This case was heard in the Nova Scotia Court of Appeal.

Mrs. Stuart had been living alone in her home from 1981 until 1998. During that time, she regularly detected a smell of oil in the basement. Her adult children were also aware of the smell, and her son, Mr. Stuart, who suspected that the smell was the result of a messy boiler repair, had repeatedly contacted the plumbing company that had carried out the repair. 

In 1998, when Mrs. Stuart moved into a nursing home, her children initiated the process of putting the house up for sale. When the oil smell was investigated more thoroughly, it was discovered that it had actually been caused by oil that had leaked from an old oil tank that was located beneath the garage. As such, it was also clear that the leak would have occurred sometime in the early 1980s, before the old oil tank had been drained and a new one had been installed. When Mrs. Stuart (through a family trust) contacted her insurer, the insurer stated that the loss was not covered by her insurance policy, as it had occurred so long ago that the policy and statutory limitation periods had expired.

Mr. Stuart, on behalf of Mrs. Stuart, initiated legal proceedings, arguing that, under the circumstances, the “discoverability rule” should be applied. In other words, he argued that the timeline of the limitation period should not begin at the moment when the loss occurred, but should begin at the moment when the loss was discovered. Mr. Stuart also argued that Mrs. Stuart should be covered under the insurance policy’s personal liability coverage, as the Nova Scotia Department of Environment required the remediation of the property, and Mrs. Stuart was therefore liable to the Department.

After examining the relevant law and legal principles, the Court concluded that the discovery rule should apply in this case. The Court then determined the point in time when the Stuarts either knew or should have known, through reasonable diligence, that the loss had occurred, and held that that moment was the autumn of 1998. Since the Stuarts initiated the legal proceedings in June 1999, they were not barred by the expiry of a contractual or statutory limitation period. The Court also held that the Stuarts’ personal liability claim could not succeed, as the Department of the Environment had not actually ordered them to carry out the remediation—they had taken it on in order to sell the house. With this in mind, the Court determined the extent of the policy coverage that the insurance company owed on the basis of the policy’s “Home Protection” provisions, and awarded that amount.

When Royal and Sun Alliance Insurance Company of Canada (Royal) appealed to the Nova Scotia Court of Appeal, the Court determined that the lower court had not erred in identifying and applying the relevant law and legal principles. The Court also held that the lower court had not made any “palpable and overriding” errors of fact, and so the appeal was dismissed.

To read about this case in the Supreme Court of Nova Scotia, go to Stuart & Stuart Trust v. Royal and Sun Alliance Ins. Co. of Canada, 2004 NSSC 58 (CanLII).

View the Decision on CanLII: https://www.canlii.org/en/ns/nsca/doc/2005/2005nsca6/2005nsca6.html

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