Editors' note: We are pleased to have Alvin Starkman join us as a guest contributor to Wise Law Blog. We've previously written about Mr. Starkman, and shall thus assume he requires no further introduction. Suffice to say, we're looking forward to his continued commentaries.
This week, Alvin revisits Chubb and Sagl, a September 2007 Ontario Superior Court decison in which an Oakville, Ontario antique collector was awarded $500,000 in punitive damages after her insurer, alleging arson, refused to pay a legitimate fire-damage claim.
NOTE: The ruling discussed in this post was overturned by the Ontario Court of Appeal in a May 2009 ruling. A new trial has been ordered.
......Bridgette Sagl was obsessed with and unusually attached to her collections … furniture, paintings, other fine art, china, glassware, clothes, jewellery, and yes antiques. Her home was like a museum according to her companion, with every square inch of wall covered with paintings, and still more packed and stored in every nook and cranny of her Mississauga home.
Between 1971 and 1994, she’d spent, sometimes with her then husband, over $300,000, in one store alone, The World of Antiques Art and Antiques Gallery, according to former owner Frank Frankfurter. So when on the night of December 16, 1997, Mrs. Sagl’s home was destroyed by fire, and Chubb Insurance Company of Canada refused to pay for her losses, the stage had been set for an ugly battle.
In the 2007 Ontario Superior Court of Justice case of Sagl v. Cosburn, Griffiths & Brandham Insurance Brokers Limited et. al., The Honourable Mr. Justice Blenus Wright was charged with determining, amongst other issues, whether or not the fire was deliberately set on behalf of the plaintiff, the amount of insurance, if Mrs. Sagl intentionally concealed or misrepresented any material facts relating to the coverage, if the insurer acted in bad faith sufficiently egregious to warrant punitive damages, and of course the value of the contents of the home.
The court ruling was lengthy, detailed, and filled with facts one usually encounters when watching a Hollywood movie or TV program.
Mr. and Mrs. Sagl initially lead a blessed existence, beginning their cohabitation in 1979, then in 1980 moving into a 113- acre property north of Milton called The Rockwood Estate, with a 16,000 square foot home filled with furniture, artwork and sculptures. In the 1980’s they developed Belltronics, a company which manufactured electronic components. In 1984 they married. They had children. In 1985 they purchased a large home in Jamestown, Barbados. Their company had facilities in Mississauga, Buffalo, France, Germany, Holland and Georgia. The Sagl’s had a 10,000 square foot Georgia mansion, a penthouse in Germany and an apartment in Italy.
Money was available to fund a lavish lifestyle where Mrs. Sagl was able to satisfy her penchant for collecting. However two events burst the bubble: Mr. Sagl’s affair with Mrs. Sagl’s sister, and the recession of the late 80’s and early 90’s which took a toll on Belltronics’ fortunes. The matrimonial proceedings were acrimonious.
After her marriage broke up, Mrs. Sagl did not manage her finances very well, perhaps due to her earlier standard of living with an abundance of money around, and her husband handling the bills. She never came to realize that she was responsible for paying the expenses, nor that she had to budget. At the time of the fire her mortgages, utilities and taxes were in default and she owed an additional $800,000. But there were considerable funds due and payable to her from her husband as a result of the separation and the order of a family court judge, and she had significant equity in her home (and a second home next door). And of course there were the antiques and collectibles.
But Chubb maintained that she deliberately set the fire, or rather had someone do it, so she could get out of debt by getting the insurance proceeds. It contended that the house had been “staged” in preparation for the fire to occur that evening by reason of the maid having the night off, the Sagl’s son staying at a friend’s home, the dog being left outside, and Mrs. Sagl being out for dinner with her companion. And it pointed to notes and reports of the Office of the Fire Marshall (OFM), which both suggested an outright alleged arson, based on the foregoing facts, as well as the functioning of the alarm system, several probable points of origin of the fire, windows being left ajar, and more.
Justice Wright, however, opined that the OFM used tunnel vision, and did a rush to judgment. Chubb relied on the OFM’s reports and “findings,” which the judge found to be seriously flawed, without Chubb doing its own thorough and even-handed investigation. And when it came to Mrs. Sagl, her lawyers, and her experts setting out their version of the facts, it became clear to the judge that the plaintiff’s story was much more probable. Their answers to the suspicions and allegations of Chubb and the OFM were logical and credible: it seemed more likely that the fire had ignited from one place of origin in the basement, with cause “undetermined” (although there was a more logical and innocent source); the “staging” was unlikely, based upon several additional facts and circumstances including that Mrs. Sagl would have been putting her daughter, son-in-law and grandchild who were living in the home next door at great risk; and, Mrs. Sagl’s financial circumstances were not so dire as to lead someone to have their home torched to get out from under debt … her net equity including what was likely owing to her from Mr. Sagl, was significant.
