Laurentian Ins. Co. v. Davidson, [1932] SCR 491

Supreme Court of Canada

Laurentian Ins. Co. v. Davidson, [1932] S.C.R. 491

Date: 1932-03-24

The Laurentian Insurance Company (Defendant) Appellant;

and

J. Donald Davidson (Plaintiff) Respondent.

1932: February 25; 1932: March 24.

ON APPEAL FROM THE APPELLATE DIVISION OF THE SUPREME COURT OF ONTARIO.

Fire insurance—Insurance Act, R.S.O., 1927, c. 222—Property becoming vacant—Destroyed by fire within 30 days from commencement of vacancy—Liability on policy—Statutory condition 5 (d)—“Change material to the risk” (statutory condition 7)—Representation as to occupancy in application for insurance.

During the term of a fire insurance policy on farm buildings, the insured, with his family, moved from the farm and took up residence in a new home, intending to reside there permanently and to rent or sell the farm, which remained vacant. He gave no notice to the insurer of the vacancy. Within 30 days from the time the insured property became vacant, it was destroyed by fire.

Held: The insurer was liable on the policy. (Judgment of the Appellate Division, Ont., [1931] 4 D.L.R. 720, affirmed.)

In view of statutory condition 5 (d) (Ontario Insurance Act, R.S.O., 1927, c. 222) in the policy, vacancy for a period of 30 days was a risk contemplated by the policy and assumed by the insurer, and it was not open to the insurer to shew that the mere fact of vacancy or non‑occupancy for less than 30 days was a “change material to the risk” within statutory condition 7.

The insured’s answer “yes” to the question in his application for insurance, “Is the house occupied all the year round,” was not a misrep-

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resentation, or a representation on which the insurer could deny liability; it was a representation as to an existing fact and was then true.

APPEAL by the defendant from the judgment of the Appellate Division of the Supreme Court of Ontario[1] which, on an equally divided court, dismissed the defendant’s appeal from the judgment of Wright J.[2], holding that the plaintiff was entitled to recover from the defendant the loss which he had sustained by fire on property covered by a certain fire insurance policy issued by the defendant.

The material facts of the case and the questions in issue are sufficiently stated in the judgments now reported. The appeal was dismissed with costs.

Nathan Phillips K.C. and H. Weinfield K.C. for the appellant.

N.L. Matthews and J.P. Ebbs for the respondent.

DUFF J.—I agree with my brother Cannon.

I think the construction proposed by the insurance company would, if acted upon, operate as a fraud upon the insured. The provision of Condition 5 (d) is a very specific one. It relates to buildings, to property contained in buildings and to manufacturing establishments, and goes into effect on vacancy or lack of occupation or discontinuance of operation for the period named in the Condition. Where a particular matter such as vacancy or lack of occupation or cessation of industrial operation is dealt with in a contract and in a specific way in a particular clause, then the parties naturally look to that clause as containing the controlling provision in relation to the subject dealt with. I think Condition 5 (d) is a declaration indicating that the parties contemplate vacancy and lack of operation during the periods mentioned as normal conditions of the risk insured against, and any change which consists merely in such vacancy or lack of occupation or cessation of operation is not a change material to the risk within the contemplation of the contract and is, therefore, not within Condition 7.

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I think that is all I have to say upon the appeal. To my mind the point is very clear and the appeal should be dismissed with costs.

The judgment of Rinfret, Lamont, Smith and Cannon JJ. was delivered by

CANNON J.—This appeal is asserted from a judgment of the Second Appellate Division of the Supreme Court of Ontario[3], which, by an equal division of opinion, dismissed an appeal of the defendant and confirmed the judgment of the Supreme Court of Ontario (Wright J.[4]), rendered on the 15th April, 1931, in favour of respondent for a fire loss covered by insurance and ordering a reference to the Master to determine the amount payable.

The policy of insurance issued by the appellant to the respondent insured, to the extent of $5,000, the respondent’s farm dwelling, barns and contents, for three years from the 24th August, 1928.

On the 20th February, 1930, the respondent, with his family, moved away from the farm and took up residence in a new home that he had built in Newmarket, with the intention of permanently residing there and of renting or selling the farm, which remained vacant after his departure.

The property insured was destroyed by fire on the 21st day of March, 1930, being within thirty days from the time the property became vacant. No notice was given by the respondent to the defendant company that the property had become vacant.

The appellant disclaims liability, first upon the ground that there was misrepresentation of fact in the application signed by the respondent where he answered “Yes” to the question, “Is the house occupied all the year round?”

The answer referred to in the application was a representation as to an existing fact and was then true, and therefore the first ground fails.

The second question involved in this appeal is whether, in view of statutory clause 5 (d) of the Ontario Insurance Act (R.S.O., 1927, c. 222), introduced in 1924, it was still open to the defendant to show that a vacancy or non-

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occupancy for less than thirty days is a change material to the risk within the meaning of statutory condition no. 7.

There was, prior to 1924, no specific statutory condition in Ontario, in relation to the non‑liability of the insurer, in the case of a vacancy or non-occupation. This was covered by the general statutory condition no. 2, which, with some unimportant changes, is now statutory condition no. 7, and which reads as follows:

Any change material to the risk and within the control and knowledge of the insured shall avoid the policy as to the part affected thereby, unless the change is promptly notified in writing to the insurer or its local agent; and the insurer when so notified may return the unearned portion, if any, of the premium paid and cancel the policy, or may notify the insured in writing that, if he desires the policy to continue in force, he must within fifteen days of the receipt of the notice pay to the insurer an additional premium, and in default of such payment the policy shall no longer be in force and the insurer shall return the unearned portion, if any, of the premium paid.

In 1924, the Ontario Legislature by the Act, 14 Geo. V, chap. 50, adopted statutory condition 5 (d), which reads as follows:

Unless permission is given by the policy or endorsed thereon, the insurer shall not be liable for loss or damage occurring:—

* * *

(d) When the building insured or containing the property insured is, to the knowledge of the insured, vacant or unoccupied for more than thirty consecutive days, or being a manufacturing establishment, ceases to be operated and continues out of operation for more than thirty consecutive days.

Evidence was offered at the trial to show that the vacancy of the property was a change material to the risk, but there was no evidence of any change material to the risk in addition to the bare fact of vacancy.

We are of opinion that, by virtue of clause (d) of condition 5 in the policy, vacancy for a period of thirty days was one of the risks contemplated by the policy, and assumed by the appellant, and that, the vacancy in question having been for less than thirty consecutive days, statutory condition no. 7 does not apply, and the appellants are liable.

The appeal is therefore to be dismissed with costs.

Appeal dismissed with costs.

Solicitors for the appellant: Nathan Phillips & Company.

Solicitor for the respondent: Norman L. Matthews.