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Insurance - Interpretation (3). Loblaw Companies Limited v. Royal & Sun Alliance Insurance Company of Canada
In Loblaw Companies Limited v. Royal & Sun Alliance Insurance Company of Canada (Ont CA, 2024) the Court of Appeal considered an insurer appeal of a complex interlocutory application to declare 'duties to defend' and if so, the allocation of legal expenses between defendants, in five merged opioid class actions against several retailers, each with multiple insurers.
Here the court cites authority for contractual interpretation in insurance law:[70] The relationship between an insurer and its insured is contractual in nature. An inquiry into the nature and scope of the duties an insurer owes to its insured starts with the insurance policy that governs them: Hanis, at para. 22; Family Insurance Corp., at para. 19; and Markham, at para. 44. When interpreting contracts of insurance, the court should give effect to clear language, reading the contract as a whole and applying general rules of contractual construction to resolve any ambiguities: Progressive Homes Ltd. v. Lombard General Insurance Co. of Canada, 2010 SCC 33, [2010] 2 S.C.R. 245, at paras. 21-24. . SIR Corp. v. Aviva Insurance Company of Canada
In SIR Corp. v. Aviva Insurance Company of Canada (Ont CA, 2023) the Court of Appeal considers a business insurance policy that the insured claimed was triggered by provincial EMCPA COVID orders.
In these quotes, the court considers the unique interpretation doctrine that applies to insurance contracts:(3) Interpretation of the Policy
(a) Principles of interpretation
[39] Insurance policies form a special category of contracts and are subject to a unique three-step interpretative approach: Jesuit Fathers of Upper Canada v. Guardian Insurance Co. of Canada, 2006 SCC 21, [2006] 1 S.C.R. 744, at para. 27; Sky Clean Energy Ltd. (Sky Solar (Canada) Ltd.) v. Economical Mutual Insurance Company, 2020 ONCA 558, 152 O.R. (3d) 159, at paras. 54-56; Progressive Homes Ltd. v. Lombard General Insurance Co. of Canada, 2010 SCC 33, [2010] 2 S.C.R. 245, at paras. 21-24; Ledcor, at paras. 49-51; Sabean v. Portage La Prairie Mutual Insurance Co., 2017 SCC 7, [2017] 1 S.C.R. 121, at para. 12; and Geoff R. Hall, Canadian Contractual Interpretation Law, 4th ed. (Toronto: LexisNexis Canada, 2020) at pp. 266-68.
[40] This court summarized the three-step approach applicable to the interpretation of insurance policies in Sky Clean, at paras. 54-56:The principles of interpretation applicable to insurance policies are well settled. The primary principle is that when the language of the policy is unambiguous, the court should give effect to its clear language, reading the policy as a whole: Progressive Homes, at para. 22, referring to Non-Marine Underwriters, Lloyds of London v. Scalera, 2000 SCC 24, [2000] 1 S.C.R. 551, at para. 71.
Where the policy language is ambiguous, the general rules of contract interpretation provide guidance, including the rule that effect should be given to the reasonable expectations of the parties, as long as the interpretation is supported by the text of the policy: Progressive Homes, at para. 23. Similar insurance policies should be construed consistently. These rules should be applied to resolve an ambiguity, not to create one.
Where ambiguity remains after the application of these rules, the contra proferentem rule applies to construe the policy against the maker, the insurer. This gives rise to the precept that coverage provisions are interpreted broadly and exclusions clauses narrowly: Progressive Homes, at para. 24. [41] Although insurance policies are subject to this unique interpretative approach, as with all contracts, the terms of the policy must be examined in light of the surrounding circumstances: Jesuit Fathers, at para. 27; Carter v. Intact Insurance Company, 2016 ONCA 917, 133 O.R. (3d) 721, at para. 28, leave to appeal refused, [2017] S.C.C.A. No. 53; and MDS Inc. v. Factory Mutual Insurance Company, 2021 ONCA 594, at para. 78, leave to appeal refused, [2021] S.C.C.A. No. 382. This is an essential part of the first step in the three‑step interpretive approach.
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[54] The Binder was prepared by SIR’s insurance broker, who acted as SIR’s agent and negotiated the policy that replaced the Binder. While not part of the Policy, the Binder is clearly part of the factual matrix: Lloyds Syndicate 1221 (Millennium Syndicate) v. Coventree Inc., 2012 ONCA 341, 291 O.A.C. 178, at para. 29, leave to appeal refused, [2012] S.C.C.A. No. 276. Indeed, in its supplementary factum below, SIR relied on the Binder as forming part of the factual matrix and setting out a summary of the terms of the Policy. Significantly, the language used in clause 1 of Section II is virtually identical to the language in the Binder describing “Perils Insured” as “All Risks of Direct Physical Loss or Damage (except as excluded)”.
