Damages caused by a leaky water main may not be covered by a homeowner’s policy

This is an action bought by the Plaintiff homeowners after they were denied coverage by the Defendant insurer for damage to their home caused by a leaky water main. The Court held that the exclusion clause under the policy applied. The claim was dismissed and the Defendant was awarded costs.

Buchanan v. Wawanesa Mutual Insurance Co., [2009] B.C.J. No. 687, British Columbia Supreme Court, February 12, 2009, E.J. Adair J.

The Plaintiffs are homeowners who had a homeowner’s policy with the Defendant. The Plaintiffs’ home sustained damage as a result of a leaky water main. This damage included cracking of the foundation and interior of the home as well as damage to the cement structures on their property.

The Plaintiffs made a claim on their policy, but were denied coverage by the Defendant. The Plaintiffs relied on the section of the policy which said “If the loss or damage is the result of the escape of water from a swimming pool or attached equipment or a public water main, you are insured.”

In denying coverage, the Defendant relied upon the exclusion clause in section 2 of the policy which stated that the Plaintiffs were covered for all risks of direct or physical loss to or damage to the property, except “settling, expansion, contraction, moving, bulging, buckling, crackling, or the falling of ceiling and wall plaster”. An additional exclusion under s. 10 of the policy said that losses arising from the discharge or overflow of water or a stream from a public water main were not covered.

The Court noted that the parties had agreed that the general principles of contract interpretation included: (1) the contra proferentum rule; (2) the principle that coverage provisions should be construed broadly and exclusions narrowly; and (3) the desirability, where the policy is ambiguous, to give effect to the reasonable expectation of the parties. It was also agreed that the insurer was to bear the onus of showing that the exclusion clause applies.

The Court found that the exclusion applied, dismissed the Plaintiffs’ claim, and awarded the Defendant costs. In doing so, the Court cited and relied upon the decisions in Leahy v. Canadian Northern Shield Insurance Co. (2000), 77 B.C.L.R. (3d) 44 and Jordan. v. CGU Insurance Company of Canada, 2004 BCSC 402.  Those cases had very similar facts and almost identical exclusion clauses.

The Court held because the damage was caused by “cracking, movement, settlement, expansion, and contraction” it fell squarely within the exclusion clause in section 2.  The cause of the damage was therefore irrelevant. Given that the claim was dismissed on this basis the Court found it was unnecessary to address the Defendant’s argument that the exclusion in s. 10 also applied.

This case was originally summarized by Kim Yee and originally edited by David Pilley.

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