SUPERIOR COURT OF JUSTICE - ONTARIO

COURT FILE NO.: 10-47877
DATE: 2012/08/30

RE: MARYSE POTVIN, by her litigation guardian JEAN POTVIN, Plaintiff

AND

DESJARDINS FINANCIAL SECURITY, Defendant

BEFORE: Kane J.

COUNSEL: Sean P. Bawden, for the Plaintiff
Marie-Claire Albanese, for the Defendant

HEARD: August 28, 2012

ENDORSEMENT

[ 1 ] The plaintiff and defendant agree to proceed with this motion as brought under Rule 20 and Rule 21 of the Rules of Civil Procedure , R.R.O. 1990, Reg. 194 as amended. Specifically, the plaintiff seeks summary judgment and a declaration that the insurer’s refusal to pay her disability benefits is a contravention of her rights to such coverage pursuant to a certificate of insurance issued to her. Accordingly, the plaintiff seeks a declaration that she is entitled to receive disability benefits from the defendant insurer.

[ 2 ] Both parties agree that the plaintiff is disabled as contemplated under the contract of insurance. The issue is when did the insurance disability coverage under the contract begin and was the plaintiff disabled prior to the commencement of that insurance coverage and as a resulted disentitled to recover that benefit.

[ 3 ] The plaintiff argues that she is entitled to such coverage under paragraph 18 of Appendix No. 1 of the insurance contract. The relevant portions of paragraph 18 state:

18- LOAN FOR THE PURCHASE OF AN IMMOVABLE PROPERTY

If a sum is borrowed to pay for the purchase of an immovable property, the insurance begins at the moment when a loan contract secured by a mortgage is signed between the financial institution and the borrower , provided that the borrower has enrolled in the insurance, that he has committed to purchasing the immovable property and that the said property is actually purchased within the 3 months following the signing of the loan contract. If these conditions are not met, the insurance is considered to have begun in application with the provisions of Section 5 of the LIFE INSURANCE and the DISABILITY INSURANCE. (Emphasis added)

[ 4 ] It is not disputed that the above provisions contain four elements which must occur before this insurance coverage is in effect. The parties agree that the second, third and fourth elements were in place. The dispute relates to the first element, namely whether there was a signed loan contract secured by a mortgage on March 6, 2008 or not until April 11, 2008. March 6, 2008 is the date the plaintiff in writing accepted the offer of loan terms extended to her by Caisse Populaire de L’Ontario “La Caisse”. April 11, 2008 is the date of the mortgage advance from the mortgagee to the purchaser and the registration of the mortgage from the plaintiff to La Caisse.

[ 5 ] The plaintiff submits that the above highlighted portion of paragraph 18 of Appendix No. 1 is ambiguous and should be interpreted against the drafter or insurer under the contract in her favour, thereby resulting in coverage and recovery of disability benefits.

[ 6 ] The plaintiff submits there are two possible interpretations of the highlighted phrase thereby establishing the ambiguity. The plaintiff submits that the phrase must either be read as

(a) … insurance begins at the moment when a loan contract to be secured by a mortgage is signed between the financial institution and the borrower …

(b) … insurance begins at the moment when a loan contract that is secured by a mortgage is signed between the financial institution and the borrower …

[ 7 ] The plaintiff argues that her signature accepting the offer of finance from La Caisse on March 6, 2008, constitutes compliance of the first condition in paragraph 18 and therefore the disability coverage was in place as of March 6, 2008. This date is crucial as the plaintiff was involved in a motor vehicle accident on March 17, 2008, in which she suffered serious injuries rendering her disabled and is therefore entitled to the insurance disability benefit notwithstanding that the mortgage funds were not advanced and the mortgage was not registered until April 11, 2008. Accordingly, the plaintiff submits that the proper interpretation of the clause is “a” above and not “b”.

[ 8 ] The defendant insurer disagrees with the plaintiff and submits that although the offer of finance agreement was signed March 6, 2008, disability coverage did not commence until the mortgage securing the loan is executed by the mortgagor on April 11, 2008.

[ 9 ] This court is of the opinion that the proper interpretation of this insurance contract as to when disability coverage began is April 11, 2008, for the following reasons:

(1) The clause in issue could have stated that “the insurance begins at the moment the mortgage is signed” or “the insurance begins at the moment the funds are advanced under the mortgage”. Although either of those phrases might have avoided this dispute that is not determinative of whether the words used are ambiguous. This issue remains whether the wording used is ambiguous.

(2) The object of contractual interpretation is the identification of the true intent of the parties at the time they entered into the contract. That intention must be ascertained by reference to the meaning of the words used by the contracting parties. See: Pharmacie Acadienne de Beresford Ltée v. Beresford Shopping Centre Ltd./Ltée., 2008 NBCA 12 , 290 D.L.R. (4th) 294 at 308 (N.B.C.A.).

