Landlords Must be Careful about Insurance

 

Landlords ~ Don’t Let Tenants raise your Insurance

Ontario Real Estate Source

By Brian Madigan LL.B.

Sometimes Landlords overlook the issue of insurance. Make sure that your Tenant is not carrying on activities which will either increase your insurance premiums or result in a termination or denial of coverage.

 

You might include a provision such as this:

 

“The Lessee covenants and agrees with the Lessor as follows:

 

1)     not to engage in any act or activity, or permit, allow, suffer or acquiesce in any act or activity by occupants or others which may result in the insurer for the Lessor increasing the premium for insurance or which might cause the insurer to reduce, deny, or refuse to continue with coverage under any insurance policy,”

 

You certainly don’t want your tenant operating an illegal grow house (or even a legal one, for that matter), using paints, storing paints, using cleaning solvents, resins or other toxic or obnoxious substances, nor operating any kind of activity which may affect your insurance.

 

There are obviously some risks and you should know about them. A contract of insurance is unlike other basic contracts. Each party is not simply “on their own” and “free to negotiate”. An insurance contract is a contract based on the legal doctrine of “uberrimae fides”, or “utmost good faith”. There is a positive duty upon the insured to disclose all material information. Any information is material if it would be considering in assessing the risk or setting the premium.

 

The remedy available is the insurer is a denial of coverage, once the material non-disclosure issue arises. By that time, of course, there has already been some kind of accident or catastrophe. Too late to get other insurance now!

 

A companion clause to the effect that the Tenant will pay any increased insurance premium should also be included. And, don’t just consider the Landlord’s own insurance. Assuming a multi-unit facility, the immediately adjacent neighbour may also have an increase in insurance premiums. So, that matter should be covered too. The offending Tenant should pay for all the related insurance costs.

 

In many cases, a clause is not generally covered in the standard form Lease agreements, so you will have to include it yourself.

 

This might be a matter to bring to your lawyer’s attention. A good solicitor who practices in the real estate field in Ontario should be able to draft a suitable clause for your protection.

 

Brian Madigan LL.B., Broker is an author and commentator on real estate matters, if you are interested in residential or commercial properties in Mississauga, Toronto or the GTA, you may contact him through RE/MAX West Realty Inc., Brokerage 416-745-2300.
www.OntarioRealEstateSource.com

Homeowners’ Insurance Rescues Seller with False SPIS

Insurer Must Back Up False Statements Made by Seller

Ontario Real Estate Source

By Brian Madigan LL.B.

In Aiken v. Unifund Assurance Co. the Superior Court in Ontario had to consider whether there was a duty to defend under a homeowners’ policy, where the claim arose as a result of a false Seller Property Information Statement.

A purchaser sued a vendor claiming misrepresentation and fraudulent concealment. The purchaser later amended the claim presented to include negligence. That is an unintentional tort and might be covered under an insurance policy.

In the Amended Statement of Claim, it is alleged that the Applicants:

1.     falsely, knowingly, carelessly or negligently failed to disclose or misrepresented a number of facts about the property in the SPIS,

2.     that they consciously omitted to disclose material information relating to the subject property:

a)     with knowledge that the omissions would mislead the Plaintiff or

b)    were careless as to whether such omissions would mislead the Plaintiff;

3.     that they deliberately failed to disclose information about the subject property; and

4.     that they were negligent in relation to information and renovations relating to the subject property.

The Court commented on the duty to defend as follows:

“ An insurer is required to defend a claim where the facts alleged in the pleadings, if proven to be true, would require the insurer to indemnify the insured for the claim.

Similarly, where the claim raises the possibility of indemnity by the insurer, the insurer must defend the action on behalf of the insured.

The recent Supreme Court of Canada decision in Progressive Homes lt. v. Lombard General Insurance Co. of Canada found:

… it is irrelevant whether the allegations in the pleadings can be proven in evidence. That is to say, the duty to defend is not dependent on the insured actually being liable and the insurer actually being required to indemnify. What is required is the mere possibility that a claim falls within the insurance policy.”

