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On October 29, 2009, the Honorable Justice Micheline Sasseville
of the Court of Quebec, in the case Valade c. Capitale
(La), assurances générales inc.,
ordered an insurer to reimburse its insured for the cost of
decontaminating the ground under the insured's home pursuant to
a homeowner's insurance policy. The contamination had been
caused by a leak in the insured's heating oil tank located in
the basement.
This judgment sheds some light on a question that arises more
and more frequently in relation to homeowners insurance: to what
extent, and in what circumstances, is the soil on which the
residence rests insured property under the policy?
The facts are as follows. Between October 20 and October 22,
2006 an accidental fuel leak occurred in the insured's
basement. The damages were limited to the basement. Immediately
upon receiving notice of the loss, the insurer dispatched a
decontamination team on site. Cylindrical containment sponges were
installed to minimize the propagation of the contaminants.
There were no living quarters in the basement which was
essentially a cellar. The foundations of the residence rested
directly on compacted ground consisting of soil and gravel. The
builder had not installed a concrete slab, with the exception of
two isolated platforms on which rested the water heater and the
furnace.
The insurer's adjuster immediately advised the insured that
the concrete platforms and the foundations of the house as well as
the water heater and the furnace were "Insured Property".
However, he informed the insured that the soil, and the gravel
which formed the floor of the cellar were not insured by the
policy.
The adjuster specified that if the floor of the cellar had been
built of concrete, the insurer would have paid for its removal and
its decontamination but it would not have paid to decontaminate the
soil under the concrete floor.
As a result, the insurer agreed to pay for the damages to the
concrete components of the cellar and to the water heater and the
furnace but denied any obligation to indemnify the insured for the
balance of the decontamination costs which amounted to
$30,000.00.
The relevant portion of the policy defined the terms
"Insured Property" as follows:
"The term "Building" as appears in the
Declaration's Page means:
The principal dwelling at the Insured location designated
in the Declarations Page; [...] –
Your lawns, trees and shrubs located outside the dwelling
as well as your landscaping form part of the Building. They are
insured up to $250 per tree subject to a maximum of 5% of the limit
of insurance for the Building provided in the Declaration's
Page including debris removal costs. They are covered exclusively
against fire, lightning, explosion, the shock of a road vehicle or
aerodyne, riot, vandalism, malicious acts and water
damage." [Our translation]
The insurer, citing a constant line of caselaw on the subject,
argued that this definition of the term "Building"
designated only the building itself and not the ground or the soil
on which it rested.
The Court refused to follow these precedents. Firstly, the Court
noted that the soil under the footing of the building and around
the foundations was not contaminated. The contamination affected
exclusively the compacted soil and gravel on which the foundations
of the building had been constructed and which served as the floor
of the cellar. As a result, one must distinguish between the
present situation and the concept of "soil" discussed in
the precedents cited by the insurer.
The Court concluded as follows:
"It does not appear to the Court that there should be
coverage where the floor consists of a concrete slab and absence of
coverage if the floor is more crudely made up of soil and gravel.
The difference between the materials used to make the floor must
not constitute an obstacle to coverage. If the footing of the
Building rests on this surface, it is Insured Property."
[Our translation]
This judgment serves as a reminder that the true question is not
whether the contaminated materials can be described as
"soil" or "earth". The true question is whether
this material, for example compacted granular material under the
footing of the building, is part of the construction itself and can
be included in the definition of "Insured Property" in
the homeowners insurance policy.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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