Executive Summary: Key Legal and Evidentiary Issues

• At issue was whether the insureds could obtain immediate judgment for the $237,000 difference between actual cash value and replacement cost before finishing reconstruction.
   
• Ontario's Superior Court of Justice found the policy's settlement clause unambiguous and held that the insurer's conduct did not amount to a repudiation excusing the insureds from the policy's conditions.
   
• Incomplete demolition of the Quonset Hut meant replacement had not begun, since under the policy a building must be demolished before it can be rebuilt.
   
• Delay in paying the Wood Frame Building's actual cash value, failure to arrange storage for contents, and non-disclosure of demolition quotes during settlement negotiations each breached the insurer's duty of good faith.
   
• Punitive damages were refused because the conduct was not malicious, oppressive, or high-handed, and the court instead awarded $17,700 in compensatory damages using a percentage-based method adapted from the Dorion Inn case.
   
• A mental distress claim failed for lack of independent evidence and on credibility grounds, while documents from the statutory appraisal were excluded under the doctrine of deliberative secrecy.
   

Facts of the case

George Ward and Kelly Gallant, his common law spouse, held an Intact Insurance Company policy covering a rural property just outside Thunder Bay. In April 2022, two large outbuildings on the property, a Quonset Hut and a Wood Frame Building, collapsed under snow load. Intact confirmed coverage on May 13, 2022. Mr. Ward dealt exclusively with Intact in processing the claim, including with Sandra Freeman, the initial adjuster assigned to the file, until she went on medical leave in February 2023.

Early estimates came from Intact's preferred "RELY" contractors. First General Services provided an estimate for the Quonset Hut about a week after coverage was confirmed and one for the Wood Frame Building on July 22, 2022, but Intact did not produce these to the plaintiffs until January 29, 2026. OnSide Restoration, another RELY contractor, provided a Wood Frame Building estimate on or around June 24, 2022, which was first disclosed during the later appraisal. Mr. Ward discovered by accident in the fall of 2022 that Intact had also obtained a quote from Thunder Bay steel fabricator Coastal Steel in September 2022.

On July 18, 2022, Intact advanced $13,000, made up of $10,000 toward the contents claim and $3,000 for a lost watercraft. Throughout a rainy summer, Mr. Ward repeatedly asked Intact for Seacans or paid off-site indoor storage for large contents, such as vintage snowmobiles, left exposed after the collapse. Intact never acted on those requests, so he moved many items into his home and bought outdoor covers for the machinery. On September 22, 2022, the parties settled demolition and debris removal for both buildings at $74,000, consisting of $70,000 for demolition and $4,000 for contents manipulation. Mr. Ward considered the offer very generous at the time but later learned that Intact held undisclosed demolition estimates in the range of over $100,000.

Counsel for the plaintiffs delivered a Proof of Loss on December 21, 2022, and the claim was issued on February 27, 2023. Intact provided approved Contents Assessment Reports on August 21, 2023. A settlement for temporary storage costs was also reached in August 2023. On August 25, 2023, the plaintiffs invoked the appraisal process under s. 128 of the Insurance Act to fix the actual cash value (ACV) [the decision describes this as "actual cost value" when framing the trial issues, while the policy wording uses "actual cash value"] and the replacement cost (RC) of both buildings. After a motion was needed to appoint the umpire, the process concluded on November 28, 2024, with an award setting ACV at $78,000 for the Quonset Hut and $180,000 for the Wood Frame Building, and RC at $195,000 and $300,000 respectively. Intact paid the ACV for both buildings on December 12, 2024.

Reconstruction of the Wood Frame Building began in spring 2026. By trial, the shell was up, the concrete floor poured, and the roof on, but the electrical, interior finishing, windows, and heating had not been installed. Demolition of the Quonset Hut remained incomplete. Mr. Ward testified that finishing it required heavy equipment he did not own, that none of the many Thunder Bay financial institutions he had approached would lend him money, and that he intended to rebuild once Intact paid. He acknowledged still holding approximately $8,000 of the December 2024 ACV funds. Justice F. Bruce Fitzpatrick heard the trial from September 8 to 11, 2026, relying on two agreed statements of facts.

