Willoughby et al. v. Pilot Insurance Company, a Division of Aviva Canada Inc.

[Indexed as: Willoughby v. Pilot Insurance Co.]

Ontario Reports
Ontario Superior Court of Justice,
Stinson J.
January 7, 2014

118 O.R. (3d) 604 | 2014 ONSC 95

Case Summary

Insurance — Interpretation and construction — Homeowners policy containing guaranteed replacement cost on buildings ("GRC") endorsement — Insured deciding to purchase new home in another location instead of rebuilding after home was destroyed by fire — GRC coverage merely engrafting new monetary limit on basic coverage and not changing requirement of reconstruction at same location — Loss not attracting GRC coverage as insured opted to purchase replacement property instead of rebuilding. [page605]

The plaintiffs were insured under a comprehensive homeowners policy issued by the defendant. When their home was destroyed by fire, the plaintiffs chose to purchase a home in another location instead of rebuilding or repairing their damaged home. The policy contained a guaranteed replacement cost on buildings ("GRC") endorsement. The defendants took the position that the plaintiffs were not entitled to payment under the GRC endorsement, but only to basic fire loss coverage. The plaintiffs sued, and brought a motion for summary judgment.

Held, the motion should be dismissed.

The GRC coverage merely engrafted a new monetary limit on basic coverage. It did not change the requirement of reconstruction at the same location. In the circumstances, the loss did not attract GRC coverage.

Brkich & Brkich Enterprises Ltd. v. American Home Assurance Co., 1995 1809 (BC CA), [1995] B.C.J. No. 1638, 127 D.L.R. (4th) 115, [1995] 8 W.W.R. 363, 62 B.C.A.C. 186, 8 B.C.L.R. (3d) 1, 31 C.C.L.I. (2d) 160, [1996] I.L.R. 1-3263, 57 A.C.W.S. (3d) 99 (C.A.); Chemainus Properties Ltd. v. Continental Insurance Co., 1989 10437 (BC SC), [1990] B.C.J. No. 154, 43 C.C.L.I. 146, [1990] I.L.R. Â1-2574 at 10025 (S.C.), consd

Other cases referred to

Brissette Estate v. Westbury Life Insurance Co., 1992 32 (SCC), [1992] 3 S.C.R. 87, [1992] S.C.J. No. 86, 96 D.L.R. (4th) 609, 142 N.R. 104, J.E. 92-1622, 58 O.A.C. 10, 13 C.C.L.I. (2d) 1, 47 E.T.R. 109, [1992] I.L.R. Â1-2888 at 2051, 36 A.C.W.S. (3d) 449; Consolidated Bathurst Export Ltd. v. Mutual Boiler and Machinery Insurance Co., 1979 10 (SCC), [1980] 1 S.C.R. 888, [1979] S.C.J. No. 133, 112 D.L.R. (3d) 49, 32 N.R. 488, [1980] I.L.R. Â1-1176 at 595, 1 A.C.W.S. (2d) 169; Huggins v. Hanover Insurance Co., 423 So. 2d 147 (S.C.A.D. Ala. 1982); Non-Marine Underwriters, Lloyd's of London v. Scalera, [2000] 1 S.C.R. 551, [2000] S.C.J. No. 26, 2000 SCC 24, 185 D.L.R. (4th) 1, 253 N.R. 1, [2000] 5 W.W.R. 465, J.E. 2000-935, 135 B.C.A.C. 161, 75 B.C.L.R. (3d) 1, 18 C.C.L.I. (3d) 1, 50 C.C.L.T. (2d) 1, [2000] I.L.R. I-3810, 96 A.C.W.S. (3d) 479; Pilot Insurance Co. v. Sutherland (2007), 86 O.R. (3d) 789, [2007] O.J. No. 2596, 2007 ONCA 492, 51 C.C.L.I. (4th) 12, [2007] I.L.R. I-4611, 55 M.V.R. (5th) 38, 159 A.C.W.S. (3d) 280; Progressive Homes Ltd. v. Lombard General Insurance Co. of Canada, [2010] 2 S.C.R. 245, [2010] S.C.J. No. 33, 2010 SCC 33, 293 B.C.A.C. 1, [2010] I.L.R. I-5051, 406 N.R. 182, 323 D.L.R. (4th) 513, 9 B.C.L.R. (5th) 1, EYB 2010-179515, 93 C.L.R. (3d) 1, 2010EXP-3049, J.E. 2010-1683, [2010] 10 W.W.R. 573, 73 B.L.R. (4th) 163, 89 C.C.L.I. (4th) 161

