Background
The insureds, the Emonds, owned a home located along the Ottawa River, within the jurisdiction of the Mississippi Valley Conservation Authority (“MVCA”). They purchased a standard form homeowners’ insurance policy (the “Policy”) from Trillium Mutual Insurance Company (“Trillium”).
On April 29, 2019, the Emond’s home suffered flood damage and was deemed a total loss. Trillium acknowledged that the loss was covered under the Policy. The dispute, however, related to how much Trillium was required to pay to rebuild the home, particularly whether it had to cover additional costs required to comply with MVCA regulation policies that came into force after the home was originally built.
The Insurance Policy at Issue
The case turned on the interpretation of three key provisions of the Policy:
- Guaranteed Rebuilding Cost Coverage (“GRC”): An endorsement providing coverage to replace the home with materials of similar quality using current building techniques.
- Compliance Cost Exclusion (the “Exclusion”): An exclusion for “increased costs of repair or replacement due to operation of any law regulating the zoning, demolition, repair, or construction of buildings and their related services.”
- Building By-Law and Code Compliance Coverage (“BBCC”): An endorsement providing up to $10,000 in coverage for increased demolition, construction, or repair costs required to comply with applicable laws or regulations.[1]
Competing Positions of the Parties
Trillium took the position that:
- The GRC required it to rebuild the home using materials of similar quality and current building techniques;
- Any additional costs associated with compliance with MVCA requirements and other bylaws and regulations were expressly excluded under the Exclusion; and
- Notwithstanding the Exclusion, it was obligated to pay up to $10,000 for such costs under the BBCC endorsement, which it agreed to do.[2]
The Emonds, by contrast, argued that compliance with conservation authority regulations, municipal by-laws, and other building code regulations were unavoidable when rebuilding and that Trillium was therefore required to fully cover those increased costs.[3]
Earlier Court Decisions
In 2022, the Ontario Superior Court ruled in favour of the Emonds, finding that Trillium was required to cover the full cost of compliance.
In 2023, the Ontario Court of Appeal overturned the decision, holding that the Policy clearly limited recovery for by-law and regulatory compliance costs to the $10,000 cap set out in the BBCC endorsement.
The Emonds were granted leave to appeal to the SCC.
The Supreme Court of Canada’s Decision
The SCC (7:2, in part) dismissed the appeal.
Writing for the majority, Justice Rowe held that the Policy was unambiguous: increased costs required to comply with MVCA building requirements were excluded from coverage, except for the $10,000 expressly provided under the BBCC endorsement.[4]
The Court rejected the argument that the GRC overrode the Exclusion. Justice Rowe explained that the GRC serves a limited but important purpose – it allows insureds to recover rebuilding costs even when those costs exceed the policy’s insurance limit. It does not expand coverage to include costs that are expressly excluded elsewhere in the policy.[5]
As the Court put it, applying the Exclusion does not deprive the insureds of the benefit of the GRC. Even without coverage for regulatory compliance costs, the GRC still allows recovery beyond the Policy’s base insurance limit.
“This case presents an opportunity to clarify when the language of an insurance contract is ambiguous and when the nullification of coverage doctrine would justify a departure from language that is unambiguous,” Justice Rowe explained.
The Court explained that the nullification of insurance coverage doctrine, which prevents policy provisions from being applied in a way that defeats the purpose of purchased coverage, did not apply here. Although the Emonds would recover less than they hoped, the GRC still retained meaningful value in that it allowed them to recover amounts exceeding the clear upper limit set under the base Policy.[6]
Justice Rowe added that even if the words “increased costs” were ambiguous, that ambiguity would “necessarily be resolved against the Emonds.”[7] No reasonable policyholder, he explained, would expect an insurer to assume unlimited responsibility for pre-existing regulatory non-compliance.[8] As he noted, “Courts have generally avoided interpretations of this nature, which would transform the insurer into a guarantor for the insured’s regulatory non-compliance…and have long given effect to similar language in compliance cost exclusions…”[9]
Regarding the Policy as a whole, the SCC concluded that the GRC modifies how losses are calculated – it does not displace the exclusions that apply to the insured home. As a result, the increased costs of complying with MVCA building requirements remained excluded, subject only to the limited $10,000 exception.
Takeaways
This decision reinforces that insurance policies must be interpreted as a whole. Endorsements – whether they expand, limit, or exclude coverage – cannot be read in isolation from the rest of the policy. Each provision must be understood in the context of the contract overall.
The Court also sent a clear message that ambiguity is not easily established. The mere fact that policy endorsements and exclusions overlap or interact does not automatically create ambiguity.
Emond underscores the value of clear and internally consistent drafting. The decision highlights an opportunity for insurers to more clearly – and more simply – articulate how guaranteed rebuilding endorsements operate alongside compliance cost exclusions, reducing the risk of disputes down the road.
[1] Emond v. Trillium Mutual Insurance Company, 2026 SCC 3, at paras 9 – 12 [Emond].
[2] Trillium Mutual Insurance Company v. Emond, 2023 ONCA 729 at para 10.
[3] Ibid at paras 10, 18.
[4] Emond, supra note 1 at para 4.
[5] Ibid at para 5.
[6] Ibid at para 109.
[7] Ibid at para 98.
[8] Ibid at para 101.
[9] Ibid.
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