Wight v. Peel Insurance, 2016 ONSC 6904

CITATION: Wight v. Peel Insurance, 2016 ONSC 6904

COURT FILE NO.: CV-13-049

DATE: 20161213

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

Cheryl Wight Plaintiff, Moving Party

– and –

Peel Mutual Insurance Company, Responding Party Defendant, Responding Party

David A. Morin, for the Plaintiff, Moving Party

Svet Ivanov for the Respondent, Responding Party

HEARD: October 28, 2016

CORRECTED Decision on Summary Judgment motion

The heard date has been changed from October 27, 2016 to the correct date of October 28, 2016.

In the first sentence of Paragraph [1] the year “2016” is changed to “2013”. The corrected sentence reads as follows: On April 16, 2013 a dam broke on a lake located on a property approximately 500 metres uphill from the plaintiff’s home.

E.J. Koke J.

INTRODUCTION

[1] On April 16, 2013 a dam broke on a lake located on a property approximately 500 metres uphill from the plaintiff’s home. Retained water rushed down a tiny creek bed and onto the plaintiff’s property, washing out the driveway, damaging the landscaping and seeping into the basement of the house.

[2] At the time of the incident the plaintiff’s property was insured with the defendant insurance company pursuant to a comprehensive homeowners policy of insurance.

[3] The plaintiff brings this motion seeking summary judgment pursuant to Rule 20.01(a) on the issue of liability for a determination that she has coverage for her loss under her policy of insurance with the defendant insurer, with damages to be assessed at trial.

[4] The defendant insurer’s position is that the loss is excluded by the policy. The defendant opposes the motion and asks for a dismissal of the action against it with costs.

BACKGROUND FACTS

[5] The plaintiff, Cheryl Wight purchased her home in September, 2010. At the same time she purchased a policy of comprehensive home insurance from the defendant Peel Mutual Insurance Company (“Peel Mutual”).

[6] Ms. Wight’s home, which is located at 22 Lindgren Road East in the Town of Huntsville is situated on one acre of land which slopes gently downward from east to west. Uphill, east of the home, is a wooded area. A small creek which accommodates approximately one foot of water, and which dries up during the summer, is located about 45 feet from the home. About a 20-minute walk up the creek is a 10 to 12 acre man-made lake and the dam.

[7] On April 16, 2013, the dam broke. The retained water in the lake found the small creek in which to flow down the hill and flowed onto a cluster of driveways (one of them being the plaintiff’s), onto Lindgren Road, and onto Ms. Wight’s property.

[8] Ms. Wight assessed the damage on the morning of April 17, 2013. The Town of Huntsville had repaired her driveway and Lindgren Road. She saw craters in her yard where her lawn and landscaping had washed away. Water had entered her basement.

[9] Ms. Wight called her insurance broker, who reported the loss to Peel Mutual. Peel Mutual assigned an independent adjuster, Al Cormier, to attend and assess the situation.

[10] Mr. Cormier investigated on April 17, 2013. In his First Report to Peel Mutual dated April 25, 2013 Mr. Cormier reported that :

On April 16^th, 2013 an approximate 20 ft. section of a dam let go on private property about 500 metres away from the insured’s home causing water to escape from a lake which caused a flash flood in the area allowing water to travel downwards in a nearby creek. The water reached the height of at least six feet high from the ground level according to water level on a nearby tree on the insured’s property. It washed away part of the road on Lingren Road East and caused damage to four driveways including the insured’s driveway. It created sink holes up to four to five ft. deep and scattered debris it had taken from upstream all over the area (logs, trees, and other debris). The water and debris plugged the four culverts at the four driveways. Water got into the insured’s house (one section of storage area) and came up thru cracks in the floor and thru one wall of the pump room thru a hole which had a pipe in it. It also allowed mud and debris to completely cover the detached garage at both levels by getting in from underneath the doorway. It shifted a small section of the block work on the lower level of the detached garage. The force of the water was so strong it overturned a 5600 pound metal smoker used to smoke food as well as lifting a trailer and took away four car jacks that were underneath it.