APPLICATION by the plaintiffs for summary judgment.

Leonard Kunka and Carr Hatch, for plaintiffs/ moving parties.

Elizabeth Bowker, for defendant/responding party.

[1] STINSON J.: — This is a motion for summary judgment brought by agreement of the parties. It involves the interpretation of insurance coverage under a comprehensive homeowners policy (the "Policy"). [page606]

Facts

Background

[2] The relevant facts are straightforward. The defendant, Pilot Insurance Company, is the home insurance provider for the plaintiffs, Doug and Beth Willoughby, who are spouses. Unhappily for them, the Willoughbys' home on Cheshire Drive in Toronto was destroyed by fire on March 11, 2009. At the time of the loss, the Policy was in good standing. The insurance premium paid by the Willoughbys included a "Guaranteed Replacement Cost On Buildings" ("GRC") endorsement.

[3] Following the fire, the Willoughbys decided not to rebuild or repair their fire damaged home on the same site. Instead, they purchased a home in another location and moved there. In light of the Willoughbys' decision to relocate instead of rebuilding, Pilot has taken the position that they are not entitled to payment under the GRC endorsement of the Policy, but only basic fire loss coverage. In this action, therefore, the Willoughbys are claiming the benefit of the GRC coverage.

[4] As initially framed, this motion for summary judgment raised two issues. The first issue concerned the correct interpretation of the Policy and whether, on these facts, the Willoughbys' loss attracts GRC coverage. The second issue involved the assertion by the Willoughbys that representatives of Pilot were aware of their intention to relocate instead of rebuild, but acquiesced and failed to notify them that by so doing they would lose the benefit of GRC coverage, with the result that Pilot is precluded from denying their claim.

[5] In the course of my review of the motion materials in advance of the hearing, I became concerned that there were factual and evidentiary disputes between the parties in connection with the second issue that would prevent me from deciding that issue by way of a motion for summary judgment. At the commencement of argument, I drew my concerns to the attention of counsel; they then decided to move forward with the motion, confined to the first issue. In the event the Willoughbys are successful on the first issue, that will resolve the matter; in the event they do not prevail on the interpretation issue, the matter can proceed in the ordinary course in relation to the second issue.

[6] The question to be decided on the present motion, therefore, is whether, on a proper interpretation of the Policy, the Willoughbys are entitled to the benefit of the GRC coverage despite the fact that they did not rebuild their fire damaged [page607] home. Both sides agree this issue can be decided on a motion for summary judgment.

The Policy

[7] The declaration page of the Policy/Certificate of Property Insurance provides that under "Coverage A -- Dwelling Building" the plaintiffs have $345,300 in coverage, for which the premium is $1,048. The declaration/certificate goes on to state under the heading "Endorsements" that the plaintiffs' premium includes "Guaranteed Replacement Cost On Buildings".

[8] Under "Coverage A -- Your Principal Residence", the Policy states:

We insure:

1. The principal dwelling and attached structures[.]

[9] After reciting the scope of Coverages B, C and D, the Policy contains a heading "Insured Perils" and provides: "You are insured against all risks of direct physical loss or damage subject to the exclusions and conditions in this form." Later on in the same document, under two separate but consecutive headings -- "Your Principal Residence and Other Buildings" and "Guaranteed Replacement Cost on Dwelling Buildings" -- the following text appears:

Your Principal Residence and Other Buildings

If you repair or replace the damaged or destroyed building on the same location with a building of the same occupancy constructed with materials of similar quality within a reasonable time after the damage, you may choose as the basis of loss settlement either (A) or (B) below; otherwise, settlement will be as in (B).

