What your home insurance won’t cover
When Sellers are better off disclosing any damage to their home; buyers – talk to the neighbours before you commit.
If you’re selling your home and the buyer asks whether you’ve had a fire or there has been other damage to the house, just tell them and avoid trouble later.
In an unusual case revolving around this principle, Zahid Shah, a Brampton man who was sued by the buyers of his home for withholding that information, hoped his insurance company would help him pay to defend the suit.
Shah was planning to rely on a clause in most home insurance policies that says the insurer will pay if a court finds the policyholder must pay damages because of unintentional injury to a person or to the property.
George and Francesca Chrysanthis offered to buy the Brampton house from Shah in the spring of 2010. They noticed black marks on a door hinge and were worried there had been a fire. This was important to them because Mrs. Chrysanthis had respiratory difficulties. They asked their real estate agent to find out. The agent spoke to Shah’s real estate agent and was told there had never been a fire or smoke damage to the home.
The Chrysanthis’s moved in on June 26, 2010. Shortly after, neighbours told them there had been a kitchen fire and Shah had received a cash settlement to fix the damage. The Chrysanthis’s sued Shah, the real estate agents and the home inspector for their failure to find out about the damage.
Shah asked his home insurance company to defend them, claiming that he had not understand the questions that had been asked by their agent. Since he misunderstood the questions, he argued, he should be covered since he had made a mistake.
The judge disagreed. In a decision dated March 18, 2013, Justice Deena Baltman found that since all of the allegations against Shah were based on fraudulent misrepresentations, they were not covered by the policy. The claims not only were about lying, but that the sellers also actively concealed the fire damage so that it would not be noticed by the buyers, agents and home inspectors.
“There is no plausible way to categorize the claim here as anything other than deceit,” she said.
In other cases, where it is claimed that the seller was careless in making statements about their home and the buyer suffered a loss later, the insurance company was required to defend them.
For example, in the case of Aitken vs. Unifun Assurance, when a seller was careless and failed to properly disclose such things as a leaky roof and basement and bad wiring, the court held that the seller’s insurance policy had to defend the claim based on the damages suffered by the buyer.
In the case of Shah and the Chrysanthis’s a judge will eventually decide who pays for the loss.
These cases also illustrate the importance of speaking to the neighbours whenever you are interested in buying a home. Neighbours will often tell you things that sellers either forget or deliberately refuse to talk about, whether it is major repairs, floods or prior damage.
You can now use services such as Homeverified.ca or Iverify.com to determine whether there has been an insurance claim made against a home by a prior owner, including claims for fire, water damage or sewage backup.
Make sure you get legal advice before deciding to ask your insurance company to defend you on a lawsuit. Better still, tell the truth about your property and avoid aggravation later.
By: Mark Weisleder
Printed With Permission