In 9369-1426 Québec Inc. (Restaurant Bâton Rouge) c. Allianz Global Risks US Insurance Company, 2021 QCCA 1594, the Court of Appeal analyzed a mediation and arbitration clause contained in an insurance policy. Further to its analysis, it affirmed that the clause was legal and enforceable.

Background

In May 2020, Bâton Rouge Restaurant (“Bâton Rouge”) filed an application for authorization to institute a class action against its insurer, Allianz Global Risks US Insurance Company (“Allianz”). The purpose of the application for authorization was to obtain indemnification for the operating losses suffered by Bâton Rouge and the members of the proposed class due to the COVID-19 pandemic.

Once the application for authorization was filed, Allianz raised a declinatory exception, asking the Superior Court to decline jurisdiction and refer the parties to mediation and arbitration. Allianz’s position was based on the following clause, contained in the section headed “Provincial Statutory Conditions Applicable to the Province of Quebec only”:

“5. 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.”

Bâton Rouge contested the declinatory exception, claiming, in particular, that the mediation and arbitration clause is ambiguous. In support of that argument, it submitted that a choice of forum clause conflicted with the mediation and arbitration clause,  thus rendering it ambiguous. The choice of forum clause is contained in the “General Terms and Conditions” section, and is worded as follows:

“2. Policy Jurisdiction

This policy shall be deemed to have been made under and shall be governed by the laws and decisions of the province or territory shown in the mailing address of the Named Insured, as it is shown in the “Policy Declarations”.

The Courts in the Court District in which the Named Insured is located shall have exclusive jurisdiction in case of a coverage dispute.”

Upon analysis, the Superior Court concluded that the mediation and arbitration clause is a complete undertaking to arbitrate, and is not tinged with any ambiguity[1]. Thus, it allowed Allianz’s declinatory exception, declined jurisdiction, and dismissed the application for authorization. Bâton Rouge appealed the decision.

The Court of Appeal decision

According to the Court of Appeal, to resolve the dispute between the parties, it is necessary to interpret the terms of the insurance policy. The first step in the interpretation exercise is to determine whether the terms are clear or ambiguous. If they are clear, the Court’s role is limited to applying them. If there is any ambiguity, the terms must be interpreted based on the general rules of contract interpretation contained in Articles 1425 to 1432 C.C.Q.

Applying these principles to the facts of the case, the Court of Appeal dismissed the appeal and affirmed the validity of the mediation and arbitration clause.

Indeed, while it acknowledges that there is a conflict between the mediation and arbitration clause and the choice of forum clause, the Court reminds us of the rule of interpretation whereby specific clauses prevail over general clauses, in the same way as an exception prevails over the rule it derogates from. Thus, according to the Court, the choice of forum set out in the “General Terms and Conditions” section applies in the common law provinces, while the mediation and arbitration clause set out in the “Provincial Statutory Conditions Applicable to the Province of Quebec only” clause applies in Quebec.

To the Court, this conclusion is in accordance with Article 1428 C.C.Q., which states that a clause is given a meaning that gives it some effect rather than one that gives it no effect.

Finally, the Court was of the opinion that it is not necessary to resort to the contra proferentem interpretation rule, according to which any interpretation issues in a contract of adhesion must be resolved in favour of the adhering party. Indeed, this rule is a last-resort interpretation measure and the other interpretation rules (like the one whereby specific clauses prevail over general clauses) prevail over the contra proferentem rule.

Comments

This decision confirms that mediation and arbitration clauses contained in an insurance policy are legal and enforceable and it reminds us of the need to give them a flexible and liberal scope.

Insurers would be well advised to include such clauses in their insurance policies, since they facilitate risk management while avoiding lengthy and costly delays before the courts, especially in the context of class actions.

For any questions concerning insurance matters, please contact a member of Stein Monast’s team, or the writer of this article.

[1]   For further details of the Superior Court’s decision, we refer you to the article by our colleagues, Maud Rivard and Émilie Nadeau, titled Assurance interruption des affaires : votre litige doit-il être soumis à la médiation ou à l’arbitrage?