



COURT OF APPEAL FOR ONTARIO

CITATION: Desjardins General Insurance Group
    v. Campbell, 2022 ONCA 128

DATE: 20220215

DOCKET: C68843

Benotto, Brown and
    Harvison Young JJ.A.

BETWEEN

Desjardins General
    Insurance Group, and The Personal Insurance Company, and State Farm Insurance

Applicants (Appellants)

and

Ruth
and Leonard
Campbell
, and Grace (Grazyna) and Thomas
    Blazejewski

Respondents (
Respondent
)

Pasquale Santini, for the appellants

Joseph Obagi and Sarah Russell, for the
    respondent Ruth Campbell

Heard: September 10, 2021, by video
    conference

On appeal from the order of Justice Marc
    Smith of the Superior Court of Justice, dated October 30, 2020.

Harvison Young J.A.:


A.

Overview

[1]

This appeal arises out of a number of
    applications and motions involving three separate insurance claims for damages
    to homes caused by a tornado that hit the city of Ottawa on September 21, 2018.
    The respondent Ruth Campbells home was one of them. The appellant Desjardins
    General Insurance Group [Desjardins] was the homes insurer.

[2]

Following a disagreement between the parties
    over the value of the loss, the respondent triggered the appraisal mechanism
    under s. 128 of the
Insurance Act
, R.S.O. 1990, c. I.8. She appointed
    as appraiser her lawyer Mr. Joseph Obagi. Desjardins appointed an employee, who
    was the adjuster assigned to the respondents file. The appraisers agreed on
    the choice of an umpire.

[3]

After Mr. Obagi advised that he might be
    bringing a bad faith claim on the respondents behalf arising from the
    adjustment of her file, the umpire expressed concern about Mr. Obagis dual
    role as both an appraiser and a lawyer in the incipient action. He also
    expressed concern with the independence of Desjardins appraiser. He advised
    the parties that 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. He was not prepared to proceed without directions from the Superior
    Court of Justice.

[4]

While Desjardins satisfied the umpires
    concern by eventually appointing an appraiser who was not an employee, the
    respondent maintained her choice of Mr. Obagi. Desjardins brought an
    application for judicial direction, asking the court, among other things, to
    remove Mr. Obagi as the respondents appraiser. The application judge held that
    while the umpire is required to be impartial, that is not true of the
    appraisers selected by the parties. The appellants
Desjardins General Insurance Group, The Personal Insurance Company,
    and State Farm Insurance
appeal from that decision.

[5]

The only issue on appeal is whether the
    application judge erred in not removing Mr. Obagi as the respondents appraiser
    for lack of independence.

[6]

I would dismiss this appeal. While the
    application judge erred in characterizing the appraisal process as an
    administrative tribunal, he was correct in finding that there was no basis for
    requiring the removal of Desjardins choice of appraiser who is also her
    lawyer.

B.

Background

[7]

On September 21, 2018, a tornado damaged the
    respondents home, which was deemed a total loss. Steven Keane, a Desjardins
    employee, was the adjuster assigned to her file. Between January and March
    2019, Desjardins presented estimates to the respondent. In March 2019, the respondents
    family (the Campbell family) contracted with Omega Homes to rebuild their
    home. In April, Ms. Campbell requested an appraisal and, in May, she submitted
    an interim proof of loss. Desjardins appointed Mr. Keane (the adjuster) as
    appraiser and Ms. Campbell appointed Mr. Obagi. The appraisers agreed to
    appoint William Neville as umpire.

[8]

On May 23, 2019, the appraisers and the umpire
    held their first case conference. At that point, Mr. Obagi advised that he
    might be asserting a bad faith claim on behalf of Ms. Campbell arising from the
    adjustment of her file.

[9]

On May 27, 2019, Mr. Obagis law firm was
    retained to represent the Campbell family and two other families in an action
    for punitive damages against the appellants, Mr. Keane and others. This
    concerned Mr. Neville, who, in an email on the same day, wrote the following: Based
    on the previous experience that I shared with you both, I am certain you will
    appreciate that I would be less inclined to proceed with the appraisal if there
    was going to be a lawsuit with bad faith elements imbued within it about to
    be launched as between the insured and insurer.

