Cabell v. Personal Insurance Co., (2011) 278 O.A.C. 51 (CA)

• Judge: Rosenberg, MacPherson and LaForme, JJ.A.
• Court: Court of Appeal (Ontario)
• Case Date: November 05, 2010
• Jurisdiction: Ontario
• Citations: (2011), 278 O.A.C. 51 (CA);2011 ONCA 105

Cabell v. Personal Ins. (2011), 278 O.A.C. 51 (CA)

MLB headnote and full text

Temp. Cite: [2011] O.A.C. TBEd. FE.016

Barbara Janet Cabell and Leslie John Gerald Cabell (applicants/appellants) v. The Personal Insurance Company (respondent/respondent)

(C52026; 2011 ONCA 105)

Indexed As: Cabell v. Personal Insurance Co.

Ontario Court of Appeal

Rosenberg, MacPherson and LaForme, JJ.A.

February 8, 2011.

Summary:

The Cabell's outdoor in-ground swimming pool was damaged as a result of hydrostatic uplift pressure, due to the build up of groundwater. The displacement caused the pool to crack. The Cabells had purchased property insurance from Personal Insurance Company. They applied for a declaration that they had coverage for the loss. At issue was whether one of the common exclusions in the policy applied to an endorsement that the Cabells purchased for loss or damage to the pool.

The Ontario Superior Court, in a decision not reported in this series of reports, dismissed the application. The Cabells appealed.

The Ontario Court of Appeal allowed the appeal and granted a declaration that the Cabells did have coverage for the loss. The interpretation urged by the Personal Insurance Company would virtually nullify coverage or render coverage illusory and therefore the exclusion could not be enforced against the Cabells.

Insurance - Topic 1856

The insurance contract - Interpretation of contract - Exclusions - The Ontario Court of Appeal stated that "[a]n exclusion clause limiting coverage will be strictly interpreted. Since insurance contracts are contracts of adhesion, any ambiguity in the policy will be construed against the insurer, applying the contra proferentem doctrine ... However, these principles of interpretation cannot create ambiguities; if the exclusion clause is clear, it is to be applied according to its terms, subject to the nullification of coverage doctrine" - See paragraph 11.

Insurance - Topic 1856

The insurance contract - Interpretation of contract - Exclusions - At issue was whether one of the common exclusions in the appellants' policy applied to an endorsement that they purchased for loss or damage to their in-ground swimming pool - The Ontario Court of Appeal stated that "generally speaking the endorsement does not operate independently of the policy ... An endorsement changes or varies or amends the underlying policy. While it may be comprehensive on the subject of the particular coverage provided in the endorsement, it is built on the foundation of the policy and does not have an independent existence. However, if limitation of apparent coverage in an endorsement is ambiguous, the limitation should be set out in the endorsement itself" - In the end result, the court granted a declaration that the appellants did have coverage for the loss - See paragraph 12.

Insurance - Topic 1870

The insurance contract - Interpretation of contract - Broad construction in favour of coverage - The Ontario Court of Appeal considered the case law interpreting the doctrine of nullification of coverage, and concluded that the court had adopted the interpretation that the doctrine was an independent doctrine that applied even in the absence of an ambiguity - See paragraphs 14 to 17.

Insurance - Topic 1870

The insurance contract - Interpretation of contract - Broad construction in favour of coverage - The Ontario Court of Appeal stated that "[i]f the court is able to determine on an objective basis that the insurer's interpretation would render nugatory coverage for the most obvious risks for which the endorsement is issued, a tactical burden shifts to the insurer. It will be for the insurer to show that the effect of its interpretation would not virtually nullify the coverage and would not be contrary to the reasonable expectations of the ordinary person as to the coverage purchased. This is a reasonable approach given that the insurer is in an ideal position to show that, contrary to what appears to be the case, the endorsement does in fact provide coverage" - See paragraph 28.

