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Last December 23, the Supreme Court of Canada partially overturned the decision of the Quebec Court of Appeal in the case of Cinar Corporation v. Robinson1 and reinstated most of the conclusions of the Quebec Superior Court.BACKGROUNDIn the 1980s, Claude Robinson (“Robinson”) developed a project for a television series entitled “The Adventures of Robinson Curiosity” (“Robinson Curiosity”). He partnered with Pathonic to whom he had presented his project. His copyright was registered shortly afterward and Productions Nilem Inc. (“Nilem”), of which he was the sole shareholder, was named owner of the copyright. In 1986, Pathonic partnered with Cinar so that Cinar could represent Pathonic’s interests in the United States. Cinar’s directors, Micheline Charest and Ronald Weinberg, were provided with a copy of all of the documents for the Robinson Curiosity project. However, the project never saw the light of day.In parallel with Robinson’s activities, during the 1990s, a producer with France Animation, Christophe Izard, presented a project for a televised series whose main character was named Robinson Sucroë (“Sucroë”). Cinar was involved as early as 1992 in the production of this project, and, as of 1993, in the writing and co-script writing under contracts with France Animation.Robinson continued his work on his Curiosity project during 1994. In August 1995, Cinar registered copyright to the Sucroë project which was first broadcast in September 1995. Robinson immediately noticed similarities between the Sucroë project and his Curiosity project.In July 1996, Robinson and Nilem Inc. brought an action for damages and an injunction against Cinar, Charest, Weinberg, France Animation, Izard and other European partners, including Ravensburger and the BBC, alleging plagiarism of their work.DECISION OF THE SUPERIOR COURT OF QUÉBECAfter 83 days of trial, Justice Claude Auclair concluded that the defendants had had access to the Robinson Curiosity project and work during the 1980s.The judge found that even though the Robinson Curiosity work had not been completed, it was nevertheless an original work because it was sufficiently developed and advanced. There were many similarities between the characters and drawings of Sucroë and the original Robinson Curiosity project, despite some misleading changes. According to the Court, a layperson would have been convinced of the similarity, which gave rise to a presumption of infringement that was not rebutted by the defendants.The Court found the defendants solidarily liable and that Cinar and its two directors, Charest and Weinberg, had violated their obligations of good faith and loyalty. Therefore, Charest and Weinberg could not hide behind the corporate veil to escape their liability.The injunctions issued applied against the BBC preventing it from broadcating Sucroë. The Court also ordered that the copies be returned, followed by their destruction within 60 days.As for the damages, Justice Auclair ordered the defendants to pay a total of $5,224,293, detailed as follows:  $607,489 in compensatory damages for pecuniary loss; $1,716,804 in loss of profits (50% of the profits earned by the Sucroë project, given the plaintiffs’ partnership with Pathonic); $400,000 for the psychological harm suffered by Robinson; $1,000,000 in punitive damages; $1,500,000 for costs on a solicitor-client basis, since the defendants tried to exhaust the plaintiffs in their conduct of the proceeding. COURT OF APPEAL’S DECISIONThe Court of Appeal allowed the appeal in part. It upheld the trial judge’s decision on the infringement of Robinson’s work, finding that there was no error in the trial judge’s reasoning. The Court also affirmed the liability of Cinar and of Weinberg, both personally and in his capacity as liquidator of the estate of the deceased, Micheline Charest as well as of Izard.However, the Court of Appeal reduced the damage award to a total of $2,736,416. As for the loss of profits, the Court set aside the awards against Weinberg and Izard because only Cinar and France Animation benefited from the use of the Sucroë work. The Court also set aside the award of $1,117,252 relating to the musical rights, based on the finding that the Robinson Sucroë musical work was original and dissociable from the Curiosity project. According to the judgment, there was therefore no violation of Robinson’s copyright in this respect.Finally, according to the Court of Appeal, the psychological harm suffered by Robinson