Mystery Heating Oil Dumped into Residence > Insurance Claim Denied

Our thanks to the Chinese News Group and Nancy Jin for allowing us to participate in their recent article. 

The text of that article is re-printed here:

Should home insurance deny her claim?

By Nancy Jin, Reporter

To expect the unexpected, we purchased home insurance that serves to protect our property from fire or theft. However, there are certain events that nobody seems able to prepare for.

Some insurance claims could result from bizarre events that seem very unlikely to happen: A ram head butted a policyholder and knocked out one of his teeth; a homeowner was shocked to find that cows had invaded his garden and climbed into his pool; A policyholder accidentally burned several hundred dollars of cash he had left in an envelope; a chocolate fountain exploded leaving the carpet with molten brown stains.

Believe it or not, according to media reports, each of the above claimants had their claims settled by their respective home insurance companies and were compensated by their policies.

But when even a stranger incident happened to Ms. Dian Mui, a member of the local Chinese community, where 450L of oil was dumped through Mui’s old oil tank causing nearly $7,000 damage, Mui filed an insurance claim to her home insurer – The Cooperators, but much against commonsense, the insurer denied her claim.

Mui came home on the afternoon of Sunday Dec. 12, shocked to find that her whole house stunk with an unknown smell. Chasing down the odor source throughout the house, she came all the way down to her basement, where she found that several inches of oil had spilled to the concrete basement crawlspace floor.

“I was completely taken aback by what I saw and couldn’t immediately figure out what had happened,” said Mui.

Apparently, such a volume of oil was a potential source of fire and disaster. Mui called the police and the fire fighters arrived, who put down an absorbent material to soak up the oil. It was discovered that the oil spill was caused by a deposit of 450 litres of heating oil from an outside oil pipe to the rusted oil tank that had not been used for more than 20 years!

“We speculated that a heating company accidentally dumped the heating oil to our house, which has been using natural gas for heating since the first day we moved in,” said Mui.

The house was considered uninhabitable and Mui had to take refuge at another resident’s home.

Realizing that the incident could be very costly, Mui contacted her home insurer, expecting that her home policy would come to the rescue by covering at least part of the costs, but their answer left Mui dissatisfied.

“They told me that, as my primary source of heating is not oil, any related damages are not covered,” said Mui.

“Without insurance, who will pay for the cleanup, where am I to stay, who would compensate for the impaired home value?” asked Mui.

Frank Bomben, media spokesperson with The Co-operators told Chinese News that “her policy does not cover the escape of the oil that is not part of the heat of the building… a provision in the policy provides that we cover loss or damage to your personal property caused by the accidental escape of fuel oil from … tank… and pipes which is part of the heating units of the insurer’s building… It is not the case for Mu.”

Following the incident, Enbridge Gas Distribution adopted emergency procedures — heating meters and water taps were shut off to avoid a burst, portable heaters were installed and a hazard tag was issued.

After an inspection to Mui’s home, the Technical Standards and Safety Authority (TSSA) ordered that Mui to hire a certified engineer to remove the oil tank and disconnect all oil pipes. The TSSA billed Mui for an inspection report at a cost of over $1000, and Mui spent another $2500 to remove the oil tank and pipes.

Mui also has to hire a company to clean up the house. To remove the odor that has permeated her entire house and even her clothing, she bought special detergents and cat litter, at a cost of $300. Mui estimates that the total costs of emergency services, inspection, draining the oil tank and house cleaning would go as high as $7,000.

The purpose of a home insurance policy is to cover any losses incurred to a homeowner in the case of an unexpected incident. After all, Mui’s inactive feed to an old heating tank was not an invitation for a company to fill their tank up. After paying the premium on her insurance policy for many years, Mui was discontented that her insurance company left her in the worst possible position at the time of her greatest need.

After reviewing Mui’s entire home policy, Gregory Chang, an experienced insurance lawyer with Bougadis, Chang LLP told Chinese News that Mui’s policy supports her claim for the coverage, and that the insurance company should look at the whole policy under the circumstances, rather than focusing on a single provision.

“I personally believe that the insurance company should not be denying her claim… Given the circumstances of the case, I am surprised that the insurance company denied the coverage,” says Chang. “The insurance should, in my view, pay for the clean-up and remediation of their property. Then the insurance company can go after the heating company that made this error.”

Given that the accident was not the fault of Mui, would the insurer, on which Mui is still pinning her hopes, maintain that she has to bear all the expenses?

“Yes, having uninvited heating company deposit oil would still have no bearing…..　still not connected to the heating system…still no coverage under the policy,” answered Bomben.

Insurance companies have a responsibility to review a claim quickly and fairly, but very often, the contract is interpreted in two different ways – one way by the insurer and another way by the insured’s lawyer, says Chang.

But as a claim is escalated into a lawsuit, insurers would have more information, based on which, re-evaluate the claim.

“In a lawsuit, the homeowner would seek to have its insurance company pay for all the repairs and environmental assessments, plus pay for some of the lost time and effort occasioned by the insurer’s denial,” Chang advised.

Gregory Chang

Toronto Insurance Lawyer