The Supreme Court has ruled that Intact insurance has no right of appeal against the decision from the Ontario Court of Appeal in favor of business owner John Laporte. In Intact Insurance Company v. Laporte, it upheld an umpire’s assessment of the actual cash value (ACV) of his fire-damaged property. The decision reverses the Divisional Court’s ruling, which had previously quashed the umpire’s valuation as unreasonable.
Laporte, who operates a military apparel business from a repurposed schoolhouse near the Petawawa military base, suffered extensive fire damage to his commercial property on November 23, 2018. His insurance policy with Intact Insurance provided coverage of up to $3 million, with provisions for replacement value coverage in some cases and ACV payments in others. When Intact refused to cover the replacement value, the dispute moved to an appraisal process under Section 128 of Ontario’s Insurance Act.
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The primary contention in the case centered on how ACV should be determined. Intact Insurance proposed an ACV based on the market value of the property, estimated at $265,000, while Laporte argued for a valuation based on replacement cost minus depreciation, amounting to $2,093,046. The appointed umpire ultimately determined an ACV of $1,084,000, which was significantly higher than Intact’s proposed valuation but lower than Laporte’s estimate.
Under the Policy, if Laporte elected to repair or replace the Property, he was entitled to a valuation based on replacement cost: “whichever is the least of the cost of replacing, repairing, constructing or reconstructing the Property on the same site with new property of like kind and quality and for like occupancy without deduction for depreciation.”
Intact Insurance challenged the umpire’s decision, arguing it was unreasonable under the standard established in Canada (Minister of Citizenship and Immigration) v. Vavilov, as it led to an ACV that was nearly four times the market value of the property. The insurer contended that such an assessment violated the principle of indemnity, which prevents insured parties from profiting from insurance claims.
The Divisional Court sided with Intact, ruling that the umpire’s valuation lacked adequate evidentiary support and risked creating a moral hazard. However, Justice Paciocco, writing for the Ontario Court of Appeal, overturned that decision, emphasizing that ACV is not strictly bound to market value but instead reflects the property’s actual worth to the insured.
The insurance policy itself defined ACV by stating: "Various factors shall be considered in the determination of actual cash value. The factors to be considered shall include, but not be limited to, replacement cost less any depreciation and market value."
The Court of Appeal found that the Divisional Court improperly gave undue weight to market value as a benchmark for ACV. Justice Paciocco highlighted that Laporte’s ongoing operation from the premises demonstrated the site’s unique business value, justifying a valuation above the property’s resale price. The Court also reaffirmed that repair estimates can be factored into ACV assessments, as they reflect the costs necessary to restore the insured to their pre-loss position.
Additionally, the Court noted that the umpire’s valuation process, which involved selecting from the competing ACV estimates submitted by the parties, was a legitimate and pragmatic approach permitted under Section 128 of the Insurance Act. The Court ruled that the umpire’s discretion should be respected, as the process is intended to be a cost-effective and expedited means of resolving insurance disputes.
Outcome The Ontario Court of Appeal reinstated the umpire’s ACV determination of $1,084,000, overturning the Divisional Court’s decision. Intact Insurance was ordered to cover Laporte’s legal costs, totaling $16,000 for the Divisional Court proceedings and $18,000 for the appeal.
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