Menninga v. Lloyd’s Underwriters Date:, 2012 BCPC 267

Citation: Menninga v. Lloyd’s Underwriters Date: 20120606 2012 BCPC 0267 File No: C21074 Registry: Port Alberni IN THE PROVINCIAL COURT OF BRITISH COLUMBIA BETWEEN: MALCOLM MENNINGA CLAIMANT AND: LLOYD'S UNDERWRITERS DEFENDANT REASONS FOR JUDGMENT OF THE HONOURABLE JUDGE COWLING Appearing in person: Malcolm Menninga Counsel for the Defendant: Michael O'Meara Place of Hearing: Port Alberni and Nanaimo , B.C. Date of Hearing: April 30, 2012 in Pt. Alberni and May 9, 2012 in Nanaimo Date of Judgment: June 6, 2012

[ 1 ] The Claimant sues to recover on a multi-peril insurance contract and the Defendant seeks to deny coverage based on limitation issues. There is also an issue as to the amount of the claimed damages. FACTS: [ 2 ] The Claimant is a log-scaler who resides in Qualicum Beach and owns a rental single-family dwelling in Port Alberni which he insured with the Defendant. He bought the property in 2006 and believes it to have been built circa 1965. [ 3 ] In December of 2006 he rented the home to Ms. Desjarlais and Mr. Rampanen for $1,600 per month with the lease ending in June of 2008.

In December of 2007 one of the tenant's three children put some decorative rocks into a toilet in the house which caused flooding that was noticed on December 6, 2007. A plumber, Mr. Walcot, was called to fix the blockage and the claims service for the insurer was promptly notified of the water damage. [ 4 ] Mr. Ferreira was the initial adjuster and he arranged for renovation work to be done by restorers referred to as Rock Steady. [ 5 ] On December 28th, 2007, Mr. Walcot had to be called back to the home because of another flooding incident.

In this case it appears that Rock Steady or sub-trades working under its direction had left drains in the house uncovered. Debris from the renovation work got into the drains and caused a blockage somewhere between the house and the connection to the city drainage system. Mr. Walcot, who was a witness at the trial, ascertained this through the use of a "pipe-eye" video system. [ 6 ] This blockage was more severe than the initial event and required bringing a Hitachi excavator onto the property to dig a hole in the front yard to a depth of about 12 feet to access the drain at the blockage location.

See the photos in Ex.1. It was noted that the line had what was referred to as a "belly" or sag in it which would lead to future problems if not corrected. The blockage was removed, the sag corrected and clean-outs were installed to bring the line up to code. [ 7 ] Mr. Walcot finished this work by January 7, 2008, and his invoices are Ex. 2. [ 8 ] After the second flooding there remained extensive work to be done inside the home including using heaters and fans to dry out the flooded portions to prevent future mould/mildew issues.

After the cause of the second incident had been ascertained the Claimant arranged with Mr. Rowe, who had taken over the adjustment of the claim, for new restorers to do the work. The new restorers are referred to as Whole Show. [ 9 ] The evidence indicates that both Rock Steady and Whole Show were restorers/renovators who were routinely used by the Defendant's adjusters and recommended to the Claimant by the respective adjuster. The Claimant indicated that he had no previous experience with such claims or with hiring restorers and basically deferred to the choice of the adjusters.

He acknowledges that he was the person who ultimately authorized the restorers to do the work. See Ex. 10. [ 10 ] During the restoration work by Whole-Show one of its workers or a sub-trade working under its direction opened up a valve on a water line on the upper floor of the home. This appears to have been an unused line which was not capped. (refer to the photos in Ex. 3, tab 4, photos 5-8). It appears that when the system was reactivated water escaped from the uncapped line causing extensive damage to the laminated wood floor in the kitchen and the basement ceiling.

Most of the living area of the home was on the upper floor with a bedroom, playroom, bathroom with shower and laundry area on the lower floor. [ 11 ] This third flooding event was detected on or about the 30th of January, 2008. The evidence indicates that due to a shortage of alternative rental accommodation the tenants remained in the premises for the majority of the time that it was under repair. The tenants had given the Claimant post-dated cheques for the monthly rent payable in advance. The December 1st cheque was cashed by the Claimant but he did not cash the other cheques that had been left with him.

The tenants did pay him $1,780 and Ms. Desjarlais testified that they had done so as they felt responsible for the initial damage and were aware that the Claimant had a deductible for his insurance (in an amount of $1,000). Subsequent correspondence indicates that the insurer may have waived the deductible. Prior to the flooding incident in December there had been unfinalized discussions between Ms. Desjarlais and the Claimant as to a possible rent reduction. [ 12 ] Eventually the tenants left the premises completely as of April 15, 2008. Ms.

