Court File and Parties

COURT FILE NO.: 3/15 DATE: 20/09/2016 SUPERIOR COURT OF JUSTICE – ONTARIO

RE: Nurredin Nejim and Tracy Nejim (Applicants) AND: Intact Insurance Company (Defendants)

BEFORE: Justice J.C. George

COUNSEL: Nurredin Nejim and Tracy Nejim, Appearing in Person Sean Miller, Counsel for the Defendants

HEARD: August 8, 2016

Endorsement

Relief Sought

[1] The applicants seek:

• a declaration that their real property, known municipally as 126 Brookfield St., Denfield, Ontario (home), is an insured property pursuant to a policy issued by the respondent.
• a declaration that they are entitled to damages;
• alternatively, that they are entitled to the repayment of expenses incurred by them for repairs they made to the home on or about January 7, 2014;
• a declaration that water damage incurred at the home is a loss covered by the policy; and
• a determination of the total amount the respondent is to pay the applicants, pursuant to the policy;

Nature of Application

[2] This matter was argued on the filed record. This includes the affidavit of the applicant Nurredin Nejim, along with these attachments:

• the land title search;
• ‘Rented Dwelling’ comprehensive coverage contract (policy);
• a document titled ‘Insurance Coverage Summary for 126 Brookfield’;
• copies of photographs depicting the emergency work undertaken; and
• the Claim Opening Notice by Intact Insurance dated January 14, 2014.

[3] Within the supplemental application record we have the affidavit of Katherine Marie Baer, as well as a second affidavit from Nurredin Nejim. This record contains an invoice from Shane Doherty Construction dated June 10, 2014, and a copy of a lease with Bradley and Patricia Travis dated July 5, 2014.

[4] I have also reviewed affidavits from Andrew Witherstone, and the applicant Tracy Nejim.

[5] The parties agree that I have the authority, pursuant to r. 14.05(3)(d) of the Rules of Civil Procedure, to decide this matter without the need for a trial. I am being asked to make a determination of rights, which depends entirely on my interpretation of the policy. There are no factual disputes to resolve.

Evidence

[6] The respondents were each questioned on their affidavits. I will make reference to the transcript.

[7] On December 18, 2013, the respondents issued a rental insurance policy covering the applicants for a one year term.

[8] On January 7, 2014, severe water damage was incurred at the home on account of a frozen pipe that had burst.

[9] The respondents have refused coverage and will not pay for the applicant’s losses. The applicants claim their right to be reimbursed is clear on a reasonable interpretation of the policy.

[10] While a rental property, it was formerly the Nejim family home. They lived there for 15 years during which time they maintained a standard residential home owner’s policy. In the fall of 2013 they decided to move and rent it out. At the time, in anticipation of tenants, they obtained the rented dwelling policy in question.

[11] The applicant’s daughter, Shaylana, remained in the home until mid-December 2013, when she joined the family in the new residence.

[12] While they had a tenancy lined up for the beginning of January 2014, that arrangement fell through.

[13] The time period I must closely examine begins when the family moved out, until the date of damage.

[14] The governing policy section is clause 17(ix). It provides:

LOSS OR DAMAGE NOT INSURED

We do not insure loss or damage:

17. caused by water unless the loss or damage resulted from:

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

……but we do not insure loss or damage:

ix. occurring while the building is under construction or vacant even if we have given permission for construction or vacancy

[15] The policy defines the term “vacant”:

Vacant refers to the circumstances where, regardless of the presence furnishings, all occupants have moved out with no intention of returning and no new occupant has taken up residence…….

[16] There is no dispute that from mid-December until the date of damage, no one was living in the home. There is no indication anyone was even periodically spending the night.

[17] The applicants depose that, at the relevant time, while they were not living there, they “still regularly attended at the home but also made arrangements for friendly neighbours to check in on it”. They describe this as their best effort to maintain the property, prudently keeping a close eye on it.

[18] I am told that between 3:30 p.m. on January 7, which is the last time Tracy Nejim checked the property, and 5:30 p.m., a pipe underneath the kitchen sink broke discharging water. This caused flooding and extensive damage. This was eventually noticed by a neighbour who entered the home turning off the main water valve.

[19] The respondent insurer promptly retained folks to complete some initial repairs; essentially emergency work to clear debris and “dry out” the premises. All subsequent coverage was denied.

