February 4, 2014

Courts can level playing field for homeowners

Posted by WARREN PERLEY – Editor, BestStory.ca
Writing from Montreal

Journalists who have had the privilege of covering legal issues know the drama that can unfold in a courtroom. Often, due to space or time restrictions, only a small part of that drama makes it into the newspaper, website or broadcast.

Many years have passed since I last covered court cases for United Press International and The Gazette, but I stumbled upon an opportunity last year to cover a lawsuit brimming with drama pitting a Montreal homeowner against two large insurance companies which refused to pay her for damages from a frozen pipe which burst in her vestibule, flooding her finished basement.

I can’t take any credit for uncovering the case; it fell in my lap when my sister, Linda Shohet, mentioned to me in January 2012 that she had likely suffered in excess of $20,000 worth of damage after a pipe burst while she was down south during the Christmas holiday period that year.

I knew that she had insurance on the house she had lived in for four decades, so I just assumed that Aviva Insurance and its sister company, Traders General, would pay for the repairs.

After all, Aviva Insurance makes a point in a flyer it includes with its insurance policies of promoting how “simple and easy” it is to make a claim. “Happiness…Guaranteed”, trumpets the flyer.

But it was anything but “happiness guaranteed” when Linda tried to get reimbursed. Aviva Insurance and Traders General refused to pay out based on a clause of “exclusion” in her policy which states that daily visits are required to a home when its owner is absent for more than seven consecutive days during heating season.

The truth is that she was not even aware that Clause 9Cii of her policy required daily visits. It’s not as if either Aviva Insurance or her broker, Dale Parizeau Morris Mackenzie, ever brought the clause to her attention.

And she is not alone. There are 9 million Canadian homeowners, including 2.1 million in Quebec province, many of them with similar clauses in their insurance policies requiring daily visits when they are absent. And, like Linda was, most are not aware of the need for daily visits when they are away during heating season.

Founder of the Montreal-based Centre for Literacy, Linda is one of Canada’s top literacy experts and a 2012 winner of the Queen Elizabeth II Diamond Jubilee Medal for contributions in that field. So she knows unclear language when she reads it, as she did when she perused in detail the legal jargon in her home insurance policy in January 2012 after the flood occurred.

The fact that she had paid her premiums like clockwork for 40 years without ever making a claim also made her wonder about the lack of balance and fairness on the part of the insurance company in refusing to pay her anything.

To press her claim, she hired George Peizler of the law firm of Peizler & Vani, whom both of us have known since childhood. His March 2012 demand letter was refused by Aviva Insurance. Then just days before the case came to trial in February 2013, Linda told me that the insurer offered to settle for $3,000, a throwaway that added insult to injury.

Linda countered at $12,000, but never received another offer from the insurance company which, in effect, was telling her: meet us in court. Aviva Insurance and Traders General must have felt very confident about their legal position argued by the team of Robinson Sheppard Shapiro, a 75-lawyer firm, more than one-third of whom specialize in insurance law.

The winning legal strategy employed by Peizler is detailed in the story on our home page, as are the possible ramifications of Linda’s win for millions of homeowners across Canada, especially those in Quebec, and for the insurance industry in general.

There were three legal arguments raised by Peizler. Any one of them could have won the case for his client, and, in fact, one did: his position that Clause 9Cii in her insurance policy is “abusive” and, therefore, “void” under the Quebec Civil Code.

But one of the three arguments Peizler raised, which I thought would be a checkmate move, the judge did not even rule on, likely because he had already decided the case on the issue of Clause 9Cii being abusive.

Due to the fact that the judge did not rule on the argument alluded to above, I did not delve into it in detail in my story on our home page. However, it is worthy of discussion here because it gives you, the reader, an idea of some of the colour, context and nuance that can occur during the thrust and parry between lawyers dueling in a courtroom.

Peizler was very nonchalant as he brought up this, his third argument that February 2013 day before Judge Jean-F. Keable of Court of Quebec. He had already presented his first two arguments, looking almost as though he was through for the morning and about to sit down when he told the judge: “You know, My Lord, just a couple of days ago I was thinking about Clause 9Cii and wondering why it mentions about a policyholder being away for more than seven consecutive days. What is the significance of the seven days?”

It reminded me of a scene out of a Columbo movie starring the late Peter Falk, when the detective always looked as though he was finished with his line of questioning, only to turn back and say: “Oh, just one more thing….” Based on the judge’s intense look and note-taking, I concluded that Peizler’s allusion to the seven days was like a shot of caffeine for him.

