A recent Ontario court decision is a reminder that boat owners cannot simply assume their homeowner's or cottage insurance automatically extends to a new watercraft, according to Adam Wagman (pictured), partner at Howie, Sacks & Henry LLP, who represented the family at the center of the case.
The case, McNair v. Aviva Insurance, arose after a man purchased a new Sea-Doo and assumed it was covered under his existing homeowner's policy, or simply forgot to secure separate boating insurance for it specifically, Wagman said. That assumption proved catastrophic. The man was later involved in an accident that killed Wagman's client's husband and father.
"The defendant who was responsible for killing my client's husband and father had purchased a Sea-Doo and assumed that it was insured under his homeowner's policy," Wagman said.
Once the claim arose, Aviva took the position that its policy did not cover the incident, and the defendant brought a motion asking the court to force the insurer to defend him. At the center of the dispute were two provisions within the same homeowner's policy that appeared to directly contradict each other.
"Most homeowners' policies, and in this case Aviva definitely had this policy, had two conflicting provisions," Wagman said. "Number one, we do not insure boats over 25 horsepower, period. But the policy also says if you get a new boat, you're covered for 30 days until you figure out your insurance situation."
In other words, Wagman said, the policy simultaneously excluded fast boats outright while also offering automatic temporary coverage for any newly purchased boat, without initially reconciling what happens when those two clauses collide.
The court's task was to determine whether that 30-day automatic grace period could apply to a boat that would never have qualified for permanent coverage in the first place, given its horsepower.
"Did the temporary coverage actually come into place under circumstances where permanent coverage wouldn't have been possible because the boat was too fast?" Wagman said, describing the central question the judge had to resolve.
The court ultimately sided with the insured, applying a long-standing principle of insurance law that favours the policyholder when a policy's language is ambiguous.
"As a tenet of insurance coverage interpretation, all coverage should be interpreted broadly, and any exclusions should be interpreted narrowly," Wagman said. "A policy is interpreted, if there's any ambiguity, in favour of an insured person."
Based on that principle, the court found that the temporary 30-day coverage provision did apply, meaning Aviva's policy was in effect at the time of the accident.
"The court in that case found, yes, McNair should have insurance on this Sea-Doo, that the insurance from Aviva should be in place because it was within that 30-day period," Wagman said.
Beyond the specific outcome, Wagman said the case illustrates a broader lesson for anyone who owns, or is considering buying, a boat: existing homeowner's or cottage coverage cannot be assumed to extend automatically to a new watercraft, particularly a faster or more powerful one.
"It really does stand for the proposition that people cannot simply assume that their homeowner's policy or their cottage policy is going to automatically cover all of their boats," Wagman said. "They must make specific inquiries and make sure that appropriate coverage is in place."
That uncertainty exists, he added, largely because boating insurance in Canada is not mandatory, unlike auto insurance, which leaves the burden of figuring out whether coverage actually applies entirely on the individual boat owner, often only discovered after it's too late.
