MacDonald v. Chicago Title Ins.,

• Jurisdiction: Ontario
• Judge: Cronk, Hourigan and Benotto, JJ.A.
• Neutral Citation: 2015 ONCA 842
• Citation: (2015), 341 O.A.C. 299 (CA),2015 ONCA 842,127 OR (3d) 663,341 OAC 299,127 O.R. (3d) 663,(2015), 341 OAC 299 (CA),341 O.A.C. 299
• Date: 22 September 2015
• Court: Court of Appeal (Ontario)

MacDonald v. Chicago Title Ins. (2015), 341 O.A.C. 299 (CA)

MLB headnote and full text

Temp. Cite: [2015] O.A.C. TBEd. DE.009

Paul MacDonald and Stefanie MacDonald (plaintiffs/appellants) v. Chicago Title Insurance Company of Canada (defendant/respondent)

(C59947; 2015 ONCA 842)

Indexed As: MacDonald v. Chicago Title Insurance Co. of Canada

Ontario Court of Appeal

Cronk, Hourigan and Benotto, JJ.A.

December 3, 2015.

Summary:

The plaintiffs moved for summary judgment, seeing a declaration that the title insurance policy that they had purchased from the defendant provided coverage and indemnification for a dangerous structural condition affecting their home. That condition was caused by unpermitted construction done by a previous owner.

The Ontario Superior Court, in a decision reported at [2012] O.T.C. Uned. 117, dismissed the motion and, notwithstanding that the defendant did not bring a cross-motion, granted summary judgment in the defendant's favour, dismissing the action. The plaintiffs appealed.

The Ontario Court of Appeal allowed the appeal, set aside the order below, and granted the plaintiffs' motion for summary judgment on the issues of coverage and indemnification under the policy.

Barristers and Solicitors - Topic 910

Duty to court - Making submissions - Time for - The plaintiffs moved for summary judgment, seeing a declaration that the title insurance policy that they had purchased from the defendant provided coverage and indemnification for a dangerous structural condition affecting their home - The motion judge dismissed the motion and granted summary judgment in the defendant's favour - No costs were awarded - The plaintiffs appealed and, if successful, requested costs of the motion on a partial indemnity basis in the amount of $32,809.79, including fees, disbursements and applicable taxes - The defendant asserted that if the plaintiffs were successful on the appeal, the court should direct the parties to make further submissions on the costs to be awarded on the motion - The Ontario Court of Appeal allowed the appeal and granted the plaintiffs' motion for summary judgment - The court refused the defendant's request to make further submissions - Parties were expected to come to the court ready to argue all issues on the appeal, including costs - The court was also cognizant of the significant disparity in resources between the parties - The defendant could easily afford to continue making submissions, whereas the plaintiffs did not have unlimited resources to continue litigating the matter indefinitely - There was no reason to deprive the plaintiffs of their costs - The quantum of costs sought, which was less than what the defendant claimed on the motion, was entirely reasonable, fair and proportionate - The court awarded the plaintiffs costs of the motion fixed at $32,800 - See paragraphs 82 to 90.

Contracts - Topic 7401

Interpretation - General principles - Intentions of parties - Home owners discovered that load-bearing walls in their home had been removed by a previous owner without a building permit, rendering the second floor unsafe - The City of Toronto issued an Order to Remedy an Unsafe Building, requiring that work be done to temporarily support the floor - The owners undertook the required temporary work and made a claim under their title insurance policy with Chicago Title Insurance Company of Canada (Chicago Title) for the costs of the repairs and the permanent repairs needed to make the home structurally sound - Coverage was denied - The owners sued Chicago Title for a declaration that the policy provided coverage and indemnification - The motion judge dismissed the motion and granted summary judgment in Chicago Title's favour - The owners appealed - Chicago Title asserted that the policy was never intended to cover the type of loss suffered by the owners, and had it been so, the premium would have been much higher - The Ontario Court of Appeal stated that "There are two problems with this contention. First, ... a party's subjective intentions are not relevant to the exercise of contractual interpretation. Second, if this argument were accepted it would, in effect, reverse the business relationship between the parties such that the appellants become the insurers of Chicago Title, with the appellants bearing the loss caused by Chicago Title's failure to properly draft the coverage provisions and properly price the policy. This is a commercially absurd result." - See paragraphs 75.

