Policies and Insurance Contracts - Coverage - Exclusions - Misrepresentation in Obtaining Insurance - Interpretation of Policy - Rights and Duties of Insured - Notice - Relief Against Forfeiture

Certain Underwriters at Lloyd's of London v. All Spec Home Inspections

The court gave effect to the terms of an insuring agreement for a professional liability claims-made-and-reported policy, which provided that the failure to disclose any situation or circumstance which may in the future result in a claim excluded coverage of any action subsequently emanating therefrom. As coverage for this action never existed, the insured could not seek relief against forfeiture.

[2013] O.J. No. 5246

2013 ONSC 7149

Ontario Superior Court of Justice

J.W. Quinn J.

November 19, 2013

The insured, a home inspector, held a claims-made-and-reported professional liability insurance policy.

The insured performed an inspection of a home in July of 2010. Shortly thereafter, a worker attending the home to do repairs in attic was fatally electrocuted. The Ministry of Labour investigated the incident and interviewed the insured on August 25, 2010. The insured recalled seeing and testing loose wiring in the attic at the time of the inspection.

Subsequent to the Ministry interview, the insured sought to renew his professional liability insurance policy. The insured filled out an application which asked if the insured was aware of any situation or circumstance which may in the future result in a claim, to which the insured answered "no". The application also stated that the insured agreed that "if there be knowledge of any such fact, circumstance or situation, any claim or action subsequently emanating therefrom is excluded from coverage under the proposed insurance". The insurer accepted the application and issued the policy ("Policy").

In November of 2011, the worker's family commenced an action against the insured and the insured gave notice to his insurer under the Policy.

The insurer applied for a declaration that the insured does not have coverage under the Policy.

The court noted that the test for awareness of any situation or circumstance which may in the future result in a claim is objective: see Sayle v. Jevco (1984), 58 BCLR 122, affirmed, (1985), 16 CCLI 309 (BCCA). In light of the objective test, the insured "could not overcome the fact of the investigation by the Ministry of Labour and the fact of the inquest, and the conclusion that they called out for notice" to the insurer when the application for the Policy was made.

The court held that the exclusion contained in the Policy application deprived the insured of coverage under the Policy for this risk. Furthermore, relief from forfeiture was not available to the insured because there never was insurance with respect to the excluded risk.