A Toronto homeowner was recently awarded coverage against hidden structural defects in home 7 years after purchase.
This just goes to show that when buying a property, it is often a good idea to purchase property title insurance for protection against unknown risks or problems.
This was aptly illustrated in the recent case of MacDonald v. Chicago Title Insurance Company of Canada, 2015 ONCA 842 (CanLII). In that case, Paul and Stefanie MacDonald purchased a home in Toronto in 2006, along with a property title insurance policy from the Chicago Title Insurance Company of Canada. The Chicago Title policy provided insurance coverage for:
"Covered risks, if they affect your Title," with Title being defined by the policy as "the ownership of your interest in the Land."
One such covered risk was set forth as clause 11, which provided:
"Your Title is unmarketable, which allows another person to refuse to perform a contract to purchase, to lease, or to make a mortgage loan."
In 2013, seven years after purchasing their home, the MacDonalds discovered that their house was literally falling down, or at least the second floor of their home anyway. At that point, it became apparent that the previous owner had conducted unapproved renovations and had (unwisely) removed load bearing walls, without having made provision to carry the existing load.
Needless to say, the previous owner had likewise neglected to obtain a building permit. The City of Toronto then got involved and issued an Order to Remedy an Unsafe Building. The MacDonalds then looked to Chicago Title for title insurance coverage, but Chicago Title (wrongly) refused to pay. The MacDonalds then hired an insurance lawyer and brought suit to enforce their insurance agreement.
In a significant decision, the Court of Appeal recently decided that Chicago Title's interpretation of its title insurance policy was unreasonable, and that its policy did in fact provide coverage for the building defects that rendered the MacDonalds' property unmarketable. As such, the MacDonalds were able to show their loss was covered by their title insurance policy, and collect under the insurance policy they had purchased and paid premiums for.
As the MacDonald case illustrates, if you have purchased a home with hidden structural defects, you may be entitled to collect damages from the following parties:
- Your title insurance company
- Your Lawyer (if they did not recommend or inform you about title insurance)
- Your Realtor(s)
- Your home inspector
- The Seller(s)
- Plus others, depending on your situation
If you have discovered substantial defects in your home or been denied coverage by your insurance company for a loss, visit our Property Insurance Claim Denials page.
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.