The recent Breen v. FCT Insurance, 2018 ONSC 3644 (CanLII) case is illustrative of the breadth of coverage afforded to Ontario homeowner’s through title insurance. In that case, John Breen purchased a cottage in 1999. When he went to construct an addition in 2011, he learned of the existence of serious (but hidden) structural defects (latent defects) and was advised not to occupy the building. It was subsequently determined that the structural defects were the result of an inadequate Building Permit and inspection process.
Determining Title Insurance Coverage:
To determine whether title insurance coverage applied, the Court addressed the following questions:
- Whether the plaintiff had established a loss?
- Whether the loss came within the coverage provisions of the Title Insurance Policy?
- Whether the Title Insurer had proven that an exclusion applied (taking the loss outside of coverage)?
Title Insurance Coverage Provisions:
Under the FCT Insurance Company LTD. title insurance policy, insurance coverage was applicable (or potentially applicable) under the following policy provisions:
10. Your Title is unmarketable, which allows another person to refuse to perform a contract to purchase, lease or make a mortgage loan.
15. Work orders, unless you agreed to be responsible for them.
16. You are forced to remove or remedy your existing structure, or any part of it, other than a boundary wall or fence, or you cannot use it for single family residential purposes, because:
e. of any outstanding notice of violation or deficiency notice;
f. any portion of it was built without obtaining a building permit from the proper government office or agency. Your insurance under this item 16(f) is limited to your actual loss in excess of a deductible amount equal to one percent (1%) of the Policy Amount and to our maximum dollar liability of $25,000.
18. Any adverse circumstance affecting the Land which would have been disclosed by a Local Authority Search of the Land at the Policy Date.
19. Any other defects, liens, or encumbrances.
Title Insurance Exclusions Relied Upon:
Conversely, the title insurer attempted to prove the following exclusions from coverage:
1. Governmental power and the existence or violation of any law, by-law, order, code or governmental regulation. This does not include subdivision or development agreements, but does include zoning by-laws, and also laws, by-laws, orders, codes and regulations concerning:
- land use
- improvements on the Land
- environmental protection
This exclusion does not apply to violations or the enforcement of these matters which appear in the Public Records at Policy Date. This exclusion does not limit the coverage described in Items 9, 14, 15 and 16 of the Covered Title Risks.
3. Title Risks:
• That are actually known to you, but not to us, on the Policy Date-unless they appeared in the Public Records;
Interpretation of the Exclusionary Clauses:
With regard to the Title Risks exclusion, the Court found that the there was no evidence that the plaintiff knew of the potential defects beforehand, so it was hence inapplicable. The Court’s treatment of the Governmental power exclusion was more legally significant.
With regard to the Governmental power exclusion, the court determined it to be vague and/or ambiguous, as in the event it was applied, it would be so broad as to ‘exclude all risks,’ effectually negating coverage and rendering insurance coverage illusory. As such, that exclusion was also found to be inapplicable.
If you are a homeowner and have discovered serious defects in your home, it is important to report it to your title insurance company. However, if your insurance claim is denied, speak to an experienced title insurance lawyer at Michael’s Firm today, by calling 647-495-8995.