The delayed notice prejudiced the insurer’s ability to defend the claim: court
In a recent decision, the Ontario Court of Appeal ruled that the sellers of a residential property breached their insurance policy by delaying notice of a lawsuit over alleged misrepresentation of the property's condition.
The dispute in Kerk-Courtney v. Security National Insurance Company (TD General Insurance Company), 2024 ONCA 676 focused on whether the insurer, who had previously provided home insurance to the sellers, had a duty to defend and indemnify them in a lawsuit brought by the property purchasers, who alleged that the sellers had misrepresented the home's condition.
In 2016, the appellants sold the property to purchasers Danielle Fex and Robert Duncan. Following the sale, the purchasers discovered several defects, including water damage, mould, and rodent issues. In 2018, they sued the sellers for fraudulent and negligent misrepresentation, claiming they were misled about the property's condition.
In 2021, the sellers reported the claim to their insurer, seeking coverage under their home insurance policy. The insurer denied coverage, leading the sellers to apply for a court declaration that the insurer had a duty to defend and indemnify them. The lower court dismissed this application, and the sellers appealed.
The Court of Appeal agreed with the sellers that the lower court judge made an error in dismissing the case based on an "entire agreement" clause in the purchase and sale agreement. The judge had concluded that this clause would likely prevent the purchasers’ negligence claims from succeeding and that other claims fell under policy exclusions.
However, despite finding this error, the Court of Appeal ultimately upheld the dismissal of the appeal. The court determined that the sellers had failed to promptly notify their insurer about the lawsuit, as required under the insurance policy. The sellers had defended the lawsuit for nearly three years before informing their insurer, which was deemed a breach of the policy's notice provisions. The court rejected the sellers' request for relief from forfeiture, citing that their delay in providing notice was unreasonable and prejudiced the insurer’s ability to defend the claim.
