Indexed as:

Sadema Lumber Products Ltd. v. Hanover Insurance Co.


Sadema Lumber Products Limited, plaintiff/respondent, and

Hanover Insurance Company, Orion Insurance Company Limited,

New India Assurance Company Limited, Albion Insurance Company

of Canada and Sovereign General Insurance Company,


[1981] O.J. No. 228

[1981] I.L.R. 279

[1981] I.L.R. para.1-1381 at 279

8 A.C.W.S. (2d) 300

No. 3966/80

Supreme Court of Ontario - High Court of Justice

Motions Court - Toronto, Ontario

Callaghan J.

Heard: April 14, 1981.

Judgment: April 27, 1981.

(10 pp.)


John I. Laskin, for the respondent/plaintiff.

R.G. Colautti, for the applicants/defendants.

1 CALLAGHAN J.:-- This is an application by the defendants for an order staying this action pending the disposition of an appraisal pursuant to the provisions of The Insurance Act, R.S.O. 1970, chapter 224, s. 102 and 122 (Act). The circumstances can be briefly stated. The plaintiff is engaged in the manufacture of wood products and the defendants are the subscribing underwriters to a policy of insurance issued to the plaintiff for loss against fire at its premises. On the 23rd day of August, 1979, one of the insured buildings was destroyed by fire and a quantity of equipment and stock used in connection with the plaintiff's business was destroyed or damaged.

2 The writ of summons was issued on August 22nd, 1980 and a statement of claim filed on September 29, 1980. On October 11, 1980 the defendants specifically demanded in writing that the differences as to the valuation of the losses incurred in the fire be referred for appraisal. Thereafter the defendants filed their statement of defence on October 24, 1980. There is no evidence before this court as to the date the proof of loss was delivered.

3 The statement of defence, filed herein, admits coverage under a contract of insurance. It also admits the fire. The defendants, however, take issue with the sufficiency of the proof of loss and the value of the amount of the loss. The appraisal demanded is in accordance with Statutory Condition 11 which was deemed to be part of the policy under s. 122 of the Act. That condition reads as follows:

  1. 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 there for is made in writing and until after proof of loss has been delivered.

The procedure to be followed on such an appraisal is provided for in s. 102 of the Act (see Re Krofchick et al. and Provincial Insurance Co. Ltd. et al. (1978), 21 O.R. (2d) 805).

4 On this application, the plaintiff submits that the right of the defendants to the appraisal pursuant to stat. con. 11 expired sixty days after delivery of proof of loss, or in the alternative, the court has a discretion with reference to a stay which discretion should not be exercised in favour of the applicants/defendants because of the delay in initiating these proceedings. The plaintiff submits that stat. con. 11 must be read together with stat. con. 12. Stat. con. 12 reads as follows:

When Loss Payable

12. The loss is payable within sixty days after completion of the proof of loss, unless the contract provides for a shorter period.

5 It is argued that there is no right to an appraisal until after proof of loss has been delivered (stat. con. 11) and that the power to require an appraisal expires within sixty days thereafter as that is when the loss becomes payable (stat. con. 12). I am urged to rule that stat. con. 12 supplies a clear ground for reading the power to require an appraisal under stat. con. 11 within a limitation confining its exercise to a reasonable time after the proofs are furnished but not later than sixty days at which time the loss becomes payable. For the purposes of this application, I am prepared to assume that the sixty day period has lapsed.

6 While I recognize there must be a reasonable limitation on the right to demand an appraisal under stat. con. 11, I am not satisfied that such a limitation has been defined or imposed by the terms of stat. con. 12. In my view, the last-mentioned condition vests the plaintiff's right of action within sixty days after completion of proof of loss. Appraisal is not a condition precedent to the commencement of that action (see McIntyre v. The National Insurance Co., (1880) 5 O.A.R. 580; Patterson v. Central Canada Insurance Co., [1910] W.L.R. 123 and Young v. The Waterloo Mutual Fire Insurance Company, [1955] I.L.R. 850).

7 The requirements for proof of loss are provided for by stat. con. 6 which reads, in part, as follows:


6.(1) Upon the occurrence of any

After Loss

loss of or damage to the insured property,

the insured shall, if the loss or damage

is covered by the contract, in addition to

observing the requirements of conditions

9, 10 and 11, ...

(Emphasis added)

While it is clear that stat. con. 11 limits the time before which an appraisal can be sought, it does not, in my view, impose a limitation beyond which such an appraisal can be sought. Had such limitation been intended, it could easily have been specified (e.g. see stat. con. 13). On the contrary, stat. con. 6 by its very wording indicates clearly that the requirements of stat. con. 11 are "in addition to" separate and apart from the requirements relating to proof of loss. Furthermore, stat. con. 11, by its very terms, is mandatory evidencing again a legislative intention that the determination of disputed value of the loss must be resolved by appraisal before there can be any recovery on the contract. This implies a continued availability of the mechanism of appraisal notwithstanding the right of action has vested or that the said action has been instituted. Stat. con. 11 is clear that disputed questions of value are to be determined by appraisal independently of all other questions arising under the contract. I accordingly must reject the submission that the right thereto must be exercised and tied to the sixty day period provided by stat. con. 12.

8 In M & P Enterprises Ltd. v. London and Lancashire Guarantee and Accident Company of Canada Ltd., [1965] I.L.R. 735 Mr. Justice Wilson (Manitoba Queen's Bench) stated at p. 738:

  1. Statutory Condition 11 requires, in imperative terms, that the extent and value of damage caused by fire be determined by appraisal. Fire insurance policies -- Canadian British and American -- have, for upwards of one hundred years, provided for the assessment of damage by way of inspection by impartial third parties, call it what you will. The practice accords with common sense, and is a convenience to the Court by way of reference to that extent. The insurer has an absolute right (unless waived by writing clearly expressed for the purpose) to insist upon the observance of that requirement, the assurance of which right, formerly Statutory Condition 22, was by S.M. 1956, c. 36, s. 16, re-enacted as Sec. 136A(1) of the Act.

While stat. con. 11 under the Fire Insurance Act S.M. 1956, c. 36, s. 12 is an amalgam of stat. con. 11 and s. 102 of the Act, the legislative history of the said provisions are in substance pari materia.

9 This court has a jurisdiction under s. 18, paras. 6 and 8 of the Judicature Act, R.S.O. 1970, c. 228, to stay proceedings. It also has an inherent jurisdiction to make such an order when it is just and reasonable to do so. On an application such as this it is clear that the burden is on the defendants, and that the power to grant a stay ought not to be lightly exercised. I do not find that the delay in demanding an appraisal herein has been inordinate to the point that my discretion should not be exercised in favour of the applicant. While that delay appears lengthy (14 months between the date of the fire and the application), having regard to the large amounts in issue and the absence of any material indicating prejudice to the plaintiff, I am not prepared to refuse the relief sought. Furthermore, I am of the view that a determination by appraisers, pursuant to the Act, may well avoid unnecessary expense in subsequent proceedings in proof of detailed matters of loss at trial.

10 There will accordingly be a stay of proceedings pending the report of the appraisers appointed pursuant to stat. con. 11 and s. 102 of the Act. While the applicants' delay has not disentitled them to the relief sought herein, there will under the circumstances be no order as to costs.