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  • The Superior Court of Québec rules on the insurable interest of someone
    who acted as a nominee in the context of the acquisition of a property

    On September 8, 2017, in the case of El-Ferekh c. Intact, compagnie d’assurance, 1 the Superior Court of Québec ruled on the insurable interest of someone who acted as a nominee in the context of the deeds pertaining to the acquisition of an immovable property covered by an insurance policy. The insurer had denied coverage on several grounds, namely, the absence of insurable interest, the misleading representations at the time of the underwriting of the policy and an increase of risk. The facts The plaintiff, Robbie El-Ferekh (“Robbie”), instituted proceedings against Intact compagnie d’assurance (“Intact”), claiming $296,941.38 for damages caused to a property which Intact insured. At the time the mortgage was purchased, Steven El-Ferekh (“Steven”) had asked Robbie to act as a nominee in the context of the sale for tax and financing reasons. The deeds of mortgage and sale were both made in Robbie’s name even if, in fact, Steven was assuming the payment of the mortgage and all expenses related to the property. When purchasing the insurance policy on the property, Steven posed as his brother as he answered the questions of the insurance broker. Since Steven declared that he would live in the property, a homeowner policy was issued by Intact. Prior to the closing of the sale of the property and purchasing the insurance policy, and contrary to his representations to the insurance broker, Steven rented the property to a third party. The tenant occupied the property for more than three years. Several months after the tenant left, a fire, the cause of which remains undetermined, entirely destroyed the property. Robbie filed a claim with Intact. Intact denied coverage on the grounds that the policy was null ab initio for lack of insurable interest and because of the false and misleading representations of the El-Ferekh brothers. The judgment The Court first confirmed that an insured had to demonstrate that he suffered financial harm as a result of the loss of the property to justifying an insurable interest. Accordingly, a nominee has no insurable interest since he cannot suffer direct and immediate harm as a result of the loss of such property. Robbie first alleged that an implicit partnership existed between himself and his brother and that their patrimonies were merged. This argument was rejected by the Court since a private arrangement cannot be effective against third parties. Secondly, Robbie alleged that he had an insurable interest as a mortgage debtor. However, the evidence demonstrated that Steven assumed all expenses on the property and that, accordingly, Robbie was not exposed to any financial loss as a result of the fire. The Court thus ruled that the policy was void ab initio because of the lack of insurable interest. Although this conclusion was enough to dismiss the action, the Superior Court nevertheless ruled on the other grounds for denial raised by Intact. The Court confirmed that Intact was justified in invoking the nullity of the policy taking into account the bad faith of the insured and the false statements made respecting the occupation of the property. On the one hand, it was proved that Robbie never lived in the property and that a homeowner policy has issued. On the other hand, although Intact Créneaux, a division of Intact, could have accepted to cover the property as leased property, it is a separate entity from Intact. Therefore, the Court concluded that the insured acted in bad faith when he purchased the insurance, which also justified the ab initio nullity of the policy. As for the risk increase, the evidence demonstrated many aggravating circumstances during the coverage period, namely: criminal activities on the property (the culture of cannabis), police interventions, a change of the electrical system, failure to supply the property with electricity and a situation where the property was left vacant. The Court determined that Intact was well-founded in denying coverage for that reason. Conclusion In brief, the Superior Court concluded: that the simple fact that someone is a mortgage debtor does not constitute evidence of insurable interest in the property; that a nominee has no insurable interest since he cannot suffer any direct and immediate harm resulting from the loss of such property. In other words, in the absence of an exposure to financial loss, a nominee cannot demonstrate an insurable interest in a property.   2017 QCCS 4077 (Judge Guylène Beaugé).