One of the most troubling aspects of the case for Justice Wright, however, casting doubt on the theory of the case and version of the facts proffered by Chubb, related to something with which we all, as collectors of antiques, jewellery and fine art, can identify. Would someone like Mrs. Sagl, clearly obsessed with her collections more than most of us, go so far as to destroy them, under any circumstances, no matter how dire her financial situation? Would you or I? The judge reasoned that Mrs. Sagl was simply not capable of having her home, with all her possessions, torched, just to obtain insurance proceeds. He wrote:
“Who is it who continues to purchase … when there is no more display space?”The answer: someone who has an unusually strong passion for collecting and who just loves to surround herself with “objets d’art.”
“Who stores numerous paintings … on top of each other throughout the house?”
“Who is it who has multiple sets of china and glassware
Justice Wright continued that Mrs. Sagl had been betrayed by her husband and her sister, her marriage was destroyed, her lavish lifestyle funded by Belltronics was gone, and son Ryan had his own life to live. All she had left was her collections which she had spent years accumulating along with the memories of collecting all of it. When we as collectors look at various antiques in our homes, as much as admiring a piece we often recount the hunt or happenstance resulting in the acquisition.
Justice Wright continued:
"What would the plaintiff gain by torching her possessions? Insurance money could never replace her collections. If she was interested in money she could have sold her collections.”In fact he noted that Mrs. Sagl had heard of a hot stock tip, borrowed $350,000 at 24% interest to invest and lost it all. “Why not sell some possessions instead of running up a debt which costs interest at 24%,” he asked, answering that obsessed with her collections, she wasn’t about to relinquish any of her lifetime endeavours. Not then, and not to bring a defaulting mortgage into good-standing.
In dealing with the issue of insurance coverage, a Binder of Insurance had been issued 11 weeks before the fire, but no policy had been provided. There were disputes regarding the amount of coverage, exclusions, special riders, and so on. Justice Wright concluded that the Binder was the contract of insurance, and that Chubb was sloppy, unprofessional and utilized poor business practices, in particular in not using written confirmation regarding changes to coverage it contemplated or apparently believed to govern, and not obtaining Mrs. Sagl’s written consent. The onus was on Chubb, and it came nowhere close to discharging it, in its effort to try to restrict coverage.
Regarding allegations of misrepresentation and fraudulent filing of the claim, once again the judge was very critical of Chubb, citing Chubb’s own shortcomings in its investigation, and in its presentation of its case at trial in attempting to discredit Mrs. Sagl.
The stage had been set for the trial judge to pass judgment on the issue of punitive damages, ordered only when a defendant’s conduct is malicious, oppressive and high-handed. In this case, Justice Wright found that Chubb had breached its duty to act in good faith to Mrs. Sagl by:
- utilizing poor underwriting procedures to determine and restrict coverage, and
then alleging wrongdoing against an innocent insured;
- failing to consider the evidence in an impartial and common sense way, in circumstances where there was no direct evidence to implicate the plaintiff;
- pre-judging the cause of the fire as arson the day after the fire, and thereafter denying the plaintiff coverage for her additional and ongoing living expenses (recoverable under the terms of the insurance contract);
- conducting itself in a reprehensible fashion by alleging commission of a criminal offense without putting forth any supporting evidence, and
- knowing the high standard of proof in order prove fraud in a court of law, continuing this pattern of conduct for 10 years, from the day after the fire occurred, through the conclusion of trial.
Particularly surprising is that while in this case Justice Wright described Chubb’s conduct against Bridgette Sagl as malicious, oppressive and high-handed, in the same court in the year 2000, another judge in a different case involving the same Bridgette Sagl, described her conduct against someone else, in the same vein.
In that case Mrs. Sagl agreed to promote and sell the works of artist Ruth von Bismark, and simply kept the art for herself…some of the same pieces of art destroyed in the 1997 Sagl house fire. Mrs. Sagl was ordered to pay Ms. Bismark, amongst other amounts, $50,000 in punitive damages, an award upheld on appeal.
In the Chubb case, it should come as no surprise given the size of the award and the issues, that insurer is appealing the decision. Counsel for the insurance company has advised me that the hearing of the appeal likely will not take place until near the end of this year.
- Alvin Starkman, M.A., LL.B, Oaxaca
Alvin Starkman received his Masters in Social Anthropology in 1978. After teaching for a few years he attended Osgoode Hall Law School, thereafter embarking upon a successful career as a litigator until 2004. Alvin, a good-standing member of the Law Society of Upper Canada, now resides with his wife Arlene in Oaxaca, Mexico, where he writes, leads small group tours to the villages, markets, ruins and other sights, is a consultant to documentary film production companies, and operates Casa Machaya Oaxaca Bed & Breakfast.