[11] Following his inspection of the property Mr. Cormier informed Ms. Wight that the claim would not be covered because it was “ground water”, and ground water was excluded from coverage. On April 30, 2013, Peel Mutual formally wrote to deny her claim, asserting that the “ground water” exclusion applied.

[12] Ms. Wight investigated the property and the dam uphill from her property and determined that its owner was a property developer, Huntsville Highlands (Muskoka) Inc. (“Huntsville Highlands”). She retained legal counsel and on July 2, 2013 she issued a Statement of Claim against Huntsville Highlands for causing the loss, and another Statement of Claim against Peel Mutual for failing to cover the loss. In the action against Huntsville Highlands, Huntsville Highlands brought in a third party, Square B Properties Inc., which was the corporation which sold the land to Huntsville Highlands in 2006.

[13] Peel Mutual wrote to Ms. Wight’s counsel on July 11, 2013 stating that, in addition to the ground water exclusion, the “surface water exclusion” also applied.

[14] Ms. Wight’s lawyer wrote to Peel Mutual on July 30, 2013 to advise that the water flowing from the dam was neither ground water nor surface water. It was dam water, and it was covered.

[15] Peel Mutual responded by letter dated August 23, 2013 saying that, even if it was neither ground water nor surface water, it was water and all water was excluded unless specifically excepted, and there was no exception for dam water.

[16] In the context of the third party proceeding, it has been determined that the dam was constructed by the previous owner of the land, Wilf Doering of Square B Properties Inc., (“Square B Properties”) in approximately the year 2000. His evidence is that construction of the dam was necessary to manage the water that accumulated on the land and which would otherwise undermine the trails and roads he had constructed on the property in order to develop it into a subdivision.

[17] Included in Mr. Doering’s affidavit of documents is a document he authored entitled Summary of the Damn Dam”, dated August 19, 2015. In this summary he describes the dam as follows:

Since I purchased Lot 7 & 8 in 1980 the original beaver dam broke at least two times, causing damage downstream on Lindgren Road. Approx. between 2000 and 2003 I replaced the beaver dam with a man-made dam, which is part of a trail system. The dam is constructed with a river rock lined overflow, set at approx. the same elevation and location as the original beaver dam. The back slope of the dam is covered with erosion control blankets. I also installed a pipe and gate valve on the bottom of the dam to allow the pond to drain completely if need be.

After the sale in 2006 [to Huntsville Highlands] beavers built a dam over top of [sic] man-made dam and plugged the overflow, which caused the water level in the pond to rise by approx. 4 feet. (At least twice the original volume of water).

It is my opinion that this caused water to flow over the beaver dam and over time eroded the back of the man-made dam, which finally failed during spring run-off in 2013. There also might be a factor that beaver dams upstream collapsed, adding to the problem.

[18] In an interview with an insurance adjuster in 2015, Mr. Doering added that the dam was constructed of “partly imported material”, and “it was constructed with an overflow plus culverts to take any excess water so that it does not rush over the road/dam.” Mr. Doering said that beavers were a problem because they blocked culverts with sticks and built dams. He had to regularly remove the sticks. He said:

I did not remove any dams. I only maintained the roads being built through the property. I – I – I never took a dam out, with the exception of the one in question here now, which I replaced with a man-made dam at the same location. Because this is the last dam down – uh, going downstream, which could cause, I suppose, damage to somebody else, and which eventually I guess it did.

[19] Mr. Doering, a civil engineer by training, gave his opinion on the probable cause of the dam breaking. The transcript of his interview states,

Q. So what do you think happened here?

A. I would think it was the melt – spring melt and heavy rains, and it could have been – and it – I’m speculating that one or two of the upper upstream dams broke –

Q. Beaver dams?

A. -- correct – beaver dams broke, rushed onto the dam, and since the dam overflows and culverts were blocked by beaver, uh, it had no way to go other than to rush over the beaver dam constructed on top of, uh, the man-made dam/road and washed it out from behind…

Q. Um, do you, in your expert opinion, feel that if the, uh, lands had been maintained as you had maintained them during your ownership, uh, by Huntsville Highlands during their ownership, um, that this incident would have happened?

