September 11, 2022
If you are like most of us you think about your property insurance – either commercial or personal – once a year upon renewal, if then.
THE ISSUE
As with any other type of insurance, you need to review your property insurance anytime you have a significant change – in the case of property insurance, when you purchase or dispose of significant assets, or add a new location.
A BIT OF INSURANCE LAW
Unlike auto insurance where the basic Ontario policy is the same for everybody, there is no form of standard property insurance. What is covered depends upon what you buy and what the particular insurer covers. There are some basic principles that might help you check your insurance.
Although certain types of property may be insured wherever in the world they are located, other types of property are only insured when they are physically present at an insured location listed under your policy. This is particularly true with commercial property insurance, but it may also apply to personal property. Some types of personal property can be just as expensive as commercial assets to replace. Certain types of assets also will only be insured if they are specifically scheduled on the policy, or special coverage through what is often called a “rider” is purchased in addition to your basic coverage. That is particularly true of certain types of costly personal property – the sort that not everybody owns routinely as part of owning a house or condominium. Therefore, the insurer prices their coverage of those items on top of the basic coverages. You may be aware that this can apply to things like jewelry, antiques, and art, but it may also apply to other sorts of assets, including recreational vehicles.
THE CASE
The Ontario Court of Appeal illustrated the risks of not paying attention to your insurance coverage in Letwin v. Camp Mart. Letwin had purchased a recreational trailer from a dealership which agreed to store the trailer for two months. The parties signed a storage agreement which showed a price of $0.00. Before the end of that agreement, Letwin discovered that his campsite was not ready, so we asked the dealership to store the trailer until spring, which they agreed to do. No further written agreement was signed. In the spring the dealer moved the trailer to the front of the lot the day before Letwin intended to pick it up. Unfortunately, that night thieves broke into the lot cutting through the bolt on the front gate and hauled away Letwin’s trailer. Letwin had not insured his trailer. He sued the dealership.
A BIT OF BAILMENT LAW
At trial, there was a vigorous debate over whether the dealership was a “gratuitous bailee” or a “bailee for reward” because these two descriptions create different standards of care. A gratuitous bailee is only responsible for “gross negligence” while a bailee for reward is liable for ordinary negligence. Since there was a finding of no negligence, in this case the dealership was not at fault regardless of which type of bailee they might be.
A BIT OF THE LAW OF NEGLIGENCE
The trial judge and the Court of Appeal found no negligence on the part of the dealership. The dealership met the standard of caring for Letwin’s property just as if they were a prudent owner.
Though theft by a third party was reasonably foreseeable, the dealership had an upgraded security system including periodic security patrols, a large ditch around the property, and a locked gate. While not perfect, this system was reasonable, which is the standard for negligence – no security system would stop a highly motivated thief and there had been no history of security breaches. Letwin’s expert claimed that the dealer should have put a “blocker car” across the entrance to the lot but the courts found that the blocker car could easily have been pushed aside by the thieves. The dealer’s inventory had the same protection as Letwin’s trailer.
THE RESULT
Letwin lost his claim against the dealership.
No doubt he now wishes that he had insured the trailer while it was stored at the dealership.
TAKEAWAYS
- You do not want to be left without coverage like Mr. Letwin
- Suing in negligence is an uncertain and less satisfactory approach than being insured
- Liability fights over negligence or the categorization of bailees are expensive – probably much more costly than insurance premiums – and should be avoided
- Whether you are insuring production equipment, inventory, or personal assets, understanding when the insurance risk passes to you is an important legal consideration
- In most cases, whoever owns the property is required to purchase insurance for it
- Relying upon someone else to insure your property is risky at best
- If you intend to do so, you want to make sure that the agreement that you have includes a requirement that the other person provides insurance which covers your interest
- That means they must insure your property under property coverage, not simply have liability insurance – their liability insurance only pays you if you prove they were at fault
HOW WEILERS LLP CAN HELP YOU
Though we are not insurance brokers, the insurance litigation team at Weilers LLP remains current on developments in insurance coverage and liability. We frequently review agreements and fact situations for clients and often can recommend amendments to agreements, or spot gaps in coverage. In those cases, we recommend that you consult a broker with the proper expertise to fill the gaps. We can also work hand-in-hand with brokers to review coverages so you benefit from both our different perspectives.
If you have a dispute over damage to or theft of your property, we are here to help in either a claim on your insurance, or a lawsuit against those at fault.
Our litigation team also works closely with our commercial lawyers on reviewing contracts being drafted, including storage contracts, to consider the adequacy of the insurance clause and who is responsible if there is damage or theft. If you need this seamless advice, Weilers LLP may be the right lawyers for you.