Trillium Mutual Insurance Company v. Emond, 2023 ONCA 729
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By: Krista Nasartschuk (Articled Clerk)
In 2022, we featured an article on the case of Emond v. Trillium Mutual Insurance Company, 2022 ONSC 5519. This matter has now been successfully appealed by Trillium Mutual Insurance Company (“Trillium). Thank you to Jaime Wilson of Gowling WLG for recommending we feature an article on the appeal!
The case concerned the reconstruction costs associated with rebuilding the Emonds’ home, which had been washed into the Ottawa River by flooding. The Emonds had ‘guaranteed rebuilding cost coverage (“GRC”) through their policy with Trillium which stated that Trillium would pay the full reconstruction costs of the home if the home was rebuilt in the same location within a reasonable timeframe using materials of similar quality and current building techniques.
The GRC was subject to various exclusions, including an exclusion for increased costs of repair due to the operation of any law, and by-law and code compliance coverage up to $10,000.
In order to rebuild, the Emonds were required to comply with new Mississippi Valley Conservation Authority (MVCA) regulations, which resulted in higher costs.
The Emonds’ position was that the GRC allowed them to rebuild without limitation, and further that the exclusion clause described above did not apply because it was inconsistent with the purpose of the GRC. Trillium maintained that the exclusion clause was applicable and, in any event, coverage was capped at $10,000 under the by-law and code compliance coverage clause which was not overridden by the GRC. Further, they argued that the Emonds’ position was contrary to the principle of indemnity and would result in a profit from their loss.
The trial judge ultimately ruled in favor of the Emonds and held that limitations on endorsements which are not clearly apparent should be set out in the endorsement itself, that the term ‘any law’ as used in the exclusion clause did not include MVCA regulations, and that Trillium’s interpretation would contravene the nullification of coverage doctrine. Please see our 2022 article for further information: https://fosterandcompany.com/exclusions-nullifying-coverage-that-go-against-reasonable-expectations-can-be-struck/
Trillium appealed on the grounds that the trial judge erred in her interpretation of this standard form policy and that, if her interpretation were to be upheld, there would be a wide-reaching and detrimental impact on the insurance industry in Canada.
J.A. Thorburn of the Court of Appeal for Ontario held that the trial judge erred in her interpretation of the term ‘any law’ and found that it did, in fact, include by-laws and regulations, such as those imposed by the MVCA. The appeal was granted.
The issue of quantification of the replacement loss remains outstanding, leaving the parties to determine whether an increased expense is covered as a ‘current building technique’, or whether the increased costs are required by ‘any law’ and therefore excluded from coverage except for payment up to $10,000.