Desjarlais testified that on Feb. 29, 2008, she gave a lengthy statement to Mr. Rowe, a transcript of which appears at Tab 16 of Ex.3. Mr. Rowe mistakenly took from that interview that the tenants had continued to pay rent to the Claimant and reported that information to the claim's office of the Defendant. [ 13 ] In her evidence in court Ms. Desjarlais explained that the entire episode had left her in something of an emotional state at the time she was interviewed by Mr. Rowe and that it was not correct that anything was paid to Mr. Menninga other than the $1,780.

She indicated that at the time of the interview she was not clear about whether the rent had been paid because the post-dated cheques had not been returned to her. Ms. Desjarlais also confirmed that while they had wished to move to less expensive accommodation prior to the flooding their inquiries as to such had not been successful and that they would have remained in the property until the end of June when their children would complete school but for the flooding and ongoing renovation work. [ 14 ] Mr.

Menninga's work as a log-scaler took him to work at locations where it was difficult for him to keep in touch with Mr. Rowe and vice-versa. Subsequent to the third flooding event Mr. Menninga lost confidence in Whole Show and it was agreed between he and Mr. Rowe that a third restorer (Mike Worms Renovations. Ex. 1 Tab 7) would be engaged. The insurer's misapprehension of the rental situation and the communication problems between the parties appears to have contributed to a situation where the insurer took an antagonistic view of the claim. [ 15 ] Amongst other things they only offered to pay Mr.

Menninga for half of four months rent (4 x $800 = $3,200) and also took the position that each flooding event constituted a separate claim requiring a separate proof of loss for each. Payment of the restorers was

held up during this process and the repair work proceeded slowly if at all. Mr. Menninga felt that he was entitled to loss of rent from January forward until the property was rented again and that this could not be determined until the repairs were done and the home was back on the rental market. As it turned out he had to do some of the repairs himself and the work was not completed until sometime in June of 2008. The property was rented again as of mid-August. [ 16 ] Mr. Menninga also felt that it was reasonable to treat the episode as in reality a single claim. Mr.

Menninga was not aware of the misunderstanding as to the rent aspect of the claim until a much later date. (refer to Ex. 3, Tab 7, page 5--email of 20 Feb. 2009 and Tab. 11 -- letter of 27 August 2008 Kerruish to Menninga). [ 17 ] On March 24, 2008, Mr. Rowe mailed to Mr. Menninga a final proof of loss. The cover letter for this form is at Tab 9 of Ex. 3 and the form itself, as sent, also at that tab. At the time of this letter the insurer still contemplated that the repair work would be done by Whole Show. After discussions between Mr. Rowe and Mr.

Menninga as to various concerns, including having the work done by Mike Worms, an "interim" proof of loss was returned by Mr. Menninga having been sworn on May 29, 2008. (see Ex. 3, Tab 8). [ 18 ] In August of 2008 (see Ex. 3, Tab 11) Coast Capital was still operating under the belief that Mr. Menninga's tenants had paid him rent throughout the flooding debacle and had vacated the premises in April for reasons unrelated to the flooding and the lack of expeditious repair work. [ 19 ] In the interim Mr.

Menninga had apparently tried to resolve his differences with the insurer through the General Insurance OmbudService of Canada which appears to be some form of Better Business Bureau for the insurance industry. A portion of this correspondence is included in Ex. 5 with an email to "Cathy Blasius" of that organization. This email mentions that Mr. Menninga had made "numerous phone calls" to Coast Capital which were not returned. The process of seeking assistance from GIO was not fruitful. [ 20 ] On March 5 of 2009 Mr. Rowe wrote to Mr.

Menninga re the ongoing dispute over the rental loss issue and the claim generally. Mr. Rowe's letter included the following statement: "....you have one year in which to complete the final proof of loss form provided to you on March 24th, 2008, as well as all documentation required. After the one year your claim will have proscribed and all further claims will be statute barred and no further payments considered. Please be advised that if you have any documentation that you wish to submit for consideration this must be received no later than March 24th, 2009, at 4:00 pm." [ 21 ] Mr.

