Marketability of a property is affected by municipal work orders even if they are not registered against title of the property

Municipal work orders do not need to be registered against title to affect the marketability of the property.

Insurance law – Title insurance – Policies and insurance contracts – Interpretation of policy – Coverage – Indemnity – Municipal work orders – Ownership of property

MacDonald v. Chicago Title Insurance Co. of Canada, [2015] O.J. No. 6350, 2015 ONCA 842, December 3, 2015, Ontario Court of Appeal, E.A. Cronk, C.W. Hourigan, M.L. Benotto JJ.A.

The insureds had obtained title insurance in connection with the purchase of their family home. Seven years after acquiring their home, the insureds discovered that the previous owner had removed load bearing walls in construction undertaken without a permit which had rendered the second floor unsafe. The City issued an Order to Remedy an Unsafe Building which required that work be done to temporarily support the floor. The insureds undertook the required temporary work and made a claim under their title insurance policy for the cost of the repairs needed to make the home structurally sound. The insurer denied the claim on the primary basis that the property was still marketable.

The insured brought an action against the insurer seeking among other things a declaration of coverage and indemnification. The insured then brought a motion for summary judgment which was dismissed and that decision was appealed to the Ontario Court of Appeal.

The Court of Appeal allowed the appeal finding that the motions judge had misinterpreted the policy. In particular, the Court held that the judge had erred in concluding that the municipal work order did not affect the insureds’ ownership of the property because it had not been registered on title. Moreover, the Court did not accept the insurer’s argument that the insureds might be able to sell the property to someone else at an undetermined lower price. The fact that someone might be willing to purchase a dangerously defective building did not make it marketable under the terms of the policy. The Court granted judgment on the issues of coverage and indemnification.

This case was digested by Cameron B. Elder 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 celder@harpergrey.com or dpilley@harpergrey.com or review their biographies at http://www.harpergrey.com.

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