ONTARIO
SUPERIOR COURT OF JUSTICE
COURT FILE NO.: 15-63389
DATE: 20150820
BETWEEN:
MOHAMED CHOUKAIR
Applicant
– and –
ALLSTATE INSURANCE COMPANY OF CANADA
Respondent
Danesh Rana, for the Applicant
Sean Van Leeuwen, for the Respondent
Heard: May 15, 2015
RULING ON APPLICATION
QUIGLEY, J
[1] The Applicant is seeking the following relief in this Application:
(a) A Declaration that the Respondent must pay for repairs and/or building costs associated with Building Code upgrades.
(b) Costs of this Application on a substantial indemnity basis.
Background
[2] The Applicant, Mohamed Choukair has a Homeowner's Policy (“Policy”) with the Respondent, Allstate Insurance Company of Canada, (“Allstate”).
[3] On January 20, 2014, there was a total loss fire at the Applicant's residence located at 68 Wigan Drive, Ottawa (“Property”).
[4] As a result of the fire loss, the Applicant's residence had to be rebuilt. The parties have not come to an agreement on a budget for the rebuild. The Applicant states his replacement cost is $450,700.00, plus HST. Allstate has paid $369,000 for the rebuild, but refuses to pay the balance.
[5] The main difference between what the Applicant claims and what Allstate has paid relates to the increased cost of the rebuild associated with upgrades required as a result of the Building Code, O. Reg. 332/12, which Allstate says are excluded by the Policy.
Issue
[6] The main issue in this Application is whether the Policy excludes the upgrades that are mandated by the Building Code.
The Exclusion Clause
[7] The Exclusion Clause reads:
We do not insure:
(5) losses or increased costs of repair or cost of improving or upgrading dwellings or structures due to the operation of any by-law regulating the zoning, demolition, repair or construction of buildings and their related services;
Position of the Applicant
[8] The Applicant submits that the increased cost to rebuild as a result of the fire loss is not covered by the Exclusion Clause in the Policy.
[9] The Applicant submits that the exclusion clause is ambiguous as the losses ultimately were as a result of the fire, and not simply the operation of the Building Code. In this regard the Application relies upon the decision of Gokstorp v. TD Insurance Meloche Monnex, 2009 92122 (ON SC), 2009 CarswellOnt 9686, 102 O.R. (3d) 235 which is described in greater detail below.
[10] Further, the Applicant submits that the wording of the Exclusion Clause only addressed “by-laws” and not “laws, acts or regulation”. In this regard, the Applicant relies on the definition given in Blacks' Law Dictionary (7th Edition) (Tab 4 of Applicant's Book of Authorities) defining “by-law” as “[A] rule or administrative provision adopted by an association or corporation for its internal governance.”
[11] The Province of Ontario is not an “association”, nor is it a “corporation”. The Province of Ontario does not pass by-laws but passes laws and enacts regulations. The Building Code is a Regulation under the Building Act, and by definition is not a by-law. Therefore the Policy cannot operate to exclude increased costs as a result of the Building Code as it is not a by-law as specified by the Exclusion Clause. In effect, if the Respondent wanted to exclude increased costs as a result of the operation of the Building Code, it should have addressed it in its Policy, including the Complete Home Replacement Guarantee portion of the Policy.
[12] The exclusion at bar must be read pursuant to the accepted principles of insurance contract interpretation, i.e., exclusions must be read very narrowly. In Reid Crowther & Partners Ltd. v. Simcoe & Erie General Insurance (1993 150 (SCC), [1993] 1 S.C.R. 252) (Tab 5 of Applicant's Book of Authorities), the SCC in discussing the principles of insurance contract formation stated at para 37:
...the principle that coverage provisions should be construed broadly and exclusion clauses narrowly.
