9124-4541 Québec Inc. et al. v. Intact compagnie d’assurance et al., 2014 QCCS 42501
After a fire damaged a poultry-processing plant not long before a backflow of water overtook the plaintiffs’ administrative offices, the latter, unhappy with the amount they received from their insurer, claimed additional compensation totalling just over 8 million dollars for damages to the plant, equipment and offices, in addition to business losses and additional costs.
More generally, the plaintiffs accused their insurer of incompetence and of acting in bad faith while processing their claims, failing to perform any specific interventions in the days following the incidents. In a judgment rendered September 3, 2014, Justice Jacques Blanchard did not uphold the main claims of the plaintiffs, citing that they failed to mitigate their damages by ignoring their insurer’s recommendation to begin certain repairs as soon as possible. It should be noted that repairs to the plant and its offices still hadn’t been completed at the time of the judgment, and in the meantime, the building had become unsafe and a total loss.
In its ruling, the Court revisits the legal principles applicable in such a situation, namely that the insurer is responsible for paying the indemnity resulting from an incident, while reserving the right to repair, rebuild or replace the insured property. Similarly, the insureds have the obligation not to abandon the damaged property and to facilitate its salvaging.
With regards to the plant, the insurer had advised the plaintiffs to board-up the openings resulting from the fire on the day following the incident, which was only done one month later. Furthermore, the insurer wanted to quickly proceed with the selective demolition of the damaged areas. Disagreeing with this position, the insureds elected to do nothing, thus committing a fault by not mitigating their damages. The Court ruled that the action chosen by the insurer was justified and that the plaintiffs did not act reasonably by delaying the boarding up of the openings, by not moving forward with the selective demolitions and by letting the building disintegrate. By doing so, the causal link was broken and the insurer cannot be held responsible for the damages resulting from the insureds’ failure to mitigate.
The Court’s ruling is the same for the plant equipment. In fact, if the plaintiffs had proceeded with the selective demolition as planned, the equipment could have been cleaned and salvaged.
Concerning the water damage to the administrative offices, the insurer advised the plaintiffs to dry the floor the next day, and authorized repair work a little more than one month later. The Court ruled that the bungalow could not yet be deemed a total loss at the time when the work was authorized, even though the insurer should have acted sooner. That being said, the insureds should have started the work as soon as the authorization had been granted instead of allowing mould to set into the building. As a result, the damages claimed are due to worsened damage caused by the plaintiffs’ failure to act.
Regarding the loss of business, the Court deems that, if the plaintiffs had followed the plan established by the insurer, operations could have resumed 12 weeks after the fire. Considering the variable costs not incurred during this period, the Court ruled that there were no operating losses.
In conclusion, the Court only upheld the $10,000 claim in additional costs as provided by the policy, as all other damages being claimed were a result of the plaintiffs’ inaction.
1 This decision has been appealed.