Introduction

[1] Water damage to a homeowner’s property is, in today’s world, not an uncommon occurrence. Insurance policies once widespread in their coverage of such claims have, in the face of rising claims by policyholders, retreated to the position that only a very narrow class of this type of damage will be covered. Claimants generally assume that any disaster befalling their home will be compensated for by the policy that cost them a generous premium. In cases of water damage, however, they now find that the damage suffered is excluded from general coverage. The damage may, in some instances, be cured through affordable piecemeal repair. In other instances, the damage may be catastrophic and render the property unfit to live in as a home.

[2] This case, regrettably, involves the latter. At the heart of this summary judgment motion is an insurance policy notable not for what it covers but what it excludes.

[3] For the reasons set out below, I find that the damage sustained by the plaintiffs in this case is excluded from coverage by the provisions of the insurance policy they purchased from the defendants.

Factual Background

[4] This motion arises out of an incident of water damage to the plaintiffs’ home, situated at 27 Argonne Crescent in Toronto (“the Property”), alleged to have occurred as a result of heavy rain on or about 24 June 2011 and/or from a leak in the plumbing of the home some time thereafter.

[5] The water damage affected three areas of the Property: the basement, basement bathroom and closet, and the garage. The plaintiffs, who had purchased an insurance policy from the defendants on 14 July 2010, filed a claim to recover their losses.

[6] The plaintiffs asserted that the Property was damaged by water entering from the windows and outside of the home as a result of a heavy rainstorm. The plaintiffs also alleged that, on or around the same time, there was a sudden and accidental escape of water from the plumbing in the shower area and bar sink in the basement. This caused “extensive water damage throughout the house and to the foundation of the property.”

[7] Subsequently, an umpire was appointed by the court, pursuant to section 128(5) of the Insurance Act, R.S.O. 1990, c. l.8., to assess the quantum of damages incurred as a result of the water damage. An Appraisal Award released on 18 June 2015 measured the plaintiffs’ losses at an amount exceeding $2,000,000.

The Positions of the Parties

[8] Although the plaintiffs sought summary judgment for a number of claims that they feel have merit, they conceded, in oral argument, that the central issue in this case is whether the insurance contract that they agreed to covers the damage sustained. The plaintiffs maintain that the water damage came from a burst faucet within the home as well as heavy rain storms. They submit that the terms of the insurance policy sufficiently cover the damage.

[9] The defendants, on the other hand, argue that the evidence demonstrates that any damage was the result of water seepage through the Property’s foundation walls in addition to a general physical depreciation of the structure. That being the case, the insurance policy taken out by the plaintiffs does not cover their losses.

LEGAL PRINCIPLES

The Test for Summary Judgment

[10] Rule 20.04(2)(a) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, states that:

(2) The court shall grant summary judgment if,

(a) the court is satisfied that there is no genuine issue requiring a trial with respect to a claim or defence; or

(b) the parties agree to have all or part of the claim determined by a summary judgment and the court is satisfied that it is appropriate to grant summary judgment.

(2.1) In determining under clause (2)(a) whether there is a genuine issue requiring a trial, the court shall consider the evidence submitted by the parties and, if the determination is being made by a judge, the judge may exercise any of the following powers for the purpose, unless it is in the interest of justice for such powers to be exercised only at a trial:

Weighing the evidence.
Evaluating the credibility of a deponent.
Drawing any reasonable inference from the evidence.

[11] In Hryniak v. Mauldin, 2014 SCC 7, [2014] 1 S.C.R. 87, the Supreme Court of Canada concluded, at para. 47, that “[s]ummary judgment motions must be granted whenever there is no genuine issue requiring a trial”. The court indicated, at para. 49, that the test under Rule 20.04 would be satisfied if the judge could reach “a fair and just determination on the merits of a motion for summary judgment.” This is the case when the process:

(1) Allows the judge to make the necessary findings of fact;

(2) Allows the judge to apply the law to the facts; and

(3) Is a proportionate, more expeditious and less expensive means to achieve a just result.

[12] I am satisfied that, in the circumstances of this case, there is no genuine issue requiring a trial to resolve the plaintiffs’ claim that the defendant is liable for damages.

IS THE PLAINTIFFS’ DAMAGE EXCLUDED BY THE INSURANCE POLICY?

The Terms of the Insurance Policy

[13] The insurance policy (“the Policy”) governing any claims for water damage is restrictive, as is the practice in today’s insurance industry.

[14] Those sections relevant to the plaintiffs’ claim are set out as follows:

INSURED PERILS - Dwelling Building...

