Question:
In Ontario, is there a preclusion in the Title Insurance policy with respect to the insurer’s right of subrogation?
Answer:
In Ontario, there generally is no automatic statutory preclusion in a title insurance policy regarding the insurer’s right of subrogation but there are important legal and contractual limits that impact how (and if) such a right can be exercised.
1. Subrogation as an Insurance Doctrine
- Subrogation is a long-established feature of insurance law allowing an insurer that has indemnified an insured to “step into the shoes” of the insured and pursue recovery from a third party who caused the loss. This right can arise by contract (i.e., a subrogation clause) and under common law once the insured has been fully indemnified, otherwise the right to sue remains with the insured.
2. No Specific Ontario Statutory Ban for Title Insurance
- Ontario’s Insurance Act does not specifically preclude subrogation rights in title insurance policies. The Act regulates how title insurance contracts must be written and that insurers’ liability is limited to the amounts in the contract, but it does not contain language that automatically eliminates subrogation rights for title insurers generally.
3. Contractual Language Controls Subrogation Rights
- Any right of subrogation for a title insurer in Ontario will largely depend on the policy wording itself.
- Standard subrogation clauses in insurance contracts allow the insurer to pursue third parties once it has paid a claim.
- Conversely, an express waiver of subrogation clause, if included in the title policy or related agreement can preclude the insurer from pursuing certain subrogated claims (e.g., against specified parties).
4. Limits Under Common Law and Equity
- Even where a policy purports to give subrogation rights, Courts in Ontario will not allow an insurer to pursue subrogation against its own insureds or parties that are clearly protected by waiver provisions, unless there is clear and unambiguous contractual language to override the common law prohibition against claiming from one’s own insured.
5. Policy-Specific Waivers and Endorsements
- Title insurance policies sometimes contain endorsements or waivers that prevent the insurer from subrogating against certain classes of third parties. These can arise in commercial settings, construction contracts, or where insured and potential negligent parties have agreed in advance to waive subrogation as part of their contractual risk allocation.
- If such a waiver is included in the title insurance contract itself, that effectively precludes the insurer’s subrogation rights in accordance with the contractual terms.
6. Considerations
- No blanket statutory preclusion: Ontario law does not categorically bar subrogation in title insurance.
- Dependent on policy wording: The insurer’s right of subrogation arises (or is limited) based on what the title insurance policy says.
- Common law restraint: Courts will not permit subrogation against insured parties absent clear policy language.
- Contractual waivers matter: If the policy contains a waiver of subrogation or there is a separate contract with such a waiver, the insurer can be precluded from pursuing those subrogation rights.
Conclusion
In Ontario, there is no automatic statutory preclusion on subrogation in title insurance policies, but policy language and established legal principles may limit or bar an insurer’s ability to exercise subrogation rights, especially against insureds or where a waiver has been agreed. Always review the specific title policy wording to determine if subrogation is preserved or expressly waived.
A Landlord will want the Tenant to agree “to a waiver of subrogation”, otherwise, the Landlord will have to obtain their own policy of insurance in order to protect them, and then, they will add that cost to the Lease, meaning that the Tenant would pay twice.
Brian Madigan LL.B., Broker