Policy and legislative provisions at issue

The parties agreed that the governing wording appeared under the heading "Basis of Claims Settlement" at page 10 of 20 of the policy. Under the first clause, if the insured repaired or replaced the destroyed building on the same site, with a building of the same occupancy constructed with materials of similar quality, within a reasonable time after the damage, Intact would pay the cost of repair or replacement, whichever was less, without deduction for depreciation. A second clause provided: "If you decide not to repair or replace the damaged or destroyed building, we will pay the actual cash value of the damage at the date of occurrence."

Separately, the plaintiffs relied on a policy promise of "A right to know how insurers calculate price based on relevant facts," which they characterized as part of the "peace of mind" Intact was selling. Section 128 of the Insurance Act, R.S.O. 1990, c. I.8, supplied the appraisal mechanism used to fix ACV and RC.

Reasoning and analysis

On the replacement cost claim, the plaintiffs argued that reading the two clauses together created an ambiguity: an insured can decide to replace property without having completed the work, so the policy did not clearly make RC payable only on completion. Applying the interpretive principles in Ledcor Construction Ltd. v. Northbridge Indemnity Insurance Co., 2016 SCC 37, they asked that the ambiguity be resolved in their favour with an immediate order for $237,000. Their alternative argument, drawing on Donald A. Foley Ltd. v. Canadian Indemnity Co., was that Intact's bad faith amounted to a repudiation relieving them of any obligation to submit invoices or estimates. Intact countered that demolition of the Quonset Hut, a condition precedent to rebuilding, was unfinished, and that Mr. Ward still had unspent ACV funds for the Wood Frame Building. It relied on J.I.L.M. Enterprises & Investments Limited v. Intact Insurance, 2017 ONSC 357 (the Dorion Inn case), and Newton J.'s addendum, which made replacement cost payable on satisfactory proof that the ACV funds had been spent on rebuilding.

Fitzpatrick J. found the policy unambiguous. Citing Hi-Tech Group Inc. v. Sears Canada Inc. for the proposition that a contract is ambiguous only if reasonably susceptible of more than one meaning, he described the wording as an either/or proposition covering two scenarios: rebuild or not. A "decision," he reasoned, is a question of fact that must be evidenced by clear and identifiable action. Mr. Ward's building work proved he had decided to replace the Wood Frame Building, but that decision did not entitle him to the full RC at once, and having chosen to rebuild, the plaintiffs could not use the now-inapplicable "decide not to repair or replace" clause to create a superior right to full payment. Intact's approach of paying progress payments on proper proof of work was found commercially reasonable. The repudiation argument also failed, because Intact had acknowledged the claim and made interim payments for contents, demolition, and ACV. Timeliness was a concern, but that conduct was not that of a party repudiating its obligations.

Following the Dorion Inn case and its addendum, the court held that progress payments on the Wood Frame Building would become payable once the plaintiffs proved they had spent the ACV funds on its replacement and provided receipts or reasonable estimates for the next construction steps. Neither step had been taken. For the Quonset Hut, the $74,000 settlement relieved Intact of any further obligation for demolition costs, and since a building must be demolished before it can be rebuilt under the policy, replacement had not begun. Both RC claims were dismissed, although the court described commencing the action as a reasonable step to protect the plaintiffs' rights.

For punitive damages, the plaintiffs sought $180,000, arguing that Intact withheld information, ignored reasonable requests, and never provided storage. They also asked for an adverse inference from Intact's failure to call Ms. Freeman. Intact admitted the Seacan request had "slipped through the cracks" but maintained that the ACV delay was legitimate while the appraisal played out, that the catastrophic spring 2022 conditions in Thunder Bay slowed the usual process, and that estimates are not sent to insureds until approved internally. Drawing on the Dorion Inn case, Bhasin v. Hrynew, Fidler v. Sun Life Assurance Co. of Canada, and Whiten v. Pilot Insurance Co., the court found a breach of the duty of good faith on a balance of probabilities, yet concluded that the conduct was not a marked departure from ordinary standards of decency. Mr. Ward's evidence was found "rife with hyperbole," given records showing Ms. Freeman spoke with him at least nine times between April and September 2022. Justice Fitzpatrick accepted the evidence of Intact claims specialist Sarah Khan that this was a catastrophic event and assessed Intact's conduct through that lens. The reasons do not expressly rule on the requested adverse inference.

