The Colonsay Hotel – Canada’s “Leading Case” in Insurance Valuation Law

The Colonsay Hotel around the time it was built in 1910. Source

The Colonsay Hotel was at the centre of a major insurance case that went all the way to the Supreme Court of Canada in the early 1920s. The Court’s decision, handed down on June 15, 1923, greatly limited the liability of insurance companies on old buildings. It also became known as the “leading case” in Canadian insurance valuation cases.

Built in 1910, the 22-room hotel at Colonsay was sold two years later to John Daley for $20,000. In 1912, even though Colonsay had a population of only 150 people, optimism ran high. At that time, the bars were open, and the sale of liquor was lucrative for the hotel business.

With the advent of Prohibition in 1915, the value of the Colonsay Hotel, as with all Saskatchewan hotels, plummeted dramatically. In 1917, Daley was forced to turn the hotel was over to – ironically – the Saskatchewan Brewing Company to which Daley owed $3,300.

In February 1920, Peter and Rosalina Pura, in partnership with John Lashkewicz, formed the Colonsay Hotel Company and bought the village’s hotel from the brewing company for $3,950. The Puras decided to operate a movie theatre in the hotel and had a $400 addition built. They took out three insurance policies totalling $14,500 – one with the Canadian National Fire Insurance Company for $6,500 on the building and contents; one with the Union Insurance Society of Canton, Limited for $4,000 on the buildings and furniture; and one with the British Crown Assurance Corporation, Limited for $4,000 on the building and contents.

Lashkewicz sold the Puras his half interest in the hotel property on September 20, 1920. Three weeks later, on October 2, 1920, the hotel was destroyed by fire. What resulted, according to newspaper reports, was a lengthy court battle between the hotel owners and the insurance companies. 

Courts Hear Insurance Case

Leader-Post, June 16, 1923

The Puras had insured the hotel at a value that they believed to be the replacement value of the building -- $14,500. After the fire, however, the three insurance companies offered to indemnify the Colonsay Hotel Co. for only $5,100. The owners appealed and were awarded $13,500 by the Court of King’s Bench in Saskatoon.

The insurance companies turned to the Saskatchewan Court of Appeal, claiming that the original verdict should have been based on the actual value of the hotel at the time of the fire rather than on the cost of replacing the structure. The Court of Appeal maintained the original judge’s verdict and dismissed the appeal with costs.

The insurance companies then took the case to the Supreme Court of

Canada, which rendered its verdict on June 15, 1923. The five judges decided with the insurance companies, stating that the appeal should be allowed. They referred to the Saskatchewan Insurance Act, chapter 84, R.S.S. 1920, section 82 which stated that insurance companies were not liable for loss “beyond the actual value destroyed by fire.” The Supreme Court then ordered a new trial which took place in September 1923.  The insurance companies were eventually awarded $8,000.

The Leading Case in Canada

 

Star-Phoenix, Sept. 22, 1923

According to Marvin G. Baer in his article on insurance law published in the Ottawa Law Review (Winter 1976), “Canadian National Fire Insurance Co. v. Colonsay Hotel Co.” became “the leading case” in Canada for determining actual cash value in property insurance. Baer notes, however, that “Canadian courts have been reluctant to be tied down to any particular test” for valuation. The courts have since used some combination of replacement value less depreciation or market value.

The unique factor in the Colonsay Hotel case, Baer asserts, was the fact that the building’s depreciation in value came about not by physical deterioration, but by “obsolescence caused by external factors.” The external factor in this case was, of course, the closure of the bars. The value of a large hotel in a small town following Prohibition “is an obvious example of the kind of obsolescence which should be considered” when assessing its actual cash value.

 

After the ashes settled, a new, smaller hotel was built in Colonsay which still stands today. It is now called Kobis Bar and Grill.

The Colonsay Hotel, April 2006. Joan Champ photo

©Joan Champ, 2019

The Woman in the Well: Murder at Sutherland's Shore Hotel

On June 29, 2006, on the west corner of 108^th Street and Central Avenue in the Saskatoon neighbourhood of Sutherland, a work crew discovered a woman’s body while excavating fuel tanks from an old gas station. She had been murdered, wrapped in a burlap sack, stuffed into a barrel, then thrown into a well. The Shore Hotel once sat on the site where the woman’s body was found.

Subsequent investigations by the Saskatoon City Police determined that the “Woman in the Well,” as she was soon called, had been killed sometime in the early 1900s. Her body and clothing were relatively well-preserved due to the mixture of water and gasoline from the gas station that was later built on the site.