[13] The Applicant further claims that it would not be proper for the Court to read “laws” into the Exclusion Clause, and would be contrary to the rule of contra preferendum. He further asserts that at the very least the wording is ambiguous and asks the Court to apply the rule of contra preferendum in the Applicant's favour.
[14] A similar exclusion clause was discussed in Gokstorp, supra. In this case, Little J. said, at paragraph 8:
- the relevant portion of the LOSSES EXCLUDED IN GENERAL section of the policy provides:
This policy does not insure against:
(o) Loss or damage directly or indirectly, proximate or remotely resulting from or contributed to by the operation of any by-law, ordinance or law regulating zoning or the demolition or construction of buildings or structures.
[15] At paragraphs 11 and 13 of the decision, Little J. found that:
- The losses excluded in general section of the policy applies only to loss or damage resulting from the operation of the by-law/Building Code. In this case, the loss or damage resulted from the fire. [emphasis in original]
and in paragraph 13,
- The fact that the cost of repairs is impacted negatively by Building Code/by-law requirements, is in no way affected by the “Losses Excluded in General” section of this policy.
[16] Further, at paragraph 14, Little J. agreed with the counsel for the plaintiff that the case of Carlyle v. Elite Insurance Co., 1986 1014 (BC CA), [1986] B.C.J. No. 135 (B.C. C.A.), “is on all fours with this case.” Little J. states,
...I concur with Seaton J.A., therein who, based on facts similar to ours, found that the words “loss or damage” cannot be given such an expanded interpretation as to cover increased costs of repair or reconstruction.
[17] And at paragraph 15, Little J. said as follows:
- At a very minimum, if I am wrong, I find the wording of subsection (o) to be ambiguous and would apply the contra preferendum rule and decide in the plaintiff's favour in any event.
[18] The Gokstorp, supra decision was upheld by the Ontario Court of Appeal, in Gokstorp v. TD Insurance Meloche Monnex, 2010 ONCA 313, 2010 CarswellOnt 2564.
[19] It is the position of the Applicant that the Gokstorp decision supports his argument that the losses (or increased costs of repair) in this case are not due to the operation of a by-law but rather the fire itself and, in any event, the exclusion is limited to by-laws. This is contrasted with the more expansive exclusion clause in the Gokstorp decision which excluded for losses resulting from “any by-law ordinance or law regulating zoning or the demolition or construction”.
[20] Thirdly the Applicant argues that the insurer is required to pay for the loss in any event under the Home Replacement Cost Guarantee clause of the Policy, which guarantees that the costs of construction will be paid for by the insurer even if the construction costs exceed the policy limits.
[21] With respect to the Complete Home Replacement Guarantee, the Policy reads as follows:
Home Replacement Cost Guarantee
In consideration of your agreement to insure your dwelling and other building structures in accordance with the following provisions, we agree that the limit of liability under Coverage A – Dwelling Building, and or Coverage B – Detached Private Structures are not limited by the amount shown on the Declaration Page, provided:
- You have insured your dwelling and other building structures to 100% of their replacement cost, as determined by:
a) An Allstate Dwelling Valuation Calculator completed and based on the accuracy of information you furnished, or
b) An inspection of your dwelling and any other building structures,
and pay the premium charged;
You have accepted the Property Insurance Adjustment provision in the policy, agree to accept each annual adjustment in the Dwelling coverage limits of liability and pay the premium charged;
You notify us within 90 days of the start of any additions or other physical changes which increase the replacement or repair cost of your dwelling or other building structures on the residence premises by $10,000 or more, and pay any resulting additional premium.
In all other respects, the policy provisions and limits of liability remain unchanged.
Position of the Respondent
[22] The Respondent submits that the facts in Carlyle, supra have been distinguished by the BC Court of Appeal's decision in Manhas v. Sovereign General Insurance Co., 1999 BCCA 162, 1999 CarswellBC 522. This decision involved a building destroyed by fire which could not be rebuilt due to the application of provincial legislation.