(A) The cost of repairs or replacement (whichever is less) without deduction for depreciation, in which case we will pay in the proportion that the applicable amount of insurance bears to 80% of the replacement cost of damaged building at the date of damage, but not exceeding the actual cost incurred, nor for more than the applicable amount of insurance.

(B) The Actual Cash Value of the damage at the date of the occurrence.

In determining the cost of repairs or replacement under (A) or the amount payable under (B) above, we will not pay or include the increased costs of repair or replacement due to the operation of any law regulating the zoning, demolition, repair or construction of buildings and their related services.

Guaranteed Replacement Cost on Dwelling Buildings

If Guaranteed Replacement cost is indicated in the Declarations, we will pay the cost of repairs or replacement even if it is more than the amount of insurance for Coverage A, provided: [page608]

a) the amount of insurance for Coverage A shown on the Coverage Summary page on the inception date of the policy, or the most recent renewal dale or the increased amount under the inflation protection coverage on the date the increase took effect was not less than 100% of the cost to replace the dwelling building, as determined by a valuation guide acceptable to us;

b) the amount of insurance applicable to Coverage A has not been reduced below the amount determined by the valuation guide; and

c) you notified us within 30 days of the start of the work if any improvement extension or addition has been made to your dwelling.

lf you do not repair or replace we will pay the actual cash value [sic] of the damage on the date of occurrence.

In determining the cost of repairs or replacement, we will not pay or include the increased costs of repair or replacement due to the operation of any law regulating the zoning, demolition, repair or construction of buildings and their related services.

If any Guaranteed Replacement cost provisions under the Basis of Claims settlement are not met this will result in the loss of any single limit coverage available.

(Emphasis added)

[10] For clarity and ease of reference, I note that both of the foregoing provisions are part of the Policy's "Coverage A". In the remainder of these reasons, I shall refer to the insurance provided by the Policy language found immediately after the heading "Your Principal Residence and Other Buildings" as "Basic Coverage" and the insurance provided by the Policy language found immediately after the heading "Guaranteed Replacement Cost on Dwelling Buildings" as "GRC Coverage". I further note that the Basic Coverage contains two different bases for loss settlement, being para. (A) -- cost of replacement, generally limited to 80 per cent of replacement cost -- and para. (B) -- Actual Cash Value. By contrast, GRC Coverage requires the insurer to pay "the cost of repairs or replacement even if it is no more than the amount of insurance in Coverage A" (i.e., $354,300) provided certain conditions are met.

[11] Finally, the Policy contains a definition of the term "Actual Cash Value" as follows:

Whenever the words "Actual Cash Value" are used in this policy, settlement of a claim will take into account such things as the cost of replacement less any depreciation, and in determining depreciation we will consider the condition immediately before the damage, the resale value and the normal life expectancy.

Issues and Analysis

[12] The issue on this motion raises two interrelated questions. Firstly, can the language contained in the GRC Coverage [page609] be interpreted as extending that coverage to circumstances where the insured acquires a house at a different location in substitution for the damaged house? Secondly, does the GRC Coverage override the provision in the Basic Coverage that limits the insurer's liability to Actual Cash Value in the event the repair or replacement is not carried out at the same location?

Positions of the parties

[13] The plaintiffs submit that both questions should be answered in the affirmative. They argue that the Basic Coverage provision is separate and apart from the GRC Coverage endorsement, which the plaintiffs had paid for. The former provision applies to an insured who did not purchase the additional coverage. Because they relocated and did not rebuild, the plaintiffs would be restricted to receiving Actual Cash Value (para. (B)) if they did not have the GRC Coverage. Having paid the additional premium to obtain GRC Coverage, they are taken out of the Basic Coverage contained in the Policy and not restricted by the requirement that they rebuild on the same location. By "replacing" their fire damaged home with a new home at a different location, they came within the scope of the GRC Coverage and are entitled to the replacement cost payment.

