Water damage dispute: Why the court wouldn’t end three-year dispute resolution

B.C.’s Supreme Court has denied a claimant’s attempt to bail out of two mandatory dispute resolution hearings with multiple insurers in a three-year dispute over the value of water damage in her strata unit.

“The plaintiff is understandably frustrated by the situation in which she finds herself and the length of time that this dispute has been ongoing,” B.C. Supreme Court Justice Ronald Skolrood wrote in a decision released in mid-June 2022. “That frustration causes her to question, with some validity, whether the [dispute resolution process, or DRP] is meeting the objective of providing a timely and cost-effective dispute resolution mechanism.

“That said, I am not satisfied that the [insured] has established grounds for terminating the DRP and having all matters determined in this [civil court] action [instead].”

In April 2019, Pauline King experienced a water loss in her strata unit on Beach Avenue in Vancouver.

The Mutual Fire Insurance Company of British Columbia wrote King’s homeowner policy for her strata unit, which was sold to King by the brokerage Square One.

Aviva Insurance Company of Canada, Allianz Global Corporate & Specialty, Temple Insurance Company and Lloyd’s Underwriters issued an insurance policy to the strata corporation.

King submitted claims for the water damage under both her homeowner’s policy and the strata corporation’s policy.

During adjustment of the water loss, a disagreement arose between King and each of the various insurers about the value of the water damage and the extent of required repairs. King led evidence the situation was compounded by a disagreement between the strata insurers and its adjuster, and Square One and its adjuster, about the cause of the water loss and responsibility for repairs.

Based hurdles she encountered in getting the damage valued and repaired, the claimant invoked two DRPs on Nov. 24, 2020. One was for the homeowner policy and one for the strata policy. The insured delivered an interim proof of loss to the different insurers on the same date.

Square One and the strata insurers agreed to cooperate in the appraisal process relating to the water loss. They noted the cooperation agreement was intended to avoid duplication and potential inconsistencies in the appraisal process.

The appraisal umpire noted in correspondence to the agreement’s parties that it would result in a single scope of loss, notwithstanding there were two DRPs. He also confirmed any final decision would be the product of three votes — one on behalf of the insurers, one by the umpire and one by counsel representing the claimant.

But the claimant lost her legal representation along the way, which made it impossible for her by law to participate in the process, she said. While the DRP was ongoing, on Apr. 6, 2021, she filed the notice of civil claim commencing this action.

On June 21, 2021, three days after the umpire called for her DRP submission, King told the parties she no longer wished to participate in the DRP. She wanted it halted and that all issues should be dealt with in her civil law action.

B.C.’s Supreme Court said no, and added the move would make the process even more cumbersome, costly and time-consuming.

“The DRP has advanced to the stage where all that is left to be done is for the [claimant] to make her submission and the umpire to render a decision,” the court ruled. “In contrast, this [civil legal] action is still in its infancy with no steps taken beyond the initial filing of pleadings.

“It would be antithetical to the principles of proportionality, efficiency and fairness to require the parties to essentially start all over and engage in a lengthy and potentially expensive court process.”

As for representation in the DRP, the court found the plaintiff knew her stuff, and so should have no trouble finding a nominal representative in the DRP process.

Feature photo courtesy of iStock.com/PixelsEffect