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PROPERTY INSURANCE - Business policies

Monday, March 30, 2020 @ 9:34 AM  


Lexis Advance® Quicklaw®
Appeal by the insurer from summary judgment declaring it must indemnify the respondent insured for recoverable depreciation. Cross-appeal by the insured for a declaration that the appellant waived the 24-month deadline in the 2013 settlement agreement or an order that it was entitled to relief from forfeiture. The respondent’s commercial building was destroyed by fire in 2011. Under a rider to the policy, the respondent was entitled to replace the destroyed building at the same or a different site and be indemnified for recoverable depreciation provided it effected replacement with due diligence and dispatch and a building of like kind and quality. In 2013, the respondent had not replaced the destroyed building and commenced the present action for indemnity under its policy and damages. In May 2013, the parties settled some of the claims and agreed that the respondent would have 24 months to proceed with replacement of the destroyed building, failing which it would be deemed to have forever waived and forfeited any claim for recoverable depreciation. Prior to the deadline the respondent entered into an agreement to purchase a Scarborough property as a replacement which met the like kind and quality requirement. In May 2015, the parties settled the outstanding issues regarding the building loss claim on the basis of a further payment of $3 million. This agreement was subject to various conditions, including the closing of the agreement to purchase the Scarborough property. The respondent then entered into an agreement to purchase a Pickering property in November 2015 and terminated the agreement for the Scarborough property. The appellant discovered this in November 2015 and proceeded to assess the suitability of the Pickering property as a replacement for the destroyed building. Subsequently, it argued the respondent had forfeited its entitlement to recoverable depreciation under the policy and the 2013 settlement agreement. The motion judge found that the 2013 settlement agreement required the respondent to complete the purchase of another building of like kind and quality within the stipulated 24-month replacement deadline but that the May 2015 agreement effectively amended the 2013 settlement agreement through a qualified waiver of the 24-month replacement deadline, which instead required the respondent to complete the purchase of the Scarborough property. The motion judge found that by its conduct after November 2015, the appellant demonstrated a clear and unequivocal intention to calculate the recoverable depreciation owing pursuant to the policy utilizing the Pickering property in substitution for the Scarborough property and had therefore waived the respondent’s failure to close the Scarborough transaction and its right to deem that it had waived and forfeited any claim for recoverable depreciation.

HELD: Appeal allowed. Cross-appeal dismissed. The appellant did not waive the respondent’s failure to replace its destroyed building as required under the policies and agreements of the parties. Under the May 2015 agreement, the $3,000,000 settlement on account of recoverable depreciation was subject to closing the purchase of the Scarborough property. The appellant did not waive absolutely the 24-month replacement deadline by considering the Pickering substitution. The motion judge erred in holding that the appellant had to give notice to the respondent that it had forfeited its entitlement to recoverable depreciation by failing to close the Scarborough transaction and further erred in finding the appellant waived the obligation to close that transaction. None of the agreements or correspondence required notice of forfeiture. Under the 2013 settlement agreement, forfeiture was automatic in the event of default. The appellant’s post-November 2015 conduct indicated at most a willingness to consider accepting the Pickering property as a substitute for the Scarborough property but never indicated, either expressly or by its conduct, that it would do so. The respondent forfeited its right to recoverable depreciation when it failed to close the Scarborough transaction and the appellant never waived the forfeiture. There was no basis on which to grant relief from forfeiture when the respondent had neither replaced its destroyed building nor proposed terms on which it should be permitted to do so now. The appellant was not contractually obliged to fund the Pickering transaction. There was thus no basis on which to award damages.

Champion Products Corp. v. Intact Insurance Co., [2020] O.J. No. 602, Ontario Court of Appeal, J.M. Simmons, G.I. Pardu and I.V.B. Nordheimer JJ.A., February 12, 2020. Digest No. TLD-March302020003