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

A.B.C. Hotels

Ardath

 

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Asquith

 

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The first and only hotel in Asquith was built in 1906 by Andrew Lunn. Named the Arlington Hotel, it had a bar, a barber shop, and a laundry. Once the hotel was established, Lunn moved on to establish more hotels in Saskatchewan, including one at Rosthern. Miss Emma Brown who had worked for Lunn as a chambermaid become the owner of the Arlington Hotel after he left. Emma Brown operated the hotel for over 30 years. She died in 1956 at age 93.

Bladworth

 

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Built in 1906, the Bladworth Hotel was destroyed by fire in 1933. The fire broke out in the old barroom. Tom Anderson, the hotel's proprietor, lost $1500 in cash as a result of the fire -- a lot of money to lose during the Depression.

Brownlee

 

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Jerry MacRoberts built the City Hotel in Brownlee in 1909. It contained a bar, restaurant, bowling alley, and dance hall. In 1911, Jim Conner took over the hotel and operated it until the bar was closed in 1915 due to Prohibition. In 1916, Charlie Yock bought the hotel and ran it as a boarding house. The hotel burned down on June 30, 1929 along with many other businesses along Brownlee's main street.

Carlyle

The Carlyle Hotel and the Del Monte Hotel, 1908. Source

The Arlington Hotel (formerly the Carlyle Hotel), c1916. Source

The stone and brick Carlyle Hotel was built in 1901 by Ben Hollonquist. A year later, a syndicate composed of J & E Abercrombie, Porteous, and others built the Del Monte Hotel across the street from the Carlyle. In 1913, a third storey was added to the Carlyle Hotel. Its name was changed to the Empire Hotel, then to the Arlington Hotel in 1916 by owner James Anderson. Businesses which operated out of the Arlington were the town butcher shop, a harness shop and a hardware store.

Carnduff

 

Working on the balcony of the Avenmore Hotel, 1910. Source

Frank and Harry Crozier built the Avenmore Hotel in Carnduff in 1909. Harry and his wife Jessie operated this hotel for 40 years. They lived in the hotel with their daughters Irene and Laura and their son Lloyd.

Caron

 

Merchant's Hotel, Caron, c. 1912. Source

 

Chaplin

 

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Colonsay

 

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The Colonsay Hotel was built in 1910. In 1917 during Prohibition, the 22-room hotel was turned over - ironically - to the Saskatchewan Brewing Company by the owner, a Mr. Daley, who owed the company $3,300. Peter and Rosalina Pura bought the hotel from the brewing company for $3,000 in February 1920. the hotel was destroyed by fire in October of that same year. The Puras had insured the hotel at a value of $14,500, and were awarded $13,500. The insurance company appealed this payment, claiming that the total amount of insurance was greater than the actual value of the hotel at the time of the fire. The jury agreed, and the insurance companies were awarded $8,000.

Craik

 

Hotel Waldorf, Craik, 1914. Source

Craik Hotel, 1952. Source

The two-storey hotel in Craik was built in 1903. It was destroyed by fire 100 years later in 2003.

Cupar

 

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The Imperial Hotel at Cupar was built in 1906. After the provincial liquor laws allowed women into bars in 1961, the hotel proprietors Henry and Laura Erhart commissioned a mural for the bar from Plains Cree artist Sandford Fisher of the Gordon Reserve.