March 24, 2026
Do you know what your insurance policy covers? Will it pay the full cost of rebuilding if your home or commercial building is destroyed by fire or other insured hazards?
If you have not read your policy closely you might be surprised by the answer.
THE ISSUE
Most property policies contain an exclusion clause which limits the payment of costs increased by the need to comply with building bylaws or other regulations.
This can be particularly significant for older homes, where the existing construction may require a lot of upgrading to meet modern standards. Unfortunately for property owners, the exclusions are often tougher for older homes, and it may be harder, even impossible, to buy enhanced coverage for older homes.
Compliance cost exclusions vary from company to company, and most companies will have three (or more) versions of their coverage. Many will sell additional coverage at additional cost, but you probably would need to ask for it. Whether dealing through a broker or a “direct writer” company representative, taking the time to get the best coverage that you can afford is worth it if you have a loss.
THE CASE
The homeowners in Emond v. Trillium Mutual Insurance Co took their dispute all the way to the Supreme Court of Canada. They argued that in spite of the compliance cost exclusion, they should be paid in full for the rebuilding cost because their policy contained a guaranteed replacement cost endorsement. The Supreme Court disagreed and found in favour of the insurer.
You would be correct if you found this somewhat surprising – the Supreme Court tends to favor policy holders. Since insurers write the policies, any doubt usually goes against them. That however was not the result here.
Every part of an insurance policy must be given meaning, and if the guaranteed replacement cost overrode the compliance cost exclusion, there would be no point to have the exclusion.
The order of interpretation of the policy is first to examine to scope of coverage, then to consider exclusions, and finally, exceptions to the exclusions.
In technical terms, the endorsement extends the coverage, it is not an exception to the exclusion. The exclusion takes precedence.
The case did not determine how much the excluded compliance cost was, but it appears to have been not less than $50,000.00, and perhaps a several hundred thousand. The Emonds claimed that the additional cost could be $700,000.00.
With amounts that large in issue, understanding your coverage, and shopping around for the best coverage, is crucial.
TAKEAWAYS
- Understanding your coverage, and especially the exclusions, is important.
- Excluded costs may be substantial.
- Different insurers will offer different limits of coverage or impose different exclusions.
- It pays to shop around.
- The cheapest coverage is not always the best coverage.
WHAT WEILERS LLP CAN DO TO HELP YOU
At Weilers LLP, we have experience reading insurance policies and know insurance law. We do not sell insurance policies, but we can help you understand the coverage that you need, or the coverage you have under your policy.
If you have an insurance dispute, we can give you the advice you need. If you require help dealing with your insurer, you may give us a call at Weilers LLP. We do not help you for free, but our fees are often a sound investment. If we cannot help you economically, we will let you know. We may be the right lawyers for you.