November 7, 2013 by Canadian Underwriter
The Court of Appeal for British Columbia recently cited an 81-year-old Supreme Court of Canada decision when it ruled against The Wawanesa Mutual Insurance Company over a disputed residential fire claim, overturning a 2012 decision by a lower court in favour of the insurer.
Scott Peebles and Tor Quinn owned a house in Surrey, B.C. that was completely destroyed by an explosion and fire April 26, 2008.
Court records indicate that Wawanesa contended at the time that the loss was excluded from coverage because the fire occurred after the house had been “vacant” for more than 30 consecutive days. The carrier also contended the policyholders had “failed to advise it of a change in its occupation and use, which it regards as material to the risk insured.”
In a decision released April 25, 2012, Mr. Justice Peter Willcock of the Supreme Court of British Columbia agreed with Wawanesa, in that the policyholders failed to notify Wawanesa of a material change in risk.
That ruling was overturned Nov. 1 of this year when the provincial appeal court ruled that the vacancy exclusion in Wawanesa’s policy permitted “reduced occupancy.”
Quinn and Peebles bought the house in 2006, with the intent that Quinn would live in it. Court records indicate that the following year, Quinn was staying at his girlfriend’s house some of the time and in early 2008 was offered work on a mine in the Northwest Territories. The owners had also put the house up for sale.
“He was away from the Lower Mainland from February 7-27; from March 4-26; and from April 1-23, 2008,” according to court records. There was also no bed at the house, though Quinn had contended he spent one night in March at the property, in his sleeping bag, less than 30 days before the explosion and fire.
Justice Willcock ruled in 2012 that Wawanesa had “not established that Quinn permanently removed himself from and abandoned” the home “more than 30 days before April 26, 2008” and had not proven the claim fell within the vacancy exclusion of Wawanesa’s policy. He also disagreed with Wawanesa’s argument that the policyholder made a wilfully false statement when he wrote “not applicable” on the proof of loss, in response to the question of whether there had been a change in use, possession, location or exposure of the property described.
But Justice Willcock did find that there was a material change in risk, “within the knowledge and control of the insured,” that notice of that change was not given to the insurer and that “the nature of the occupancy had changed dramatically.”
Justice Willcock noted at the time that Quinn’s “infrequent and tenuous connection with the house gave rise” to specific risks described by a personal lines underwriter who gave evidence on behalf of Wawanesa.
“I am satisfied that had notice been given to Wawanesa it would, on reasonable grounds, have altered the terms upon which it would have covered the risk and the premium that would have been charged for doing so,” Justice Willcock ruled at the time.
However, that ruling was overturned Nov. 1 by the provincial appeal court, which cited the Supreme Court of Canada’s 1932 ruling in the case of J. Donald Davidson versus The Laurentian Insurance Company.
In August 1928, Laurentian wrote a three-year policy on Davidson’s farm, which was destroyed by fire Mar. 21, 1930. On Feb. 20, 1930, Davidson had moved to Newmarket, Ontario with the intention of living there permanently and selling his farm. He had not given notice to Laurentian that his property became vacant.
At the time, Ontario Statutory Condition 5 (d) stated that an insurer shall not be liable for loss to an insured property that is “vacant or unoccupied for more than thirty consecutive days.”
“Evidence was offered at the trial to show that the vacancy of the property was a change material to the risk, but there was no evidence of any change material to the risk in addition to the bare fact of vacancy,” wrote Mr. Justice Sir Lyman Poore Duff, in the Supreme Court of Canada’s ruling, released Mar. 24, 1932, against Laurentian.
“We are of opinion that, by virtue of clause (d) of condition 5 in the policy, vacancy for a period of thirty days was one of the risks contemplated by the policy …”
The policy that Wawanesa renewed June 29, 2007 for Quinn and Peeble’s home in Surrey contained an exclusion for “loss or damage occurring after your dwelling has, to your knowledge been vacant for more than 30 consecutive days.”
The exclusion defined vacant as “circumstance where, regardless of the presence of furnishings: all occupants have moved out with no intention of returning and no new occupant has taken up residence; or in the case of a newly constructed house, no occupant has yet taken up residence.”
Wawanesa argued that the Supreme Court of Canada’s 1932 decision in Laurentian vs Davidson could not be applied to its dispute with Quinn and Peebles, contending there is a distinction between the terms “vacant” and “unoccupied” in common law.
But in its Nov. 1 ruling this year, the Court of Appeal for B.C. noted that Peebles and Quinn’s house in Surrey did remain “‘occupied’ in the usual sense of the word.”
The policyholders “were entitled to assume that the specific provision that inferentially permitted a 30-day period of un-occupancy (or ‘vacancy’ as defined by this policy) meant that it was ‘one of the risks contemplated by the policy'” wrote Madam Justice Mary Newbury, Mr. Justice John Hall, and Mr. Justice Edward Chiasson for provincial court of appeal. “If the clause permitted non-occupancy for up to 30 days, it permitted reduced occupancy as well.”