[2011] O.J. No. 622

2011 ONCA 105

Ontario Court of Appeal

M. Rosenberg, J.C. MacPherson and H.S. LaForme JJ.A.

February 8, 2011

The appellants appealed the dismissal of their application for a declaration that their property insurance policy covered their outdoor in-ground swimming pool. The issue was whether the common exclusions in the policy applied to an endorsement relating to the pool. The judge who heard the application found that the exclusions did apply and therefore the loss was not covered.

The appellants’ pool was damaged as a result of hydrostatic uplift pressure caused by the build up of ground water. The pool cracked and was significantly damaged. The appellants had property insurance with the respondent. Their policy included permanently installed outdoor equipment including outdoor antennae, fences, retaining walls and driveways. The common exclusions portion of the policy stated that respondent did not insure settling, expansion, contraction, moving, bulging, buckling or cracking of insured property, or loss or damage to outdoor swimming pools, outdoor antennae, and other items. The appellants had also purchased Endorsement 33b, which amended the policy to provide property coverage for damage to their pool caused by all risks other than flooding or water-borne objects. The judge held that Endorsement 33b was not an independent part of the policy and therefore the exclusions in the policy applied. He rejected the appellants' submission that only the exclusions expressly referred to in Endorsement 33b applied.

The appeal was allowed and the Court of Appeal held that the appellants were entitled to a declaration that they had coverage for the loss. The application of the common exclusions to Endorsement 33b would virtually nullify coverage under the endorsement. Such a result could not have been within the reasonable expectation of the parties. The judge erred in failing to consider the most obvious of risks to the pool and making a determination of whether or not the nullification of coverage doctrine applied.