Interpretation. MacDonald v. Chicago Title Insurance Company of Canada
In MacDonald v. Chicago Title Insurance Company of Canada (Ont CA, 2015) the Court of Appeal recited principles of interpretation applicable to insurance contracts:
 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:. Sabean v. Portage La Prairie Mutual Insurance Co.
• 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),  3 S.C.R. 405, at para. 19; Non-Marine Underwriters, Lloyd’s London v. Scalera, 2000 SCC 24 (CanLII),  1 S.C.R. 551, at paras. 67-71; Derksen v. 539938 Ontario Ltd., 2001 SCC 72 (CanLII),  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.
 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.
In Sabean v. Portage La Prairie Mutual Insurance Co. (SCC, 2017) the Supreme Court of Canada succinctly states basic principles of interpretation of standard-form insurance contracts:
 In Ledcor Construction Ltd. v. Northbridge Indemnity Insurance Co., 2016 SCC 37 (CanLII), this Court confirmed the principles of contract interpretation applicable to standard form insurance contracts. The overriding principle is that where the language of the disputed clause is unambiguous, reading the contract as a whole, effect should be given to that clear language: Ledcor, at para. 49; Progressive Homes Ltd. v. Lombard General Insurance Co. of Canada, 2010 SCC 33 (CanLII),  2 S.C.R. 245, at para. 22; Non-Marine Underwriters, Lloyd’s of London v. Scalera, 2000 SCC 24 (CanLII),  1 S.C.R. 551, at para. 71. Only where the disputed language in the policy is found to be ambiguous, should general rules of contract construction be employed to resolve that ambiguity: Ledcor, at para. 50. Finally, if these general rules of construction fail to resolve the ambiguity, courts will construe the contract contra proferentem, and interpret coverage provisions broadly and exclusion clauses narrowly: Ledcor, at para. 51.. OSPCA v. The Sovereign General Insurance Company
 At the first step of the analysis for standard form contracts of insurance, the words used must be given their ordinary meaning, “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”: Co-operators Life Insurance Co. v. Gibbens, 2009 SCC 59 (CanLII),  3 S.C.R. 605, at para. 21; see also Ledcor, at para. 27.
In OSPCA v. The Sovereign General Insurance Company (Ont Sup Ct, 2014) the court set out the interpretive "fortuity principle" of insurance law:
 Sovereign submits that it is a well-established principle of insurance law that liability policies generally only cover losses from fortuitous events (accidental or unforeseen occurrences): Non-Marine Underwriters, Lloyd’s of London v. Scalera, 2000 S.C.C. 24 at paras. 68 and 69. The allegations against the OSPCA in the three contested claims allege that agents of the OSPCA willfully violated the law, intentionally violated the rights of the plaintiffs and/or intentionally caused them harm. Sovereign’s position is that not only are these allegations expressly excluded by the Sovereign Policy, they are also uninsurable in law.. Carter v. Intact Insurance Company
 Sovereign relies on the Ontario Court of Appeal decision of Liberty Mutual Insurance Co. v. Hollinger Inc., 2004 CanLII 10995 (ON CA), 2004 CanLII 10995 (ONCA), which applied the fortuity principle in the context of intentional torts and determined that there was no duty on the insurer to defend a claim for intentional discrimination. The Court recognized that for the purposes of insurance law, a distinction should be drawn between intentional conduct that results in unintended harm, and conduct where the kind of harm or loss was intended from the standpoint of the insured. The fortuity principle, as a matter of law, prevents an insured from recovering where the actual harm alleged was intended by the insurer.
In Carter v. Intact Insurance Company (Ont CA, 2016) the Court of Appeal sets out basic principles of interpreting insurance contracts:
 The guiding principles for interpreting insurance policies are well established, and were concisely summarized by Rothstein J. in Progressive Homes Ltd. v. Lombard General Insurance Co. of Canada, 2010 SCC 33 (CanLII),  2 S.C.R. 245, at paras. 21-24.. OSPCA v. Sovereign General Insurance Company (Ont CA, 2015)
 An insurance policy is a contract, and the primary goal of contract interpretation is to give effect to the intention of the parties. If the policy provision in question is unambiguous, the court gives effect to the parties’ intention by giving effect to the provision’s plain and ordinary meaning. In doing so, and as interpretive aids, the court should take into account the provisions of the policy as a whole, the surrounding circumstances and the “commercial atmosphere” in which the insurance policy was contracted for, and the general purpose of insurance: see Consolidated Bathurst Export Ltd. v. Mutual Boiler & Machinery Insurance Co., 1979 CanLII 10 (SCC),  1 S.C.R. 888, at para. 26.
