Dispute resolution and adjudication
Dispute resolution and adjudication
Independent, neutral and accessible process
A decision about whether a defect in a new home is covered by warranty is an important decision for the homeowner and the builder. Regardless of the dollar value of a claim, it touches on what is likely to be the single biggest purchase an individual or family will make. The homeowner will have a deeply personal and vested interest in how their warranty claim is addressed.
Where there is a dispute, a dispute resolution process must not only deliver justice but also be seen to deliver justice. Independent adjudication offers a chance for a fresh look at a warranty claim that the homeowner and builder or warranty provider have been unable to resolve. The independent adjudication should be visibly neutral and independent from the warranty providers (See Appendix B Recommended Dispute Resolution for Warranty Protections).
Under my proposed model, homeowners will be required to deal with a warranty provider chosen by their builder. It is important to provide homeowners with reasonable access to an independent party who can review a claim and provide external validation of a decision made by the warranty provider.
An independent adjudicator should continue to provide an alternative to complex and costly litigation – not as a substitute for litigation but as an accessible and cost effective alternative.
With multi-providers in a competitive model, having access to a body of decisions of an adjudicative body on warranty claims can support consistency in the interpretation and application of the warranty legislation.
If a roster system for adjudicator selection is used, there are reputable dispute resolution associations and individuals who can assist in the selection. Standards for being added to the roster could include provable adjudication training and experience, with an evaluation system that considers prior adjudicative decisions of candidates. Existing dispute resolution bodies have a process for engaging neutral adjudicators and avoiding conflicts of interest in assignments. Additional training could be offered with a focus on new home construction. This is not intended to make the adjudicator an expert in home construction but to provide context for the range of standards and expectations and the varied disputes that can arise.
Review of decisions of the independent adjudicator
The courts have a role in reviewing decisions of administrative tribunals. Usually this review is by way of judicial review of a decision, on application to the Divisional Court, a branch of the Superior Court of Justice. The Divisional Court sits in a panel of three. Alternatively, review could be by a single judge of the Superior Court. Decisions on the appropriate level of review and the process for review of decisions of the independent adjudicator will need to be reflected in the final design.
Right to sue
The accessibility and affordability of the independent adjudication process and its neutrality should be such as to encourage most homeowners to choose the proposed adjudication process as an alternative to litigation. However, there may be cases best addressed in the courts and I am not recommending that it be mandatory to access the warranty claim adjudication process.
Homeowners should continue to have access to the courts in the event of a dispute with a builder or a warranty provider as is the case today. It may be, for example, that the dollar value of the claim is well beyond the warranty limits. It is not possible to confirm the degree to which homeowners are accessing the courts today to resolve warranty disputes. However, there have been important decisions of the courts dealing with the new home warranty program, including decisions that speak to the consumer protection aspect of the home warranty legislation. Court decisions will continue to play an important role in the interpretation and implementation of the legislation.
It was noted that in some cases, particularly in the condominium sector, the timelines for warranty claims are such that a party may need to initiate litigation as a precaution to ensure that their claim is brought in time should the warranty process not resolve the matter. I heard from several stakeholders that the current time limits allow a builder to “red line” offers to settle, presenting them late in the day, leaving homeowners with little time to consider or seek legal advice on a proposed settlement. This problem is particularly acute in the context of condominiums. Consideration should be given to whether it would be appropriate to suspend the running of limitation periods for initiating court action where the parties are engaged in the warranty dispute resolution process. It would be important to evaluate the implications of such a change to avoid any unintended consequences on other parties, including construction professionals and subtrades.
Role of warranty provider in dispute resolution
Many people spoke of problems generally with today’s dispute resolution process. This intersection point between the homeowner and the warranty system - when disputes between a homeowner and builder are not resolved and Tarion becomes involved - has been particularly contentious. Today’s dispute resolution process does not always reach the level of accessibility and effectiveness that it could.
Some homeowners and builders expressed frustration with the dispute resolution process. Problems were often the result of a lack of understanding, on the part of homeowners and builders, of what was covered by warranty. For some disputes, problems arose because of a lack of information about homeowner maintenance obligations. For other disputes, homeowner and builder expectations about what could be done and how quickly were not aligned. In some cases, expert evaluation early in the process might have mitigated the conflict and generated an earlier resolution.
