Robitaille v. Madill, [1990] 1 S.C.R. 985
Gaston Robitaille Appellant
v.
J.A. Madill, Sovereign General Insurance Company and Markel Insurance Company of Canada Respondents
indexed as: robitaille v. madill
1990: March 20; 1990: May 3.
Present: La Forest, L'Heureux-Dubé, Gonthier, Cory and McLachlin JJ.
on appeal from the court of appeal for quebec
Insurance -- Fire insurance -- Content of insurance contract ‑‑ Time formed -- Inconsistency between insurance policy and application -- Civil Code of Lower Canada, arts. 2476, 2478.
Appellant, the owner of a hotel establishment, had installed an automatic extinguisher system in his kitchen at the request of his previous insurers. Some years later respondents offered to insure appellant, and on August 20, 1980 an inspector and a broker went to his premises. After inspecting the building the inspector classified the risk as "acceptable" and gave appellant the applicable rates. The insurance application was written on the spot and accepted. The broker then told appellant that his coverage began that same evening. There was nothing in the application to indicate that appellant had to sign a maintenance contract for his extinguisher system -- a requirement which was also not part of his old insurance contract. However, the insurance policy when issued three weeks later stated in clause 8 that the extinguisher system had to be checked at least twice a year by the manufacturer's authorized representative. When a fire occurred in 1981 the extinguisher system did not operate correctly and the hotel establishment sustained considerable damage. Respondents refused to compensate appellant, alleging his failure to observe clause 8 of the policy. Appellant brought an action against respondents in the Superior Court for compensation. The trial judge allowed the action but a majority of the Court of Appeal reversed the judgment and dismissed the action.
Held: The appeal should be allowed.
Respondents had a duty to compensate appellant. Under art. 2476 C.C., an insurance contract is formed upon the insurer's acceptance of the policyholder's application. Since here this application, which was accepted on August 20, 1980, contained no mention of the requirement contained in clause 8 of the policy, namely inspection and maintenance of the sprinkler system, in principle this condition forms no part of the insurance contract. However, assuming that the condition is part of the contract and there is a resulting inconsistency, art. 2478 C.C. must be applied. As respondent insurers did not inform appellant in writing of the inconsistency between the policy and the application, the latter is evidence of the insurance contract and its content.
Statutes and Regulations Cited
Civil Code of Lower Canada [am. 1974, c. 70, s. 2], arts. 2476, 2477, 2478 [am. 1979, c. 33, s. 42], 2500 [am. idem, s. 47].
APPEAL from a judgment of the Quebec Court of Appeal, [1985] C.A. 319, reversing a judgment of the Superior Court, 1983 5478 (QC CS), [1983] C.S. 331, 2 C.C.L.I. 117. Appeal allowed.
André Gagnon, Q.C., for the appellant.
Patrick Henry, for the respondent Madill.
Kristen Zimakas and Robert De Blois, for the respondents Sovereign and Markel Insurance Co. of Canada.
The Court
The following is the judgment delivered by
The Court -- This appeal concerns the formation of a land insurance contract, and in particular the relationship existing between an insurance application and the policy relating thereto under the provisions of the Civil Code of Lower Canada (hereinafter C.C.), in effect in the province of Quebec.
Appellant owned and operated a hotel establishment in Fossambault, Quebec. In response to a requirement by his previous insurers he installed an automatic extinguisher system in his kitchen in 1973. However, the insurers he had at that time never required that he sign a contract for the maintenance of this system, and he did not do so.
In 1980, without being approached by appellant, another insurance company formed by respondents offered to insure him. On August 20 Maurice Grimard and an inspector, Mr. Gaudet, went to appellant's premises and the latter asked for an estimate for protection similar to that which he had previously had. Gaudet classified the risk as "acceptable" and gave appellant the applicable rates. The insurance application was written on the spot and accepted, whereupon Grimard told appellant that his coverage began that same evening. At no time during this meeting was appellant's obligation to sign a maintenance contract for his extinguisher system discussed, let alone imposed. The application, dated August 20, is also silent in this regard.
The insurance policy was issued on September 10, 1980. It contains clause 8, applicable to a risk protected by an entirely automatic chemical or CO2 extinguisher, which provides:
[TRANSLATION] The insured agrees:
(a) to notify the insurer immediately if he learns of any circumstances that may interfere with the effectiveness of the equipment protecting the insured property;
(b) if he is the owner or renter of the equipment, to ensure that the said equipment is regularly maintained in accordance with the manufacturer's instructions and to have it checked at least twice a year by the manufacturer's authorized representative, so long as this insurance remains in effect. [Emphasis added.]