Insurance - Topic 1151

The insurance contract - Policy limits - General - Home owners discovered that load-bearing walls in their home had been removed by a previous owner without a building permit, rendering the second floor unsafe - The City of Toronto issued an Order to Remedy an Unsafe Building, requiring that work be done to temporarily support the floor - The owners undertook the required temporary work and made a claim under their title insurance policy for the costs of the repairs and the permanent repairs needed to make the home structurally sound - The insurer denied coverage - The owners sued the insurer for a declaration that the policy provided coverage and indemnification - The owners moved for summary judgment - The motion judge, in dismissing the motion and granting summary judgment in the insurer's favour, held that, under the policy, the owners were entitled only to their actual loss - Having made no permanent repairs, the owners' actual loss did not include unincurred expenditures - The owners appealed - The insurer relied on the judge's finding that the owners had not suffered any actual loss - The Ontario Court of Appeal stated that "To the extent that the motion judge held that the loss has not been incurred because the City Order was restricted to temporary repairs, he is incorrect because logically an order that is explicitly marked as temporary means that other permanent work is required. It appears that the motion judge meant that the appellants would only be compensated after they went into their own pockets to pay for the repairs. This would be a remarkable interpretation that would mean that only those insureds who had the financial resources to cover their loss would receive compensation. In either case, this is a highly restrictive interpretation of this limitation of liability and it cannot stand." - See paragraphs 82 and 83.

Insurance - Topic 1852

The insurance contract - Interpretation of contract - Intent of the parties - [See Contracts - Topic 7401 ].

Insurance - Topic 1852

The insurance contract - Interpretation of contract - Intent of the parties - The Ontario Court of Appeal referred to the following well settled principles of interpretation of insurance contracts: "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." - The court stated that "Responsible consumers purchase insurance policies for indemnification. Canadian courts have developed these fundamental principles of interpretation as a means of ensuring that these consumers are treated fairly and that their reasonable expectations are protected. The principles are to be applied rigorously in the interpretation of insurance contracts. It is not sufficient ... to cite the principles and then move on to an interpretation of a contract of insurance that is free from any analysis of how the principles apply to the contract in issue." - See paragraphs 66 and 67.

Insurance - Topic 1856

The insurance contract - Interpretation of contract - Exclusions - [See second Insurance - Topic 1852 ].

Insurance - Topic 1856

The insurance contract - Interpretation of contract - Exclusions - The plaintiffs moved for summary judgment, seeing a declaration that the title insurance policy that they had purchased from the defendant provided coverage and indemnification for a dangerous structural condition affecting their home - That condition was caused by unpermitted construction done by a previous owner - The plaintiffs relied on, inter alia, clause 11 of the policy which provided for coverage in circumstances where "Your Title is unmarketable, which allows another person to refuse to perform a contract to purchase, to lease, or to make a mortgage loan." - The judge dismissed the motion and granted summary judgment in the defendant's favour - The plaintiffs appealed - The insurer asserted that the unpermitted construction was discovered many years after the policy date and, consequently, there was no coverage pursuant to an exclusion clause - The Ontario Court of Appeal declined to give effect to the insurer's argument - The exclusion clause had to be restrictively interpreted - There was nothing in the policy indicating that a defect rendering title unmarketable under clause 11 that was extant at the time of the policy date was not covered unless the plaintiffs discovered the defect as of the policy date - The introduction of that discoverability concept would be a significant broadening of the exclusion provision that was not supported by the language of the policy - The plaintiffs' title was unmarketable within the meaning of policy from the moment they acquired the property, even if they were not then aware of that fact - The unpermitted construction was an existing defect that crystalized when the plaintiffs became aware of the defect - See paragraphs 76 to 81.

Insurance - Topic 1859

The insurance contract - Interpretation of contract - Construction - Sensible commercial result - [See Contracts - Topic 7401 and second Insurance - Topic 1852 ].