[10]

On June 14, 2019, Mr. Neville unilaterally suspended
    the appraisal pending direction from the Superior Court of Justice on whether (a)
    Mr. Obagi can reasonably function as an appraiser on behalf of Ruth Campbell
    while continuing to act as her counsel in the lawsuit (my view is that he
    cannot); and if not, who his replacement should be; (b) Mr. Keane can
    reasonably function as an appraiser on behalf of his nominating insurer while
    remaining a party in the lawsuit (my view is that he cannot); and if not, who
    his replacement should be.

[11]

On July 8, 2019, Mr. Neville advised the
    appraisers that he was not prepared to proceed with the appraisal if the
    Campbell Family maintained their wish to have Mr. Obagi (or a member of his
    firm) act as an appraiser and similarly, where Desjardins sought to have an
    employee serve as an appraiser. He stated: Surely the Tribunal must be seen to
    function as an independent panel under the
Insurance Act
where there
    is no actual or perceived conflict of interest.

[12]

Desjardins responded to the umpires concerns.
    It removed Mr. Keane as the appraiser and appointed Michael Martin, another
    employee of Desjardins who had not been involved in the dispute or in adjusting
    the loss. This change did not alleviate the umpires concerns because
    Desjardins was a party in the claim. Desjardins therefore appointed a
    non-employee, John Valeriote of Crawford & Company. The Campbell Family did
    not wish to change Mr. Obagi as their appraiser.

[13]

Desjardins then brought an application to, among
    other things, remove Mr. Obagi as an appraiser, arguing that the appraisal
    process is an administrative tribunal and the two appraisers and the umpire
    must all be impartial. Desjardins contended that although the Ontario
    legislature had not specifically stated in the
Insurance Act
that an
    appraiser should be impartial and/or disinterested, the statute implied that
    they should be.

[14]

The application judge found that the appraisal
    process under the
Insurance Act
is an administrative tribunal, created
    to establish the value of the loss. He
noted that
s. 128(2)
of the Act,
    which provides that both parties shall appoint an appraiser, contains no
    restrictions imposed upon the parties regarding
who
can act as an
    appraiser. He took heed of the common practice in the insurance sector, whereby
    the insurers appoint an employee (property adjuster) to act as their appraiser
    while the insureds appoint a lawyer, a public adjuster, or even themselves to
    act as appraiser.

The Statutory Framework

[15]

It will be useful for the purposes of the
    following discussion to set out the relevant sections of the
Insurance Act
,
    namely ss. 128 and 148:

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.

Costs

(4) Each party to the appraisal shall pay the
    appraiser appointed by the party and shall bear equally the expense of the
    appraisal and the umpire.

Appointment by judge

(5) Where,

(a)  a party fails
    to appoint an appraiser within seven clear days after being served with written
    notice to do so;

(b)  the appraisers
    fail to agree upon an umpire within fifteen days after their appointment; or

(c)  an appraiser or
    umpire refuses to act or is incapable of acting or dies,

a judge of the Superior Court of Justice may
    appoint an appraiser or umpire, as the case may be, upon the application of the
    insured or of the insurer.

[]

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.

[]

Appraisal

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.

The Decision Below

[16]

The application judge described the appraisal
    process as an informal valuation, not an arbitration, run entirely by the
    umpire as they see fit. To that end, he noted:

·

There is no requirement for a hearing, nor is
    there a prohibition that one take place;

·

If oral evidence is presented, contractors
    and/or insureds can be called to testify, and cross-examinations can occur;

·

Experts can be asked to attend a hearing and
    provide their opinion;

·

The hearing can last a few hours, one day or
    span over many days; and

·

The valuation can also be entirely based upon
    written documentation.

