COURT FILE NO.: CV-09-512
DATE: 2012-12-06
ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N:
J.I.L.M. ENTERPRISES & INVESTMENTS LIMITED
Christopher Hacio, for the Plaintiff
Plaintiff
- and -
INTACT INSURANCE (formerly called ING INSURANCE COMPANY OF CANADA) and AON REED STENHOUSE INC.
Umberto Agostino and Robin. Clinker, for the Defendant and Intact Insurance
Defendants
HEARD: June 29 and September 25, 2012,
at Thunder Bay, Ontario
Mr. Justice D.C. Shaw
Reasons On Motion
[1] On May 8, 2009, fire damaged the Dorion Inn – a hotel, convenience store, gas bar and restaurant in the town of Dorion, owned and operated by the plaintiff.
[2] The plaintiff made a claim under a policy of insurance with the defendant, Intact Insurance. It included a claim of $825,296.32 for the replacement cost of contents that were destroyed or damaged in the fire.
[3] Intact denied the claim for contents on the basis that the policy did not include contents coverage.
[4] The plaintiff brought the within action against Intact. The action also named the defendant, AON Reed Stenhouse Inc., the plaintiff’s insurance broker. The plaintiff subsequently settled its claim against AON for $250,000.00.
[5] Intact brings this motion for partial summary judgment to dismiss the plaintiff’s claim for the replacement cost of the lost contents.
Summary Judgment
[6] The parties agree that a summary judgment motion made under Rule 20 is to be determined in the context of the principles set out by the Ontario Court of Appeal in Combined Air Mechanical Services Inc. v Flesch, 2011 ONCA 764, [2011] ONCA 764, 108 O.R. (3d) 1.
[7] Pursuant to rule 20.04 (2.1), the motion judge may weigh the evidence, evaluate the credibility of a deponent and draw any reasonable inference from the evidence in determining whether there is a genuine issue requiring a trial, be it a claim or a defence. Rule 20.04 (2.2) enables a motion judge to direct the introduction of oral evidence to assist him or her in exercising these powers.
[8] The Court of Appeal notes that the new wording in Rule 20 – “a genuine issue requiring a trial” – coupled with the enhanced powers under rule 20.04 (2.1) and (2.2), now permits the motion judge to dispose of cases on the merits where the trial process is not required in the “interest of justice”. See paras. 36 and 44 of Combined Air.
[9] At paras. 50, 53, 54 and 75 the Court of Appeal states:
50…In deciding if these powers should be used to weed out a claim as having no chance of success or be used to resolve all or part of an action, the motion judge must ask the following questions: can the full appreciation of the evidence and issues that is required to make disposition findings be achieved by way of summary judgment, or can this full appreciation only be achieved by way of a trial.
53… We wish to emphasize the very important distinction between “full appreciation” in the sense we intend here, and achieving familiarity with the total body of evidence in the motion record. Simply being knowledgeable about the entire content of the motion record is not the same as fully appreciating the evidence and issues in a way that permits a fair and just adjudication of the dispute. The full appreciation test requires motion judges to do more than simply assess if they are capable of reading and interpreting all of the evidence that has been put before them.
54… The point we are making is that a motion judge is required to assess whether the attributes of the trial process are necessary to enable him or her to fully appreciate the evidence and the issues posed by the case. In making this determination, the motion judge is to consider, for example, whether he or she can accurately weigh and draw inferences from the evidence without the benefit of the trial narrative, without the ability to hear the witnesses speak in their own words, and without the assistance of counsel as the judge examines the record in chambers.
75…The important element of the analysis under the amended Rule 20 is that before using the powers in rule 20.04 (2.1) to weigh evidence, evaluate credibility, and draw reasonable inferences, the motion judge must apply the full appreciation test in order to be satisfied that the interest of justice does not require that these powers be exercised only at trial.
[10] The Court of Appeal recognized the continued applicability of the proposition that each side must put its best foot forward and that a party is not entitled to sit back and rely on the possibility that more favourable facts may develop at trial. This position is subject to the caveat that it will not be in the interest of justice to bring a summary judgment early in the litigation process “…in cases where the nature and complexity of the issues demand that the normal process of production of documents and oral discovery be completed before a party is required to respond to a summary judgment motion.” See paras 56 and 57 of Combined Air.
Interpretation of Insurance Policies
[11] In Brissette Estate v Westbury Life Insurance Co., 1992 CanLII 32 (SCC), [1992] 3 S.C.R. 87 (S.C.C.), Sopinka J., for the majority, stated at para. 4:
In interpreting an insurance contract the rules of construction relating to contracts are to be applied as follows:
The court must search for an interpretation from the whole of the contract which promotes the true intent of the parties at the time of entry into the contract.