Insurance - Topic 1861

The insurance contract - Interpretation of contract - Contra proferentem rule - Ambiguity construed against insurer - [See second Insurance - Topic 1852 ].

Insurance - Topic 1863

The insurance contract - Interpretation of contract - Extrinsic aids - [See second Insurance - Topic 1852 ].

Insurance - Topic 1864

The insurance contract - Interpretation of contract - By context - [See second Insurance - Topic 1852 ].

Insurance - Topic 1869

The insurance contract - Interpretation of contract - Reasonable expectations principle - [See second Insurance - Topic 1852 ].

Insurance - Topic 1870

The insurance contract - Interpretation of contract - Broad construction in favour of coverage - [See second Insurance - Topic 1852 ].

Insurance - Topic 1870

The insurance contract - Interpretation of contract - Broad construction in favour of coverage - The plaintiffs moved for summary judgment, seeing a declaration that the title insurance policy that they had purchased from the defendant provided coverage and indemnification for a dangerous structural condition affecting their home - That condition was caused by unpermitted construction done by a previous owner - The plaintiffs relied on, inter alia, clause 11 of the policy which provided for coverage in circumstances where "Your Title is unmarketable, which allows another person to refuse to perform a contract to purchase, to lease, or to make a mortgage loan." - The motion judge found that the policy provided coverage for the specific risk as described therein, but only if it affected the plaintiffs' title - The plaintiffs' title had not been affected because it was as marketable as it always had been, although it was subject to a duty to disclose the nature of the structural problems, and the home would therefore be sold for less than the plaintiffs had paid for it - The Ontario Court of Appeal allowed the plaintiffs' appeal - It was irrelevant and speculative to postulate that the plaintiffs might be able to sell the home at some undetermined lower price - The fact that someone might be willing to purchase a dangerously defective building did not mean that it was marketable under the policy - The judge's interpretation of clause 11 was overly restrictive and violated the principle that coverage provisions had to be construed broadly - It also imported a definition of unmarketable that was inconsistent with clause 11 - The correct approach was to determine, first, whether the defect had rendered the home unmarketable as that term was defined in clause 11 (i.e., could a potential purchaser refuse to close a purchase and sale agreement on learning of the defect?) - The next question was whether coverage was excluded under the policy's exclusions or limitations of liability provisions - The court was satisfied that clause 11 provided coverage for the plaintiffs and was not caught by any contractual exclusion or limitation - See paragraphs 68 to 72.

Insurance - Topic 1870

The insurance contract - Interpretation of contract - Broad construction in favour of coverage - Home owners discovered that load-bearing walls in their home had been removed by a previous owner without a building permit, rendering the second floor unsafe - The City of Toronto issued an Order to Remedy an Unsafe Building, requiring that work be done to temporarily support the floor - The owners undertook the required temporary work and made a claim under their title insurance policy for the costs of the repairs and the permanent repairs needed to make the home structurally sound - Coverage was denied - The owners sued the insurer seeking a declaration that the policy provided coverage and indemnification - The motion judge, in dismissing the motion and granting summary judgment in the insurer's favour, held that the City's order did not affect the owners' ownership of the property because it had not been registered on title - The Ontario Court of Appeal stated that the motion judge's understanding that municipal work orders were routinely registered against title was incorrect - Municipal work orders were not registered in either the Registry or Land Titles systems in Ontario - They were a defect that could only be discovered by "off-title searches" - Title insurance did not respond only to defects registered against title - The judge's misapprehension of the scope of the insurance permeated his analysis of the policy - That caused the judge to adopt an unduly strict interpretation of the policy's coverage provisions - See paragraphs 54 to 63.

Insurance - Topic 1873

The insurance contract - Interpretation of contract - Judicial review or appeal (incl. standard of review) - At issue on appeal was a motion judge's interpretation of a title insurance policy - The Ontario Court of Appeal stated that "In summary, the standard of review that applies to a standard form insurance contract like the Title Policy is correctness. The rationales in [Creston Moly Corp. v. Sattva Capital Corp. (2014, SCC)] that support adopting a deferential standard of review do not apply to contracts of this type, as the factual matrix does not meaningfully assist in interpreting them and their construction has broad application. For these reasons, adopting the correctness standard of review for these contracts best ensures that provincial appellate courts are able to fulfill their responsibility of ensuring consistency in the law." - See paragraph 14.

