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I am sorry to hear of this difficult situation.
If the city inspectors will not assist you then your next step is to either send a demand letter yourself or have a lawyer send a demand letter to the neighbours for you. The letter will demand that the neighbours rectify the situation at once by using the proper installation and threaten a lawsuit for damages, for an order requiring them to insulate properly and for your legal costs.
Let me know if you need any further clarification.
You can only make the city liable if the neighbour breached a bylaw or zoning requirement and the city allowed it.