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Ontario Court of Appeal provides commentary on the determination of actual cash value in property insurance claims

Intact Insurance Company v Laporte, 2024 ONCA 454  

Reading Time: 3 minutes (approx.) 

By: Krista Nasartschuk 

This appeal stems from a structure fire which occurred in a commercial premises wherein John Laporte, the Appellant, the operated a military apparel business named Warrior Gear. The Appellant’s insurance policy with Intact Insurance, the Respondent, provided for $3 million in coverage with the option for replacement value coverage in qualifying cases or actual cash value (ACV) in the alternative. 

The parties undertook the procedure as outlined in section 128 of the Insurance Act, RSO 1990 c I.8, which sets out the appointment of an appraiser by each party. Should the appraisers be unable to reach a resolution, an umpire is appointed to determine the matter.  

The Respondent’s appraiser initially assessed an ACV of $265,000, while the Appellant’s appraiser submitted assessed the value at $2,093,046. Failing to reach a resolution, an umpire was appointed who assessed the ACV at $886,000. Both parties opposed the decision of the Umpire, who invited them to resubmit appraisal amounts following which he would make a decision between the two amounts provided. The Respondent submitted an ACV of $390,000. The Umpire ultimately chose the Appellant’s ACV re-submission of $1,084,000. 

The Respondent sought judicial review of this decision, stating that it was untenable on the facts as it was four times the market value of the property, and that it would result in a profit to the Appellant contrary to the indemnity principle. The Division Court agreed and quashed the Umpire’s ACV determination. The Ontario Court of Appeal allowed the appeal based on multiple reasons. 

Firstly, the ONCA found that the Divisional Court gave unwarranted weight to the market value in assessing the ACV. It went on to assert that ACV can exceed market value and that this does not constitute and indication on an unreasonable ACV assessment. It was clarified that case law has defined ACV as the value to the insured at the time of the loss, and that the wording of the policy did not change this accepted definition.  

Secondly, it determined that the Umpire’s assessment was supported by the facts. The court referred to the brief provided to the Umpire by the Appellant which indicated that the property’s location near the Petawawa military base contributed to the success of his military apparel business.  The ONCA also allowed for the consideration of replacement costs, noting that the policy specifically identified depreciated replacement value as a factor for consideration in assessing ACV.  

Thirdly, the ONCA clarified that the Umpire’s award did not offend the indemnity principle as the Appellant’s position was premised on the unique aspects and location of the property. As the Appellant had continued to operate in the same location following the fire, the ONCA accepted that the award would be consumed by restoration and that there was no evidentiary basis for the Divisional Court’s finding that a windfall would result.  

Finally, the ONCA reiterated that ACV assessments are not required to be precise quantifications, stating that Section 128 does not require a scientific identification of value, but rather relies on ‘an art that operates based on best estimates of a myriad of factors’. As such, the Division Court owed deference to the Umpire with respect to his exercise of discretion and use of expertise.  

The appeal was granted with costs payable to the Appellant.  

Link: https://canlii.ca/t/k53sg  

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