Vincent et al v Red River Mutual, 2021 MBCA 53

Citation: Vincent et al v Red River Mutual, 2021 MBCA 53 Date: 20210525 Docket: AI21-30-09554 IN THE COURT OF APPEAL OF MANITOBA Coram: Madam Justice Freda M. Steel Madam Justice Holly C. Beard Mr. Justice Christopher J. Mainella BETWEEN : ) S. C. Scarcello JOHN SHELDON VINCENT and ) for the Appellants KELLY LYNN VINCENT ) (via videoconference) ) (Applicants) Appellants ) L. K.

Troup ) for the Respondent ) (via videoconference) - and - ) ) Appeal heard and ) Decision pronounced: RED RIVER MUTUAL ) May 11, 2021 ) (Respondent) Respondent ) Written reasons: ) May 25, 2021 COVID-19 NOTICE: As a result of the COVID-19 pandemic and pursuant to r 37.2 of the MB, Court of Appeal Rules , MR 555/88R , this appeal was heard remotely by videoconference. On appeal from 2020 MBQB 153 BEARD JA (for the Court): I. THE ISSUE [ 1 ] The applicants (the insureds) are appealing the dismissal of their application for the appointment of a dispute resolution representative pursuant to section 121(9) (

a) of The Insurance Act , CCSM c I40 (the Act ). The main issue on this appeal is one of statutory

interpretation, being whether the right to access the dispute resolution process is subject to the two-year limitation period set out in

section 136.2(2) of the Act and incorporated into the insurance policy. The relevant statutory and contractual provisions are attached as an appendix hereto. As an issue of statutory

interpretation is a question of law, it is reviewed on the standard of correctness. [ 2 ] We dismissed the appeal at the hearing, with reasons to follow. These are those reasons. II. THE FACTS [ 3 ] The underlying facts are not at issue. The insureds’ house was insured by the respondent (Red River). On October 27, 2017, a fire caused extensive damage to the house and the contents. Red River arranged for repairs to the house and for the restoration of, or payment for, the contents, but the insureds were unsatisfied with the work and the offer.

The claim remained unresolved on September 16, 2019, so the claims specialist emailed the insureds, stating, “I want to mention to you that the policy has a 2-year limitation period to complete your claim, which expires on October 27, 2019.” There were further reminders sent on October 11, 2019, and October 22, 2019.

[ 4 ] The insureds did not commence an action, but their lawyer submitted a demand to Red River on October 28, 2019 (October 27, 2019 was a Sunday, so this was the last day of the limitation period) to initiate the dispute resolution process, and a proof of loss form on November 22, 2019. Red River’s lawyer refused both on the basis that the claim was statute barred and, as a result, the dispute resolution process was no longer obligatory. That led to the current application by the insureds for the appointment of a dispute resolution representative. III. THE APPLICATION JUDGE’S DECISION [ 5 ] The application judge identified the issue before her as “whether the limitation period in

section 136.2(2) [of the Act ] applies if the dispute resolution process in the Act has been engaged” (at para 11). She summarized the insureds’ position as being that, “as long as an insured has given notice to use the [dispute resolution] process before the limitation date, their right to utilize the process and recover the value of their loss so determined is preserved” (at para 23).

She noted that they were relying on the Alberta Court of Appeal’s decision in Terroco Industries Ltd v Sovereign General Insurance Company , 2007 ABCA 149 , as authority for their position (see para 32). [ 6 ] The application judge reviewed and analyzed that decision in detail, noting that, in Terroco , the “parties had agreed to be bound by the decision of the umpire. For that reason the limitation date was not applicable” (at para 33).

She further noted the finding that the insurer in that case had “admitted its liability under the policy” and had “agreed to make payment of the claim subject only to the amount being determined by the appraisal process, which was intended to be carried out in accordance with the procedure outlined in the legislation” (at para 34, quoting Terroco at para 35). [ 7 ] The application judge then found as follows (at paras 35, 37): The facts of the case before me are quite different than Terroco .

