General Accident v. Chrusz Finally Goes to Trial

Back in 1999, the Ontario Court of Appeal handed down its ruling in the case of General Accident Assurance Company et al. v. Chrusz et al. The decision became one of the leading cases in Ontario on the meaning of solicitor-client privilege and litigation privilege.

Seven years later, the case has finally been tried. (In fact, the trial was bifurcated, so the trial proceeded only on this issue of liability. Damages will be assessed at a later date.)

The just-released decision of Regional Senior Justice McCartney on the liability phase of the case is reported here. When the trial on damages is held, the news is not likely to be good for the insurers (who, in this action, are the plaintiffs). McCartney R.S.J. dismissed G.A.’s claim for damages resulting from fraud in a proof of loss filed in connection with a fire claim. A number of individual defendants were sued by G.A. and the action was dismissed as against all of them.

To make matters worse (for the insurers), the defendants had counterclaimed. Justice McCartney held that most of the claimants were entitled to both compensatory and punitive damages against the insurers. The counterclaim of the main defendant, Daniel Chrusz, was also allowed, but only for compensatory damages.

As mentioned above, damages on the counterclaims have yet to be assessed.

The action arose out of a fire at the Silverado Hotel, owned by Daniel Chrusz. Initially, the loss was adjusted in the usual way. But at some point, an adjuster for the insurers received information from one Denis Pilotte, that Chrusz was deliberately exaggerating his claim, in various ways. These included damaging salvageable property, claiming for goods not damaged in the fire and counselling others (e.g., cleanup crews) to exaggerate their claims. This is what led the insurers to sue Chrusz, alleging fraud.

Chrusz denied all of the allegations and at trial, McCartney R.S.J. found that the insurers had fallen well short of proving fraud. In finding for the defendants on the counterclaim, Justice McCartney took the insurers to task for the quality of their investigation:

[T]he investigative performance of the insurers prior to the issuance of the Statement of Claim leaves much to be desired.  The rush to accept the version of events related by Pilotte without a full investigation, particularly with respect to the few interviews that they conducted when one considers the number of witnesses that Pilotte had identified, and particularly in light of the fact that the witnesses they did interview gave very little support to Pilotte’s allegations, was quite unseemly.

We would not be surprised to see the case settle before damages are assessed.

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