Canada: An "Owner Occupant" Home Insurance Requires Actual Occupancy By The Owner

On December 20, 2022, in Dang c. Industrielle-Alliance, assurance auto et habitation inc., 2022 QCCA 1739, the Court of Appeal maintained the Superior Court judgment which was the topic of our bulletin of June 17, 2021 (Homeowner Insurance Policy: The Importance of Living in the Insured Dwelling).

The Superior Court Decision

Appellant was the sole insured under a policy which covered "owner occupant" ("propriétaire occupant") and "your dwelling" ("votre bâtiment d'habitation"). Respondent had insured the house since 2012 and in May 2018, the house was damaged by fire. During its investigation, the insurer concluded that appellant had sporadically travelled to the United States from 2013 to 2016 and that she had been living in the United States since February 2016 without any intention to reside in Quebec. The house was, however, continuously occupied by family members. At trial, appellant argued that she had every intention of returning to Quebec. However, the evidence revealed that she left the residence in February 2016 to live with her spouse in the United States and had not returned to Quebec in the 27 months prior to the fire. As well, she no longer had automobile insurance in Quebec, had acquired a new residence in Texas with her spouse, tried unsuccessfully to sell her house and obtained her permanent resident status and green card in the United States. Furthermore, the respondent established with two independent insurance company representatives that they as well would not have renewed the policy had they known that the insured did not have any intention of coming back to live in the house. Appellant argued that the insurance contract was ambiguous and that there was a doubt with respect to the meaning of "owner occupant". According to appellant, "occupant" means a person who exercises either personally or through another person, a real right on property without necessarily having a lease. As such, according to appellant, the Superior Court judge erred in concluding that she did not occupy her residence at the time of the fire.

The Court of Appeal Decision

Essentially, appellant submitted three questions to the Court of Appeal.

1. Did the Superior Court Err in its Interpretation of the Insurance Contract and More Particularly of the Notion of "Owner Occupant"?

The Court of Appeal dismissed the first question in appeal by underlining that there was no ambiguity in the policy and that the object of the contract is to insure the owner who occupies the residence, a condition which was not satisfied by appellant at least two years prior to the fire. It concluded that "owner occupant" must be interpreted according to its ordinary meaning and in a manner which an ordinary person who seeks insurance would understand. The Court of Appeal also added that it would not intervene in the decision of the trial judge to retain the testimony of the two independent insurance company representatives to support the decision to annul the policy.

2. Did the Superior Court Err in the Distinction Made Between Aggravation of Risk and Excluded Risk?

With respect to the second means of appeal, appellant argued that the judge erred in concluding simultaneously to an exclusion of coverage and to an aggravation of risk. The Court of Appeal reminded that an insurer may refuse to indemnify an insured if following a change of circumstances, the risk which materialized is no longer covered at the time of the loss. This is considered an exclusion of risk or exclusion of coverage. In such a case, the sanction is total absence of indemnity. The Court also mentions that an exclusion of risk is characterized by the will of the insured to never cover such a risk which is different from an aggravation of a risk.

The Court then cited from Lejeune v. Cumis Insurance Society Inc., 1989 CanLII 50 (SCC), [1989] 2 SCR 1048, rendered by the Supreme Court of Canada which explains how to determine if we are dealing with an aggravation of risk or exclusion of risk. Essentially, the insurance policy must be analyzed and one must identify what the insurer had the intention of insuring. Once the object of the insurance is identified, one must determine if the insurer had manifested the intention of insuring the risk which materialized.

The Court of Appeal, citing from the Superior Court judgment stated that contrary to what the appellant was arguing, the Superior Court judge did not conclude to an aggravation of risk, rather to the exclusion of a risk. The Superior Court concluded that the insurance contract revealed that the insurer had the intention of insuring the owner occupying a house. The word "occupant" adds to the word "owner" the notion of living in the house insured. Furthermore, the expression "your dwelling" confirms the meaning which the insurer intended on giving to its contract which, until February 2016, conforms to what the appellant wanted to insure, her house in Trois-Rivières. The insurer had the burden of establishing that the insured no longer was "owner occupant" of the house and the evidence established that this was the case. The essential condition to the insurance contract was no longer fulfilled. The risk materialized was no longer what the insurer wanted to insure. As such, the trial judge properly applied the teachings of the Supreme Court of Canada in Lejeune.

The Court of Appeal further underlined that respondent clearly demonstrated that it would have put an end to the contract had it been informed of the situation of unoccupancy which the appellant failed to declare.

3. Did the Superior Court Err in its Appreciation of the Evidence?

The Court of Appeal dismissed the third means of appeal in which appellant argued that the trial judge erred in its assessment of the proof on appellant's intention to come back to Quebec as there was no manifest error of fact or of law.

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