I am going to do a quick search, as I'm curious to see the fallout and legal repercussions of such an incident. 

@Ryan Fortier who did you go with after that incident?

She was advised of her options but nonetheless, I am seeing a pattern and want to nip it in the butt now.With that said, should I do the 3 day pay or quit form that will also set the standard for future incidents? 

One reason they won’t do this is simple;If you had a fire or other incident that caused repair costs of say $200k....that would be 90% of the insured value if insured for $226k and about 30% of the $650k.....while your rates are based on the insured value....not  good math for an insurance company.

I have had 3 incidents with different dogs before I swore them off for good.

The worst incident we had is when a doofus from next door cut his hand up badly smashing a window when his girlfriend locked him out. 

With a though understanding of how mortgages work in Canada, you'll find that, while different than south of the 49th, they are not really more risky (Canada has a far lower incident rate of mortgage arrears and defaults than in the U.S.A.)Our personal preference is to use 3-yr or 5-yr term variable rate financing {most of these have a cap or a right of conversion if the interest rates rise above a certain point).  

The umbrella will be more likely to protect your from a personal accident than a rental incident if you have only one property. 

So what happens if there is an incident (fire, for example) that originates in and/or harms someone in an illegal unit?

The idea of a gift card and a thank you for your patience note would be much appreciated - obviously, it was an accidental incident that wasn't your fault, but you still want to be courteous and have a trusting and respected relationship with your tenant!