The Ontario Court of Appeal has ruled in Truscott v Co-operators General Insurance Company, 2023 ONCA 267, that the appraisal process under Ontario's Insurance Act may be iterative. Where the parties limit the appraisal, the award that results need not decide the entire valuation dispute between the parties.
The alleged facts in the case were troubling. The plaintiff, Truscott, had a fire in an old Victorian house that he used as an office. Without insurance proceeds he did not have the funds to rebuild, but the insurer would not accept interim proofs of loss to start reconstruction while the total cost of the repairs was still being determined. Allegedly, it told Truscott to submit a final proof of loss, and that he could subsequently amend it. When he did so, and the insurer disagreed on the quantum, Truscott triggered the appraisal process under s. 128 of the Insurance Act. Notwithstanding that both parties knew there were quantum issues outstanding, and the umpire for the appraisal expressly limited his award to exclude issues related to necessary by-law upgrades, the insurer would not consider additional or amended proofs of loss thereafter. It argued the appraisal had finally settled all issues as to the value of the loss under the building loss coverage.
Although the insurer was initially successful in having Truscott's additional claims dismissed, the Court of Appeal reversed. It ruled the appraisal process permits an umpire to confine an award to identified claims at the time of the appraisal. Where the umpire does so, the insured may submit further proofs of loss regarding different expenses. Although the statutory conditions imposed by the Insurance Act stipulate that an insured will "as soon as practicable" provide the insurer with "a complete inventory of the destroyed and damaged property", it does not necessarily follow that an appraisal must address all valuation issues in dispute.
The court reasoned that:
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 the insurance policies; and, that this is consumer protection legislation.
Insureds that wish to take advantage of an iterative process must be careful, however. The Court of Appeal referred to Truscott's decision not to label the revised proof of loss requested by the insurer as "final" (instead, he simply removed the word "interim"), and that the umpire's award was expressly limited. It would be best to have the insurer's agreement to the limitation of scope. But if that is not possible, insureds will need to make certain that any scope restrictions of an appraisal are objectively verifiable and acknowledged by the umpire
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