Property Loss Update: A view from Glenn Gibson

For the most part, 2009 was a rather quiet year in our court system for property cases.  Yet, as we moved into the last quarter of the year, things started to heat up.

For instance, the last decade of ‘bad faith’ claims prompted a number of ground breaking decisions from the Supreme Court of Canada that clarified what constitutes “bad faith.”  This has resulted in greater clarity around what we can and cannot do when dealing with some of the tricky situations we find ourselves in as loss adjusters [and as insurance professionals].

To me, it boils down to two key factors:

  1. We need as much clarity as we can achieve in setting out the terms and conditions of the insurance contract. That requires the people selling and buying this product having a clear understanding of the product.
  2. Adjuster files need to demonstrate that they have clearly and fully communicated with the policyholder on what’s going on with the handling of their file.

As you review these cases keep these two points in mind.


TGA Contracting v. Cirillo et al, and
 Cirillo et al v. Wawanesa Mutual Insurance Co.
Ontario Superior Court, DiTomaso J., Oct. 15, 2009


On March 7, 2004 an accidental fire caused significant damage to a family-owned dwelling. The insureds had a homeowner’s policy with Wawanesa Insurance Company.  The building limit was $219,000 (CDN) but there was a “Guaranteed Replacement Cost Endorsement” (GRC) on the policy. 

In the immediate aftermath of the fire, the loss adjuster brought in two experienced fire general contracting firms to scope the damage and submit repair prices. The repair estimates came in at: $175,000 and a second price at $203,000. 

The insureds spoke very little English and handled virtually all of their dealings through their son-in-law. Early in the process, the insureds also engaged a public adjusting firm who inspected the damage and produced an estimate to repair the building damage of $235,000. 

Eventually, the insureds terminated their relationship with the public adjusting firm and engaged their own choice of contracting firms—TGA Contracting—to do the repair work.  This firm used the public adjusters’ scope of damage as their initial guideline recognizing very early that the GRC endorsement was going to be involved with the loss and that would push the policy indemnity past the stated limits on the building coverage.

At the point the insured was authorizing repairs to their building the insurer made it very clear that they were taking the position that their policy obligation to indemnity for repair costs were based on the lowest estimate they had obtained. 

The initial stage of the repair process was to strip out fire damaged materials that required replacement. In the course of doing this it became evident that there was additional damage to the building structure. This led to a re-inspection of the damage by the insurer and their contracting representative. This led to a revision upward in their pricing to about $295,000. 

As the repairs marched onward, the insured’s engaged a second firm who did some sub-trade work on the building. They were directed by the insured on the work. 

As the repairs progressed, Wawanesa made regular progress payments up to the point where they felt they had reached their maximum responsibility. This was based upon using the lowest priced estimate and the additional repair costs. The insureds not only disagreed with this position of the insurer but also ran into conflict in reconciling the amount of money that TGA Contracting was owed for work completed. This resulted in two lawsuits: one against the insurer for breach of contract; the other in defense of a “lien” action commenced against the insured by TGA. 

Both actions were consolidated into one trial, adjudicated by Justice J. DiTomaso. In an unusual move the insureds chose to represent themselves in during the five-day trial.

The trial supported the assertion that good documentation by adjusters and other insurance professionals is critical. During the case, the trial judge commented specifically on the evidence of two Wawanesa employees—Ms. Sharda Dookhie-Kangal and James Phinn.  He commented that:

      “…(they) were excellent witnesses.  Their oral evidence was clear and cogent. They had excellent recollection of this particular claim which was supported by a meticulous insurance file consisting of telephone call notes, reports, summaries, computer entries involving Ms. Dookie-Khangal, her manager Mr. Phinn and his manager Dieter Mayer. Their evidence demonstrated a consistent and professional handling of the file which entirely supported the position taken by Wawanesa. They were professional and competent in handling this claim which was acknowledged by Mr. Ferris (son-in-law) and Mr. Wilkins (contractor). Mr. Ferris testified that Wawanesa’s representatives were courteous in all their dealings with the Cirillos.”

These comments provided an early insight into the outcome; an outcome that included the following points:

  • Wawanesa was entitled to rely upon the lowest repair estimate.
  • The insurer was not party to any contract involving the insured and their choice of contractor.
  • The insurer had clearly and effectively communicated their point of view to the insured and their contracting firms.
  • There was no disagreement that TGA Contracting had done excellent work on the repairs they had completed.  They were granted their lien and a judgment for the work they performed.


Case summary
This was obviously a complex loss with many interesting dynamics including the early involvement of a public adjusting firm. The trial judge was clearly and distinctly impressed with the work of Wawanesa’s claim professionals. 


