Insurance Law – May 4


Questions relating to the Homeowner’s Policy with Intact



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Questions relating to the Homeowner’s Policy with Intact.


  • Questions you think your insurer would have asked you prior to giving you this policy:

      • Review of CCQ 2408. The client, and the insured if the insurer requires it, is bound to represent all the facts known to him which are likely to materially influence an insurer in the setting of the premium, the appraisal of the risk or the decision to cover it, but he is not bound to represent facts that the insurer knows or is presumed to know because of their notoriety, except in answer to inquiries.

      • Insurers are particularly interested in statements of previous losses

  • You have to inform the insurer as soon as you know of the loss – utmost good faith

  • Avenant = rider (endorsements)

      • You pay extra for this

Try to answer them, justifying with reference to the policy where possible.




  1. Typical early summer question: Am I covered for back up (refoulement) of the sewer into the basement after a heavy rainfall? (need to look in two places in the Policy).

    1. P. 6 likely not covered: 9.2 + 16.3

    2. However, p. 14 includes it. this is an endorsement

  2. My waterbed burst and the water soaked through the ceiling. Will I be indemnified?

    1. P. 4 biens meuble - Yes

    2. 9.3 p. 6 would exclude

  3. Thieves broke into the house on a day when I was at work and stole the diamond and sapphire ring I inherited from my grandmother (a valuation from Birks done 10 years ago appraised it at $5000) and a painting by A.Y. Jackson (appraised by an art expert on June 3 2009 at $15,000). i) are these losses covered? Any limitations ? ii) how will they be valued? (valeur au jour du sinistre ou valeur de remplacement?)

    1. Jewelry capped at 4K valeur de remplacement; painting : valeur au jour, capped at 10K (p. 4, 8)

    2. Limits in 2.2 up to 4K, limit in 2.8 up to 10K

    3. 3.2 : valuer a neuf does not apply to painting

    4. To have had full protection here, should’ve taken out a rider that would be a valued policy (establishes in advance how much certain items are worth) or a replacement value policy

  4. In the situation above, I also claim the loss of a mink coat, declaring its value to be $3500. I have no receipt or photograph. I also claim the costs of considerable repair to the floor and walls of the house where the robbers lit a bonfire and roasted marshmallows. The insurer discovers that not only can I not prove the value of the coat, but that I never had one. (Hint 2472 CCQ)

    1. 2472. Any deceitful representation entails the loss of the right of the person making it to any indemnity for the risk to which the representation relates. However, if the occurrence of the risk insured against has entailed the loss of both movable and immovable property or of both property for occupational use and personal property, forfeiture is incurred only with respect to the class of property to which the representation relates.

    2. What do we mean by risk?

      1. Here: Theft and damage from fire.

      2. Deceitful representation of one of the items would generate the forfeiture of the indemnity for anything in that class

  5. Is there a mortgage clause?



  6. Find the defence clause (can only be for liability coverage)

    1. P.10, art. 4

  7. My daughter, who lives elsewhere, and has her own Tenant’s property and liability insurance, accidentally caused a fire in my kitchen. My insurer has indemnified me, and now wants to take an action in subrogation against her liability insurer. Can it? (Hint: 2501-3, 2474 (2) CCQ).

    1. Not a member of the household. Can be sued.

  8. Typical winter scenario:

I went to Florida for four days (Mon-Thurs) in February. The weather here was -15C or colder. I left the heat on at 10C, but a burner on the furnace malfunctioned on Monday, and by Tuesday morning the pipes had frozen. I had arranged with my neighbour to come in every day and she called the furnace company to fix the burner, which was done by Wednesday morning. The pipes had burst in several places when frozen, and as the ice defrosted, the water shot out and caused extensive damage. Am I covered?

    1. Yes, likely covered, p. 6, re: 9.3

  1. i) if I hit someone on the green with my golf cart, is my liability covered?

