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.