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By: Nabil Mahmood, Litigation Associate |
Introduction
In Gill v The Wawanesa Mutual Insurance Company,[1] the British Columbia Court of Appeal was tasked with determining what parts of a home are “within the dwelling” when interpreting coverage provisions in a homeowner’s insurance policy. In overturning the decision below, the Court found that the trial judge appeared to interpret the policy from the perspective of an average person that was “erroneously disconnected from the language of the policy.”[2] It held that, in interpreting the ordinary meaning of policy language, the Court must consider the policy from the perspective of an average person purchasing insurance.
Facts
Amritpal Gill and Baljit Gill (the “Gills”) are the owners of a residential property in Surrey, British Columbia (the “Property”). The Property contains a 3-storey house with a sun deck on the rear side of the partially underground basement level. The sun deck, which is partially open to the outdoors, contains a pool as well as entrances to a laundry room, bathroom and a sauna.
On December 20, 2019, a blockage occurred in the perimeter drainage system of the Property resulting in water backing up and escaping from a drain located in the sun deck. The Gills’ home was insured under an all-risks homeowners’ policy (the “Policy”) issued by the defendant insurer, Wawanesa Mutual Insurance Company (“Wawanesa”). The Policy excluded coverage for loss or damage caused by water or sewage backups, however, a Sewer Back-Up Endorsement (the “Endorsement”) provided limited coverage. The Endorsement read:
INSURED PERILS
If the Declarations indicate that a location is insured for LIMITED SEWER BACKUP COVERAGE – FORM 3114A, “you” are insured against direct physical loss or damage to property insured under SECTION I – PROPERTY COVERAGE caused by “sewer backup”.
…
“Sewer Backup” means the sudden and accidental backing up or escape of water or sewage within your dwelling or detached private structures through a:
- Sewer on your premises;
- Septic on your premises;
- Sump located within your dwelling or detached private structures.
(emphasis added)
The Policy defined “dwelling” as “building … described on the Declarations wholly or partially occupied as a private residence.”
The Gills’ made a claim under the Policy, however, Wawanesa denied coverage claiming that the Gills’ sun deck, where the sewer backup had occurred, was not located “within” their “dwelling” as required by the Endorsement. The Gills brought a claim against Wawanesa, and the insurance agency which placed the Policy, and moved for a summary trial.
BC Supreme Court Decision
At the summary trial, the judge rejected the Gills’ argument that the term “dwelling” and “building” in the Policy should be broadly interpreted to include the entire structure on the Property.[3] Because the sewer backup had occurred on the sun deck, to fall within the ambit of coverage, the sun deck needed to be “within” the dwelling. While Wawanesa admitted that the sun deck was part of the dwelling, it disputed that it was “within” the dwelling.
Finding that “any average person viewing the sun deck area would immediately know and understand it to be outside, not inside”, the trial judge held that the sun deck was not within the Gills’ dwelling.[4] Therefore, the backup or escape of water from the drain in the sun deck did not fall within the coverage provided for in the Endorsement.
BC Court of Appeal Decision
On appeal, the Gills submitted that the trial judge erred by accepting Wawanesa’s concession that the sun deck was part of the dwelling, but then concluding that it was not “within” the dwelling. Wawanesa resisted, arguing that the judge made no error, and an average person would interpret the word “within” to mean inside the exterior walls of a dwelling.
In a unanimous decision, the Court of Appeal found that the trial judge “did not interpret the policy as a whole and misapplied the average person perspective and therefore arrived at an incorrect interpretation.”[5] First, in addition to coverage for a sewer backup “within” the dwelling, the Endorsement provided for coverage where the backup occurred in detached private structures. The Policy did not require that detached private structures have exterior walls. Instead of focusing on the plain language of the Endorsement, the trial judge incorrectly reduced the analysis as turning on the word “within”, which he took to mean “inside” or “indoors”.
Second, Justice Griffin explained that:
If an average person purchasing insurance was told that the insurance policy defines the dwelling as the building and the building includes the sun deck, and the person was then asked whether the drain on the sun deck was “within the dwelling”, the answer would be “yes”.[6]
The Court allowed the appeal and granted the declaration sought by the Gills, requiring Wawanesa to compensate them for the December 2019 sewer backup.
Conclusion
It is important to consider the entire policy when interpreting the plain language of any one provision. Caution should be exercised to not reduce the entire analysis to the meaning of one word, as it will rarely provide enough context to meaningfully interpret the plain language of the provision. Further, it is important to define what the perspective of an “average person” is, because it can vary depending on the context. The way an average person would describe their property to a friend is different than the way an average person purchasing insurance would describe that same property. The Court makes it clear that the only relevant perspective when interpreting policies of insurance is the perspective of the average person purchasing insurance. The perspective of any other average person can lead to an unjust result such as that made by the trial judge in this case.
Footnotes
[1] 2023 BCCA 97 [“Appeal Decision”].
[2] Appeal Decision at para 24.
[3] Gill v Wawanesa Mutual Insurance Company, 2022 BCSC 981 [“Trial Decision”].
[4] Trial Decision at para 65.
[5] Appeal Decision at para 23.
[6] Appeal Decision at para 29.
Nabil Mahmood is an associate at Theall Group LLP and is developing a broad commercial litigation and insurance coverage practice. Prior to joining Theall Group LLP, Nabil was an associate at a leading litigation boutique in downtown Toronto where he gained experience regularly appearing before the Ontario Superior Court of Justice, including on two trials and on the Commercial List. Nabil has also appeared before the Court of Appeal for Ontario and assisted with matters before the Federal Court and Supreme Court of Canada.
For more information, visit https://theallgroup.com/
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