[17]

The application judge found that the umpire is
    the sole decision maker.
While s. 128(3) of the Act
    sets out the duty of the appraisers to determine the matters in disagreement,
    it is silent regarding the umpires role and responsibilities. The umpire,
    after hearing and considering all the evidence (oral and/or documentary), as
    presented by the appraisers, decides between two competing valuations (insurer
    or insured), and the umpires selection determines the value of the loss. It is
    the umpires choice and nothing else that creates the majority decision that
    determines the value of the loss. The umpire, he stated, must always be
    independent and impartial, and in the event that they find it appropriate to
    hold a hearing, it must be conducted in a manner that ensures procedural
    fairness.

[18]

The application judge described
the appraisers role as one of presenting evidence that supports their
    assessments of the loss. The appraisers do not give evidence but merely plead
    the case on behalf of the clients and present the evidence in a manner meant to
    persuade the umpire that their valuation of the loss is reasonable and
    appropriate in the circumstances. He summarized these points as follows:

In sum, the choice
    of the appraiser belongs to the party.  It is expected that the chosen
    appraiser will vigorously advocate the clients 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 partys respective positions are properly advanced before the umpire,
    in the best interest of the client.

[19]

After the application judges decision, the
    parties agreed to proceed with the appraisal with the same parties,
    notwithstanding the pending appeal. As at the time of the appeal hearing, both
    appraisers had submitted their appraisal brief and put forward their numbers.

C.

Issues on Appeal

[20]

The central issue on the appeal is whether the
    application judge erred in rejecting the appellants submission that the
Insurance
    Act
implicitly imposes a duty of independence and impartiality on
    appraisers. In the course of the oral hearing, the correctness of the application
    judges decision in characterizing the appraisal scheme under the
Insurance
    Act
as an administrative tribunal was also questioned.

D.

Submission of the Parties

[21]

The appellants argue that the application judge
    erred in finding that an appraiser is an advocate and not a decision maker
    because this offends the principle of impartiality and breaches procedural
    fairness. In doing so, they argue, he also erred in relying on the witnesses
    understanding of the role rather than the wording of s. 128(3) of the
Insurance
    Act
and the jurisprudence. Moreover, they submit, the application judge
    also erred by misinterpreting and misapplying the legislative amendment of Statutory
    Condition 11 under s. 148, which removed the word disinterested, and failed
    to give effect to the requirement that a decision maker in the context of an
    administrative tribunal be independent from the parties before them.

[22]

The respondent argues that the
Insurance Act
expressly permits the parties to an appraisal to appoint an appraiser of their
    choice and that choice need not be neutral, non-partisan or independent
    of the parties. She further notes that the suggestion that an appraiser
    appointed by the parties must be neutral runs contrary to the legislative
    scheme created by the
Insurance Act
and to the practice in the
    industry where insurers regularly appoint their own employees or adjusters as
    appraisers and parties often appoint their lawyer.

[23]

There is no dispute between the parties that
    this appeal depends on  statutory interpretation, which is a pure question of
    law. The standard of review is therefore one of correctness:
Housen v.
    Nikolaisen
, 2002 SCC 33, [2002] 2 S.C.R. 235, at para. 8.

E.

Discussion

(1)

The application judge correctly interpreted the
    relevant provisions of the
Insurance Act.

[24]

In modern 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. As Professor Ruth Sullivan notes in her text
    on statutory interpretation, [t]he ordinary meaning of a word or a group of
    words is not their dictionary meaning but the meaning that would be understood
    by a competent language user upon reading the words in their immediate context:
    Ruth Sullivan,
Statutory Interpretation
, 3rd ed. (Toronto: Irwin Law,
    2016), at p. 61.

[25]

The appellants submit that because s. 128 of the
Insurance Act
removes the quantification of the loss from the courts
    and gives it to the appraisal process, all participants in the appraisal
    process who have the power to quantify the loss must also act judicially.
Put another way, the argument is that it is not only the umpire who
    must act judicially but also the two appraisers. For that reason, the
    appraisers must be impartial as well as the umpire.