The Act’s dispute resolution process was put in place at a time when the only recourse for a homeowner was litigation. The dispute resolution process is called “conciliation” in the Act. Other provisions of the Act make it clear that the intention was that parties to a dispute would access the “conciliation” before proceeding to court. It was meant to improve the situation for homeowners and avoid the need for litigation.
Describing the dispute resolution as “conciliation” may have been correct when first introduced but it is an unfortunate choice of word for today’s process that is more akin to adjudication than it is to conciliation. The commonly understood meaning of “conciliation” is a process that assists the parties to come to their own resolution of the dispute. At Tarion today, this “conciliation” process has become an adjudication process.
At various stages of the process, the homeowner will see Tarion as their friend, their advocate, their neutral inspector but, at some point, may also see Tarion as their builder’s friend, their builder’s advocate and favouring the builder. Some builders have the reverse perception, feeling pressure to repair items that were not warranted and believing that Tarion was motivated to get settlements for extraneous reasons. Either way, the homeowner and the builder are both asked to accept that at the end, Tarion will render a binding decision in a neutral and unbiased manner.
These and other problems were canvassed in detail by Ms. Chornenki in her report, Tarion Warranty Corporation: Independent Dispute Resolution Review - 2015
The dispute resolution process I envision would have a role for the warranty provider to support the homeowner and builder in resolving their dispute directly. This would remain a fundamental part of the dispute resolution process, a “facilitation” process that supports homeowners and builders in resolving disputes. In an insurance context, the “facilitator” might be the adjuster or another person whose responsibilities include supporting homeowners and builders in identifying defects and seeking to address them.
In Recommendations 19 and 20 of my Ontario Automobile Insurance Dispute Resolution System Review – Final Report to government
Home warranty providers should have a similar expectation placed on them: to provide an internal review process for denials of warranty coverage. In the insurance context currently, where home warranty protection is delivered as an insurance product, different insurance companies can have different dispute resolution processes. They are however, subject to an outside timeline for providing a decision to a homeowner. In a new multi-provider model, regulations could impose certain obligations, such as time limits within which to advise a homeowner of a decision and the reasons for the warranty claim decision.
The warranty provider might engage independent experts to assist the parties. It is reasonable to assume that many claims will continue to be resolved efficiently and effectively without the need for third party adjudication. The warranty provider, acting as facilitator, would be supporting constructive conversation between the new home owner and the builder and, at this stage, would not necessarily be directly engaged in the dispute.
If the homeowner and builder cannot resolve matters, the warranty provider would then step into the role of adjuster, assess the claim, decide on the claim and, where warranted, arrange for the work to be done. It is at this point, where a claim is determined to not be warranted or a homeowner disagrees with the proposed remedy or repair, that the homeowner would have a right to ask that the matter be heard by an independent adjudicator.
It may be necessary to consider the timelines that should apply, for example, for submitting claims and repair periods. There may be a role for government and the insurance sector regulator to set expectations and minimum requirements.
Flexible and accessible process
I am recommending a process that is flexible and allows for different hearing processes considering the subject matter and dollar value of the claim in dispute. This would allow for a proportionate response to the dollar value and complexity of different disputes. Guidelines could be developed to assist the adjudicator including the possibility of setting dollar value limits under which the default would be a paper hearing
To support timely and efficient hearings, expectations on hearing times and length of proceedings could be set out in guidelines.
The adjudication process must be accessible to homeowners. One measure that could support accessibility is having the adjudication hearing in the home itself. Tarion field representatives currently attend at the home where necessary. In tomorrow’s world, warranty providers’ assessors, adjusters and others would attend at the home. Consideration should be given to allowing the adjudicator to determine where to hold a hearing, including in the home.
Costs of adjudication process and individual adjudication requests
My recommendation is that the administrative costs of individual adjudications, including the costs of experts, continue to be funded at minimal cost to the homeowner, as they are currently. Tarion’s dispute resolution process imposes limited administrative costs on the new home owner to initiate the process. There is no cost to file a warranty claim, however, there is a $250 fee to request a conciliation inspection (which may be refunded if at least one claimed item is found to be warranted). The cost to file an appeal to the LAT is a non-refundable $100. This is a reasonable cost to the homeowner to initiate the dispute resolution process and a similar approach should be continued in a new adjudication system.
