Seven years too late for coverage

Insurance law – Homeowner’s insurance – Delay – Relief against forfeiture – Duties and liabilities of insured

Searles v. Economical Insurance, [2022] O.J. No. 5784, 2022 ONSC 7217, Ontario Superior Court of Justice, December 29, 2022, The Honourable Mr. Justice Pierre E. Roger

The insureds purchased a home insurance policy, which was in force when the insureds sold their home in 2011. In 2013, the purchasers sued the insureds, alleging that defective renovations resulted in black mould. The insureds retained counsel and defended the action, including exchanging documents, completing examinations for discovery in 2015, and attending a pre-trial conference in 2020. The insureds notified their insurer of the claim in July 2020. The insurer denied coverage on the basis that the insureds breached the policy’s notice and cooperation conditions. The insureds settled with the purchasers in October 2021, and then sought indemnification for the settlement amount and defence costs from the insurer. The insurer did not dispute that the insureds would have been entitled to a defence and may have been entitled to indemnity had prompt notice of the purchasers’ action been provided.

The insureds applied for declarations that the insurer was obligated to indemnify them and that they were entitled to relief from forfeiture. The application was dismissed. The policy required the insureds to promptly give notice to the insurer when an accident or occurrence took place, and required the insureds to help the insurer obtain evidence about the accident and cooperate in any legal action. The reporting delay of almost seven years fell short of prompt notice and the insureds’ obligation to cooperate with the insurer. The failure to give timely notice was imperfect compliance, opening the door to relief from forfeiture. However, the breach was grave, given the extent of the delay, and the insurer was prejudiced by its inability to participate in the purchasers’ action. As such, the insureds did not meet their onus to establish entitlement to relief from forfeiture.

This case was digested by Joe Antifaev, 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 contact Joe Antifaev at [email protected].

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