[20] Permanency of the new residence, and whether or not the Nejims or any member of the family intended to return to the home, was addressed with Mr. Nejim during his examination for discovery. I reproduce the relevant exchange:

Q: Once you and your family moved out of that Brookfield home did you have any intent to return?

A: To the house for living?

Q: Yes.

A: Oh. I don’t know. Maybe, who knows. I didn’t have a plan no, definitely. We just bought a house and fix it up and moved in. I would probably say no but you never know.

Q: No you never know but you had spent over a year renovating the home.

A: Yes.

Q: So I would think you had decided to move to the Richmond property and you wouldn’t be moving back to the Brookfield property. You wanted to try and rent it out?

A: Yes. I put up a sign. Sign was there for rent, you know, and can find a tenant.

[21] In his affidavit, Mr. Nejim swears that his family had “various possessions” at the property, but admitted there were only a few and that they could easily and quickly be removed. Most everything had been relocated to the new residence.

[22] Mrs. Tracy Nejim testified as follows:

Q: Okay. Did you plan on moving back to the Brookfield Street property?

A: I don’t think that was in the scheme, no.

Q: Because you had decided you were either going to rent it out or sell it. Fair?

A: Right.

Q: There was no intent to move back to the Brookfield Street property after you had moved out? You have to say yes or no.

A: Yes.

Q: There was an intent?

A: There was no intent. No.

[23] Neighbour Katherine Baer swore an affidavit. She deposes that she “checked on the property regularly”; approximately 8 to 10 times during the period from December 15, 2013 to January 7, 2014. She says she did so “due to the fact that it was not being lived in and to ensure everything was in good working order”.

[24] She speaks specifically to the morning of January 7. She deposes that upon checking the home, she noted the temperature inside to be “comfortable”; that everything was in working order; and that she noticed no damage. She learns later that evening, apparently from another neighbour, that there was flooding.

Position of Parties

[25] The applicants dispute vacancy. They argue that their efforts to check on the property, or have others do it on their behalf, amounts to occupancy.

[26] They take umbrage with the emergency clean-up work. They argue it was too extensive. Mr. Nejim alleges that the emergency crew “destroyed” the home. In support, he filed several photographs depicting the completed work. These photographs are found at tab d of his affidavit.

[27] The respondent’s position is quite simple. The home was vacant. No one was living there. Therefore the exclusion clause applies.

[28] Beyond the interpretation of the contract, the applicants argue that, in light of the emergency work that was completed and covered, the respondent cannot now deny coverage. It is estopped.

Law and Assessment

[29] Interpretation of an insurance policy is to occur in two steps. First, I must ask whether the loss falls under the policy? In our case there is no dispute. It does.

[30] Second, I must determine whether an exclusion clause applies? On these facts, the better question to ask is, whether the home was vacant? Again, there is no factual dispute. It’s a question of whether these, essentially agreed upon facts, trigger the exclusion clause?

[31] The answer is yes. The home was vacant. To periodically “check in” on the place does not amount to occupancy. I reject the idea that there is any ambiguity on this point.

[32] The clause in question is clear. This is significant as it eliminates the application of the doctrine of contra preferentum, which is only to be applied where there is ambiguity or confusion. In other words, to interpret against he who drafted a contract does not over-ride easy to understand contractual language. In fact, this policy seems to specifically anticipate situations such as this, as clause 17(ix) excludes coverage even if permission for construction or vacancy is granted. Vacancy operates as an absolute bar to coverage.

[33] The applicable principles are explained by the Supreme Court in Progressive Homes Ltd. v. Lombard General Insurance Canada, 2010 SCC 33. When interpreting insurance contracts I am to focus first and foremost on the language. Understanding that clear contractual language trumps all else, ensuring consistency across the industry is also a consideration. I am to accept that while coverage must be construed broadly, exclusionary clauses are to be interpreted narrowly. There are other guiding principles, but the overarching direction is that rules of construction should be employed in a way that resolves ambiguity, not create it.