So, the Court is saying that the duty to defend does not depend upon the merits of the plaintiff’s lawsuit. Whether it would ultimately be successful is not relevant. The insurer must come to the rescue and pay the defence costs. That’s the point of having insurance in the first place.

The Court also reviewed with approval another recent case:

“The case of Poplawski v. McGrimmon involved a similar fact situation to the one at issue.  In Poplawski, home owners were sued by the purchasers after the sale of their home for alleged misrepresentations and negligence as it related to a SPIS.  The homeowner’s insurer refused to provide coverage and claimed an exclusion under the policy applied which placed the claim outside the coverage of the policy and therefore resulted in no duty to defend or to indemnify.  Mr. Justice C. McKinnon disagreed and found the exclusion did not apply and held there was a duty to defend.  His reasons and findings were upheld by the Ontario Court of Appeal.”

Both cases involved an interpretation of the insurance contract, being a limitation to prevent a homeowner from claiming under the policy themselves. In this case, as well as Poplawski, the Court felt that that principle was still intact, since the homeowners had sold their properties.

Comment

If there is insurance, then there will be more claims. Also, why allege fraud, if fraud is not covered under the insurance policy. Just allege negligent behaviour and then the insurance company must come to the rescue.

Brian Madigan LL.B., Broker is an author and commentator on real estate matters, if you are interested in residential or commercial properties in Mississauga, Toronto or the GTA, you may contact him through RE/MAX West Realty Inc., Brokerage 416-745-2300.
www.OntarioRealEstateSource.com

Let’s Regulate Residential Property Managers in Ontario

Should Condo Property Managers be Regulated?  ~ $ 20 million Fraud

Ontario Real Estate Source                                 

By Brian Madigan LL.B.

The question following a $20 million fraud of at least 7 condominium corporations is whether or not the Ontario Government should take steps to regulate property managers.

The essential reason is that the board of directors in many residential condominiums are simple, average, unsophisticated homeowners who may have the time to devote to the board but don’t have the necessary qualifications, education or experience for the position.

Retail and commercial owners can fend for themselves. It is the smaller, lower end condo corporation which is vulnerable. As the building gets older and the residents age and lack new sources of income, they become more and more vulnerable to rogue property managers.

I should, of course, point out that there is not a growing trend of rogue property managers, but I suppose one is enough, based upon the damage that one person can do.

It can have a severe impact when millions of dollars are pledged in a series of fraudulent transactions against a condominium.

In one case, a condo unit was purchased for $152,000 but can’t be sold for $70,000 just a few months later. In some cases, it is the working poor who suffer. Many families have immigrated and are often dependent upon a single wage earner in a low end position. There’s not much room left for saving. Others have second and third jobs, and they are the lucky ones, while others on welfare have no other source of income and may eventually face eviction.

If the industry were regulated:

1)     training and education would be provided,

2)     a code of ethics would be followed,

3)     mandatory spot audits would operate as a deterrent, and

4)     basic insurance would be mandatory.

In this case, with respect to insurance I’m referring to bonding the individuals involved with money and having insurance to back up fraud and defalcation,

So, who pays? The condo corporation of the lenders! They were probably both negligent in the handling of the situation. It sounds more like tort liability than contract.

So, who gets paid? Obviously, the lawyers and the auditors!

As a society, we have failed to protect some of our most vulnerable. We have encouraged them to buy, but we have not provided the basic tools to allow them to protect themselves. The condos that were victimized were not the high end expensive downtown condos owned by lawyers, doctors, stock brokers and the like. They were the lower end, poorer condos catering to the working class new Canadians. What a great way to invest in your new country!

Brian Madigan LL.B., Broker is an author and commentator on real estate matters, if you are interested in residential or commercial properties in Mississauga, Toronto or the GTA, you may contact him through Royal LePage Innovators Realty, Brokerage 905-796-8888
www.OntarioRealEstateSource.com

Is it Safe to Buy a Condo ~ $20 million Fraud

Is it Safe to Buy a Condo ~ $ 20 million Fraud

Ontario Real Estate Source

By Brian Madigan LL.B.

Channel Property Management operated in Toronto for years under Manzoor Khan of Brampton, Ontario.

