Newsletters

105

The Insured Left Its Imprint

Was there a sufficient insurable interest for this insured whose building housed a printing business owned by a different entity with the same shareholder?

On January 12, 2023, the Honourable Dominique Poulin of the Superior Court of Quebec answered this question in a decision on the notion of insurable interest: 9208-9499 Québec inc. c. Royal & Sun Alliance du Canada, société d’assurances, 2023 QCCS 62.

Summary of the Facts

9208-9499 Québec inc. (the “insured“) is the owner of a building that was damaged by a fire on March 18, 2018. The fire partially destroyed the building where a printing business was located, the property and equipment of which belonged to 9228-4280 Québec inc. who occupied the building as a tenant (the “tenant“).Mr. Mehdi Afzali, owned both companies as sole share-holder.  Royal & Sun Alliance du Canada, société d’assurances (the “insurer“) issued a policy only in favour of its insured covering  the building and its contents.

Insurer’s Position

Following the fire, the insurer refused to indemnify its insured on the grounds that it would not have an insurable interest in the insured property, in that the contents of the building did not belong to it and that it did not have an economic interest in the building used exclusively by the tenant. The latter also paid the expenses.

The Court’s Decision

The leading principles regarding insurance interests were set out by the Supreme Court of Canada in Kosmopoulos v. Constitution Insurance Co, [1987] SCR 2. Essentially, the court stated that there is a sufficient interest as long as some relationship or connection is established with the insured property and that he sustains damages as a result of the loss because he gains a certain benefit from the insured property and sustains a loss if the property is damaged. The Honourable Dominique Poulin relied on this leading case to render her judgment and did not apply a strict interpretation of the concept of insurable interest.

Insured’s Insurance Interest in the Building

The insurer attempted to establish that its insured was acting as a prêt-nom for the tenant. However, the insured established, to the satisfaction of the Court, its ownership and insurable interest in the building. Indeed, the insured communicated a deed of purchase of the building and demonstrated that it had resold it to a third party. Furthermore, the fact that the insured had a financial obligation to the bank, secured by mortgage, established its economic interest in the building.

The insurer also argued that its insured was not acting as an owner at the time the policy was taken out in 2016 in that it was the tenant that, as of 2015, was paying the mortgage payments and the other expenses related to the building. Mr. Afzali explained that the tenant was occupying the premises under a lease, the rent for which was paid by assumption of the mortgage payments and by the payment of other building expenses. The judge found that this was not sufficient to raise questions about the existence of the insured’s ownership and insurance interest in the building.

Insured’s Insurance Interest in the Contents

The Court concluded from the evidence that the contents of the building were owned by the tenant, that they were intended for the operation of the tenant’s business, that the tenant’s operations allowed it to generate income and pay its rent, and that the insured, the owner of the building, had no ongoing financial activities since 2015. The Court also noted that the insured and the tenant were related companies owned by the same person, Mr. Afzali, and that the tenant was not insured for its assets and was not compensated for its loss.

In light of the foregoing, the Court determined that the insured had a clear economic interest in the tenant’s assets. Indeed, since Mr. Afzali had an insurable interest in the tenant’s assets and was the sole shareholder of both the tenant and the insured, the Court concluded that this interest existed even though Mr. Afzali was acting through the insured company.

The Court therefore concluded that the insured succeeded in demonstrating its insurable interest and ordered the insurer to pay an indemnity to the insured for damages to the building and to its contents.

105

Authors

Articles in the same category

Manufacturers: the heat is on!

An important decision in Product Liability and the obligation of Diligence and Transparency The Court of Appeal recently rendered a decision in CCI Thermal Technologies Inc. c. AXA XL (XL Catlin), 2023 QCCA 231, concerning the liability of the manufacturer and the apportionment of liability between the parties. This case involved twenty separate fires caused […]

Four RSS Lawyers Named Litigation Stars

We’re proud to announce that four of our lawyers were named “Litigation Star” by Benchmark Litigation Canada for 2023: Patrick Henry, Lynne Kassie, Hugues Duguay and Vikki Andrighetti. Congratulations for this accomplishment!

Without a Written Conventional Subrogation, Your Recourse May Be Dismissed

On March 28, 2023, the Superior Court of Quebec partially granted a motion to dismiss the case, dealing with the notions of legal subrogation, conventional subrogation and prejudice. This judgment, Gouvernement de la Nation Crie / Cree Nation Government c. 9327-1781 Québec inc., 2023, reminds us that it is essential for a non-insurer to agree […]

Standard Mortage Endorsment: Is it a Shield for the Creditor?

The scope and protection afforded to a mortgage creditor by the standard mortgage endorsement was again analyzed by the Court of Appeal in Roma Capital inc. 2023 QCCA 307. It should be noted that in this decision rendered on March 7, 2023, the Court of Appeal was hesitant since the decision was rendered on a […]

The strict standard applicable to the exclusion clause for suicide

On February 3, 2023, in Bolduc v. SSQ Assurance, 2023 QCCS 266, the Superior Court once again reminded the insurance industry that strict compliance with the rules governing the drafting of exclusion clauses, particularly in the case of suicide, is essential to avoid unfortunate consequences for insurers. The facts in dispute On November 23, 2006, […]

Where do you keep your corrosive cleaner?

The Facts La Capitale was claiming reimbursement of more than $137,000 in compensation paid to its insureds following water damage that occurred in their home on February 2, 2017. La Capitale was thus suing the general contractor who built the residence in 2012, the distributor of the faucet whose flexible pipe failed, as well as […]

Be the first informed:

Subscribe to our communications