Wu v. Gore Mutual,
Ontario Superior Court, J. Nolan, Dec. 2, 2009


On or about October 10, 2006 an arson fire destroyed a rental dwelling in Windsor, Ontario. 

The dwelling owners lived several blocks away from the rental property and had owned it for 13 years prior to the fire. The owners had a variety of tenants during this period of time with no issues until the property owners agreed to rent the property to a new tenant in 2002. Initially there were no problems until the female tenant had a new boyfriend move into the property during 2003. From that point onward there was a build-up of complaints from neighbours about garbage piling up on the property. This led to a citation from a building department inspector in early 2006. At the time the tenant responded to a clean-up request but it wasn’t long before conditions deteriorated. This led to an order to clean up the property in March 2006. Once again the tenant complied but wasn’t long before problems occurred again and the tenants were eventually ordered by the owner to leave the property, which they eventually did on August 4, 2006. 

The owner orchestrated a major clean up of the dwelling resulting in over 1,400 kilograms of refuse diverted to the city dump. During this final clean up the owners were at the house daily, orchestrating the clean up.

By mid-September, they were ready to rent the house. They quickly found a new tenant who agreed to move into the property on November 1, 2006.

On October 11, 2006 the dwelling owner discovered a fire had occurred in the property.  The fire had burned itself out without being discovered. The fire and police services investigated the fire and determined it was “arson” with most of the suspicion focused towards the prior tenant. The authorities laid no charges in this matter.

When the dwelling owner reported the fire loss to his broker he was advised of the “30- Day Vacancy Exclusion.” He reports this was the first time he became aware of such an exclusion.

Initial damage estimates were in the area of $70,000 (CDN). No repairs were carried out immediately and by the time this case went to trial the damages had creeped upward into the $130,000 area.

There were some key dates and events to note in the handling of this fire loss:

  • The fire was discovered on October 11, 2006.
  • An adjuster met the dwelling owner on October 12, 2006 and obtained a ‘Non Waiver Agreement’.  This was based upon initial information that a policy  exclusion could be involved with the loss.
  • On November 7, 2006 the handling adjuster sent a blank proof of loss form to the insured. They also advised their investigation was still “ongoing”.
  • The proof of loss had not been returned before the adjuster, on December 6, 2006 formally advised the insured that his claim was being denied because the insurer investigation had determined the dwelling had been “vacant” since August 5, 2006.  This was more than the 30-days that was allowed under the policy.
  • On January 9, 2007 the owner received a formal letter of cancellation of coverage for the rental property based upon its current condition.
  • The proof of loss form was provided to the insurer on July 12, 2007.  The insurer continued to maintain its position on the damages being excluded.

At trial the insurer moved beyond relying only the ’30-day Vacancy’ exclusion and also adopted the position that there had been a breach of Statutory Condition 4, which suggested the insured had also failed to notify the insurer of a “material change in the risk.” 

During the trial an underwriter appeared as one of the insurer’s witnesses. Her evidence at trial hit on a few points:

  • The insurer was not aware the property was vacant prior to learning of the fire.
  • They also had not been aware of complaints from neighbours nor the involvement of the city building inspector.
  • A property “vacancy” is considered by an insurer to be a “material change in risk”.
  • If the insurer had been aware of the deteriorating condition of the property before the fire they would have cancelled the policy.

In cross-examination the plaintiff’s lawyer elicited clarification that….

  • There was no requirement in the policy for the insured to get a vacancy permit.
  • There was also no requirement that the insurer had to be notified each time a tenant might move from the insured premises.
  • There was no policy requirement relating to being informed of “complaints” about the property condition.
  • The “usual” chain of events was that if a property was vacant for “one to two weeks” the insurer is notified.
  • When the tenants moved out on Aug. 4, 2006 and the dwelling was not immediately habitable then the insurer should have been notified on that date.  When challenged on where the contract required this type of notification, the underwriter promptly referred to Statutory Condition #4.
  • The underwriter conceded there was no policy definition for “occupancy”.  But, rightly pointed out there was a clear definition for what “vacancy” was supposed to mean.
  • It was the broker’s responsibility to go through the contract with the insured.

The trial judge reviewed a variety of legal cases from the lawyers handling this case.  None of the cases was exactly on target with this fact situation but the trial judge noted that, “In the case before me, the tenants had moved out on Aug. 5, 2006 and had moved out all their possessions. No one else moved in or even stayed overnight occasionally.”  And the judge noted that this was, “…not a seasonal property and was insured as a rental property.”