was a bodily injury of a non-pecuniary nature for which compensation was limited by the cap set by the Supreme Court of Canada.2 Since the present value of this cap was $242,700, the Court awarded 50% of this amount, or $121,350, in light of the circumstances and the seriousness of the psychological harm.The Court of Appeal also reduced the amounts awarded in punitive damages and assessed them individually at $100,000 for Cinar and $50,000 each for Weinberg, Charest and Izard. It further declared that these awards were not solidary.As for costs, the Court of Appeal upheld the trial judge’s decision, but did not allow the solicitor-client costs incurred in the appeal proceedings.THE SUPREME COURT’S DECISIONIn a unanimous judgment the reasons of which were written by Chief Justice McLachlin, the Supreme Court upheld the judgment of the Court of Appeal on the issue of the defendants’ liability. It stated that one must determine the cumulative effect of the copied features of the Curiosity project in deciding whether they amount to a substantial part of Robinson’s skill and judgment expressed in his work as a whole. To determine whether a substantial part has been copied, one must conduct a qualitative and holistic assessment of the similarities between the works, taking into account the relevant resemblances and differences. In the absence of a palpable and overriding error in both the trial judge’s and Court of Appeal’s assessment of the facts, the Supreme Court refused to intervene and affirmed the defendants’ liability.On the assessment of damages, the Court noted that the Court of Appeal could not intervene unless there was a palpable and overriding error in fact by the trial judge and reassessed each head of damages. It set the amount to which Robinson and Nilem was entitled at $4,379,293. With respect to the loss of profits, the Supreme Court found that the trial judge had committed no error in allowing the amount for the soundtrack to the work on the basis that it was indissociable from the work itself, and reinstated the holding of the trial judgment on this point. However, it found that this award must not be solidary since its aim was the disgorgement of the profits illegally obtained by each of the defendants personally. Accordingly, Charest, Weinberg and Izard were not personally bound to disgorge the profits since they did not benefit therefrom.As regards the non-pecuniary damages, the Supreme Court held that the application of the cap on claims should not be extended beyond those stemming from bodily injury. In this case, the non-pecuniary damages suffered by Robinson did not stem from a bodily injury. It should rather be characterized as psychological suffering stemming from material injury, i.e. the infringement of his copyright which is equivalent to a breach of his property rights. The Court reinstated the trial judgment and confirmed that Robinson was entitled to the amount of $400,000 under this head.The Court also confirmed that punitive damages cannot be awarded on a solidary basis. However, it found that, while the Court of Appeal was correct in reassessing the amount thereof, it did not give sufficient weight to the gravity of the defendants’ conduct. In the Court’s view, the amount of $500,000 achieved an appropriate balance between the overarching principle of restraint that governs the awarding of such damages and the need to deter conduct of such gravity. It apportioned the liability for these damages, awarding $200,000 against Cinar and $100,000 against each of Weinberg, Charest and Izard.COMMENTSThis decision finally brings to a close this dispute between the parties which has lasted nearly 18 years, and largely upholds the trial judge’s analysis of the case.The judgment will certainly have a significant impact on subsequent case law not only on copyright, but also on other areas of the law, particularly the characterization of psychological damages based on their source and the refusal to apply the cap on non-pecuniary damages for psychological harm stemming from material prejudice. The judgment will also guide the courts in the awarding of punitive and exemplary damages and on the principles of solidarity applicable thereto._________________________________________ 1 2013 SCC 73.2According to the trilogy of cases, i.e. Andrews v. Grand & Toy Alberta Ltd. [1978] 2 S.C.R. 229, Thornton v. Board of School Trustees of School District No. 57 [1978] 2 S.C.R. 267, and Arnold v. Teno [1978] 2 S.C.R. 287, which set this cap at $100,000 in 1978.

