Insurance Law – May 4

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  When insuring its own interest in the property, the hypothecary debtor also assumed a mandate to take out a separate and distinct contract of insurance to insure the hypothecary creditors' interest in the hypothecated property.  The insurers cannot refuse to honour this independent contract. The standard mortgage clause makes no distinction between acts and neglects of the hypothecary debtor committed at the inception of the policy, and acts and neglects subsequent to its formation. The insurance of the hypothecary creditors cannot, therefore, be invalidated by any act or neglect of the hypothecary debtor, be it at the inception of the policy, or subsequent to its formation. 
  
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  The ejusdem generis rule finds no application in the context of the standard mortgage clause (A rule of interpretation that where a class of things is followed by general wording that is not itself expansive, the general wording is usually restricted things of the same type as the listed items.) 
  
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  Additionally, insurance contracts must be interpreted as they would be understood by the average person applying for insurance, and not as they might be perceived by persons versed in the niceties of insurance law.  If the insurer were reserving to itself the right to invalidate the coverage of the hypothecary creditor as a result of some misrepresentations and omissions of the hypothecary debtor, it was incumbent on the insurer, in drafting its insurance form, to make this known in clear, express and easily intelligible terms.
  
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  Finally, while the hypothecary debtor is acting as the mandatary of the hypothecary creditor when it insures the hypothecary creditor's interest, it does not follow that any false representations made by the hypothecary debtor in effecting its mandate should be held to be those of the hypothecary creditor.  The law of mandate does not operate so as to have this effect in the context of the standard mortgage clause. 
  

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  The insurance clause in the hypothecary loan contract is a contract of mandate, by which the hypothecary debtor undertakes to insure the hypothecated property on behalf of his hypothecary creditor. Since the debtor was acting in accordance with his mandate by purchasing the hypothecary creditors' insurance contract, the misrepresentations he made at that time must be regarded, for the purposes of considering the validity of this contract, as misrepresentations made by the hypothecary creditors themselves. 
  
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  Furthermore, by application of the rule of interpretation noscitur a sociis or the ejusdem generis rule, we must therefore conclude that only misrepresentations subsequent to purchase are covered by the mortgage clause. 
  

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  what happens if it was at the beginning? Well if it never took effect, it never took effect…but we have two contracts here, technically.
  
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    So even if it is null ab initio, the contract is still valid with respective to the bank
    
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  Strong dissent by L’Heureux-Dube: if insured, via using the theory of the mandate, is representing the bank, then the bank contract should be void. You can’t have the representative acting for the bank when it’s to their favour and not when it’s not (the whole corporate veil thing: can’t lift it here and then not there; must apply it evenly across the board).
  
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  FCP (the appellant) has two insurance policies. One of them is with NH (Respondent). FCP rents an abbateuse from co. Abbateuse is completely destroyed when being used by FCP’s employee. FCP is bound to return the property in proper condition back to co. from whom they borrowed. NH is refusing to indemnify, claiming the action is prescribed (loss happened over 5 years ago).
  

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  What type of insurance did FCP have? (As prescription period all turns on this issue)
  
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    Was this insurance that protected objects that they owned (property insurance) or insurance that covered objects that they were responsible for (liability insurance)?
    
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  What was the intention of the parties concerning objects that didn’t belong to FCP but were under their control?
  
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  What was the intention of the parties concerning objects that had two insurance policies on them?
  

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  First, the clause No. 5 of the policy states that payments are made to the insured or to the order, while a liability insurance payment is a third victim of the fault of the insured. Second, the policy does not deal with the representation of the insured by the insurer, which would be an oversight if it were a liability insurance. Third, the policy covers the property owned by the insured, which are destroyed, making it a property insurance, qualification consistent with its title "Ancillary Property Insurance". In addition, it covers property not belonging to the insured property described as "real and personal property for which they are responsible where ever located.”
  
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  Holds that a clause by which a person insures an object that does not belong to them can be perfectly valid in QC, just need a direct and immediate interest in the object, 2580 CCLC
  
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    It is sufficient that the insured has a direct and immediate interest in the property. In the proceedings, the appellant has agreed to deliver the abbateuse in good condition after use. If they can’t do it, they will be prejudiced because it will have to be replaced. They are thus legally responsible.
    
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    This does not think this makes the policy liability insurance. It was insured only for the value of giving it back in a good state.
    
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  If it had been concluded that it was liability insurance, the amount could have exceeded the actual value of the abatteuse because the owner could have claimed on top of the value of the abatteuse loss of profits.
  
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  So the insurance does protect FCP to give it back in a good state, but not by claims made by third parties.
  
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  Thus, the insurance was property insurance and the prescription period has run.
  
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  Should be noted that FCP instituted this action 5 years after the loss of the abatteuse.
  
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  Must always look to what the intention of the parties was when drafting the contract“
  
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  2475 CCLC (2395 & 2396) insures against two types of damage. Property insurance and liability insurance.
  
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    CCQ does not prevent you from having both types of coverage.
    
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    This distinction is important in this case because if the type of insurance was for property, then the protection is prescribed.
    

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  Insurance interest is at the heart of the problem.
  

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  Thinks the main obstacle in qualifying the insurance as property insurance is claiming that FCP had a direct and immediate interest in the abatteuse. FCP did not own the property. Furthermore, the prejudice depends here on an intermediary factor (the other company instituting proceedings, i.e. the prejudice here depends on action by RM or Blackwood.)
  

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  However, insurable interest as a concept as evolved and 2483 CCQ recognizes explicitly that someone can insure the interest of a third party.
  
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  Insurance for the account of others was based on the stipulation for another and was a property insurance. Thus, the stipulation for another justifies, in this case, the qualification of the policy as property insurance.
  