[14] The defendant submits that the terms of the Policy are clear that insureds are only entitled to replacement cost if they rebuild "on the same location" as set out in the Policy under the Basic Coverage clause. GRC Coverage merely increases the amount of monetary coverage available if the insureds replace their home on the same site, and in doing so incur a cost that exceeds the Basic Coverage limit. The GRC endorsement in no way removes the requirement that the insureds must rebuild on the same location in order to be eligible for replacement cost coverage. Because they chose to acquire a different property, the plaintiffs' entitlement is limited, as provided under para. (B) of the Basic Coverage, i.e., the "Actual Cash Value of the damage" at the time of the loss.

Applicable legal principles

[15] The interpretation of contracts of insurance is guided by several well-recognized principles.

[16] In Brissette Estate v. Westbury Life Insurance Co., 1992 32 (SCC), [1992] 3 S.C.R. 87, [1992] S.C.J. No. 86, at para. 4, the following statement appears:

In interpreting an insurance contract the rules of construction relating to contract are to be applied as follows: [page610]

(1) The court must search for an interpretation from the whole of the contract which promotes the true intent of the parties at the time of entry into the contract.

(2) Where words are capable of two or more meanings, the meaning that is more reasonable in promoting the intention of the parties will be selected.

(3) Ambiguities will be construed against the insurer.

(4) An interpretation which will result in either a windfall to the insurer or an unanticipated recovery to the insured is to be avoided.

(Citations omitted)

[17] More recently, in Non-Marine Underwriters, Lloyd's of London v. Scalera, 2000 SCC 24, [2000] 1 S.C.R. 551, [2000] S.C.J. No. 26, the Supreme Court noted (at para. 70) that "coverage provisions should be construed broadly and exclusion clauses narrowly" and further that "one must always be alert to the unequal bargaining power at work in insurance contracts, and interpret such policies accordingly". The court again cited with approval the following statement of Estey J. in Consolidated Bathurst Export Ltd. v. Mutual Boiler and Machinery Insurance Co., 1979 10 (SCC), [1980] 1 S.C.R. 888, [1979] S.C.J. No. 133, at pp. 901-902 S.C.R.:

[L]iteral meaning should not be applied where to do so would bring about an unrealistic result or a result which would not be contemplated in the commercial atmosphere in which the insurance was contracted. Where words may bear two constructions, the more reasonable one, that which produces a fair result, must certainly be taken as the interpretation which would promote the intention of the parties. Similarly, an interpretation which defeats the intentions of the parties and their objective in entering into the commercial transaction in the first place should be discarded in favor of an interpretation of the policy which supports a sensible commercial result. . . . Said another way, the courts should be loath to support a construction which would either enable the insurer to pocket the premium without risk or the insured to achieve a recovery which could neither be sensibly sought nor anticipated at the time of the contract.

[18] Most recently, in Progressive Homes Ltd. v. Lombard General Insurance Co. of Canada, 2010 SCC 33, [2010] 2 S.C.R. 245, [2010] S.C.J. No. 33, the relevant principles were summarized as follows (at paras. 22, 23 and 24):

The primary interpretive principle is that when the language of the policy is unambiguous, the court should give effect to clear language, reading the contract as a whole[.]

Where the language of the insurance policy is ambiguous, the courts rely on general rules of contract construction . . . . For example, courts should prefer interpretations that are consistent with the reasonable expectations of the parties . . . , so long as such an interpretation can be supported by the text of the policy. Courts should avoid interpretations that would give rise to an unrealistic result or that would not have been in the contemplation of the parties at the time the policy was concluded . . . . These rules of [page611] construction are applied to resolve ambiguity. They do not operate to create ambiguity where there is none in the first place.

When these rules of construction failed to resolve the ambiguity, courts will construe the policy contra proferentem -- against the insurer . . . . One corollary of the contra proferentem rule is that coverage provisions are interpreted broadly, and exclusion clauses narrowly.

