Homeowner's insurance may provide coverage to allegations that the insured misrepresented the condition of the property in a real estate transaction. The court is not to consider whether the plaintiff is interested in obtaining access to insurance funds.
The applicants sought a declaration that their home insurer defend them in relation to a claim brought against them. The application was allowed.
Aitken v. Unifund Assurance Co., [2011] O.J. No. 5083, September 29, 2011, Ontario Superior Court of Justice, B. Warkentin J.
The applicants had a homeowner’s policy with the respondent insurance company, Unifund Insurance Company (“Unifund”). The applicants were sued by the purchaser of their former home. They applied for a declaration that Unifund defend and indemnify them with respect to the claim.
The applicants sold their home, which was insured with Unifund, on September 12, 2008. The purchaser of the home commenced an action against the applicants on September 10, 2009 and alleged that the applicants knowingly or recklessly made misrepresentations on the Seller Property Information Statement and deliberately failed to disclose information.
The applicants filed a defence on September 22, 2009. Unified was notified of the claim on March 30, 2010. Unifund denied the claim on the basis that there was a failure to notify them of the claim in a timely way which voided the policy. They also asserted that there was no duty to defend given that there was no coverage for intentional acts.
The purchaser amended their statement of claim on January 26, 2011 and deleted the allegations of deliberate or wilful conduct and replaced them with allegations of negligence and carelessness. Unifund asserted that the amendments do not change the substance of the acts, it was merely an attempt to access insurance.
The Court held that Unifund had a duty to defend applicants. The claim contained allegations that Unifund would be required to indemnify the applicants if they were hypothetically found to be liable.
The Court confirmed that the duty to defend is triggered by claims that “potentially” trigger the duty indemnify under the insurance policy. The Court is to look beyond the choice of labels used in the amended statement of claim to determine the true nature of the allegations. The Court must consider the factual allegations as pleaded, but then must determine whether the legal claims could potentially be supported by the alleged facts. The plaintiff cannot change an intentional tort into a negligent one simply by the choice of words.
Because a claim can be brought in both intentional tort and negligence does not mean that the negligence claim is sufficient to trigger a duty to defend. Where a court determines that both an unintentional tort and a negligence claim are pled properly, it must then determine whether the harm allegedly inflicted by the negligent conduct is derivative of that caused by the intentional conduct. A plaintiff is entitled to plead in the alternative. Claims should only be considered derivative if they are clearly inseparable from a claim of intentional tort.
The Court rejected the assertion that the plaintiff was solely interested in gaining access to insurance coverage. The Court held that the proper analysis is only whether a negligence claim is derivative of an intentional tort claim or not.
The policy did not contain an exclusion that prevented coverage. The applicants notified Unifund in a timely way of the claim. If they had notified Unifund earlier coverage would have been denied because the allegations in the original claim were intentional torts which were excluded from the policy. Unifund was not prejudiced by the notification. The issue as to whether there was a duty to indemnify was left to the trial judge.
This case was digested by Kim Yee and edited by David W. Pilley of Harper Grey LLP.
