, pursuant to r. 21.01(1)(b): (a) he applied an incorrect legal principle; and (b) he failed to accept, as true, the material facts as pleaded against Mr. Carroll.

1.     The Legal Error

[102]   At para. 79 of his reasons, the motion judge stated, “If an employer is vicariously liable for the conduct of its employees (who are acting in the course of their duties) there is no independent action against the employees”. That statement of law is incorrect. The fact that Mr. Carroll’s involvement with the appellants occurred only in the course of his employment with Co-operators does not mean that there can be no independent action against Mr. Carroll. An employee acting in the context or course of employment can be sued and held personally responsible in law for their tortious conduct: see e.g., Correia v. Canac Kitchens, 2008 ONCA 506, 91 O.R. (3d) 353, at para. 86; ADGA Systems International Ltd. v. Valcom Ltd. (1999), 43 O.R. (3d) 101 (C.A.), at p. 109, leave to appeal refused, [1999] S.C.C.A. No. 124; and Sataur v. Starbucks Coffee Canada Inc., 2017 ONCA 1017, 140 O.R. (3d) 307, at para. 4.

[103]   In Sataur, the motion judge made a similar legal error to that committed in this case. The plaintiff in Sataur brought a claim in negligence against Starbucks, as well as against a barista and store manager in their personal capacities. The plaintiff alleged that the barista negligently poured scalding water on her hands. She contended that the manager and barista each owed her a duty of care and each was personally liable for breaching their duty to her.

[104]   At first instance, the motion judge struck the claims of negligence against the barista and manager. On appeal, this court set aside that decision, explaining there is no general rule in Canada that an employee acting in the course of their employment cannot be sued personally for breaching a duty of care owed to a customer: at para. 4.

[105]   As was the case in Sataur, the motion judge in this case conflated two separate legal concepts: the employer’s vicarious liability for its employees acting within the scope of their employment; and the employee’s personal liability for their own tortious conduct while acting within the scope of their employment.

[106]   The respondents suggest that Sataur must be limited to negligence claims against employees. That is incorrect. This court has confirmed that an employee acting in the course of employment can be personally responsible in law for committing torts other than negligence. In Correia, for example, the motion judge granted summary judgment and dismissed the plaintiff’s claim for intentional infliction of mental distress against an employee in her personal capacity. The motion judge dismissed the claim on the basis that the employee committed the alleged tort while acting in her capacity as a human resources manager for the employer: at para. 79. On appeal, this court re-iterated that the employee could be held personally liable for her conduct and allowed the claim to proceed: at para. 88.

[107]   In the Claim (and the amended statement of claim, discussed below), the appellants have alleged conduct on the part of Mr. Carroll that would give rise to an independent actionable wrong for which the appellants might be entitled to recovery, separate and apart from the underlying claims against Co-operators. The Claim includes allegations of negligence on the part of Mr. Carroll that are distinct from the negligence claims against Co-operators. For example, the Claim alleges that Mr. Carroll himself acted negligently when he did not secure experts to address the appellants’ position on building loss. Further, the appellants allege that Mr. Carroll defamed them during the course of his dealings over their claims.

[108]   As a separate point, I also accept the appellants’ submission that Mr. Carroll’s presence is necessary, pursuant to r. 5.03(1), so the trial court can effectively and completely adjudicate the issues raised in the Claim. One example demonstrating this relates to the appellants’ punitive damages claims made against both Co-operators and Mr. Carroll. At para. 91 of Blackwater v. Plint, 2005 SCC 58, [2005] 3 S.C.R. 3, the Supreme Court held that “punitive damages cannot be awarded in the absence of reprehensible conduct specifically referable to the employer”. The trial judge may determine that Mr. Carroll’s personal conduct is worthy of punitive damages but that his conduct is not referable to Co-operators.

2.     The Pleadings Error

[109]   The motion judge also erred by failing to accept, as true, the material facts as pleaded against Mr. Carroll.

[110]   When assessing whether to strike out a pleading under r. 21.01, on the basis that it discloses no reasonable cause of action, the court must accept as true the material facts as pleaded; however, this obligation does not extend to bald conclusory statements of fact, unsupported by material facts: Trillium Power Wind Corp. v. Ontario (Ministry of Natural Resources), 2013 ONCA 683, 117 O.R. (3d) 721, at para. 31. Accepting as true the material facts as pleaded, it is not plain and obvious that the Claim against Mr. Carroll has no reasonable prospect of success: it should not have been struck.

[111]   As a preliminary matter, I note that the motion judge ruled on this issue with consideration only for the Claim. In my view, that was an error. As previously noted, at para. 1 of his reasons, the motion judge stated that leave for the appellants to amend their pleadings had been resolved (subject to costs). In light of that, in my view, the motion judge should have considered the additional particulars in the draft amended statement of claim when determining whether the pleadings disclosed a reasonable cause of action against Mr. Carroll. In the draft amended claim, the appellants allege that Mr. Carroll acted outside the reasonable role of an adjuster and his conduct led to aggravated damages, increased business losses beyond the Policy provisions, constituted defamation, and interfered with the economic relationship between the appellants and Co-operators. Numerous particulars of Mr. Carroll’s alleged conduct to support these broad allegations are set out at para. 43 of the draft amended claim.

[112]   In any event, however, reading the Claim generously, and accepting the allegations in it to be true, it cannot be said that the appellants’ claims against Mr. Carroll have no reasonable prospect of success. At para. 45 of the Claim, the appellants set out particulars of Mr. Carroll’s conduct which they allege attracts punitive damages. Those particulars include Mr. Carroll: accusing Mr. Truscott and his representative of fraud and dishonesty; making proposals for settlement and payments calculated to take advantage of the appellants’ vulnerability and which were made without evidence or a basis in law; taking unreasonable and unsubstantiated positions with respect to the value of the building loss, which led to that matter unnecessarily having to go to appraisal and causing delay; intentionally or negligently failing to secure experts that would have verified the appellants’ position on the building loss; and, forcing Mr. Truscott to spend excessive time away from his business to support his claims, knowing that this burden would result in reduced income and added expenses.

DISPOSITION

[113]   For these reasons, I would allow the appeal, set aside the Judgment, and permit the entire Claim to proceed to trial.

[114]   I would order costs of the appeal to the appellants, fixed at the agreed-on amount of $15,000 plus HST. If the parties are unable to agree on costs of the Motion, they may file written submissions on the matter, to a maximum of three pages, within ten days of the date of the release of these reasons. Such submissions shall include the party’s bill of costs.

Released: April 19, 2023  “E.E.G.”

 

“E.E. Gillese J.A.”

“I agree. M. Tulloch J.A.”

“I agree. L.B. Roberts J.A.”