A. No. If – if – if they would have maintained as it needs to be, uh, no, it would – would – would not have happened. I mean, the overflows at that particular dam were constructed out of, uh, river rock. Uh, there’s – there’s – there’s no way, uh, that high water would – would wash it out, there’s just no way. But after the beavers blocked the overflows and built a dam over top of, uh, the roadway/dam, uh, yes. It just couldn’t take the water and it had to overflow and wash the dam out from behind.

[20] When Huntsville Highlands became interested in purchasing the property, it had an expert provide a development opinion on the property. The expert was Lanny Dennis of Wayne Simpson and Associates, and he retained Michalski Nielsen Associates Limited to provide a summary assessment of the natural features of the property. Michalski Nielsen’s report dated November 12, 2007, described the water bodies and watercourses on the property as follows:

The outlets of both large ponds are of interest to the development. The western pond has been blocked by the previous owner of the property, with a control structure installed to regulate the flow downstream. The maintenance and scheduling of flows through the outlet into the downstream tributary will need to be determined through the development process, as it would be detrimental to the downstream system should flows stop entirely. The eastern pond is partially blocked by works of the previous owner and in combination with active beavers. The development plan is to pursue the solidification of the temporary beaver structures at the outlet, and potentially set a higher water level for the pond than is currently evident, but within the natural variation of the beaver structures.

PROVISIONS OF THE HOMEOWNERS POLICY

[21] Ms. Wight’s policy of home insurance contains the following relevant provisions:

COMPREHENSIVE HOMEOWNERS PACKAGE

This policy … is designed to indemnify you against actual losses or expenses incurred by you or for which you are liable, arising from accidental events.

AGREEMENT

In return for payment of the premium, we provide insurance to indemnify you from loss by sudden and unexpected occurrences as described and limited in the Insured Perils section of this policy and subject to the terms and conditions set out in the policy…

DEFINITIONS

“Ground water” means water in the soil beneath the surface of the ground, including but not limited to water in wells and in underground streams, and percolating waters.

“Surface waters” means water on the surface of the ground where water does not usually accumulate in ordinary watercourses, lakes, or ponds. This includes any waterborne objects.

“Water” means the chemical element defined as H2O in any of its three natural states, liquid, solid and gaseous.

“Water main” means a pipe forming part of a public water distribution system, which conveys consumable water but not wastewater.

EXCLUSIONS

Perils Excluded

We do not insure against loss or damage resulting from, contributed to or caused directly or indirectly,

15. by water unless the loss or damage directly resulted from:

(a) the sudden and accidental escape of water from within a water main,

swimming pool or equipment attached;

(b) the sudden and accidental escape of water or steam from within a heating,

sprinkler, air conditioning or plumbing system…

(c) the sudden and accidental escape of water from a sewer or drain, sump or

septic tank, eavestrough or downspout;

(d) water which enters through an opening which has been created suddenly

and accidentally by a peril not otherwise excluded;

(e) water from the accumulation of ice or snow on the roof or eavestrough,

which enters the dwelling through the roof as a result of ice damming.

But we do not cover loss or damage:

i) caused by continuous or repeated seepage or leakage of water

ii) resulting from escape of water from a sump pit not equipped with a sump pump;

iii) caused by ground water or rising of the water table;

iv) caused by surface waters, unless the water escapes from a water main or swimming pool;

v) to water mains or outdoor plumbing systems and equipment attached (including but not limited to swimming pools, hot tubs or spas) caused by freezing, water or rupture;

vi) to the system or appliance from which the water escaped;

vii) occurring while the dwelling is under construction or vacant, even if permission for construction or vacancy has been given by us;

viii) caused by freezing of any part of a heating, sprinkler, air conditioning or plumbing system or domestic appliance unless it happens within a dwelling heated during the usual heating season and you have not been away from your premises for more than 4 consecutive days. However, if you had arranged for a competent person to enter your dwelling daily to ensure that heating was being maintained or if you had shut off the water supply and had drained all the pipes and appliances you would still be insured.