 If the provision is ambiguous – that is, it is reasonably capable of more than one meaning – then the court applies the following rules: it should prefer an interpretation that is consistent with the reasonable expectations of the parties, as long as that interpretation can be supported by the text of the policy; it should avoid an interpretation that would give rise to an unrealistic result or that would not have been contemplated by the parties at the time the policy was contracted for; and it should strive for an interpretation that is consistent with similar provisions in other insurance policies.
 If the rules for resolving ambiguity are inadequate, then the court should interpret the provision contra proferentem, “against the offeror” – that is against the party who drafted the policy, the insurer. In applying the rule of contra proferentem, courts should construe coverage provisions broadly and exclusion provisions narrowly.
In OSPCA v. Sovereign General Insurance Company (Ont CA, 2015) the Court of Appeal considered the basic principles applicable to the fortuity principle' (that intentionally-caused harm is not implicitly covered by liability insurance):
(ii) Fortuity Principle
 The fortuity principle serves as an interpretive aid. It is a “general principle of insurance law that arises from the very nature and purpose of insurance, namely, that ordinarily only fortuitous or contingent losses are covered by a liability policy”: Hollinger, at para. 16. The principle is based on the notion that insurance makes economic sense where losses are unforeseen or accidental and that it would be undesirable to encourage people to injure others intentionally by indemnifying them for the civil consequences: Non-Marine Underwriters, Lloyd’s of London v. Scalera, 2000 SCC 24 (CanLII),  1 S.C.R. 551, at paras. 68-69.
 A fortuitous loss is one that is neither intentional nor inevitable: Hollinger, at para. 16; ING Insurance Co. of Canada v. Miracle, 2011 ONCA 321 (CanLII), 105 O.R. (3d) 241, at para. 23.
 In Hollinger, the insurance policy allowed for coverage for claims of discrimination but coverage for a claim alleging intentional discrimination was denied based on the fortuity principle. As Sharpe J.A. noted, at para. 16, the language of the policy:
must be read and interpreted in light of a general principle of insurance law that arises from the very nature and purpose of insurance, namely, that ordinarily only fortuitous or contingent losses are covered by a liability policy. Where an insured intends to cause the very harm that gives rise to the claim, the insured cannot look to a liability policy for indemnity. [Emphasis added.] The fortuity principle should be distinguished from rules of public policy designed to prevent tortfeasors or criminals from benefitting from their own wrongful acts: Hollinger, at para. 21; Beresford v. Royal Insurance Co. Ltd.,  A.C. 586 (H.L.). While the fortuity principle can overlap with various rules of public policy, the two bodies of law are distinct, since the fortuity principle is an aspect of contractual interpretation, rather than a rule of public policy: Hollinger, at para. 16; Beresford, at pp. 594-95. It is an interpretative aid that is of assistance in interpreting contracts: Scalera, at paras. 67-69.
 In some cases, insurers may include clauses in the insurance policy that mirror the fortuity principle. Of course, the converse is also true; an insurer may expressly agree to cover intentional acts: E.M. v. Reed (2003), 49 C.C.L.I (3d) 57 (Ont. C.A.).
 As Sharpe J.A. observed in Hollinger, the fortuity principle does not exclude coverage for all claims that arise from intentional acts. Absent provision in an agreement to the contrary, the critical issue when determining whether the fortuity principle aids in precluding coverage for harm caused by an intentional act is whether or not the insured intended to inflict the actual harm about which the plaintiff complains. An intended act may have unintended consequences. The fortuity principle does not preclude coverage for an intentional act with unintended consequences. Rather, it precludes coverage for an intentional act with intended consequences: see Hollinger, at paras. 18-19.
 Section 118 of the Insurance Act, R.S.O. 1990, c. I.8 incorporates the distinction: “Unless the contract otherwise provides, a contravention of any criminal or other law…does not, by that fact alone, render unenforceable a claim for indemnity under a contract of insurance except where the contravention is committed by the insured…with intent to bring about loss or damage…”