Flood Insurance Definition Issues Commonly Misused Language Concerns

[39] The resolution of this dispute depends primarily on the interpretation of the word "flood" in the insurance policy and flood endorsement: does the pooling of rainwater qualify as "the rising of, breaking out of or the overflow of any body of water whether natural or man-made"?

[40] Parker relies on the decision of this court in T&T Realty Ltd. v. Allstate Insurance Co. of Canada, [1986] O.J. No. 532, 1986 CarswellOnt 727 (H.C.J.). In that case, flooding of an underground parking garage was caused by surface water runoff from a "profuse and violent downpour of rain". The court found [page615] that none of the damage to the property was caused "by an overflow of a river, stream or natural watercourse".

[41] The question for the court was whether the loss was covered by the plaintiff's insurance policy. That policy contained wording similar to the policy in our case. The policy stated:

Perils Excluded

This policy does not insure against loss or damage caused directly or indirectly . . . by flood, and the word "flood" includes waves, tides, tidal waves, and the rising of, the breaking out or the overflow of, any body of water, whether natural or man made . . .

(d)(i) by seepage, leakage or influx of water derived from natural sources through the basement wall, doors, windows or other openings therein[.]

[42] Anderson J. concluded that the damage had been caused by a flood within the meaning of that term in the insurance policy, and was therefore covered by the exclusion. He stated:

Taking the word in its ordinary meaning I would have no hesitation in concluding that the incident described . . . comprised a flood. It is to be noted that among the definitions contained in the Shorter Oxford English Dictionary (1933 Edition) is the following: "a profuse and violent outpouring of water, a swollen stream, a violent downpour of rain."

[43] Parker argues that if I adopt this reasoning, the incident in our case would be excluded by clause 6B(b) of the insurance policy, but then covered by the flood endorsement.

[44] The difficulty with this argument is that the definition of flood in the T & T case used the phrase "the word aeflood' includes", while the clauses in our case uses the phrase "Flood means", and the difference between "includes" and "means" is significant. Anderson J. concluded that the word "includes" was intended to be non-exhaustive. While sometimes the term "includes" is intended to precede a list that is complete and exhaustive (see Dilworth v. Commissioner of Stamps, [1899] A.C. 99 (P.C.), at pp. 105-106; R. v. Loblaw Groceteria Co. (Manitoba), 1960 CanLII 84 (SCC), [1961] S.C.R. 138, [1960] S.C.J. No. 73; Canada 3000 Inc., Re; Inter-Canadian (1991) Inc. (Trustee of), [2006] 1 S.C.R. 865, [2006] S.C.J. No. 24, 2006 SCC 24, at paras. 47-50), it is generally used to indicate that what follows are examples rather than an exhaustive list. That latter interpretation was adopted by Anderson J. in T & T, at para. 8: "There is no such basis for interpretation here and the specified categories of flood are not exhaustive."

[45] In contrast, the word "means", which is used in the policy at issue in this case, "generally precedes a definition to be construed as exhaustive" (Canada 3000, at para. 46). [page616]

[46] There is no question that the ordinary meaning of the word "flood" would include the pooling of water resulting from a rainstorm; see Oakleaf v. Home Insurance Ltd., 1958 CanLII 136 (ON CA), [1958] O.R. 565, [1958] O.J. No. 617, 14 D.L.R. (2d) 535 (C.A.), per Porter C.J.O. [at para. 6]: "The word aeflood' as applied to quantities of water inundating cellars as in this case is in common use." Or, as LeBel J.A. (dissenting) stated in the same case [at para. 51]:

It is not to be denied, of course, that rain is the commonest cause of a disastrous overflow or flood. After all, it was "rain upon the earth" for forty days and forty nights that caused the deluge: Genesis, 7: 4, 5 and 6.

[47] In this case, however, the term flood is given a very specific and restricted definition in both the insurance policy and the flood endorsement, so the ordinary meaning of "flood" does not assist. The plaintiff is covered only if the influx of rainwater through the foundation was caused by a "flood" as defined in clause 6 of the flood endorsement: "the rising of, the breaking out or the overflow of any body of water whether natural or man-made".

