Executive Summary: Key Legal and Evidentiary Issues

• Leave to amend the statement of claim to plead punitive damages was granted under Rule 26.01 because the insurer did not show prejudice that could not be compensated.
   
• Summary judgment was refused because the record disclosed genuine issues requiring a trial under Rule 20 and the principles in Hryniak v. Mauldin.
   
• Competing affidavits on rebuilding costs could not be weighed, as neither deponent adequately explained the methodology or assumptions behind their opinion and neither was cross-examined.
   
• Failure by the homeowners to invoke the appraisal process under Statutory Condition 11 was found relevant to causation and mitigation.
   
• Claims for consequential damages based on present-day costs, for the contents of the home, and for aggravated and punitive damages all turned on disputed facts unsuitable for summary determination.
   
• Costs of the motion were ordered in the cause because the outcome turned on triable issues rather than findings on the merits.
   

Facts of the case

Joseph Dutremble and Jessica Smith owned a dwelling, then under construction, that was destroyed by fire on August 5, 2020. Their insurer, Heartland Farm Mutual Inc., had issued a policy providing replacement-cost coverage for the dwelling to a limit of $671,000, and it did not dispute that the fire caused a total loss or that the policy was in force at the time. After the fire, Heartland retained an independent adjuster and obtained an appraisal from MBC that assessed the cost of rebuilding at approximately $477,000. Heartland paid that amount and later increased the payment to cover items initially omitted from the appraisal.

The plaintiffs maintained that the appraisal did not reflect the true cost of rebuilding, that no contractor would take on the work for the appraised sum, and that construction costs had risen significantly during the Covid-19 pandemic. On February 3, 2021, the independent adjuster expressed concern about “the actual potential rebuild cost for this house,” pointing to volatility in the construction market caused by Covid-19. A quote the plaintiffs obtained on March 8, 2021 came to $697,991 plus HST, slightly more than the policy limit, and was provided to the adjuster. On April 4, 2021, they received a revised rebuilding estimate of $501,438.90, which they considered inadequate because it did not account for pandemic-driven increases in material costs. Three days later, the adjuster told them Heartland would not pay more than the MBC estimate and suggested they might wish to invoke the appraisal process under the policy’s Statutory Conditions. When the independent adjuster advised Heartland on May 3, 2021 that an “ICF + Slab quote may represent an actual Covid-19 related construction cost increase,” Heartland’s adjuster replied that he had previously advised that “we weren’t interested in any inflationary increases in costs.”

Throughout 2021 and 2022, the plaintiffs sent Heartland information on rebuilding costs and asked it to reconsider the amount payable. Heartland ultimately maintained that its payment represented the full extent of its obligation on the dwelling claim. The plaintiffs sued on July 28, 2022, alleging that Heartland breached the insurance contract by failing to indemnify them for the actual cost of rebuilding and failing to reconsider the claim in light of increased construction costs, and that it breached its duty of good faith in handling the claim. On November 21, 2024, Heartland invoked the appraisal process. Before the summary judgment hearing, it also moved to stay the action and compel an appraisal. That motion was dismissed in an earlier decision (Dutremble et al. v. Heartland Farm Mutual Inc., 2026 ONSC 3230), which found that the parties disagreed not only on the amount of the loss but also on the appropriate valuation date, an issue outside the scope of the appraisal process. As a result, the matter proceeded on the plaintiffs’ motion for summary judgment, in which they sought damages based on present-day reconstruction costs together with aggravated and punitive damages. The motion was heard on July 7, 2026, and at the outset the plaintiffs sought leave to amend their claim to expressly plead punitive damages.

Policy and legislative provisions at issue

Statutory Condition 11 of the policy provides that, where there is a disagreement as to the value of the property insured, the property saved or the amount of the loss, “those questions shall be determined by appraisal as provided under The Insurance Act before there can be any recovery under this contract,” whether or not the right to recover is disputed. No right to appraisal arises until a specific written demand is made and proof of loss has been delivered. Heartland also submitted that replacement-cost benefits under the policy were conditional on the plaintiffs rebuilding within a reasonable time and incurring the relevant costs.