    1. P. 10, 7.3.2

ii) find the ‘auto’ exclusion similar to the one in Djepic v Kuperovic

exclusion on p. 9, 1.2


Public Insurance Regime



Insurance Law – May 21


  • Exam will be one essay, one fact pattern, one set of short answer questions

      • Fact pattern dense, but hints given in the names




  • liability insurance and timing of the pleadings

  • liability insurance can be for liability arising out of contract or extra-contractual

  • proceeds are to be used exclusively to indemnify the victim

      • public order provision

  • 2498. Civil liability, whether contractual or extracontractual, may be the subject of a contract of insurance.

  • 2500. The proceeds of the insurance are applied exclusively to the payment of injured third persons.

  • 2501. An injured third person may bring an action directly against the insured or against the insurer, or against both; the option chosen in that regard by the injured third person does not deprive him of his other recourses.

      • This article reduces the amount of litigation overall

  • 2502. The insurer may set up against the injured third person any grounds he could have invoked against the insured at the time of the loss, but not grounds pertaining to facts that occurred after the loss; the insurer has a right of action against the insured with respect to facts that occurred after the loss.

      • Things about formation, declaration of risk at formation, things in the course of the policy not revealed (like material change), something in control of the insured, and intentional fault of the insured

      • After the loss: insured must notify the insurer right after the loss. If the insured fails to do this promptly, insurer can use this to resist indemnity. But according to this article, cannot against third party.

  • 2503. The insurer is bound to take up the interest of any person entitled to the benefit of the insurance and assume his defence in any action brought against him; Costs and expenses resulting from actions against the insured, including those of the defence, and interest on the proceeds of the insurance are borne by the insurer over and above the proceeds of the insurance.




Nichols v American Home [1990] 1 S.C.R. 801 – CML

Liability Insurance – Duty to defend

Facts: An action alleging fraud was commenced by a Bank against the respondent. The respondent gave notice of the suit to the appellant insurance company, which had issued a liability policy to the Law Society on behalf of its members. The insurer denied any obligation to defend the respondent in view of the exclusion clause, which provided that the policy did not apply to fraudulent acts or omissions of an insured.  The Bank later discontinued its action, and costs were awarded to the respondent on a partyandparty scale.  The respondent claimed the balance of his costs (unrecovered balance of the cost of his defence) from the insurer, which refused to pay. 

Issue: (1) Whether insurer under a duty to defend insured when policy not applying to fraudulent acts – (2) Whether obligation to defend governed by pleadings or by facts as they emerge at trial.

Held: No. By pleadings.

Reasoning:

  • Under the policy, the insurer was under no duty to defend the insured. 

  • The duty to defend imposed by the defence clause is unambiguously restricted to claims for damages which fall within the scope of the policy. 

  • Since the only damages sought against the insured in this case were on account of fraudulent acts or omissions, and such damages are not payable under the policy, the defence clause did not apply. 

  • The duty to defend, while broader than the duty to indemnify, is not so broad that it arises with respect to allegations which are clearly beyond the scope of the policy.

  • General principles relating to the construction of insurance contracts support the conclusion that the duty to defend arises only where the pleadings raise claims which would be payable under the agreement to indemnify in the insurance contract. 

      • It is not necessary to prove that the obligation to indemnify will in fact arise in order to trigger the duty to defend; the mere possibility that a claim within the policy may succeed suffices. 

Ratio: (1) The duty to defend does not cover allegations not covered in the policy. (2) Assessing whether obligation to defend arises is assessed only at the pleading stage and if they raise claims which would be payable under the policy.
Class Notes


  • this case has been incorporated into QC law by Boreal Assurance

  • Nichols was a lawyer accused of fraud by a bank. He had professional liability insurance w/ respect to 3rd parties. Bank sues, but then discontinues action. N claims liability insurance in cost of defending himself against bank.

  • Policy has an exclusion: policy does not apply to dishonest, fraudulent, criminal, malicious act on part of the insured

  • Question becomes: does this exclusion clause only to actual acts of fraud that have to be proven, or to allegations of fraud as well?

  • Court says no, and states that the policy is clear. There’s a statement that the duty of defend is only triggered where the lawsuit contains of a loss or damage which are or maybe payable under the policy. Thus, fraud would never trigger any damages payable under the policy.

