An insured has an ongoing obligation to advise his insurer of relevant information upon the renewal of the policy

A renewed insurance policy is a new policy for the purpose of determining the policy’s inception date. An insured has an obligation to advise his insurer of relevant information upon the inception or renewal of the policy.

South Stormont (Township) v. Frank Cowan Co., [2008] O.J. No. 3594, Ontario Superior Court of Justice, J. Mackinnon J., January 14, 2008

In January 1998, the Township of Osnabruck and the Township of Cornwall were amalgamated into the Township of South Stormont, the Plaintiff in this action.  At the time of the amalgamation, the Plaintiff arranged insurance coverage which included coverage for environmental liability, but which excluded coverage for environmental liabilities that were known to the insured when the policy came into effect.  The Plaintiff made a claim under the insurance policy for an environmental liability regarding contaminated well water which was known to the Township of Osnabruck prior to the amalgamation.  The insurer denied coverage on the basis that the insured was aware of the potential liability prior to the policy coming into effect.  The Plaintiff took the position that since it came into existence at the same time as the policy took effect, it could not have any prior knowledge of the liability of the former Township of Osnabruck.

The court held that notwithstanding the fact that the policy originally came into effect on the date of amalgamation, it had been renewed twice in the interim, with additional coverages purchased.  The effect of renewing the policy was to renew its inception date.  The Plaintiff made no effort to report the environmental liability to the insurer at the time of the renewals, despite having clear and cogent knowledge of the potential for liability, and in violation of the policy’s reporting conditions.  The court held that the policy came into effect at the date of renewal, and that therefore the Plaintiff had prior knowledge of the environmental liability, so its coverage was excluded.  The court further held that even if the policy came into effect on the date of amalgamation, the court would have found that the Plaintiff had prior knowledge of the environmental liability on the basis that the amalgamated township inherited the rights and obligations of its predecessor entities.

This case was originally summarized by W. Jay Havelaar and originally edited by David W. Pilley.

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