Coverage dispute arises as to whether construction exclusion applies to building under renovation

Editor’s Note: In an earlier version of this story, Canadian Underwriter incorrectly reported that Intact was denied leave to appeal an earlier court finding that a building renovation does not necessarily trigger an “under-construction” exclusion. In fact, the Court of Appeal for Ontario is scheduled to hear an appeal on this issue. Also,  Canadian Underwriter originally reported that a client’s lawsuit against her brokers was dismissed in 2020. In fact, the court dismissed claims against the brokers for failing to arrange coverage for a building under construction. Canadian Underwriter apologizes for the errors.

The Court of Appeal for Ontario is scheduled to hear this month an appeal, from Intact, of an earlier court finding that a building renovation does not necessarily trigger an “under-construction” exclusion, a lawyer representing a property insurance client reports.

In Tataryn v. Axa Insurance Canada, released Jan. 9, 2020, Ontario Superior Court Justice Pierre Roger found that a construction exclusion in an AXA Insurance Canada property policy applies to new construction, not a renovation.

Intact acquired AXA Canada’s operations in 2011.

Susan Tataryn was operating a tax law practice from her Ottawa home when she experienced two water damage incidents – the first in December 2010, and the second in March 2012. She was insured by AXA Insurance Canada.

The 2010 event occurred after an internal plumbing malfunction. The 2012 event occurred when the client’s boiler system malfunctioned. AXA made some payments for the 2010 loss but the parties could not agree on the amount of the loss. That is among the issues in the ongoing lawsuit. AXA also took the position that the 2012 loss is not covered due to the construction exclusion.

Tataryn’s property “was undergoing significant renovations prior to the first occurrence, and these renovations remained largely in abeyance up until the second occurrence,” Justice Roger wrote in his January, 2020 ruling.

The case has yet to go to trial. Tataryn sued AXA Insurance Canada (now known as Intact Insurance Company of Canada), adjuster Charles McLeod, broker Irvin Hoffman, and brokerage Cohen & Lord Insurance Brokers Limited. Allegations against the defendants have not been proven in court.

The 2020 ruling contained several decisions. Among them, the court granted a motion by Tataryn that her property was not subject to the “building is under construction” exclusion relied upon by AXA. The Court of Appeal for Ontario is scheduled to hear the insurer’s appeal on that issue May 27, Low Murchison Radnoff LLP lawyer Brian Elkin told Canadian Underwriter. Elkin is representing Tataryn.

The AXA Canada policy did not define “construction,” Justice Roger noted.

In finding that renovation is not the same as construction, Justice Roger cited Wilson v. Ina Insurance Co. of Canada, released in 1993 by the Court of Appeal for British Columbia. In Wilson, B.C.’s appeal court cited Black’s Law Dictionary, which defines construction as  “the creation of something new, as distinguished from the repair or improvement of something already existing.”

As a result of finding that Tataryn’s policy did not exclude the 2012 loss on the grounds of the construction exclusion, Justice Roger dismissed Tataryn’s lawsuit against her broker for not obtaining insurance that would have covered a property under construction.

The January 2020 decision does not mean Tataryn won her case. It only means AXA cannot rely on the construction exclusion. Several other rulings were made in the same decision. Among them, both the carrier and adjuster were ordered to provide certain documents and additional examinations for discovery.

Originally, the time to set the lawsuit for trial was scheduled Aug. 30, 2020. In a September 2020 ruling, Justice Roger extended the date for setting a trial to Dec. 31, 2021.