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Insured Denied Coverage After Failing to Notify Insurer he was Renting Rooms in his House

Zheng v. John Galon Insurance Services, 2016 SKPC 090

The Plaintiff contacted the Defendant broker to purchase insurance for his new home. The broker assisted the Plaintiff to fill out his insurance application.  In the application, the Plaintiff stated that he was not seeking coverage for rental income, was not renting any rooms and would not be renting the home for any weeks during the year.

A few months after obtaining home insurance, the Plaintiff rented out one floor of his home, while living on the other floor himself. A year after obtaining coverage, the Plaintiff’s policy was up for renewal and he did not notify his insurer about the tenants.

The Plaintiff’s home was later damaged by fire. During the investigation, the insurer discovered that three tenants were living in the home. The insurer denied coverage on the basis that this constituted both a misrepresentation by the Plaintiff and a material change in risk.

At trial, the Plaintiff testified that the broker had filled out the application form on his behalf, without any assistance from the Plaintiff. The Court preferred the evidence of the broker, who testified that it was his practice to go through each question with the insured and fill out their response. The Court found the Plaintiff’s evidence with respect to the application form not credible, as there is no way that without the Plaintiff’s assistance the broker could have answered many of the questions on the application, such as the Plaintiff’s date of birth, wife’s date of birth, last address, etc.

The Court found that the application form made it clear the presence of tenants was an important consideration for the insurer. This should have alerted the Plaintiff that he needed to advise the insurer when he started to rent out part of his home and when renewing his policy.

The trial judge dismissed the Plaintiff’s claim against both the insurance broker and the insurer.

You can read Zheng v. John Galon Insurance Services, 2016 SKPC 090, in its entirety here.

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