Was it a theft or was it a fraud?
This was the question the Quebec Court and the Court of Appeal had to answer in the matter of Christian Desmeules Beaumont v. Société d’assurance Beneva inc. (2023 QCCA 50 (2021 QCCQ 7298). An insured (“the insured”) claimed the amount of $38,303 from its insurer who refused to indemnify him following the loss of a boat due to a fraudulent scheme.
The insured owned a “Runabout Triumph” pleasure boat. In the spring of 2019, he agreed to the terms of a sale with a buyer for a price of $23,000. In the hours leading up to the trade-in, the buyer informed him that he had mandated a trusted carrier to pick up the boat and to pay the insured. A few days later, the situation took a turn for the worse when the bank where the insured had deposited the money informed him that the amount would be withdrawn from his bank account because the bank draft that had been given to him was counterfeit. The insured sought indemnification from his insurer, who denied coverage.
Court of Quebec decision
The issue in this case was whether the insurance policy covered the loss described above.
The Court proceeded to analyze the policy, which covered “all risks directly affecting the insured property, subject to the exclusions and limitations of this contract”. The Court had to determine whether, in these circumstances, the loss of the boat could be considered direct damage to the property covered by the policy.
To do so, the Court based itself on the Court of Appeal decision of Commerce & Industry Insurance Co. of Canada v. Giovanni Management Ltd. and distinguished between the notion of theft and fraud. The difference between these two concepts lies in the victim’s intention to dispose of the property. In the case of theft, the victim will not have voluntarily surrendered the property, unlike in the case of fraud.
In this case, however, the situation was more akin to fraud, since the insured had voluntarily handed over the boat to the buyer in exchange for a sum of money. Although the boat was obtained dishonestly, the fact remains that the boat was voluntarily given to the buyer and that the sale did not include a reservation of ownership until full payment was made.
Consequently, the insured’s loss was not directly related to the boat, but to the sum of money that had been given to him. Thus, the Court concluded that the insurer was justified in denying coverage on the basis that the loss was not directly linked to the insured property.
Court of Appeal Decision
In a brief decision, the Court of Appeal noted that the leading case on this issue is Commerce & Industry Insurance Co. of Canada v. Giovanni Management Ltd. It concluded that the insured had failed to demonstrate that its situation was different from the case before the Court in the above-mentioned decision.
Indeed, according to the Court of Appeal, although said decision was rendered in 1985, the underlying logic derived from it remains valid and still governs the interpretation of the insurance policy at issue. The Court of Appeal therefore confirmed the decision of the Court of Quebec which had dismissed the insured’s action.