Ontario’s Court docket of Enchantment discovered a house insurer, in precept, has an obligation to defend a declare in opposition to a house owner in a property sale, as a result of a decrease court docket can’t assume the house insurance coverage coverage’s exclusion for ‘intentional acts’ reminiscent of fraud would apply to a purchaser’s declare of negligence.
Nonetheless, the house insurer doesn’t should defend the property sale declare, the Enchantment Court docket in the end dominated, as a result of the property sellers have been too late in notifying their insurer concerning the declare.
In Kerk-Courtney v. Security National Insurance Company (TD General Insurance Company), the insurer’s obligation to defend a lawsuit in opposition to a policyholder turned on the interpretation of an “complete settlement” clause within the house’s buy and sale settlement.
As framed by the Enchantment Court docket, the query is whether or not a negligence declare associated to statements made within the buy settlement clearly match inside the insurer’s coverage exclusion for intentional acts.
In 2016, Karen Joanne Kerk-Courtney and Daniel Joseph Courtney bought their Gorham, Ont., property to Danielle Fex and Robert Duncan. (Daniel Joseph Courtney was not a registered proprietor of the property.)
The Settlement of Buy and Sale (APS), dated Oct. 27, 2016, contained an “complete settlement” clause, offering that the APS, together with any connected schedules, constituted the whole settlement. The schedules included an inventory abstract and a Vendor Property Data Assertion (SPIS).
After the sale, Fex and Duncan found defects with the property, together with ice damming, mould progress, run-off points, skirting harm, and rodent harm.
They sued the property sellers, searching for damages for fraudulent or negligent misrepresentation associated to the situation of the property on the time of the sale. Fex and Duncan claimed that after they entered into the APS, they relied on misrepresentations within the itemizing, the SPIS, and oral statements made by the sellers.
These allegations haven’t been confirmed in court docket.
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Kerk made a declare to her house insurer, Safety Nationwide, to defend within the lawsuit. Safety Nationwide denied an obligation to defend the declare.
A decrease court docket discovered the insurer didn’t have an obligation to defend the declare. However in so doing, it discovered the ‘complete settlement’ clause within the APS would make it unattainable for any negligence-based tort claims in opposition to the sellers to succeed, as summarized by the Enchantment Court docket. That’s as a result of the insurance coverage coverage excludes protection for any “intentional or legal act or failure.”
Fex and Duncan appealed, arguing the decrease court docket decide mustn’t have presumed the lawsuit would fail as a result of all of its allegations concerning the ASP would have fallen below the coverage’s “intentional acts” exclusion.
The Enchantment Court docket noticed the consumers’ lawsuit doesn’t distinguish between intentional and negligent claims.
“The [sellers] argue that since alleged oral misrepresentations, if made negligently, wouldn’t be captured both by the [insurance policy’s] contractual legal responsibility exclusion or the exclusion for intentional acts or failures to behave within the coverage, [Security National] due to this fact has an obligation to defend the motion,” because the Enchantment Court docket summarized.
On this level, the Enchantment Court docket agreed. It discovered the decrease court docket justice incorrectly assumed all the allegations associated to the ASP would fall below the ‘intentional acts’ exclusion within the coverage.
On the identical time, the Enchantment Court docket discovered the insurer didn’t have an obligation to defend for a special cause; that’s, property sellers took too lengthy to inform their insurer of the declare. “The [policyholders] discovered of the [buyers’ lawsuit] in November 2018,” the Enchantment Court docket discovered. “They defended the motion on Mar. 28, 2019.
“On Could 14, 2021, after examinations for discovery, the [buyers] requested coverage paperwork from [Security National]. The [buyers] lastly notified [Security National] of the [lawsuit] on Oct. 8, 2021.
“The [policyholders’] conduct in delaying discover to [Security National] for 2 and a half years clearly constituted a breach of its immediate discover obligation.
“I don’t settle for the [policyholders’] clarification for the delay: the truth that [they] failed to understand that the [lawsuit] associated to allegations of negligence in addition to intentional acts didn’t droop the reporting obligation. A declare for negligent misrepresentation was clearly asserted within the assertion of declare.”
Function picture courtesy of iStock.com/fstop123
