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Bill 125, Innocent Persons Insurance Recovery Act, 2017

Policies of home insurance typically include an 'Intentional Act Exclusion' which provides that an insured person may not recover for any loss arising from their own intentional or criminal act. Here is an example of an Intentional Act Exclusion from a home insurance policy:


This Policy does not insure:


(d) loss or damage caused by a criminal or wilful act or omission of the Insured or of any person whose property is insured hereunder;


The Intentional Act Exclusion in a policy of home insurance gives effect to the common sense notion that a person should not recover from their insurer for a loss which they intentionally caused.


The effect of the Intentional Act Exclusion can be controversial where a policy covers multiple insureds. Where a policy of insurance covers multiple insureds, the effect of Intentional Act Exclusion is to prevent all insureds from recovering for a loss intentionally caused by any one insured. On the one hand, this prevents one insured from committing insurance fraud for the benefit of another. On the other hand, denying coverage to all insureds can result in an injustice where one insured is victimized by another.


The 1989 decision of the Supreme Court of Canada in Scott v Wawanesa Mutual Insurance Co illustrates the problem of the 'Innocent Co-Insured'. Mr. and Mrs. Scott took out a policy of home insurance with Wawanesa Mutual Insurance. Their 15 year old son deliberately set fire to their home without their knowledge or complicity. Wawanesa Mutual Insurance denied their claim for compensation. The Supreme Court of Canada agreed that the Scotts were not entitled to compensation. Since the son was an 'insured' for the purpose of the policy, the effect of the Intentional Act Exclusion was to deny coverage to his mother and father for damage caused by the fire that he deliberately set.


Recent incidences of domestic violence have raised the profile of the Innocent Co-Insured problem.


On April 26, 2017, the Liberal MPP for Lawrence-Eglington Mike Colle introduced the Bill 125, Innocent Persons Insurance Recovery Act, 2017, in the Ontario Legislature. If it is enacted, Bill 125 will amend Ontario's Insurance Act to add an additional section 118.1. The proposed section 118.1 will allow an Innocent Co-Insured to recover from their insurer to the extent of their interest in the insured property. The proposed section 118.1 provides as follows:


Recovery by innocent persons


118.1 (1) If a contract contains a term or condition excluding coverage for loss or damage to property caused by a criminal or intentional act or omission of an insured or any other person, the exclusion applies only to the claim of a person,


(a) whose act or omission caused the loss or damage;

(b) who abetted or colluded in the act or omission;

(c) who,

(i) consented to the act or omission, and

(ii) knew or ought to have known that the act or omission would cause the loss or damage; or

(d) who is in a prescribed class.


Recovery limited to proportionate interest


(2) Nothing in subsection (1) allows a person whose property is insured under the contract to recover more than the person's proportionate interest in the lost or damaged property.


If Bill 125 was the law at the time that Mr. and Mrs. Scott lost their home, then they would have recovered from their insurer for the losses caused by their son.


It remains to be seen whether Bill 125 will be enacted as law in Onario. However, the Liberal government has indicated that it will support Bill 125.


The information contained in this article is provided for general information purposes only and does not constitute legal or other professional advice. Readers are advised to seek specific legal advice in relation to any decision or course of action contemplated.

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