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  • $8 million awarded to a quadriplegic hockey player: the Court of Appeal confirms the Superior Court's decision

    Last May 2, the Court of Appeal granted a motion to dismiss an appeal against a significant decision in the area of civil liability in the context of the practice of a sport.1 Decision at trial2 The facts in the case date back to October 3, 2010. A few seconds after the start of a hockey game between two junior teams, the plaintiff, Andrew Zaccardo, was violently body checked from behind by the defendant Ludovic Gauvreau-Beaupré, a player on the opposing team. Zaccardo, who became quadriplegic as a result of the incident, brought an action in damages against Gauvreau-Beaupré and his insurer, Chartis, claiming $8 million in damages. We commented this decision in a previous publication.3 At trial, Justice Daniel W. Payette noted that a hockey rink is not [translation] "a law-free zone".4 The Court found that by body checking Zaccardo from behind, Gauvreau-Beaupré had breached the basic rules of care, thereby committing a fault within the meaning of the civil law. In addition, the Superior Court pointed out that while it is true that hockey involves certain inherent risks, Zaccardo could not reasonably have expected to become quadriplegic as a result of an illegal body check. Gauvreau-Beaupré and Chartis, his insurer, were therefore ordered to indemnify Zaccardo for $8 million, which amount had been the subject of an agreement between the parties. Court of Appeal's decision In a short decision, the Court of Appeal dismissed the appeal by Chartis and Gauvreau-Beaupré against the decision at trial, noting that it had no reasonable chance of success, since the trial judge had carefully assessed the evidence in reaching his decision. Moreover, the Court dismissed the argument by Chartis that Gauvreau-Beaupré had committed an intentional fault when he made the body check from behind, stating that [translation] "where the insured is accused of committing an intentional fault, the intention must relate not only to the act committed, but also to the results of that act".5 At trial, Chartis had, moreover, waived the right to invoke this exclusion. Ultimately, the Court of Appeal upheld the award against the insurer to pay the total amount of $8 million in compensation for the injuries suffered by Zaccardo. This amount is certainly one of the highest ever granted by a Canadian court in such a context. Chartis Insurance Company of Canada c. Zaccardo, 2016 QCCA 787 ["decision of the Court of Appeal"]. Zaccardo c. Chartis Insurance Company of Canada, 2016 QCCS 398. Need to Kwow publication, march 2016. Supra note 2, at paragraph 10. Paragraph 5 of the decision of the Court of Appeal.

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  • The Québec Court of Appeal rules on the duty to defend and the exclusion of liability assumed by contract