Peizler went on to explain that Clause 9Cii of his client’s Aviva Insurance policy states that daily visits are required “if you have been away from your premises for more than seven consecutive days….” The mention of “seven days” could be interpreted to mean that an absence of fewer than seven days did not require daily visits, he argued.

At first, the insurance companies’ lawyer, Marcel-Olivier Nadeau, tried to argue that it didn’t matter when the damage occurred during the 30-day period because the policy would only be in force if daily visits had been executed, regardless of whether the incident occurred during the first seven days or afterwards.

But Peizler argued that every clause in a contract must be interpreted to have a meaning by virtue of Article 1428 of the Quebec Civil Code, which stipulates that “a clause is given a meaning that gives it some effect rather than one that gives it no effect.” Therefore, Peizler said, a meaning must be imparted to that part of Clause 9Cii which stipulates if a policyholder has been away from her home for more than seven consecutive days she must arrange for a competent person to make daily visits.

If the “seven days” had no meaning, why had the insurance company not written the policy to state that any absence by a homeowner, regardless of the number of days, required her to arrange daily visits? he asked rhetorically.

In any case, if the judge was to find that the clause was unclear, Peizler reminded the court that Article 1432 of the Quebec Civil Code states: “In case of doubt, a contract is interpreted in favour of the person who contracted the obligation and against the person who stipulated it. In all cases, it is interpreted in favour of the adhering party or the consumer.”

Peizler introduced into the court record a written admission by Nadeau that the damage occurred at “an unknown date between December 22, 2011 and January 5, 2012.” Therefore, he argued, the insurance companies had not met their legal burden of proof, as stipulated in Article 1432 of the Quebec Civil Code, to prove that the water pipes in Linda Shohet’s house burst between the eighth and 30^th days, which according to Peizler’s interpretation of Clause 9Cii was the only period when daily visits would have been required.

Peizler’s arguments seemed to unsettle Nadeau, who called such reasoning “pernicious”. Judge Keable asked Nadeau to give his interpretation of what the “seven days” mentioned in Clause 9Cii meant. Nadeau, who seemed unprepared for the question, replied that it meant that seven days should be counted backwards from the time that Linda Shohet called on January 5, 2012 to report the damage, meaning the court should then fix December 28, 2011 as the date of record when the pipe likely burst.

Judge Keable, who seemed to want to make sure that he understood Nadeau’s reasoning correctly, repeated what Nadeau had just told him, asking Nadeau whether that was what he had meant to say. Nadeau replied in the affirmative.

Nadeau went on to say that the insurance company could not determine when the flooding occurred because Linda Shohet only reported it on January 5, 2012 when she returned from vacation. Peizler replied that the claims adjusters should have been able to tell by comparing watermarks on the walls and the colour of standing water approximately when the disaster had occurred.

At one point, what appeared to be a frustrated Nadeau questioned before the judge the competence of Linda’s adult son, David Shohet, to check on the house during her absence. He told the judge that asking an incompetent person to check on the house was akin to having nobody available for the task.

Keable then asked Nadeau whether that meant one had to be a plumber in order to ascertain water damage. Nadeau replied that he meant to say that David Shohet had not gone into the house daily, as required by the insurance policy. In fact, he pointed out that David Shohet had not even gone into the house on a weekly basis.

The plaintiff admitted prior to trial that her son, David Shohet, had visited the house twice during her absence but had only entered the house once —on his first visit of December 22, 2011, two days after she had left for Atlanta to visit family.

When the trial ended, I tried to interview Nadeau to ask him about his reasoning in counting backwards to give a meaning to the “seven days” mentioned in Clause 9Cii, but he refused to speak with me. As it turned out, it really didn’t matter what he was trying to say because the point was never ruled on by Keable, and Nadeau ended up losing on the issue of 9Cii being null and void because the judge found it to be “abusive” under the circumstances. Nadeau also refused my request for his photo to run with our story.

Just three years out of law school at the Université de Montréal, perhaps Nadeau was finding out first hand that there is no such thing as a “slam dunk” when it comes to litigation. What had looked like a sure win for Aviva Insurance and Traders General heading into trial turned into a victory for a determined underdog, Linda Shohet, who may have led the way for other besieged Canadian homeowners fighting for justice from their insurance companies.

[See teaser below]