Intact Assurances inc. v. 9221-2133 Québec inc. (Centre Mécatech), 2015 QCCA 916

The insurer’s investigation is an important step in the claims process, which begins as soon as the loss occurs. The Civil Code of Quebec (hereinafter, “C.C.Q.”) states that the insured has certain obligations towards his insurer to facilitate the exercise of investigative power devolved on the latter. This legal obligation is provided for in Article 2471 of the C.C.Q., which states:

“2471.   At the request of the insurer, the insured shall inform the insurer as soon as possible of all the circumstances surrounding the loss, including its probable cause, the nature and extent of the damage, the location of the insured property, the rights of third persons, and any concurrent insurance; he shall also provide the insurer with vouchers and attest under oath to the truth of the information.

Where, for a serious reason, the insured is unable to fulfil that obligation, he is entitled to a reasonable time in which to do so.

If the insured fails to fulfil his obligation, any interested person may do so on his behalf.”

From forms to loss experts making inquiries on the insured and third parties, etc., insurance companies have many ways—which have been reformed by the practice and by jurisprudence over the years—to collect the information necessary to determine the circumstances surrounding the loss and to evaluate the scope and validity of a claim. One of these methods is statutory examination.

Although it is currently recognized in practice by insurers, the legitimacy of and the conditions for conducting a statutory examination have in recent years been called into question before the Quebec courts. However, the debate could be definitively closed due to a decision rendered by the Court of Appeal in May 2015, which is described more fully below.

1.   Statutory Examination: Overview of the Jurisprudence

A statutory examination is primarily intended to enable an insurer to investigate the circumstances of a loss and especially to require the insured to declare all information surrounding the loss, under oath. To this end, the Honourable André Roy writes, in Centre de développement familial provincial (1978) inc. v. Axa Assurances inc., 2007 QCCS 4899:

[TRANSLATION]
“The obligation to cooperate [in the insurer’s right to question any of the insured’s representatives] is obviously stipulated in favour of the insurer. It is intended to enable the insurer, the payor, namely to verify the validity of the claim, the circumstances surrounding the loss, its probable cause, and the scope of the damages.”¹

The insured’s failure to fulfill the obligation to cooperate in the insurer’s investigation can result in the forfeiture of the insured’s right to insurance benefits, on the basis of certain eligibility criteria.²

In this sense, the insurers maintain that this legal obligation to cooperate enables them to require that the insured submit to a statutory examination as part of their investigation. In the event of a refusal, the insured’s coverage may be denied.

However, as certain authors have expressed³, decisions rendered in recent years have challenged the jurisprudence as established thus far, casting doubts regarding the possibility that an insurer might require a statutory examination in conformity with 2471 C.C.Q., under penalty of forfeiture of the insured’s right to coverage. This minority jurisprudence is primarily founded on statements made by author Jean-Guy Bergeron:

[TRANSLATION]
“The initiative rests with the insurer. At its request, the insured provides the information relevant to the circumstances surrounding the loss, the supporting documents, and the sworn affidavit. The insurer can require the insured party to disclose the circumstances, but cannot force a cross-examination at this stage in the claims process.”⁴

[Our emphasis]

In Martin-Bédard v. Axa Assurances inc.⁵, rendered in 2007, and in Utica Mutual Insurance Company v. Aspler, Goldberg, Joseph Ltd.⁶, rendered in 2008, the Superior Court ruled on two cases which would confound the foundations of a principle that had been established many years ago. With utmost eloquence, the Honourable France Martel states, in the Utica case:

[TRANSLATION]
“It is true that in practice, the examination is a method retained by insurers to find out the circumstances surrounding a claim, but the insured has no legal obligation to submit to it.”

[Our emphasis]

As far as a statutory examination is concerned, the insured’s legal obligation to cooperate in the insurer’s investigation was most certainly being criticized. Thereupon, these two judgments led to a potential upheaval of this insurance practice.

2.   9221-2133 Québec inc. (Centre Mécatech) v. Intact Assurances inc., 2014 QCCQ 1613

More recently, under the influence of this minority jurisprudence, the Court of Quebec rejected the insurer’s argument that the insured had caused it harm in denying it its right to conduct a full investigation as a result of the insured’s refusal to cooperate.

The insurer maintained that no indemnity should be paid out given that the plaintiff’s representative, also a plaintiff, had manifestly refused to be questioned as part of a statutory examination, thus refusing to cooperate in the investigation.

Although the Court perceived a negative inference in the plaintiff-insured’s refusal to submit to a statutory examination, it also distinguished, on the one hand, the authorization request necessary to enable access to certain information, and on the other hand, the examination of the very same insured party regarding the circumstances surrounding the loss claimed. To this effect, the Honourable François Godbout writes:

Dealing specifically with the issue of an insured party’s refusal to submit to an examination regarding the circumstances surrounding a loss, Judge Godbout continues:

[TRANSLATION]
“The insurer, or the representative acting on its behalf, must in principle, limit its quest for information to only the elements specified in that Article, that is to say all circumstances surrounding the loss, including its probable cause, the nature and extent of the damage, the location of the insured property, the rights of third persons, and any concurrent insurance.

