Most people turn to their insurance companies to help them after suffering property damage, a commercial loss, or injuries resulting in an accident. In a perfect world, the process of collecting payment from an insurance company would be a hassle-free experience. Unfortunately, that’s not always the case. In a recent decision from the Ontario Superior Court of Justice, an insurance company was penalized for its failure to disclose why it denied a claim from one of its customers.
A leak in the basement
On March 12, 2007, the plaintiff discovered water in his basement. He called in a plumber who discovered a break in a pipe at the front of the house inside the basement wall. The plumber had to use an excavator to repair the damage, leaving the plaintiff with a $5,000 bill. Three years later, the plaintiff experienced more plumbing issues in the basement, this time coming from a sewage backup. The plaintiff was convinced the plumber from 2007 had acted incompetently, failing to remedy all of the plumbing issues in the house. As a result, he called a second plumbing company, who repaired the sanitary drain line outside of the house, and partially inside the house. This work cost $6,000.
The plaintiff’s problems weren’t over. In October 2016, the plaintiff noticed a lengthy crack in his driveway as well as a sloped floor in his basement. It was as though the house was sloping to one side. He thought the damage was the result of a damaged foundation stemming from the leaks the house had experienced.
The second plumbing company offered a full warranty on its work, but the plaintiff did not wish to deal with them. Instead, he called his insurance company, who instructed the plaintiff to bring in a third plumbing company to perform an inspection. This third plumbing company told the plaintiff there was an underground water leak in the house, stating “our guys will find it.” Ultimately, no leaks were discovered, meaning the damage that had occurred to the house was not a result of an ongoing plumbing, piping, drainage, or other water-related difficulty. In addition, the insurance company sent a building contractor to determine whether there was obvious structural issues. None were discovered.
No insurance coverage
The plaintiff continued to allege that the underground leakage from years before had affected the soil around his home and was responsible for the damage. Unfortunately, his insurance coverage excluded “damage caused by a movement of earth around or under the house,” “settling, expansion, contraction, moving, bulging, buckling, or cracking, except resulting damage to building glass,” “wear and tear, inherent vice, latent defect, mechanical breakdown, deterioration” and “the cost of making good faulty material or workmanship.” Even though the plaintiff had paid extra for water damage, it did not cover the type of damage he was seeking compensation for. Instead, that coverage was for damage due to flooding as a result of storms or other sudden rushes of water.
The insurance company denied the claim, but failed to provide an explanation as to why it did so.
The plaintiff’s terms & conditions book explained these exclusions, and the plaintiff had access to them. The court noted the exclusions are in force and enforceable. The court had no reason to force the insurance company to compensate the plaintiff for the damage to his home.
Under normal circumstances, the plaintiff would have been responsible for the payment of costs to the insurance company. But the court noted this is a “rule of thumb” and does not have to be followed in every case. Ontario’s Courts of Justice Act allows judges to deviate from that standard practice. In this case, the court determined that the whole trial could have been avoided had the insurance company disclosed why it was denying coverage to the plaintiff. The court wrote,
“In my view, (the insurance company) has brought this case on itself. The poor customer relations that it has exhibited in continually raising premiums without explanation and in denying coverage without a comprehensible explanation, all converged to egg the Plaintiff on in what he thought was a pursuit of justice.
“The Plaintiff turns out to have been wrong about the coverage and in the dark about the premiums. Intact has the law on its side when it comes to the merits of the claim. But under the circumstances it would be a step too far to award costs to (the insurance company). It is incumbent on an insurer to treat insureds in a way that does not exacerbate the problems that they are already facing when they contact them for a home insurance problem. I am therefore not inclined to award any costs to (the insurance company).”
The insurance team at HMC Lawyers has over 130 years of combined litigation experience and have worked on countless insurance claims on behalf of our clients. We understand the nuances of policy language as well as how the courts have interpreted insurance clauses in the past. We provide exception, insightful, and timely advice designed to help our clients achive the best possible result for their insurance coverage disputes. Please call us at 1-800-480-3534 or reach us online to discuss your issue today.