Homeowner costs for warranty claims and adjudication should continue to be limited to administration fees that are not cost prohibitive. The rules could allow for reasonable administration fees at various stages of the adjudication process including for example, an initial filing fee, pre-hearing fee and hearing fee.
Consistent with rules for similar adjudicative tribunals hearing appeals of administrative decisions, awarding costs against a homeowner should be limited to exceptional circumstances.
Different rules on allocation of costs may be appropriate for adjudication hearings involving a condominium corporation. In at least some cases, condominium corporations will be in a better position financially to engage experts and bear costs.
Consideration could be given to funding the core administration costs of the adjudication process as is done in the Canadian Motor Vehicle Arbitration Plan, CAMVAP, model
Onus of proof
There is currently considerable ambiguity about who must prove what. This should be clarified in the legislation. The homeowner is not the technical expert and must rely on the builder to carry out what is contracted for, engage competent trades people, and have the necessary oversight in place to ensure quality workmanship. A new home owner purchases an end-product and should not be expected to have the expertise to be able to assess whether something is a defect, even if given an opportunity to “inspect”. Consequently, the most a new home owner can be expected to do is provide credible evidence of the symptoms they are experiencing or observing. A homeowner will know the symptoms but should not be expected to prove the cause.
A claimant would be required to provide the necessary supporting documentation setting out a description of the symptoms they are experiencing and where appropriate include photographs and other measurements. In the case of intermittent symptoms or symptoms that are difficult to observe additional time or expert input may be required.
Homeowners might be asked if they have reviewed what is covered by the warranty and whether they have read the definition of what constitutes a major defect. They might be asked whether they believe there has been actual physical damage to one or more parts of their home or whether they think the home is unsafe or unlivable. As to the symptoms, a homeowner would be expected to be specific and provide photographs and other hard evidence where available. They should be asked to note when the symptoms were first noticed and their frequency.
Use of experts
Tarion does use experts but the process appears to be ad hoc and there is no clear policy on when they are retained, who retains them and how they are paid. In some cases, Tarion will engage them directly while in other cases it has offered a homeowner money to hire the expert. Warranty providers in other jurisdictions will also engage experts as required. The policy regarding the use of experts should be clearly set out and communicated to the homeowner both at the warranty provider level and at the level of the adjudicator.
Some homeowners spoke of the expense of having to hire experts when appealing a warranty decision to the LAT. Many believed they had to engage experts at great cost, to succeed in their claim. If an expert is required, an adjudicator should be able to engage the expert directly at no cost to the homeowner. The expert would be engaged in a neutral capacity to provide input to the adjudicator and not as an advocate for one or the other of the parties. As with the selection of adjudicators, experts should be neutral and preferably drawn from a roster established independently of the warranty providers.
Self-represented litigants
Some homeowners’ experiences before the LAT have been difficult. They have faced the prospect of two opponents, Tarion and the builder, each with their own legal counsel. For many, the LAT appeal process is difficult to navigate without hiring a lawyer.
The adjudication process should make every effort to keep the dispute between the two parties directly concerned: the warranty provider making the decision and the homeowner.
Whether independent adjudication moves to a new entity or remains with the LAT, I believe more can be done to assist self-represented parties. Consideration should be given to whether:
- Further training for adjudicators and staff interacting with self-represented individuals is needed;
- Having templates, checklists and other materials available for adjudicators dealing with self-represented individuals is useful;
- It should be obligatory for an adjudicator to provide self-represented parties with explanations of the process and important concepts prior to the start of the adjudication process; and,
- A more informal and less intimidating setting such as the use of a round table rather than an adjudicator’s dais would be beneficial.
Footnotes
- footnote[1] Back to paragraph Chornenki, supra Note 3.
- footnote[2] Back to paragraph Ontario Automobile Insurance Dispute Resolution System Review – Final Report. Web. February 2014 http://www.fin.gov.on.ca/en/autoinsurance/drs-final-report.pdf.
- footnote[3] Back to paragraph Mendes, Errol et al., 2013. ADR-Research and Analysis Report. Web. 4 December 2016 . http://opo-boa.gc.ca/autresrapports-otherreports/evalform-formeval/red-adr-eng.html
- footnote[4] Back to paragraph CAMVAP 2015 Annual Report. Web. 4 December 2016.http://www.camvap.ca/annual-reports/2015-annual-report/