Channel specialized in condominium management and gained the confidence in many cases of immigrants who identified with him from his native Bangladesh , where he has now returned.

It appears that Manzoor looked after about 15 residential condominium buildings.

While it does not really seem that sophisticated, here is what he did:

1)     Manzoor had his employees pose as senior officers of the condominium corporation,

2)    As President and Secretary, they could issue certified copies of the by-laws of the company,

3)    They certified a new banking by-law and/or borrowing by-law authorizing certain loans to be negotiated,

4)    The proceeds of the loans were placed in bank accounts over which Manzoor Khan had signing authority,

5)    The total borrowed appears to be about $20 million and such loans are secured against about 7 properties.

The arrangement is simple enough. The fraud is clear and the man has fled the country.

But, are the owners of the residential condominiums at risk? They might be!

The lenders are innocent and the homeowners are innocent. Both were duped by the same person. Hopefully, they all had insurance bonds as against Manzoor and his company. If they did, then they will be compensated.

This may not be just the fault of the lender. At the outset, it will be necessary to determine whether the board of directors might be liable. There may be directors and officers liability insurance. That would be helpful too.

However, the fundamental question for the courts is going to be whether these mortgages were valid.

This is an extremely costly undertaking. And, it could be that one or more of the residential condominium corporations do not have insurance and is therefore at risk of liability.

In the meantime, if you were a purchaser about to close a deal, you would want a very large holdback and if you were looking for a condo to purchase, you would probably avoid these buildings until the issues are resolved.

With all this uncertainty, homeowners will just have to put their lives on hold. And, this could go on for years!

Make sure you see and understand the financial statements of the condominium before you buy. Ask yourself whether the property manager is reputable and whether the board members are sophisticated. Get professional assistance right from the beginning.

Brian Madigan LL.B., Broker is an author and commentator on real estate matters, if you are interested in residential or commercial properties in Mississauga, Toronto or the GTA, you may contact him through Royal LePage Innovators Realty, Brokerage 905-796-8888
www.OntarioRealEstateSource.com

Reduce Risks in the Home Staging Business

Home Staging and Risk Management

By Brian Madigan LL.B.

(Ontario Real Estate Source)

The Home Staging industry is still unregulated, and to some extent it is still in its infancy.

As society becomes somewhat more litigious, it would seem to be wise that those in the home staging business take some precautions on their own to reduce their potential liabilities.

In the real estate business, the home staging industry is placed in the forefront of disclosure, concealment, repair, rectification of defects, and renovations.

And, it is the home inspection industry which is in the forefront of having to discover problems. As an industry, it is also unregulated.

Home stagers are at risk for covering something up, and home inspectors are at risk for not finding them.

However, none of this really helps the individual practitioner. So, let me make some recommendations for risk management:

1) Have a website. Make sure it is full of information for the consumer.
2) Have a business services model. Make sure that the nature and type of services that are available are outlined.
3) Carry professional liability insurance. Ensure that it covers errors and omissions made in the ordinary course of business.
4) Maintain other insurance additional coverages as may be required.
5) Draft a Code of Ethics and publish it for the consumer.
6) Draft a standard form contract that provides protection from liability.
7) Specify the client, ensure that the client is protected and that your first obligation is to the client and not someone else. This should not be vague.
8) Clarify roles of referral agents.
9) Clarify the role of contractors.
10) Outline the obligations of the homeowner in terms of disclosure.
11) Outline the obligations of the real estate agent in terms of disclosure.
12) Limit liability by agreement to a refund of fees paid.
13) Encourage the owner to deal directly with the contractor, if possible.
14) Require a deposit on account of a retainer.
15) Provide a written report and recommendations.

Some of these steps will go a long way to reducing and limiting liability.

They will never eliminate every potential risk. If you are going to be sued, you might be, simply because you took on the wrong project.

However, if you follow some of these steps you will enhance your professional image while you await accreditation and regulation of the industry in some more formal way.

Brian Madigan LL.B., Broker is an author and commentator on real estate matters, if you are interested in residential or commercial properties in Mississauga, Toronto or the GTA, you may contact him through Royal LePage Innovators Realty, Brokerage 905-796-8888
www.OntarioRealEstateSource.com

Religion, Insurance Companies and Acts of God

By Brian Madigan LL.B.