[34] A similar fact-set was present in Wu v. Gore Mutual Insurance Co., 2009 ONSC 6600, where the court was considering an exclusion clause in identical form. In holding the residence was no one’s habitual abode, Nolan J. wrote at para. 87:

In the case before me, while the Wu’s did not have the utilities shut off to the home after Ms. Ouellette and Mr. Steptoe moved out on August 5, 2006, there was no one “occupying” the property. While the Wu’s attended the home on a regular basis, no one slept or cooked there and it was no one’s “habitual abode” for more than 30 days. Thus, I find that the property was vacant for more than 30 consecutive days. It may be that Mr. Wu did not appreciate that the home became vacant in accordance with the definition in the policy when the last tenants moved out…..Nevertheless, on all of the evidence, I find that as of the date of the fire, October 10, 2006, 1613 St. Clair was vacant for more than 30 consecutive days. It was no tenant’s habitual abode and the Wu’s had no intention of moving in themselves. Indeed, the new tenant was not going to move in until November 1, 2006.

[35] As already indicated, I similarly find that there is vacancy. I further find that the applicants had no intention to move back in. They were going to ultimately find tenants, or sell.

[36] In Maracle Estate v. Bay of Quinte Mutual Insurance Co., 2010 ONSC 5217, Leroy J. speaks of how vacancy might contemplate not just that the place be unoccupied, but that all contents be removed. This is important, because it highlights in our case the policy’s specific definition of vacancy, which is different. In other words, reasonable people can disagree on what vacancy means from a practical perspective, including a view that every object would have to be out; but not in this case, with this policy language. It speaks very clearly to there being no occupants, and to there being no intention to return. The respondent’s specific intention was to, in offering coverage, modify what some may see as the default definition of vacancy. This must have been understood by the applicants, and if they did not, they ought to have.

[37] On a plain reading of the applicant’s affidavits, and more clearly upon a review of their evidence on examination for discovery, there is an inarguable element of permanence. They were not returning. No reasonable person could come to this conclusion. There was some prospect of future tenant occupancy, but this was uncertain at best. Indeed, an expected January tenancy had already fallen through.

[38] I further find that the occasional visits detailed in the materials, both by the applicants and neighbours, did not change the home’s vacant status. It did not establish occupancy, nor did it demonstrate an intention to return.

[39] The vacancy exclusion applies.

[40] Moving on to estoppel. The issue is, by engaging the services of an emergency restoration crew, is the respondent estopped from denying coverage? In taking that step, did the respondent implicitly accept coverage?

[41] The answer is no.

[42] The applicant bears the burden of proving each element of estoppel, and they have failed. The respondent arguably paid for work in circumstances where it was not obliged to. It acted in good faith and assisted the applicants in an emergency situation, before any questions could be asked, or final determinations made on coverage. That being the case, it would be a stretch to say the respondent’s conduct induced detrimental reliance; see Scotsburn Co-operative Services Ltd. v. W.T. Goodwin Ltd., [1985] 1 S.C.R. 54. In fact the opposite is true. A benefit was gained. The emergency work did not alter the applicant’s position in any negative way.

[43] The Ontario Court of Appeal has made it clear, most notably in Williams v. Paul Revere Life Insurance Co., 1997 CarswellOnt 2450 (CA), that, in an insurance context, there are three elements to estoppel. First, there must be a representation, or conduct amounting to a representation, intended to induce a course of action on the part of the person to whom the representation is made. Second, an act or omission resulting from the representation, whether actual or by conduct, by the person to whom the representation is made. And third, detriment as a consequence of the act or omission.

[44] In this respect, I make these findings:

• First, the respondent did not intend to induce the applicants into believing they were covered for the loss. A reasonable person would understand that the moral thing for an insurer to do in these circumstances would be to immediately mitigate against any damage; and that thereafter, there must be an opportunity for the insurer to investigate the circumstances that led to the loss.
• Second, that the applicants were not in fact induced to undertake a particular course of action on account of the respondent’s representations. On the record before me, I am unable to determine what would have been different, or in what way the applicant’s altered their position, on account of the emergency work.
• Third, there was no detriment. Work was done at no cost to the applicants; plain and simple. The bleeding was stopped. A mess was cleaned up. Irreparable flooring and damaged walls were removed.

[45] To the applicants argument there was too much in the way of emergency repairs, and that this work only exacerbated the damage, I disagree. The photographs do not bear this out. But even if it did, perhaps the applicants have a cause of action against those who did the work, but it does not alter the scope of the policy’s coverage or elevate an estoppel argument.

Conclusion

[46] In the result I dismiss the Application and claim for coverage.

[47] I invite the parties to provide brief written submissions on costs, to be no more than three pages in length, together with a bill of costs. The respondent has 20 days to file; the applicant 30.

“Justice J. C. George” Justice J. C. George Date: September 20, 2016