|
Insurance - Interpretation
MORE CASES
Part 2 | Part 3
. Le Treport Wedding & Convention Centre Ltd. v. Co-operators General Insurance Company
In Le Treport Wedding & Convention Centre Ltd. v. Co-operators General Insurance Company (Ont CA, 2020) the Court of Appeal set out basic principles of insurance contract interpretation:[19] The principles of interpretation for insurance policies bear repeating. In Sam’s Auto Wrecking Co. Ltd. (Wentworth Metal) v. Lombard General Insurance Company of Canada, 2013 ONCA 186, 114 O.R. (3d) 730, Laskin J.A. gave a short statement of the general law on interpreting insurance contracts, at para. 37:The principles for interpreting insurance policies, and in particular exclusion clauses, are well-established. The policy should be interpreted to promote a reasonable commercial result; provisions granting coverage ought to be construed broadly; provisions excluding coverage ought to be construed narrowly; in the case of ambiguity, the interpretation most favourable to the insured should be adopted; and even a clear and unambiguous clause should not be given effect if to do so would nullify the coverage provided by the policy. In addition, the court must strive to interpret the contract according to “the whole of the contract and any relevant surrounding circumstances” in a way that “promotes the true intent and reasonable expectations of the parties at the time of entry into the contract” and avoids “either a windfall to the insurer or an unanticipated recovery to the insured”: MacDonald v. Chicago Title Insurance, 2015 ONCA 842, 127 O.R. (3d) 663, at para. 66, per Hourigan J.A. . Van Huizen v. Trisura Guarantee Insurance Company
In Van Huizen v. Trisura Guarantee Insurance Company (Ont CA, 2020) the Court of Appeal clarified the distinction between an insurance policy and an insurance contract in the context of professional liability insurance:E. Applicable Legal Principles
[21] The motion judge had to consider the question of whether the appellant had a duty to defend the respondents in response to the Behlok proceedings, as he acknowledged, under the Van Huizen insurance contract. The motion judge erred by effectively treating the master policy as the entire insurance contract for all AIC members. This led him to conflate the Van Huizen and Barkley insurance contracts.
[22] It is therefore important for the purpose of this appeal to clarify the distinction between an insurance policy and an insurance contract. These words are often used interchangeably. This conflation can give rise to considerable confusion, as it did here.
[23] An insurance policy is an instrument. Without parties entering into an agreement to be bound by its terms and conditions, it is not an insurance contract. By itself, it is “merely a recitation of terms and conditions which do not attach to a particular person, item or interest”: Barbara Billingsley, General Principles of Canadian Insurance Law, 2nd ed. (Markham: LexisNexis, 2014), at p. 58. No legal obligations are created by the mere existence of a written insurance policy. Absent a contractual relationship incorporating its terms, the words of a policy “are worth less than the paper on which they are printed”: Denis Boivin, Insurance Law, 2nd ed. (Toronto: Irwin Law, 2015), at p. 242.
[24] An insurance contract, by contrast, creates contractual obligations between parties: Rayner v. Preston, (1881) 18 Ch. D. 1 (Eng. C.A.), at p. 10. The formation of insurance contracts is governed by the law of contracts. There must be offer and acceptance, and agreement on all material terms, including the premium, the nature and duration of the risk to be covered, and the extent of liability: McCunn Estate v. Canadian Imperial Bank of Commerce (2001), 2001 CanLII 24162 (ON CA), 53 O.R. (3d) 304 (C.A.), at paras. 18-19, leave to appeal granted but appeal discontinued, [2001] S.C.C.A. No. 203. In determining whether to enter into a particular insurance contract, the insurer assesses the risk and determines an acceptable premium based on the representations made by the applicant for insurance: Craig Brown & Andrew Mercer, Introduction to Canadian Insurance Law, 3rd ed. (Markham: LexisNexis, 2013), at p. 23.
[25] An insurance policy may evidence the existence of an insurance contract because often parties will agree, as part of their contract, to be bound by terms and conditions as set out in an appropriate policy: Billingsley, at p. 59; Brown & Mercer, at p. 23. When an insurer uses a standard policy, it may issue a certificate of insurance as proof of the underlying contract on the terms set out in an applicable policy: Boivin, at p. 258. But an insurance policy or certificate of insurance is only the instrument; it evidences the existence of the insurance contract by which the parties have agreed to be bound.
[26] This relationship between an insurance contract and an insurance policy is recognized by the statutory definitions of “contract” and “policy”: Insurance Act, R.S.O. 1990, c. I.8, s. 1. Under s. 1 of the Insurance Act, “contract” means an insurance contract, and includes a policy and certificate of insurance evidencing the contract. By contrast, “policy” means the instrument evidencing a contract.
[27] Therefore, while an insurance policy sets out terms that may govern the relationship between the parties to an insurance contract, it is the contract that gives rise to legal consequences and must be the subject of interpretation for the purposes of determining the parties’ rights and obligations.
....
[34] It follows that while each member who holds a certificate will be bound by identical terms as set out in the master policy, they are also bound by the unique terms as set out in their certificates and are therefore necessarily party to separate contracts with the insurer. In Re Lawton, 1945 CanLII 291 (MB CA), [1945] 4 D.L.R. 8 (Man. C.A.), at p. 37, Bergman J.A., concurring, noted a similar phenomenon in the context of a group life insurance policy for employees of a certain employer:The master policy is, in effect, merely an agreement by the [insurer] with the [employer] to insure the individual employees who are eligible, on the terms specified in the master policy. In my opinion the certificates issued to the individual employees pursuant to, and in performance of, that agreement, constitute the real and effective insurance. I am further of the opinion that these certificates are not incorporated in, and made part of, the master policy. It is the other way about; the master policy is incorporated in, and made part of, each individual certificate of insurance. . Traders General Insurance Company v. Gibson
In Traders General Insurance Company v. Gibson (Ont CA, 2019) the Court of Appeal commented as follows on the interpretation of an insurance contract:[31] When interpreting an insurance policy, coverage provisions should be construed broadly, exclusion clauses should be construed narrowly, and ambiguities should be construed against the insurer: Non-Marine Underwriters, Lloyd’s of London v. Scalera, 2000 SCC 24 (CanLII), [2000] 1 S.C.R. 551, at paras. 70-71; Reid Crowther & Partners Limited v. Simcoe & Erie General Insurance Co., 1993 CanLII 150 (SCC), [1993] 1 S.C.R. 252, at p. 271.
[32] The court must attempt to ascertain the purpose of the clause: Wawanesa Mutual Insurance Company v. Bell, 1957 CanLII 16 (SCC), [1957] S.C.R. 581, at p. 583. . 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:[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. . Sabean v. Portage La Prairie Mutual Insurance Co.
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:[12] 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), [2010] 2 S.C.R. 245, at para. 22; Non-Marine Underwriters, Lloyd’s of London v. Scalera, 2000 SCC 24 (CanLII), [2000] 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.
[13] 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), [2009] 3 S.C.R. 605, at para. 21; see also Ledcor, at para. 27. . Carter v. Intact Insurance Company
In Carter v. Intact Insurance Company (Ont CA, 2016) the Court of Appeal sets out basic principles of interpreting insurance contracts:[27] 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), [2010] 2 S.C.R. 245, at paras. 21-24.
[28] 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), [1980] 1 S.C.R. 888, at para. 26.
[29] 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.
[30] 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.
|