Menninga submitted a notarized proof of loss to the Defendant on March 23, 2009. See Ex. 3, Tab 12. He also submitted or had previously provided the information set out at Tab 13. [ 22 ] Mr. Menninga received no response to his proof of loss and commenced this action on November 20, 2009. SUBMISSIONS [ 23 ] The Defendant says that Mr. Menninga is subject to a limitation period pursuant to

section 22 of the Insurance Act of one year which would have commenced shortly after the provision of the proof of loss with the letter sent on March 24th, 2008. The Defendant suggests that April 7th of 2009 would be the latest that Mr. Menninga could have commenced his claim as the correspondence in Ex. 3, Tab 10 suggests he had received the form by that time. [ 24 ] The Defendant stresses that the period is one year from the date the form is provided not from the date it is returned. The Defendant relies on authorities such as: Churchland et al v. Gore Mutual Ins. Co . 2001 BCCA 470 ; Essau v.

Co-operators Life Insurance Co . 2006 BCCA 249 ; KP Pacific Holdings v. Guardian Insurance 2000 BCSC 673 . [ 25 ] Mr. Menninga does not feel that such an

interpretation operates fairly in his circumstances. Mr. Menninga relied on the Supreme Court of Canada decision in the KP Pacific case at 2003 SCC 25 . In ordinary circumstances I would have expected counsel for the Defendant to have been more thorough in the matter of provision of authorities on the limitation issue, the more so where the other party is unrepresented. DECISION RE LIMITATION ISSUE: [ 26 ] In the decision of Gumpp v. Co-operators Life Insurance Co ., 2004 BCCA 217 , Madame Justice Southin said the following:

1. Southin, J.A.: - In KP Pacific Holdings Ltd. v Guardian Insurance Co. Of Canada (2003) 1SCR 433, 2003 SCC 25, the Chief Justiceof Canada, on a question of property insurance, said this: 3 The Insurance Act was passed in 1925 (S.B.C. 1925, c. 20). Despite repeated housekeeping amendments, it remains essentiallyunchanged. It was designed for a world where insurers issued policies geared to specific risks and subjects, such as fire insurance, theftinsurance, business loss insurance, and so on.

Accordingly, it lays down rules, including limitation periods, based on different anddiscrete categories of insurance. 4 Insurance practices, by contrast, have changed. A dominant policy in today's world is the "all-risks" or "multi-peril" policy, whichcovers a panoply of perils. This is good for consumers. It minimizes the number of policies they need to buy and ensurescomprehensive coverage at lower cost. But it is bad when legal issues arise. The outmoded category-based Act contains rules based onthe old classes of insurance.

The newer comprehensive policies are difficult if not impossible to fit into the old categories. The result iscontinued uncertainty about what rules apply. Claims stall. Litigation ensues. Courts struggle with tortuous alternative

interpretations. The rulings that have emerged have been likened to a "judicial lottery": Professor J. A. Rendall, Annotation to Briggs v. B.C.A.A.Insurance Co. (1990), (BC SC), 40 C.C.L.I. 282, at p. 288 (commenting on B.C. case law prior to Dressew SupplyLtd. v. Laurentian Pacific Insurance Co. (1991), (BC CA), 57 B.C.L.R. (2d) 198 (C.A.)). 5 It would be highly salutary for the Legislature to revisit these provisions and indicate its intent with respect to all-risks and multi-perilpolicies.

In the meantime, the task of resolving disputes arising from this disjunction between insurance law and practice falls to thecourts. Brown and Menezes lament: "Surely there can be little which is less productive, or more wasteful, than litigation about suchtechnicalities": C. Brown and J. Menezes, Insurance Law in Canada (2nd ed. 1991), at p. 16. I whole-heartedly agree.

Her Ladyship added the following: "In matters of limitation periods on claims under policies of insurance against the vicissitudes of life, the Legislature has created ascheme so labyrinthine as to be deserving of even harsher judicial condemnation." [27] In the Gumpp decision the reasoning of Huddart, J.A., in Balzer v. Sun Life Assurance Co. of Canada 2003 BCCA 306 wasapproved of and followed with particular reference to paragraphs 36 through 45 of that decision. [28] I note the following passages from the Balzer decision: “39 I have no difficulty with the proposition that the claim of Ms.

Balzer is continuing, that her cause of action accrues monthly, andthat the risk insured against was the continuance of a total disability. But that coverage could terminate at any time for want ofcontinuing proof of total disability. 40 It is at denial of coverage or termination of benefits that an insured would have reasons to sue the isurer. That is when alimitation period should begin to run, not while benefits are being received, not on some later date when an insured decides to file aproof of loss or commence an action.

