In Cabell v. The Personal Insurance Company, 2011 ONCA 105 (“Cabell”), which can be read at this location http://www.ontariocourts.on.ca/decisions/2011/2011ONCA0105.htm, the Ontario Court Appeal applied the nullification doctrine to find coverage for the Plaintiffs under their homeowner’s insurance policy for damage to their in-ground swimming pool.
In Cabell, the Plaintiffs purchased an endorsement to their homeowners’ insurance policy to obtain coverage for damage to their pool which was not available in the policy. After making a claim to their insurer for damage to their pool, the insurer denied the claim on the basis that despite the endorsement a common exclusion in the policy applied to deny coverage.
After a Judge dismissed the Plaintiffs’ application for a declaration of coverage, they appealed to the Ontario Court of Appeal. The Court of Appeal found that despite being an offshoot of the principle that ambiguities in the policy are interpreted against the insurer, the nullification doctrine was a stand-alone principle that voids an exclusion clause, even without ambiguity, when the exclusion clause would nullify coverage for the obvious risks that a policy is issued for.
The Court of Appeal concluded that application of the common exclusion in Cabell would nullify obvious risk that the endorsement was obtained to cover, in this case damage to the swimming pool. As a result, the Court voided the exclusion clause and declared coverage under the policy for damage to the swimming pool.
Cabell is a significant case because the Court of Appeal addressed the evidentiary burden required for application of the nullification doctrine. The Court found that Courts are able to determine whether an exclusion clause would nullify coverage without evidence. The Court advised that once a Court determines on an objective basis that an insurer’s interpretation of the policy would negate coverage for the most obvious risks, the tactical burden shifts to the insurer, and the insurer is then required to lead evidence showing that its interpretation of the policy would not negate coverage.
Shane H. Katz, B.A., J.D.
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