An Insured does not “Own” a Residence if he does not have Right to Alienate the Residence

An insured does not “own” a residence if he or she does not have right of alienation to the residence. The plain meaning of where one lives is the answer to the question “Where is your home?”.

Carscallen v. Chubb Insurance Co. of Canada, [2013] A.J. No. 780, July 22, 2013, Alberta Court of Appeal, R.L. Berger and P.W.L. Martin JJ.A. and K.M. Horner J. (ad hoc)

The insured owned a home in Calgary as well as a life tenancy interest in a cottage outside of the city. The insurer issued two policies, one for each building. The home policy provided contents coverage. The insurer’s agent confirmed the contents coverage from the home policy would extend to the cottage. However, there was an exclusion clause limiting contents coverage for an unlisted residence that the insured owned or lived at to 20 percent of the highest amount of contents coverage.

The insured used to own the cottage; however, he sold it to a holding company and then entered into a life tenancy agreement giving him exclusive use and occupation of the property during his lifetime. The insured’s two sons held the common shares in the holding company. The insured held the preferred shares which could be redeemed for the value of the cottage. The cottage burnt down and the insured claimed for the amount representing the actual loss of contents at the cottage.

The insurer concluded the insured both owned and lived at the cottage and so the clause limiting recovery to 20 percent of the loss applied. The insured disagreed and sought a declaration that the 20 percent limit did not apply. The chambers judge found the insured was an owner of the cottage as the word “owner” could mean more than just the entity holding title to the property. The arrangement with the holding company and conditions on its ownership meant the insured’s life interest was more like an ownership as it is commonly understood. The chambers judge went on to find the insured also “lived at” the cottage.

The issue on appeal was the interpretation of the words “at a residence you own or live at”. The court easily concluded the insured did not “live at” the cottage. The plain meaning of where one lives is answered by the question “Where is your home?” The answer to this was the home in Calgary, not the cottage. The court criticized the chambers judge for not considering the reasonable expectations of the parties, despite finding no ambiguity in the policy. The court stated the insured clearly contemplated that he would have contents coverage over both buildings. With respect to whether the insured was an “owner”, the court held the pivotal question is whether the insured has the right of alienation as this is the fundamental right of an owner. The court concluded the right of alienation had been relinquished with the sale of the cottage to the holding company and so the insured was not an owner under the policy.

This case was digested by Djuna M. Field and edited by David W. Pilley of Harper Grey LLP.

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