Executive Summary: Key Legal and Evidentiary Issues

• Conflict over how to determine Actual Cash Value (ACV) following fire damage to insured property.

• Intact Insurance Company claimed ACV should reflect the property’s market value.

• John Laporte argued ACV should be replacement cost minus depreciation.

• The appraisal umpire selected Laporte’s valuation of $1,084,000.

• Divisional Court overturned the award, calling it inconsistent with the indemnity principle.

• Court of Appeal reinstated the umpire’s decision, deferring to the appraisal process and policy terms.

Facts and outcome of the case

John Laporte, operating as Warrior Gear, owned a business on property located in Eastern Ontario. He held an insurance policy with Intact Insurance Company. In 2018, a fire caused damage to the insured property. Laporte chose to claim the Actual Cash Value (ACV) under the policy rather than the full replacement cost. However, the parties disagreed on how ACV should be calculated, prompting use of the statutory appraisal process under Ontario’s Insurance Act.

Laporte’s appraiser valued the ACV at over $2 million, applying a replacement cost less depreciation approach. Intact Insurance’s appraiser asserted that ACV should instead reflect the market value of the property, which was significantly lower. The appointed umpire proposed a compromise of $886,000, but no agreement was reached. The umpire then directed both parties to submit final valuations, announcing he would choose one. Intact submitted a figure of $390,000, while Laporte submitted $1,084,000. The umpire selected Laporte’s value.

Intact Insurance sought judicial review of the umpire’s decision. The majority of the Divisional Court set aside the award, holding it was unreasonable and inconsistent with the indemnity principle because it greatly exceeded the property’s market value. The majority emphasized that indemnity should restore the insured to their pre-loss position without resulting in a windfall.

Justice Leiper dissented, finding that the emphasis on market value was misplaced. She noted that the policy did not expressly define ACV as market value and that using replacement cost less depreciation was a valid approach. She also stressed the importance of deferring to the appraisal process governed by the Insurance Act.

The Ontario Court of Appeal allowed the appeal brought by Laporte, substantially adopting Justice Leiper’s reasoning. It held that the umpire’s selection of the $1,084,000 valuation was reasonable and consistent with the terms of the insurance policy and the statutory process. The court concluded that market value is not the exclusive measure of ACV and that the appraisal result deserved deference.

As a result, the umpire’s award in favour of John Laporte was reinstated, and Intact Insurance’s application for judicial review was dismissed. There was no indication of any additional damages being awarded beyond the ACV, and while costs likely followed the result in Laporte’s favour, the exact amounts were not specified.