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September 23, 2015

Insurer Must Pay for Repairs Associated With Building Code Upgrades

The importance of the wording of exclusion clauses can be seen in Choukair v. Allstate, 2015 ONSC 4989 (S.C.J.).

The Applicant, Choukair, had a Homeowner’s Policy with the respondent, Allstate. On January 20, 2014 there was a total loss fire at Choukair’s residence. As a result, the house had to be rebuilt. Choukair stated that his replacement cost was $450,700.00, plus taxes. Allstate paid Choukair $369,000.00 but refused to pay the balance.

The difference between what Choukair claimed and what Allstate paid related to the increased cost of the rebuild associated with upgrades required as a result of the Building Code, which Allstate stated were excluded by the Insurance Policy.

There was an exclusion clause in the Policy which stated the following:

We do not insure: (5) losses or increased costs of repair or cost of improving or upgrading dwellings or structures due to the operation of any by-law regulating the zoning, demolition, repair or construction of buildings and their related services;

Justice Quigley held that the loss did not result from the operation of a by-law. The increased costs were related to the application of the Building Code, which is categorized as a law and not a by-law.
Allstate therefore had to pay the balance related to increased costs associated with the Building Code upgrades.

Insurers may want to consider the wording of their exclusion clauses as a result.

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