Three breaches were identified. Intact was found to have been in a position to make an ACV payment by May 2023, and quotes for the Wood Frame Building were given to the plaintiffs on September 15, 2023 [elsewhere, the decision states that the RELY contractors' preliminary demolition estimates and the Coastal Steel and Finn Way reconstruction estimates were never provided to the plaintiffs until 2026; the reasons do not reconcile the two statements]. Since no ACV payment followed until a year and three months later, and Intact never explained why payment had to await the end of the appraisal, the delay breached the duty of good faith. A second breach arose from the failure to help with interim storage, which the court said should have been addressed by July 2022 at the latest, with "falling through the cracks" rejected as an excuse for a sophisticated insurer that had promised peace of mind. Third, withholding the demolition quotes while negotiating for Mr. Ward to do the work himself breached the express promise of a right to know how prices are calculated. Because it was unusual for a non-commercial insured to perform demolition, the need for disclosure was heightened, and in hindsight the $74,000 proved insufficient to complete the Quonset Hut demolition.

Compensatory damages were assessed using a percentage methodology adapted from Newton J.'s punitive damages assessment in the Dorion Inn case: 5% of the $180,000 Wood Frame Building ACV ($9,000), plus 5% of the $74,000 demolition payment ($3,700), plus $5,000 for the storage breach, for a total of $17,700. The punitive damages claim was dismissed.

Mr. Ward's mental distress claim sought $35,000. He testified to weight loss, sleepless nights, and lost appetite, while acknowledging that his heart problems were not attributable to Intact. Ms. Gallant testified that he had always had a "short temper," and no independent evidence supported the claim. Applying Fidler and Saadati v. Moorhead, 2017 SCC 28, the court accepted that the policy was a peace of mind contract but found no breach of the contract in respect of payment, so any damages sounded in tort. Credibility on this issue was undermined by his background running a major commercial hotel in Thunder Bay and practising law, and by his ability to retain counsel, negotiate settlements, and begin rebuilding. Whatever upset he experienced did not rise above ordinary annoyances and anxieties to a serious and prolonged disturbance, and his expectations of "peace of mind" were described as inflated.

A mid-trial evidentiary ruling excluded two documents: an excerpt of submissions by Frank Castaldo, acting as an appraiser in the s. 128 process, and an email from Dylan Cox, plaintiffs' trial counsel, sent while acting as an appraiser, requesting production from Intact. Relying on Dominion of Canada General Insurance Company v. Nelson, 2023 ONSC 386, the court held that a party-appointed appraiser acts as a statutory decision-maker rather than as that party's employee, so Mr. Castaldo's actions could not be attributed to Intact. Although the Statutory Powers and Procedure Act, R.S.O. 1990, c. S22 [as named in the decision] did not apply, the appraisers and umpire exercised a statutory power of decision, attracting the common law protection of deliberative secrecy as summarized in Derenzis v. Gore Mutual Insurance Co. (Div. Ct.). Secrecy may be lifted on a clearly articulated and objectively reasonable concern that a legal right was infringed, but the plaintiffs made no allegation that the appraisal was flawed or unfair. Mr. Castaldo had not been summoned to testify, and the attempt to introduce the documents was seen as an effort to circumvent that protection.

Ruling and overall outcome

The plaintiffs succeeded only in part. Intact was ordered to pay them, jointly and severally, $17,700 as damages for breach of the duty of good faith, while their claims for immediate payment of the $237,000 replacement cost difference, $180,000 in punitive damages, and $35,000 in mental distress damages were dismissed. The parties had a prior costs agreement contingent on an undisclosed Intact offer to settle, so no costs amount was fixed; the court invited a joint submission on costs for inclusion in the final order if needed. Reasons were released on September 24, 2026.