When a vacant school under demolition in Sault Ste. Marie, Ontario was destroyed by fire in September 2022, the insurer in the case successfully argued that there was no insurance coverage available for the loss because the property was not properly secured, as required by the terms and conditions of the policy.

The plaintiff in the Ontario Superior Court of Justice case 2749978 Ontario Ltd. v. United States Liability Insurance Company, advanced the position that it maintained the property properly but that someone had cut through the fencing on the night of September 17, 2022, to start the fire which led to the loss. “The plaintiff states that this is precisely the type of event for which it purchased the policy and the loss should be covered,” the reasons for judgment in the case states.

A history of problems  

In addition to a history of problems at the property, including trespass incidents and a 2018 fire which predate the plaintiff’s ownership of the property and which were not considered, a series of by-law photographs taken in the months leading up to the 2022 fire show that that building was accessible.

In July 2022, “it was noted that plywood walls were being removed and that the protective barrier/wall was collapsing. The photos show incomplete boarding without safety fencing in place. The front wall of the building is collapsing, and the orange fencing is partially collapsed and unattached in some areas.” In August 2022 it was noted that the structure was even more accessible than before. September 15, two days before the fire, a by-law officer posted a copy of the July 2022 order to remedy on the property’s front door and took pictures which again showed unobstructed access to the interior and fencing which did not extend around the entire building.

The plaintiff maintains that his staff attended the property the next day, September 16, to repair the damage. A contractor at the site during the same time confirmed that one employee was present and that orange snow fencing had been repaired during the short time he attended the property, which lasted about five minutes. The employee in question confirmed that he did not repair any boarding on the building that day.

According to the reasons for judgement, the insurer “indicates that the municipal inspection records, orders to remedy and the Sault Ste. Marie Fire Department’s incident report, all confirmed that the property was accessible to trespassers in the years, months and days leading to the fire and remained open to entry on the date of loss." Meanwhile, "the plaintiff submits that the insurance company did not define or otherwise explain what is required by the statement ‘fully secured’.” 

Although the justice agreed that if the insurer wanted city by-laws to be the standard for what it means to fully secure a building, this should have been stated in the policy warranty. “However, the lack of specific criteria does not mean that the language is ambiguous,” they write. “What is required to fully secure a vacant building will depend on the state of the property.” 

The reasons go on to say that multiple photographs taken two days before the fire clearly show entire sections of the wall at the back of the property exposed with no boarding and no fencing. 

“Based on the size of the exposed area, it would’ve taken Mr. Greco (the employee) some considerable time and effort to repair and/or replace the missing boards the next day. Further, it was Mr. Greco’s evidence that when he attended the property on September 16, 2022, he did not repair and/or replace any of the boarding. All he did was ensure that the orange fencing had been adequately restored. Although Mr. Greco states that all the sheeting was in place, this does not accord with the photographic or other evidence.”

The justice in the case ultimately granted the summary judgement motion declaring that the insurer had no obligation to indemnify the plaintiff for fire loss and that any payments made are repayable by the plaintiff. Although it was not clear that any payments had been made, for this reason the justice in the case did not make an order dismissing the action. Similarly, they noted that clarification was required before they could make an order for costs.