On May 18, 1981 a fire at appellant's property caused considerable damage. The automatic extinguisher system did not operate correctly during the fire because, the trial judge found, there had not been regular inspections by a qualified technician. Respondent insurers refused to pay appellant the compensation provided in the insurance contract, alleging the latter's failure to observe clause 8 regarding inspection and maintenance of the extinguisher system. Appellant sued respondents and the trial judge (Letarte J.) ruled in his favour: 1983 5478 (QC CS), [1983] C.S. 331, 2 C.C.L.I. 117. A majority of the Court of Appeal (Rothman and Tyndale JJ.A., Chouinard J.A. dissenting) reversed the judgment and dismissed the action: [1985] C.A. 319.
The entire matter turns on the content of the insurance contract. This contract was formed as soon as the parties agreed and its content must be assessed at that time. The rule is stated in art. 2476 C.C., read together with arts. 2477 and 2478:
An insurance contract is formed upon the insurer's acceptance of the policyholder's application.
The policy is the document evidencing the insurance contract.
The insurer must provide the policyholder with the policy and a copy of any application made in writing.
In case of inconsistency between the policy and the application, the latter prevails unless the insurer has in writing indicated the inconsistencies to the policyholder.
Here the contract became complete on August 20, 1980 since the application was accepted on that date. This application contains no mention of the requirement contained in clause 8, namely inspection and maintenance of the sprinkler system "by the manufacturer's authorized representative". In principle, therefore, this condition forms no part of the contract.
If this condition can really be said to be a part of the contract and there is a resulting inconsistency, art. 2478 C.C. must be applied. As no indication of inconsistencies was provided by the insurer in the case at bar, the Court must necessarily conclude that, even if there is an inconsistency, the wording of the application is still evidence of the insurance contract and of its content. Further, if there is no inconsistency between the application and the insurance policy, the policy is the document evidencing the insurance contract (art. 2477 C.C.)
The trial judge found that there was an inconsistency, as the content of the contract was decided on between appellant and Grimard and Gaudet at the meeting of August 20, 1980. He emphasized the public nature of art. 2478 C.C. (art. 2500, para. 1 C.C.) in finding that respondents were not entitled to benefit from clause 8 of the policy. On appeal, the dissenting opinion of Chouinard J.A. adopted the conclusion that the addition by the insurer of a specific supplementary obligation, such as that of obtaining maintenance service by the manufacturer's authorized representative, can only be an inconsistency within the meaning of art. 2478 C.C. The majority, on the other hand, found that the insurance contract was only formed when the policy was issued on September 10, 1980, since neither Grimard nor Gaudet were respondents' authorized agents. Moreover, Rothman J.A. held that in any case clause 8 was not inconsistent with the application, but only extended it somewhat, and such extension was in fact reasonable in the circumstances.
We all share on this point the opinion of the trial judge and of Chouinard J.A., dissenting in the Court of Appeal.
Accordingly, we are all of the view that the appeal should be allowed and the judgment at first instance restored, allowing appellant's action, subject to the following.
The judgment at first instance set the amount owed at $303,700. However, by a subsequent final judgment the Court of Appeal ordered respondents to pay directly to appellant's hypothecary creditor (Caisse d'entraide économique de Portneuf) the sum of $114,142.66 plus interest, on account of an existing hypothecary clause in the insurance contract, and this amount was paid. It must accordingly be deducted from the original award of $303,700, leaving a balance of $189,557.34 to be paid, in accordance with the judgment at first instance, being 34 percent to Lloyd's of London, represented here by J.A. Madill, 33 percent to the Sovereign General Insurance Company and 33 percent to Markel Insurance Company of Canada.
Respondents are further ordered to pay interest and additional indemnity in accordance with the judgment at first instance, the whole with costs throughout.
Appeal allowed with costs.
Solicitors for the appellant: Gagnon, de Billy & Associés, Québec.
Solicitors for the respondent Madill: Robinson, Sheppard & Associés, Montréal.
Solicitors for the respondents Sovereign et Markel Insurance Co. of Canada: De Blois, Parent & Associés, Québec.