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From the Bench: Plaintiff Fails to Prove Vehicle Damaged During Theft

Insurers and adjusters should ensure they have properly documented procedures and observations as it may assist in refuting claims by an insured for further compensation and alleged bad faith.

O’Donoghue v Unifund Assurance Company, 2018 ABPC 33

Case Facts

The Plaintiff brought an action against his insurer alleging his stolen vehicle should have been declared a total loss as a result of its condition following its theft. The Plaintiff further argued the insurer acted in bad faith due to their investigations and adjusting of damage. The insurer took the position they properly investigated and adjusted the damage arising from the theft and it did not breach its duty of good faith.

The Plaintiff had purchased the vehicle at an auction in November 2011. He had initially driven the vehicle for some time; however, he noted the vehicle had hesitation. As a result, he undertook work to change out the injectors, but ultimately failed bringing the vehicle to Diesel Tech for repairs. When the vehicle was first brought to Diesel Tech it would not start. After installing re-furbished injectors provided by the Plaintiff, the vehicle was described as “running good”. The Plaintiff testified after these repairs the vehicle was running perfect.

On May 5, 2014, the vehicle was stolen from the Plaintiff’s home and was recovered a few days later. The insurance policy provided coverage for theft. After the vehicle was recovered, the Defendant retained an independent adjuster to adjust the claim under the Plaintiff`s insurance policy.

Upon inspection of the vehicle, it was noted there were significant failed tasks requiring replacement parts. Among other things, the engine was noted to be “running rough”. The Defendant took the position the issues with the injector was unrelated to the theft; however, they authorized the injector replacement as a goodwill gesture. The Plaintiff disagreed claiming the injector issue was a result of the theft as the vehicle had no issues prior to the theft.

At issue before the Court was whether the Plaintiff was entitled to the actual cash value of the vehicle and whether the Defendant had breached its duty of good faith for failing to deal with the claim in a proper and efficient manner.

The Insurance Policy

Under the insurance policy, accidental loss of or damage to the vehicle as a result of theft is covered under S.P.F. No.1 and Schedule C. Additionally, pursuant to Statutory Condition (5) of the policy, the insurer is only required to pay the lesser of the actual cash value, with appropriate deductions for depreciation, and the cost to repair or replace the automobile:

[36] The Insurance Policy is the Alberta Standard automobile policy S.P.F. No. 1 [Exhibit 2, tab 21] and theft of an automobile is dealt with under Schedule C, which provides that the Defendant, “agrees to indemnify the [Plaintiff] against direct and accidental loss of or damage to the [Vehicle.].” The amount of the Defendant’s liability, also as set out in Schedule C, is “limited to the amount of loss or damage in excess of the amount deductible, . . .”

[37] Pursuant to Statutory Condition (5) of the Insurance Policy, the Defendant “is not liable for more than the actual cash value of the [Vehicle] at the time any loss or damage occurs, and the loss or damage must be ascertained or estimated according to that actual cash value with proper deductions for depreciation, however caused, and must not exceed the amount that it would cost to repair or replace the automobile . . .”

Expert Evidence

Judge Young considered the evidence from appraisers employed by the Defendant; expert evidence with respect to valuation of the vehicle; and expert evidence with respect to the mechanics of the vehicle.

The evidence provided by the employed and formerly employed appraisers of the Defendant, outlined the procedures by which they would inspect the vehicle and assess the repairs required. This evidence was used in determining whether the Defendant had breached its duty of good faith in its investigation and adjusting of the damages to the vehicle.

The expert evidence provided by automobile appraisers provided insight into the actual cash value of the vehicle.

Experts with respect to the mechanics of the vehicle provided evidence as to what might have been the cause for vehicle issues. Their evidence was considered by the Court in determining whether the additional damages alleged by the Plaintiff was caused by the theft or for another reason.

Analysis

Judge Young considered the wording of the insurance policy noting the loss or damage to the vehicle must have been caused by the theft. As a result, the Plaintiff bore the burden of proving, on a balance of probabilities, any loss or damage claimed was caused by the theft:

[117] Section C of the Insurance Policy provides coverage to the Plaintiff for “direct and accidental loss of or damage to the [Vehicle] . . . caused by theft.” [emphasis mine]. The Plaintiff has the burden of proving, on a balance of probabilities, that any loss or damage he is claiming was caused by the Theft.

Judge Young found the Plaintiff had failed to prove on a balance of probabilities the additional damage to the vehicle was a result of the theft. Coming to this conclusion, she considered the fact the vehicle was approximately 13 years old at the date of the loss; the vehicle had never run perfectly before the theft; and the vehicle had numerous issues the Plaintiff did not attribute to the theft. The vehicle was simply in poor condition overall and the Plaintiff failed to prove the issues with the vehicle were a result of the theft:

[118] As at the Date of Loss, the Vehicle was approximately thirteen (13) years old. The Plaintiff would have me accept that the Vehicle was running “perfect” which seems to be something of an embellishment given the age of the Vehicle … Ultimately, Diesel Tech had to replace all eight (8) injectors and even then, the description of the Vehicle was that it “ran alot smoother” – certainly not that it was running “perfect.” …

[119] Still further, the inspection of the Vehicle at Freedom Ford after the Theft revealed that the Vehicle had a number of issues that the Plaintiff did not argue were in any way related to the Theft and that reflected poorly on the overall condition of the Vehicle.

[126] Given all of the foregoing, I find that the Plaintiff has not proven, on a balance of probabilities, that there is additional damage to the Vehicle caused by the Theft that would entitle the Plaintiff to further coverage under the Insurance Policy. As a result, the Plaintiff is not entitled to the actual cash value of the Vehicle as he claimed. Consequently, this portion of his Claim is dismissed.

The Plaintiff had failed to prove on a balance of probabilities there was additional damage to the vehicle as a result of the theft. He was not entitled to the actual cash value of the vehicle as he had claimed.

Bad Faith

Judge Young found there was no bad faith on the part of the Defendant. Although the Plaintiff was unhappy the Defendant would not perform further repairs to the vehicle or declare it a total loss this was not bad faith. Further yet, the Defendants went above and beyond the agreed upon repairs which was indicative of good faith and not bad faith.

[134] That the Plaintiff was upset that the Defendant would not complete further repairs to the Vehicle or to declare it a total loss, is not, without more, bad faith on the part of the Defendant. … There are no negative or perjorative comments in the AS400 Notes that would indicate that there is any animosity towards the Plaintiff. The Defendant, despite the assessment by Mr. Bailer, actually went beyond what it originally agreed to have repaired, which is actually indicative of good faith and not bad faith. The evidence led by the Defendant shows that it did the additional repair work on the basis that it wanted to maintain a good relationship with the Plaintiff.

In Conclusion

Pursuant to the terms of Statutory Condition (5) of the S.P.F. No. 1 an insured is only entitled to the lesser of the actual cash value, less the appropriate deduction for depreciation, and the cost of repair. Where the insured disagrees, they bear the onus of proving their position. With respect to the cost of repair, an insurer is only required to pay for repairs which were as a result of the covered loss. The onus is on the insured to prove the damages were in relation to the covered loss.

Consequently, this decision emphasizes the importance of evidence. Although the Plaintiff attempted to claim the further damages and bad faith on the part of the insurer, he was ultimately unsuccessful. The evidence before the Court did not support this conclusion. Testimonies, adjuster reports and statements from the repair company were sufficient to refute the Plaintiff’s position. As such, insurers and adjusters should ensure they have properly documented procedures and observations as it may assist in refuting claims by an insured for further compensation and alleged bad faith.