Executive Summary: Key Legal and Evidentiary Issues

• Determination of whether Section 519 Dispute Resolution or Section 776 of the Insurance Act is the appropriate forum for Ms. Schoenbrunn’s dispute.

• Assessment of Ms. Schoenbrunn’s standing as a “complainant” under Section 776 of the Insurance Act.

• Interpretation of mandatory policy terms and statutory requirements under the New Home Buyer Protection Act and Insurance Act.

• Evaluation of whether procedural complaints about the claims process can circumvent the contractually mandated dispute resolution process.

• Consideration of the scope and applicability of the oppression remedy in insurance disputes under Section 776.

• Analysis of whether Ms. Schoenbrunn’s complaints are fundamentally about coverage decisions or about claims handling practices.

Background and policy context

Karen Jane Schoenbrunn is the holder of a new home warranty insurance policy issued by Alberta New Home Warranty Program and The New Home Warranty Insurance (Canada) Corporation (NHWICC) for her home in Lethbridge, Alberta. New home warranty insurance is a mandatory requirement for all new homes sold in Alberta under the New Home Buyer Protection Act, SA 2012, c N-3.2, and is regulated by the Insurance Act, RSA 2000, c I-3. The policy provides coverage for defects in materials and labour (one year), defects in materials and labour in delivery and distribution systems (two years), defects in building envelope (five years), and structural defects (ten years). For Ms. Schoenbrunn’s home, coverage commenced on May 25, 2021, with expiry dates ranging from May 24, 2022, to May 24, 2031, depending on the type of defect.

Claim and dispute

Ms. Schoenbrunn submitted a request for assistance on May 2, 2022, regarding defects she alleged were present in her home. NHWICC conducted a claims assessment inspection on May 27, 2022, and issued a Claims Assessment Report (CAR) on October 31, 2022. The CAR considered 160 alleged defects, of which three were identified as warrantable defects requiring action; the rest were determined to be either not warrantable under the policy or not defects. Following the report, Ms. Schoenbrunn corresponded with NHWICC and others, raising complaints about the handling of her claim and asserting that NHWICC made incorrect determinations. Her primary motivation was to have the alleged defects repaired under the policy.

Policy terms and statutory framework

The policy contains a mandatory condition requiring that, in the event of disagreement as to whether a defect exists, the nature and extent of repairs or replacements, or the adequacy of repairs or replacements, such questions must be determined using the dispute resolution process set out in Section 519 of the Insurance Act. This process is required by the Home Warranty Insurance Regulation for all new home warranty insurance policies. Ms. Schoenbrunn was aware of this requirement, as confirmed in her affidavit and through communications with NHWICC, the Superintendent of Insurance, and government officials. Despite repeated advice to use the Section 519 Dispute Resolution Process (DRP), Ms. Schoenbrunn chose not to submit a Proof of Loss and instead pursued an application under Section 776 of the Insurance Act, arguing that her complaints related to the inspection process rather than the existence of defects.

Court’s analysis and decision

Justice Donald Lee found that Ms. Schoenbrunn’s complaints, although framed as procedural, ultimately challenged the insurer’s determination of whether the claims were warrantable defects under the policy. The court held that such disputes must be resolved through the Section 519 DRP, as mandated by both the policy and the governing legislation. The judge determined that Ms. Schoenbrunn did not have standing as a “complainant” under Section 776, as her rights and interests were contractual and not of the type protected by the oppression remedy. The court noted that Section 776 has not been judicially considered and is not an appropriate avenue for disputes between insurers and insureds. The court referenced the Alberta Court of Appeal’s decision in Shefsky v California Mining Inc., 2016 ABCA 103, to support the conclusion that oppression remedies are not intended to be a substitute for contractual claims.

Outcome

The court dismissed Ms. Schoenbrunn’s application under Section 776 and granted the Application to Strike filed by NHWICC. No costs were awarded, given the unique relief sought by Ms. Schoenbrunn and her financial circumstances. The court acknowledged the difficult position faced by Alberta homeowners like Ms. Schoenbrunn, who inherited a limited warranty negotiated between the homebuilder and the insurer prior to her purchase, with little effective input from her. The successful parties were Alberta New Home Warranty Program and The New Home Warranty Insurance (Canada) Corporation, and no monetary amount was ordered or awarded in their favor.