The court also ruled that the insurer's attempt to exclude arson coverage was invalid
The Ontario Court of Appeal upheld the dismissal of appeals in an insurance dispute over the Empress Hotel's wall collapse and subsequent arson.
The court affirmed that the collapse was not a covered fortuitous event and that the insurer could not unilaterally amend the policy to exclude arson coverage without the insured's written consent.
The Empress Hotel, a historic building at Yonge and Gould Streets, experienced a wall collapse in April 2010, leading to its tenants' evacuation. In January 2011, the vacant building was destroyed by arson. Through their corporations Lalani Properties International Inc. and 2160943 Ontario Limited, the Lalani family held insurance from Intact Insurance Company, obtained via their broker CG&B Group Inc.
When Intact denied coverage for the wall collapse and the fire, the Lalani family initiated legal action. The trial judge ruled in favour of Intact concerning the wall collapse but sided with the Lalanis regarding the fire, awarding them nearly $6 million in damages.
The Lalani family argued that the wall collapse should have been covered by their "all perils" insurance policy, contesting the trial judge's finding that it was not a fortuitous event covered by the policy. They challenged the trial judge's acceptance of Intact's expert testimony, which attributed the collapse to water seepage and gradual deterioration rather than vibrations from nearby construction projects, as suggested by Lalani's experts.
The Court of Appeal upheld the trial judge’s decision, affirming that the wall collapse was not a fortuitous event and fell under policy exclusions related to gradual deterioration and structural changes from renovations in the 1970s. Consequently, Lalani's appeal on this issue was dismissed.
Intact Insurance appealed the trial judge's ruling that they were liable for the fire losses. The trial judge had found that Intact’s attempt to amend the policy in late 2010 to exclude coverage for arson was invalid due to non-compliance with the Insurance Act's requirement for written consent from the insured. Additionally, the judge concluded Intact was estopped from invoking a vacancy exclusion clause, as they knew the building was vacant when the policy was renewed.
The Court of Appeal agreed with the trial judge, rejecting Intact’s argument that they could unilaterally amend the policy without Lalani’s written agreement. The court held Intact was estopped from relying on the vacancy exclusion due to their actions and found no error in the trial judge’s reasoning.
Ultimately, the decision rendered the cross-appeals moot, as they were contingent on the success of the primary appeals.