    Last April 4, in the case of Aldo Group Inc. v. Chubb Insurance Company of Canada,1 the Court of Appeal ruled on the insurer’s duty to defend its insured and on the interpretation to be given to a clause excluding insurance coverage for liability contractually assumed by the insured. The decision highlights the difficulties of interpretation sometimes faced by the parties and the courts in situations involving complex contracts where the parties have adduced no evidence of what their respective intentions were at the time the contract was concluded. It also illustrates the importance of assessing each insurance policy on a case-by-case basis. Facts Aldo Group Inc. (“Aldo”) had concluded various agreements including, in particular, with Moneris (“Moneris”), an agent of the Bank of Montreal (“BMO”), in order to facilitate purchases made by its clients with MasterCard credit cards. Pursuant to these agreements, Aldo agreed with Moneris to abide by certain IT security standards in order to protect the personal information of its clients. In particular, it undertook to pay penalties and other charges in the event of a breach of these standards. Moneris, in turn, entered into similar agreements with MasterCard. Aldo’s computing system was subsequently hacked, thereby jeopardizing its clients’ data. Pursuant to the aforesaid agreements, MasterCard charged Moneris with more than $4.8M in penalties and other costs, which Moneris in turn charged against Aldo. No debate was held on this issue as these charges were automatically deducted, so that they could not be contested by Aldo. Instead, Aldo filed a claim in Ontario against Moneris and MasterCard, alleging that the amounts were deducted unfairly. Aldo then applied to the Superior Court of Québec for an order against its liability insurer, Chubb Insurance Company of Canada (“Chubb”), to pay for its legal costs, i.e. its defence, in the action instituted in Ontario. Trial judgment The Superior Court dismissed the motion to force Chubb to pay for Aldo’s legal costs2 (its defence) in the action instituted in Ontario against Moneris and MasterCard. While the judge came to the conclusion, after interpreting the terms of the insurance contract between Aldo and Chubb, that the action instituted by Aldo was a valid claim within the meaning of the insurance policy, she found that the exclusion relating to liability assumed by contract applied. She also found that Aldo had contractually waived certain rights that it could have asserted against Moneris or MasterCard, thereby justifying the refusal by Chubb to assume its defence. Court of Appeal judgment Two preliminary comments by the Court of Appeal are important for parties and lawyers faced with resolving problems in the interpretation of insurance policies. Firstly, the Court of Appeal noted that this decision was not intended to “set a precedent” (“translation”), since it dealt with the analysis of contracts between the parties and an insurance policy specific to that case. In other words, each situation must be assessed in light of the particular insurance policy and the specific facts of each situation. Secondly, the Court of Appeal stressed that there was no evidence of the circumstances surrounding the negotiation and conclusion of the insurance contract between Aldo and Chubb, including the specific exclusion at issue in this case. In the absence of evidence of the negotiations that led to the conclusion of the contract, or of the application of this exclusionary clause in the past, the court’s analysis was limited to the text of the insurance policy alone, according to the applicable rules of interpretation. On the merits, the Court of Appeal concluded, firstly, that the action instituted by Aldo against Moneris and MasterCard was a claim within the meaning of the insurance policy. Given the terms of the contract, the mere fact that Aldo itself had instituted the proceeding instead of being sued was not a sufficient reason, by itself, to conclude that Chubb’s duty to defend had not been triggered. Secondly, the Court of Appeal held, contrary to the trial judge, that Aldo had not contractually waived the ability to assert certain rights against MasterCard and Moneris, as Chubb had claimed. The mere fact that deductions had been made for the amount of the penalties did not constitute a waiver of the right of contestation. Furthermore, Aldo could not be accused of having failed to cooperate with Chubb. Thirdly, the Court of Appeal confimed the trial judgment and concluded that Moneris’ claim against Aldo was contractual in nature. The exclusion contained in the insurance policy for any liability assumed by contract therefore applied. In interpreting the policy, the Court held that this was a clause by which the insurer excluded claims from the liability insurance policy so as to avoid being held liable for any defaults by the insured in fulfilling its contractual obligations, such as unpaid accounts or other debts to third parties. In addition, the Court held that the exception to this exclusion relating to extra-contractual liability did not apply because Moneris could not have asserted its rights against Aldo in the absence of the contract. The fact that third parties, such as the victims of the leak of personal information, might potentially have been able to assert their rights against Aldo, was not a situation that enabled the exception to the exclusion to apply in this case. The Court of Appeal therefore concluded that Chubb did not have the obligation to pay for Aldo’s legal costs (its defence) in the claim brought in Ontario against Moneris and MasterCard. Conclusions In summary, the Court of Appeal concluded as follows: while no legal action was brought against Aldo, Aldo’s claim against Moneris and MasterCard was a valid claim within the meaning of the insurance policy and the duty to defend it would have been triggered, had it not been for the exclusion; Aldo had not waived the ability to assert any right whatsoever which prejudiced Chubb, and Chubb could therefore not claim on this basis that its duty to defend Aldo was not triggered; Chubb nevertheless had no duty to pay for the legal costs, i.e. the defence, of Aldo’s claim against Moneris and MasterCard because this situation was covered by the clause excluding insurance coverage for any liability contractually assumed by Aldo. As the Court of Appeal noted, this case in no way changes the principles governing the duty to defend. In this regard, Justice Bich wrote as follows: [Translation] [53] One cannot deny the atypical nature of this situation, which is certainly not an ordinary case. But, one must also see that the interpretation reached by the trial judge is not meant to be a general postulate that is intended to transform the duty to defend. It is a specific solution, based on the specific terms of a specific contract. The fact that we are outside the norm does not mean, by itself (subject to a palpable and overriding error), that we are justified in substituting the trial judge’s interpretation of the text of the policy with a reading that would be consistent with Chubb’s conception thereof. [54] The defence contemplated in clause 16 is not therefore limited to contesting a legal action brought against the insured. This is, moreover, in no way incompatible with the meaning given by current dictionaries to the verb “to defend”/”défendre”, which is not limited to a defence against a duly instituted court action, but more generally connotes such concepts as to protect, sustain, help, intercede and support. The Court of Appeal also issued a warning to the parties to the insurance contract: if a contract such as an insurance policy must be interpreted with the help of other elements than the text, then evidence must be presented. Otherwise, only the text will guide the court, in light, of course, of the rules of interpretation as provided in the legislation and case law. Finally, each insurance contract must be construed in accordance with its own wording and the facts of the case. Therefore, even in the presence of similar terms, insurers and insureds must nevertheless avoid speaking in generalities when the time comes for determining whether, for instance, the insurer has the duty to defend or indemnify.   2016 QCCA 554 (Justices Yves-Marie Morrissette, Marie-France Bich and Marie St-Pierre); reasons given by Justice Bich. Aldo c. Chubb Insurance Company of Canada 2013 QCCS 2006 (Justice Marie-Anne Paquette).

