Agrola Inc. v. Wawanesa Mutual Insurance Company Inc. 2024 ABCJ 92
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By: Alexandre Doucet (Articled Clerk)
In September 2022, Agrola Inc. (the Plaintiff), which operated a garden centre and nursery, suffered a series of thefts and property damage. The Plaintiff was a longstanding client of Wawanesa (the Defendant) and had coverage through them for more than 20 years, including a policy which covering the subject property which was effective from September 8, 2021, to September 7, 2022. At issue was the effect of the policy’s co-insurance clause.
The thefts and property damage occurred on September 2, 2022, and September 26, 2022. The thieves cut through a chain-link fence and removed motors, pumps, wires and other equipment from the property. Damages were evaluated by an agent of the Defendant’s broker.
The Defendant alleged that the Plaintiff was not entitled to recovery notwithstanding that it had coverage on the date of the loss due to a co-insurance clause. In essence, co-insurance clauses are designed to ensure policyholders insure their property to an appropriate value and that the insurer receives a fair premium for the risk.
Relying on the co-insurance clause, the Defendant, through a complex method of calculation, stated that the value of the loss was lower than the value of the deductible, thereby avoiding coverage. Furthermore, since the Plaintiff was not adequately insured and allegedly violated the co-insurance clause of 90%, they were unable to recover.
The Plaintiff submitted that he did not know he had to maintain coverage of 90% of his property’ value and that the broker responsible for his policy never informed him of the requirement. That testimonial evidence was never contradicted at trial, as no witnesses from Wawanesa testified to counter the claim. Justice G.W. Sharek wrote, “The burden of proof to establish that there is insurance coverage is on the plaintiff insured […]. However, as Wawanesa seeks to limit the coverage and impose a penalty, it is for the insurer to establish, on the balance of probabilities, the applicability of the co-insurance clause and the components of the formula they seek to rely upon to reduce the face value of the coverage stipulated in the endorsement” [para 32].
Further, when insurance disputes are litigated at trial, direct evidence supporting methods of valuation are required. The Defendant’s method of calculation was convoluted, and it relied on hearsay evidence, not direct evidence, therefore failing to establish the appropriate calculation for the co-insurance provision being relied upon. “To be clear,” Justice Sharek wrote, “I find that there was coverage of the plaintiff […] and I also find that the co-insurance provision was applicable to this loss. However, the insurer has not provide the appropriate calculation for the co-insurance provision on which they rely […], nor have they proven how they arrived at the amount they considered to be the insured’s loss” [para 36].
Ultimately, the court found the Plaintiff was entitled to recovery of the insurance policy limits adjusted for the appropriate application of the co-insurance clause and based on the actual cash value of the stolen equipment.