Insurance - Topic 10105

Title insurance - Coverage - Scope of - [See Contracts - Topic 7401 , Insurance - Topic 1151 , second Insurance - Topic 1856 and second and third Insurance - Topic 1870 ].

Insurance - Topic 10105

Title insurance - Coverage - Scope of - Home owners discovered that load-bearing walls in their home had been removed by a previous owner without a building permit, rendering the second floor unsafe - The City of Toronto issued an Order to Remedy an Unsafe Building, requiring that work be done to temporarily support the floor - The owners undertook the required temporary work and made a claim under their title insurance policy for the costs of the repairs and the permanent repairs needed to make the home structurally sound - Coverage was denied - The owners sued the insurer for a declaration that the policy provided coverage and indemnification - The owners relied on, inter alia, clause 11 of the policy which provided for coverage in circumstances where "Your Title is unmarketable, which allows another person to refuse to perform a contract to purchase, to lease, or to make a mortgage loan." - The motion judge dismissed the motion and granted summary judgment in the insurer's favour - The owners appealed - The insurer asserted that the property's structural condition was a latent defect that was not subject to coverage under the policy - It asserted that the previous owners' failure to obtain the necessary permit from the City was not the cause of the problem; it was the improper construction that caused the problem - The Ontario Court of Appeal refused to give effect to the insurer's argument - There was no issue that the unpermitted work led to the issuance of the City's order - Had the necessary approval for the dangerous construction been sought from the City, it would have been denied - The dangerous condition, therefore, flowed directly from the previous owners' failure to attempt to obtain the necessary approval - That failure made the owners' title unmarketable within the meaning of clause 11 - See paragraphs 73 and 74.

Land Regulation - Topic 3251

Land use control - Building or development permits - Offences - Remediation or restraining order or removal of building or structure - [See third Insurance - Topic 1870 ].

Land Regulation - Topic 3949

Land use control - Remedies - Restoration orders - [See third Insurance - Topic 1870 ].

Practice - Topic 3687

Evidence - Affidavits - Use of - Cross-examination (incl. transcripts) - The plaintiffs moved for summary judgment, seeking a declaration that the title insurance policy that they had purchased from the defendant provided coverage and indemnification for a dangerous structural condition affecting their home - That condition was caused by unpermitted construction done by a previous owner - The plaintiffs sought to rely upon admissions that were made by defendants' Vice President of Claims (Mineo) when he was cross-examined on his supporting affidavit - The motion judge held that the contents of Mineo's affidavit were based on his personal information and belief and did not bind the defendant - The judge dismissed the motion and, notwithstanding that the defendant did not bring a cross-motion, granted summary judgment in the defendant's favour, dismissing the action - The Ontario Court of Appeal stated that to the extent that the motion judge meant that Mineo's personal information and belief was not binding on the judge to vary clear contractual terms, the judge was correct - However, where a corporate officer was cross-examined on an affidavit filed in support of the corporation's position on a motion for summary judgment, that officer spoke for the corporation and his admissions on cross-examinations could be used against the corporation in the same way that admissions on an examination for discovery could be - It was a mistake for the judge to conclude otherwise - See paragraphs 42 to 53.

Practice - Topic 4961

Admissions - By corporate officer - [See Practice - Topic 3687 ].

Practice - Topic 5710

Judgments and orders - Summary judgments - Evidence - [See Practice - Topic 3687 ].

Practice - Topic 7020

Costs - Party and party costs - Entitlement to - Successful party - General principles - [See Barristers and Solicitors - Topic 910 ].

Practice - Topic 7021

Costs - Party and party costs - Entitlement to - Successful party - Quantum - [See Barristers and Solicitors - Topic 910 ].

Practice - Topic 8808

Appeals - General principles - Duty of appellate court respecting conclusions or interpretation of trial judge - Contractual interpretation - [See Insurance - Topic 1873 ].

Real Property - Topic 7281

Title - Registration of instruments, etc. - Requirement of registration - General - [See third Insurance - Topic 1870].

