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Insurance - Interpretation of Policy

MacDonald v. Chicago Title Insurance Company of Canada (Ont CA, 2015)

In this case the Court of Appeal recited principles of interpretation applicable to insurance contracts:
[66] The following principles of interpretation for insurance contracts cited by the appellants in their factum are well settled in Canadian law and are not disputed by Chicago Title:

• The court must search for an interpretation from the whole of the contract and any relevant surrounding circumstances that promotes the true intent and reasonable expectations of the parties at the time of entry into the contract;

• Where words are capable of two or more meanings, the meaning that is more reasonable in promoting the intention of the parties will be selected;

• Ambiguities will be construed against the insurer having regard to the reasonable expectations of the parties;

• An interpretation that will result in either a windfall to the insurer or an unanticipated recovery to the insured is to be avoided;

• Coverage provisions are to be construed broadly, while exclusion clauses are to be construed narrowly;

• The contract of insurance should be interpreted to promote a reasonable commercial result; and

• A clause should not be given effect if to do so would nullify the coverage provided by the policy.

See e.g. Amos v. Insurance Corp. of British Columbia, 1995 CanLII 66 (SCC), [1995] 3 S.C.R. 405, at para. 19; Non-Marine Underwriters, Lloyd’s London v. Scalera, 2000 SCC 24 (CanLII), [2000] 1 S.C.R. 551, at paras. 67-71; Derksen v. 539938 Ontario Ltd., 2001 SCC 72 (CanLII), [2001] 3 S.C.R. 398, at para. 49; Zurich Insurance Co. v. 686234 Ontario Ltd. (2002), 2002 CanLII 33365 (ON CA), 62 O.R. (3d) 447 (C.A.), leave to appeal refused, 189 O.A.C. 197 (note), at paras. 23-28; Tannahill v. Lanark Mutual Insurance Co., 2010 ONSC 3623 (CanLII), 86 C.C.L.I. (4th) 69, at para. 26; and, Sam’s Auto Wrecking Co. v. Lombard General Insurance Co. of Canada, 2013 ONCA 186 (CanLII), 114 O.R. (3d) 730, at para. 37.

[67] Responsible consumers purchase insurance policies for indemnification. Canadian courts have developed these fundamental principles of interpretation as a means of ensuring that these consumers are treated fairly and that their reasonable expectations are protected. The principles are to be applied rigorously in the interpretation of insurance contracts. It is not sufficient, as the motion judge did in this case, to cite the principles and then move on to an interpretation of a contract of insurance that is free from any analysis of how the principles apply to the contract in issue.

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