[26]

This submission is flawed for a number of
    reasons.

[27]

First, it is well established that the purpose
    of the appraisal scheme under the
Insurance Act
is to provide an easy,
    expeditious, and cost-effective means for the settlement of claims for
    indemnity under insurance policies:
Madhani v. Wawanesa Mutual Insurance
    Company
, 2018 ONSC 4282 (Div. Ct.), at para. 46;
Northbridge General
    Insurance Corp. v. Ashcroft Homes-Capital Hall Inc
., 2021 ONSC 1684, at
    para. 23. The narrow function of the appraisal process is to provide the
    parties to the dispute with a valuation of the loss, and not the determination
    of legal rights:
Madhani
, at para. 40.

[28]

The appraisal process is not exhaustive of all
    potential disputes between the parties. For example, there may be a dispute
    about the scope of coverage such as whether landscaping restoration is covered.
    While such a loss might be valued as part of the appraisal process, that
    process cannot address other issues.

[29]

Second, as Perell J. noted in
Northbridge
,
    at para. 29, the process is designed to be collaborative and not adjudicative:

The appraisal
    process is designed to be collaborative and not adjudicative, and the process,
    which does not require a hearing with evidence, contemplates that the
    appraisers and the umpire will arrive at a binding decision based on their own
    knowledge and expertise. The umpire is the ultimate impartial decision-maker
    that makes a binding determination that removes the quantification of the loss
    from the court. As for procedure, the umpire may permit viva voce testimony
    under oath and may receive affidavit evidence but he or she is not required to
    do so. [Footnotes omitted.]

This point also relates to the
    question of whether the application judge correctly described the process as an
    adjudicative tribunal which will be addressed further below.

[30]

Third, as the application judge noted, the
    legislature removed the qualification competent and disinterested from the
    word appraiser through
An Act to Amend the Insurance Act
, S.O. 1966,
    c. 71, s. 8. The appellants, in effect, ask this court to read this
    qualification back into the statute.

[31]

The court must give effect to what the
    legislature intended. The best source of the legislatures intention is the
    legislation itself. As the application judge noted, ss. 128(2) and (3) of the
    Act have never stipulated that appraisers must be competent and disinterested.
    While a previous version of Statutory Condition 11 at s. 148 of the Act
    stipulated that both appraisers and umpires had to be competent and
    disinterested, this condition was removed by the 1966 amendment. Although no
    explanation was given for this change, it must be presumed that the legislature
    was not simply careless with the language and did not intentionally make the
    statute vague: see Sullivan, at p. 41;
D. R. Fraser Co. v. Minister of
    National Revenue
, [1948] 4 D.L.R. 776 (P.C.), at p. 781. The legislature
    must have intended to remove the qualification competent and disinterested
    for appraisers. Were it found otherwise, insureds would not be able to
    self-represent and provide a valuation of their own loss.

[32]

The appellants argue that the reason s. 128 of
    the
Insurance Act
does not explicitly state that an appraiser must be
    independent is because the ordinary meaning of the terms appraisal and
    appraiser imply a degree of independence. In support of this argument the
    appellants submit the
Blacks Law Dictionary
definition of the term
    appraisal as meaning [a] valuation or estimation of value of property by
    disinterested persons of suitable qualifications and of the term appraiser
    as meaning [a]n impartial person who estimates the value of something, such as
    real estate, jewelry, or rare books.  Also termed valuer. It must be noted
    that these definitions have been lifted out of different editions of the
    dictionary: Joseph R. Nolan et al.,
Blacks Law Dictionary
, 6th ed.
    (St. Paul, Minn.: West Publishing, 1990), sub verbo appraisal; Bryan A.
    Garner et al. 8th ed. (St. Paul, Minn.: Thomson/West, 2004), sub verbo
    appraiser. In any event,
Blacks Law Dictionary
definitions are not
    helpful as they cannot take into account the context and purpose of the
    appraisal process under the
Insurance Act
.

