Canadian Underwriter

Invoices don’t add up in commercial claim against RSA, court rules

September 1, 2022   by David Gambrill

Female entrepreneur holding tablet while doing inventory in her trendy clothing shop

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Ontario’s Superior Court has rejected two claims made by a clothes store operator against RSA for a total of $127,000 in lost inventory due to water damage, because the retailer could not prove the value of the lost merchandise.

In the store owner’s first claim, despite repeated emails from the insurance company, Royal & Sun Alliance Insurance (now owned by Intact Insurance), and its adjuster, Crawford and Company (Canada), the store owner never did provide the insurer with credible documentation proving the value of the lost claim. The court found the one-year limitation period to sue the insurer had expired.

Tahir Qureshi operated a retail clothing store, ATQ Fashion, in Oshawa, Ont. He bought a commercial insurance policy from RSA for one year of coverage beginning on Mar. 27, 2014.

In October 2014, the roof of his building leaked, and items of clothing stored in boxes on the second-floor sustained water damage. Qureshi notified RSA of the loss and submitted a claim for $53,488. RSA denied the claim because Qureshi did not prove the amount of this first loss.

Qureshi sustained another water loss when the roof leaked again in February 2015. He submitted a second proof of loss document, this time for $74,486. Since he submitted the second proof of loss using the same claim number of the first loss, RSA did not process the second claim because it was not aware that a proof of loss relating to the second claim had been submitted.

Nonetheless, the court denied the second claim as well.

Qureshi maintained in court that Crawford appointed AAA Appraisals to inventory the damaged articles in his first claim. He contended AAA Appraisals correctly valued the damaged items. But the court found Qureshi didn’t fully understand AAA’s role in the process.

“[Crawford adjuster Linda] Fitzgerald retained AAA Appraisal to establish an inventory list of the damaged goods,” the Ontario Superior Court ruled. “It was not AAA’s role to establish the value of the claim. Ms. Fitzgerald testified that in commercial loss cases, the insurer looks to the property owner to provide invoices to support the claim.

“AAA was instructed to make an inventory list, and to provide wholesale prices for the goods, and then, with the help of Mr. Qureshi and his invoices, to cross-reference anything that was on the list.”

Qureshi’s insurance policy with RSA states the insured shall “deliver as soon as practicable to the insurer a proof of loss verified by a statutory declaration giving a complete inventory of the lost or damaged property and showing in detail quantities, costs, actual cash value and particulars of the loss claimed; [and], if required and if practicable, produce accounts, warehouse receipts, stock lists, invoices and other pertinent records, verified by statutory declaration, as well as any relevant contracts or agreements with others.”

But the invoices Qureshi supplied to verify the value of his losses raised red flags for Crawford’s adjuster and RSA, according to the court decision, released Aug. 31.

“The invoices appeared odd to Ms. Fitzgerald [Crawford’s adjuster],” the court decision reads. “They contained spelling errors. Notably, one contained a business address on ‘Young’ Street in Toronto, rather than ‘Yonge’ Street. Ms. Fitzgerald explained that this was unusual because a business would take care to provide a correct address on its invoice, so that it could receive payment.

“She further noted that all the product costs were in rounded numbers, which based on her considerable experience in the industry appeared odd. She noted that the fonts on the invoices were the same. She searched the addresses online and learned that the address for a clothing supplier named ‘U&U’ was the address of a UHaul store, and that the address for a clothing supplier named ‘Linx’ was the location of a Linx cellphone distributor. In her searches, she was unable to verify the existence of any of the companies listed on the invoices.

“She forwarded the documents to Daniel Hébert, an examiner at RSA. She was advised by RSA to stand down and she did nothing further to investigate the first loss.”

RSA rejected the first claim. The same issues plagued the invoices Qureshi submitted to prove the losses in the second claim, the court observed.

For example, the adjuster sent a photo of Lacoste shirts found in the inventory to RSA. The labels on the garments in the photographs indicated that they were made in “Morroco.” Lacoste products are manufactured in “Morocco.”

Qureshi said he had no invoices for some of his goods, because he normally paid for them in cash. But the court decision states he did not keep “a record of the large cash withdrawals he would have needed to make to pay those suppliers.” Plus, the court added, “he did not testify he kept tens of thousands of dollars on hand.”

Ultimately, the court found Qureshi produced no evidence at trial to authenticate the invoices.

“He called no witnesses from his purported suppliers to verify their invoices,” the court ruled. “He produced no records to show that the invoices were paid. The ‘invoices’ are replete with irregularities.

“On the totality of the evidence, I am satisfied that the invoices are not authentic and were created for the purpose of supporting Mr. Qureshi’s insurance claim.”


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