(Citations omitted)

[19] The particular approach to follow in interpreting an endorsement to a policy was addressed by Lang J.A. in Pilot Insurance Co. v. Sutherland (2007), 86 O.R. (3d) 789, [2007] O.J. No. 2596, 2007 ONCA 492 (at para. 21):

[I]n my view, an endorsement is generally not understood to be a self-contained policy. . . . An endorsement changes or varies or amends the underlying policy. While it may be comprehensive on the subject of the particular coverage provided in the endorsement, it is built on the foundation of the policy and does not have an independent existence.

[20] Against the foregoing legal backdrop, I now turn to the two questions raised on this motion.

1. Can the language contained in the GRC Coverage be interpreted as extending that coverage to circumstances where the insured acquires a house at a different location in substitution for the damaged house?

[21] The answer to this question requires me to interpret the language contained in the GRC Coverage, specifically the use of the terms "replacement" or "replace". The plaintiffs contend that they "replaced" their fire damaged home by purchasing their new home; they contend that the new house is a "replacement" for the old one within the meaning of the GRC Coverage.

[22] The terms "replace" and "replacement" are not defined in the Policy. In the Oxford Dictionary of Current English, the term "replace" is defined to mean "1. put back in place; 2. take the place of, succeed, be substituted for; 3. find or provide a substitute for; 4. fill up the place of". The term "replacement" is defined to mean "1. replacing or being replaced; 2. person or thing that replaces another".

[23] In Webster's Ninth New Collegiate Dictionary, the term "replace" is defined as "1. to restore to a former place or position; 2. to take the place of especially as a substitute or successor; 3. to put something new in place of". The term "replacement" is defined to mean "1. the action or process of replacing, the state of being replaced, substitution; 2. something that replaces, [page612] especially an individual assigned to a military unit to replace a loss or complete a quota".

[24] From the perspective of the plaintiffs, the house that they purchased and to which they relocated following the fire was intended as a substitute for the fire damaged one. They moved to the new location and established their permanent residence there. In that sense, the new house took the place of the fire damaged one and may properly be described as a replacement for the latter.

[25] There is authority for the proposition that a new house acquired in such circumstances does qualify as a "replacement" dwelling for purposes of insurance coverage. In Chemainus Properties Ltd. v. Continental Insurance Co., 1989 10437 (BC SC), [1990] B.C.J. No. 154, 43 C.C.L.I. 146 (S.C.), the insurance contract contained a replacement endorsement. Before entering into the insurance contract, however, the plaintiff insisted that a clause in the replacement endorsement be deleted, and it was. The deleted clause had read: "replacement shall be on the same site or on an adjacent site". After the original building was totally destroyed by fire, the plaintiff "replaced" it by purchasing an existing building at another site. The insurer refused to accept the newly acquired building as a replacement for purposes of the replacement endorsement, and the insured sued.

[26] Coultas J. of the British Columbia Supreme Court considered American jurisprudence when addressing the issue of the correct interpretation of the endorsement as amended. Among other authorities, he cited Huggins v. Hanover Insurance Co., 423 So. 2d 147 (S.C.A.D. Ala. 1982), a decision of the Supreme Court of Alabama, Appellate Division. In Huggins, the plaintiffs had been building a house which was destroyed by fire before completion. They purchased a new house in substitution. They had a replacement clause in their fire insurance policy, but the insurer was prepared to pay only actual cash value. The Alabama court concluded (at p. 150 So. 2d):

While the new house did not take the place of the fire damaged house in the same physical location, it did serve the same function as the previous home and might be considered [as] a substitute therefore.

[27] Relying on Huggins and other American jurisprudence, in Chemainus Coultas J. concluded that an insured in these circumstances may effect replacement by purchasing a substitute of equivalent use. He noted that the provision in the policy which had required that the replacement must be on the same site had been deleted, removing the requirement that the plaintiff rebuild in the same place. He therefore concluded that the [page613] new building was, for purposes of the policy, a replacement for the old one.

