Canada: Homeowner Insurance Policy: The Importance Of Living In The Insured Dwelling

June 17, 2021 - The Superior Court recently rendered an interesting decision in Dang c. Industrielle-Alliance, assurance auto et habitation inc., 2021 QCCS 1408, emphasizing the importance for the insured to give a thorough declaration of the risk to the insurer. In this case, the plaintiff was asking her insurer for an indemnity following a fire that had damaged her house. The Superior Court rendered a judgment in favor of the insurer, who argued that the homeowner insurance policy compelled the insured to remain in the house to benefit from the coverage.

The facts

The plaintiff owns a house in Trois-Rivières, which had been insured by the defendant since 2012, with an automatic yearly renewal. The plaintiff was the sole insured under a policy that contained the terms "propriétaire occupant" and "votre bâtiment d'habitation" ["owner occupant" and "your dwelling"; our translation]. In May 2018, the building was damaged by fire.

During its investigation, the insurer learned that the plaintiff had traveled sporadically to the United States from 2013 to 2016 and that she was living there permanently since February 2016 without any intention to come back to reside in Quebec. However, the house was never left vacant since members of the plaintiff's family lived there continuously.

The plaintiff argued that she had not really moved to the United States and that she always had the intention to come back.

The evidence revealed that the plaintiff had left her Trois-Rivières home in February 2016 to go live with her spouse in the United States and had not once come back to Quebec during the 27 months prior to the fire. During that time, she cancelled her automobile insurance in Quebec; tried unsuccessfully to sell her house; acquired a new dwelling in Texas with her spouse; and obtained her permanent resident status and green card in the United States.

At trial, the defendant produced as witnesses representatives of two unrelated insurers who confirmed that, just like the defendant, they would not have renewed the policy had they known that the insured had no intention of coming back to live in her house.

Analysis and decision

The Court stated that the burden is on the insurer to prove that the plaintiff did not have the intention to live in her house, and that it would not have renewed the insurance if it had been aware of that information. It then stated that an insurance contract depends on the parties' ultimate good faith and that the insured must disclose any material change of circumstance to the insurer. Should the insured fail to do so, the Court may declare that the policy is cancelled if the insured's bad faith is established or if the evidence confirms that the insurer would not have accepted the risk. On this point, the Court favoured the defendant's evidence that the risk would not have been covered if it had been duly disclosed: "Living in the building is such an important condition that if an insured fails to live in one of the insured buildings, there simply cannot be any insurance." [par 26; our translation] This is not a case where the risk is more significant than expected: it is excluded altogether. Case law confirms that the concept of "homeowner" depends upon living in the dwelling.

Considering the above facts, the Court ruled that the plaintiff had not lived in Quebec since February 2016 and had no intention to come back.

The Court endorsed the insurer's argument that it would not have renewed the policy in February 2016 if it had been informed of the change in the risk. Therefore, the Court declared the policy null as of February 2016 and ordered that the premiums be refunded. The plaintiff was not entitled to the indemnity.

The decision reminds us of the importance of declaring to the insurer all facts relevant to the appraisal of risk and the harsh consequences that the insured can face in case of default.

As the case is now under appeal, we shall await the ruling of the Court of Appeal.

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