702535 Ontario Inc. et al. v. Non-Marine Underwriters, Lloyd's, London et al., (2000) 130 O.A.C. 373 (CA)

• Judge: Finlayson, Weiler and O'Connor, JJ.A.
• Court: Court of Appeal (Ontario)
• Case Date: November 24, 1999
• Jurisdiction: Ontario
• Citations: (2000), 130 O.A.C. 373 (CA);2000 CanLII 5684 (NS CA);2000 CanLII 5684 (ON CA);184 DLR (4th) 687;[2000] CarswellOnt 904;[2000] OJ No 866 (QL);130 OAC 373;95 ACWS (3d) 556

702535 Ont. Inc. v. Lloyd's (2000), 130 O.A.C. 373 (CA)

MLB headnote and full text

Temp. Cite: [2000] O.A.C. TBEd. MR.059

702535 Ontario Inc. and 702536 Ontario Inc. (plaintiffs/appellants) v. Edward W. Tinmouth in his quality as Attorney in Canada for the Non-Marine Underwriters Members of Lloyd's London, England (Lloyd's Open Market), and Canassurance General Insurance Company Inc. (defendants/respondents)

(C28495)

Indexed As: 702535 Ontario Inc. et al. v. Non-Marine Underwriters, Lloyd's, London et al.

Ontario Court of Appeal

Finlayson, Weiler and O'Connor, JJ.A.

March 22, 2000.

Summary:

The plaintiff insureds sued their insurer (Lloyd's) under a fire insurance policy after a fire at their hotel. They sued for the bal­ance of insurance proceeds, consequential dam­ages for breach of contract and punitive damages for bad faith. They argued, inter alia, that Lloyd's delay in payment to the insureds' mortgagees caused an accrual of substantial interest on the monies owed to the mortgagees by Lloyd's. As a result, there were no proceeds available under the policy for the plaintiffs.

The Ontario Court (General Division), in decisions reported at 40 O.T.C. 256 and 84 O.T.C. 194, dismissed the plaintiffs' action. The insureds appealed.

The Ontario Court of Appeal dismissed the appeal.

Damages - Topic 201

Entitlement - Requirement of loss - In­sureds sued their insurer (Lloyd's) for consequential and punitive damages for Lloyd's 18 month delay in paying the insureds' mortgagees under a fire insurance policy - The Ontario Court of Appeal found that the failure to pay 50% of the claim to the mortgagees within a reason­able period of time after the filing of the proof of loss constituted a breach of Lloyd's duty to respond to the claim in good faith - However, the court concluded that this failure did not result in any loss for which the insureds had not already received the benefit through the payment of interest in full to the mortgagees - Since there was no loss, the insureds could not claim punitive damages - Additionally, Lloyd's conduct did not offend a sense of decency and was not deserving of punish­ment - See paragraphs 59 to 72.

Damages - Topic 555

Limits of compensatory damages - Re­moteness - Contracts - Consequential damages - [See Damages - Topic 201 ].

Damages - Topic 1297

Exemplary or punitive damages - Con­ditions precedent (or when awarded) - [See Damages - Topic 201 ].

Damages - Topic 1305.1

Exemplary or punitive damages - Insurance claim denial - [See Damages - Topic 201 ].

Insurance - Topic 730

Insurers - Duties - Duty of good faith - The Ontario Court of Appeal reviewed an insurer's duty of good faith to an insured -See paragraphs 27 to 32.

Insurance - Topic 730

Insurers - Duties - Duty of good faith - Insureds sued their insurer (Lloyd's) for consequential and punitive damages for Lloyd's 18 month delay in paying the insureds' mortgagees under a fire insurance policy - Lloyd's delayed payment on the basis, inter alia, that original insurance policies were still in force at the time of the fire and the original insurers were therefore co-insurers and liable to pay their proportionate share of the loss (i.e., 50%) -Lloyd's defence was subsequently rejected in the mortgagees' actions - The Ontario Court of Appeal agreed with the trial judge that Lloyd's did not breach its duty of good faith by taking the position that the original policies were in effect at the time of the fires - However, that position only entitled Lloyd's to withhold 50% of the claim - Therefore, the failure to pay 50% of the claim to the mortgagees within a reasonable period of time after the filing of the proof of loss constituted a breach of Lloyd's duty to respond to the claim in good faith - See paragraphs 27 to 32.

Insurance - Topic 1804

The insurance contract - Breach by insurer - Disputing coverage - [See second In­surance - Topic 730 ].

Insurance - Topic 1806

The insurance contract - Breach by insurer - Delay in payment of proceeds - Section 148(12) of the Insurance Act (Ont.) (statu­tory condition 12) provided that a loss under a fire insurance policy was payable within 60 days after completion of the proof of loss unless the contract provided for a shorter period - Insureds argued that this time requirement was absolute - If an insurer failed to pay within 60 days of receiving a proof of loss and the claim ultimately succeeded, then the insurer breached this condition and was liable for any damages incurred as a result to pay the claim within 60 days - The Ontario Court of Appeal rejected the insureds' argument, stating that they placed too broad an inter­pretation on the language and purpose of the condition - See paragraphs 33 to 39.

Insurance - Topic 1806

The insurance contract - Breach by insurer - Delay in payment of proceeds - [See second Insurance - Topic 730 ].

Insurance - Topic 6001

Fire insurance - Statutory conditions - General - [See first Insurance - Topic 1806 ].

Cases Noticed:

Whiten v. Pilot Insurance Co. et al. (1999), 117 O.A.C. 201; 42 O.R.(3d) 641 (C.A.), refd to. [para. 27].

Bullock v. Trafalgar Insurance Co. of Canada et al. (1996), 9 O.T.C. 245 (Gen. Div.), refd to. [para. 28].

Labelle v. Guardian Insurance Co. of Can­ada (1989), 38 C.C.L.I. 274 (Ont. H.C.), refd to. [para. 28].

Jauvin v. L'Ami Michel Automobile Can­ada Ltée et al. (1986), 57 O.R.(2d) 528 (H.C.), refd to. [para. 28].

Palmer v. Royal Insurance Co. of Canada (1995), 27 C.C.L.I.(2d) 249 (Ont. Gen. Div.), refd to. [para. 29].

Granpac Ltd. v. American Home As­surance Co. (1981), 33 A.R. 212; 129 D.L.R.(3d) 704 (C.A.), refd to. [para. 35].

Caisse populaire des Deux rives c. Vallée du Richelieu (La), compagnie mutuelle d'assurance de dommages, [1990] 2 S.C.R. 995; 115 N.R. 1; 34 Q.A.C. 241; [1990] 49 C.C.K.I. 23, refd to. [para. 45].

National Bank of Greece (Canada) et autres v. Simcoe & Erie General As­surance Co. et autres, [1990] 2 S.C.R. 1029; 115 N.R. 42; 32 Q.A.C. 250, refd to. [para. 45].

National Bank of Greece (Canada) v. Katsikonouris - see National Bank of Greece (Canada) et autres v. Simcoe & Erie General Assurance Co. et autres.

Statutes Noticed:

Insurance Act, R.S.O. 1990, c. I-8, sect. 147(1), sect. 148(5) [para. 52]; sect. 148(11) [footnote 2; para. 36]; sect. 148(12) [paras. 16, 33]; sect. 150(1) [para. 55].

Counsel:

Paul Leamen and William Houston, for the appellants;

Eric Williams, for the respondent.

This appeal was heard on November 24, 1999, before Finlayson, Weiler and O'Con­nor, JJ.A., of the Ontario Court of Appeal. O'Connor, J.A., released the following decision for the court on March 22, 2000.