[55] Contrary to SIR’s submission, relying on the Binder to interpret the coverage afforded under the Policy is not contrary to s. 124(1) of the Insurance Act, R.S.O. 1990, c. I.8. That section provides:124(1) All the terms and conditions of the contract of insurance shall be set out in full in the policy or by writing securely attached to it when issued, and, unless so set out, no term of the contract or condition, stipulation, warranty or proviso modifying or impairing its effect is valid or admissible in evidence to the prejudice of the insured or beneficiary. [56] The purpose of s. 124 is to protect an insured from unilateral changes to an insurance policy: Sagl v. Chubb Insurance Company of Canada, 2009 ONCA 388, 249 O.A.C. 234, at para. 68, leave to appeal refused, [2009] S.C.C.A. No. 303. Here, I consider the Binder to interpret the Policy, not to modify or impair its effect. As Sattva instructs, the factual matrix is to be “used as an interpretive aid for determining the meaning of the written words chosen by the parties, not to change or overrule the meaning of those words”: at para. 60. . SIR Corp. v. Aviva Insurance Company of Canada
In SIR Corp. v. Aviva Insurance Company of Canada (Ont CA, 2023) the Court of Appeal considers the 'policy contains all terms' provision of the Insurance Act [s.124(1): 'Requirement for all terms to be set out in policy; relevance of proposal, etc. - Terms, etc., of contracts invalid unless set out in full'], here as it relates to insurance policy interpretation:[54] The Binder was prepared by SIR’s insurance broker, who acted as SIR’s agent and negotiated the policy that replaced the Binder. While not part of the Policy, the Binder is clearly part of the factual matrix: Lloyds Syndicate 1221 (Millennium Syndicate) v. Coventree Inc., 2012 ONCA 341, 291 O.A.C. 178, at para. 29, leave to appeal refused, [2012] S.C.C.A. No. 276. Indeed, in its supplementary factum below, SIR relied on the Binder as forming part of the factual matrix and setting out a summary of the terms of the Policy. Significantly, the language used in clause 1 of Section II is virtually identical to the language in the Binder describing “Perils Insured” as “All Risks of Direct Physical Loss or Damage (except as excluded)”.
[55] Contrary to SIR’s submission, relying on the Binder to interpret the coverage afforded under the Policy is not contrary to s. 124(1) of the Insurance Act, R.S.O. 1990, c. I.8. That section provides:124(1) All the terms and conditions of the contract of insurance shall be set out in full in the policy or by writing securely attached to it when issued, and, unless so set out, no term of the contract or condition, stipulation, warranty or proviso modifying or impairing its effect is valid or admissible in evidence to the prejudice of the insured or beneficiary. [56] The purpose of s. 124 is to protect an insured from unilateral changes to an insurance policy: Sagl v. Chubb Insurance Company of Canada, 2009 ONCA 388, 249 O.A.C. 234, at para. 68, leave to appeal refused, [2009] S.C.C.A. No. 303. Here, I consider the Binder to interpret the Policy, not to modify or impair its effect. As Sattva instructs, the factual matrix is to be “used as an interpretive aid for determining the meaning of the written words chosen by the parties, not to change or overrule the meaning of those words”: at para. 60. . Trillium Mutual Insurance Company v. Emond
In Trillium Mutual Insurance Company v. Emond (Ont CA, 2023) the Court of Appeal considered (and allowed) an insurer's appeal on the interpretation of a home owners insurance policy, here involving flood damage. The policy essentially insured the 'replacement cost' of the destroyed home as it stood at the time of destruction [see para 56], and a main issue was the interpretation and application of a limiting provision that excluded "increased costs of repair or replacement due to the operation of any law regulating the zoning, demolition, repair, or construction of buildings” (the 'para. 8 Exclusion')" (ie. new, legally-required work).
In these quotes the court considered general principles of insurance law interpretation:VII. PRINCIPLES OF INSURANCE CONTRACT INTERPRETATION
[36] I begin my analysis with a review of the principles applicable to the interpretation of contracts of insurance.