Where words are capable of two or more meanings, the meaning that is more reasonable in promoting the intention of the parties will be selected.
Ambiguities will be construed against the insurer.
An interpretation which will result in either a windfall to the insurer or an unanticipated recovery to the insured is to be avoided. See Consolidated-Bathurst Export Ltd. v Mutual Boiler and Machinery Insurance Co., 1979 CanLII 10 (SCC), [1980] 1 S.C.R. 888.
[12] The first of these rules of construction is described by Estey, J., in Consolidated-Bathurst, supra, at p.899, as step one in the interpretative process. Step two of the process encompasses the second through fourth of these rules of construction. Step two arises only where an ambiguity is found in the terms of the policy. If there is an ambiguity in the terms of the policy, the courts should try to give effect to the reasonable expectations of the parties, without windfalls in favour of either of them. See Jesuit Fathers of Upper Canada v. Guardian Insurance Co. of Canada, 2006 SCC 21, [2006] 1 S.C.R. 744 (S.C.C.) at para. 29.
[13] A contractual provision is ambiguous if it is reasonably susceptible of more than one meaning. See Hi-Tech Inc. v. Sears Canada Inc. (2001), 2001 CanLII 24049 (ON CA), 52 O.R. (3d) 97 (C.A.). An ambiguity may also arise where two or more provisions in the same policy are each, itself, clear but are irreconcilable. See Craig Brown, Insurance Law in Canada (Scarborough: Carswell, looseleaf, updated 2010).
[14] The ambiguity principle resolves conflicts between two reasonable but differing interpretations of the policy. However: “The court should not strain to create an ambiguity where none exists”. See Chilton v Co-operators General Insurance Co., [1997] O.J. No. 597 (C.A.), at para. 26.
[15] As noted by Sanderson J. in Torchia v Royal Insurance Co. of Canada, 2003 CanLII 19344 (ON SC), [2003] O.J. No. 2199 (S.C.J.), at para. 18: “It is trite to say that an insurance policy is a contract. Where a contract is clear and unambiguous, effect must be given to its terms, even if a perceived unfairness may result. Insurers are entitled to limit the risks they are prepared to cover.”
Positions of the Parties
[16] Intact submits that the wording of the policy is clear, that there is no coverage available to the plaintiff for contents that were lost or damaged in the fire. Intact further submits that because there are no ambiguities in the policy, the principles of contra proferentem and reasonable expectation have no application.
[17] The plaintiff submits that the policy does provide contents coverage. In the alternative, the plaintiff submits that there is a genuine issue requiring trial because the policy is ambiguous and the court requires a trial to consider the extrinsic evidence necessary to resolve the ambiguity.
Discussion
[18] I am satisfied that a full appreciation of the evidence and the issues can be achieved on this summary judgment motion, on the motion record, in a way that permits a fair and just adjudication of whether or not the insurance policy provides contents coverage to the plaintiff, without the necessity of a trial to weigh the evidence, evaluate credibility and draw reasonable inference. Further, I am satisfied, on reading the wording of the policy, in light of the relevant surrounding circumstances, that there is no ambiguity in the policy, that there is no coverage for loss of contents and that there is therefore no genuine issue requiring trial. Summary judgment, as claimed in the notice of motion, should be granted.
[19] In their respective submissions, counsel for both parties referred at some length to affidavits and transcripts filed on the motion, relating to interactions between the plaintiff and the plaintiff’s insurance broker, the defendant AON Reed Stenhouse. AON Reed Stenhouse had acted as the plaintiff’s broker in obtaining insurance for the Dorion Inn on an annual basis, with various insurers, from the mid 1980’s until the 2008-2009 policy in question. The plaintiff contends that it requested and relied on AON to arrange for insurance that included contents and coverage. Intact contends that although for some period of time the policies arranged by AON had contents coverage, such coverage ended with the 1994-1995 policy and that AON repeatedly warned the plaintiff after that date that the annual policies did not contain contents coverage. The plaintiff answers that there is no proof that it actually received these warnings from AON. Intact refers to evidence that the plaintiff representative admitted that he did not read the policies and, in the normal course, would only look at the invoices for the premiums. The plaintiff submits that an adverse inference should be drawn against Intact because it failed to provide evidence (a) that the plaintiff did not want contents coverage, (b) that Intact did not intend to provide contents coverage to the plaintiff and (c) verifying the type of insurance that AON asked Intact to provide.
