After 24 years with the same insurance company, Elizabeth Kimball wasn't expecting the news she got this summer -- Royal Sun Alliance was cancelling the policy on her 100-year-old Toronto house. Thinking it had to be a mistake, Ms. Kimball called her agent. There was no mistake.
When Ms. Kimball asked where she might go to find another policy, her agent replied, "You might want to look in the Yellow Pages."
After weeks of scrambling, Ms. Kimball finally found another policy. The cost was $1,886 -- an increase of more than 450 per cent over last year's premium. "I'm not very happy about it," says the 91-year-old pensioner. "The whole thing seems ridiculous."
She is not alone in her home-insurance woes. Across Toronto, the owners and would-be owners of older homes are running into unprecedented resistance from insurers. Many are finding it nearly impossible to get insurance at all, unless they are willing to pay for costly upgrades to their homes.
Lawyer Shaheen Hirani and her husband came up against this when they bought their first home, an older semi-detached house in Toronto's east end. To get insurance, they had to agree to replace the entire wiring system. "There wasn't much we could do about it," Ms. Hirani says. "We have to have insurance, and that's the only way we could get it."
For the downtown Toronto real-estate market, which is largely driven by sales of older homes, the house-insurance problem has emerged as the new deal breaker.
"The whole situation is ridiculous," says Conrad LeDrew, an agent with Re/Max Hallmark Realty. "Buyers and agents are being held hostage by all this."
Mr. LeDrew says many of his clients are now finding themselves in a new kind of Catch-22: In a sellers' market, they're often forced to make an unconditional offer, then find it impossible to get house insurance -- and without insurance, they can't get a mortgage.
Mr. LeDrew's own home policy was cancelled recently after the insurance company said it was not willing to underwrite homes with knob and tube wiring, common in homes built before 1950. Mr. LeDrew finally got a new policy after calling in inspectors who confirmed that his wiring was safe.
Royal LePage agent Julie Kinnear, who specializes in neighbourhoods such as High Park and Bloor West Village, says the availability of insurance has become the driving factor in many deals. "We're getting to the point where there's major panic among home buyers. Deals are falling apart all the time."
Ms. Kinnear said the single biggest objection from insurance companies is the wiring in older homes: "When it comes to old houses with knob and tube wiring, 90 per cent of the insurance companies are just flat out refusing now. It's putting a lot of pressure on people."
One of Ms. Kinnear's clients was recently told that she couldn't get insurance unless she got an engineering report that proved that less than 15 per cent of the wiring in the house she wanted to buy was knob and tube. Ms. Kinnear objects to the attitude displayed by insurers: "I don't think the risks they're citing are real," she says. "You don't see old houses burning down because of knob and tube wiring."
Paul Armstrong, an insurance broker who used to work with one of the largest insurance firms in Canada, says the reluctance to insure older houses is part of a general business chill produced by Sept. 11 and poor stock market returns. "Insurance companies are hurting, and they want to get out of whatever they can," he says. "If they can find a way to say no, they will. . . . If they take on any new business, they want it to be for houses that are built to modern code."
Knob and tube wiring isn't the only thing that scares insurers away from old houses. Other sore points include aging pipes that can cause costly floods, leaking roofs, crumbling outbuildings and bad foundations. One insurance company found itself on the hook after a waterproofing contractor excavated between two old downtown homes to put in weeping tiles. The foundations of both houses buckled when the earth was removed, causing massive structural damage that cost nearly $500,000 to fix.
But even that case pales next to the one that stands as the ultimate home-insurance nightmare: the Hyndman oil tank disaster. Several years ago in Belleville, Ont., an oil truck showed up to fill the basement tank of homeowner Bill Hyndman. The driver put the nozzle in the filler, then waited. As the oil ran into the aging tank, one of its legs collapsed. By the time the driver realized what was happening, the basement was awash in oil.
The cleanup turned into an Exxon Valdez-style debacle. The insurance company paid to jackhammer out the basement, only to discover that the oil had contaminated the surrounding soil, forcing it to pay for a massive environmental cleanup. The costs eventually ran to more than $1-million.
Marcel Besner of Besner Home Inspections says he now makes it a habit to tell clients to check with an insurance company before making an offer on a house: "That's what you have to do now. It's getting to be a real problem."
Home inspector Peter Yeates, who has spent much of his 20-year career examining older Toronto homes, says several of his clients have found themselves stranded, unable to get insurance in time to close a deal. Mr. Yeates thinks that insurance companies are wrong to suggest that older homes represent a higher risk. "I don't think there's any evidence to support that. I see a lot of new homes that aren't good risks, and people tend to think of them as disposable, which makes it even worse. By the time these houses are 12 years old, some of them are almost tear-downs."
Bob Aaron, a Toronto real-estate lawyer, said it's now commonplace for insurers to demand "signed-in-blood" commitments from buyers to replace aging wiring, under threat of losing their coverage. "Insurers are in business to take risks, but they don't seem to recognize that any more."