On January 30, 2026, the Supreme Court of Canada released its decision in Emond v. Trillium Mutual Insurance Co., 2026 SCC 3. At its core, the case is about contract interpretation, specifically, how courts should interpret insurance policies where a coverage-enhancing endorsement appears to conflict with an exclusion.

Background

The insured homeowners’ property, located along the Ottawa River within the jurisdiction of the Mississippi Valley Conservation Authority (“MVCA”), was destroyed by flooding in 2019. While Trillium accepted that the loss was covered, the parties disagreed on the scope of coverage for rebuilding costs.

Reconstruction triggered additional regulatory requirements imposed by the MVCA, significantly increasing costs. The insureds argued the Guaranteed Rebuilding Cost (“GRC”) endorsement guaranteed full rebuilding. Trillium relied on the compliance cost exclusion, maintaining that regulatory compliance costs were not covered beyond the policy’s $10,000 by-law coverage.

The Policy Provisions in Issue

The dispute required the Court to interpret how three provisions operated together:

• the Guaranteed Rebuilding Cost (“GRC”) endorsement, which removes the policy’s monetary limit for covered rebuilding losses;
• the Compliance Cost Exclusion, which was removed from coverage, increased costs caused by laws regulating construction; and
• the Building By-Law and Code Compliance (“BBCC”) coverage, which restored limited coverage for those otherwise excluded costs, capped at $10,000.

Ontario Court of Appeal

The application judge held that the GRC effectively required Trillium to cover the full cost of regulatory compliance.

The Ontario Court of Appeal disagreed. It emphasized that the policy must be read as a whole and that no single endorsement can be interpreted in isolation. When the provisions were read together, the Court concluded that the GRC removed the monetary cap on covered losses but did not displace the exclusion defining what losses were covered. In other words, the GRC increased the amount payable for covered losses but did not expand the types of losses covered, a distinction that became central to the SCC’s analysis.

Supreme Court of Canada

The SCC dismissed the appeal and largely endorsed the Court of Appeal’s interpretive framework.

Insurance policies must be read as a whole

Justice Rowe reaffirmed the established approach to interpreting insurance contracts, namely that courts must:

• give effect to clear policy language;
• read the contract as a whole and in a harmonious manner; and
• avoid interpreting provisions in isolation.

The Court stressed that endorsements form part of the overall policy and must be interpreted within that integrated framework.

The SCC also confirmed that overlapping provisions or competing interpretations do not, on their own, create ambiguity. Ambiguity arises only where the policy, read as a whole, reasonably supports more than one meaning.

Applying a whole-policy reading, the majority found no ambiguity. Justice Rowe rejected an isolated reading of the GRC and held that, when read harmoniously with the exclusion, the endorsement removed the monetary cap but did not create coverage for regulatory compliance costs. The compliance cost exclusion, therefore, continued to apply, subject only to the $10,000 BBCC carve-out.

The insureds argued that enforcing the exclusion would nullify the GRC endorsement.

The Court disagreed and confined the nullification doctrine to narrow circumstances where coverage would be effectively eliminated. Because the GRC still provided meaningful benefit (removal of the policy limit for covered losses), the doctrine was not engaged.

Conclusion

Emond reaffirms a disciplined contract interpretation: the SCC confirmed that insurance policies must be read as a whole and that endorsements cannot be interpreted in isolation.

With contracts, especially insurance policies, becoming more complex with multiple endorsements and exclusions, courts will need to use these guidelines when resolving conflicts between the insured and insurer.