[37] As the Supreme Court of Canada explained in Ledcor Construction Ltd. v. Northbridge Indemnity Insurance Co., 2016 SCC 37, [2016] 2 S.C.R. 23, at para. 24:[W]here an appeal involves the interpretation of a standard form contract, the interpretation at issue is of precedential value, and there is no meaningful factual matrix that is specific to the parties to assist the interpretation process, this interpretation is better characterized as a question of law subject to correctness review. [38] The factual matrix is less relevant in such standard form contracts because, as Wagner J. (as he then was) explained, “the parties do not negotiate terms and the contract is put to the receiving party as a take-it-or-leave-it proposition”: Ledcor, at para. 28, citing MacDonald v. Chicago Title Insurance Company of Canada, 2015 ONCA 842, 127 O.R. (3d) 663, at para. 33, leave to appeal refused, [2016] S.C.C.A. No. 39.
[39] The general principles for interpreting insurance policies as set out in Ledcor, at paras. 49-51, are that:[W]here the language of the insurance policy is unambiguous, effect should be given to that clear language, reading the contract as a whole.
Where, however, the policy’s language is ambiguous, general rules of contract construction must be employed to resolve that ambiguity. These rules include that the interpretation should be consistent with the reasonable expectations of the parties, as long as that interpretation is supported by the language of the policy; it should not give rise to results that are unrealistic or that the parties would not have contemplated in the commercial atmosphere in which the insurance policy was contracted, and it should be consistent with the interpretations of similar insurance policies.
Only if ambiguity still remains after the above principles are applied can the contra proferentem rule be employed to construe the policy against the insurer. [Citations omitted.] [40] All parts of a policy should be given meaning: RBC Travel Insurance Co. v. Aviva Canada Ltd. (2006), 2006 CanLII 32594 (ON CA), 82 O.R. (3d) 490 (C.A.), at para. 11.
[41] Provisions granting coverage should be construed broadly and provisions excluding coverage construed narrowly: Sam’s Auto Wrecking Co. Ltd. v. Lombard General Insurance Company of Canada, 2013 ONCA 186, 114 O.R. (3d) 730, at para. 37. Even a clear and unambiguous clause should not be given effect if to do so would nullify the coverage provided by the policy: Sam’s Auto Wrecking, at para. 37.
[42] Endorsements to an insurance policy should be read together with the other policy provisions because “an endorsement is generally not understood to be a self-contained policy”: Pilot Insurance Co. v. Sutherland, 2007 ONCA 492, 86 O.R. (3d) 789, at para. 21.
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[53] The onus rests on the insurer to establish an exclusion of coverage: Progressive Homes Ltd. v. Lombard General Insurance Co. of Canada, 2010 SCC 33, [2010] 2 S.C.R. 245, at para. 51. . Kellerman-Bernard v. Unica Insurance Company
In Kellerman-Bernard v. Unica Insurance Company (Div Court, 2023) the Divisional Court considered an interesting SABS appeal where the insured, whose son was injured in a bicycle accident, herself applied for 'catastrophic impairment' SABS coverage on the basis of emotional and psychological injuries. She was denied coverage both at the LAT appeal and a further LAT reconsideration on grounds that she was not categorically-eligible, but reversed at the Divisional Court on a statutory interpretation argument.
Here the court sets out the basics of it's statutory interpretation assessment:[14] In Skunk v. Ketash, 2018 ONCA 450, the Court of Appeal states as follows:[8] The principles of statutory interpretation require the court first to look to the plain meaning of the statute. If the words have a plain meaning and give rise to no ambiguity, then the court should give effect to those words. ....
The interpretation adopted by the LAT ignores the purpose of the SABS
[23] In Vavilov, supra at para. 117, the Supreme Court reiterates that the words of a statute are to be read “ in their entire context and in their grammatical and ordinary sense harmoniously with the scheme of the Act, the object of the Act, and the intention of Parliament.”
[24] The courts have repeatedly recognized that the SABS are remedial and constitute consumer protection legislation and ought to be read, interpreted and applied in such a way. This was confirmed by the Supreme Court of Canada in Smith v. Co-Operator’s General Insurance Co. 2002 SCC 30 (CanLII), [2002] 2 S.C.R. 129 at para. 11.
