Published In: Insurance Law Newsletter – 14.Aug.18 August 14, 2018

Case Summary: The title insurer was liable to indemnify the purchaser of a cottage containing latent structural deficiencies which flowed from an inadequate building process and made the home unsafe for occupancy

Insurance law – Title insurance – Exclusions – Coverage – Latent defect

Breen v. FCT Insurance Co., [2018] O.J. No. 3260, 2018 ONSC 3644, Ontario Superior Court of Justice, June 14, 2018, M.P. Eberhard J.

The insured purchased a cottage in 1999, which had been built years earlier by a previous owner pursuant to a building permit. In 2011, the insured hired a structural engineer to assist with renovations. The engineer observed structural deficiencies and warned the insured not to occupy the home. It was subsequently discovered that the original building permit for the cottage was issued without the required drawings, structural design, and engineering oversight.

The insured sought indemnity from the title insurer on the basis that the structural deficiencies flowed directly from the inadequate building permit process, and made the property unmarketable. The court rejected the insurer’s arguments that the claim fell within the “governmental power” exclusion, which was found to be vague. The court also rejected the insurer’s reliance on the “actual knowledge” of the defects exclusion. Although at the time of completion the insured learned there was no record of a final inspection having been performed, the insured and his conveyancing solicitor were not expected to investigate the issue further. Relying on the decision of MacDonald v. Chicago Title Insurance Co. of Canada, [2015] O.J. No. 6350, 2015 ONCA 842, the court held that the insured’s loss fell within coverage.

This case was digested by Kora V. Paciorek, and first published in the LexisNexis® Harper Grey Insurance Law Netletter and the Harper Grey Insurance Law Newsletter. If you would like to discuss this case further, please contact Kora V. Paciorek at