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TITLE INSURANCE

Thursday, September 05, 2019 @ 8:52 AM  


Lexis Advance® Quicklaw®
Appeal by the defendant insurer from judgment finding it responsible for certain losses sustained by the respondent in relation to a cottage property for which he obtained title insurance with the appellant. The previous owner commenced construction of the cottage in 1989 pursuant to a building permit. The respondent purchased the cottage in 1999 under a power of sale. Due to a loss of records in a 1996 fire, the Building Department could not confirm whether the cottage ever passed its final inspection. The respondent did not request that the Building Department conduct a final inspection of the cottage prior to closing. During a 2011 renovation project, the respondent discovered several significant structural defects that made the cottage inhabitable. The appellant denied coverage because it learned that there was no open building permit. The trial judge concluded that the defects in the cottage were latent defects and that the factual situation here fell within the coverage offered by the Policy for unmarketable title.

HELD: Appeal allowed. The evidence demonstrated that, even if a final inspection had been conducted, that inspection would not have revealed the construction defects because those defects were hidden behind the walls of the cottage that were already constructed and had apparently already passed inspection. Had the respondent insisted that the Township conduct a final inspection before the purchase was completed, that inspection would thus not have revealed the defects. The defects would not then be an issue regarding the marketability of the title. An off-title search would also not have revealed the construction defects or any of the other deficiencies the respondent alleged were associated with the handling of the building permit by the Township and the construction undertaken pursuant to that building permit. The purpose of title insurance was to protect against what off-title searches would reveal and obviate the need for exhaustive and costly off-title searching, not to protect against defects that would not be revealed by such searches. The situation in this case was much more akin to an issue with the marketability of the land than with the marketability of the title.

Breen v. FCT Insurance Co., [2019] O.J. No. 3846, Ontario Court of Appeal, P.D. Lauwers, J.M. Fairburn and I.V.B. Nordheimer JJ.A., July 12, 2019. Digest No. TLD-September22019009