Gascon partner Jonathan Hodes recently appeared as counsel for the successful insurer in the BC Court of Appeal’s decision of Tremblett v TD Insurance Direct Agency Ltd., 2024 BCCA 358. The claim was brought under a property policy issued by the defendant insurer. The policy was written on an all-risk form and contained, among other terms, an exclusion for property damage caused by “subsidence”.
The claim arose when the insured came home from a short vacation to discover sink holes in his yard. Further inspection revealed damage to the walls and foundation of his home. He reported the claim to his insurer, who engaged a geotechnical engineer to assess the cause of the damage. The engineer concluded that the damage was caused by a chain of events, starting with the movement of groundwater below the surface which caused the soil to subside, ultimately resulting in damage to the house.
The insurer denied the claim, and was subsequently sued by the insured, who claimed that because the subsidence had been caused by the movement of groundwater, which was not an excluded peril, the subsidence exclusion did not apply. The insurer argued that while the movement of groundwater was one cause in chain or sequence of events, the language of the exclusion specifically addressed both direct and indirect causes, as well as sequential causation involving both excluded and covered causes, as follows:
“WE DO NOT INSURE loss, damage or expenses caused directly or indirectly by … subsidence …
This exclusion applies whether or not there is another cause or occurrence (whether covered or not) that contributes concurrently or in any sequence to the occasioning of the loss, damage or expenses.”
The insurer succeeded at a summary trial before the BC Supreme Court, and the plaintiff appealed. The BC Court of Appeal agreed with the summary trial judge, holding as follows:
“[42] … By its clear language, [the policy] excludes coverage where the subsidence in question contributes causally to the loss, damage, or expense for which a claim is brought. This is so whether the subsidence contributes causally directly or indirectly, and whether it does so solely, concurrently, or in sequence with other causes as part of a chain of events.
[43] In my view, Exclusion 3 is not amenable to any other reasonable interpretation. This conclusion aligns with Finch J.A.’s guidance in Pavlovic, where he considered an exclusion clause in an all-risk policy when determining a claim for property damage caused by a chain of events. He concluded that the clause in question was ambiguous, but, by way of contrast, described the meaning of a clause that excludes coverage for loss and damage caused “directly or indirectly” by a specified peril as not “open to doubt”: at paras. 23–24. In other words, he stated, such a clause would be unambiguous. As noted, Exclusion 3 is such a clause.”
As a result, the Court of Appeal found that the loss was excluded by the policy and the plaintiff’s appeal was dismissed.
A link to the decision can be found here:
https://www.bccourts.ca/jdb-txt/ca/24/03/2024BCCA0358.htm
This case serves as a reminder of the adage that “insurers have language available to them that would remove all ambiguity from the meaning of an exclusion clause” (see Derksen v. 539938 Ontario Ltd., 2001 SCC 72), and the well drafted exclusion in this case provides an example of such language. Insurers should regularly review their policy wordings to ensure that exclusionary language is properly drafted in line with underwriting intentions. Jonathan Hodes provides policy drafting and coverage advice to insurers and brokers under all types of policies.
