Court of Appeal Dismisses Insurer’s Appeal Involving “Under Construction” Exclusion

In Tataryn v. AXA Insurance Canada, 2021 ONCA 413, the plaintiff commenced renovations to the second and third floor of her property while she lived on the first floor. Following the commencement of the renovations, there were two incidents of water damage. The plaintiff sought coverage under her homeowner’s insurance policy.

The plaintiff’s insurer made some payments for the first loss but denied coverage for the second loss, relying on an exclusion in the policy which indicated that the insurer does not insure loss or damage occurring while the building is under construction.

The insurance policy did not contain a definition of “under construction”.  The motion judge held that a finding as to whether a property is “under construction” is a question of fact and that the evidence did not support that the renovations were sufficient to find that the house was “under construction”.

The motion judge indicated that the fact that a house is being renovated does not necessarily mean that it is “under construction”.  As a result, the motion judge held that the plaintiff was entitled to coverage.

The Court of Appeal dismissed the insurer’s appeal. The Court of Appeal stated that the motion judge properly instructed himself on the applicable rules of contractual interpretation, including that he was required to give effect to the clear language of the policy, reading it as a whole.  The motion judge properly considered the plain meaning of the term “under construction” and applied it to the entirety of the evidence.

The Court of Appeal declined to provide a definition of “under construction” that would apply to all cases because it is a fact-specific inquiry. The Court of Appeal also noted that exclusion clauses in insurance policies are construed narrowly.

Overall, if the term “under construction” is not defined in an insurance policy, it should be given its plain meaning, and the evidence should be examined to determine whether the property was in fact “under construction”. Renovating a property does not necessarily mean that the property is “under construction”.