Contracting out of the Insurance Act

Section 263 of the Insurance Act provides that in cases of property damages involving two insured automobiles, the insured is entitled to recover from his or her own insurer.

A recent appeal decision held that although s. 263 precludes tort claims, it permits claims based in contract.

In Hafeez v. Sunaric, 2015 ONSC 4065 (S.C.J.), after a collision in a parking lot, the defendant agreed to pay the plaintiff $15,000 "minus insurance payment".  The vehicle was appraised at $13,500.  The plaintiff was paid $6,500 by his insurer and sought to recover the rest from the defendant pursuant to their contract.  The Small Claims Court judge held the agreement was unenforceable due to s. 263.  The plaintiff appealed.

Justice Perrell allowed the appeal.  The property loss compensation scheme introduced by s. 263 precludes tort claims but does not preclude claims based in contract.

Insurer Must Pay for Repairs Associated With Building Code Upgrades

The importance of the wording of exclusion clauses can be seen in Choukair v. Allstate, 2015 ONSC 4989 (S.C.J.).

The Applicant, Choukair, had a Homeowner’s Policy with the respondent, Allstate. On January 20, 2014 there was a total loss fire at Choukair’s residence. As a result, the house had to be rebuilt. Choukair stated that his replacement cost was $450,700.00, plus taxes. Allstate paid Choukair $369,000.00 but refused to pay the balance.

The difference between what Choukair claimed and what Allstate paid related to the increased cost of the rebuild associated with upgrades required as a result of the Building Code, which Allstate stated were excluded by the Insurance Policy.

There was an exclusion clause in the Policy which stated the following:

We do not insure: (5) losses or increased costs of repair or cost of improving or upgrading dwellings or structures due to the operation of any by-law regulating the zoning, demolition, repair or construction of buildings and their related services;

Justice Quigley held that the loss did not result from the operation of a by-law. The increased costs were related to the application of the Building Code, which is categorized as a law and not a by-law.

Allstate therefore had to pay the balance related to increased costs associated with the Building Code upgrades.

Insurers may want to consider the wording of their exclusion clauses as a result.

The New Deductibles Under the Insurance Act

The Insurance Act and its regulations have been amended to increase the amount of the deductibles.  As of August 1, 2015, the deductible for non-pecuniary damages is $36,540 (up from $30,000) and for Family Law Act damages it is $18,270 (up from $15,000).  In addition the $100,000 threshold above which the deductible applies has been raised to $121,799 and the $50,000 threshold for Family Law Act damages to $60,899.  The deductibles will be indexed for inflation on January 1st of each year beginning in 2016.

In addition, s. 267.5(9) has been amended to provide that costs are to be determined "with regard" to the effect of the deductible, i.e. costs are now net of the deductible.