You are insured against all risks of direct physical loss or damage subject to the exclusions and conditions of this Policy

INSURED PERILS - Personal Property

Your are insured against direct loss or damage caused by the following perils as described, subject to the exclusions and conditions of this policy:

Water Escape. This peril means loss or damage resulting from:

(a) the sudden and accidental escape of water from a watermain;

(b) the sudden and accidental escape of water or steam from within a plumbing ... system or domestic water container, which is located inside your dwelling;

(c) the sudden and accidental escape of water from a domestic water container located outside your dwelling. However, such damage is not covered when the escape of water is caused by freezing;

(d) water from the accumulation of ice or snow on the roof or eaves trough, which enters the dwelling through a roof;

But we do not insure loss or damage:

ii. caused by continuous or repeated seepage or leakage of water;

iii. caused by the backing up or escape of water from a sewer, storm drain, drain, sump or septic tank;

iv. caused by ground water or rising of the water table;

v. caused by surface waters including flood, unless the water escapes from a watermain or from a domestic water container located outside your dwelling;

EXCLUSIONS - LOSS OR DAMAGE NOT INSURED

caused by settling, expansion, contraction, moving, bulging, bucking or cracking, except resulting building glass breakage;
wear and tear, inherent vice, latent defect, mechanical breakdown or deterioration, extremes of temperature, rust or corrosion;
the cost of making good faulty material or workmanship;

DEFINITIONS

Ground Water means water in the soil beneath the surface of the ground, including but not limited to water in wells, underground streams and percolating water; Surface Waters means water on the surface of the ground where water does not usually accumulate in ordinary watercourses, lakes or ponds;

Watermain means a pipe forming part of a water distribution system, which conveys consumable water but not waste water.

SECTION II - PERSONAL LIABILITY PROTECTION

Coverages

This insurance applies:

to accidents or occurrences which take place during the period this policy is in force;...

COVERAGE E - PERSONAL LIABILITY

We will pay all sums which you become legally liable to pay as compensatory

damages because of unintentional bodily injury or property damage arising out of:

your personal actions anywhere in the world;
your ownership, use or occupancy of the premises defined in Section II.

Occurrence means an accident to which this coverage applies occurring within the policy period, including continuous or repeated exposure to conditions neither expected nor intended.

The Expert Reports

[15] As stated previously, the plaintiffs contend that the water damage was the result of a rain storm and defective plumbing in the basement bathroom shower and bar sink which materialised sometime after the storm. The three areas affected were the basement, basement bathroom, and garage roof.

[16] This was not a case where the flood was followed by an immediate call to the defendants to rectify the harm. Instead, the plaintiffs undertook repairs themselves and then filed a claim identifying their contended causes of damage.

[17] To resolve the issue, the plaintiffs and the defendants each retained experts in water damage to assess the cause and extent of the flooding that had occurred on the Property.

The Craft Report (5 August 2011)

[18] The defendant retained Craft Restoration Services, who delivered its conclusions on 5 August 2011 following an inspection of the three areas of the Property with alleged water damage.

[19] Craft’s observations led it to eliminate the prospect of water entering through the garage roof as it found no evidence of water damage in that area. With respect to the water in the basement bathroom, Craft’s opinion was that loose ceramic tiles in the shower stall walls permitted water to trickle in behind the tile. Most significantly, they concluded that the water entering the basement was caused by ongoing seepage through the foundation walls brought about by a severe slope in the rear garden.

The All Seasons Report (7 November 2011)

[20] The plaintiffs retained All Seasons Inspection to conduct a visual inspection of the Property. Like Craft, All Seasons observed a significant slope at the back of the house. All Seasons concluded that this was likely to collect water in the back side window well and was the cause of cracks to the double brick wall. All Seasons also concluded that water penetration in the basement was the result of damaged weeping tile, damaged flashings on the roof and an improper roof drainage system. The darkened area found on the roof was, in All Seasons’ view, caused by a lack of ventilation in the attic area.

The Arcon Report (14 March 2012)

[21] The defendants commissioned a further opinion from Arcon Engineering Consultants Limited, who reviewed the Craft and All Seasons reports. After attending the Property, Arcon agreed with the findings of Craft and All Seasons that the presence of water in the basement area was caused by seepage through the foundation wall system. Their overall conclusion was that the damage reported by the plaintiffs was caused by “pre-existing wear and tear related conditions in addition to lack of general maintenance and repair resulting in further deterioration of building components.” In Arcon’s view, the age of the Property contributed to the construction defects.

[22] Arcon also agreed with Craft’s view that loose tiles were the cause of the staining found in the basement bathroom. Moreover, their investigation found no physical evidence of a plumbing leak which might have caused the water damage in the basement.

