Claims of deceit will generally not give rise to insurance coverage

No coverage under homeowner policy for claim against vendor for fraudulent misrepresentation leading to sale of home.

Chrysanthis v. Ali, [2013] O.J. No. 1239, March 18, 2013, Ontario Superior Court of Justice, D.F. Baltman J.

The defendant insured sold his house to the plaintiffs who later sued the insured for failing to disclose damages caused by an earlier fire. The insured launched a third party claim against his insurer for coverage under his homeowner policy. The insurer brought an application for summary judgment on the basis that the policy did not cover the claims being advanced by the plaintiff and therefore, there was no duty to defend.

The plaintiffs' claim against the insured was for fraudulent misrepresentation and breach of contract. It was alleged that the insured had assured the plaintiffs that there had never been a fire or smoke damage to the property. When the plaintiffs moved into the residence, they learned that the insured had received a cash settlement to fix damage from a fire to the kitchen.

The insurer submitted that the claims for breach of contract and misrepresentation were, in essence, about deliberate acts of concealment by the insured and could not be considered "unintentional" bodily injury or property damage as provided for under the policy.

The court held that when the statement of claim was read in its entirety, it was clear that the claim against the defendant was one of fraud. The court found it implausible that the insured could have forgotten or been mistaken about whether there was a fire and about whether he received a cash payment in compensation. The court found that this omission could not be mere oversight or attributable to carelessness and the only possible inference was that he lied about that fact in order to facilitate a sale. Consequently, the court found that there was no plausible way to categorize the claim as anything other than deceit and therefore beyond the scope of the policy.

This case was digested by Cameron B. Elder and edited by David W. Pilley of Harper Grey LLP.

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