In the event that an insured party informs his insurer that he has been the victim of a theft, there is a presumption that this assertion is correct, because in contractual matters, good faith is presumed.

The insurer has many means at its disposal to validate this assertion or to be convinced of the opposite. Information collection is essential, and only an insured’s refusal to allow it, with all of the openness required, is itself sufficient to justify a decision not to compensate.

Questioning the insured is another one of the methods frequently used by insurers in the context of an investigation into a reported claim.

Without denying its role in understanding what might have happened, the Court believes that an insured party cannot be forced to submit to an examination, and such a refusal is not in and of itself sufficient to justify an insurer’s refusal to compensate the insured.

This refusal raises doubts, that is certain, but the evidence must, with the required preponderance, point to other negative factors colouring the position of the insured, who claims to have had something stolen.

It is not up to the insured to prove that he has not been robbed; it is up to the insurer to demonstrate it.”⁸

[Our emphasis]

Consequently, the Court concluded that the insured’s refusal did not deliberately prevent the insurer from possibly obtaining any other information relevant to its investigation, the insurer having many other methods at its disposal to either validate or disprove the  insured’s version of facts. In such cases, the insurer did not have the power to require a statutory examination before denying coverage.

3.   The Appeal Decision

In a judgment rendered by the Court of Appeal on May 25, 2015⁹, the Honourable Jacques Chamberland reminded us of a fundamental principle derived from the insured’s obligation to cooperate in the insurer’s investigation: [TRANSLATION] “It is not up to the insured to decide whether a statement is necessary on his account, nor to choose how the insurer will lead its investigation.”

In the Court’s view, the insurer’s right to impose any obligation on the insured must take precedence over its power to investigate with third persons:

[TRANSLATION]
“With all due respect for the trial judge, it is not correct to subject the insurer’s right to any obligation on its part to investigate with third persons. This reductive manner of viewing the obligation to cooperate would allow any insured party to systematically refuse to answer any of the insurer’s questions regarding the circumstances surrounding the loss, while settling for providing the consent required for the collection of relevant information by investigating with third parties.”¹⁰

Thus, the Court considers that the insured’s refusal to participate in or answer the insurer’s questions with respect to a statutory examination constitutes a breach of his obligation to cooperate.

When an insured party fails to honour his obligation to cooperate in the insurer’s investigation, he could potentially lose his right to compensation. The Court does not deviate from the jurisprudence in this regard: the insurer is required to establish, on the one hand, the bad faith of the insured, and on the other hand, that the lack of cooperation caused it harm, namely by preventing it from conducting a full investigation or exercising a potential subrogatory remedy. To this end, we agree with the following statement, made by Judge Chamberland:

[TRANSLATION]
“In this case, I have no hesitation in concluding that Mr. Cloutier’s lack of cooperation in his insurer’s investigation was in bad faith. The fact that the appellant suffered harm is also without doubt, if only because it was never able to determine whether its insured party had a real interest in insuring the vehicle.”¹¹

For these reasons, the Court of Appeal reverses the judgment rendered by the Court of Quebec and rejects the action brought against the insurer.

Conclusion
Although in the present case the Court of Appeal legitimized this practice by insurers, already recognized by former jurisprudence, the controversy regarding the requirement to submit to a statutory examination is by no means over. In this particular case, the plaintiff-respondents will attempt to take this debate all the way to the Supreme Court of Canada, where they will present a motion for leave to appeal.

Consequently, it will be interesting to pay special attention to the outcome of this appeal, which will make it possible, maybe finally, to permanently define the insured’s obligation to cooperate in the insurer’s investigation with regards to a statutory examination.

 

1. Centre de développement familial provincial (1978) inc. c. Axa Assurances inc., 2007 QCCS 4899, par. 145. Voir aussi Bonneville c. Prudentielle (La), compagnie d’assurance ltée., [1994] R.R.A. 554 (C.S.).
2. Idem.
3. Jean-François PICHETTE, « L’interrogatoire statutaire, extension de l’obligation de collaboration de l’assuré », dans Service de la formation continue du Barreau du Québec, Développements récents en droit des assurances, Cowansville, Éditions Yvon Blais, 2009.
4. Jean-Guy BERGERON, Précis de droit des assurances, Sherbrooke, Les Éditions Revue de Droit de l’Université de Sherbrooke, 1996, p. 197.
5. Martin-Bédard c. Axa Assurances inc., 2007 QCCS 1316.
6. Utica Mutual Insurance Company c. Aspler, Goldberg, Joseph Ltd., 2008 QCCS 3811.
7. 9221-2133 Québec inc. (Centre Mécatech) c. Intact Assurances inc., 2014 QCCQ 1613, p. 8.
8. Ibid., p. 9.
9. Intact Assurances inc. c. 9221-2133 Québec inc. (Centre Mécatech), 2015 QCCA 916.
10. Ibid., p. 3.
11. Idem.