If a tree falls in the forest, no one cares, except perhaps the termites. But, if your neighbour’s tree falls on your house, then there is a little problem.

First of all, is your neighbour liable? Let’s say your neighbour has a 35 foot pine tree and one day it simply blows over in the wind and damages your eaves trough. Can you recover the cost? You inspect the damage and find out that the eaves trough will cost $215.00 to repair. But, much to your surprise, it will cost over $ 900.00 to remove the tree.

Naturally, you call your insurance broker, only to discover that you have a $ 1,000.00 deductible. This means that your insurance company will only pay you $115.00, if you present a claim. Why not keep and claims free record and absorb this expense?

So, what about the neighbour! In order to have a claim against the neighbour for the damage, you have to prove negligence. This means that the neighbour failed to do something that was reasonable. Was the tree old and diseased? Was it hanging precariously over your property? If this was simply a surprise to everyone, then your neighbour may not have been negligent. This was a simple accident. And in law, the courts see no particular purpose transferring the cost of the damage from one innocent party to another. OK, this means that you will have to repair the eaves trough yourself without proof of negligence.

Generally, this is the story you will hear from your own insurer and your neighbour’s insurer. In fact, at times like these they often like to speak quite philosophically about religion, acts of God and forces of nature. However, the bottom line is that they don’t want to provide you with compensation, just condolences.

What about the cost of removing the tree? That’s almost $1,000.00 on its own (when you include taxes). That is a completely different story.

Your neighbour is responsible in nuisance for the cost of removal of his tree from your house. It’s a matter of strict liability. There’s no need to prove negligence.

The simple presence of his tree constitutes a continuing nuisance and he is under a legal obligation to remove it. Fault is irrelevant. Ownership is all that matters.

You will have to demonstrate that you provided reasonable notice to your neighbour to remove the tree. You may then remove it yourself and claim the costs in Small Claims Court. Or, you could even bring an application in Superior Court seeking an Order requiring your neighbour to remove the tree. This is a much more costly approach.

In either case, your neighbour’s insurer will be responsible for the claim without the imposition of a deductible. So, when you are speaking with an insurer it’s always better to discuss compensation than religion.

Brian Madigan LL.B., Realtor is an author and commentator on real estate matters, Royal LePage Innovators Realty
905-796-8888
www.OntarioRealEstateSource.com

Insurance Backs Up Disclosure Statements

By Brian Madigan LL.B.

The Miersma and Pembridge case was an application brought in October 2005 before the Superior Court of Justice of Ontario to determine whether a policy of insurance covered a false statement under a Seller Property Information Statement (SPIS) pursuant to an agreement of purchase and sale.

Mr. and Mrs. Pinkerton bought certain property in Picton, Ontario from Mr. and Mrs. Miersma. Pursuant to that agreement, there was a SPIS which included representations alleged to be false concerning a septic system and an underground storage tank.

The purchasers sued the vendors for false representations in the SPIS, both in contract and tort. Upon receipt of the claim, the vendors reported the matter to their insurer, Pembridge Insurance Company. The insurer took the position that the insurance policy did not cover this claim, since it was a claim in contract.

The purpose of this application was to determine whether the insurer had a “duty to defend” under the insurance policy. The actual merits of the lawsuit are not in question, just the issue of coverage under the policy.

The Court observed:

The duty of a liability insurer to defend will be triggered if, on a reasonable reading of the pleadings, they allege facts, which, if true, would require the insurer to indemnify the insured for the claim.

The mere possibility that a claim falling within the policy may succeed will suffice.

In its decision in BG Checo International Ltd. v. British Columbia Hydro and Power Authority, 1993 CanLII 145 (S.C.C.), [1993] 1 S.C.R. 12, the Supreme Court of Canada stated that where a given wrong prima facie supports an action in contract and in tort, the party may sue in either or both, subject to any limit the parties themselves have placed on that right by their contract.

