Where a House was Deemed Unsafe for Occupancy, Title Insurance was Found not to Cover the Loss

The applicant homeowners’ summary judgment application brought against their title insurer for breach of contract and breach of good faith was dismissed on the basis that the loss was not covered.

Insurance law – Title insurance – Policies and insurance contracts – Interpretation of policy – Coverage – Good faith breach of

MacDonald v. Chicago Title Insurance Co. of Canada, [2014] O.J. No. 6190, December 29, 2014, Ontario Superior Court of Justice, J. MacDonald J.

 The applicants purchased a multi-storey family home and a contract of title insurance for the transaction. Prior to the purchase, the home had undergone a renovation, for which a building permit was never obtained. After taking possession, the applicants became aware that during the renovation load bearing walls had been removed, rendering the house unsafe for occupancy. The City of Toronto subsequently issued an order to remedy this, and required shoring to be installed to temporarily support the floor structure.

The court held that the loss in question was not covered under the title insurance policy. First, the court noted that, although the policy provided coverage if the applicant’s title is unmarketable, this clause had to be constrained to instances where the marketability relates to the applicants’ interest in the land. Here, the applicants owned the entire right, title and interest in the lands and premises just as they did before they knew of the deficient and dangerous nature of what they had purchased. Thus, their “title” was just as marketable. Furthermore, although a clause in the policy provided coverage for remediation because of an outstanding notice of violation or deficiency notice, there was again no evidence capable of supporting an assertion that the applicants’ ownership of the lands and premises was affected by the order.

This case was digested by Kora V. Paciorek and edited by David W. Pilley of Harper Grey LLP. If you would like to discuss this case further, please feel free to contact them directly at kpaciorek@harpergrey.com or dpilley@harpergrey.com or review their biographies at http://www.harpergrey.com.

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