What Happens With Insurance If Two People Own Property and One Person Damages the Property?

Insurance Policies Exclude Intentional Damage When Caused By An Insured Person; However, If Property Is Jointly Owned By People Insured Under the Policy, Then Coverage For the Innocent Person Statutorily Remains Valid.

A Helpful Guide For How to Understand the Coverage Protection Available For Persons Uninvolved in Intentional Damage

Insurance Claim Document Once in a while an incident will occur where more than one person is an owner of, or holds an interest in, property insured under a policy wherein both persons are also the insured persons.  Situations involving co-owned or co-interested property are actually quite common.  Examples of property with multiple persons sharing ownership or otherwise holding an interest include:

  • A husband and wife that co-own the contents within a household dwelling; or
  • A person who owns an automobile in title while a lender with a lien also holds a financial interest in the automobile.

In the above, among various other examples, where the co-owned or co-interested property is damaged or destroyed by an 'insured peril', meaning that the cause of the damage is within the coverage provided by the insurance policy, such as fire, lightning, or other unexpected and accidental cause that is protected against, the insurance company is obligated to provide compensation to the co-owners or co-interested persons in accordance to the proportion of interest each holds in the damaged property.  Simply said, if an object is owned by two people on a fifty-fifty basis (or other proportion), and the object is destroyed by an accidental cause, subject to coverage being otherwise applicable, the insurance company must make a payout on a fifty-fifty basis (or other applicable proportion).  Of course, so far, this is common sense and would seem fair to reasonably minded people.

Property Intentionally Damaged

Furthermore, for reasonably minded people there will be little surprise and confusion, if any, that property intentionally damaged is excluded from coverage under an insurance policy.  Typically, an insurance policy will contain an exclusion for intentionally damaged or criminally damaged property.  A typical exclusion will read  something such as:

We do not insure loss or damage:

4. resulting from the intentional or criminal acts of, or the failure to act by:

a) any person insured by this policy; or

b) any other person at the direction of any person insured by this policy;

Source: Intact Insurance, Homeowner's Comprehensive Policy, Form 703L

As is shown within the exclusion, when damage is done intentionally by, "any person" or "at the direction of any person" who is insured person, such damage is excluded from the coverage.  Furthermore, it is notable that there is lack of an exception, such as 'except insofar as the interest of other persons'.  Accordingly, at first glance, it appears that if any person causes damage to insured property, then all persons having an interest in the insured property will be without insurance coverage even if other persons are innocent and were without knowledge or involvement in intentionally damaging the property.

Statutory Coverage Prescribed

For the protection of innocent persons whose property is intentionally damaged by another person insured under the same policy, the Insurance Act, R.S.O. 1990, c. I.8 at section 129.1 prescribes the following:

129.1 (1) If a contract contains a term or condition excluding coverage for loss or damage to property caused by a criminal or intentional act or omission of an insured or any other person, the exclusion applies only to the claim of a person,

(a) whose act or omission caused the loss or damage;

(b) who abetted or colluded in the act or omission;

(c) who,

(i) consented to the act or omission, and

(ii) knew or ought to have known that the act or omission would cause the loss or damage; or

(d) who is in a class prescribed by the regulations.

(2) Nothing in subsection (1) allows a person whose property is insured under the contract to recover more than the person’s proportionate interest in the lost or damaged property. 

Accordingly, whereas an insurance policy may exclude intentional damage caused by any person insured under the policy, and even in such a manner as would otherwise nullify any remaining right to coverage under the policy by a person innocent to the intentional damage, section 129.1 of the Insurance Act mandates that the coverage remains available to the innocent person.

Summary Comment

Generally, all insurance policies will exclude damage caused intentionally by a person insured under the policy.  Furthermore, when multiple people have an interest in property insured under a policy, and one of the people causes intentional damage, the wording of the policy will exclude the coverage in such a manner as to nullify the right to make a claim even by the people innocent to the damage.  To resolve the unfairness to the innocent person, the Insurance Act prescribes a solution.


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