The statement of claim:

The particulars of the negligence pleaded against the defendants are as follows:

(a) they represented that they did not know of any underground fuel oil storage tank when they had themselves disconnected the tank some years previously and left it in the ground;

(b) they represented that the septic system was constructed in conformity with applicable laws and was in good working order when they knew or ought to have known that there was an unlawful effluent line allowing leachate to move into the Bay of Quinte;

(c) they represented that all environmental laws and regulations had been complied with when they knew or ought to have known that they had not complied with the shutdown and removal requirements relating to the underground fuel oil storage tank in accordance with the provisions of the Technical Standards and Safety Act 2000;

(d) they represented to the best of their knowledge no hazardous condition or substance existed on the premises when they knew or ought to have known that their failure to properly decommission and remove the underground fuel oil storage tank left a hazardous condition or substance on the land.

Further, and in the alternative, the plaintiffs state that the defendants are liable for damages for breach of contract by reason of the breach of the express warranties contained in the Agreement of Purchase and Sale.

Decision of the Court

“In my view, the present case is similar to that in BG Checo, supra, where the court held that a pre-contractual representation which becomes a contractual term could found liability in negligent misrepresentation. This is the situation referred to in BG Checo where it was held that the duty in contract and the common law duty in tort are co-extensive.”

COMMENT:

This imposes an additional burden upon insurers if they are to provide insurance coverage for this type of claim. You might quickly see that general homeowners’ liability policies will soon begin to exclude coverage for this type of claim. You might be able to purchase it, but you will have to buy it and pay a premium related to its risk.

The case is important because it means that the vendor will have money to pay any judgment. Why? There’s insurance! Also, the proceedings will become somewhat more costly. Why? There’s insurance, and a professional litigant will incur greater expense. Further, a lawsuit like this is more likely. Why? There’s insurance! The first insurer pays the loss to the purchaser. It then determines whether it can sue anyone to recover. Now, it can sue the vendor for negligent statements under the SPIS. So, it initiates proceedings, and just hopes that it is not also the insurer for the vendors.

Brian Madigan LL.B., Broker is an author and commentator on real estate matters, Royal LePage Innovators Realty
905-796-8888
www.OntarioRealEstateSource.com

Ontario’s E &O Insurance for Real Estate Industry Explained

Errors & Omissions Insurance Policy Explained

By Brian Madigan LL.B.

The Real Estate Council of Ontario (RECO) has mandated the participation of all of its registrants in an insurance program that includes among other coverages, an “Errors & Omissions Insurance Policy”.

This policy is designed to safeguard registrants from third party claims in the event of an act, error, omission or personal injury arising out of their activities as either a salesperson or broker.

So, there must be an aggrieved third party who initiates a claim against the registrant. The intention is to cover professional activities, as well as personal injury arising out of professional activities.

There are some additional limitations and requirements under the policy before a claim will be paid. The limits of liability are $1,000,000 for each claim and $3,000,000 in aggregate for each insured member, annually. There is a $2,500 deductible which is applied against each and every claim. Recently, the deductible has been increased to $5,000 in the case of the second claim and $7,500 in the case of the third claim within a rolling three year period.

While the policy is designed to provide protection, this only means financial protection within the policy limitations. If there is a Judgment against the insured that requires some act to be performed, or requires the insured to refrain from some act, then that will not be covered. The insured will have to comply. The policy only responds financially by paying a sum of money awarded by the Court as damages.

Insuring Agreements

Let’s have a look at some of the insuring agreements under the policy. Here, the insurer agrees:

• “to pay on behalf of the insured
• all sums that the insured
• shall become legally obligated to pay
• as damages
• for professional services
• (1) by reason of any act, error or omission
• whenever or wherever committed
• in connection with or incidental to the insured’s activities as a salesperson or broker
• (2) because of personal injuries arising out of the insured’s activities as a salesperson or broker”

So, this is intended to be restricted to the business of real estate. A trip and fall at home would not be included, but a trip and fall at an “open house” would be*. Additionally, advice, opinions, directions, false information all within the scope of providing a professional service in the context of a real estate business would be covered. If it is not related or incidental to acting, either as a salesperson or broker, then it’s not covered.