In a recent decision by the Court of Appeal of Québec, the Honourable Jacques Chamberland, J.C.A. reviewed the application of exclusion clauses contained in a home insurance policy in the context of criminal activities1.THE FACTSThe Appellant, Union canadienne compagnie d’assurance insured the building of respondent, Mrs. Lise Houle and her spouse, Christian Alexandre. The latter was growing cannabis in the insured building. In fact, the residence (the kitchen and possibly the basement) was used for germinating the cannabis seeds while the garage was used for growing the seedlings after they were planted. This was unknown to Mrs. Houle, who never went into the garage as she was disabled.A fire caused by the electrical installations used for growing cannabis occurred on August 8, 2006 and damaged both the residence and the garage.EXCLUSIONSThe insurer relied on the two following exclusions to deny coverage to its insured:  [translation] “16. In addition to the exclusions set out elsewhere in this contract, WE DO NOT COVER:(…)The constructions:(…)Occupied by the INSURED and used for illegal or criminal activities.21. The LOSSES caused by the criminal acts (…) of an INSURED.” THE JUDGMENT IN THE FIRST INSTANCEIn the first instance, judge Sophie Picard first examined exclusion clause 16. She concluded that in the absence of the words “in whole or in part”, as was the case in the decision Promutuel Bagot v. Lévesque2, this exclusion only applied to constructions of which “a substantial part” is used for criminal activities. Therefore, she was of the view that the garage was excluded, but not the residential building, which was only used in part for growing marijuana.The judge also concluded that exclusion clause 21 applied to Mr. Alexandre, who was producing cannabis, but not to Mrs. Houle, who was completely unaware of these activities.THE JUDGMENT OF THE COURT OF APPEALThe Court of Appeal examined exclusion clause 16, first referring to article 2402 par. 1 C.C.Q., which provides that an insurer may be released from its obligations in the events that a breach of the law constitutes a criminal act:  « 2402. In non-marine insurance, any general clause whereby the insurer is released from his obligations if the law is violated is deemed not written, unless the violation is an indictable offence. (…)» The Court noted that the clause of the policy provided for an exclusion for the “constructions” and not the “insured premises”, used for illegal activities. Accordingly, this clause had to be analyzed in relation to each of the constructions and not the insured premises as a whole, as the Appellant was maintaining.However, contrary to the trial judge, the Court of Appeal was of the view that it was wrong to tie the application of the exclusion clause to the extent the building was used for criminal activities. [translation] “ [26] In my view, the occupation of a construction by the insured and its use for illegal activities are sufficient to conclude that this construction is not insured, regardless of whether all or only part of the construction is used.” Despite the fact that the words “in whole or in part” are absent from the wording of the clause, it remains that it is not necessary for the insurer to demonstrate that a “substantial part” of the construction has been used for criminal activities. The Court of Appeal therefore concluded that the issue to be decided was whether the construction had been used for criminal activities, without it being necessary to determine the degree of such use. In the circumstances, since both the residence and the garage were used for criminal activities, both constructions were excluded from insurance coverage. In view of this conclusion, the Court deemed it unnecessary to review exclusion clause 21. CONCLUSIONWe note that the very wording of the various clauses is particularly important when analyzing insurance policies. In the case under review, the absence of the words “in whole or in part” resulted in a debate before the Court of Appeal.This case also raises the issue of knowledge by an insured of an illegal use of the premises when examining the exclusion. The Court of Appeal does not specifically deal with this issue in the case under review. However, the Superior Court, examining a similar exclusion, came to the conclusion that the use for criminal purposes by a third party cannot be used against an insured where the insured does not have specific control over such use for criminal purposes3. However, the clause examined in that decision did not provide that the premises had to be occupied by the insured, as was the case in the Union canadienne v. Houle decision. It will be interesting to see whether the Court of Appeal will eventually deal with this specific issue._________________________________________ 1 L’Union canadienne compagnie d’assurance v. Houle, 2013 QCCA 677. 2 EYB 2011-28493 (C.A.). 3 Lévesque v. Compagnie d’assurance Desjardins, 2013 QCCS 1552.