[20] The plaintiff settled its claim against AON in this action for $250,000. In its pleadings, the plaintiff alleged that AON had failed to properly assess the plaintiff’s insurance needs, that it had failed to advise the plaintiff that it did not have coverage for contents and that it led the plaintiff to believe that the plaintiff had coverage for contents under the policy.
[21] Intact submits that it is inconsistent for the plaintiff to have settled with AON for failing to advise the plaintiff that it did not have contents coverage, but at the same time to allege, as against Intact, that it did have coverage. Intact submits that a finding of coverage would give the plaintiff double recovery.
[22] Dealing with this latter point, the fact that the plaintiff made alternative claims against AON and Intact in its pleadings, and settled with AON, is of no consequence in determining this motion. Pleadings are not evidence, and alternative claims do not operate to prejudice a plaintiff. Likewise, the plaintiff is not prejudiced in its claim against Intact because it settled with AON. Parties settle for any number of reasons. The settlement is not an acknowledgement by either the plaintiff or AON of the truth of any facts from which an adverse inference can be drawn against the plaintiff.
[23] In considering what significance, if any, to attach to the evidence of the dealings between the plaintiff and AON, on the issue of whether the policy contained contents coverage, it is important to distinguish between an insurance broker and an insurance agent. In Adams-Eden Furniture Ltd. v. Kansa General Insurance Inc., 1996 CanLII 12473 (MB CA), [1996] 113 Man. R. (2d) 142, the Manitoba Court of Appeal adopted this statement from Couch On Insurance, (2nd ed. (rev.) 1984), para. 25:93:
An “insurance broker” is one who acts as a middleman between the insured and the insurer, and who solicits insurance from the public under no employment from any special company, and who, upon securing an order, places it with a company selected by himself, whereas an “insurance agent” is one who represents an insurer under an employment by it. Whether a person acts as a broker or an agent is not determined by what he is called but is to be determined from what he does. In other words, his acts determine whether he is an agent or a broker.
[24] In this case, the parties agree that AON was an insurance broker. As such, the only agency relationship was between AON and the plaintiff.
[25] If, at the time the plaintiff and Intact entered into the contract, the plaintiff had made it known to an agent of Intact that it wanted contents insurance, this would be material and relevant evidence in determining the common intention of the parties. However, that was not the case here. The most that can be said, if the plaintiff’s evidence as to what it told AON is accepted, is that it made its intentions known to its own agent. That evidence is not material or relevant to the issue of the proper interpretation of this policy of insurance. I accept that even in the absence of ambiguity, the objective circumstances or factual matrix surrounding the parties’ entry into the contract, may be admissible in order to give effect to the intention of the parties as expressed in
their written agreement. In Jesuit Fathers, supra, the court stated at para. 27:
“As with all contracts, the terms of the policy must be examined, in light of the surrounding circumstances, in order to determine the intent of the parties and the scope of their understanding”.
However, evidence of one party’s subjective intention (in this case, the plaintiff’s subjective intention as expressed to its agent, AON) has no place in the determination of the contractual intent of the parties. See Eli Lilly & CO. v Apolex Inc., 1998 CanLII 791 (SCC), [1998] 2 S.C.R. 129 (S.C.C.), at para. 54; Telecommunications Employees Assn. of Manitoba Inc. v Manitoba Telecom Services Inc., 2012 MBCA 13; Anna Wong, “The Admissibility of Extrinsic Evidence”, The Lawyers Weekly, May 11, 2012.
[26] Further, having found that there is no ambiguity in the policy, there is no need to have resort to extrinsic evidence or to go past step one of the interpretive process as described by Estey J. in Consolidated-Bathurst, supra.
[27] Because the issue is the interpretation of the wording of the insurance policy, without resort to extrinsic evidence, a motion judge in this particular case is in as good a position as a trial judge in fully appreciating the evidence and the issues. There is no advantage in this case to weigh and draw inferences from the evidence, to hear directly from witnesses, and to weigh credibility in the context of a trial. There is no legal or factual issue that requires a trial for its fair and just resolution.
[28] Intact Insurance Policy, Number 501217235, was in effect for the period September 15, 2008, to September 15, 2009. The contents of the Dorion Inn were damaged or destroyed by fire on May 8, 2009.
[29] Page 2 of the policy is a declarations page for property and business interruption coverages under the policy. For ease of reference a copy of this page is attached as Schedule “A” to these Reasons.