Consider the case of an electrician who serves as a part time realtor. If some wiring were to be undertaken at a client’s home in the expectation of signing a listing, any error or omission here, would not be covered. The electrician should have insurance as an electrician. The only time coverage applies under this policy, is at the time that the electrician stops being an electrician and starts acting as a real estate salesperson or broker.

The term “damages” is defined to mean compensatory damages and includes the costs of repair, that is, placing the aggrieved party in the position they would have been in, had the error etc. not taken place. Pre-Judgment and Post-Judgment interest are both covered, but any fines or penalties are not.

There is one further and very important restriction; punitive and/or exemplary damages are not covered. These are damages sometimes awarded by a Court in special circumstances where the Court wishes to “teach the defendant a lesson”. In other cases, they might simply be used to “bump-up” the award somewhat. The issue here is quite clear. If they are described by a Court as either punitive or exemplary damages, then they are not covered.

You might also wonder what is covered under the term “personal injury”, and it’s not what you might think.

Under the policy, personal injury means:

• False arrest
• Humiliation
• Detention or imprisonment
• Wrongful entry or eviction
• Invasion of private property
• Malicious prosecution
• Libel
• Slander
• Defamatory or disparaging material
• Publication or utterance in violation of an individual’s right of privacy

Actual physical harm is not covered. You would need a different insurance policy for that. This kind of personal injury is the type that might be sustained by reason of an act or omission on the part of the insured that causes harm to the person’s reputation or psychological well-being. It is not “bodily injury”.

Defence and Payment of Costs

The insurer has some obligations under the policy and agrees to:

• defend in the name of the insured any action
• against the insured coming within the policy
• even if the claim is groundless, false or fraudulent
• pay any appeal costs
• pay any costs awarded against the insured
• pay any interest accruing within the policy limits
• reimburse the insured for all reasonable costs including legal costs

There are some observations here. The defence and the costs associated with the claim are in addition to the policy limits. Reimbursement for an insured’s costs are those that relate to requests made by the insurer. Costs do not cover loss of earnings. So, this means “out-of-pocket” expenses only. For example, it is reasonable for the insurer to require that the insured attend at the trial of the action. The trial could take place at a location several hours away from the insured’s place of residence. Accordingly, the reimbursement would be for travelling expenses, meals and the hotel room during the two week trial, but the actual loss of income to the insured would not be covered.

You will also note that it includes “legal costs”. This is important. Not all professional liability policies include this provision. Let’s consider the case of two sales representatives in one brokerage acting in a multiple representation situation. One or the other may very well wish to point the finger at someone other than themselves. After all, professional reputations are at stake. There may be a conflict among the various defendants. The brokerage, itself, may also be at risk. Here, this policy will reimburse the insured in respect to independent legal advice, in such circumstances where that is required.

Naturally, the defence costs already include the payment of legal fees for the law firm retained by the insurer directly to defend the matter on behalf of the insured.

The policy provides coverage on a worldwide basis, but the requirement in terms of defence only extends to Canada and the United States. So, a salesperson could be vacationing in Australia or on a cruise ship in the Caribbean. If they offer bad advice, it will be covered, but only if the lawsuit takes place in those two jurisdictions.

Furthermore, the insurer has some rights with respect to the defence. It may investigate and negotiate any claim. However, it will not settle or compromise the lawsuit without the insured’s consent. If there is more than one insured, then the insurance company will try to reach a consensus among the insureds. If a consensus cannot be reached, then the insurer may act unilaterally.

The actual “named insured” in the policy is RECO. The insurance extends to both:

1) RECO, and
2) An insured member (a registrant to whom RECO has issued a Certificate).

The definition of insured member is extended and provides coverage to brokerages acting through a registrant (whether or not such registrant is an insured), the heirs, executors, administrators, assigns and legal representatives of an insured in the event of the death, incapacity or bankruptcy of such person.

Policy Exclusions

For greater certainty, insurance contracts often include a list of exclusions. These are specific matters that are not covered under the policy. These include the following:

• Fraudulent, dishonest, criminal or malicious acts, errors or omissions
• Bodily injury, sickness, disease or death to any person
• Theft of any property
• Claims related to commission entitlement or fees
• Claims covered by other policies, except for the excess
• Claims in respect to transactions where the insured has a direct or indirect interest
• Claims for the return of money held on deposit
• Fines, penalties and taxes
• Property management

Policy Exceptions to the Exclusions

No insurance policy would make any sense at all to the reader, unless there was a section that dealt with exceptions to the exclusions. So, these are things that were out, but now they’re back in again.

