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Court upholds insurer's denial of $100K water damage claim

By HUB SmartCoverage Team on April 29th, 2024

An insurance policy exclusion for vacancy applies, even when an insured has arranged for people to look after the vacant property on a daily basis, so long as there is no intention to inhabit the place again, the Ontario Superior Court has ruled in a $100,000 water damage claim.

As a result, the court tossed the case of a claimant against his insurer, Co-operators General Insurance.

Among other things, the insured, James Douglas Morgan, argued the meaning of the word “vacancy” in his home insurance policy was vague because he had someone looking after the residence every day or two while he was living in Florida during the winter months. Also, he said he planned to return to rent out the place, and so that was not the same as having “no intention” of returning.

Didn’t intend to inhabit

But the court made it clear the policy exclusion for a vacant rental property applied, because the property owner had no intention of inhabiting the place himself, nor did the policy make an exception for him to arrange to have someone tend to the residential unit while he was living out of the province.

“The premises would be regarded as vacant within the meaning of the policy if the occupant moved out with no intent to return ‘as an occupant,’” Ontario Superior Court Justice Byrdema MacNeil wrote, citing previous caselaw on vacancy.

“For a dwelling house to be in a state of occupation there must be the presence of human beings as their customary place of abode, not absolutely and interruptedly continuous, but that must be the place of the usual return and habitual stoppage…

“Occasional visits do not change the status of the home from being vacant to occupied … Sporadic visits do not manifest any intent to exercise dominion over the house.”

Morgan was the owner of a residential townhouse unit located in Stoney Creek, Ont. He rented the property to a tenant until Oct. 15, 2019, when the tenant moved out and Morgan decided to sell the property.

To prepare for a sale, Morgan began renovating it in October 2019. He continued to attend the property regularly after the tenant moved out and during the renovations. The property was mostly uninhabitable while being renovated. The renovations were done in November 2019.

At the end of September 2019, after speaking with his insurance broker, Morgan bought an additional Comprehensive Water Endorsement for his insurance policy, which took effect on Nov. 17, 2019.

Near the end of October 2019, Morgan vacationed in Florida. While he was away, his son attended at the property either daily or every other day to check on it.

Burst pipe caused water damage

In December, Morgan’s real estate agent phoned him in Florida to tell him a pipe had burst at the property, causing water damage. Morgan immediately returned to Canada and attended the property on Dec. 10, 2019. The water damage cost about $101,000 to fix.

The Co-operators denied his insurance claim under the policy’s vacancy exclusion, which read: “We do not insure loss or damage caused by glass breakage, water escape, rupture, freezing, ice back up, vandalism or malicious acts after your dwelling has been vacant for more than five (5) consecutive days.”

The policy defined vacancy as: “regardless of the presence of personal property or furnishings, a dwelling is vacant, in the case of … an existing dwelling, when all residents have moved out with no intention of moving back in and another resident has not yet moved in.”

Morgan argued that elsewhere in the policy, it states: “if you are away more than five (5) consecutive days, you are covered if you do one of the following: you had arranged for a competent person to enter the dwelling daily to ensure heating is maintained.”

But in dismissing the part of Morgan’s claim related to policy coverage, the court noted this particular phrase in the policy was in the context of water damage being caused by the freezing of pipes, which was not proven in this case.

- Canadian Underwriter


What is vacant home insurance?

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