In a property insurance contract to breach an insured for failing to install an alarm, the exclusion must be in the wording of the policy provided to the insured

The Court held that an alarm warranty in an Interim Binder was not enforceable against the Insured.

0712914 B.C. Ltd. v. Aviva Insurance Co. of Canada, [2007] B.C.J. No. 205, British Columbia Supreme Court, Fisher J., February 2, 2007

The Insured operated a convenience store which sustained a loss as a result of a burglary. Less than a week before the burglary, the Insured obtained insurance from the Aviva Insurance Company of Canada (“Aviva”). An Interim Binder of coverage had been provided but the full policy of insurance had not yet been issued. Aviva denied coverage under the insurance policy because the Insured’s alarm system was not operating and Aviva claimed that this was a breach of the alarm warranty in the policy.

The Court noted that the case involved a claim arising from an event that took place after the insurance was bound but before the policy was issued. In these circumstances, the claim must be adjudicated by reference to the contract as expressed in the Interim Binder only. When the Insured signed the application for insurance, this operated as a formal offer to enter into an insurance contract on the terms set out. When Aviva accepted the proposal and bound the insurance, the Interim Binder required Aviva to issue a policy in accordance with the proposal. The Court noted that where the Insurer agrees to the proposal but requires the Insured to agree to a warranty that was not contained in the Interim Binder, the unsigned warranty constitutes a counter-offer which is capable of acceptance by the Insured, citing Scottish & York Insurance Co. Limited v. Metrix Professional Insurance Brokers Inc., [2006] B.C.J. No. 1431. In this case, the Interim Binder included an alarm warranty as a condition. However, the terms of the warranty were not defined and there was no specific reference to the Alarm System Warranty Endorsement in the policy that was to be issued or to any standard terms relating to an Alarm Warranty in the Aviva policy.

The Court rejected Aviva’s argument that the Warranty should be effective because an explanation of its inclusion was provided to the Insured at the time of the application for insurance. The Court applied s. 12 of the Insurance Act, R.S.B.C. 1996, c. 226 which required that a term or condition of the contract of insurance, when issued, must be set out in full in the policy or in the document attached to it unless an alteration of the contract has been agreed on in writing between the Insurer and the Insured after the policy is issued. The Court concluded that the Alarm Warranty was not accepted in accordance with s. 12 of the Insurance Act and was not enforceable.

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