[33]

The cases relied on by the appellants for the
    proposition that appraisers must be disinterested do not assist them.

[34]

In both
Ice Pork Genetics Inc. v Lombard
    Canada Ltd. et al
, 2010 MBQB 77, and
Florida Insurance Guaranty
    Association, etc. v. Branco
(2014), 148 So. 3d 488 (Fla. 5th Dist. Ct.
    App.), the court was interpreting legislation or an insurance policy which
    specified that appraisers must be disinterested. There is no such provision in
    the Ontario
Insurance Act
.

[35]

In
Congregation of Knox's Church (Trustees)
    v. Hudson's Bay Co
., [1993] O.J. No. 764 (Ont. C. J. (Gen. Div.)), the
    court was concerned with the narrow issue of whether valuators appointed
    pursuant to a private act of the Ontario legislature to determine rental lands
    leased to Hudsons Bay Company had to be independent. As such, the case is not
    helpful in the insurance context.

[36]

While appraisers need not be disinterested, I
    would disagree with the application judge that they are therefore advocates.
    The purpose of the appraisal scheme under the
Insurance Act
is to
    provide an easy, expeditious, and cost-effective means for the settlement of
    claims for indemnity under insurance policies:
Madhani
, at para. 46;
Northbridge
,
    at para. 23. It is designed to be collaborative and not adjudicative:
Northbridge
,
    at para. 29. To fulfil the purposes of the appraisal scheme outlined above and
    to facilitate a collaborative process, an appraiser must attempt, in good
    faith, to reach a compromise with their fellow appraiser. That does not
    preclude the appointment of one partys lawyer as their appraiser as well, but
    the appraisal process presupposes that each appraiser work collaboratively.
    While this involves advocacy in the sense that each side may be expected to
    advocate their valuation to the other, their overall role within the appraisal
    process is more collaborative and less adversarial. The umpire will ultimately
    choose one side or the other. That places a premium on each side to be reasonable
    and also to reach agreement with the other side if possible.

[37]

If the appraisers are nevertheless unable to
    agree and therefore appoint an umpire to resolve their disagreement, then the
    umpire becomes the tie breaker. At that point, the umpire becomes the ultimate
    decision maker, who must necessarily be impartial and make a binding
    determination:
Northbridge
, at para. 29. While the appraisal process
    is not subject to the SPPA, it is subject to judicial review for denial of
    procedural fairness at common law from the moment of the umpires involvement:
Madhani
,
    at paras. 37-38. It is the umpire who bears the responsibility for ensuring
    that the process is fair.

[38]

The content of procedural fairness in the
    appraisal process is modest and flexible, and will depend upon the exigencies
    of the particular case, having regard to, for example, the amount of money
    involved in the dispute:
Northbridge
, at paras. 34, 71 and 73. There
    is no requirement that reasons for decision be provided:
Madhani
, at
    para. 41. The more complex cases may require a more structured and formal
    appraisal process:
Northbridge
, at para. 73. To that end, the umpire
    enjoys considerable discretion. Courts afford the umpires choice of procedure
    considerable deference and will be reluctant to interfere unless there is proof
    of fraud, collusion, bias, or partiality on the part of the umpire, or the
    umpire or the appraisers exceed their jurisdiction under the Act:
Northbridge
,
    at para. 34,
Shinkaruk Enterprises Ltd. and Mr. Klean Enterprises Ltd. v.
    Commonwealth Insurance Company et al.
, 71 D.L.R. (4th) 681 (Sask. C.A.), at
    p. 688.

[39]

This lack of a rigid structure is deliberate,
    intended to provide the insureds and the insurers with an expeditious and easy
    means for the settlement of claims for indemnity under insurance policies:
Northbridge
,
    at para. 68. It is in the best interests of appraisers to be objective in the
    appraisal process and not harm their position by losing credibility in the eyes
    of the umpire. In other words, the appraisal process itself provides sufficient
    constraint on the conduct of appraisers.