The Options Building Services Report (4 June 2012)

[23] Finally, Options Building Services visited the Property at the request of the plaintiffs on 29 May 2012. Options, like all the other inspectors, agreed that the basement water damage had probably been caused by water seepage through the drains, sloped roof and foundation. They also took the view, mirroring the All Seasons report, that low level windows and problems with the weeping tile had contributed to the incident.

ARE THE CLAIMS EXCLUDED?

Damage to the Basement

[24] All four reports concluded that the water damage found in the basement was related to the grading issue and that the basement flood had been caused by water levels seeping through the foundation. Additionally, Arcon, All Seasons and Options Building Services all took the view that water also entered the Property through damaged weeping tiles. There is no doubt in my mind that this type of water entry into the property would fit under the Policy definitions of ground water and surface water. As such, any claim under this heading would be excluded under paragraph 8(d)(ii)(iv) or (v) of the Policy irrespective of whether this occurred suddenly or over an extended period of time.

[25] Moreover, with respect to the damage to the steps and bricks, Arcon’s opinion was that the damage was caused by slow deterioration of the exterior, which was exposed to water freezing and then melting as winter gave way to warmer weather. Arcon concluded that the problems in the basement were not related to a single rainstorm event but “progressive wear and tear related conditions due to freeze thaw cycling, pre-existing construction related deficiencies, and settlement related conditions.” Accepting this to be the case, these instances of damage would be excluded by paragraphs 16 and 20 of the Exclusions section of the Policy which identify “settling, buckling and cracking” as well as “wear and tear” as items specifically exempted from being insured.

Damage to the Basement Bathroom

[26] The expert reports indicate that prior repairs had been completed to the bathroom area. No evidence was produced to this court as to when those repairs took place. However, the Arcon report noted that the plaintiffs had indicated that the repair was performed by Mr. Hojjat. Both Craft and Arcon concluded that the loose tiles in the bathroom were sufficient evidence of water entering behind the tile. Once again, this type of water damage appears to be excluded by paragraph 8 (ii) of the Exclusions section of the Policy.

Conclusion

[27] None of the reports point to any damage caused by “sudden and accidental escape" of water within the residential plumbing as required by paragraph 8(c) of the Policy. Even though evidence of repair to the plumbing was indicated, not one of the inspections pointed to this fact as being the cause of the water damage. There appeared to be some evidence of a leaky faucet, but that would not fall into the definition of a “sudden” escape of water. The leak, if it caused the damage, would have done so over a period of time rather than suddenly or abruptly. Moreover, the evidence concerning the roof eliminated the possibility of water entering the property by that means.

[28] I conclude therefore that the water damage to the Property was not covered by the Policy.

[29] As stated earlier, both parties agreed that this was the central issue in this motion. Although not formally argued, I would also take this opportunity to comment on the remaining allegations made in the plaintiffs’ motion and state that I find no evidence of defamation or any conduct requiring punitive damages.

[30] I therefore grant judgment in favour of the defendants and dismiss the plaintiffs’ action.

Costs

[31] At the conclusion of the case, the defendant submitted a Bill of Costs in the amount of $5838.30 on a partial indemnity basis. I find those costs to be fair and reasonable: Boucher v Public Accountants Council (Ontario), (2004), 71 O.R. (3d) 291, at paras 26, 37. The plaintiffs are liable for these costs on a joint and several basis.

[32] Accordingly, the plaintiffs must pay the amount of $5838.30 to the defendants within 30 days.

S.A.Q. Akhtar J.

Released: 6 April, 2016

CITATION: Kermani v. Axa Insurance, 2016 ONSC 2318

COURT FILE NO.: CV-12-456921

DATE: 20160406

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

HASSAN HOJJATIAN AND MITRA KERMANI

Plaintiffs

– and –

INTACT INSURANCE COMPANY, AXA INSURANCE

Defendants

REASONS FOR JUDGMENT

S.A.Q. Akhtar J.

Kermani v. Axa Insurance, 2016 ONSC 2318

Case Summary

Introduction

Factual Background

The Positions of the Parties

LEGAL PRINCIPLES

The Test for Summary Judgment

IS THE PLAINTIFFS’ DAMAGE EXCLUDED BY THE INSURANCE POLICY?

The Terms of the Insurance Policy

The Expert Reports

The Craft Report (5 August 2011)

The All Seasons Report (7 November 2011)

The Arcon Report (14 March 2012)

The Options Building Services Report (4 June 2012)

ARE THE CLAIMS EXCLUDED?

Damage to the Basement

Damage to the Basement Bathroom

Conclusion

Costs

Judge

Counsel

Parties

Areas of Law

Fact Patterns

Financial Outcomes

Issues

Legal Tests 1

Legislation 2