Damage appraisal method leaves a toilet back-up case running

Did a toilet backup cause $35,700 worth of damage to the cell phone stock of a retail business, as argued by Gore Mutual, or $105,000, as the business owner claimed?

Neither side agreed with the appraised value of the losses, which featured a controversial (but cost-efficient) sampling method to determine damage to the cell phone stock. But both believed enough evidence existed for the court to decide the matter one way or the other, without going to trial.

Ontario’s Superior Court disagreed, finding a trial would be required to determine how much water damage had been done to the cell phone company’s sales stock, largely because of the sampling method used.

In 9491716 Canada Inc. v. Gore Mutual Insurance Co., a toilet at the cell phone business’ premises backed up in July 2017, causing water damage. Gore’s policy was in force at the time, and the water damage was an insured peril. The business made a claim for the cellphone stock damaged by the toilet back-up.

Gore agreed some of the cell phone stock was ‘obviously affected’ by water (actual cash value of $18,000), some of it may have been affected by water (actual cash value of $17,4000), and the insurer also agreed to pay out $300 for a damaged phone system, for a total payment of $35,700.

The insurer invoked an appraisal process. Both sides agreed to a sampling inspection procedure, given the cost to test all the allegedly affected cellphones would be prohibitive. Based on the appraisal process, the insurer denied coverage for $69,600 worth of cell phone stock.

“The defendant insurer denies any liability for [these] disputed phones, as the applicable testing showed no indicia of any water damage whatsoever to these cellphones,” as the court decision characterized the insurer’s position. “Indeed, submits the defendant insurer, the disputed phones were stored on tables and shelves at the time of the toilet back-up and, as such, not exposed to any applicable moisture.”

The cell phone business owner disagreed. He said because of the limited scope of the sampling process, he could not tell which of the $69,000 worth of disputed phones had sustained moisture damage, and so he couldn’t sell any of them, making his total loss $105,000.

“It is the insured’s position that all of the phones were rendered valueless, whether they sustained water damage or not, on the basis that the insured should not be selling any of the phones given his inability to determine which 20% sustained water damage,” the court ruling stated outlining the business owner’s argument.

Both sides called for summary judgment, meaning they thought enough evidence existed on the record for the court to make a quick determination one way or another. Not so, the court found.

“There is no evidence before me respecting the existence or absence of damage to any of the disputed phones resultant from the toilet backup,” the court ruled in a decision released Tuesday. “Although this is the result of the parties’ agreement to engage in only sample testing of the disputed phones, this nonetheless leaves me with no evidence of damage, one way or the other, to that category of cellphones….

“As such, I am unable to find, as requested by the [cell phone retailer], that all of the disputed phones suffered damage. In addition, I am equally unable to find, as requested by the defendant insurer, that none of the disputed phones suffered any damage whatsoever.”

The matter is now scheduled to be resolved at trial.

Feature photo courtesy of iStock.com/Martin Ivanov