SUPERIOR COURT OF JUSTICE - ONTARIO

COURT FILE NO.: 09-11485
DATE: 2012-01-04

RE: RYAN SMALL and VESNA KONDIC, Plaintiffs

AND:

CHICAGO TITLE INSURANCE COMPANY and CONSTANTINE GLINOS, Defendants

BEFORE: The Honourable Mr. Justice D. S. Crane

COUNSEL:
Mr. G. Tighe, Counsel for the Applicant Glinos

Mr. P. Volaric, Counsel for the Plaintiffs/Applicant

Mr. R. Dowhan, Counsel for the Defendant/Respondent, Chicago Title Insurance Company

HEARD: 20 December, 2011 and reserved for Decision

ENDORSEMENT

CRANE J.

[ 1 ] The plaintiffs and the defendant, Constantine Glinos jointly bring this motion requesting a declaration of this court that the claim set out in the statement of claim as against the defendant Chicago Title is a covered claim under the plaintiffs’ Title Insurance policy, number 0904-05321 or number 0904-053217-177505-2 (the Policy) issued by Chicago Title.

The motion is pursuant to Rule 20.01 seeking partial summary judgment declaring that the Policy provides indemnity to the plaintiffs on an insured loss.

ISSUES AND ARGUMENT

[ 2 ] The issue upon the motion is whether the claim for damages occasioned by a collapse of a wall of the plaintiffs’ dwelling property, now required to be repaired pursuant to a City of Hamilton work order, is an occurrence covered under the subject title insurance policy.

[ 3 ] The defendant/respondent, insurer, states that the Policy is void due to an alleged material misrepresentation made upon the application for the insurance wherein the solicitor for the plaintiffs, namely the defendant Mr. Glinos, submitted the application with the section on the nature of the dwelling checked as a single family residence. The fact is that the property is legally zoned as a triplex but was purchased and used by the plaintiffs as an income property containing four units.

[ 4 ] The applicants admit that the correct box in the application was not ticked (a single family residence) but the second box which provides a place for a tick mark and then the words “multi units” should have been marked.

[ 5 ] It is the submission of the applicants that the correction entry should have been three units as that was the legal description of the property. On the other hand, counsel for the respondent argues that the property was marketed, purchased and used as a 4-plex and the required application information was “multi 4-units”.

This is an important issue between the parties. Should the correct answer be a 3-plex, then the searches that the respondent states it would have done by its underwriting department would have revealed nothing that would change the policy of insurance that was in fact issued. On the other hand, had the answer been multi 4 unit, the search as to zoning compliance at the City of

Hamilton would have revealed that the dwelling was zoned for a maximum of three residential units.

[ 6 ] It is the evidence of Ms. Edith Branning, the respondent’s underwriter with regard to this contract, that the respondent would have issued a policy but not the policy that was issued.

[ 7 ] She agreed on her examination for discovery that there would have been no change in premium as that amount is based on the value of the property. However, she states that a policy that would have been issued in the above circumstances would have had exceptions in schedule B as set out in her affidavit found in the Respondent’s Motion Record at tab 2C. The second of the three exemptions would exclude coverage for;

2. Failure of the improvements on the land to comply with the zoning by-law only as it relates to the permitted number of residential units.

[ 8 ] The evidence is that the collapse of the basement wall of the plaintiffs’ dwelling was due to an excavation below the foundation, done to provide increased height of the basement area. The evidence is that this work was initially done in the 1980s. It was done without a building permit and therefore was not subject to inspection by the City of Hamilton. The Record further indicates that the present collapse of the wall was due to the plaintiffs as the present owners attempting to rectify the deteriorating condition of the wall and the supporting earth, due to; it is suggested, the Spring melting and resulting soil erosion at the place of the original excavation.

[ 9 ] The plaintiffs have been issued a work order by the city of Hamilton to repair the wall. The cost is substantial, exhibit F to the affidavit of Ryan Small. Unpermitted work by a prior owner, it is submitted, would be a covered loss under the policy that was issued to the plaintiffs

property owners, subject to the respondent’s position that the policy would not have been issued but for a material misrepresentation.

ANALYSIS

[ 10 ] The parties, through counsel, are substantially agreed on the law of material misrepresentation. Briefly stated there must be a finding of fact upon evidence that a misrepresentation was made in the application for insurance, that the insurer relying on that application issued the subject policy in circumstances in which had it known of the error would have either declined the risk or issued a policy upon an increase of premium.

[ 11 ] In my view it is an open question on this Record as to whether the excavation below the foundation was for the purposes of providing the fourth and therefore unlawful dwelling unit; whether the plaintiffs may rectify their application for insurance to either multi-units or to multi 3 units, and if so whether such answers would be material representations.

[ 12 ] In the result, I find the applicants have failed to meet the test for partial summary judgment as requested in this motion. There is a case to be tried on whether the misrepresentation was material to the risk. Combined Air Mechanical Services v. Flesch, 2011 ONCA 764 , in particular paragraph 50.

THE SECOND GROUND

[ 13 ] The applicants submit that they are entitled to the declaration as sought in this motion on a second ground, namely that the respondent insurer is bound to accept this claim because it expressly communicated to its insured that it had accepted the subject claim under the policy as

issued as covered under risk number 16, subject to a decline of claim upon further investigation and inquiry without taking a non-waiver agreement from its insured.

[ 14 ] The applicants rely for this non-waiver submission on a letter of the respondent dated October 22, 2008 signed by Howard Kleiman, Assistant Vice President, Claims Counsel, exhibit H to the affidavit of the applicant Ryan Small in the Motion Record of the applicants and as exhibit K to the affidavit of David C. Mineo found within tab 1 of the Respondent’s Motion Record.

[ 15 ] There is indirect information and belief in the affidavit of Mr. Mineo as to the knowledge and understanding of Mr. Kleiman related to his 22 October, 2008 letter that it was not his intention to waive the insurer’s right to decline the claim going forward in its investigation.

CONCLUSION

[ 16 ] On my the reading of the subject October 22, 2008 letter in the context of the full evidence of this record, I fail to see a case for summary judgment on this second motion grounds. There is much that could be learned of this letter, constituting a genuine issue for trial.

[ 17 ] Accordingly, the motion is dismissed on the basis that the applicants have failed to demonstrate that a trial is not required on the issue that the application for insurance does not contain a material misrepresentation as a full defence to the plaintiffs’ claim in this action, and secondly on the issue of whether or not Mr. Kleiman had accepted the subject claim and has bound the respondent to cover the loss.

COSTS

[ 18 ] The parties have asked that they make written submissions on costs following the event of the decision on this motion. I allow two weeks for the service and then filing with me of the parties’ materials.

CRANE J.

Date: January 4, 2012