Carole Wakabayashi, a clothing and textile historian, worked with the City police and was able to date the woman’s fitted jacket, high collared blouse, and long skirt to somewhere between 1910 and 1920. A broken golden necklace was found with the body. Also found rolled up in a ball next to the woman’s corpse were a man’s vest and trousers.

Two facial reconstructions of the Woman in the Well. Source

Dr. Ernest Walker, forensic archeologist at the University of Saskatchewan, helped the police determine that the victim was a Caucasian woman between the ages of 25 and 35, five feet and one inch tall, with a prominent nose and light brown to reddish hair. Walker extracted mitochondrial DNA from the woman’s remains, which investigators hoped would help to match to a living descendant. Police unveiled two facial reconstructions, a two-dimensional image from an RCMP facial reconstructionist in Fredericton, and a 3D model from an expert from Montreal who volunteered to work on the case. It was hoped someone might recognize the woman from old family photos. Police subsequently received about 30 calls from people across Canada and as far away as France looking for a missing mother, grandmother, or great aunt, but no DNA matches have been made to date.

The Shore Hotel

The only photo I have found to date of the Shore Hotel. Source: The Star Phoenix, December 16, 1912.

The Shore Hotel was erected in May of 1912 by William W. Shore in the village of Sutherland. Located about three miles east of Saskatoon, Sutherland was founded by the Canadian Pacific Railway (CPR) in 1908 and incorporated into a village in 1909. By the end of 1912, its population had grown from 100 to 1500. Over half of the residents were employees of the CPR.

“I have a good business here which has been growing by leaps and bounds,” Shore told the Saskatoon Daily Star in January 1914. “Since the advent of street cars, the receipts have doubled.” When the City of Saskatoon built a new streetcar line to Sutherland that year, people originally waited for the arrival of streetcars inside the Shore Hotel. The hotel must have had an unsavory reputation because, on January 14, 1914, the Sutherland Town Council requested that City of Saskatoon build a separate shelter, stating, “… it is not conducive to the morals of the community to have ladies and children awaiting the arrival of cars in the Hotel.”  

Prior to 1914 when water mains and sewer lines were extended from Saskatoon to Sutherland, water was either delivered by horse-drawn tanks to barrels in the kitchens of the town's homes, or hauled from wells. The well on the Shore Hotel site may or may not have been in active use at the time of the woman's murder.

Ownership of the Shore Hotel changed three times in 1914. On January 3rd, John King of Kindersley bought the business for $50,000. The 1914 Henderson’s Directory lists five members of the King family living in the Shore. Joseph Pelowski of Watson bought the hotel from King in July of 1914. Saskatoon real estate broker W. J. Graham handled the sale. On December 3, 1914, Graham sold the Shore Hotel to a Saskatoon man, whose name was withheld, for $51,000.

Source: The Star-Phoenix, November 23, 1927.

Prohibition (1915-1924) spelled the end for the Shore Hotel. According to Saskatoon City Archivist, Jeff O’Brien, the Town of Sutherland took the property back when the owner didn’t pay his taxes. The Henderson Directory lists the hotel as closed until 1925, when it disappears from the record. Advertisements in October and November 1927 issues of the Star-Phoenix show that the hotel building had been declared a public nuisance, dangerous to public health.Tenders were sought for the demolition of the old hotel.

Missing Persons

Who was the Woman in the Well? Was she a prostitute in this rough-and-tumble town filled with railway workers? Was she an employee at the Shore Hotel, killed by a man at the hotel? Was she a transient herself? Was the crime a domestic one?

Source: The Saskatoon Daily Star, December 27, 1912

 

One sad story. Saskatoon Daily Star, March 3, 1923

There were certainly a lot of missing persons back then. “Sorrowing Mothers, Fathers and Relatives Seeking Information in Regard to Missing Ones in Canada,” reads the headline in the December 27, 1912 issue of the Saskatoon Daily Star. “Western Canada appears to be the mecca for many people wishing to hide themselves if enquiries received here by mounted and local police during the past year are to by taken as any criterion.” The newspaper reported that, throughout 1912, hundreds of letters from anxious family members had been received by the Saskatoon police on an almost daily basis. The paper provided names and descriptions of some on the missing persons list, including several women. For example, Mrs. Charles Washam of St. John, North Dakota, was sought by her husband. “She is 5 feet tall, weighs 140 pounds, slight in figure, blue eyes, brown hair, fair complexion, brown fur hat and brown suit. Has false teeth.” 

Those last three words rule out the mystery woman found in Sutherland's well. Investigators revealed that she had one tooth that had been filled by a dentist and an abscessed tooth that would have needed attention. Sadly, despite the valiant efforts of the Saskatoon Police Service, we will probably never learn her identity.

©Joan Champ, 2019