Healy v. Pilot Insurance Co.,  O.J. No. 5165 Ontario Superior Court of Justice
The Plaintiff mortgagee sought a Declaration that he was entitled to receive payment from the Defendant Insurer in the amount of $44,000 pursuant to an insurance policy which insured the subject premises against loss or damage caused by water. The policy contained a Standard Mortgage Clause in favour of the Plaintiff as first mortgagee. The policy was in force on the date of the loss when the premises were seriously damaged by a sudden and accidental escape of water. At the time of the loss, the premises had been vacant for at least six months.
The Insurer denied coverage on the basis that the policy did not insure against loss or damage occurring while the building was vacant. It was agreed that, but for the vacancy of the premises, the provision of the policy with respect to water damage would apply.
The Standard Mortgage Clause stated that it was in force notwithstanding any act, neglect, omission, or misrepresentation attributable to the mortgagor, owner, or occupant of the property insured, including any vacancy or non-occupancy. The Clause further stated that the mortgagee shall notify the insurer of any vacancy or non-occupancy extending beyond 30 consecutive days that shall come to his knowledge. The Mortgagee, however, had no knowledge of the vacancy.
The court held that the Standard Mortgage Clause stated in simple and untechnical language that the insurance, as to the interest of the mortgagee, was to be in force notwithstanding any act or neglect committed by the mortgagor. Any other interpretation of the clause would distort its plain and ordinary language. Even if the provisions were viewed as ambiguous, the court would have held for the Plaintiff given the principle of contra proferentum and the fact that coverage provisions are to be interpreted broadly and exclusions are to be interpreted narrowly. In addition, from the perspective of the mortgagee, the interpretation of the clause put forth by the Insurer would stand to defeat its very purpose which is to protect the mortgagee from the acts or omissions of the mortgagor over which he has no control. Thus, the interpretation put forward by the Plaintiff in this case was sensible, commercially realistic, and within the reasonable expectation of the parties. The Plaintiff was therefore entitled to judgment.
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