In the recent Canadian case of , the Court considered what parts of a home are 鈥within the dwelling鈥 under a homeowner鈥檚 insurance policy.
The insureds owned a residential property which included a sun deck in a basement which was partially exposed to the outdoors. The perimeter drainage system in their property became blocked, causing water to back up and escape from the drain in the sun deck area. The water entered the property and damaged the basement. The insureds claimed under their all-risks home policy.
The policy
Under the policy, cover for damage caused by water or sewage backup was excluded. However, a 鈥楽ewer Backup鈥 Endorsement provided limited coverage for 鈥sudden and accidental backing up or escape of water or sewage within your dwelling 鈥 through a sewer on your premises鈥.
Insurers denied cover on the basis that the location of the sewage backing up was in the sun deck area. The insurer argued the sun deck area was not 鈥within the 鈥渄welling鈥 as required by the Endorsement.
The insured disputed insurers鈥 interpretation and brought claims against insurers and the insurance agency, arguing that the terms 鈥dwelling鈥 and 鈥Building鈥 should be broadly interpreted to include the entire structure on the property.
Judgement
The Court initially rejected the insureds鈥 argument, following which the insureds appealed. The Court allowed the appeal, with the Superior Court Justice ruling that 鈥溾ny average person applying for insurance would understand the phrase 鈥榳ithin your dwelling鈥 to mean inside the dwelling or inside the house.鈥
Conclusion
A key takeaway from this judgment is to always consider the policy in its entirety when interpreting. Here, the Supreme Court was criticised for failing to interpret the policy as a whole and incorrectly reduced the definition of 鈥渨ithin鈥 to mean inside. Also remember to consider the perspective of an average person when interpreting policy provisions. If you do require a word to have a specific meaning that could differ from the meaning that would be applied by an 鈥榓verage person鈥, it is sensible to consider using a specific definition to reduce the likelihood of a dispute.
Contents
- The Word, April 2023
- Beware of broad exclusion – Cronos v Generali
- Australian courts issue a ‘common sense’ judgment on a rainfall exclusion
- Subrogation and ‘co-insureds’
- Canadian court rules on whether COVID-19 amounts to physical damage
- FCA launches Consultation Paper on Multi-Occupancy Buildings
- E-scooters – what are they?
- Artificial Intelligence – the science of art