In the case St-Amour v. Promutuel Boréale, société mutuelle d’assurances générales[1], the owner of a rental property submitted an insurance claim for significant damage caused to the building following a fire started by his tenant, who had left a pot of oil unattended on a propane stove.
Following the insurer’s refusal to indemnify, plaintiff instituted proceedings before the Superior Court. In a judgment dated February 4, 2025, the Court upheld the insurer’s position and dismissed the claim.
Central to the reasoning for the denial of coverage were, inter alia, the illicit activities carried out by the tenant on the insured premises.
The Facts
The plaintiff was the owner of a dozen rental units in a small village, including the building at issue, purchased in 2006, which remained vacant until a tenant expressed interest in early 2015. No credit or criminal background checks were conducted.
However, the tenant was facing 12 criminal charges related to drug trafficking. In December 2015, a drug-related police search was conducted at the property, and the tenant was arrested. He was incarcerated in July 2016. The owner then began collecting rent from the tenant’s partner.
On July 9, 2017, the property caught fire while the tenant, recently released from prison, was cooking fries in the middle of the night. The material damage was considerable, and the owner submitted an insurance claim, which was ultimately denied two years later.
The Exclusion Clause for Illicit Activities
The insurer’s primary ground for denying coverage was the presence of an exclusion clause in the policy related to illicit activities.
The owner first claimed he was unaware of this exclusion clause, stating that the form containing it had never been submitted to him.
This argument was quickly dismissed by the judge, who found that a form containing the exclusion clause had indeed been provided to him when the policy was originally issued 26 years earlier, although it included a clerical error regarding the property’s address.
Moreover, the judge found the explanations given by the owner during the hearing to be lacking in credibility and confirmed that he had been receiving annual renewal notices. However, he admitted to only reading the first page of these documents, which is inconsistent with the behavior expected of a reasonable insured.
Furthermore, the owner argued that the exclusion clause for illicit activities only applied if such activities were ongoing at the time of the loss, which was not the case here, as the tenant had ceased all illegal activity after his arrest in December 2015.
The judge acknowledged that there was no evidence of continued illicit activity on the premises after December 2015. However, since the insured owner was aware of prior illegal activities and deliberately failed to disclose them to the insurer at the time, the building was no longer covered under the policy.
False Statements by the Owner
The insurer also sought retroactive nullity of the insurance contract as of the date the owner became aware of the criminal activities taking place at the property—at least as early as the tenant’s incarceration.
After recalling the duty of good faith that applies to all insureds, the judge emphasized that good faith requires the insured to proactively disclose any circumstance that may increase the risk, even if the insurer does not specifically inquire about it.
The owner’s claim that he was unaware of his tenant’s illegal activities lacked credibility. At the very least, he was aware from the time of the tenant’s incarceration in July 2016. The judge concluded that the owner’s inaction, which amounted to willful blindness, was fatal to his claim.
Additionally, during the claim process, the owner falsely stated to the insurer’s representative that he had not been informed of the police raids or his tenant’s incarceration. This false statement justified the forfeiture of his right to indemnity.
However, after analyzing the circumstances of the fire and the evidence, the judge did not find sufficient proof of intentional misconduct by the owner.
Conclusion
As a result, the Superior Court confirmed the retroactive nullity of the insurance policy, leaving the owner to bear the cost of the substantial damages himself.
This decision clearly illustrates the consequences that landlords may face when they are too passive about their tenants’ activities and serves as a reminder of the importance of disclosing any information that could increase the risk, to the insurer, before it’s too late.
[1] 2025 QCCS 329