  • The duty to defend is only triggered if there is a possibility that the allegations, if proven, and the damages were to be payable under the policy, will the defense clause be triggered.

  • Exclusion clause refers to duty to indemnify. Scope of the duty to indemnify triggers duty to defend.




Non-Marine Underwriters v. Scalera [2000] 1 S.C.R. 557 - CML

Homeowner’s insurance – Insurer’s duty to defend

Facts: In 1996, a plaintiff brought a civil action against five B.C. Transit bus drivers, including the appellant, arising out of various alleged sexual assaults between 1988 and 1992.  The allegations included battery, negligent battery, negligent misrepresentation and breach of fiduciary duty.  The appellant owned a homeowner’s insurance policy issued by the respondent insurer.  The policy provided coverage for “compensatory damage because of bodily injury” arising from the insured’s personal actions, excepting “bodily injury or property damage caused by any intentional or criminal act”. 

Issue: Whether insurer has a duty to defend in this case even though policy contains exclusion for intentional acts of insured.

Held: No.

Reasoning:

Majority:

  • The plaintiff’s claims could not trigger coverage under the policy.  Accordingly, the respondent has no duty to defend. 

  • The exclusion clause in the policy must be interpreted as requiring an intent to injure.  Where there is an allegation of sexual battery, courts will conclude as a matter of legal inference that the defendant intended harm for the purpose of construing exemptions of insurance coverage for intentional injury.

Concurring (important):

  • The respondent has no duty to defend the appellant because the plaintiff’s statement of claim makes no allegation that could potentially give rise to indemnity under the insurance contract.

      • Therefore, if an insurance policy, like the one in this case, excludes liability arising from intentionally caused injuries, there will be no duty to defend actions based on such injuries.

  • A three-step process must be applied to determine whether a claim could trigger indemnity:

      • (1) A court should determine which of the plaintiff’s legal allegations are properly pleaded.  In doing so, courts are not bound by the legal labels chosen by the plaintiff.  The Courts must decide on the substance of the allegations contained in the pleadings

      • (2) The court should determine if any claims are entirely derivative in nature.

        • The duty to defend will not be triggered simply because a claim can be cast in terms of both negligence and intentional tort.  A claim for negligence will not be derivative if the underlying elements of the negligence and of the intentional tort are sufficiently disparate to render the two claims unrelated.  However, if both the negligence and intentional tort claims arise from the same actions and cause the same harm, the negligence claim is derivative, and it will be subsumed into the intentional tort for the purposes of the exclusion clause analysis.  If neither claim is derivative, the claim of negligence will survive and the duty to defend will apply. 

      • (3) The court must decide whether any of the properly pleaded, non-derivative claims could potentially trigger the insurer’s duty to defend. 

  • Sexual battery requires the plaintiff to prove that a reasonable person should have known that the plaintiff did not validly consent to the sexual activity in question.  Since nonconsensual sexual activity is inherently harmful, any injuries resulting therefrom are intentionally caused, and the exclusion clause would apply. 

  • The plaintiff’s claims of negligence and breach of fiduciary duty are either not properly pleaded or are subsumed into the sexual battery because these claims are based on the same facts and resulted in the same harm.  Therefore the exclusion clause applies equally to them. 

      • Thus, there being no potentially indemnifiable claim, the respondent has no duty to defend.

Ratio: To determine whether the duty to defend is triggered, one must look to see if the claim is potentially indemnifiable. In order to determine this, refer to the three-part test set out by Iacobucci. (2) Where there is an allegation of sexual battery, courts will conclude as a matter of legal inference that the defendant intended harm for the purpose of construing exemptions of insurance coverage for intentional injury.

Class Notes


  • Scalera, Sansalone = defendants

  • Being civilly sued by Plaintiff claiming bus drivers (defendants) sexually assaulted plaintiff

  • The defendants went to their liability insurer. Liability insurer denied coverage of duty to defend because it’s bodily injury tied to a criminal act.

