Insured denied defence in respect to negligence claim arising out of sale of property

Insured denied defence in respect to negligence claim arising out of sale of property.

Insurance law – Property insurance – Duty to defend – Notice – Relief against forfeiture – Practice – Appeals

Kerk-Courtney v. Security National Insurance Co., [2024] O.J. No. 4125, Ontario Court of Appeal, September 12, 2024, K.M. van Rensburg, L. Sossin and J. Dawe JJ.A.

In 2018, the insureds were sued in a dispute arising out of the sale of a residential property in 2016. The plaintiffs alleged there were a number of problems with the home and that the insureds had misrepresented its condition at the time of the sale. The insureds had a homeowner’s policy of insurance with the insurer at the time of the sale. The insureds sought coverage from the insurer in 2021 and coverage was denied. The insureds commenced an application seeking a declaration that the insurer had a duty to defend and indemnity the insureds in relation to the action.

The application judge dismissed the application finding that the insurer had no duty to defend or indemnify the insureds. The insureds appealed.

The Court of Appeal concluded the application judge erred by basing his determination that the insurer had no duty to defend on an “entire agreement” clause in the purchase and sale agreement. The applications judge concluded this clause made it impossible for the purchasers’ negligence-based tort claims to succeed and found that the other claims advanced by the purchasers were captured by exclusions in the policy. However, the Court of Appeal held that the applications judge had reached the correct result on the basis that the insureds provided late notice to the insurer and that relief from forfeiture was not available to them.

This case was digested by Cameron B. Elder 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].