[28] Based upon the dictionary definitions and the literal meanings of the words "replace" and "replacement" and the jurisprudence mentioned in Chemainus, I accept that the words in the GRC Coverage are capable of being interpreted to include the acquisition of a substitute building as opposed to the construction of a new one. It is also arguable that the use of these terms in the Policy in the absence of the definition section for them supports the conclusion that they should be construed against the insurer and in favor of the insured. The additional concept that coverage provisions should be construed broadly further supports this interpretation.

[29] Viewed in isolation, therefore, I accept that the terminology in the GRC Coverage may be read in favor of the plaintiffs. If the GRC Coverage were the only provision in the Policy that provided coverage for repairs or replacement of a damaged building, the absence of any mention of the requirement to repair or replace at the same location would be much more significant. As the authorities recited above make plain, however, I cannot view the endorsement as a self-contained policy. Indeed, I am required to search for an interpretation from the whole of the contract. This leads me to a consideration of the second question posed above.

2. Does the GRC Coverage override the provision in the Basic Coverage that limits the insurer's liability to Actual Cash Value in the event that the repair or replacement is not carried out at the same location?

[30] Since my obligation is to search for an interpretation from the whole contract to promote the true intent of the parties, I need to determine their objective in entering into the contract.

[31] A replacement cost endorsement is a departure from the concept of indemnity, which is the principle underlying all insurance contracts. See the discussion on this subject in Brkich & Brkich Enterprises Ltd. v. American Home Assurance Co., 1995 1809 (BC CA), [1995] B.C.J. No. 1638, 127 D.L.R. (4th) 115 (C.A.), at paras. 27 to 29. As noted in Brkich (at para. 27), pure indemnity insurance only pays the actual cash value of the property at the time of a loss, in other words, the depreciated value of a building. Actual cash value, however, may well not be sufficient to restore the property's pre-loss use. To meet this perceived deficiency, the insurance industry offers replacement cost insurance in which the insurer agrees, in effect, to pay the difference between actual [page614] cash value and full replacement cost; what is insured (on top of the value of the underlying property) is depreciation. This coverage thus permits the insured to receive an amount necessary to rebuild the structure in a new condition without deducting for depreciation, and enables the insured to be restored to his/her pre-loss use of the property.

[32] The concept is summarized, in para. 44 of Brkich, as follows:

Insurance for only the actual cash value of damaged property is often insufficient for many insureds, who would be unable to rebuild to maintain use with only depreciated value. Insuring depreciation is a departure from indemnity, as the insured may be placed in a better position following the loss, than he was in before. The reason is that depreciation is already lost to the insured before an insured loss occurs, but the depreciation may be recovered as insurance proceeds on the occurrence of such a loss. The potential to recover lost depreciation increases moral hazard, because it allows the insured to benefit from an insured loss. The coverage is usually offered as an optional supplement to actual cash value coverage.

[33] In relation to the concept of "moral hazard", the court in Brkich commented (at para. 29) as follows:

Replacement cost insurance raises concerns of increased moral hazard because it creates the potential for an insured to obtain more than mere indemnity for the damaged property. To address this concern, insurers willing to offer replacement cost insurance have typically limited their obligation to pay more than actual cash value to circumstances where reconstruction was carried out[.]

[34] While not imputing any improper motive or conduct to the Willoughbys, Pilot submits that the GRC Coverage in the present case must be considered with the foregoing objectives in mind. Since the underlying principle of insurance is indemnity, replacement cost coverage should be construed in a fashion that is consistent with that concept, while avoiding betterment, to the point where the insured is restored to the use of the property which he or she enjoyed before the loss, and nothing more. This explains the rationale for the requirement that the replacement building be constructed on the same location. The cost of restoring the insured to the pre-loss use which he or she enjoyed at a building located on the same site is far easier to ascertain and confirm objectively than it would be if the insured could simply take the estimated replacement cost and invest it in a new location. Put in slightly different way, the potential for betterment -- which is ordinarily to be avoided in property insurance claims -- is far more difficult (if not impossible) to control if the insured is left with the option to buy a replacement building elsewhere. [page615]