  • However, there were allegations of negligence.

  • Courts said you can’t look at a set of facts that show them to be intentional or criminal to make a “derivative claim”

      • You can’t use the same exact things on the one hand use them to prove an intentional criminal act and also call them negligent

  • If you have to examine what the substance of the claim is, ask which of the plaintiff’s allegations are properly pleaded? You look beyond the words of the substance of the allegation to determine what is pleaded.

  • This case sets out test in determining what is being pleaded




  • In QC, Wellington motion:

      • While the obligation to defend is clearly set out in the Civil Code of Quebec (L.Q., 1991, c. 64) at Article 2503, the "Wellington" motion goes a step further, allowing the insured to immediately demand that the insurer act upon this obligation and, in addition, immediately reimburse any expenses already incurred.

      • The theory behind the "Wellington" motion is largely based on the premise that the obligation to defend is far broader than the obligation to indemnify; the first resting on simple allegations while the latter rests on proven facts. As outlined in Nichols, the obligation to defend exists when, following a prima facie review of the allegations, it appears that the acts or omissions are covered by the policy. The obligation to indemnify, on the other hand, exists only when such acts or omissions are proven.

      • Reference: lexology.com

  • How far can you go assessing the true nature of the claim / allegation and eliminating any derivative claims (such as the whiffs of negligence potentially claimed)

      • Can you go to extrinsic evidence?

        • Courts have said it is possible to look at extrinsic evidence

        • Extrinsic evidence can also be consulted to ascertain the true nature of the claim at the preliminary allegation stage

  • What about a situation where the insurer is not obliged to defend, but is then is called upon to indemnify?

Hector Hoyos v Chubb Assurances [2008] QCCA 1296 - CVL

Liability insurance – duty to defend – prima facie intentional fault of the accused negated at trial

Facts: H is owner of property in QC and is insured for property and liability by the respondents, which contained an exclusion for intentional faults by the insured. A visitor was injured at his QC residence. She pursued a case in front of an American tribunal, alleging that the suffered the injuries while being a victim of a sexual assault by H. H successfully denied sexual assault. Now is claiming reimbursement for lawyer fees and the indemnity paid out to the victim.

Issue: Is the insurer liable to pay the indemnity? Is the insurer liable to pay defense costs retroactively?

Held:

Reasoning:

  • firstly, the principles of CML from Nichols have been adopted into CVL through Boreal Assurances and are interpreted through CCQ 2503 (duty to defend article)

  • the TJ in this case erred in accepting the motion to dismiss and thus saying that the insurer had no obligation to defend or to indemnify. She mingled the obligations to defend and to indemnify.

  • The obligation to defend depends on allegations which could be covered by the insurance contract, whereas the obligation to indemnify is given birth if the alleged acts are proven.

  • If prima facie duty to defend arises, the insurer is not liable to pay indemnity if it is shown that the actions of the insured really fall under an exclusion clause.

  • In the current case, the situation is inversed. In any case, if the insurer does not have an obligation to defend does not make it impossible for them to have an obligation to indemnify if the insured can show that the injury sustained by the victim was the result of an accident not an intentional fault.

  • Therefore, the case should go back to the Superior court to allow the insured to demonstrate this.

Ratio: the lack of a duty to defend does not eliminate the duty to indemnify if insured shows that his actions fall under policy coverage.
Class Notes


  • madam suffers injury to her arm while visiting Mr. Hoyos at his country place in QC.

  • Hoyos informs his 3rd party liability insurer

  • Year later allegation of sexual assault happening in the context of this injury

  • There is a settlement; no admission of responsibility, aggression, or sexual assault, etc.

  • After settlement is concluded, Hoyos goes to liability insurer requesting reimbursement

  • Can the insurer be liable?

  • Would the obligation to defend be triggered retroactively?

      • CoA didn’t really deal or conclude this issue. No outcome given.

  • CoA has kept the possibility of indemnity under the policy alive, however.

      • i.e. if no duty to defend, but case concludes on an allegation covered under the policy.



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