[23] The Exclusion Clause in this case said,
We do not insure:
- losses or increased costs of repair due to the operation of any law regulating the zoning, demolition, repair or construction of buildings and their related services.
[24] At paragraph 18 of Manhas, supra, Esson J.A. stated,
- After referring to the National Benefit case supra, and commenting that it illustrated the kind of wording that “might have been used but was not” in Carlyle v. Elite, I said at p. 348:
The issue here was not one as to whether such clauses are improper or illegal, but simply as to whether the result was achieved, and it was not achieved in this case.
In this case, the result was achieved. I therefore agree with the chambers judge on the first question.
[25] The Respondent argues that the Manhas decision determined that the loss resulted from the operation of the law, not the fire, and therefore the exclusion was triggered to limit the payment to the insured.
[26] The Respondent also argues that the Building Code and the Building Code Act have been “adopted by reference” by the City of Ottawa in its various municipal by-laws. In particular, the municipal by-laws enforce the Building Code by ensuring that permits comply with the Building Code. According to the Respondent, any requirement of the Building Code becomes a requirement of the municipal by-laws. As a result the Respondent argues that the exclusion clause which is limited only to by-laws is still applicable.
[27] The Respondent also refers to the decision of Voloudakis v. Allstate Insurance Co. of Canada 1998 CarswellOnt 431 for the proposition that the Court disallowed the costs related to the application to the municipal committee of adjustment when there was an identical exclusion clause which excluded costs due to the operation of a by-law.
[28] The Respondent further takes the position that the Home Replacement Cost Guarantee does not provide additional rights to the insured and it only affects the policy limits.
Decision
[29] I find that the Applicant succeeds on his submission that the loss did not result from the operation of a by-law.
[30] I agree with the Applicant's position that the exclusion on its face only excludes by-laws and not laws. The fact that the City of Ottawa adopted the Building Code in its By-law is immaterial to the issue of the strict wording of the Exclusion Clause. I find that the increased costs are clearly related to the application of the Building Code and not specifically to a by-law.
[31] There is no suggestion that any of the increased costs resulted independently from the operation of the municipal by-law. If the Building Code requirements were taken out of the equation, there were no increased costs imposed by the by-law itself. It cannot be said that any of the increased costs of repair are “due to the operation of any by-law regulating the zoning, demolition, repair or construction of buildings and their related services”. The increased cost of repair is due to the requirements of the Building Code.
[32] As seen in both the Gokstorp and Manhas decisions, if the insurer wanted to exclude more than increased costs of repair due to the operation of a by-law, it could have done so.
[33] I do not believe the decision Voloudakis, supra, provides any assistance to the Respondent. While the exclusion clause is almost identical to the exclusion clause in the Applicant’s policy, there is no suggestion in Voloudakis, supra, that the requirement to apply to the Committee of Adjustments resulted from anything other than the application of a by-law. It is also unclear why the application to the committee of adjustments was differentiated from other application fees, including building permits. The distinction may result from the previous construction work conducted by the insured prior to the loss. In any event, there is no suggestion the application costs in Voloudakis related to a requirement of the Building Code.
[34] With respect to the Home Replacement Cost Guarantee, I agree with the Respondent that it was intended to increase the policy limits but was not intended to provide coverage which would otherwise be excluded.
[35] Therefore, an Order shall go that the Respondent must pay for repairs and/or increased costs associated with Building Code upgrades.
[36] If the parties cannot agree on costs, written submissions not to exceed two typewritten pages may be sent to me at my Brockville chambers, no later than September 30, 2015.
The Honourable Mr. Justice M.J. Quigley
Released: August 20, 2015
COURT FILE NO.: 15-63389
DATE: 20150820
ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N:
MOHAMED CHOUKAIR
Applicant
– and –
ALLSTATE INSURANCE COMPANY OF CANADA
Respondent
RULING ON APPLICATION
Quigley J.
Released: August 20, 2015