Realtors are not insured for damages caused to customers’ homes

A Realtor burned down a house that he was showing.  He was sued by the owner of the house.  The Realtor was insured by a standard homeowners policy.  He brought an application to compel his insurer to defend the lawsuit that was brought against him by the owner of the house.  The Court allowed his application and compelled the insurer to defend the lawsuit.  The insurer appealed.  The appeal was allowed. The Court of Appeal determined that the realtor’s claim was not covered by his insurance policy as he had care, custody, and control of the home at the time of the damage.

Fiaklow v. The Personal Insurance Co., [2006] A.J. No. 1530, Alberta Court of Appeal, December 8, 2006

A fire broke out in the home while a real estate agent, was holding an open house. The homeowners had provided the Realtor with a key to the house in a lock box in order to facilitate the showing of the home to potential buyers. The Realtor started a fire in the fireplace to make the home seem more attractive. The fire caused significant smoke damage to the home and the homeowners sued the Realtor for damage. The Realtor was insured through a standard homeowners policy.

The Realtor’s insurer denied coverage to the Realtor on the basis of an exclusion for claims arising from damage to property in the Insured’s care, custody, or control.  The realtor sought a declaration of entitlement to a defence to the lawsuit commenced against him by the homeowners.  At first instance, the judge found that the Insured was entitled to a defence under the policy as he did not have care, custody, or control of the house at the time of the damage. The Insurer appealed this decision.

The Court of Appeal allowed the Insurer’s appeal. The question of whether the Realtor was in the care, custody, or control of the premises was a mixed question of fact and law which depended partly upon the correct interpretation of the contractual terms, as well as the complete factual context. In this case, the Realtor had access, although not exclusive access, at the time of the damage. The Realtor was the one in the house and it was he who started the fire in the fireplace. He clearly had the authority of the owners to admit third parties to the house and, while the owners were away, had a greater level of dominion over the house than any other person. In the circumstances, the only proper conclusion was that he was in the care, custody, or control of the house at the time of the fire. As a result, the claims against the Realtor were excluded from coverage under the policy under the exclusion clause for “damage to property in your care, custody or control”.

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