The insurer agreed to indemnify Ontario lawyers acting for transferees and chargees from and against any claims arising under a title insurance policy

18. August 2016 0

Title insurance provider was required to indemnify a lawyer for costs in defending a claim arising under title insurance policy pursuant to indemnity obligation set out in correspondence with Law Society of Upper Canada.

Insurance law – Title insurance – Interpretation of policy

Small v. Chicago Title Insurance Co.[2016] O.J. No. 3131, 2016 ONSC 3876, Ontario Superior Court of Justice, June 15, 2016, R.A. Lococo J.

The insureds brought an action against their conveyancing lawyer and their title insurance provider arising out of their purchase of a unit in a multi‑unit dwelling. The defendant lawyer mistakenly checked a box to indicate that the building was a single-family dwelling rather than a multi‑unit dwelling. The title insurance policy that the insurer issued covered a dwelling with up to six residential units.

After closing, structural damage to the building came to light when a basement wall collapsed. The previous owners had removed a load bearing wall without obtaining the required building permit. The City issued a work order requiring remediation of the resulting damage.

The insureds made a claim under the title insurance policy seeking coverage for the cost of the required remediation work. The insureds ultimately settled their claim with the insurer and what remained was a cross‑claim by the lawyer for indemnity. The lawyer relied on the insurer’s indemnity obligation set out in correspondence between the insurer and The Law Society of Upper Canada. The indemnity obligation applies where the insurer has issued a title insurance policy in favour of transferees obtaining an interest in land that is the subject of a real estate transaction. The insurer agreed to indemnify and hold harmless Ontario lawyers acting for transferees and chargees from and against any “claims arising under the title insurance policy” except for the lawyer’s gross negligence or willful misconduct.

The Court concluded that the insureds’ claim against the insurer and the lawyer arose under the title insurance policy and the insurer was required to indemnify and hold harmless the lawyer with respect to his legal costs in defending the action including his legal costs relating to the cross‑claim against the insurer.

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

To stay current with the new case law and emerging legal issues in this area, subscribe here.