Executive Summary: Key Legal and Evidentiary Issues

• Central issue was whether indemnity under the title insurance policy should be based on the cost to repair or replace the residence, or limited to the diminution in value of the property.

• Interpretation of policy terms, particularly the insurer’s discretion in choosing the method of indemnification and the definition of “Actual Loss,” was contested.

• The extent of coverage for alternate living expenses, including after the plaintiffs purchased a condominium, was disputed.

• The parties disagreed on whether the plaintiffs’ actions in vacating and renovating the property affected their entitlement to indemnity.

• Application of case law (Gemeinhardt and MacDonald) regarding full indemnification versus diminution in value in title insurance disputes was considered.

• The court needed to determine the total amount owed, including whether policy limits and additional living expenses were properly calculated.

Facts of the case

Giacomo Vincenzo Abiusi and Maria Antonietta Abiusi, spouses residing in Winnipeg, Manitoba, purchased a property at 1880 McCreary Road, Winnipeg, for $1,100,000 on March 1, 2021. They obtained title insurance from Lawyers’ Professional Indemnity Company (LAWPRO), also known as TitlePLUS, under Policy Number 202102003786, which was valid and in force at the time of the loss.

After taking possession, the plaintiffs began renovations and discovered mould and other defects in the residence. Upon further investigation, it was found that two different constructions had been done between 1974 and 1998 without required permits: the conversion of a detached garage into an attached garage, and the addition of a bedroom, bathroom, and sunroom. The City of Winnipeg issued a By-Law Violation Notice on April 22, 2021, for these unpermitted works.

The plaintiffs submitted a Proof of Loss to LAWPRO on May 4, 2021, stating the loss was due to part of the home being built without a permit. LAWPRO agreed the loss was covered under the policy.

Policy terms and clauses at issue

The policy defined “Actual Loss” as any direct financial loss incurred due to a decrease in the value of the title or land, costs to bring the land into compliance, or delays in sale, mortgaging, or leasing. Upon a claim, LAWPRO could, at its discretion, pay the claim, repair or replace any building, or remove any building and pay for any resulting diminution in value. The policy limit was $1,100,000, and it provided for reimbursement of reasonable substitute accommodation if the insured could not live on the land due to a covered risk.

Development of the dispute

After the Violation Notice, the plaintiffs vacated the residence and incurred alternate living expenses, including renting and later purchasing a condominium. LAWPRO paid $59,794.68 for alternate living expenses and $644,903.84 for losses related to the residence, totaling $704,698.52. The plaintiffs accepted these payments but claimed further amounts were owed for full remediation and ongoing living expenses.

The plaintiffs argued that indemnity should be based on the cost to repair or replace the residence, up to the policy limit, and that alternate living expenses should continue until they could return to the residence. LAWPRO argued it could elect to pay only for the diminution in value, that the plaintiffs had been fully indemnified, and that only actual rent was covered, not ownership costs of a purchased condominium.

Arguments of the parties

The plaintiffs relied on Gemeinhardt v. Babic, 2016 ONSC 4707, and MacDonald v. Chicago Title Insurance Company of Canada, 2015 ONCA 842, to argue for full indemnification for repair or replacement costs, not just diminution in value. LAWPRO maintained that the policy allowed it to choose the indemnification method and that the plaintiffs had already been indemnified.

Court’s analysis and outcome

The court concluded that, subject to the policy provisions, LAWPRO was obligated to indemnify the plaintiffs for the costs to repair or replace the residence, up to the $1,100,000 policy limit. The court found the plaintiffs’ position was supported by the evidence and relevant case law, and that the insurer’s interpretation would leave the plaintiffs without a habitable home, which was not the intent of the policy.

The court also held that alternate living expenses were recoverable, including those incurred after the plaintiffs purchased a condominium, as the substance of the expense, not its form, was relevant. The court accepted the plaintiffs’ calculation of $73,225 for alternate accommodations for the period March 1, 2023 to August 30, 2025, and $2,825 for each month thereafter until the plaintiffs could return to the residence.

Ruling and overall outcome

The court ordered that the plaintiffs are entitled to indemnity from LAWPRO for their costs to repair the residence up to the $1,100,000 policy limit, and for alternate living expenses until they are able to reside in the residence following repairs. The plaintiffs were also awarded their costs based on the applicable Tariff. The total amount ordered in favor of the plaintiffs included both amounts already paid and additional sums up to the policy limit and for ongoing alternate living expenses, with the precise final figure to be determined as repairs progressed.