Two procedural rules framed the motion. Under Rule 26.01 of the Rules of Civil Procedure, the court must grant leave to amend a pleading at any stage on just terms, unless prejudice would result that could not be compensated by costs or an adjournment. Summary judgment, in turn, is available under Rule 20 where there is no genuine issue requiring a trial.

Reasoning and analysis

Heartland opposed the amendment, arguing that it was sought shortly before the hearing, that further pleadings, particulars and procedural steps would follow, and that the motion had been scheduled on the existing pleadings. The court disagreed. Bad faith had been alleged from the outset, the facts said to support punitive damages had long been known to Heartland, and those allegations were already addressed in the motion materials and oral submissions. Since Heartland had not shown that further discovery or material delay would result, leave was granted, with the amendment deemed made as of the hearing date.

Turning to summary judgment, the court applied Hryniak v. Mauldin, 2014 SCC 7, under which summary judgment is appropriate only where the record allows the necessary findings of fact and law to be made fairly and justly. It also relied on J.I.L.M. Enterprises & Investments Limited v. Intact Insurance, 2017 ONSC 357, which summarizes an insurer’s duty to investigate, assess and resolve claims promptly, fairly and reasonably, and to give as much consideration to the insured’s interests as to its own. The plaintiffs argued that Heartland was repeatedly told the MBC appraisal did not reflect pandemic-era costs, that its own independent adjuster recommended further review, and that it later agreed to consider COVID-related construction increases for other insureds. Heartland countered that it paid the full amount owing, and that the reasonable time for rebuilding, the amount of the loss, the recoverability of later cost increases, and whether the plaintiffs’ estimates reflected materials of similar kind and quality were all disputed.

On the evidence of current costs, the plaintiffs relied on an April 2023 estimate from Brayman Construction of $748,997.73, inclusive of HST, and an affidavit from its owner, Benjamin Brayman, stating that costs had risen a further 15 percent by the time of the hearing. Heartland filed the affidavit of John Valeriote, Executive General Adjuster and Director of Mediation and Appraisal Services at Crawford & Company, who has worked as an adjuster for 33 years. In his opinion, the funds Heartland paid were sufficient to rebuild, and the Brayman estimate overstated costs because labour and material prices had fallen since the peak of the pandemic. Mr. Brayman disagreed in a supplementary affidavit. Because neither deponent adequately explained the methodology or assumptions behind his opinion, and neither was cross-examined, the court could not decide whether the amount paid was still sufficient or, if not, how large the shortfall was.

The court found it likely that the plaintiffs could not find a contractor to rebuild for the MBC amount, and noted evidence that Heartland was unwilling, at least initially, to consider whether pandemic-related cost increases warranted an adjustment. It also acknowledged compelling evidence capable of supporting the conclusion that the MBC appraisal understated rebuilding costs. Even so, the plaintiffs had chosen not to invoke a statutory and contractual mechanism designed specifically to resolve disputes over the amount of the loss, and the record did not explain why. That choice bore on causation and mitigation: had appraisal been pursued when the dispute arose, the loss could have been quantified years before the motion was heard, and the plaintiffs had not established that the substantial increase in rebuilding costs they now claimed was caused solely by Heartland’s conduct.

Similar problems affected the contents claim. The plaintiffs said that, lacking a permanent residence in which to store replacement items, they could not replace their belongings within the time the policy contemplated, and that Heartland’s underpayment on the dwelling effectively prevented them from recovering full replacement value. While the court considered this position “not without force,” it depended on disputed questions about whether the funds paid were insufficient, whether the plaintiffs could reasonably have mitigated, and whether any inability to replace the contents was caused by Heartland. The aggravated and punitive damages claims, resting on allegations of unreasonable and bad-faith claims handling, raised the same triable issues.

Ruling and overall outcome

The court allowed the plaintiffs’ motion for leave to amend their claim to plead punitive damages, but dismissed their motion for summary judgment, finding genuine issues requiring a trial on the consequential damages, contents, and aggravated and punitive damages claims. Heartland therefore succeeded in resisting summary judgment, while the plaintiffs obtained the amendment they sought. No damages were awarded, and no costs amount was fixed: the court ordered costs in the cause, so responsibility for the costs of the motion will follow the ultimate outcome of the action.