Generally, theft is out, but it is contemplated that an insured may be looking after someone else’s property. So, this will be covered up to $25,000 provided the insured had the care, custody and control of a third party’s property that was damaged or destroyed. The insured will be responsible for the first $500. If something is stolen from an “open house” then the insured will pay the first $500, and any amount over $25,500.

Property management is generally not covered unless it represents less that 35% of the insured’s business.

There are some others but they are somewhat “esoteric”, and consequently I will leave those items to be reviewed at an appropriate time.

Other Insurance Policies

This policy is designed for a particular purpose. It provides professional liability insurance. It also includes additional coverages that might not be available elsewhere. However, it does exclude some fairly basic matters. And, for that you will find that other types of policies will commonly respond. So, add some additional riders and coverages to other insurance liability policies and you should be risk-free. Well, risk-free within limits!

This policy of insurance is “second payor”. That means that if there is any other insurance policy or other indemnity available to satisfy this loss, then, this policy will only come into pay the excess leftover (if any) after the first policy of insurance has paid out.

Conditions Precedent to Policy Rights

One of the key items in every insurance policy is the requirement to ensure the co-operation of the insured in the defence of an action. No co-operation, no coverage.

There also needs to be timely reporting of a claim. The keywords in this policy are “as soon as practicable”. The trigger to give notice will be the “claim itself” being presented as well as “any circumstance likely to give rise to a claim”. So, the insurer could deny coverage by reason of the insured failing to report an appropriate circumstance.

To guard against this, the right advice should be: report everything. There is a saving provision for the insured who was acting in good faith and was unaware of the claim under the policy. Here, the insurer must prove actual prejudice by reason of the late reporting. Oftentimes, the insurer need only prove that memories of the witnesses have faded .

Notices under the policy are to be given to the named insured, RECO.

Retirement Benefits

Should a registrant enter voluntary retirement, coverage is automatically extended for three additional years, and after that for a further seven year period upon payment of a small premium. Such extended coverage is not available to registrants who retire if they were censured or disciplined.

Subrogation

The insurance company is subrogated to the rights of the insured. Subrogation is an insurance term referring to an “automatic assignment”. The insurer once it pays out under a policy has the right to sue in the name of the insured any party who might otherwise be responsible for the loss. So, the person who caused the loss doesn’t necessarily get off the hook. The insurance company makes a business decision as to whether it is feasible to commence litigation and recover the loss from the offending party. This, of course, includes any registrant whose dishonesty may have lead to the loss.

Uberrimae Fides

From time to time there are Latin expressions that find themselves entrenched in our laws. The expression “uberrimae fides” means “utmost good faith”. It is an inherent and fundamental part of every insurance contract. This means full disclosure, provide all details of every matter whatsoever, no confidential information, no restrictions. In fact, there is a specific positive duty to “tell all”. Any insured who fails to meet its obligations will relieve the insurer of any liability under the policy. This very fundamental term underlies the very nature of the insurer-insured relationship. This is not a simple contract with two independent contracting parties. This is a contract whereby both contracting parties will come together as one, so “no secrets”, or that would defeat the purpose of the relationship.

Caution

All in all, insurance maters can be tricky. So, please refer to an up to date copy of the RECO Errors & Omissions Policy for greater clarification and the specific wording. You might also wish to obtain legal advice.

* the trip and fall case is interesting. Coverage is limited and any actual bodily injury would be excluded. Other aspects of the trip and fall, save and except the bodily injury itself, may be afforded coverage under the policy. Please note, that a general third party liability policy would include coverage for the bodily injury aspect of this matter. Provided the insured maintained both policies, then the incident would be fully insured.

 

Brian Madigan LL.B., Realtor is an author and commentator on real estate matters, Royal LePage Innovators Realty
905-796-8888
www.OntarioRealEstateSource.com