On March 1, 2013, the Court of Appeal rendered a judgment on the insurer's duty to defend and indemnify the insured in the area of commercial general liability insurance.1 It confirmed the decision of the trial judge which had held that the insurer has the duty to defend and indemnify,2 and ordered it to reimburse its insured for the amounts paid to settle the claim of a third party and the amounts incurred by the insured in defending itself against the action.On the one hand, the Court found that the general coverage of the policy was occurrence-based. However, an extension to the policy also gave the insured, a manufacturer, claims-based coverage for its errors and omissions. The Court therefore found that there was an ambiguity which enabled it to apply the contra proferentem rule set out in article 1432 of the Civil Code of Québec. The trial judge's interpretation of the contract in favour of the insured was therefore without error.On the other hand, the Court found that the insurer did not show that the allegations that were not covered by reason of exclusions in the policy itself could give rise to separate and quantifiable defence costs from those incurred in defending the allegations that were covered under the policy. Therefore, there was no reason to apply a percentage to distinguish between the amounts claimed that were covered and those that were not covered. The insurer was therefore bound to pay all of the amounts incurred by its insured for its defence.Finally, the Court noted that the insurer's duty to defend starts as soon as it is served with a formal demand and not upon the service of the originating process. It reiterated what was originaly decided by the Supreme Court of Canada in the case of Nichols v. American Home Assurance Co.,3 namely that the insurer must take up the insured's defence in a “timely manner”._________________________________________   1 Zurich, compagnie d’assurances v. Gestion Guy Lamarre inc., 2013 QCCA 367 (Justices Jacques A. Léger, Jacques J. Lévesque and Dominique Bélanger).  2 Laboratoires Confab Inc. v. Zurich, compagnie d’assurances, 2011 QCCS 3282 (Justice Yves Poirier).  3 Nichols c. American Home Assurance Co. [1990] 1 S.C.R 801.