[48] Gore relies on the decision of the British Columbia Court of Appeal in British Columbia (British Columbia Ferry Corp.) v. Commonwealth Insurance Co., 1987 CanLII 2882 (BC CA), [1987] B.C.J. No. 1671, 40 D.L.R. (4th) 766 (C.A.). In that case, the plaintiff's property was damaged by six-foot waves raised by the winds across the Georgia Straits, an arm of the Pacific Ocean between Vancouver Island and the mainland. The waves pounded against and battered the structures comprising the plaintiff's ferry terminal. The trial judge concluded that all of the damages were caused exclusively by the waves and that the exclusionary clause in the insurance policy applied. He therefore dismissed the claim of the plaintiff. The Court of Appeal allowed the appeal, concluding that the damage was not caused by a flood as defined by the policy.

[49] The relevant definition in the exclusion clause was identical to the one in our case and read as follows:

10.  Perils Excluded:

This policy does not insure against . . .

(b)   loss or damage caused directly or indirectly by flood, and the word "Flood" means waves, tides, tidal waves, and the rising of, the breaking out or the overflow of, any body of water whether natural or man made[.]

(Emphasis added) [page617]

[50] The trial judge concluded that there was no ambiguity in the language of the exclusionary clause. Since the damage was caused by waves it was excluded from coverage. The Court of Appeal agreed that there was no ambiguity, but came to the opposite conclusion, deciding that the damage was not caused by a flood as defined. In reaching its conclusion, the Court of Appeal interpreted the words ". . . and the rising of, the breaking out or the overflow of, any body of water . . .", stating (at paras. 9 and 10):

Properly construed, in my opinion, what the draftsman of the clause has done is to provide that flood is to be interpreted as covering both cause and effect. Thus, the flood may be caused by waves, tides, tidal waves, and if, for example, as in this case, waves result in the rising of, the breaking out, or the overflow of a body of water that would amount to a flood within the meaning of that term as defined in the exclusionary clause.

. . . it is clear that what occurred . . . was that waves battered the plaintiff's ferry terminal causing damage, but those waves did not result in the rising of, the breaking out, or the overflow of any body of water. As a result, I conclude that there was no flood within the meaning of the exclusionary clause in the policy. Therefore, the damage suffered by the plaintiff fell within the coverage of the all risks policy.

[51] I make two observations with respect to this decision. First, it strikes me that if two judges disagree over the interpretation of the same clause there must be at least some ambiguity in the language. Second, I would have thought that a six-foot wave on the Pacific Ocean does qualify as the "rising of . . . a body of water".

[52] Either way, the holding in B.C. Ferry does not directly address the issue in this case. Gore argues that the case stands for the proposition that the loss at issue "did not involve any body of water". That is not correct. There was no question in that case that the loss involved a body of water: the waves came from the Pacific Ocean, and no one disputed that the Pacific Ocean is a body of water. The issue, according to the Court of Appeal, was whether the waves resulted in the rising of, the breaking out, or the overflow of any body of water. The British Columbia Court of Appeal found that it did not. In any event, the case did not consider whether a "body of water" must be pre-existing, permanent and identifiable (although there is no doubt that the Pacific Ocean meets all of those criteria).

[53] In my opinion, the ordinary meaning of the phrase "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 tsunami" is limited to pre-existing bodies of water and does not include pooling of rain water in a location [page618] where no body of water previously existed. I come to this conclusion by considering all of the words in context. A pre-existing body of water such as a lake, river or reservoir can rise, breakout or overflow. In this case, the pool of water did not exist before the rain, and cannot be said to rise, break out or overflow because it has no pre-determined boundary or level from which it can rise, break out or overflow.

[54] While the term "body of water" might be ambiguous when considered in isolation, it is not ambiguous when considered in the context of the complete clause. In my view, the context clearly shows that the intention was to include the rising, breaking out or overflow of an existing and identifiable body of water.