Document Your Possessions in Event Insurance Claim is Necessary

Bob Aaron in Legal

A court case that went all the way to the Supreme Court of Canada highlights the importance of homeowners keeping accurate records of their possessions in the event an insurance claim becomes necessary.

Back in 1997, a fire destroyed the luxury house of Bridgette Sagl on Doulton Dr. in Mississauga.

The house was empty on the night of the fire. It was the housekeeper’s night off. The dog was left in the yard, some of the windows were left open and the owner was out for dinner. At the time, the mortgages, utilities and taxes were in arrears, and Sagl had accumulated large legal bills following contested divorce proceedings.

The house contained Sagl’s huge art collection consisting of hundreds of paintings and sculptures, all of which were destroyed, and dozens of pieces of expensive jewellery. The house was insured for $630,000, the contents for $600,000, the jewellery for $1 million and the art for $2 million.

Chubb insurance refused to pay Sagl’s claim, and alleged that the house was “staged” in preparation for the fire.

After a delay of more than nine years, a 22-day trial took place in 2007. Chubb was ordered to pay the owner’s full claim of more than $4.5 million plus interest and legal costs. It was also hit with punitive damages of $500,000 for its “malicious, oppressive and high-handed” conduct in refusing to pay the claim.

Witnesses from the Office of the Fire Marshal and the insurance company testified that in their opinion the fire was “incendiary” and originated in as many as four locations.

The owner’s independent expert testified that, in his opinion, the fire originated in a basement storage area, possibly from the halogen bulbs in two tall lamps.

After hearing the experts, Justice Blenus Wright wrote in his decision: “There is not a shred of evidence that the fire was deliberately set on her (Sagl’s) behalf or at her direction.

“I do not believe that the plaintiff is capable of having her home, with all her possessions, torched by someone just to obtain insurance proceeds.”

In the end, the judge decided that Chubb had “tunnel vision” in prejudging the cause of the fire and that it failed to prove that Sagl was in any way implicated in the alleged arson.

Chubb, the judge wrote, breached its duty of good faith in alleging that the owner had committed fraud in her claim under the policy. As a result, he awarded Sagl $500,000 in punitive damages in addition to her full losses under the policy.

Chubb took the case to the Ontario Court of Appeal, and in 2009, that court set aside the trial decision and ordered a new trial restricted solely to the issue of the owner’s proof of the amount of her loss.

Sagl applied to the Supreme Court of Canada for leave to appeal the appeal court’s decision, and in January 2010, her application was dismissed.

A new trial was held over the course of 15 days in May and June of this year. Last month, the court ruled that Sagl had proved the full value of her art collection and was entitled to recover the $2 million for which it was insured, but reversed the award of $500,000 in punitive damages. Sagl was awarded full costs for both trials.

The words of Wright in the first trial provide excellent advice to homeowners: “Once a fire destroys possessions, it is difficult to determine true value of the possessions without proper documentation, which hopefully has not been consumed in the fire.

“Persons with possessions of above-average value ought to be aware that they need to keep purchase invoices and take photographs and get up-to-date appraisals, all of which need to be kept in a fireproof place. Unfortunately, most people neglect to prepare proper documentation. They procrastinate, doubting that their possessions will ever be destroyed.”

I echo Wright’s advice. Maintain enough insurance, keep records and photos off site, and be prepared to document the value of what you own.

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Bob Aaron is a sole practitioner at the law firm of Aaron & Aaron in Toronto and a board member of the Tarion Warranty Corp.  Bob specializes in the areas of real estate, corporate and commercial law, estates and wills and landlord/tenant law. His Title Page column appears Saturdays in The Toronto Star and weekly on Move Smartly.  E-mail

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