Various arguments were raised by opposing lawyers including an effort to use the case of Tilden Rent-a-Car Company vs. Clendenning (1977), 18 O.R. 601 (Ontario Court of Appeal. This case involved a car rental. The Court of Appeal held that the provision on the reverse side of the contract was in “small type and so faint on the customer’s copy to be hardly legible.” The company had not taken steps to alert the customer on the onerous provisions of the standard form contract and the defendant was not aware of them. So, the provisions did not apply.
But, in this situation the trial judge did not feel the policy exclusions or statutory conditions were “hidden in any way in the insurance policy.”  While the dwelling owner argued his broker did not explain the policy to him he acknowledged he did receive a copy of the policy. And there was no evidence led that he was not able to understand the policy, so the judge concluded that he was “…deemed to have understood the provisions.” 

It was of interest that the plaintiff lawyer did try to argue the fairness principle. The trial judge did not agree. This was a case of interpreting the terms of the contract. Both parties owe a duty of “good faith” to each other.  In this case, the dwelling owner had a duty to inform the insurer or their broker of the vacancy and the deteriorating condition of the property. The case against the insurer was therefore “dismissed”.

Case Summary
It was interesting to see that the broker was not included as a co-defendant in this legal action. It is also noteworthy of how the policy exclusion for “vacancy” has evolved to the current language:

“The insurer does not insure direct loss or damage occurring after your property has, to your knowledge been vacant, even if partially or fully furnished, for more than 30 consecutive days.”

The underlined wording was added to provide clarity to the exclusion. This was the second time this same definition was subject to a trial….the first being –Saavedra vs. Gore Mutual Insurance Company, Thomson J., Ont. Superior Court, Unreported decision, Windsor file 47338.


2069190 Ontario Inc. v. Economical Mutual et al,
Ontario Superior Court, Lalonde, J., Dec. 8, 2009


A piece of forestry machinery was allegedly stolen October 7. 2006. The policyholder initiated an action against the insurer on March 16, 2009. The insurer was seeking to dismiss the action by way of a Summary Judgment on the basis there was no genuine issue for a trial judge to determine as it was statute barred.

There is a key sequence of dates that need to be noted:

  1. By early November 2006, the adjuster sent proof of loss forms to the insured.
  2. A proof of loss was received on Feb. 5, 2007.
  3. The adjuster felt the form was “incomplete”.  He sent a new form to be completed by a letter dated March 5, 2007.
  4. A new proof of loss was completed and signed on August 16, 2007.  It was sent to the insurer in a lawyer’s letter dated August 23, 2007.
  5. On October 17, 2007 a lawyer acting for the insured wrote the adjuster and requested a “status report” on the claim.
  6. On February 22, 2008 the lawyer requested a reason behind the apparent denial of his clients claim.
  7. On March 19, 2006 the adjuster advised the lawyer his client’s claim was statute barred as the reason for denying the claim.

What follows in this decision is an interesting review of limitation arguments and the manner in which the plaintiff lawyers framed their pleadings. But, the main argument being raised was that the policyholder had been lulled into a false sense of security by the adjuster and that this had worked to his detriment. They argued that the insurer had not told the insured the reasons as to why his original proof of loss was being rejected.  They also argued that the Limitation Period should run from the date that the insurer formally rejected the claim in March 2007 and not from the date of loss.

The plaintiff lawyer also moved onto arguments relating to the principle of fairness. Their arguments in this area related to the level of responsiveness to the lawyers request for a “status report.” 

The plaintiff lawyer then moved on to a novel argument relating to Section 438 of the Insurance Act R.S.O. 1990 c. 1.8. This relates to “unfair or deceptive acts or practices” by an insurer.

The plaintiff lawyer arguments came in the face of what seemed to be an obvious missing of a limitation period. The insurer lawyers led their own strong arguments on many fronts with the trial judge concluding a number of things:

  1. Section 438 of the Insurance Act does not apply to this case.
  2. There was no evidence in the affidavits filed of deliberate acts or delays by the insurer.
  3. The language was clear that the insured had a one-year prescription period running from the date of the loss.
  4. The plaintiff could not argue the “discoverability” strategy because they had not included it in their pleadings.
  5. Breach of trust and breach of duty also must be pleaded as stand-alone causes of action. They had not been included in the pleadings. 
  6. The plaintiff was represented by Council prior to the expiry of the one year limitation. There is no duty owed to the plaintiff’s lawyer for the insurer to advise them of their strategy. 


The judge granted the motion and dismissed the action against the insurer.

Case Summary
The critical thing here was that the policyholder was represented by legal counsel prior to the one-year limitation period expiring. 

 There are some very important messages from these Ontario Court of Appeal judgment, particularly on the use and proper documentation on the application for insurance. The application is the fundamental starting point for the selling of our product so the points these judgments have raised are very important to recognize.

Our purpose as adjusters is to “help people.” Your commitment to achieving this purpose is important. Keep this in mind as you move forward into a new decade of what should be exciting but challenging times.


Glenn Gibson, Global Chief Strategy Officer, Crawford & Company,

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