[25] In Tomec v. Economical, 2019 ONCA 882 the Ontario Court of Appeal confirmed that “[the] legislature’s definition of ‘catastrophic impairment’ is intended to foster fairness for victims of motor vehicle collisions by ensuring that accident victims with the most health needs have access to expanded medical and rehabilitation benefits. That definition is meant to be remedial and inclusive, not restrictive” and that the goal of the SABS “is to reduce the economic dislocation and hardship of motor vehicle accident victims and as such, assumes an importance which is both pressing and substantial” (see para. 42). . Intact Insurance Company v. Laporte et al.
In Intact Insurance Company v. Laporte et al. (Div Court, 2023) the Divisional Court sets out principles of insurance interpretation:[36] The approach to interpretation of insurance contracts is well-settled law. Those principles include:a. effect should be given to clear and unambiguous language;
b. ambiguous language should be interpreted using general rules of contract construction; and
c. courts should avoid interpretations that would give rise to an unrealistic result or one that would not have been in the contemplation of the parties at the time that the Policy was entered.[13][Progressive Homes v. Lombard General Insurance Co of Canada, 2010 SCC 33, at paras 21-25] [37] Justice Laskin, writing on behalf of the Ontario Court of Appeal, stated that “indemnity is a main objective of insurance and, to the extent possible, coverage provision should be interpreted with that objective in mind”.[14][Carter v. Intact Insurance Co. 2016 ONCA 917, at para. 48] He described a policy providing for actual cash value coverage as a pure indemnity contract: “actual cash value recovery prevents insureds from profiting or benefitting from their loss.”[15][Carter, at para. 21]
[38] Justice Sopinka stated that “[a]n interpretation which will result in either a windfall to the insurer or an unanticipated recovery to the insured is to be avoided”.[16] [Brissette] Justice Laskin explained how insurers control or limit the “moral hazard” in the context of replacement cost coverage:But, allowing insureds to replace old with new raises a concern for the insurance industry. The concern is moral hazard: the possibility that insureds will intentionally destroy their property in order to profit from their insurance; Or the possibility that insurers will be careless about preventing insured losses because they will be better off financially after a loss.
To put a brake on moral hazard, insurers will typically only offer replacement cost coverage if insureds actually repair or replace their damaged or destroyed property. If they do not, they will receive only the actual cash value of their insured property.[17] [Carter, at paras. 24-25.] . Varriano v. Allstate Insurance Company of Canada
In Varriano v. Allstate Insurance Company of Canada (Ont CA, 2023) the Court of Appeal held that a SABS provision that required notice was not also a 'coverage' provision, and thus not subject to a broad interpretation, as opposed to a narrow interpretation to which exclusions or restrictions are subject:B. The Divisional Court Erred in Construing s. 37(4) as an Insurance Coverage Provision
[35] The Divisional Court held that its interpretation of s. 37(4) is consistent with the general principle that “insurance coverage provisions are to be interpreted broadly, while coverage exclusions or restrictions are to be construed narrowly, in favour of the insured”.
[36] While I do not quarrel with this statement, the provision in question is not a coverage provision – s. 37(4) does not in anyway determine whether a person is entitled to coverage under the SABS. The only issue to be determined was whether that notice provision had been complied with. The correct interpretation of s. 37(4) requires an interpretation that accords with the purposes of the SABS, that is the timely submission and resolution of claims (Sietzema, at para. 16) and the purpose of the provision itself, which is to permit the insured to decide whether or not to challenge the denial of benefits (Turner, at para. 8). Respectfully, the Divisional Court’s interpretation of this notice provision did not accord with those principles.
[37] Because I have found that the notice was not deficient and complied with the legislative requirements of s. 37(4) of the SABS, it is not necessary to address either Allstate’s alternative argument that even if the notice was deficient in failing to provide a medical reason, it had triggered the limitation period by clearly and unequivocally terminating Mr. Varriano’s IRBs, nor Mr. Varriano’s rejoinder that the termination left his eligibility for future benefits under s. 11 unclear. . Cronos Group Inc. v. Assicurazioni Generali S.p.A.
In Cronos Group Inc. v. Assicurazioni Generali S.p.A. (Ont CA, 2022) the Court of Appeal considered an issue of insurance contract interpretation:[44] With respect to the fourth matter, Generali had submitted that the absence of an explicit payment term for an Excess Policy OEP option created an ambiguity that supported the exclusion of an OEP option. The application judge assessed that submission in light of the principle that contracts of insurance are to be interpreted to give effect to their terms and in a commercially reasonable manner. She found support for such an approach in the decision in Re Canada 3000 Inc. (2002), 2002 CanLII 49602 (ON SC), 35 C.B.R. (4th) 37 (Ont. S.C.). ...
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