In the recent judgment of Vandale v. Wawanesa Mutual Insurance, the British Columbia Supreme Court was asked to judicially review the decision of an umpire, who was appointed to settle a property valuation dispute under s. 12 of the BC Insurance Act. At issue was the appropriate valuation of several pieces of insured jewelry that had been stolen from the insured’s home. The court focused on both the standard of review it should use when reviewing the decision (essentially, the degree of scrutiny it would employ in assessing the fairness and rightness of the umpire’s decision), and whether the umpire acted within the powers granted to her under the dispute resolution process contained in the Insurance Act. The court’s decision to uphold the judgment of the umpire affirms the difficulty both insurers and insured parties will face, should they wish to challenge a valuation decision made under the Insurance Act.
The Vandale family insured several pieces of jewelry with the Wawanesa Mutual Insurance Company (“Wawanesa”) in September of 2012, under a policy which provided either the replacement cost of the jewelry or the actual cash value, depending on the circumstances surrounding the loss and whether they were replaced. The jewels were stolen less than a year later and the Vandales submitted a proof of loss in which they claimed they were entitled to the full replacement value of the jewelry, based on an appraisal completed when the policy was created which valued the jewelry at $79,000.
Wawanesa disagreed with the valuation, as it had obtained an independent valuation report, based on the original appraisals, which estimated the fair replacement value at $50,900 and the actual cash value after depreciation at $25,450. Wawanesa also contested the allegation that the policy rendered it liable for the full replacement costs rather than the jewelry’s fair market value, given that the Vandales had declined to replace the jewelry in question. In response, the Vandales obtained a new valuation report from a different expert, also based on the original appraisals, which instead placed the replacement value at $75,000 but did not address the actual cash value.
Pursuant to s. 12 and Statutory Condition 11 of the new BC Insurance Act, either an insured or an insurer, after a proof of loss has been delivered, may trigger the dispute resolution process. Under the old provision, s.9, the process was limited primarily to fire damage, but it now applies whenever there is any dispute over the value of insured property, the cost or nature of repairs, replacements, or, more generally, the amount of any covered loss or damage.
Once triggered, the parties must each appoint a “representative” who is neither an employee nor the insurer or insured themselves. These representatives then meet and either settle the matters in question or, if they cannot agree, they must jointly appoint an impartial “umpire” to render a decision. In this case, an umpire was appointed for the sole purpose of determining the value of the stolen jewelry.
The umpire’s decision preferred the expert valuation report submitted by Wawanesa instead of the plaintiff’s more recent report, reasoning that the plaintiff’s expert was a general appraiser of goods while the one engaged by Wawanesa was a specialist in jewelry. Additionally, the plaintiff’s valuation report failed to address the actual cash value of the jewelry, only stating the estimated replacement costs. As a result, the replacement value of the jewelry was held to be the lower figure, $50,900, and the actual cash value of the jewelry, in the absence of any evidence to the contrary, was deemed to be $25,450.
Dissatisfied with this outcome, the insureds applied to court for a judicial review of the umpire’s administrative decision. On a judicial review, a court must first decide how much deference to give the previous decision-maker’s reasoning and autonomy. In British Columbia, unlike most other provinces, the standard of review to be employed is set out in the Administrative Tribunals Act (the “ATA”), and varies depending on both the type of decision in question and whether or not the legislation giving the decision-maker its powers contains a “privative clause” that mandates a degree of deference by the courts. Here, the court found the ATA to apply and, further, that the umpire’s home statute, the Insurance Act, contained such a ‘privative clause’ since, in the trial judge’s view, it conferred exclusive jurisdiction upon the umpire to determine valuation issues. Since the question before the umpire was also held to be one of fact, not law (namely, the replacement and actual cash value of the jewelry), the trial judge reasoned that the ATA dictated the greatest deference possible, and the umpire’s decision could only be overturned and re-heard if it was “patently unreasonable”.
Applying this standard, the trial judge noted that the umpire had given only brief reasons but had considered the deficiencies of the plaintiffs’ expert valuation report. This was held to be a sufficient basis for the decision. The trial judge was also careful to note that the umpire had stayed within the bounds of her authority and had not attempted to answer the legal question as to whether the Vandales were due the full replacement value of the jewelry under the policy, or merely the actual cash value. In light of these findings, the trial judge ultimately upheld the umpire’s decision to affirm the lower valuations and dismissed the petition.
The value of insured property is often a central issue after a claim has been filed. This case is the first judicial review of a decision originating from the newly expanded valuation dispute resolution process under s. 12 of the Insurance Act, and it sets a high threshold for successfully challenging such determinations. Should an umpire limit their reasons solely to questions of fact pertaining to valuation, and therefore remain firmly within the statutory grant of power, future courts applying this precedent are likely to only overturn such decisions if they are clearly not supported by the evidence.
If you have any questions about this case or other insurance law matters, please contact Larry Munn (604.643.3160 or email LMunn@cwilson.com) or Glen Boswall (604.643.3125 or email GBoswall@cwilson.com), or any other member of the Clark Wilson’s Insurance Group.
Thank you to Michael Larsen for his assistance with this article.