On October 29, 2009, the Honorable Justice Micheline Sasseville of the Court of Quebec, in the case Valade c. Capitale (La), assurances générales inc., ordered an insurer to reimburse its insured for the cost of decontaminating the ground under the insured’s home pursuant to a homeowner’s insurance policy. The contamination had been caused by a leak in the insured’s heating oil tank located in the basement.
This judgment sheds some light on a question that arises more and more frequently in relation to homeowners insurance: to what extent, and in what circumstances, is the soil on which the residence rests insured property under the policy?
The facts are as follows. Between October 20 and October 22, 2006 an accidental fuel leak occurred in the insured’s basement. The damages were limited to the basement. Immediately upon receiving notice of the loss, the insurer dispatched a decontamination team on site. Cylindrical containment sponges were installed to minimize the propagation of the contaminants.
There were no living quarters in the basement which was essentially a cellar. The foundations of the residence rested directly on compacted ground consisting of soil and gravel. The builder had not installed a concrete slab, with the exception of two isolated platforms on which rested the water heater and the furnace.
The insurer’s adjuster immediately advised the insured that the concrete platforms and the foundations of the house as well as the water heater and the furnace were “Insured Property”. However, he informed the insured that the soil, and the gravel which formed the floor of the cellar were not insured by the policy.
The adjuster specified that if the floor of the cellar had been built of concrete, the insurer would have paid for its removal and its decontamination but it would not have paid to decontaminate the soil under the concrete floor.
As a result, the insurer agreed to pay for the damages to the concrete components of the cellar and to the water heater and the furnace but denied any obligation to indemnify the insured for the balance of the decontamination costs which amounted to $30,000.00.
The relevant portion of the policy defined the terms “Insured Property” as follows:
“The term “Building” as appears in the Declaration’s Page means:
- The principal dwelling at the Insured location designated in the Declaration’s Page; […]
- Your lawns, trees and shrubs located outside the dwelling as well as your landscaping form part of the Building. They are insured up to $250 per tree subject to a maximum of 5% of the limit of insurance for the Building provided in the Declaration’s Page including debris removal costs. They are covered exclusively against fire, lightning, explosion, the shock of a road vehicle or aerodyne, riot, vandalism, malicious acts and water damage.” [Our translation]
The insurer, citing a constant line of caselaw on the subject, argued that this definition of the term “Building” designated only the building itself and not the ground or the soil on which it rested.
The Court refused to follow these precedents. Firstly, the Court noted that the soil under the footing of the building and around the foundations was not contaminated. The contamination affected exclusively the compacted soil and gravel on which the foundations of the building had been constructed and which served as the floor of the cellar. As a result, one must distinguish between the present situation and the concept of “soil” discussed in the precedents cited by the insurer.
The Court concluded as follows:
“It does not appear to the Court that there should be coverage where the floor consists of a concrete slab and absence of coverage if the floor is more crudely made up of soil and gravel. The difference between the materials used to make the floor must not constitute an obstacle to coverage. If the footing of the Building rests on this surface, it is Insured Property.” [Our translation]
This judgment serves as a reminder that the true question is not whether the contaminated materials can be described as “soil” or “earth”. The true question is whether this material, for example compacted granular material under the footing of the building, is part of the construction itself and can be included in the definition of “Insured Property” in the homeowners insurance policy.