When it comes to home insurance, most people purchase it with the aim of being able to rest assured that in the event something major (or even minor) happens to their home, they’ll be covered. In many cases, that’s what people experience. However, disputes between insured parties and their insurers are all too common. These disputes can arise over whether insurance covers a particular loss, or whether the correct process is being followed in order to resolve a dispute between an insured and their insurer. In the decision we will cover today, the insured’s home experienced significant damage following a tornado. The parties did not agree on the assessed value of the home and followed a legislated arbitration process to resolve it. But questions came up about who should represent each party during this process.

Parties cannot agree on value of home following tornado

In late September 2018, the Ottawa area was struck by a tornado, causing damage to the home of the respondent (“RC”). RC and her insurer had a disagreement about the value of the loss sustained from the tornado, with RC believing the assessed value the insurer arrived at was lower than it should have been. This disagreement led to the triggering of the appraisal mechanism under the province’s Insurance Act. As part of this process, RC and the insurer each appointed a representative and agreed on the choice of an umpire. RC elected her lawyer to serve as her umpire, while the insurer appointed an adjuster employed by them who had worked on the original assessment of the home’s value.

Umpire has concerns about insurer’s representative

After the umpire became aware that there may be a bad faith claim filed against the adjuster, he expressed concern about the lawyer’s role as both appraiser and lawyer. The umpire also expressed concern with the independence of the insurer’s appraiser, stating the appraisal “must be seen to function as an independent panel under the Insurance Act where there is no actual or perceived conflict of interest.

The insurer responded by appointing an appraiser they did not appoint to represent them. However, RC did not appoint someone to replace her lawyer. This led to the lawyer bringing an application asking the court to remove him from his role. During the original trial, the court held that while the umpire is required to be impartial, it is not necessary for the representatives of the party to be impartial. The insurer appealed this decision, with the question before the Court of Appeal being whether the trial judge was correct in finding there was no basis for requiring the removal of RC’s lawyer as appraiser.

Do appraisers have to be impartial?

The court turned to the Insurance Act, which outlines the requirements for the appraisal process. The Act states that each party shall appoint an appraiser and that a difference in opinion would lead to the involvement of an umpire. However, the Act stops short of outlining any requirements for appraisers or any element that would disqualify someone from serving in that capacity.

The application judge described the appraisal process as being informal, and that while experts can be called and cross-examinations can take place, the entire process can also be done via written documentation. Additionally, the umpire is the sole decision maker in the process, and appraisers are responsible for representing their clients (much like lawyers at a trial). The application judge underscored that it is the umpire’s choice and “nothing else” that creates the majority decision. Because of this, it is necessary for the umpire to be independent and impartial in order to ensure procedural fairness.

In turning to the role of the appraisers, the application judge described their job as presenting evidence that supports their assessments of the loss. They don’t present evidence, but more plead the case for their clients. The role was summarized as,

In sum, the choice of the appraiser belongs to the party.  It is expected that the chosen appraiser will vigorously advocate the client’s position, with the goal of convincing the other appraiser, or more importantly, the umpire as the sole decision maker of the appraisal process.  Selecting an advocate as an appraiser does not eliminate the integrity of the appraisal process. Rather, it ensures that the party’s respective positions are properly advanced before the umpire, in the best interest of the client.

The court found that the lack of a rigid structure for the process was intentional and is meant to provide the parties with an easy method for settling disputes. While it would be in the best interests of the appraiser to be objective and not lose credibility, the use of an umpire provides enough checks and balances to ensure an appropriate outcome.

In turning to whether RC’s lawyer had a conflict of interest, the court found that the bad faith claim and the appraisal are entirely different issues. The appraisal process is entirely removed from the rest of the issues, and no longer involves the appraiser upon whom a bad faith allegation may be made.

The court dismissed the appeal, ruling in favour of the insured.

Let Campbell Litigation help you with matters related to insurance litigation

Whether you are personally injured or own property that is damaged and believe insurance should provide you with coverage, the first thing you should do is ensure the safety of those and others who may be injured. Following that, you should reach out to an experienced lawyer in order to make sure you are well-positioned to receive the coverage you are entitled to.

For experienced legal advice in insurance litigation, contact the litigation team at Campbell Litigation. Call us at 519-886-1204 or contact us online. We offer prospective clients a free initial consultation.