(3) The canons of construction of written documents include the following:

(i) Where there is no ambiguity in a written contract it must be given its literal meaning.

(ii) Words must be given their plain, ordinary meaning, at least unless to do so would result in absurdity.

(iii) The contract should be construed as a whole, giving effect to everything in it if at all possible.

(iv) In cases of doubt, as a last resort, language should always be construed against the grantor or promisor under the contract or, as commonly referred to as, against the drafter of the contract.

(v) If a single transaction is carried into effect by several documents, those several documents are treated as one document and they must all be read together for the purpose of ascertaining the intention of the parties, provided the several documents are executed within so short an interval that the court can come to the conclusion that in fact they represented a single transaction. See G.H.L. Fridman, The Law of Contract in Canada , 6th ed. (Toronto: Carswell, 2011) at 451-460.

(4) In addition to the above, even if a contractual term is ambiguous, the contact should be construed as a whole, giving effect, if possible, to everything in it. See: Canada Deposit Insurance Corp. v. Canadian Commercial Bank (1992) , 13 C.B.R. (3d) 183 ; aff’g (1991), 1991 ABCA 76 , 79 Alta. L.R. (2d) 294 (Alta. C.A.) ; rev’g (1990), 1990 5504 (AB KB) , 73 Alta. L.R. (2d) 230 (Alta. Q.B.) ; and National Trust Co. v. Massey Combines Corp. (1988), 39 B.L.R. 245 , 69 C.B.R. (N.S.) 171 (Ont. H.C.) .

(5) The contractual terms in issue will now be considered in light of the legal principles.

(6) The phrase, “insurance begins at the moment when a loan contract secured by a mortgage is signed between the financial institution and the borrower” on its plain meaning and examined in isolation, is broad enough and clear enough to support the interpretation argued by the defendant. Specifically, the loan contract is not secured by a mortgage until, as in this case, it is signed by the mortgagor.

(7) The interpretation proposed by the insurer does not produce an absurd result in that there is no liability for insurance to protect against until the advancement of the loan amount which occurs upon the registration of the mortgage and therefore there is no risk to insure against unless and until the loan is advanced.

(8) The defendant’s interpretation becomes stronger upon consideration of the other terms of the contract, which, pursuant to paragraph 17 of the insurance policy between the defendant and La Caisse, states that the contract includes the following documents:

(vi) The insurance policy,

(vii) The financial institutions application,

(viii) The application for insurance,

(ix) The participant’s guide, and the declarations of the borrowers to obtain the loan.

(9) The plaintiff executed the defendant’s application for disability insurance on March 6, 2008. It states that the plaintiff’s insurance will begin at a date which is the later of the date of the application for insurance or the date the loan is advanced. This application contains the plaintiff’s confirmation that such application forms part of the insurance contract.

(10) There is no dispute that the loan advance did not occur until April 11, 2008, subsequent to the plaintiff becoming disabled on March 17, 2008.

(11) Page 2 of the application for insurance states that the insurance begins at the moment that increase loan interest rate for such insurance coverage applies to the principle debt amount.

(12) Paragraph 5 of the disability provisions of the insurance policy states that the insurance begins at the time from which the additional annual interest rate payable as a premium under the DISABILITY INSURANCE is applied to the net debt, as provided for in APPENDIX No. 2.

(13) Paragraph 1 of Appendix 2 of the policy which deals with premiums for disability insurance, states that the premium payable by the borrower to the financial institution is equal to the additional annual interest rate applied to the net debt.

(14) The mortgage states that the first payment due under the mortgage, including the mortgage insurance premium, is April 25, 2008.

(15) The participant’s guide states that it is part of the insurance contract. Page 12 thereof states that the insurance begins on the later of the signature date of the application for insurance and the date of the loan advance or the date of the signing of the mortgage. The later of the two dates provided for under the guide and the application for insurance is April 11, 2008.

[ 10 ] The contextual examination of all relevant terms of the documents forming this contract support the defendant’s position that paragraph 18 permits and should be interpreted as the disability insurance coverage commenced in this case on April 11, 2008, and not on March 6, 2008. That interpretation of paragraph 18 is in accord with the other terms of the contract cited above.

[ 11 ] The plaintiff’s alternate argument that representatives of La Caisse represented to her or led her to believe that she had disability coverage as of March 6, 2008, is not supported by the evidence.

[ 12 ] For the above reasons, this motion is dismissed. Based on joint submissions as to costs, the defendant shall be entitled to its costs agreed to in the amount of $5,000.

Kane J.

Date: August 30, 2012

ONTARIO SUPERIOR COURT OF JUSTICE RE: MARYSE POTVIN, by her litigation guardian JEAN POTVIN, Plaintiff AND DESJARDINS FINANCIAL SECURITY, Defendant, BEFORE: Kane J. COUNSEL: Sean P. Bawden, for the Plaintiff Marie-Claire Albanese, for the Defendant ENDORSEMENT Kane J.

Released: August 30, 2012