We recently blogged about the Small Claims Court decision in Renwick v. Allstate Insurance Company of Canada.[1] The case dealt with an insurer’s motion to dismiss a lawsuit on the basis that an insured’s claim for “diminished value”[2] under an OAP1 Policy had no merit. The court’s refusal to grant the motion and dismiss the action before trial left the impression that an insured’s claim for diminished value under an OAP1 Policy is a possibility in Ontario. The unreported decision in Heiner v. Pasha et al.[3] determines the issue of indemnity for diminished value more definitively[4].

Background

The Plaintiff, Andrea Heiner, claimed compensation against various defendants arising from damage caused to her vehicle following its involvement in a collision in which Heiner was not at fault. Heiner sued both the owner and driver of the at fault vehicle that struck hers, and her own automobile insurer (Desjardins Group). The action proceeded to trial and was heard over two days in 2015 before Deputy Judge Anschell. The action was dismissed in its entirety in a written decision issued in January 2016.

Heiner’s vehicle was virtually brand new at the time of the accident. It had accumulated less than 2,900 km at the time of the accident in May 2012. The cost to repair Heiner’s vehicle was estimated to be $17,120.92. Heiner wanted the vehicle replaced. Desjardins Group required the vehicle to be repaired. Heiner eventually conceded the issue, although she maintained that she did so under duress.

Heiner sued the owner and driver of the at-fault vehicle and Desjardin Group for diminished value damages. Heiner also sued Desjardin Group for breach of contract, negligence and bad faith damages because she felt the insurer should have declared her vehicle a total loss and replaced it. She maintained that the insurer’s investigation of the loss was biased and unreasonable.

At trial, Heiner tendered expert evidence from an auto appraiser about whether the vehicle should have been repaired or replaced, and about the amount of the diminished value sustained to the vehicle. On the latter point, the expert assessed that Heiner’s vehicle declined in value by $8,500.00 by reason of the stigma attached to its having been involved in an accident.

The owner and driver of the at-fault vehicle argued that Heiner’s claim for diminished value was prohibited by the provisions of the Insurance Act, specifically section 263. That section provides that, in Ontario, an insured motorist cannot sue another insured motorist for property damage sustained to a vehicle or its contents. An insured motorist’s only recourse is through his or her own insurer. Heiner maintained that diminished value is not property damage per se, but instead a pure economic loss that is not captured by the prohibition created by section 263. Heiner relied on case law outside of Ontario, namely cases from British Columbia and Alberta, where in the context of a different legislative scheme, diminished value claims have been substantiated by courts.

Desjardins Group defended the various causes of action against it. On the issue of diminished value, Desjardins Group’s own appraiser conceded that diminished value affected Heiner’s vehicle. However, Desjardins Group maintained that the claim for diminished value is one for which there is no coverage available under any policy of automobile insurance in Ontario.

Decision

Based in part on precedent decisions in Ontario, Heiner’s action was dismissed in its entirety.[5]

Desjardins Group complied with its obligations under the OAP1 Policy to cover the cost of damage to Heiner’s vehicle. Desjardins Group repaired the vehicle. Deputy Judge Anschell emphasized that the OAP1 Policy provides the insurer with a prerogative to repair, replace or rebuild the vehicle. Desjardins Group “…was completely within its right to make a decision to repair Heiner’s vehicle as it did.”

Notably, Deputy Judge Anschell agreed that Heiner’s vehicle suffered a diminished value. She accepted the expert evidence of Heiner’s appraiser in that regard, as well as the amount of the diminished value. However, the claim for diminished value was dismissed against the driver / owner of the at-fault vehicle, largely because such claims against them are statute barred by section 263 of the Insurance Act. Deputy Judge Anschell followed the precedent of two Ontario decisions: Moore v. Lee[6] and Keyhani v. Downsview Chrysler Toronto[7].

Deputy Judge Anschell determined that the question with respect to the claim for diminished value against Desjardins Group “… must be answered according to the terms of the Policy”, and that, “the Policy does not provide any coverage for diminished value. Without express coverage for this type of damage, Heiner’s claim against the Desjardins Group must fail.”[8]

What Insurers Should Know

The Heiner decision was not considered in the Renwick case.

Also, Deputy Judge Anschell does not provide analysis about whether a diminished value claim is really one for “pure economic loss” and not “property damage”, as argued by Heiner. It is beyond the scope of this blog to analyze claims of “pure economic loss”. Suffice it to say, by definition, pure economic loss claims constitute financial losses that are not consequent to physical damage to property (or personal injury). Such claims usually arise in the absence of any physical damage. Moreover, claims for pure economic loss are generally not recoverable unless the claim falls into a recognized exception, none of which apply to Heiner’s action.

In the end, the Heiner decision provides consistency in the jurisprudence about the ability to sue for diminished value in Ontario.