Nominees, Beneficial Owners and Insurance Coverage - Are you Covered

Under casualty insurance policies, where the named insured is a nominee for undisclosed beneficial owners, current case law indicates the importance of advising the insurer of the relationship and possibly the identity of the beneficial owners. A failure to disclose the information to your insurer may result in the insurer denying coverage when a claim arises. This topic is now being considered in the area of title insurance pursuant to the June, 2006 decision in Nadvornianski v. Stewart Title Guaranty Co., where the Ontario Superior Court of Justice held that a “genuine issue for trial” existed with respect to whether a nominee property owner with no beneficial interest had an “insurable interest” under a title insurance policy and was entitled to claim under the policy.

Facts

Ms. N was the sole registered owner of a home (in trust for her husband and his partner), to be redeveloped and sold. Ms. N signed a mortgage to a lender which was aware of the nominee/beneficiary relationship and all the parties signed a security agreement accordingly. The beneficial owners also executed a Co-Tenancy Agreement. Stewart Title Guaranty Co. (“Stewart”) issued a title insurance policy (“Policy”) in favour of Ms. N and the lender. During renovations, the exact location of a registered water and sewer line easement was determined. Ms. N claimed it resulted in alterations to the original design of the renovations, diminishing the value and marketability of the home and resulting in financial loss. She made a claim under the Policy. Stewart denied the claim on the basis that the easement had been specifically excluded from coverage under the Policy, that the encroachment of a small portion of a concrete porch onto the easement did not, according to a professional appraiser, diminish the value of the property and Ms. N did not suffer any loss as the property was subsequently sold for a profit. Ms. N sued and during discoveries admitted having no interest in the property. Accordingly, Stewart brought a motion for summary judgement dismissing the claim on the basis that the claimant had no interest in the property.

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