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Toronto House Destroyed by Fire: Denial Based on Contract Wording

Interesting case where the fight was over a $345,000 replacement cost provision within theresidential / homeowner’s insurance policy: Willoughby v. Pilot Insurance Company, 2014 ONSC 95 (CanLII)

There was no fight over the cause of the fire (i.e. fraud was not alleged) nor whether there was valid coverage available. Instead, the plaintiff homeowners decided to buy another home instead of building a new structure on their existing, fire-damaged lot.

It’s curious as to why this fight arose, particularly since the fire happened about 4.5 years before this summary judgment motion was heard.

The insurer denied payment, as the concept was that the policy allowed an insured to rebuild, with the $345,000 policy limit, on their lot. Of course, the insured homeowners would have to rent temporary accomodations for at least one year and deal with the headaches of hiring contractors, an architect, engineers, etc. No suprise that the homeowners decided to move.

On the specific reading of the wording of this homeowner’s policy, Mr. Justice Stinson found that the policy was restricted to paying for costs incurred to replace the fire damaged home on this specific lot location only.

As a result, the matter will still continue with litigation on the other main issue, which is whether the insurer had ample warning that the plaintiffs were intending of buying a new home, instead of replacing their home, and acquiesced and failed to notify the homeowners would not have coverage for the new home purchased (i.e. to the financial benefit of the insurer).

Presumably the homeowners no longer own the lot, 4.5 year post fire, otherwise this type of dispute does not make much sense – i.e. the homeowner’s could have rebuilt on their damaged lot and recovered insurance payments as a result. It is a difficult result for the homeowners which illustrates the need for clarity on the issue of coverage – even pressing your insurance broker to obtain written verification for you during this process – before making significant decisions in the rebuilding / purchase process.


Gregory Chang

Toronto Personal Injury and Insurance Lawyer