[35] Based upon the foregoing analysis of the rationale and limitations surrounding replacement cost coverage, I conclude that the basic intent of an insured and an insurer who enter into such an arrangement is to enable the insured to be placed in the same position (i.e., the pre-loss use) he or she enjoyed before the loss and nothing more. An interpretation of a GRC endorsement that would entitle the insured to enjoy potential further betterment -- as, by example, relocation to a different site -- would be inconsistent with such an intent, unless expressly provided for.

[36] In this case, the maximum basic insurance provided by Coverage A of the Policy in respect of damage or destruction to a principal residence is based upon repairs or replacement on the same location. In that event, the insured may choose a loss settlement based on either para. (A) -- the cost of repairs or replacement (normally 80 per cent of replacement cost) -- or para. (B) -- the Actual Cash Value of the damage. In the event the insured does not rebuild on the same location, the loss settlement "will be as in [paragraph] (B)" -- Actual Cash Value. The GRC Coverage expressly changes the limit of coverage by requiring the insurer to pay the GRC amount, "even if it is more than the amount of insurance for Coverage A" (i.e., a loss settlement based on either para. (A) or para. (B)). The GRC Coverage does not expressly address the requirement that the repairs or replacement be on the same location.

[37] When the words "repairs or replacement" are used in the Basic Coverage, they are plainly referable to repairs or replacement on the same location. The same terminology is used in the GRC Coverage. Nothing in the GRC Coverage states that the requirement of reconstruction on the same location is inapplicable. To the contrary, the only necessary extension of coverage arising from the GRC Coverage is an alteration to the monetary limit of the Policy, in that Basic Coverage is converted to GRC Coverage. The language used does not necessarily import an extension of GRC Coverage to reconstruction at a different location.

[38] Returning, then, to the concept of searching for the intent of the parties at the time the Policy was made, based upon a review of the whole contract I conclude that the intention of the GRC Coverage was to provide the insureds with, in effect, insurance coverage to protect against depreciation and inflation such that they would be able to continue the same use as before. Absent express language so providing, I do not accept that the parties intended to provide the insureds with coverage that would permit them to enjoy the same use at another location. [page616] Indeed, as a matter of logic, in such an event the insureds would not be restored to enjoying the same use as before, since they would be living at a new location.

[39] In my view, the correct way to view the GRC Coverage in the present case is as an extension of the Basic Coverage: the Basic Coverage remains, and engrafted thereon is a new monetary limit, which is available if the insured complies with the specific provisos contained in the GRC endorsement. Apart from amending the monetary limit to that extent, the ordinary rules remain in place, including the requirement of reconstruction at the same location. In my view, such an interpretation is consistent with the intention of the parties as ascertained from a review of the whole policy. It neither results in a windfall to the insurer -- which will be paying the plaintiffs an amount consistent with the Basic Coverage -- nor provides the insured with an unanticipated recovery.

Conclusion and Disposition

[40] For these reasons, I conclude that the plaintiffs' loss does not attract GRC Coverage, because they opted to purchase a replacement property instead of rebuilding. The motion for summary judgment based on the interpretation of the Policy is therefore decided in favour of the defendant. The parties are directed otherwise to proceed with the matter in the ordinary course.

[41] In relation to costs, the usual requirement is for a motion judge to fix costs. In the present case, the overall matter remains unresolved. It is conceivable that the plaintiffs may ultimately prevail on the issue of liability, on other grounds. Moreover, it will be difficult to segregate, at this stage, what costs are properly allocable to the summary judgment motion as it was actually argued.

[42] Given the foregoing considerations and the fact that it was reasonable to proceed by way of summary judgment on the issue argued, I award the costs of the motion to the defendant in the cause, to be fixed or assessed following the outcome of the action.

Motion dismissed.

End of Document