ISSUES

[22] The following issues are to be determined on this motion:

a) Does the damage claimed fall within the initial grant of coverage?

b) Does the surface water exclusion apply?

c) Does the groundwater exclusion apply?

d) Were Ms. Wight’s damages directly or indirectly caused or contributed to or the result of water such that the exclusion for water in the policy applies?

e) If the answer to a) is yes and the exclusion for water applies, do any of the exceptions to the exclusion for water damage bring this claim back into coverage?

PRINCIPLES OF INTERPRETATION

[23] The Ontario Court of Appeal recently cited the following principles of insurance contract interpretation as being “settled in Canadian law” (see MacDonald v. Chicago Title Insurance Co. of Canada, 2015 ONCA 842, 2015 CarswellOnt 18332 at para. 66 (Ont. C.A.))

• The court must search for an interpretation from the whole of the contract and any relevant surrounding circumstances that promotes the true intent and reasonable expectations of the parties at the time of entry into the contract;

• 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;

• Ambiguities will be construed against the insurer having regard to the reasonable expectations of the parties;

• An interpretation that will result in either a windfall to the insurer or an unanticipated recovery to the insured is to be avoided;

• Coverage provisions are to be construed broadly, while exclusion clauses are to be construed narrowly;

• The contract of insurance should be interpreted to promote a reasonable commercial result; and

• A clause should not be given effect if to do so would nullify the coverage provided by the policy.

[24] These principles will be applied in determining the issues before the court.

ANALYSIS

[25] In this policy, coverage, exclusions to coverage, and exceptions to exclusions are set out in four layers:

1. Generally, if a loss results from accidental events, or sudden and unexpected occurrences, it is covered. It is a comprehensive policy of homeowners insurance. This is in the AGREEMENT section of the policy.

2. Coverage is excluded for various kinds of loss in the EXCLUSIONS section, under Perils Excluded, paragraph 15 being a general exclusion for loss or damage resulting from, contributed to or caused directly or indirectly by water.

3. There are five alphabetical exceptions to the water damage exclusion, which bring the loss back under coverage. These are found in paragraphs 15 (a) to (e) in EXCLUSIONS section.

4. There are eight specific numeric exclusions for loss by water under a separate heading, “But we do not cover loss or damage” in the EXCLUSIONS section, some of which have their own specific exceptions, which bring the loss back under coverage.

5. Does the damage claimed fall within the initial grant of coverage?

[26] The initial grant of coverage provides as follows:

AGREEMENT

In return for payment of the premium, we provide insurance to indemnify you from loss by sudden and unexpected occurrences as described and limited in the Insured Perils section of this policy and subject to the terms and conditions set out in the policy…

[27] The rupture of the dam was a fortuitous or unexpected event. It was caused by forces over which Ms. Wight had no control. Quite clearly this event constituted a “sudden and unexpected occurrence”, as described in the “Agreement” section of the policy. As such, Ms. Wight’s loss falls within the initial grant of coverage, subject to the terms, conditions and exclusions set out therein.

2. Does the surface water exclusion apply?

[28] The exclusion pertaining to “surface water provides as follows:

But we do not cover loss or damage:

ix) caused by surface waters, unless the water escapes from a water main or swimming pool;

[29] Surface water is defined in the policy as follows:

“Surface waters” means water on the surface of the ground where water does not usually accumulate in ordinary watercourses, lakes, or ponds. This includes any waterborne objects.

[30] The policy’s definition of “surface water” corresponds with the Black’s Law Dictionary definition of “surface water” as:

water lying on the surface of the earth but not forming part of a watercourse or lake. Surface water most commonly derives from rain, springs, or melting snow.

[31] The policy definition indicates clearly that accumulations of surface water in ordinary watercourses, lakes or ponds are not “surface water”.

[32] The words of the exception following the exclusion also define “surface water” to some extent; - it does not include water that escapes from a water main or swimming pool. This aspect of the definition suggests that surface water should be understood to mean water which is not “contained”.

