This was a motion by the insureds to determine whether their home was insured by the insurer when it was destroyed by fire. Prior to the fire, the insurer wrote to the insureds to advise them that the policy would not be renewed (the renewal date was 8 days before the fire). The insureds argued the insurer was not entitled to terminate the policy as it did. The Court found the termination was valid. A plain reading of the termination clause of the insurance policy indicated that neither the insurer nor the insured must give any reason for termination of the policy.

[2014] O.J. No. 2434

2014 ONSC 1960

Ontario Superior Court of Justice

T.J. Carey J.

May 15, 2014

The insureds' homeowners policy had standard terms and was effective on February 25, 2006. The declarations page included the following statement regarding renewal of the policy:

Automatic Renewal - if the policy period is shown as 12 months, this policy will be renewed automatically subject to the premiums, rules and forms in effect for each succeeding policy period. If this policy is terminated, we will give you and the Mortgagee/Lienholder written notice in compliance with the policy provisions or as required by law.

The policy was renewed on February 25, in 2006, 2007, 2008, and 2009. The insureds made two claims in August 2007 and a third claim in Feburary 2009. On January 25, 2010, the insurer wrote to the insureds advising them that the policy would not be renewed and urging the insureds to obtain other insurance to prevent a lapse in coverage.

On March 4, 2010, the insureds' home was destroyed by fire.

The insureds argued that the "automatic renewal" section of the policy obligated the insurer to automatically renew the policy on its anniversary unless the insureds were in breach of the policy's provisions pertaining to "premiums, forms and rules in effect for each succeeding policy period" and as a result, the insureds argued the insurer was not entitled to terminate the policy as it did.

The insurer took the position the interpretation urged by the insureds was contrary to the plain meaning of the agreement and contrary to the commercial interests of the parties and all insurance companies. The policy contained standard wording and the insurer argued that if the interpretation urged by the insureds was accepted, it would mean that insurers would be unable to cancel insurance policies on the basis of an insureds' claims history.

The Court found that there was no ambiguity between the terms of the policy and the declarations page. The Court noted that the language on the declarations page clearly indicated the policy shall be subject to automatic renewals on an annual basis, but it did not suggest that any termination of the policy shall be subject to the "premiums, rules and forms in effect for each succeeding policy" as the renewal clause indicated. The Court found that the interpretation advanced by the insureds was not only contrary to a plain meaning of the words, but was contrary to common sense. A plain reading of the termination clause of the insurance policy indicates that neither the insurer nor the insured must give any reason for termination of the policy. Accordingly, the insurer was entitled to terminate the policy as it did and the insureds' motion was dismissed.