The Miracle of Title Insurance – Who says you can’t have your cake and eat it too?

Courts are normally very careful about preventing Plaintiffs from obtaining anything that looks like a double recovery.  However, a case decided by the Ontario Court of Appeal a few months ago called Krawchuk v. Scherbak is a rare example of exactly that. 

In this case, Mrs. Krawchuk bought a house in Sudbury in 2004 for about $110,000.  At the time that she completed the transaction, as was frequently done at that time and as is almost always done today, she purchased title insurance. 

Soon after she moved in, she discovered serious structural problems.  The City of Sudbury was contacted and it issued a work order requiring the rectification of the structural problems which were discovered.  The work to be done was extensive.  It required the removal of the house from its foundation, the excavation of its cement floor, the replacement of the subsoil and installation of new footings, foundation and cement floor, and then the replacement of the house on its new foundation.  Additional repair work was required because of the damage caused by moving the house to the extent necessary to make the repairs.  In fact, the cost of rectifying the problem amounted to over $191,000, almost double the amount she had paid for the house.

This represents yet another excellent reason to purchase title insurance whenever it is available.

Mrs. Krawchuk made a claim on her title insurance policy.  After some negotiation, the title insurer agreed to settle the claim for about $105,000, only a few thousand dollars short of the amount that she had paid for the house.  The insurer also agreed to transfer to Mrs. Krawchuk its subrogated interest.  In other words, the title insurer waived the right which it otherwise would have had to sue the vendors of the house in Mrs. Krawchuk’s name to recover the amount paid out under the policy. 

Mrs. Krawchuk recovered from her insurer almost the entire amount which she had paid for the house but she was still living in a house which required almost $200,000 in repairs.  As a result, she proceeded to sue the vendors as well as her real estate agent.

At the trial, the court determined that both the vendors and the real estate agent were liable for damages.  The vendors knew that the foundation of the house was seriously compromised and did not disclose these problems adequately.  The agent took no steps to verify the accuracy of the information supplied by the vendors or otherwise protect Mrs. Krawchuk.  Mrs. Krawchuk was awarded the full amount of the repair costs. 

As part of their appeal, the vendors argued that the amount of damages which they had to pay to Mrs. Krawchuk should be reduced by the amount which she had already obtained from her insurer.  Interestingly, the Court of Appeal rejected that argument ruling that Mrs. Krawchuk should not be required to deduct her insurance proceeds from her recoverable damages at trial.  It felt that it would be unfair to allow the vendors to benefit from Mrs. Krawchuk’s decision to spend the money on an insurance policy to protect herself from potential losses.  Mrs. Krawchuk was entitled to keep both the money received from her insurer and the full amount of the damages awarded against the vendors and the agent. 

Leave to appeal from that decision to the Supreme Court of Canada was very recently denied.

This represents yet another excellent reason to purchase title insurance whenever it is available. 

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