[33] In Neumann v. Wawanesa Mutual Insurance Co., CarswellMan 414 at para. 17 (Master), aff’d 1996 CarswellMan 614 (Q.B.) water flowed into the basement from an abandoned well through a plastic uncapped underground pipe that had become plugged but still connected the well to the interior of the basement. There was an exclusion in the insurance policy for water below the surface of the ground. The court determined,

The plain and ordinary meaning of “surface water” and its mirror image “water below the surface” denotes water which is not contained in any respect. In such an uncontrolled state, the insurer refuses to assume the increased risk which such water has. In the case at bar, the damaging water remained confined to a man-made channel specifically designed for directing its flow. There is no similarity to the uncontrolled status of unrestricted water either above or below the surface of the surrounding land.

[34] Similarly, in Partners Investment Ltd. v. Etobicoke (City), 1981 CarswellOnt 1228 at para. 22 (H.C.J.) per Cory J., a water main ruptured underground and the water travelled to the surface and made its way through a gully on the plaintiff’s property and into the basement. The plaintiff claimed under its all-risk policy but the insurer raised exclusions for flood, surface water, water which backs up through sewers or drains, and water below the surface of the ground. The court considered the cause of the flooding of the basement. It held that “flood” refers to flooding from natural causes, and that “surface water”, being between the words “flood” and “waves” could only refer to surface water arising from flooding by natural causes. Furthermore, “surface water” could not be deemed to cover water escaping from a burst water main. None of the claimed exclusions applied in the circumstances.

[35] The body of water contained behind the dam that burst has been referred to either as a pond or a man-made lake. As such, it can be distinguished from flooding which results from a sudden rain storm. A case where the surface water exclusion was found to apply is Kass v. State Farm Fire & Casualty Co. Kass v. State Farm Fire & Casualty Co., 1989 CanLII 3382 (AB KB), 1989 CarswellAlta 433 at paras. 27-29, [1989] I.L.R. 1-2461 (Q.B.). A sudden deluge of rain and hail pooled at the plaintiff’s downhill-sloping garage door and entered the home. The grill drain located just outside the garage door was inadequate to handle the volume of rain water. The plaintiff claimed for the damage to her home and the insurer claimed that the surface water exclusion applied. The trial judge agreed with the insurer, saying:

I am satisfied in this case, that once the hail and rain fell onto the surface of the earth, they became “surface waters”.

I can come to no other rational conclusion than to find that the damage to the plaintiff’s dwelling was caused by “surface waters” and thus, the exclusion applies.

[36] In conclusion, the source of the deluge of water which caused the damage to Ms. Wight’s property was water which had accumulated in what has been described by witnesses as a pond or a lake which is a natural watercourse. As such it does not fall within the definition of surface water and the surface water exclusion therefore does not apply.

3. Does the ground water exclusion apply?

[37] The exclusion pertaining to “ground water” provides as follows:

But we do not cover loss or damage:

(iii) caused by ground water or rising of the water table

[38] Ground water is defined in the policy as follows:

water in the soil beneath the surface of the ground, including but not limited to water in wells and in underground streams, and percolating waters

[39] This definition suggests that ground water is not contained.

[40] As has already been noted, in Neumann v. Wawanesa Mutual Insurance Co. (above), the court referred to the definition of “surface water” and “water below the surface” as mirror images of each other, in that neither were contained in any respect.

[41] The water which damaged Ms. Wight’s property had burst out of the dam at the man-made lake. It did not come up from the soil beneath the surface of the ground, or from a well or underground soil. It did not percolate through the soil. As such, in my view it does not fall within the definition of ground water and the ground water exclusion therefore does not apply.

4. Were Ms. Wight’s damages directly or indirectly caused or contributed to or the result of water such that the General Exclusion for water in the policy applies?

