The insured’s failure to clarify who primarily resided in a home was not a material change prior to a total fire loss.

Insurance law – Homeowner’s insurance – Material change in risk – Relief against forfeiture

Dubroy v. Canadian Northern Shield Insurance Co., [2021] B.C.J. No. 402, 2021 BCSC 352, British Columbia Supreme Court, March 3, 2021, L. Marchand J.

On January 20, 2019, a home owned by the insured was destroyed by fire. In May 2016, the insured had become the sole owner of the home and applied for a mortgage. On the mortgage application, the insured indicated it was her intention to occupy the home as her principal residence and not rent any portion out. Around the same time, the insured and her brother applied for insurance as co-insureds. They indicated that the home was their primary residence on the application for insurance. The insured was at the home frequently, but did not live there. Instead, the home was occupied by her brother, the co-insured, and his adult children. The brother moved out in late 2016 while his adult children continued to reside in the home. The policy was subsequently renewed in 2017 and 2018. The insured made a note to tell the insurer that her brother had moved out, but never did.

Following the fire, the insurer voided the insured’s policy on the basis that the insured had failed to advise of a material change in risk. The issues at trial were whether it was a material change when the co-insured brother moved out and, if so, whether the insured should be entitled to relief from forfeiture. Prior to trial, the insurer abandoned its position that there had been a material misrepresentation and agreed that the policy was valid at the outset.

The court accepted that the insurer would not have renewed the policy had it known the home was not the insured’s primary residence. However, the court concluded that the policy was not void because there had not been a change in risk. More specifically, although the brother was a named insured, his status was the same as his adult children in that he was a family member of the exclusive owner. After he moved out, the court reasoned that there was no change because the home continued to be occupied by family members of the exclusive owner and the insurer continued to insure the same risk.

Alternatively, the court would have granted relief from forfeiture. The court found that the insured, who was unsophisticated in insurance matters, had acted reasonably and accepted that the discrepancies on the application for insurance were the result of a misunderstanding since her brother, who was a co-insured, was a primary resident. Although the gravity of failing to inform the insurer of the change was significant and the court described the decision as a very close call, reasonableness was the most important factor and weighed towards the insured. Judgment was granted to the insured for indemnity plus pre-judgment interest.