Purpose of title insurance was to protect against what off-title searches would reveal

Insurance – Claims - Notice and proof of loss

In 1999, insured purchased cottage property which had been built in early 1990's. Before closing, insured's lawyer advised that it was unknown whether cottage had ever passed final building inspection. Insured accepted lawyer's advice not to request final inspection. In 2011, in course of preparing for renovation, contractor opened up wall and identified building code violations. Insurer denied claim under title insurance policy. Insured brought successful action. Insurer appealed. Appeal allowed. Trial judge erred in her conclusion regarding policy and whether it covered this situation. Insured was on notice of potential problem with building permit process and inspections (or lack thereof). Had insured insisted on final inspection before completing purchase, inspection would not have revealed defects. Defects would not then be issue regarding marketability of title. Off-title search revealed there was building permit, and would not have revealed construction defects or other alleged deficiencies in permit process and construction. Purpose of title insurance was to protect against what off-title searches would reveal, and obviate need for off-title searching, rather than to protect against defects that would not be revealed by such searches. Policy drew clear distinction between unmarketable land and unmarketable title. If it was assumed that situation here was one of land being unmarketable, cause of unmarketability of land was not one for which coverage was provided under policy.

Breen v. FCT Insurance Company Ltd. (2019), 2019 CarswellOnt 11605, 2019 ONCA 598, P. Lauwers J.A., Fairburn J.A., and I.V.B. Nordheimer J.A. (Ont. C.A.); reversed (2018), 2018 CarswellOnt 9554, 2018 ONSC 3644, M.P. Eberhard J. (Ont. S.C.J.).

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