[42] Section 15 of the policy contains a general exclusion clause whereby damage or loss “resulting from, contributed to or caused directly or indirectly by water” is excluded from coverage. Although the applicant argued that the damage was “caused” by the negligence of the neighbouring property owner to maintain the dam, in my view the use of the term “damage or loss directly or indirectly caused or contributed to” means that the word “caused” in the exclusion clause is not limited to the proximate cause, but includes both direct and indirect causes of the damage [emphasis added].

[43] In this case, the damage resulted from the deluge of water which entered the property. The plain and ordinary meaning of the above phrase denotes damage which is caused by water.

[44] In conclusion, I find that the general exclusion in the policy of coverage for damage caused by water applies, subject of course to any exceptions thereto.

5. Do any of the Exceptions to the Exclusion for Water Damage bring this claim back into Coverage?

[45] Counsel for Ms. Wight argues that a careful reading of the policy shows that the exceptions to the water damage exclusion actually bring the loss back into coverage. He submits that although the general water exclusion appears to be very broad, three of the exceptions thereto cover the loss.

[46] The exclusions are set out as follows:

Perils Excluded

15. We do not insure against loss or damage resulting from, contributed to or caused directly or indirectly …

by water unless the loss or damage directly resulted from:

(a) the sudden and accidental escape of water from within a water main, swimming pool or equipment attached;

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

(c) the sudden and accidental escape of water from a sewer or drain, sump or septic tank, eavestrough or downspout;

(d) water which enters through an opening which has been created suddenly and accidentally by a peril not otherwise excluded;

(e) water from the accumulation of ice or snow on the roof or eavestrough, which enters the dwelling through the roof as a result of ice damming.

[47] The applicant reminds the court that in interpreting the contract and in determining the true intentions of the parties the court must search for an interpretation from the whole of the contract. The respondent points out that the common denominator in all these exceptions is the escape of water from a variety of man-made containers or barriers or conduits of water, including

• water mains;
• swimming pools;
• heating, sprinkler, air conditioning or plumbing systems;
• domestic appliances;
• waterbeds;
• sewers, drains;
• sump or septic tanks;
• eavestroughs or downspouts;
• an “opening” created suddenly and accidentally by a covered peril; and
• shingles which, when combined with ice, causing ice damming on a roof.

[Emphasis added above]

Exception: 15(a) The Sudden and Accidental Escape of Water from Within a Water Main or Swimming Pool

[48] The applicant submits that the water held in the pool by means of a dam, and the overflow pipe, and the key gate valve, are comparable, or parallel, to water contained in a swimming pool or water main. She submits that there is really no significant distinguishing feature. In both cases, water is contained in a pool or pond with sides and is held in that container until it is let out, by means of a culvert, or overflow pipe, or box and key gate valve. When the system malfunctions, water escapes and finds the nearest place to flow downhill, or downstream. In this case, the escape was sudden and accidental.

[49] The applicant points out that “swimming pool” is not defined in the policy. It is defined generally as “a large structure that is filled with water and that is used for swimming” (see Merriam Webster On-line Dictionary). She argues that there is no reason to exclude the “pool” on the Huntsville Highlands land from the para. 15(c) exception. As an exception, it should be construed broadly.

[50] With respect to the “water main” exception, the contract of insurance defines “water main” to mean “a pipe forming part of a public water distribution system, which conveys consumable water but not wastewater”. Even if we broadly construe the man-made lake as part of a “public water distribution system” for a planned subdivision, there is no evidence before the court that the water which damaged the plaintiff’s property was contained in a pipe or that it was consumable.

[51] With respect to the “swimming pool” exception there is no evidence before the court that anyone uses or has used this pond for swimming, or that the future intended use of the pond is for swimming.

[52] Although the insurer bears the onus of establishing that one of the exclusions to coverage applies, if the insurer is successful at this stage, the onus then shifts back to the insured to prove that an exception to the exclusion applies: see Ledcor Construction Ltd. v. Northbridge Indemnity Insurance Co., 2016 SCC 37 at par. 52. In my view, the respondent has not met the required onus in relation to this exception.