Insurance can still qualify as property insurance even if one does not own the property and even though the indemnity will be used to compensate another party for the loss sustained.

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  what kind of insurance was in place?
  
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    was it liability insurance for an employee?
    
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  why do we care?
  
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    the way in which we classify and categorize insurance types/relationships affects the prescription period
    
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      in Smurfit, they were still within the time period in which they could make a liability claim, but outside the time limitation period in which they could make a property claim
      
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  two important clauses:
  
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    insurance will cover that which insured is responsible for
    
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    insurance will cover that for which the insured is legally liable
    
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      thus, probably wouldn't cover things like force majeure, since the insured couldn't generally be legally liable for such things
      
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    *courts were thrown off by these clauses
    
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  obligation on lessee was to return the property, thus, insurance was the force itself in order to protect that obligation
  
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  Dalphond concludes from the clauses that it was insurance on property, and thus the limitation period had expired - no ability to claim
  
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    property has a short limitation period because the insurer needs to be able to inspect it and verify the nature of the loss
    
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      more than 1 or 2 years means that the property has likely been destroyed or compromised
      
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  2nd aspect of the case relates to the presence of the 'legally liable' clause
  
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    court wants to figure out exactly what this means
    
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  if the insured is only legally liable, then again, force majeure damage/loss would not be covered
  
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    should such types of policies be subject to a narrow interpretation to limit what insurers are obliged to pay out?
    
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    one of the justices tried to bring it within a civil law context
    
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      concludes that there should be a wide interpretation to include even things like force majeure
      
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        gets his argument from CCQ 2483 - insurance that exists for the benefit of the owner
        

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  Accidental Death Benefit Provision: “the Company will pay the amount of the Accidental Death Benefit ... upon receipt of due proof that the Life Insured's death resulted directly, and independently of all other causes, from bodily injury effected solely through external, violent and accidental means ...”
  
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    Insurance policies must be interpreted in a way that gives effect to the reasonable expectations of the parties.
    
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    “Accidental means" conveys the idea that the consequences of the actions and events that produced death were unexpected. To ascertain whether a given means of death is "accidental", we must consider whether the consequences were expected.
    
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    This interpretation of death by accidental means accords with the ordinary meaning of the phrase. Death by accidental means is death that has been brought about unexpectedly — or that constitutes "an unlooked-for mishap or an untoward event which is not expected or designed".
    
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  The phrase “accidental means” in the insurance policy does not refer to a narrow subclass of the broader category of “accidental deaths”.  Both phrases connote a death that was in some sense unexpected. 
  
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  To determine whether death occurred by accidental means, it is necessary to look to the chain of events as a whole, and consider whether the insured expected death to be a consequence of his actions and circumstances. 
  
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  The central question is whether the insured expected to die. 
  
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  The circumstances of the death may point to the answer. 
  
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  The test does not change for cases involving conduct that brings with it a high risk of death; the test remains whether the death was designed or expected and is answered from the perspective of the insured.
  
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  The issue is not whether the activity was dangerous, or even whether death was likely, but whether the insured expected or intended to die.
  
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  The test for accident is essentially subjective, although to the extent the insured's actual intent is unknown, we must infer it from what a reasonable person in his or her position would have expected.
  
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  Dr. E did not expect to die but simply made a miscalculation concerning how much Demerol his body could tolerate. 
  

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  doctor addicted to opiates
  
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  in October 1996 he was in his second withdrawal program
  
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    he was working and doing well, but in a lot of pain
    
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    he never came home from his office that day
    
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      he was found dead the next day, having overdosed from demoral and an enhancing drug
      
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  insurance coverage would cover death by external, violent and accidental means
  
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    first question that the insurer would ask
    
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      did he commit suicide?
      
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        in common law, the default would be NO coverage (unless there was the 2 year clause excluding coverage for 2 years)
        
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        in civil law, the default would be coverage
        
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      facts do not indicate an intention to commit suicide
      
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        he was working, doing well, planning a vacation, etc.
        
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      he did overdose, but the death does not seem intentional
      
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        is there a way that we can interpret this series of events such that death is still the result of an accident?
        
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        ALL ACCIDENTS have some deliberate elements involved in their immediate causes
        
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          in this chain of events, did the insured expect death to be a consequence of his action?
          
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            if death was 'unlooked for', then it was an accident
            
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            the insurance coverage said that death had to be from accidental means
            
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              since he injected himself with demoral, the insurer argued that accidental means were not present
              
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              court rejected this argument
              
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        this case was important because it affirmed that you can still have an accident from a deliberate act of an insured, as long as there are unintended consequences
        
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          seems to draw on Saindon, where not only must the insured engage in intentional action, but also must intend the consequences that ensued
          
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      did the insured expect to die?
      
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        to answer this question, we initially apply a subjective test
        
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        however, if we cannot ascertain the expectation about this insured, then the court may consider whether a reasonable person in the position of this insured would have expected to die. (thus, we can draw on an objective test if necessary)
        
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          NOTE THAT COURT WANTS TO SAVE THE INSURANCE POLICY, SO THEY TRY TO WEIGH IN FAVOUR OF INSURED
          
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      amount of demoral that was injected was within the normal dose, but it seems that he miscalculated the amount of phenobarbitol (the demoral enhancer) in his system
      
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    various examples given of deliberate actions that give rise to the unexpected consequence of death
    
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    deliberate with unintended consequences = accident
    

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  guy balancing on railing of 13th floor balcony in a hotel
  
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  death ruled non-accidental by the trial judge
  
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  insurers, as in this case, can always narrow the scope of the contract by clause
  
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    they can define accident so as to limit some of these situations at the margins
    
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    there was a strong limitation clause in this case