Exclusion Clause did not Apply because it Only Excluded Repairs Relating to “by-laws” and the Building Code was not a “by-law”

An insurer was obligated to pay for the increased cost of repairs due to the additional work required under the Building Code. The relevant exclusion clause did not apply because it only excluded repairs relating to “by-laws” and the Building Code was not considered a “by-law”.

Insurance law – Homeowner’s insurance – Property insurance – Policies and insurance contracts – Interpretation of policy – By-law coverage – Exclusions

Choukair v. Allstate Insurance Co. of Canada, [2015] O.J. No. 4361, August 20, 2015, Ontario Superior Court of Justice, M.J. Quigley J.

The insured applicant sought a declaration that the insurer had to pay for repair and/or building costs associated with Building Code upgrades.

The insured had a homeowner’s policy with the insurer. A total loss fire occurred at the insured’s residence. The insured’s residence had to be rebuilt. The insurer refused to pay for the increased cost of the rebuild due to additional work required under the Building Code. The issue was whether a clause in the policy excluding the “losses or increased costs of repair or cost of improving or upgrading dwellings or structures due to the operation of any by-law regulating the … repair or construction of buildings” operated to exclude the insured’s claim.

The insured argued this clause did not apply because the loss was a result of the fire and not simply the operation of the Building Code. Further, the insured said the Building Code was a regulation and did not fit within the definition of a “by-law”. The insurer argued the exclusion clause was broad enough to exclude the claim at issue. Further, the Building Code had been adopted by reference by the City where the fire occurred in its municipal by-laws.

The court held the exclusion clause did not apply because the loss did not result from a “by-law”, rather the loss was clearly related to the Building Code. The court distinguished other cases where the clause had applied based on the wording in the policy.

This case was digested by Djuna M. Field and edited by David W. Pilley of Harper Grey LLP. If you would like to discuss this case further, please feel free to contact them directly at dfield@harpergrey.com or dpilley@harpergrey.com or review their biographies at http://www.harpergrey.com.

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