Exception: 15(c) The Sudden and Accidental Escape of Water from a Sewer or Drain

[53] The water that escaped through the burst dam on the Huntsville Highlands property was contained in a small lake or pond. Wilf Doering indicated that the dam he constructed was located at the last beaver dam downstream, and he constructed it to prevent the damage that ultimately occurred, which is the escape of water downstream to Lundgren Road and the plaintiff’s property. The last dam contained, in a large pool or pond, water that accumulated on the land. The dam was constructed with an overflow plus culverts to take any excess water so that it did not run over the road/dam, as well as a box and key gate valve at the bottom of the pool or pond so he could drain it if need be.

[54] Michalski Nielsen’s reported that the dam was built with a “control structure installed to regulate the flow downstream. The maintenance and scheduling of flows through the outlet into the downstream tributary will need to be determined through the development process, as it would be detrimental to the downstream system should flows stop entirely” [emphasis added].

[55] In effect, what Mr. Doering constructed was a water management system which contained water and controlled the water flowing downhill. It was a system which functioned as both a water retention system and a drain. In his “Summary of the Damn Dam” referred to above he stated that “I also installed a pipe and gate valve on the bottom of the dam to allow the pond to drain completely if need be” [emphasis added].

[56] In my view, the system constructed by Mr. Doering was comparable to any other storm management system in a rural subdivision. There is really no significant distinguishing feature. In both cases, water accumulates within the system, which is designed to contain and control it and direct its course to a pre-selected outlet. Sewers collect domestic and surface waste water and direct its course to the appropriate destination by drains.

[57] In this case, water escaped as a result of the neglect and subsequent failure of the water management system put in place by Mr. Doering. The retention and drainage portions of the system did not operate properly, causing water to escape, finding a path to lower lying terrain, down a nearby creek bed and entering the applicant’s property. This escape of water was sudden and accidental.

[58] “Sewer” is not defined in the policy. It is defined generally as “an artificial conduit, usually underground, for carrying off waste water and refuse” or as “a conduit, usually underground, for carrying off drainage water and sewage.” …see The Random House Dictionary (New York: Ballantine Books, 1978) “sewer”, p. 817; The Canadian Oxford Compact Dictionary (Toronto: Oxford University Press, 2002), p. 948.

[59] When a sewage system fails by reason (for example) of a plugged outlet, the waste water escapes its normal path and sewage backup occurs, often affecting the drains of homes near the blockage. I note that Mr. Cormier reported that the culverts on the property also plugged up with debris, which would have resulted in rising water levels. Sewage backup is a covered loss in the Peel Mutual policy.

[60] In my view, there is no reason to exclude the water management system in place in the Huntsville Highlands subdivision from the para. 15(c) exception for accidental escape of water from a sewer or drain. I agree that in doing so I am interpreting this exclusion narrowly, but in my view this interpretation falls within the reasonable expectation by the homeowner when she purchased her “comprehensive” policy.

Exception: 15(d) Water Entering Through an Opening

[61] Paragraph 15(d) in the list of exceptions to the general water exclusion excepts “water which enters through an opening which has been created suddenly and accidentally by a peril not otherwise excluded.” This exception is quite broad, the parameters being:

• It covers water which enters “through an opening”.
• It covers water which enters through an opening “created suddenly and accidentally by a peril not otherwise excluded”.

[62] The policy does not define “an opening” or indicate that the “peril not otherwise excluded” can be a direct or indirect peril. Also, it does not specify that the opening which allows the entry of water must be located on the insured property.

[63] In my view there is no reason to exclude water which enters through an opening created in a dam or through an enlarged creek bed opening created by the sudden and accidental bursting of a dam.

[64] Significantly, not only does paragraph 15(d) appear to cover the specific peril that damaged Ms. Wight’s property, it also corresponds to the exceptions in (a), (b), (c) and (e), all of which relate to the escape of water from a man-made container or conduit of water.

[65] The respondent argues that in this case the opening was “created” by the buildup of water which is an excluded peril.