[30] The wording at the top of page 2 is critical in determining whether there is contents coverage under the policy. It states:
Insurance provided subject to the Declarations, Terms and Conditions of the policy and its Forms only for the coverages for which specific Forms are attached and for which a specific Limit or Amount of Insurance is shown hereunder. (Emphasis added)
[31] Page 2 lists Forms and Coverages. These include Form BFO2, Commercial Building and Contents Broad Form. Under this heading, there is shown only one item – “Building” – with a “limit of insurance” of $1,769,670.00, and a premium or $6,076.00. There is nothing under the heading that relates in any way to contents and there is no specific limit or amount of insurance shown for anything that could relate to contents.
[32] Form BF02, Commercial Building and Contents Broad Form, is included further on in the policy. It states:
This form insures those of the following items for which an amount of insurance is specified on the “Declaration Page” and only while at the “premises.”
“Building”
“Equipment”
“Stock”
“Contents of Every Description”
“Property of Every Description”
[33] As noted, the declarations page regarding property and business interruption coverage refers only to “Building” and only specifies an amount of insurance for “Building”. There is no reference to “Equipment”, “Stock”, “Contents of Every Description” or “Property of Every Description”. The definition of “Building” in Form BF02 cannot lead to any misunderstanding that it might include contents.
[34] In my opinion, the policy clearly and unambiguously does not contain coverage for contents. Insurance is provided only for the coverages for which a specific limit or amount of insurance is shown. There is no specified limit or amount of insurance shown for contents. A reasonable person reading the policy would understand that, as concerns property, only the building was insured.
[35] The plaintiff submits that the coverages or declarations page (page 2 of the policy) and Form BF02 expressly state that the policy provides “Commercial Building and Contents Broad Form” coverage, and that Form BF02 specifically states that “Equipment”, “Stock”, “Contents of Every Description” and “Property of Every Description” are insured.
[36] However, with respect, that is not a fair and reasonable reading of the policy. The declarations page and Form BF02 are explicit that only items for which an amount of insurance is specified on the declaration page are insured. A reasonable insured would not ignore that clear notice.
[37] The plaintiff also refers to Form EP04, “The Commercial Edge Coverage Endorsement (Property)”, which is shown on the declarations page and which is produced in full later in the policy. The “Summary of Coverages” in that form refers to “Building and/or Contents” coverage. It is an extension of coverage to include such things as inflation protection and replacement cost rather than actual cash value. However, under the heading, “Buildings and/or Contents”, Form EP04 states:
The following extensions are subject to all terms, conditions, exclusions, stipulations and provisions applicable to the Commercial Building and Contents Broad Form (BF02) and the Limit of Insurance specified in the Summary of Coverages in this Form
[38] The reader of the policy therefore is directed back to the provisions of Form BF02, which limit insurance to those coverages for which a limit of insurance is shown on the declarations page.
[39] The plaintiff urges the court to look at extrinsic evidence that it says makes it clear that it requested AON to purchase contents insurance for the Dorion Inn. However, I agree with the submission of Intact that the issue on this motion, is whether the policy contains contents coverage, not “should the policy have contained contents coverage”. The latter issue is one as between the plaintiff and AON.
[40] It is also helpful to look at the premiums set out in the policy for the coverages in place. The first page of the policy shows the Total Policy Premium is $8,119.00. This includes the premium of $6,076.00 for the Building coverage. There is a further $244.00 under various Forms for a deductible clause, flood extension, sewer back-up extension and the extensions under Form EP04 referred to above. The balance of the premium is for crime coverage, general liability coverage and umbrella liability coverage. There is no premium shown in the policy for contents. No premium was paid for contents coverage. The plaintiff, as a reasonable insured, would not have understood from reading the policy that it had paid for contents coverage.
Conclusion
[41] The onus is on the plaintiff to prove it has the coverage claimed. This is a coverage case, not an exclusions case. The wording of the policy satisfies me that the plaintiff cannot bring itself within the policy to recover for loss of contents. There is no genuine issue for trial.
[42] A declaration is granted that there is no coverage for contents under the policy. The plaintiff’s claims that relate to the replacement cost of damaged or destroyed contents are dismissed, with costs.
[43] If the parties are unable to agree on the costs of this motion, Intact shall serve and file written submissions within 30 days. The plaintiff shall have 20 days thereafter to serve and file its responding submissions.
The Hon. Mr. Justice D.C. Shaw
Released: December 6, 2012
COURT FILE NO.: CV-09-512
DATE: 2012-12-06
ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N:
J.I.L.M. ENTERPRISES & INVESTMENTS LIMITED
Plaintiffs
- and –
INTACT INSURANCE (formerly called ING INSURANCE COMPANY OF CANADA) and AON REED STENHOUSE INC.
Defendants
REASONS ON MOTION
Shaw J.
Released: December __, 2012
/mrm