When Stephen and Claudette Emond bought what their insurer called "top of the line" coverage for their Ottawa River home, they believed they were getting exactly what the policy promised: guaranteed rebuilding cost protection. That belief was put to the test after a flood destroyed their property, and in a 7-2 ruling, the Supreme Court of Canada has now drawn a hard line on what "guaranteed" really means.
The decision in Emond v. Trillium Mutual Insurance Co. is one that property insurers across the country will want to study carefully.
The Emonds' home, built in 1968, sat within the jurisdiction of the Mississippi Valley Conservation Authority. When flooding in April 2019 destroyed the property, the couple discovered that rebuilding would require compliance with conservation authority regulations — additional work that would increase the cost. They argued their Guaranteed Rebuilding Cost endorsement should cover those expenses. Trillium disagreed, pointing to a compliance cost exclusion in the base policy.
The exclusion stated that the insurer does not cover "increased costs of repair or replacement due to operation of any law regulating the zoning, demolition, repair or construction of buildings." A separate clause capped coverage for such costs at $10,000.
The question before the Court was straightforward but consequential: does a guaranteed rebuilding cost endorsement override the compliance cost exclusion, or does the exclusion still apply?
Writing for the majority, Justice Rowe found the policy language unambiguous. The compliance cost exclusion, he concluded, applies to regulatory rebuilding costs even when a homeowner has purchased a GRC endorsement. The purpose of the endorsement, the Court held, is to permit recovery of replacement costs even when they exceed the amount of insurance — not to override exclusions elsewhere in the contract.
But the decision was not unanimous, and the dissent offered pointed criticism that insurers would be wise to consider. Justice Karakatsanis, writing for the minority, found the policy "replete with unclear language and perplexing drafting decisions." She warned that applying the exclusion as Trillium argued risks "rendering coverage illusory, especially for older homes" subject to updated building codes.
The case drew attention from the insurance industry. The Insurance Bureau of Canada, Canadian Association of Mutual Insurance Companies, Ontario Mutual Insurance Association, and Farm Mutual Reinsurance Plan Inc. all intervened in the proceedings.
For insurers, the majority's decision is a win — but the dissent's sharp words about policy clarity may linger. As more homes age and building codes evolve, disputes over compliance costs are unlikely to disappear. Insurers drafting GRC endorsements may want to ask themselves whether their policy language would survive the kind of scrutiny the Emonds' policy received — and whether "guaranteed" means what their customers think it means.
The appeal was dismissed with costs.
