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Insurance - Endorsements. SIR Corp. v. Aviva Insurance Company of Canada
In SIR Corp. v. Aviva Insurance Company of Canada (Ont CA, 2023) the Court of Appeal cites leading case law on insurance 'endorsements':[49] ... As she also noted, any endorsement is built upon the foundation of the Policy: Pilot Insurance Company v. Sutherland, 2007 ONCA 492, 86 O.R. (3d) 789, at para. 21. . Trillium Mutual Insurance Company v. Emond
In Trillium Mutual Insurance Company v. Emond (Ont CA, 2023) the Court of Appeal considered (and allowed) an insurer's appeal on the interpretation of a home owners insurance policy, here involving flood damage. The policy essentially insured the 'replacement cost' of the destroyed home as it stood at the time of destruction [see para 56], and a main issue was the interpretation and application of a limiting provision that excluded "increased costs of repair or replacement due to the operation of any law regulating the zoning, demolition, repair, or construction of buildings” (the 'para. 8 Exclusion')" (ie. new, legally-required work).
These quotes address the law interpreting insurance 'endorsements' (here the 'Guaranteed Rebuilding Cost Coverage' endorsement, or the 'GRC'), which are typically separately-negotiated add-ons to a basic policy:V. THE APPLICATION JUDGE’S DECISION
[26] The application judge accepted the Emonds’ position that the GRC coverage was intended to guarantee the cost to rebuild, and she rejected Trillium’s position that the GRC did not include coverage for increased costs to comply with “any law”.
[27] She relied on Wigle v. Allstate Insurance Co. of Canada, 1984 CanLII 45 (ON CA), 49 O.R. (2d) 101 (C.A.), and held that limitations on endorsements such as the GRC that are not clearly apparent should be set out in the endorsement itself. Since the GRC did not purport to limit compliance costs, in her view, the GRC covered all of these costs.
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Whether the Exclusion Clause Applies to Coverage in the GRC Endorsement
[75] As stated above, the law is clear that endorsements must be read together with the policy of insurance as a whole, including any exclusions from or limitations on coverage: Pilot Insurance Co., at para. 21. This is recognized in the GRC itself, which provides that “in all other respects, the Policy provisions and limits of liability remain unchanged.”
[76] The application judge held that, since there was no limitation on compliance costs in the GRC, the Emonds could recoup all of these costs. In so finding, she relied on the decision in Wigle.
[77] For the reasons that follow, I disagree with the conclusion that the para. 8 Exclusion does not limit the Emonds’ coverage under the Policy.
[78] In my view, the decision in Wigle relied on by the application judge, is distinguishable from this case. In Wigle, the insured was injured in a motor vehicle accident by an unidentified automobile. The insured had purchased a standard automobile insurance policy and an additional “underinsured motorist endorsement”. The insurer denied coverage under the endorsement on the ground that the endorsement did not provide for indemnification where the injury resulted from an unidentified automobile. The insurer argued that the term “uninsured automobile” in the endorsement did not include an “unidentified automobile”. Importantly, there was no exclusion clause elsewhere in the policy that purported to exclude injuries resulting from unidentified automobiles from coverage. There was also no language elsewhere in the policy that would exclude “unidentified automobiles” from the meaning of the term “uninsured automobiles”. The court held that it was not clearly apparent in the endorsement that the term “uninsured automobile” excluded unidentified automobiles. Since this limitation was not apparent, it should have been set out in the endorsement itself.
[79] By contrast, this Policy contains the para. 8 Exclusion of coverage for the increased costs of demolition and replacement due to the operation of any law. The para. 8 Exclusion applies “except as provided under Additional Coverages of Section 1”, which includes the BBCC. The BBCC provides a coverage limit of $10,000 for these increased costs. The fact that this coverage limit is not repeated in the GRC itself is not determinative because the Policy provisions must be read as a whole: Pilot Insurance Co., at para. 21.
[80] For these reasons, I conclude that when the GRC is read along with the para. 8 Exclusion and the BBCC, there is a limit on the increased costs (as defined above) to comply with “any law”, including the MVCA Regulation Policies: they are only covered up to $10,000. This is not a circumstance, as in Wigle, where the alleged limitation was not set out anywhere in the policy. Here, the exclusion for costs associated with legal compliance is explicit in the Policy and is clearly applicable to the GRC.
[81] I also reject the respondents’ submission that because the BBCC is not included on the Declaration Page, it does not apply to this Policy. Unlike many of the other “Section 4 Miscellaneous Coverages Section” provisions, the BBCC does not say that “coverage is shown as covered on the Declaration Page.” Rather, the BBCC specifically provides that the increased amount for compliance is either “an additional amount up to $10,000 or the amount shown on the ‘Declaration Page’” (emphasis added). Trillium has conceded that the BBCC applies and that the Emonds would receive the full $10,000 under that provision.
[82] The Emonds make much of the fact that the GRC uses the term “current building techniques”, which is not defined in the Policy and only appears in the GRC. According to the respondents, this constitutes a conflict between the GRC coverage and the para. 8 Exclusion which must be resolved in favour of the insured: Sam’s Auto Wrecking, at para. 37.
[83] Trillium concedes that the Policy provides for replacement costs which “will be determined by the lowest estimate which can rebuild the home with ‘materials of similar quality using current building techniques within a reasonable amount of time following the loss,’ so the insured does not profit from its loss” (emphasis in original).
[84] The plain language meaning of the term “technique” is “a way of...” doing something: Concise Oxford English Dictionary, at p. 1480. Trillium confirmed that in using the phrase “current building techniques”, it undertook to use construction methods that are commonly used today rather than those used in the original construction of the home. Trillium’s adjuster noted that in many instances, current building techniques are, in fact, cost-effective. However, even where they are not, they are clearly provided for in the GRC.
[85] Trillium concedes that replacing the dwelling as it was, includes the use of similar quality materials and “current building techniques” as provided for in the GRC. Whether increased costs are covered as costs of using similar quality materials or current building techniques are questions to be determined by the trier of fact.
[86] As such, the para. 8 Exclusion only applies to increased costs required by “any law”. . Le Treport Wedding & Convention Centre Ltd. v. Co-operators General Insurance Company
In Le Treport Wedding & Convention Centre Ltd. v. Co-operators General Insurance Company (Ont CA, 2020) the Court of Appeal comments on the contractual status of policy 'endorsements':[31] First, the trial judge’s use of the exclusion language misapprehends the relationship between the Commercial Broad Form policy and the Flood Endorsement. An endorsement is not a standalone insurance policy. It is linked to the policy to which it is attached and with which it is purchased: Pilot Insurance Co. v. Sutherland, 2007 ONCA 492, 86 O.R. (3d) 789.
[32] In Pilot, this court affirmed that an endorsement “does not have an independent existence” from the policy: at para. 21. In that case, the insurer disputed whether coverage was available to an insured injured in an accident that occurred in Jamaica. The automobile insurance policy was territorially limited to Canada and the United States. Attached to the policy was the Ontario Policy Change Form 44R Endorsement for Family Protection Coverage, which did not include a territorial limitation. This court held that the territorial limit in the policy applied to the endorsement. Lang J.A. observed, at para. 21:An endorsement changes or varies or amends the underlying policy. While it may be comprehensive on the subject of the particular coverage provided in the endorsement, it is built on the foundation of the policy and does not have an independent existence. [Emphasis added.] [33] In other words, the policy and the endorsement must be read together. This principle also applies to property damage claims: Cabell v. The Personal Insurance Company, 2011 ONCA 105, 104 O.R. (3d) 709, at paras. 14-17, per Rosenberg J.A.
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