Insurer’s exemption ruled invalid because it is written in the present tense

The Ontario Court of Appeal has ordered The Personal Insurance Company to defend two homeowners accused of negligently representing the condition of their home in a sale to others, because the exclusion meant to cover ‘breach of contract’ was written in the present – not the past – tense.
In McGrimmon v. The Personal Insurance Company, Derek John McGrimmon and Jennifer Lea Sholea maintained the Personal had an obligation to defend them when they were accused of negligence in the April 30 sale of their home.
In their statement of claim, plaintiffs Anna Poplawski and Geoffrey Hutchinson alleged McGrimmon and Sholea misrepresented the state of their home in an Agreement of Purchase and Sale. After the plaintiffs moved into home, they discovered faulty design and poor construction of the property.
The claim was settled except for the third-party claim against McGrimmon and Sholea, to whom the insurer said it did not owe a duty to defend.
The Personal argued the essential allegations were for a breach of a “contractual duty of care,” which is excluded from insurance coverage because a breach of contract does not represent a “fortuitous contingent risk” or loss.
The court outlined a long line of case law suggesting that breaches of contract are in fact covered under liability in insurance policies, unless there is a specific exclusion written into the policy.
The Personal noted the exclusion in its liability policy says: “You are not insured for claims made against you arising from damage to property you own, use, occupy or lease.”
Since McGrimmon and Sholea no longer owned the home, the exclusion did not apply, the Appeal Court found. The Personal thus had a duty to defend McGrimmon and Sholea.
“The appellant insurer has the onus to show that the exclusion is clearly and unambiguously operative,” the Appeal Court ruled. “It cannot do that.
“The property here is not owned by the respondent [McGrimmon and Sholea] although it once was. The exclusion cannot be read as if it was written both in the present tense and the past tense. It is in the present tense only.”
In the lower court, the judge compared the wording of The Personal’s exclusion to a policy exclusion written by another third-party insurer in the case, Federation Insurance Company of Canada. Federation’s exclusion took into account the possibility of a sale of the home. Specifically, it was for damage to “property you own, rent or occupy; premises you sell, give away or abandon.”