The decision of the Court of Appeal in the La Capitale case has been expected since February 2012 when the Superior Court dismissed the class action taken against an insurer who, with the consent of the policyholder, had unilaterally modified the waiver of premiums clause in a group insurance contact.1To better understand the context, please refer to our newsletter in June 2012 following the Superior Court judgment.THE FACTSTwo suits were brought against La Capitale by Plaintiffs Tremblay and Beaver, both public sector employees; they were authorized to institute a class action and represent class members covered by the group insurance contract who were or had been disabled since 1996 and from whom the waiver of premiums benefit had been withdrawn by a modification to the insurance contract. The group consisted of approximately 1,200 members.The Plaintiffs became disabled in 1996 and 1997, respectively, and are still disabled. They claim the right to have their premiums waived under their group insurance contract until the age of 65, as long as they remain disabled.When he became disabled in 1996, Mr. Tremblay belonged to a bargaining unit covered by the collective agreements signed with the FTQ. The long-term care centre for which he worked terminated his employment in 2000 due to his disability. In 2005, his bargaining unit became disaffiliated with the FTQ and in June 2006 the insurer notified him that insurance coverage was withdrawn because his union was no longer affiliated with the FTQ.Mr. Beaver’s situation is somewhat different. He was employed by a school board when he became disabled in 1997 and he still retains an employment relationship with it. His insurer notified him in November 2007 that under a new provision of the insurance contract, it could cease granting the waiver of premiums after 36 months of benefits. Because he had benefited from the waiver since 1997, the insurer claimed it was justified in ending it.Plaintiffs Tremblay and Beaver’s claims were joined together for hearing and they claimed, on behalf of the members of the class, that their right to the waiver of premiums be restored.All the contracts entered into between the times of their respective disabilities and the modifications that deprived them of the waiver of premiums for sickness insurance and dental care, which came into force in 2001, contained a clause entitled Modifications to the Policy [Translation], which reads as follows:“The policyholder may, at all times, after agreement with the Insurer, make changes to the contract regarding the categories of eligible persons, the extent of protection and the sharing of costs between the categories of insured persons. Such changes shall then apply to all insured parties, whether active, disabled or retired.” [Translation] (Our underlining)THE SUPERIOR COURT JUDGMENTThe Superior Court concluded that given the power granted to the contracting parties, i.e. the policyholders (a group of numerous associations representing the insureds) as well as the insurer, they could negotiate modifications to the contract because a specific clause authorized them to do so. Thus, the clause terminating the waiver of premiums was valid without the agreement of the individual insureds.The Superior Court added that the waiver is not a benefit recognized in the insurance policy, but rather a provision found in the section on payment of premiums, which confirms that the waiver of premiums is not one of the insured benefits.Although the facts in dispute and the number of parties involved make this a complex case, the real question in dispute is whether the policyholder and the insurer had the right to unilaterally modify the group insurance contract.THE COURT OF APPEAL DECISIONThe Appellants repeated all of their arguments. They claimed that “disability” and the waiver of premiums attached to it at the beginning of their respective disabilities was an insured risk. This right to the waiver crystallized when their disabilities arose and the modification made to the group policy on January 1, 2001 was not valid. Lastly, they claimed that the insurer had committed a fault that engaged its liability.The Court, in a decision written by Justice Thibault, first traced the history of the successive contracts and the provisions of the Civil Code that apply to them.It noted that the contract in force on March 1, 1991 provided for not only a waiver of premiums in cases of disability, but also a clause authorizing modifications to the contract upon agreement between the insurer and the Committee (policyholder) and those modifications apply to all insureds, whether they are active, disabled or retired.The contract in force since January 1, 1997 provided for a waiver of premiums in cases of disability, but it ceased at 65 yearsof age or when the insured no longer fulfilled the conditions of insurability. The clause giving the policyholder and the insurer the power to modify the contract was similar.The contract in force since January 1, 2001 added as a cause of cessation of the waiver of premiums privilege the date on which the Committee confirms cessation of the employees group’s membership in the union, which is the policyholder, or cessation of the member’s membership in the employees group. The 65 years of age limit and the clause permitting modification of the contract remained similar.On January 1, 2008, an endorsement was added to the contract from 2001 and it provided that, in addition to the causes described above, the sickness insurance and dental care plans ceased at the date of the end of the employment relationship or 36 months after the date of the commencement of the participant’s disability.The Court of Appeal confirmed that the benefits that the insurer must pay under the sickness and dental care coverages do not depend on the occurrence of a disability; they are not linked to disability.As for the waiver of premiums that is tied to the occurrence of disability, it is not a coverage to which the insurer has committed itself because the insurer has not taken on responsibility for it, but instead it is shared between the participants. This benefit results from the policyholder’s decision to transfer to the active participants the premiums that the disabled participants are not required to pay.Then the Court considered the argument concerning the “crystallization” of the Appellants’ rights at the times of their respective disabilities, because it is important for the insurers to know whether or not the successive contracts are distinct contracts, although the Court judged this issue to be secondary considering the fact that the contract from 1997 contains a preamble stating that it is a consolidation of the contract and endorsements in force since 1991.The contract applicable at the time of the occurrence of the disability of each of the Appellants was the one from 1997. Although it was replaced by the contract from 2001 and modified by the endorsement of 2008, all the modifications were made at the request of the policyholder because the active employees expressed their dissatisfaction with the high cost of the premiums paid for the plan. At that time, the policyholder’s insurance advisor had informed it that the waiver of premiums benefit until 65 years of age was very generous and that most plans limited the waiver period to three years.Given that all of the contracts that had been in force since the Appellants’ disabilities authorized the policyholder and the insurer to modify them by agreement and that they provided that the modifications applied to all the insureds irrespective of their status, no right could “crystallize” at the dates of disability. However, it was agreed that the Appellants continued to have the benefit of the life insurance with a waiver of premiums.Lastly, the Appellants argued that article 2405 C.C.Q. required that the modification putting an end to the contract in the event of a change in the union’s allegiance be brought to their attention. The Court rejected that argument; the group insurance contract is based on the definition of a given group for the benefit of which it is negotiated. The policyholder has authority from this group to negotiate and could agree on a modification concerning the categories of eligible persons. The Court accepted the views expressed by author Michel Gilbert stating that article 2405 C.C.Q. “can apply only to individual insurance because one cannot expect that participants come forward concerning a modification in which they are not involved.” [Translation]CONCLUSIONThe modification clauses are valid and any change, addition or withdrawal of a coverage or privilege can be invoked against all of the active, disabled or retired insureds, without them having to be notified about it, if the bilateral agreement procedure is respected.The Plaintiffs have 60 days to apply for leave to appeal to the Supreme Court._________________________________________   1 2012 QCCS 746.