[40]

On appeal, the appellants argued that the real
    issue in this case was Mr. Obagis dual role as appraiser and counsel in the
    insureds bad faith action against the insurer. They submit that this creates a
    conflict of interest and Mr. Obagi, in his role as appraiser, has the ability
    to influence and impact the decision in such a way that it could impact upon
    the bad faith claim.

[41]

This submission was not put to the application
    judge. The issue was rather framed as whether a lawyer, whose duties are to the
    client, can act as a disinterested appraiser. The application judge
reviewed the Acts provisions, surveyed the Hansard records, looked
    at the usual practice in the field, and concluded that an appraiser need not be
    disinterested.

[42]

In any event, the bad faith claim and the
    appraisal are different issues. The bad faith claim involves the conduct of the
    insurer prior to the reconstruction of the homes at issue, which have now been
    reconstructed and the sole issue for appraisal is their replacement cost.
    Should these issues become intertwined at a later point, for example if there
    arose a possibility that Mr. Obagi may be called as a witness, the conflict of
    interest that arose may be cured by Mr. Obagis removal as counsel of record in
    accordance with s. 5.2 of the
Rules of Professional Conduct
.

[43]

In short, the flaw in the appellants argument
    that appraisers must be independent is that it collapses the roles of the
    umpire and the appraisers. The integrity of the process depends on the
    impartiality of the umpire. The structure of the process, according to which
    the umpire ultimately chooses one appraisal over the other, encourages
    compromise and collaboration between the parties.

(2)

The appraisal process is not a tribunal.

[44]

I conclude that the application judge erred in
    finding that the appraisal process was an administrative tribunal. This issue
    was raised by the panel in the course of the oral hearing.

[45]

Before the application judge, the respondent
    argued that the appraisal process is not an administrative tribunal. The
    application judge rejected this submission and determined that [o]nce the
    appraisers and umpire have been appointed, an administrative tribunal has been
    created for the limited purposes of establishing the value of the loss. It
    removes the quantification of the loss from the Court. However, he did not
    provide any reasons in support of this determination.

[46]

With respect, the application judge erred in
    classifying the appraisal process as a tribunal. Tribunals are quasi-judicial
    decision-making bodies tasked with determining issues on the facts and law in
    each case that comes before them:
Prince Edward County Field Naturalists v.
    Ontario (Environment and Climate Change) (2016), 2 C.E.L.R. (4th) 140 (Ont.
    Environmental Review Trib.)
, at para. 42, per Gibbs and Wright (Vice
    Chairs).

[47]

There is no indication in the Act that the appraisal
    mechanism is an administrative tribunal. The appraisal process under the Act is
    not adjudicative or quasi-judicial in nature but is rather based on discussion
    and on the sharing of expertise in valuation:
Birmingham Business Centre
    Inc. v. Intact Insurance Company
, 2018 ONSC 6174 (Div. Ct.), at para. 5;
Madhani
,
    at para. 42. It is not an arbitration:
Madhani
, at para. 40. Appraisal
    does not require a hearing, consideration of evidence, or reasons:
Madhani
,
    at paras. 40-41. Appraisers and the umpire do not determine legal questions:
Madhani
,
    at para. 30.

[48]

Moreover, while the process contemplates a
    valuation process that is comprised of the appraisers and the umpire, the
    ultimate decision maker if the parties are unable to agree is the umpire and
    not the appraisers. The fact that the umpire chooses one partys appraisal over
    another does not change this. Seen in the context of the process as a whole and
    its purpose, this reflects the premium put on collaboration and efficient
    process because, as discussed earlier, the process creates incentive for the
    parties to present reasonable valuations to the umpire to maximize the prospect
    that theirs will be chosen.

F.

Costs

[49]

I would dismiss the appeal with costs in the
    amount of $8,750, including disbursements, plus HST to be paid by the
    appellants to the respondent.

Released: February 15, 2022 M.L.B.

A. Harvison Young J.A.

I agree M.L. Benotto J.A.

I agree David Brown J.A.


