Wednesday, 22 February 2012 19:12
Addendum to Insurance Bulletin Feb. 14, 2012: Coverage for Fire Arising from Vandalism or Malicious Acts While the Property is Vacant
In our Insurance Bulletin on the B.C. Insurance Amendment Act, 2009, we noted that many policies excluded loss or damage, including fire, caused by vandalism or malicious act while the property was vacant and that such exclusions would no longer be permitted in the future. A careful reader of our Bulletin has brought it to our attention that this interpretation is not correct.
Pursuant to s. 28.4 of the Act, an insurer must not provide in a contract that includes coverage for loss or damage by fire, an exclusion that is not permitted by the regulations. On a careful reading of the regulations, we stand corrected and exclusions for fire caused by malicious acts or vandalism while the property is vacant for more than 30 days will still be permissible.
The regulations relating to fire exclusions read in their entirety as follows:
(1) For the purposes of section 28.4(1) of the Act, an insurer may provide in a contract that includes coverage for loss or damage by fire an exclusion for fire or explosion caused by
(a) subject to section 28.6 of the Act, a criminal act or omission, or an act or omission of the insured or a person having an insurable interest in the subject of the insurance, which act or omission was intended to bring about the loss or damage or
(b) riot, civil commotion, war, invasion, act of a foreign enemy, hostilities, whether war is declared or not, civil war, rebellion, revolution, insurrection or military power.
(2) For the purposes of section 28.4(1) of the Act, an insurer may provide in a contract that includes coverage for loss or damage by fire an exclusion for fire or explosion caused by terrorism but only as the contract applies to property that is not used for residential purposes.
(3) For the purposes of section 28.4(2) of the Act, except as authorized under subsections (1) and (2) of this section, an insurer may not provide in a contract that provides coverage for loss or damage by fire an exclusion for loss or damage by fire that occurs when the insured property is vacant for a period not longer than 30 days.
Some of the confusion on this topic arose from the Insurance Act Review Discussion Paper issued by the Ministry of Finance in March 2007. At that time, the Ministry noted that there was a series of cases that held that where fire arose from vandalism, the losses were excluded under the vandalism/vacancy exclusion clause. The Ministry was then of the view that “these cases undermine a core policy goal of the legislation: that fire coverage includes fire resulting from any cause, except causes that are specifically listed in the policy or the act. These cases may result in unexpected and unfair consequences for consumers. . . “ In any event, the regulations, as they presently exist, continue to allow exclusions for a “criminal act or omission . . . which act was intended to bring about the loss or damage”. This would therefore include vandalism or malicious acts intended to result in a destructive fire to the premises.