Tough Calls: The Discretion of Umpires in Dispute Resolution
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3 min read
Overview
The Alberta Court recently upheld an umpire’s decision in a dispute arising from damage caused to property in the 2016 Fort McMurray wildfire. The Applicant, the Harris family, claimed that their home was uninhabitable and required reconstruction, while the Respondent, Co-operators General Insurance Company, argued that the home did not require reconstruction, and only needed remediation and cleaning to be habitable. The Umpire sided with Co-operators, finding that cleaning was a sufficient remedy. In arriving at their decision, in part, the Umpire referenced s 519(7) of the Alberta Insurance Act, and indicated that they were confined to choosing between the party’s positions, as opposed to presenting an independent option. The Harris family challenged the ruling, citing factual errors and misinterpretation of the legislation. The Court, however, found the Umpire’s decision to be reasonable, reaffirming the limited but important discretion of umpires in insurance disputes. This case clarifies how s 519(7) functions within Alberta’s legislative framework, emphasizing the balance between fairness and efficiency in insurance dispute resolution.
In the recent decision of Harris v Co-operators General Insurance Company, the Harris family sought judicial review following a ruling from an umpire. The Harris family were impacted by the May 2016 wildfire in Fort McMurray. Their home, outbuildings, and contents (collectively the “Property”) suffered large-scale heat and smoke damage. Their insurer, Co-operators General Insurance Company (“Co-operators”), paid over $790,000 for remediation of the Property. The Harris family returned to their home in September 2016 following this, but they moved out a short time later as they believed the state of their home was making them chronically ill.
The Harris family and Co-operators were in dispute as to whether, or to what extent, further remediation was required for the Property to be habitable. The Harris family took the position that their home needed to be reconstructed for it to be habitable, while Co-operators took the position that additional cleaning would be sufficient to remediate any additional damages to the home. The dispute was referred to an umpire under the dispute resolution provisions of the Alberta Insurance Act, RSA 2000, c I-3, ss 519 and 540.
Several consultants, including remediation experts, engineering firms, and environmental consultants, attended the Property and provided opinions, testing, and in some cases cleaning and remediation between 2017 and 2022. It is noted that the Harris family did not adduce any medical evidence as to the impact the home was having on their health. The umpire reviewed the various reports and expert opinions provided by the parties and ultimately sided with Co-operators, finding additional cleaning would be required to remediate the home and its contents. Co-operators presented estimates, based on prior remediation efforts on the Property, of approximately $95,000, while the Harris family sought more than one million dollars to reconstruct the home. The umpire found the estimates provided by Co-operators to be more reasonable but noted that neither party’s proposal accurately reflected the costs needed to clean the insured contents. The umpire, however, found that under s 519(7), he was required to select the most reasonable position rather than formulate an alternative option.
What the Court Said
The Harris family sought judicial review, arguing that the umpire’s decision was unreasonable in part due to a factual error regarding aspects of the remediation work on the home, and that the umpire failed to interpret s 519(7) correctly by limiting his decision to the estimates provided by the parties instead of considering an independent amount of his choosing. Ultimately, the Court found that the factual error did not affect the reasonableness of the umpire’s decision and held that the umpire’s decision was reasonable under s 519(7).
In arriving at its decision, the Court reviewed the wording of s 519(7) of the Insurance Act, which provides:
519(7) The representatives must determine the matters in dispute by agreement and, if they fail to agree, submit their differences to the umpire, and the written determination of any 2 of them determines the matters. …
The Court considered the broader context of s 519(7) in conjunction with the statutory provisions and Part V of the Insurance Act, which points to the Act’s purpose of “creating fair, cost-effective, and expeditious dispute resolution mechanism[s]” [69]. The Court found that umpires can direct parties towards a compromise of their positions to settle a claim where they view the same to be fair and reasonable. Where one of the parties agrees to the suggested compromise, it will form the basis for the umpire’s determination. However, if an umpire does not deem it reasonable to propose a compromise, or if neither party agrees to a compromise of their position, the umpire is limited by s 519(7) of the Insurance Act to choosing between the competing positions of the parties.
Key Takeaways
Umpires are engaged when the insured and the insurer cannot agree on the value of a claim. While umpires can work with parties to come up with solutions outside of the parties’ positions, umpires are not permitted to impose a solution to which neither party agrees.
Field Law can assist with navigating the dispute resolution process under the Insurance Act. Contact Danielle Mousseau or Christine Pratt, KC in Edmonton, Jane Freeman in Calgary, or any member of our Insurance Group for guidance and support.