This sensible result is at the root of the reasoning in the authorities cited to us.” [29] In this matter Mr. Menninga paid for insurance coverage and a claim arose which was well within the type of coverage forwhich he had bargained. He cooperated fully with the insurance company and its agents. Contractors hired on the recommendation ofthe insurer caused further damage to Mr. Menninga's property in the course of the repair efforts. The insurer through its workingrelationship with the restoration companies would have had more than the usual ability to assess the cause of the loss and the scope ofthe damage.

The representatives of the insurer in fact adopted an antagonistic and officious attitude towards Mr. Menninga. The insurerpresents as more protective of its working relationship with the restorers than with its customer. [30] I disagree that in these circumstances a new proof of loss was required for each incident. There is an original event followed byrelated further events with a tangible connection. In the particular context of this case a "rolling" date of loss was created which presentsas on or about January 30th of 2008.

As the policy included loss of rental income coverage it is arguable that the date of loss extendeduntil the property was re-rented but I do not consider this issue to be necessary to my decision in this matter. [31] I consider that in keeping with the Balzer decision the limitation period does not commence to run against the insured until therehas been a "clear and unequivocal denial of coverage" and that also as stated therein at para. 45: “45 Any ambiguity in the communication of a refusal of benefits, as to whether it is a clear and unequivocal denial, should beresolved in favour of the insured." The Balzer decision goes on to outline a simple procedure that an insurer could follow to put the insured on proper notice. [32] The correspondence in this case put Mr.

Menninga on notice that some aspects of his claim were being disputed and essentiallydiverted the discussion into secondary issues without Mr. Menninga being aware that from the insurer's point of view the clock wasrunning down on his claim as a whole.

[ 33 ] Multi-peril insurance policies such as the one purchased by Mr. Menninga are a common consumer product. Smaller claims such as the one here will not present as cost-effective for the insured to retain legal counsel. In the modern era the average Canadian consumer would expect to be dealt with in a straight-forward manner by their insurer and the use of plain language would be encouraged. The insurance industry is well-established and should not have any difficulty meeting such expectations.

An insurer, particularly one as experienced as Lloyd’s, could be taken to have been aware of the Balzer decision by 2008. [ 34 ] As that decision recommended in 2003, in a case such as this, an insurer could easily send a letter to the insured along the following lines: “We are in receipt of your proof of loss dated/sworn ______. Your claim is denied for the following reasons: (list) Pursuant to the provisions of your policy you are deemed to have received this letter within ____days from the date of this letter.

Unless you commence a legal action by a filed claim in court before (date) you will be forever barred from any recovery for this loss. We will consider any further correspondence about this matter that you wish to send but nothing will change the necessity of commencing your legal action before (date). We cannot give you legal advice about your claim; for that you need to consult with your own lawyer.” [ 35 ] A reasonable

interpretation of communications with Mr. Menninga was that he had until March 24, 2009 to file his sworn proof of loss, not to commence a legal action. If Mr. Menninga had not "confirmed his cause of action" so to speak by filing his proof of loss as he did then this might have led to a different result. I also consider that there are equitable factors in favour of allowing the claim to proceed more so than support barring the claim. [ 36 ] In the context of this case I find that the correspondence of the insurer does not meet the clear and unequivocal test and I find that this claim is not statute barred.

DAMAGES [ 37 ] The parties did not devote much of the hearing time to any discussion of the damage issues. There is a betterment issue as to some aspects of the repairs given the evidence that the line did not have modern clear-outs and had a "belly" in it that may have caused future problems. For those reasons I reduce the Walco Industries bill to $4,500 from the $5,887 paid by Mr. Menninga. The photos in Ex. 1 make it clear that extensive landscaping would be required to repair the grounds to the property. The estimate from Colyn's Landscaping and the evidence of Mr. Menninga on this issue is not precise.

I allow $5,000 under this heading. I allow $3,000 for the flooring and door issues where Mr. Menninga has done or is going to do the work himself. On the loss of rent issue Mr. Menninga received $1,780 from the tenants and $3,200 from the insurer against an overall loss of 7.5 months at $1,600/mth. This amounts to $12,000 for a net loss of $7,020 for which judgment is allowed. [ 38 ] The Claimant will have judgment for $19,520.00 plus costs and disbursements.

The Claimant will also be entitled to prejudgment interest on $14,520.00 from July 1, 2009 until date of judgment. [ 39 ] The Defendant has 60 days from the date of judgment to pay the Claimant with liberty to apply. By the Court ______________________________ The Honourable Judge J.D. Cowling