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THE INSURANCE CONTRACT - Coverage provisions and exclusion clauses

Thursday, September 05, 2019 @ 8:50 AM  


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Appeal by the plaintiff from trial judgment dismissing her action for indemnification as statute barred and refusing to grant her relief from forfeiture and from the order requiring her to pay costs of $175,000 to the insurer and $115,000 to the broker. Cross-appeal by the insurer from the trial judge’s finding that the Policy’s exclusions did not apply to deny coverage to the appellant’s loss. The appellant’s log home was damaged in 2008 when it was power washed by a restoration company. The appellant only notified the broker in 2011 of the damage. The insurer regarded the claim as time-barred. The appellant argued she informed the broker three times prior to 2011 about the damage, but each time was told that the policy did not provide coverage. Summary judgment dismissing the action was set aside on appeal and the issue of the limitation defence was ordered to be tried. The trial judge, however, expanded the issues, resulting in re-litigation of the coverage issue. The trial judge rejected the appellant’s evidence of calling the broker prior to 2011. He concluded that the cost of making good faulty material or workmanship language in the Faulty Workmanship Exclusion should be interpreted to mean the cost of re-doing the work which comprised the subject matter of the contract with the restoration company. He held that all other damage properly fell within the scope of resulting damage. The trial judge refused to grant relief from forfeiture because the appellant’s conduct in delaying making a claim was not reasonable, the insurer was prejudiced by her conduct, and while the appellant stood to forfeit a significant amount of money, the prejudice to the insurer from lack of timely notice was also significant. The trial judge found that the appellant attempted to escape the consequences of her late notice by attempting to mislead her insurer with respect to the date she discovered her damages.

HELD:  Appeal from costs award allowed in part. Cross-appeal dismissed. The trial judge did not err in interpreting and applying the Faulty Workmanship and Property Being Worked On Exclusions to the circumstances of this case. The trial judge followed the proper approach to conclude that the cost of making good faulty material or workmanship in the Faulty Workmanship Exclusion only excluded from coverage the cost of redoing the faulty work the appellant contracted for. The trial judge appropriately applied the general rules of contract construction to the Policy’s language and made no palpable and overriding error in the findings about what fell within the category of property while being worked on and what property fell outside. The trial judge did not err in finding that the first time the appellant spoke to the broker about the damage was in 2011. He made no error of law or principle or a clear and manifest error in the appreciation of the evidence. The trial judge applied the correct principles in considering the appellant’s request for relief from forfeiture. Although some of his findings on the gravity of the breach were not supported by the evidence, his ultimate finding of prejudice was supported, as were his holdings regarding the insured’s unreasonable conduct and the element of disparity. The costs award was unreasonable since the trial judge expanded the issues for determination beyond those directed by this court resulting, in practical terms, to the re-litigation of the coverage issue both at trial and on the cross-appeal. Had the trial judge limited the issue to the limitation defence as directed by this court in 2015, trial time would have been reduced by approximately one-third. Consequently, the trial judge’s costs award to the respondents were reduced by one third.

Monk v. Farmers' Mutual Insurance Co. (Lindsay), [2019] O.J. No. 3811, Ontario Court of Appeal, K.N. Feldman, D.M. Brown and B. Miller JJ.A., July 19, 2019. Digest No. TLD-September22019008