Court Decision On “Surface Water” In The Policy Exclusion, But Not In The Flood Endorsement

The Co-operators has to pay a Mississauga banquet hall facility nearly $1 million – about double the amount it originally paid on a sewer backup policy – for losses arising from an historic 2013 rain storm, the Court of Appeal for Ontario has ruled.

In a decision released July 28, the court overturned a 2019 Superior Court of Justice finding that Le Treport Wedding & Convention Centre Ltd. is only covered for sewer backup and does not also have coverage under a flood endorsement on its commercial policy.

The language “surface water” appears in The Co-operators’ policy exclusion for flood coverage, the court observed, but it does not appear in the flood endorsement on the policy. In the endorsement, a flood is defined as “the rising of, the breaking out or the overflow of any body of water, whether natural or man-made and includes waves, tides, tidal waves and tsunamis.” The discrepancy in the language used to define a “flood” featured prominently is the debate about whether The Co-operators’ flood endorsement applied in addition to the $500,000 policy limit it paid for sewer back-up.

Le Treport was one of many Greater Toronto Area (GTA) properties affected by a huge rainstorm early in the evening July 8, 2013. The western GTA got about 90 mm of rain in an hour, costing the industry about $1 billion in insured damage.