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Insurance - Definition. EPCOR Electricity Distribution Ontario Inc. v. Municipal Electric Association Reciprocal Insurance Exchange
In EPCOR Electricity Distribution Ontario Inc. v. Municipal Electric Association Reciprocal Insurance Exchange (Ont CA, 2022) the Court of Appeal quotes a definition of insurance:[83] Under the application judge’s analysis, however, EPCOR’s refusal to perform its legal obligation was a “Wrongful Act”, which resulted in a “Claim” by Mr. Houghton.
[84] This interpretation turned an uninsured liability (EPCOR’s obligation to indemnify a corporate officer under the Bylaw) into an insured liability solely because EPCOR refused to honour its obligation. Had EPCOR fulfilled its obligation, and indemnified Mr. Houghton at the outset, it would have had no claim under Coverage E for something that was simply a cost of doing business. But under the application judge’s interpretation, EPCOR was better off to refuse to perform its legal obligation because it could then recover its costs from the insurer, based on its own “Wrongful Act”.
[85] This runs contrary to the underlying economic rationale for insurance, as expressed by the Supreme Court of Canada in Scalera, at para. 68. Quoting from Craig Brown and Julio Menezes, Insurance Law in Canada, 2nd ed. (Scarborough: Carswell, 1991), at pp. 125-26, Iacobucci J. noted that “[i]nsurance is a mechanism for transferring fortuitous contingent risks.” It follows, then, that a policy generally does not cover losses that arise from the inherent nature of the subject matter insured; nor does it cover losses that are intentionally caused by the insured.
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