Can Insurance Act Appraisal Umpire Determine Quantity, As Opposed To Value, Of Damaged Property? Ontario Court Provides Clarity Sort Of

Section 128 of the Insurance Act provides a unique process to resolve disputes between insurers and policyholders as to the value of lost or damaged property under a property insurance policy. The process, which can be invoked by either party, requires both sides to appoint an appraiser to value the various disputed categories of loss. If the two do not reach agreement, they present their evidence to an "umpire" who plays the role of tie-breaker. The valuation accepted by the umpire in each category is then recorded in an award, and is binding on the parties.

The law is clear that umpires cannot determine legal questions such as whether there is coverage or whether the insured has committed fraud. The appraiser's jurisdiction is limited to matters of valuation.

But what happens where there is a dispute as to the quantity of insured property, say, for example, how many items were in a home before a fire? Is that a question of valuation properly within the umpire's jurisdiction? Or is it a factual determination that has to be made by a court, as does a finding of fraud?

The Divisional Court recently grappled with this question in Madhani v. Wawanesa Mutual Insurance Company, 2018 ONSC 4282. In that case, the insured had requested an appraisal after his home and its contents were damaged by fire. The parties went to appraisal but the insured was dissatisfied with certain of the umpire's findings, and so brought an application for judicial review to the Divisional Court.

The main issue on the application centred on the umpire's finding as to the replacement cost value of the home's contents. The insured's appraiser asserted that the contents' value was $239,000, and provided a list of the contents alleged to be present in the home and various supporting evidence from the insured. The insurer's appraiser disputed not just the value but the extent of the contents in the home, and asserted that the contents present were worth only $100,000.

The umpire found that the insured had overstated the extent of contents, noting "The extent of the contents items claimed to be present in the premises [by the insured] is not accepted." The umpire wrote that he was not identifying which specific items did not exist, but agreed with the insurer's appraisal that the value of items present during the fire was $100,000.

The insured argued on the judicial review application that the umpire had exceeded his jurisdiction because his only power was to make a...