A recent Court of Queen’s Bench decision illustrated how important it is to know and understand what your insurance policy coverage is, regardless of what the insurance is for. This case involved an application to determine whether an insurance company was obligated to protect the insured person for a loss claimed under the policy.
The Facts
In 2011, the Respondent (the insured person), purchased a house located in Westlock, Alberta as an investment and rental property. As soon as he bought the house, he got insurance coverage for it from the Applicant (the insurance company).
In August 2011, the residence was rented to a married couple, and this rental continued until the end of June 2015. The tenants moved out in July 2015 after some marital issues.
The Respondent decided to renovate the house prior to renting it out to new tenants. He planned on finishing renovations by August 2015 and renting it by September 2015. On July 22nd, 2015, the Respondent towed his holiday trailer to the site and parked it beside the house. He planned on sleeping in the trailer during the renovation. He used the washroom inside the house and stored the tools he was using for the renovations inside the house. There was no food, clothing, or personal items in the house.
On August 22nd, 2015, a fire started on the roof of the house which caused approximately $80,000 worth of damage. After the fire, the Respondent submitted a Proof of Loss claim to the Applicant insurance company. The insurance policy was in full force and effect at the time of the fire and loss by fire is covered by the policy.
The Applicant insurance company denied the claim, as it was their belief that the house was vacant for more than 30 consecutive days, which constitutes an exclusion from coverage.
The Decision
The court had to examine what is meant by “vacant”, since entire claim hinged on whether the house had been empty for more than 30 consecutive days.
The court looked at two cases. The first case reiterated that the primary guiding principle for interpreting insurance policies is:
“where the language of the insurance policy is unambiguous, effect should be given to that clear language”
The second case stated that when an insurance policy defines a term, the court must take care not to substitute a judicial definition for one that is chosen by the parties.
The court next looked at the definition of “vacant” as defined in the relevant policy:
…regardless of the presence of personal property or furnishings in a new or old dwelling, a new dwelling is vacant after it is completed and before a resident moves in and an old dwelling is vacant when all residents have moved out and another resident has not yet moved in.
The policy contained another section whose relevant portion read:
All remaining coverage will also cease if your dwelling is vacant for more than 30 consecutive days unless we give specific coverage. See the definition of vacant earlier in this policy.
The definition of “vacant” in the policy was clear and unambiguous. The court then turned to whether the house had truly been vacant or not. The Respondent had a primary residence with his wife in Fort Saskatchewan. The court held that ownership over more than one house does not necessarily mean the owner resides in more than one home. The court also noted that the terms “resident”, “moved in” and “moved out” were not defined in the policy, and took the time to define them.
“Resident” would be defined, in the context of a dwelling or house, as one who carries out the normal functions of occupancy, including food storage, cooking, eating, storage of personal items, sleeping and using the house or dwelling for leisure purposes. “Moved in” must mean taking up residency for the purposes of what is defined as resident (sleeping, eating, etc.). “Moved out” must mean permanently leaving the premises and discontinuing the purposes as previously outlined.
The court acknowledged that it is well established that completing renovations to rental premises does not necessarily mean the owner is residing in the house.
There was no evidence that the Respondent had fallen within the definition of resident as outlined by the court, or that he planned on residing in the home at any point.
The Respondent argued that the trailer parked beside the house was being occupied by him, and that it should therefore be considered an attached structure and that the entire house, as a result, was occupied by him.
The court did not agree. After looking at the definition of structure (which was defined as a “whole contained unit, a building”), the court held that parking the trailer beside the house and plugging in a power cord to the house did not make the trailer part of the house.
Therefore, the court concluded that the house had been vacant for more than 30 consecutive days, and the Respondent had not requested specific coverage for the gap between tenants. The Applicant insurance company was not obligated to cover the Respondent for the losses that arose from the fire.
The Take Away
Insurance policies are often convoluted and difficult to read. However, it is extremely important that you know what is in your policy, including the definitions. Sometimes there are exclusions that apply during certain events, such as in this case, that one may not be aware of if they do not read the terms of the policy. If you are not sure about your insurance policy coverage, you can contact a lawyer to help you understand what is covered in your policy, and any exclusionary clauses you might need to be aware of.
Insurance policies are complicated and usually filled with confusing and technical language. If you are involved in a dispute involving insurance policy coverage you need skilled lawyers to provide you with clear and forward-thinking guidance. The insurance lawyers at HMC Lawyers have many years of experience representing insurance companies and insured people and dealing with insurance coverage disputes. To book your consultation and find out how we can help, call 1-800-480-3534 or contact us online. We represent individuals dealing with employment-related issues in Calgary and across Alberta.