Case information

None.

Case summaries are prepared by the Office of the Registrar of the Supreme Court of Canada (Law Branch). Please note that summaries are not provided to the Judges of the Court. They are placed on the Court file and website for information purposes only.

Insurance - Property insurance - Subrogation - Whether the Court of Appeal erred in finding that the insurer must establish the policy is void as a precondition to recovering the payment made to the mortgagee from the insured - What is the proper interpretation of the subrogation provision of a Standard Mortgage Clause?

On February 2, 2004, the Respondents’ home and contents were damaged in a fire. They had a policy of insurance with Farmers’ Mutual Insurance Company (“Farmers’ Mutual”). The house was solely owned by Joyce Pinder and was subject to a five-year mortgage with the Bank of Montreal for the principal amount of $106,344. The Pinders submitted a claim to Farmers' Mutual seeking $302,412 for repairs to the house, damage to their contents and additional living expenses. Farmer’s Mutual denied their claim on the grounds that they had voided the policy by failing to notify the insurer of a material change in the risk, namely, a change in the heating system of the premises and because they had made wilfully false statements with respect to their contents and alternate living expenses claims.

Farmers’ Mutual paid the Bank of Montreal the principal balance on the mortgage under the Standard Mortgage Clause of the policy, in the amount of $97,143.97. On February 1, 2005 the Pinders commenced an action against Farmers’ Mutual seeking a declaration that the insurance policy was valid and binding and to recover the sum of $302,412 they claimed was owing under the policy. That action has as yet to be tried. Farmers' Mutual commenced this action on December 18, 2006, relying on its right of subrogation under the Standard Mortgage Clause, claiming from the Pinders the sum of $97,143.97 that it had paid the Bank. In their defence, the Pinders pleaded that the Standard Mortgage Clause was only triggered if Farmers’ Mutual was not liable to the Pinders for the fire loss. The Pinders also counterclaimed for a declaration that the policy of insurance remained in full force and effect on the date of the loss, that Farmers’ Mutual was liable to them pursuant to that policy, and that Farmers’ Mutual was not entitled to recover from them any amount it paid to the Bank of Montreal. In July 2007, Farmers’ Mutual brought a motion for summary judgment in its action against the Pinders. In response, the Pinders brought a motion for the consolidation of the two actions and argued that there were genuine issues for trial.