Court Upholds Insurer’s Denial of Claim Where Premises “Vacant” for More Than 30 Days

In Zimmerman v. Royal & SunAlliance Insurance Company, Mr. Justice Barry Matheson agreed that an insurer was entitled to deny coverage under a homeowner’s policy where the premises had been vacant for about 65 days. The home had been damaged by a leak from a heating system.

The plaintiffs owned two apartments. They had been renting them to university students but by the end of November, 2003, the premises were vacant. The plaintiffs had begun an upgrade of the apartments. They had visited them at least every second day during the period in question. They had not notified their insurer of the change in occupancy. When the claim was submitted, Royal denied coverage.

The exclusion relied upon by the insurer was not set out in the reasons, but typically, it reads something like this: “We do not insure loss or damage occurring after your dwelling has, to your knowledge, been vacant, for more than 30 consecutive days.”

The Royal policy contained a definition of “vacant”, which is set out in Justice Matheson’s decision:

Vacant means the occupant(s) has/have moved out with no intent to return. A newly constructed dwelling is vacant after it is completed and before the occupant(s) move(s) in. Furthermore, the dwelling is also vacant when the occupant(s) move out and before any new occupant(s) move(s) in.

His Honour referred to a 2003 B.C. decision in Price v. Zurich Insurance Co., where the B.C. Court of Appeal had considered the meaning of the identical definition. That court had held that the effect of the exclusion clause is to give the insured a 30-day grace period, even where the premises are vacant within the meaning of the definition.

In holding that the plaintiffs were in breach of their insurance policy, Justice Matheson reasoned that:

The Plaintiffs altered the degree of risk that the Defendant had to deal with. The property was vacant for much of the day and night. The Plaintiffs had a duty to advise the Defendant.

If the Defendant had been notified, the Defendant could have altered the type of coverage, imposed certain terms that would be satisfactory to both. The Defendant was not given that opportunity.

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