Insurance - Topic 1870

The insurance contract - Interpretation of contract - Broad construction in favour of coverage - At issue was whether one of the common exclusions in the appellants' policy applied to Endorsement 33b that the appellants purchased for loss or damage to their in-ground swimming pool - The pool was damaged as a result of hydrostatic uplift pressure, due to buildup of groundwater - The displacement of the pool caused the pool to crack - Common Exclusion 11 excluded coverage for "settling, expansion, contraction, moving, bulging, buckling or cracking of any insured property, except resulting damage to building glass" - The application judge rejected the argument that the scope of Common Exclusion 11 as applied to Endorsement 33b was so broad as to nullify coverage under that endorsement - The Ontario Court of Appeal allowed the appeal - It is difficult to conceive of any damage or loss to an in-ground swimming pool that would not come within that exclusion, especially the word "cracking" - The application of Common Exclusion 11 to Endorsement 33b would virtually nullify coverage - Such a result could not have been within the reasonable expectation of the parties - Accordingly, the court granted a declaration that the appellants had coverage for the loss - See paragraphs 24 to 32.

Insurance - Topic 2151

The risk - Exclusions - General - [See third Insurance - Topic 1870 ].

Insurance - Topic 2152

The risk - Exclusions - Burden of proof - [See second Insurance - Topic 1870 ].

Insurance - Topic 6606

Multi-peril property insurance - Exclusions - Loss or damage from underground water - [See third Insurance - Topic 1870 ].

Insurance - Topic 6606.4

Multi-peril property insurance - Exclusions - Settling, expansion, contraction, etc. - [See third Insurance - Topic 1870 ].

Cases Noticed:

Westcon Ornamental Iron Works Ltd. v. Continental Insurance Co. et al., [1981] I.L.R. 477 (Ont. C.A.), refd to. [para. 9].

Reid Crowther & Partners Ltd. v. Simcoe & Erie General Insurance Co., [1993] 1 S.C.R. 252; 147 N.R. 44; 83 Man.R.(2d) 81; 36 W.A.C. 81, refd to. [para. 1].

Consolidated-Bathurst Export Ltd. v. Mutual Boiler and Machinery Insurance Co., [1980] 1 S.C.R. 888; 32 N.R. 488, refd to. [para. 11]; consd. [para. 15].

Pilot Insurance Co. v. Sutherland (2007), 86 O.R.(3d) 789 (C.A.), refd to. [para. 12].

Wigle et al. v. Allstate Insurance Co. of Canada (1984), 6 O.A.C. 161; 49 O.R.(2d) 101 (C.A.), refd to. [para. 13].

Indemnity Insurance Co. of North America v. Excel Cleaning Service, [1954] 1 S.C.R. 169, consd. [para. 14].

Amos v. Insurance Corp. of British Columbia, [1995] 3 S.C.R. 405; 186 N.R. 150; 63 B.C.A.C. 1; 104 W.A.C. 1, consd. [para. 16].

Zurich Insurance Co. v. 686234 Ontario Ltd. (2002), 166 O.A.C. 233; 62 O.R.(3d) 447 (C.A.), leave to appeal refused (2003), 319 N.R. 198; 189 O.A.C. 197 (S.C.C.), consd. [para. 17].

General Accident Assurance Co. of Canada v. Foodpro National Inc. (1986), 57 O.R.(2d) 489 (H.C.), affd. (1988), 63 O.R.(2d) 288 (C.A.), leave to appeal refused (1988), 92 N.R. 326; 31 O.A.C. 160 (S.C.C.), consd. [para. 26].

Counsel:

Hillel David, for the applicants/appellants;

Loris Carlesi, for the respondent/respondent.

This appeal was heard on November 5, 2010, before Rosenberg, MacPherson and LaForme, JJ.A., of the Ontario Court of Appeal. In reasons written by Rosenberg, J.A., the Court of Appeal delivered the following judgment, released on February 8, 2011.