Real Property - Topic 8014.3

Title - Registration of instruments, etc. - Land titles system - Registration - Effect of failure to register - [See third Insurance - Topic 1870 ].

Cases Noticed:

Creston Moly Corp. v. Sattva Capital Corp., [2014] 2 S.C.R. 633; 461 N.R. 335; 2014 SCC 53, consd. [para. 14].

Hryniak v. Mauldin, [2014] 1 S.C.R. 87; 453 N.R. 51; 314 O.A.C. 1; 2014 SCC 7, refd to. [para. 15].

Housen v. Nikolaisen et al., [2002] 2 S.C.R. 235; 286 N.R. 1; 219 Sask.R. 1; 272 W.A.C. 1; 2002 SCC 33, refd to. [para. 17].

Director of Investigation and Research, Competition Act v. Southam Inc. et al., [1997] 1 S.C.R. 748; 209 N.R. 20, refd to. [para. 20].

Vallieres et al. v. Vozniak (2014), 580 A.R. 326; 620 W.A.C. 326; 2014 ABCA 290, refd to. [para. 25].

Ledcor Construction Ltd. v. Northbridge Indemnity Insurance Co. et al. (2015), 599 A.R. 363; 643 W.A.C. 363; 386 D.L.R.(4th) 482; 2015 ABCA 121, leave to appeal granted, 2015 CarswellAlta 1769; 2015 CarswellAlta 1770, refd to. [para. 25].

Robb v. Walker (2015), 369 B.C.A.C. 170; 634 W.A.C. 170; 2015 BCCA 117, refd to. [para. 25].

Investors Compensation Scheme Ltd. v. West Bromwich Building Society, [1998] 1 All E.R. 98 (H.L.), refd to. [para. 31].

Eli Lilly & Co. et al. v. Novopharm Ltd. et al., [1998] 2 S.C.R. 129; 227 N.R. 201, refd to. [para. 31].

Plan Group et al. v. Bell Canada (2009), 252 O.A.C. 71; 96 O.R.(3d) 81; 2009 ONCA 548, refd to. [para. 31].

Association des parents ayants droit de Yellowknife et al. v. Northwest Territories (Attorney General) et al. (2015), 593 A.R. 180; 637 W.A.C. 180; 2015 NWTCA 2, refd to. [para. 39].

Royal Bank of Canada v. Paul Pogue Companies Ltd. (1972), 11 O.R.(2d) 171, refd to. [para. 48].

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, refd to. [para. 66].

Scalera v. Lloyd's of London, [2000] 1 S.C.R. 551; 253 N.R. 1; 135 B.C.A.C. 161; 221 W.A.C. 161; 2000 SCC 24, refd to. [para. 66].

Derksen et al. v. 539938 Ontario Ltd. et al., [2001] 3 S.C.R. 398; 277 N.R. 82; 153 O.A.C. 310; 2001 SCC 72, refd to. [para. 66].

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.), refd to. [para. 66].

Tannahill et al. v. Lanark Mutual Insurance Co., [2010] O.T.C. Uned. 3623; 86 C.C.L.I.(4th) 69; 2010 ONSC 3623, refd to. [para. 66].

Sam's Auto Wrecking Co. v. Lombard General Insurance Co. of Canada et al. (2013), 305 O.A.C. 68; 114 O.R.(3d) 730; 2013 ONCA 186, refd to. [para. 66].

Krawchuk v. Scherbak et al. (2011), 279 O.A.C. 109; 106 O.R.(3d) 598; 2011 ONCA 352, leave to appeal refused (2011), 430 N.R. 396; 297 O.A.C. 395 (S.C.C.), refd to. [para. 80].

Counsel:

Gavin Tighe and Alexander Melfi, for the appellants;

Robert W. Dowhan and Catharine J. Grinyer, for the respondent;

R. Leigh Youd, for the intervener, Lawyers' Professional Indemnity Company (LAWPRO).

This appeal was heard on September 22, 2015, by Cronk, Hourigan and Benotto, JJ.A., of the Ontario Court of Appeal. Hourigan, J.A., released the following judgment for the court on December 3, 2015.