In a unanimous decision rendered on June 22nd, the Supreme Court of Canada confirms the principles previously established by the Court of Appeal: Quebec’s Automobile Insurance Act ("Act") must be given a large and liberal interpretation. In this case, the Court confirms that the mere use of a vehicle as a means of transportation will be sufficient for the Act to apply even if the vehicle is not the cause of the accident.

The La Capitale ruling had been expected since 2009, when the Superior Court authorized a class action against an insurer who had unilaterally modified the waiver of premiums clause in a group insurance contract in 2001.

The notion of insurable interest is fundamental to insurance law as it is at the very heart of the validity of this contract. The lack of insurable interest leads to the nullity of the insurance policy and justifies the insurer’s refusal to indemnify its insured. In a decision rendered on March 2, 2012, the Court of Appeal upheld a judgment of the Superior Court, where an insurer refused to indemnify the insured, raising its lack of interest in the property. The Court held that a debtor had sufficient interest to insure the property subject to an instalment sales contract.

The advent of social networks such as MySpace, Facebook, Diaspora, Photobucket, Twitter, You Tube and others has brought significant changes to social relationships. In Quebec alone, more than 3,250,000 persons have a profile on Facebook. In 2010, the use of social media intensified in Quebec; indeed, more than three quarters of Netsurfers in Quebec visited at least one social medium or contributed to its content. A census showed that, in 2010, 40% of Quebecers had a profile on a social network. In addition, the frequency of visits to social networks varies according to age. More than 56% of persons aged between 18 and 34 visit social networks daily as compared to 52% of those aged 35 to 44, 38% of those aged 45 to 54 and 23% of those aged 55 to 64.

The Fire Safety Act came into force on September 1, 2000. Its purpose is to implement organizational arrangements pertaining to fire safety within the regional county municipalities and major urban centres in Quebec. Section 8 of the Act requires them to establish a fire safety cover plan which must then be approved by the Minister of Public Security.

On October 29, 2010, the Supreme Court rendered a very brief judgment in the case of Christensen v. Roman Catholic Archbishop of Québec and ordered the file be remanded to the Superior Court to assess the evidence in order to determine whether the civil liability action brought in the context of a sexual assault that took place more than 25 years earlier, should be dismissed on the grounds that it was prescribed.

On September 23, 2010, the Supreme Court of Canada issued an unanimous judgment in the case of Progressive Homes Ltd. v. Lombard General Insurance Co. of Canada, reversing two lower Court judgments of British Columbia which had concluded that the insurer, Lombard, had no duty to defend the general contractor Progressive Homes, against a claim for defects and damages caused by water infiltration in four buildings built by it.

On August 25th, the Court of Appeal, for the reasons of Justice Nicholas Kasirer, rendered a significant decision with regard to the duty of care required from ski instructors and the assessment of damages awarded to a victim who developed a serious neurological disorder resulting from a ski accident. In their capacity as tutors of their child (referred to as “X” in the judgment), as well as in their personal capacity, Plaintiffs claimed damages for approximately $3.8M against Les Stations de la vallée de Saint-Sauveur Inc. and Mont Saint-Sauveur International (hereinafter “MSSI”) pursuant to the ski accident that their child suffered.