Court orders Chubb to pay policyholder Cdn$5 million in home fire case

The Ontario Superior Court of Justice ordered Chubb Insurance Company of Canada to pay just over Cdn$5 million to Missisauga policyholder Bridgette Sagl, after Sagls house burned down in December 1997.Chubb initially denied coverage based on its (ultimately disproven) theory that arson caused the fire.The court observed that Chubbs reason for denying coverage was influenced largely by the observations of a fire inspector who had arrived on the fire scene at approximately 12:45 a.m. on Dec. 6, 1997.After interviewing the firefighters and Sagl, the inspector jotted down some points of interest in his notes, which he subsequently relayed to the Office of the Fire Marshall. The court noted the fire marshalls subsequent investigation was tainted because it relied heavily on the biased nature of the inspectors preliminary theory that the fire may have been caused by arson. This appraisal of the situation by Fire Inspector McNeil was entirely negative and pointed suspicion at the plaintiff in the occurrence of the fire, Ontario Superior Court Justice Blenus Wright wrote. It started a series of events thereafter, with each event building on each other feeding the perception and belief that the fire was incendiary and that the plaintiff had been complicit in the setting of the fire at 2415 Doulton Drive.Since arson is a criminal charge, the judge noted, the standard of proof an insurer must meet to warrant denial of coverage is much higher beyond a reasonable doubt, for example, as opposed to a mere balance of probabilities.The judge said Chubbs assertion failed to meet both tests. Wright ruled that a number of other explanations offered by the plaintiff to explain the inspectors points of interest were at least as likely to have been true; none of these scenarios, he added, would have led the insurer towards the arson scenario. The alternate possibilities are thoroughly reviewed in the courts decision in Slagl. On the basis of this review, the court found the cause of the fire was in fact undetermined.Of note to insurers is that the fire happened while the policy was in a state of binder in coverage. That is, the contract was in a kind of pre-policy form.Under s. 124 of the Insurance Act, the policyholders written consent to policy changes is required. Chubb argued that in Sagl, the policy was a binder in coverage and therefore s. 124 did not apply.Justice Wright disagreed. He wrote that in his view, section 124 applies to a binder of coverage because that makes both common and business sense. Otherwise, a binder of coverage does not mean what it states as to the coverage, if an insurer can unilaterally amend the coverage without the consent in writing of the insured.