Homeowner’s insurance requires actual owner occupancy

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Me Mariella De Stefano, the author of this article. Source: Robinson Sheppard Shapiro

On December 20, 2022, in Dang v. Industrielle-Alliance, assurance auto et habitation inc., 2022 QCCA 1739, the Court of Appeal upheld the judgment rendered by the Superior Court which was the subject of our bulletin of June 17, 2021 (Insurance policy “Owner occupant »: the importance of occupying the insured building).

The Superior Court decision

The appellant was the sole insured of a policy which provided “homeowner” coverage for “your residential building”. The respondent had insured the house since 2012; in May 2018, the house was damaged by fire.

During its investigation, the insurer concluded that the appellant had traveled sporadically to the United States from 2013 to 2016 and that she had been living in the United States since February 2016 without intending to reside in Quebec. The house, however, was continuously occupied by members of his family.

At trial, the appellant maintained that she had the firm intention of returning to Quebec. However, the evidence revealed that she had left the residence in February 2016 to live with her spouse in the United States and that she had not returned to Quebec in the 27 months preceding the fire.

In addition, she no longer had automobile insurance in Quebec, had acquired a new residence in Texas with her spouse, had tried unsuccessfully to sell her house and had obtained her permanent resident status and her green card in the United States. .

Furthermore, the respondent established with two independent representatives of insurance companies that they too would not have renewed the policy if they had known that the insured did not intend to return to live in the house. .

The appellant argued that the insurance contract was ambiguous and that there was doubt as to the meaning of “owner occupant”. According to the appellant, the term “occupant” designates a person who exercises, either personally or through another person, a real right to property without necessarily being bound by a lease.

As such, according to the appellant, the Superior Court judge erred in concluding that she was not living in her residence at the time of the fire.

The decision of the Court of Appeal

Essentially, the appellant submits three questions to the Court of Appeal.

1. Did the Superior Court err in its interpretation of the insurance contract and more particularly of the concept of “owner occupant”?

The Court of Appeal dismissed the first ground of appeal, pointing out that there was no ambiguity in the policy and that the object of the contract was to insure the owner who occupies the residence, a condition which was not completed by the appellant at least two years before the fire. She concludes that the term “owner occupant” must be interpreted according to its ordinary meaning and in a way that an ordinary person seeking insurance would understand.

The Court of Appeal also added that it would not interfere with the trial judge’s decision to withhold the testimony of the two independent insurance company representatives to support the decision to void the policy.

2. Did the Superior Court err in the distinction made between increased risk and excluded risk?

As for the second ground of appeal, the appellant maintains that the judge erred in concluding simultaneously that there was an exclusion of warranty and an aggravation of the risk. The Court of Appeal noted that an insurer may refuse to indemnify an insured if, following a change in circumstances, the risk which materialized was no longer covered at the time of the loss.

This situation is considered as an exclusion of risk or an exclusion of guarantee. In such a case, the sanction is the total absence of compensation. The Court also mentions that the exclusion of risk is characterized by the will of the insured never to cover such a risk, which is different from the aggravation of a risk.

The Court then cites Lejeune v. Cumis Insurance Society Inc., 1989 CanLII 50 (SCC), 1989 2 SCR 1048, rendered by the Supreme Court of Canada, which explains how to determine whether one is dealing with risk aggravation or risk exclusion. Essentially, one must analyze the insurance policy and identify what the insurer intended to insure. Once the object of the insurance has been identified, it must be determined whether the insurer had expressed the intention to insure the risk that materialized.

The Court of Appeal, citing the judgment of the Superior Court, stated that, contrary to what the appellant maintains, the Superior Court judge did not conclude that the risk was increased, but rather that a risk. The Superior Court concluded that the insurance contract revealed that the insurer intended to insure the owner-occupant of a house. The word “occupant” adds to the word “owner” the notion of living in the insured house. In addition, the expression “your home” confirms the meaning that the insurer intended to give to its contract which, until February 2016, was consistent with what the Appellant wanted to insure, namely her house in Trois-Rivières.

The insurer had the burden of establishing that the insured was no longer the “occupant owner” of the house and the evidence is conclusive. The essential condition of the insurance contract was no longer fulfilled. The materialized risk was no longer the one the insurer wanted to insure. As such, the trial judge correctly applied the teachings of the Supreme Court of Canada in Lejeune.

The Court of Appeal also insisted on the fact that the respondent had clearly demonstrated that it would have terminated the contract if it had been correctly informed of the vacancy situation which the appellant had omitted to declare.

3. Did the Superior Court err in its assessment of the evidence?

The Court of Appeal dismissed the third ground of appeal in which the appellant maintained that the trial judge had erred in his assessment of the evidence on the appellant’s intention to return to Quebec since he did not there was no manifest error of fact or law.

The article was originally published on the firm Robinson Sheppard Shapiro’s website.

About the author

Me Mariella De Stefano is a partner and co-manager at Robinson Sheppard Shapiro in the Insurance Law group.

His practice focuses on insurance litigation, civil and professional liability, more particularly in subrogation claims and complex collection files.

She often directs the group’s approach to insurers, reinsurers and insurance syndicates in order to execute subrogation claims quickly and efficiently, using in particular methods of out-of-court dispute resolution.

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