It is true that Red River acknowledged coverage, and had already made substantial payments for repairs or replacement of property. The only issue between the parties was whether the [insureds] were entitled to be compensated for the outstanding items and, if so, the amount of the compensation to be paid. However, there was no discussion about using

section [121 of the Act ] to resolve the dispute, nor was anything said by Red River’s representative that either expressly or impliedly demonstrates an agreement to pay the loss as valued under that process. In fact, Red River’s representatives specifically rejected the [insureds’] request for compensation and pointed out several times that a claim had to be brought before the limitation date. I find that the two-year limitation period described in

section 136.2(2) applies to all claims under a contract of insurance, even where the dispute resolution process in

section 121 has been engaged. The [insureds] did not bring an action by October 28, 2019, being the applicable limitation date. As a result, their right to use the dispute resolution process lapsed. . . . IV. ANALYSIS [ 8 ] The application judge correctly adopted the

interpretation of the provisions of the Act as explained in Terroco . To summarize from Terroco , “the appraisal process contained in the Insurance Act [RSA 2000, c I-3 ] is not a complete process”; rather, “[it] determines one aspect of an insured claim, namely value” (at para 23), and the umpire has no authority to enforce any decision made as a result of the dispute resolution process (see para 24).

Further, “[t]he demand for, and participation in an appraisal, does not obligate an insurer to pay the claim and, without something more, the insured must commence an enforcement action on the policy within the [mandated] limitation period to avoid being statute barred” (at para 25).

Finally, “in the ordinary course, even if the appraisal process is not completed within the limitation period, it is necessary for the action to be commenced prior to the expiration thereof, to avoid being statute barred” (at para 26). [ 9 ] This is confirmed by Craig Brown et al in Insurance Law in Canada (Toronto: Carswell, 2002) vol 1 (loose-leaf updated 2014, release 1), ch 10 at 10-23 (see Terroco at para 27; quoted in the application judge’s decision at para 28).

This same conclusion is found in Halsbury’s Laws of Canada (online), Insurance , Payment of Insurance Proceeds: Obligations on Insured: Limitation of Actions: Determination of Application of Limitation Period (VI.2(4)(b)) at HIN-77 “Competing time periods” (2019 Reissue): . . . Appraisal proceedings. Finally, appraisal proceedings do not serve to suspend the limitation period for bringing proceedings against the insurer. There is no waiver of any term or condition of the policy due to appraisal of the amount of loss.

The demand for, and participation in, an appraisal does not obligate an insurer to pay the claim, and without something more the insured must commence an enforcement action on the policy within the limitation period to avoid being statute-barred. [footnote omitted]

[ 10 ] We also agree with, and adopt, the application judge’s analysis of the facts in Terroco and her conclusions as to how that case differs, factually, from this case (see para 35, quoted at para 7 herein). To the extent that those are either findings of fact or mixed fact and law, they are reviewed on the standard of palpable and overriding error, and we are satisfied that there are no such errors. [ 11 ] For these reasons, we found that the application judge did not err in her

interpretation or application of the law in this case. Thus, we dismissed the appeal at the hearing. [ 12 ] There will be costs on the appeal payable to Red River, in accordance with the tariff. JA JA JA APPENDIX Condition 11 of the Statutory Conditions in

Schedule B of the Act , referred to in

section 136.4(2) of the Act , which forms part of the insurance policy: In case of disagreement 11(1) In the event of disagreement as to the value of the insured property, the value of the property saved, the nature and extent of the repairs or replacements required or, if made, their adequacy, or the amount of the loss or damage, those questions must be determined using the applicable dispute resolution process set out in the . . . Act whether or not the insured’s right to recover under the contract is disputed, and independently of all other questions. 11(2) There is no right to a dispute resolution process under this condition until (

a) a specific demand is made for it in writing, and (

b) the proof of loss has been delivered to the insurer. Sections 123(2) and 123(3) of the Act : When a term or condition is not deemed to have been waived 123(2) Neither the insurer nor the insured is deemed to have waived any term of condition of a contract by reason only of (

a) the insurer’s or insured’s participation in a dispute resolution process under

section 121; (

b) the delivery and completion of a proof of loss; or (

c) the investigation or adjustment of any claim under the contract. Court may proceed in absence of appraisal 123(3) Despite any provision of this Act and any provision or statutory or other condition of a contract, the failure to have an appraisal made, or the fact that an appraisal is being made or has been made, does not preclude a court from determining, in an action brought for that purpose, an issue arising under a contract, including the determination of the value of the property insured or the value of any loss or damage to such property .

[emphasis added] The limitation provision in

section 136.2(2) of the Act : Limitation of actions 136.2(2) An action or proceeding against an insurer under a contract must be commenced (

a) in the case of loss or damage to insured property, not later than two years after the date the insured knew or ought to have known that the loss or damage occurred; and (

b) in any other case, not later than two years after the date that the cause of action against the insurer arose. The limitation provision in the insurance policy: . . . Limitation of Actions: Every action or proceeding against an insurer for the recovery of insurance money payable under the contract is absolutely barred unless commenced within the time set out in [t]he . . . Act . . . .