[66] There is no evidence before the court which suggests that the dam was of faulty construction or design. The evidence is that the dam held back water as it was intended to do for many years. The only evidence before the court is that the peril which ultimately created the opening resulted from the negligence of the owners in failing to remove the sticks and other debris which the beavers had deposited on and around the dam.

[67] In my view, the proximate cause of the failure was the failure of the new owners (Huntsville Highlands) to properly maintain the damn. Although the build-up of water pressure was no doubt a factor which caused the dam to fail, it was an indirect factor only and not the proximate cause. If Peel Mutual had intended that the exclusion applied in circumstances were an opening was caused by either direct or indirect perils, it could have worded the exception to this exclusion accordingly. I am therefore prepared to give this exclusion clause a narrow interpretation, which in my view meets what I believe is very reasonable expectation of the plaintiff homeowner who had purchased a “comprehensive” policy.

[68] I find that the exception to the exclusion for water damage as set out in paragraph 15 (d) of the policy applies to provide insurance coverage to the applicant.

Summary and Conclusion Regarding Coverage and Alleged Exclusions

[69] On a plain reading of the grant of coverage, the loss sustained by the applicant was covered. The rupture of the dam was a sudden and unexpected occurrence; the type of accidental event a homeowner would reasonably expect to be covered in a comprehensive all-risk policy of homeowner’s insurance.

[70] The ground water and surface water exclusions do not apply. The water from the dam was neither ground water nor surface water.

[71] In keeping with the principles of interpretation set out in MacDonald v. Chicago Title Insurance Co. of Canada (above), an insurer wishing to limit the comprehensive nature of a policy bears the onus of proving that an exclusion squarely and clearly applies. Exclusions are construed narrowly. Ambiguities in the wording are construed against the insurer because it is in the business of carefully wording its policy and presenting it to the homeowner who, by and large, is untrained in the nuances of insurance law and who is merely presented with a standard form contract of adhesion to sign.

[72] I have found coverage in two separate exceptions to exclusions. Exceptions to exclusions are construed liberally in favour of the insured person, for the same reason that exclusions are construed narrowly against the insurer. I have concluded that the damage to Ms. Wight’s property was caused by,

15(c) the sudden and accidental escape of water from a sewer or drain;

15(d) water entering through an opening created suddenly and accidentally

[73] When these exceptions are considered, individually or cumulatively, it becomes apparent that loss and damage caused by all escaped water is covered.

WAIVER, ELECTION AND ESTOPPEL

[74] I note that the applicant has asserted that the doctrines of waiver, election and estoppel also apply to deny the respondent’s defences. The basis for this assertion is that the insurer initially took the position that the groundwater exclusion applied, but then later adopted the additional or alternative positions that the surface water and general water exclusions applied as well.

[75] In my view, these doctrines do not apply. The applicability of these defences requires an unequivocal abandonment by the insurer of one of its defences. It also requires reliance and prejudice on the part of the homeowner. In my view, the insurer’s actions did not constitute an unequivocal abandonment of defences available to it, and the insurer was entitled to put forth more than one defence or rely on alternative defences. I see no prejudice to the insured.

DECISION

[76] For the above reasons, I find that there is no genuine issue requiring a trial on the issue of coverage for the damages which occurred to Ms. Wight’s property following the collapse of the dam. The damages which are recoverable from Peel Insurance by the applicant are those damages for which Ms. Wight has insurance under the policy. These damages are to be determined at trial, if not otherwise resolved.

COSTS

[77] If the parties are unable to settle the issue of costs directly between them, they can make written submissions to the court within 30 days of the release of this decision. The submissions are to be no longer than 5 pages, exclusive of attachments. They can reply to each other’s submissions within 15 days of receipt thereof.

The Honourable Justice E.J. Koke SCJ

Released: December 13, 2016

CITATION: Wight v. Peel Insurance, 2016 ONSC 6904

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

Cheryl Wight Plaintiff, Moving Party

– and –

Peel Mutual Insurance Company, Responding Party Defendant, Responding Party

CORRECTED DECISION on SUMMARY JUDGMENT MOTION

E.J. KOKE

Released: December 13, 2016