Although temperatures in Ontario are still largely in the freezing range, we have already begun to see flooding when temperatures rise above zero, bringing significant rain and/or melting snow. Some neighbourhoods have had to be completely evacuated as rising waters have severely damaged homes and businesses, rendering some buildings unsafe or uninhabitable. With spring approaching, Ontario property owners may be assessing their flood risk and wondering if flood insurance would be a worthy investment. Below, we will outline how the risk of flooding can impact a property owner, and what you should know about flood insurance whether you already have coverage or are considering purchasing a policy.

Flood Risk can Impact Property Values

A recent article in the Globe & Mail estimates that approximately 10% of homes in Canada are considered to be in high flood-risk areas. What does this mean for a home’s value? According to a report published this month by the University of Waterloo’s Intact Centre on Climate Adaptation, homes in areas that have suffered catastrophic flooding can expect to see, on average, an 8.2% depreciation in value compared to nearby homes that have not experienced flooding. In addition, these homes are on the market for approximately 20% more days than homes in low-flood-risk areas. The study focused on five cities across Canada, including two in Ontario: Toronto and Burlington. The report also includes several recommendations to mitigate the risk of flooding and the impact on homeowners, including:

1. Providing better flood protection guidance to homeowners to help reduce the incidence of basement flooding.
2. Update geographical flood maps and make them easily accessible to the public.
3. Assign risk levels by postal code, similar to the system that currently exists in the U.S.
4. Commitment to restoring and retaining natural infrastructures such as grasslands, wetlands, and forests, to reduce future flood risk.

The Insurance Bureau of Canada issued a statement on the report from Craig Stewart, VP of Federal Affairs, about the need to shore up insurance options related to flooding for high-risk property owners:

We agree with the six recommendations in the report for action on limiting flood risk. However, we would add one more – create a high-risk insurance pool as a priority outcome of the federal Task Force on Flood Insurance and Relocation. IBC continues to advocate to governments at all levels on the urgent need to do more to prioritize investments that build resilience and better protect our families and communities. Today, as we face the challenge of adapting to a changing climate, flooding poses the highest risk to homeowners. If homeowners are able to transfer risk through an affordable flood insurance program, their home values should be better protected.

The impact of flood risk on homeowners has already resulted in a near one-billion-dollar class-action lawsuit, with the residents of one suburban GTA neighbourhood launching a class proceeding against the towns of both Oakville and Milton, the Mayor of Oakville, Conservation Halton, Halton Region, and the provincial government. The claim, launched in 2020 and still ongoing, alleges that overdevelopment has led to an increased strain on the local stormwater management system which in turn has expanded the flood plain area. Homes that were not in a flood plain at the time of purchase, now are, resulting in lower property values and increased restrictions on property modifications. The claim alleges that the defendants knew about the potential impact of increased development in the area and proceeded anyway. However, others say that it will be difficult to prove whether the changes can be attributed to development or climate change.

What You Need to Know About Flood Risk and Insurance

First and foremost, it is important to know that most homeowners’ insurance policies do not include coverage for flood damage resulting from rain or snowmelt, otherwise known as overland flooding. While water damage from a burst pipe may be covered under a standard comprehensive policy, it is unlikely that catastrophic flooding described above would be included in an average policy.

Overland coverage is a relatively new concept in Canada, and something most homeowners may not be aware of. Whether flood insurance is necessary will largely depend on the risk level where the property is located. Insurers each maintain their own flood maps to assess risk and may deny coverage for properties deemed to be in high-risk areas. This is something a person may want to consider when deciding where to buy.

Free services are also available to homeowners and purchasers to help them assess their level of risk. FloodSmart Canada is a University of Waterloo resource which has an online database that can be searched by province to gain an understanding of flood risk by region. Keep in mind these resources may not be verified, so contacting your insurer will be the most accurate way to gauge your specific insurance needs.

Contact Milosevic & Associates For Exceptional Legal Representation in Insurance Related Matters 

The highly-experienced Toronto insurance lawyers at Milosevic & Associates represent clients with insurance-related legal issues. We understand the importance of swift, resourceful action where insurance matters are involved. We can act quickly to protect our clients and help ensure that they receive maximum compensation for their injuries or harm suffered. We are experienced litigators who can represent clients in litigation before all levels of court in the province, and we often provide skilled class action defence for mid and large-sized organizations. To learn more about how we can help you call us at 416-916-1387 or contact us online.