Insurance law – Title insurance – Interpretation of policy – Coverage – Exclusions
 O.J. No. 3998
2016 ONSC 4967
Ontario Superior Court of Justice
July 14, 2016
S.N. Lederman J.
The plaintiff advanced a loan which was secured by a mortgage charge against two adjacent properties in the City of Windsor. One of the properties had a large development-related excavation hole. The adjacent property had a building encroaching on the other property. The mortgage transaction closed in February 2006 and the defendant title insurer insured both properties together as a single parcel. Prior to the transaction, the plaintiff had notice of a forthcoming application by the City of Windsor to compel filling the excavation hole. A few months after the transaction, the City obtained the work order and filled in the hole. The significant cost of the fill was added to the tax roll, which took priority to the plaintiff’s charge. Years later, the mortgagors defaulted on their loan payments and the plaintiff initiated power of sale proceedings. A prospective buyer declined to move forward with the purchase of the properties when he discovered the encroachment and development agreements registered on title. The plaintiff then brought a claim against the title insurer for damages arising out of the tax bill, development agreements, and the encroachment.
The court found that there was no coverage for the tax bill because, at the time of the mortgage transaction, no work order was outstanding. The clause in the policy providing coverage for work orders subsequently issued for pre-existing, non-complying conditions was limited to fire safety work orders. Coverage for the work order could also not be found under the zoning endorsement. In any event, because the plaintiff knew about the work order application prior to the mortgage transaction, the claim fell within an exclusion which prevented claims arising out of defects or liens not available in the public record that the insured knew about and failed to disclose to the insurer prior to the title insurance policy taking effect.
The court also denied coverage for the plaintiff’s claim that the development agreements made title unmarketable. The plaintiff failed to demonstrate that the development agreements had any impact on the value of the property. In any event, the development agreement claim was excluded under the policy because, in purchasing intellectual property associated with the development agreements, the plaintiff expressly or impliedly accepted the defect.
The plaintiff also made a claim for coverage with respect to the claim based on the alleged encroachment. The court denied this claim on the basis of a lack of evidence that the encroachment actually diminished the value of the properties. Furthermore, the claim was excluded as the plaintiff failed to give prompt written notice to the insurer of the collapsing sale.
This case was digested by Kora Paciorek of Harper Grey LLP. If you would like to discuss this case further, please feel free to contact her directly at email@example.com or review her biography at http://www.harpergrey.com.