/home/rsslex/public_html/wp-content/themes/_RSS2/index.php

A Mediation or Arbitration Clause Can Deprive a Court of Its Jurisdiction over a Class Action

By Catherine Jobin, from our Insurance Law Practice Group in Saguenay

PDF version

When an insurance policy has a valid dispute resolution clause, the Court must decline to hear the matter and refer it to a mediator or arbitrator, even if the matter relates to a class action, as was decided by the Superior Court in 9369-1426 Québec inc. (Restaurant Bâton Rouge) v. Allianz Global Risks US Insurance Company, 2021 QCCS 47.

In this matter, 9369-1426 Québec inc. [Bâton Rouge] sought to institute a class action against its insurer in order to obtain indemnification from Allianz for business interruption losses sustained by it and class members resulting from the COVID-19 health crisis, which led to the complete shutdown of their economic activities in Quebec.

Bâton Rouge had a commercial insurance policy that included a dispute resolution clause, which provided that in the event of disagreement concerning either the coverage or the quantum afforded by the policy, the parties would refer the matter to a mediator or arbitrator:

Dispute Resolution

In the event that the Insurer and the Insured(s) cannot agree concerning either the coverage or the quantum afforded by this Policy, it is agreed that the dispute shall be resolved in accordance with the dispute resolution process hereinafter described:

a. Mediation with a Mediator mutually agreed by the parties to the dispute. If the parties fail to concur on the choice of the Mediator, a Court shall appoint a Mediator on a Motion by one of the parties.

b. If settlement at Mediation is not possible, the dispute will be referred to Arbitration in accordance with the applicable Arbitration legislation/regulations in the jurisdiction in which the Policy is issued. The decision of the Arbitrator will be binding on all parties to the dispute with no right of appeal.

c. Each party shall bear its own costs and expenses in connection with the dispute resolution process. The costs and expenses of Mediation and Arbitration shall be shared equally by the parties to the dispute. By agreement in writing, the Insurer and the Insured(s) may waive compliance with this section or any part thereof for purposes of a specified dispute.

Criteria to exclude the Courts’ jurisdiction

First, the Court noted that the parties can opt for an alternative forum to the exclusion of Quebec authorities.[1] It also reiterates the conditions for the validity of a dispute resolution clause, namely: the clause must be mandatory, clear, unambiguous, final and binding. In the presence of such a clause, section 622 of the Code of Civil Procedure [CCP] applies and the matter cannot be brought before a Court.

622. Unless otherwise provided by law, the issues on which the parties have an arbitration agreement cannot be brought before a court even though it would have jurisdiction to decide the subject matter of the dispute.

The Court analyzed the dispute resolution clause and concluded that it met the requirements of validity and qualified it as a “clause compromissoire parfaite”. It added that it had not been shown that the dispute resolution clause was illegal or contrary to public order.

Other clauses in the policy

Bâton Rouge raised that certain clauses of the insurance policy create confusion and render the dispute resolution clause non-obligatory, in particular the following clause: “The Courts in the Court District in which the Named Insured is located shall have exclusive jurisdiction in case of a coverage dispute”.

According to the Court, this clause must be interpreted as one relating to territorial jurisdiction and does not conflict with the dispute resolution clause. The Court also stated that this clause must be read not as an isolated element but rather as part of the entire contract.

Other arguments

Bâton Rouge also alleges that Allianz’s denial of coverage constitutes an abuse of right, allowing it to bring the matter before a Court. However, according to the Court, this vague allegation is not sufficient to end the dispute resolution process.

It added that Bâton Rouge’s equity argument was insufficient to justify not following the contractually established dispute resolution process. While this process can be lengthy and costly, the jurisdiction of the courts is a matter of public order, not a matter of equity.

Final impact on the class action

In light of the above, the Court was of the view that the dispute should have been resolved through the dispute resolution process set out in the insurance policy. The Court therefore dismissed the class action application. The fact that the motion to institute proceedings was an application for authorization to institute a class action was not relevant to the debate[2] and article 167 CCP cannot be used to maintain two parallel claims before two different authorities.

The Court therefore declined jurisdiction and referred the file to mediation.

[1] Art. 3150 CCQ; Mega Bloks Inc. v. American Home Insurance Company, 2006 QCCS 5083, para. 5; art. 1 et 622 CCP.

[2] Dell Computer Corp. v. Union des consommateurs, 2007 SCC 34, [2007] 2 SCR 801, para 105; Bisaillon v. Université Concordia, 2006 SCC 19, paras 19–20; Telus Mobilité c. Comtois, 2012 QCCA 170, paras 18–27

Posted in Publications |