Court of Appeal confirms Extended Water Damage Endorsement did not apply as groundwater was not the direct cause of the insured’s loss

Court of Appeal confirms Extended Water Damage Endorsement did not apply as groundwater was not the direct cause of the insured’s loss.

Insurance law – Homeowner’s insurance – Exclusions – Water damage – Interpretation of policy – Practice – Appeals

Tremblett v. TD Insurance Direct Agency Ltd, [2024] B.C.J. No. 1950, British Columbia Court of Appeal, October 18, 2024, M.E. Saunders, G. Dickson and S.A. Griffin JJ.A

The insured appealed a summary trial decision that dismissed the insured’s claim for loss and damage caused by subsidence of the soil beneath his home, which resulted in foundation cracking and other property damage. The insured reported the damage to the insurer, but the insurer denied the claim based on certain exclusions in the policy which explicitly excluded damage caused by subsidence.

At summary trial, the insured argued that the Extended Water Damage Endorsement in the policy covered his loss because it covered loss caused by groundwater which he argued caused the subsidence. The insurer argued that the loss resulted from subsidence which was explicitly excluded by the policy. The summary trial judge concluded that the Extended Water Damage Endorsement did not apply because the groundwater was an indirect cause of the damage. The groundwater did not cause the damage itself, but caused the subsidence which in turn caused the damage. Accordingly, the insured’s claim was dismissed. The insured appealed the dismissal, asserting that the judge erred in interpreting the policy.

The BC Court of Appeal found that the lower court correctly interpreted the policy by determining that the Extended Water Damage Endorsement did not apply to the insured’s loss and that policy exclusions clearly and unambiguously excluded damage caused by subsidence which was the direct cause of the damage. The appeal was dismissed.

This case was digested by Alicia Catalano and edited by Steven W. Abramson of Harper Grey LLP and first published in the LexisNexis® Harper Grey Insurance Law Netletter and the Harper Grey Insurance Law Newsletter. If you would like to discuss this case further, please feel free to contact them directly at [email protected] or [email protected].