Snow v Royal & Sun Alliance Insurance Company, 2015 NSSC 44
4/1/2015 1:24 PM
On January 13, 2015, the Supreme Court of Nova Scotia reached its decision in Snow v Royal & Sun Alliance Insurance Company, 2015 NSSC 44. This decision arose from a motion seeking a determination regarding insurance coverage in the case of a residential heating oil spill.
The Plaintiffs were owners of one-half of a duplex in Glace Bay, Nova Scotia. In 2011, the oil tank on the other half of the duplex property spilled onto the Plaintiffs’ property and leaked into the soil under their house. Subsequent to the oil spill, the property experienced two unrelated fires, and was ultimately torn down. The Plaintiffs claimed that they were unable to rebuild without remediating the soil upon which their house had previously stood. The Defendants made a claim under their own insurance policy. The policy included coverage for “escape of fuel oil”. The insurer denied the claim on the basis that the policy did not extend coverage to the soil, only to the dwelling which rested upon it. According to the Defendant, the policy wording expressly stated that it is the dwelling that is insured and thus the dwelling does not include the soil underneath it. The issue for the Court was whether the insurance policy provided coverage for the remediation of the soil under the home of the Plaintiffs.
The Court determined that at the heart of this matter was whether coverage is limited to the “dwelling and attached structures”. The policy defined “dwelling” as the “building described in the coverage summary wholly or partially occupied by you as a private dwelling”. A relevant consideration was whether or not an unfinished basement containing a dirt floor is included under the policy’s definition of “dwelling”. The Court found that as a key fact that the insurance company had specifically agreed to cover escape of fuel oil. In addition, in the policy “dwelling” was defined as “the building”. The Court cited case law which supported the view that “building” means a complete structure, including the roof, chimneys, walls, floors, foundations, and all of the fixtures which form part of the building. The Court found that it would be too fine a distinction to simply conclude that a building means four walls and a roof, and as such does not include the soil. Such an interpretation does not allow for the possibility that a dwelling often includes a basement. Even if a basement is unfinished, it is still a basement. Its floors may not be finished in concrete but it is still a floor. As such, the Court found that the attached structure of the home of the Plaintiffs included the crawl space underneath the house and the dirt floor. The Court held that if the dirt floor was contaminated below the surface then coverage should follow under the policy. The Court held that to restrict coverage as sought by the insurer would require clear wording in the policy. The Court found that the definition of dwelling was not sufficiently clear to alter the intention of the policy, which was to provide all-risks coverage and coverage for escape of fuel oil from a bursting or overflowing domestic tank.
In the alternative, the Court held that if there was ambiguity in the policy, in the term “building” or “dwelling,” the Court would resolve the ambiguity by interpreting these terms broadly so as to include damage to the house, the foundation, and the space enclosed within it. This would include the soil enclosed by the foundation and upon which the dwelling rests. The Court found that the policy in question was difficult to read and to interpret and that even if there was no ambiguity, this was the type of case that should attract broad coverage. The Court found that the circumstances before it warranted holding the insurer responsible for the insureds’ loss, based on the insureds’ reasonable expectations of coverage and that if the words of the policy were unambiguous, the policy spoke for itself providing coverage.
This is an interesting and important decision for both insurers and insureds as it broadens the definition of “building,” and “dwelling,” in circumstances such as these.
If you have questions or would like to discuss this topic further, please contact Jeremy P. Smith at Patterson Law at 1-888-897-2001.
Please note that this article is meant to provide information only and is not intended to confer legal advice or opinion. If you have any further questions please consult a lawyer. Please note as well that many of the statements are general principles which may vary on a case by case basis.