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Property owner learns a hard lesson on insurance against water damage

Jun 24, 2023 | 2023 Toronto Star Property Law Columns

By Bob Aaron
Toronto Star contributing columnist

Cover for water damage deemed not in place despite daily visits to vacant property. Talk to your broker about any change in risks, says Bob Aaron.

A homeowner in Hamilton learned the hard way that there are huge differences between insurance policies, and that the cheaper a premium is the less coverage the owner receives.

James Douglas Morgan owned a townhouse on Sunvale Place in the Stoney Creek area. When his tenant moved out in October, 2019, he decided to renovate the property and prepare it for sale. He visited the property regularly until the work was finished.

A few days later, the property was listed for sale.

For several years, Morgan had insured the property with Co-operators General Insurance Company under a condominium owner’s Prestige Policy. While the tenant was still in possession, Morgan had arranged for a comprehensive water endorsement to cover various types of water damage, such as surface water, flood and storm surge.

Following the renovations, while Morgan was on vacation in Florida, his son visited the property daily, or every other day, to check on it.

In early December, while the property was unoccupied, Morgan’s real estate agent phoned him to advise that the house had been damaged as a result of a burst water connection to a second-floor toilet.

Co-operators investigated the claim and denied coverage. The company’s position was that there was no insurance coverage for water damage after the property was vacant for more than five days, and there was no insurance at all for any loss if the dwelling was vacant for more than 30 consecutive days.

Morgan sued Co-operators seeking damages of $100,985, claiming breach of contract, breach of fiduciary duty, and negligence.

In December, 2022, Co-operators was in court seeking what is known as a summary judgment dismissing the claim.

The main issue before Justice Byrdena MacNeil was whether the property was, in fact, vacant, as Morgan and his son were regularly visiting the property. The judge found that the term “vacant” was clearly defined in the policy as “when all residents have moved out with no intention of moving back in and another resident has not yet moved in.”

The judge decided that, despite the regular inspection visits by Morgan and his son, the dwelling was still vacant under the policy wording.

According to precedents set in prior court cases, something more than just occasional visits is needed to make the house not vacant according to the policy. There was no evidence that anyone was living in the townhouse or had any intention of moving in.

As the house was vacant at the time of the loss, there was no coverage under the policy for the water damage.

After reading the court’s rather harsh decision, I decided to poll an expert for reaction to the decision. I reached out to Dayle Semple at Hub International, to explain the intricacies of insurance coverage for vacant properties.

He told me he has never seen an exclusion for water escape after a home has been vacant for only five days. “Usually, the cheaper an insurance policy gets, the more exclusionary it gets.”

The takeaway, he says, is talk to your insurance representative about any material change in risks (such as vacancy) even if you don’t think there are any.

Litigation against the insurance broker may be continuing.


Morgan v. Co-Operators General Insurance et. al., 2022 ONSC 7254 (CanLII), <https://canlii.ca/t/jtmqj>


Contact Bob Aaron

Bob Aaron is a Toronto real estate lawyer and frequent speaker to groups of home buyers and real estate agents.
He can be reached by email at bob@aaron.ca, phone 416-364-9366 or fax 416-364-3818.

Aaron & Aaron specialize in Real Estate Law, specifically Sale of Rental, Condominium, Residential, Rural Recreation, Offer to Lease, Commercial, and New Construction

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