Installion of a woodstove may not be a material change of risk in a multi-peril policy.
Appeal by the insurer of the trial judge’s award of damages for breach of contract. The insurer voided the policy and denied coverage on the basis that the insured’s installation of a woodstove constituted a material change in risk. The Court of Appeal dismissed the appeal and found that the insurer’s action demonstrated that it did not consider the installation of the woodstove as a material change in risk. Therefore, the insurer could not rely on Statutory Condition 4 which required the insured to notify the insurer in writing of any change material to the risk within his control and knowledge.
Thomas v. Aviva Insurance Co. [2011] N.B.J. No. 371, October 27, 2011, New Brunswick Court of Appeal, J.E. Drapeau C.J.N.B., M.E.L. Larlee and K.A. Quigg JJ.A.
The insured purchased a multi-peril policy from the insurer. At the time of application, the insured advised the insurer’s agent that his home’s primary heating source was electrical. No response was recorded by the insurer’s agent regarding auxiliary heating sources. At that time, electrical heat was the home’s only source of heat. The next year, the insured installed a woodstove in the back porch to supplement his home’s electrical heat.
Each year the insurer sent the insured a renewal policy notice which stated as follows:
Enclosed is the renewal of your policy. Please ensure that all information is accurate, as your coverage and premium are based upon the information you provided.
The information the insured had provided was set out in brief in the accompanying Certificate of Property Insurance: “One family, Frame, 1942 built, Updated: Heating: 1999, Plumbing: 1999, Wiring: 1999, Roofing: 1999, Primary Heat: Electric Heat, Within 13 Km of Fire Dept. […]”. None of the yearly renewal notices made any reference to the need to disclose woodstoves or auxiliary heating sources. Moreover, the yearly renewal notices did not request notification of all changes material to the risk.
After an investigation of a fire on December 15, 2007, the insurer learned of the woodstove and its role in the occurrence of the loss. The insurer denied coverage on the basis that the installation of a woodstove constituted a material change in risk, which the insured had not notified the insurer of. The insurer relied on Statutory Condition 4 which required the insured to notify the insurer in writing of any change material to the risk within his control and knowledge.
The trial judge found that the insured’s knowledge of materiality was required for application of Statutory Condition 4. The trial judge held that the insured did not know the installation and use of the woodstove might constitute a change material to the risk. Therefore, the insurer’s defence was rejected.
The Court of Appeal addressed three issues. First, whether Statutory Condition 4 formed part of the multi-peril policy the insurer issued to the insured. Second, whether the insurer was disentitled from relying on Statutory Condition 4 because of its failure to alert the insured to the alleged materiality of the installation and use of a woodstove as an auxiliary heat source. Third, whether Statutory Condition 4 was engaged only where the insured knew the change in circumstances was material to the risk.
The insured relied on KP Pacific Holdings Ltd. v. Guardian Insurance, 2003 SCC 25, and Churchland v. Gore Mutual Insurance, 2003 SCC 26, in support of his argument that Statutory Condition 4 had no application to a multi-peril policy of insurance.
The Court of Appeal found that the legislation in KP Pacific Holdings Ltd. v. Guardian Insurance and Churchland v. Gore Mutual Insurance limited application of the Statutory Conditions to “contracts of fire insurance”. In contrast, Part IV of the Insurance Act, R.S.N.B., 1973, c. I-12, was not limited to “contracts of fire insurance” and applied to “insurance against loss of or damage to property arising from the peril of fire in any contract made in the Province”. None of the exceptions in the Insurance Act applied and, as a result, Statutory Condition 4 was engaged.
The Court of Appeal then found that the insurer failed to make the appropriate enquiries, treated the matter of auxiliary heating courses as inconsequential and effectively advised the insured in its various renewal notices that only the information provided in the application was material to the risk. Thus, the Court of Appeal concluded that the insurer did not consider that the installation of a woodstove in the porch was a material circumstance requiring disclosure. Further, the Court of Appeal stated if the installation of a woodstove was a change material to the risk, the insurer’s duty of good faith to the insured required that he be so advised in plain language. This was not done; therefore, the insurer could not rely on Statutory Condition 4.
As a result of the above decision, the Court of Appeal did not render a decision on the issue of the trial judge’s ruling that Statutory Condition 4 was engaged only where the insured knew the change in circumstances was material to the risk.
This case was originally summarized by Aaron D. Atkinson, and originally edited by David W. Pilley of Harper Grey LLP.
I have a 25 year old wood stove that was part of the original house construction. It predates the UL and CSA standards certification process. According to my insurance agent, it cannot be covered in our policy because it will not pass the requirements for distance from the wall etc.
Any recourse other than replacing with a new unit?