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  • Judge blows whistle to put a stop to checks from behind: $8,000,000 awarded to a quadriplegic hockey player

    On February 1, 2016, the Superior Court of Québec rendered a significant decision in the area of civil liability in the context of the practice of a sport1. The judgment was widely reported in the media due, on the one hand, to the importance of the amount granted by the judge (8 million dollars) and, on the other hand, because it is closely related to the practice of the national sport of Canadians. Will this judgment, through which a junior hockey player who became quadriplegic after receiving a check from behind has been allowed such an important amount as compensation, change the rules of the game? The facts The plaintiff, Andrew Zaccardo (hereinafter, “Zaccardo”), who was 16 years old at the time of the events, was a junior amateur hockey player. On October 3, 2010, his life took a turn for the worse when he received a check from behind from another player, defendant Ludovic Gauvreau-Beaupré (hereinafter, “Gauvreau-Beaupré”), who violently hit him from behind. Zaccardo became quadriplegic. The video clip, filed as evidence at the trial, shows a sequence resembling those routinely seen by hockey fans in sports information bulletins (at 0:15 to 0:30 more specifically). Zaccardo instituted civil proceedings against Gauvreau-Beaupré, his insurer, as well as Hockey Québec and Hockey Canada, claiming damages, particularly for the costs and expenses related to the care required by his physical condition for the remainder of his life. Prior to the hearing, Zaccardo discontinued his action against Hockey Québec and Hockey Canada. The hearing showed that for many years both entities had systematically discouraged and condemned checking from behind. At the time of the hearing, the parties agreed to an admission as to the quantum of damages for an amount of 8 million dollars. Mr. Justice Daniel W. Payette came to the conclusion that Gauvreau-Beaupré had committed a fault and found him liable for the damages suffered by Zaccardo. The Judgment At the outset, Justice Payette stated that players participating in hockey games are subject to the law as any other citizens: [TRANSLATION] “an ice rink is not a law-free zone”2. Justice Payette reviewed the relevant case law, both from Quebec and the common law provinces and concluded that strictly speaking, “sports liability” does not exist as a separate area of liability: players are subject to the usual rules governing civil liability and are thus required to act like [TRANSLATION] “reasonable players placed in the same circumstances”. The judge also confirmed that the practice of hockey involves inherent risks which a player accepts by participating in a game, but that by doing so, he is not however deemed to accept unreasonable risks which he is not aware of. Accordingly, the violent check suffered by Zaccardo did not constitute a risk which he should have foreseen when participating in the game. Moreover, the judge noted that a breach of the rules of the game, whether sanctioned by a penalty or not during the game, will not always constitute a fault within the meaning of civil law. Therefore, the court ordered Gauvreau-Beaupré and his insurer to pay to Zaccardo the admitted amount of 8 million dollars. It must be noted that at the beginning of the hearing, Gauvreau-Beaupré’s insurer informed the court that it was not alleging the intentional fault of the insured and, accordingly, the judgment does not deal with this issue. In the circumstances, the court also ordered the insurer to indemnify Zaccardo for the damages he suffered. The surgical precision with which the judge dissected the sequence of the check shows that he no doubt has experience of the practice of hockey and leads one to believe that this may have influenced the conclusions of the judgment. In addition, the legal reasoning put forward confirms that the efforts made by Hockey Québec and Hockey Canada to promote the safe practice of hockey are still encouraged. Echoes beyond the legal sphere In addition to being the highest amount ever granted to a victim of an injury in such a context, at least in Canada according to our verifications, this judgment already echoes beyond legal circles. For the time being, it is difficult to determine the scope that this decision will have and whether it will impact sports in general. Indeed, despite the magnitude of the amount granted to Zaccardo which, again, had not been contested, the judge noted that each case is dealt with on its own merits and only involves the application of general civil liability principles. In that sense, each situation is to be considered according to its own set of facts. In an era where class actions are instituted by former professional athletes who suffered concussions3 and following numerous other cases of violent actions with serious consequences4this decision may have an impact on the prevailing culture of hockey, which is more than ever called upon to change. Lastly, it must be noted that on March 2 2016, Gauvreau-Beaupré and his insurer appealed the decision5. The conclusions reached by the judge regarding liability will therefore be reviewed in the following 18 to 24 months. Conclusion The judgment in favour of young Zaccardo and the impressive monetary compensation he was granted attest to the numerous efforts made during the last few years to raise players’ awareness to the risk of serious harm associated to the practice of contact sports. The often critical attitude of Justice Payette toward the aggressor also demonstrates that this awareness had at least already entered the mind of the judge. Despite the fact that all the calls for prudence, by-laws and increased sanctions have not succeeded in actualizing the culture of hockey6, it is to be hoped that the whistle blown by Justice Payette will accelerate the changes. Zaccardo v. Chartis Insurance Company of Canada, 2016 QCCS 398, appeal pending: 500-09-025937-160 and 500-09-025938-168. Paragraph 10 of the judgment. For illustration purposes, a group of over 100 former players of the National Hockey League filed an application to be authorized to institute a class action against the NHL for damages suffered as a result of repeated shocks received to the head while they played as professionals: Also see: For example we may think about the action of Todd Bertuzzi against Steve Moore, following which Moore was unable to continue his professional hockey career: The hockey stick hit given by Marty McSorely to Donald Brashear constitutes another example: 500-09-025937-160 and 500-09-025938-168. Only a few days ago, another young hockey player from the Montreal region suffered an injury to the neck following a check from behind by another player. However, the young man has been “luckier” than young Zaccardo since his spinal cord was not damaged:

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  • The Supreme Court of Canada will not review the duty of the insured to collaborate

    On February 18 last, the Supreme Court of Canada1 denied leave to appeal in the matter of Intact Compagnie d’assurance c. 9221-2133 Québec inc.2, thus confirming the principles applicable to the duty of the insured to collaborate. The facts Following the theft of his vehicle, the insured filed a claim with his insurer, but refused to submit to a statutory examination and provide authorizations for obtaining additional information, for example, his driver file at the Société d’assurance automobile du Québec. The judgment At trial, the Court of Québec ordered the insurer to pay its insured the indemnity arising from the theft of the insured’s vehicle but, particularly due to the [TRANSLATION] “lack of collaboration” of the insured, dismissed his claim for trouble and inconvenience. The Court of Appeal reversed the judgment and concluded that the insured has a duty to closely collaborate with his insurer in the context of settling a loss, which includes the duty to answer the questions of the insurer respecting all the circumstances surrounding the loss and provide all the documentation in support of his claim. The insured must also agree to the collection of the necessary documents and sign the authorizations required for that purpose. The duty of the insured to collaborate is not subject to any duty of the insurer to conduct investigations with third parties. In the circumstances, the Court concluded that since the insured demonstrated bad faith by systematically refusing to answer the questions of the insurer, which suffered harm as a result, he had no right to be indemnified. The refusal of the Supreme Court to review this issue also confirms the principles already established by the Court of Appeal respecting the duty of the insured to collaborate3.   9221-2133 Québec inc., F.A.S.R.S. Centre Mécatech c. Intact Compagnie d’assurance, 2016-02-18, 36569. 2015 QCCA 916. See more particularly the following cases: Northumberland General Insurance v. Genziuk, J.E. 81-1072 (C.A.) and Di Capua c. Barreau du Québec, J.E. 2003-1310 (C.A.).

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  • Civil law interpretation : Does coverage under a builder’s risk insurance policy extend to an existing structure?

    On February 19, 2015, the Court of Appeal of Quebec1 overturned a judgment rendered by the Superior Court2, on July 12, 2013, which granted the defendants’ motion to dismiss. Essentially, the Court had to determine whether coverage under a builder’s risk insurance policy extends to damage caused by the work to an existing structure, or whether it is limited to the site on which the work is being done. THE FACTS The facts of this case were discussed in further detail in a newsletter published in October 2014.3 However, for ease of reference, we have summarized the main facts of the case. Quebec City (“the City”) intended to convert the Palais Montcalm from an entertainment venue into a concert hall. On December 1, 2004, it retained the services of Génitech as a general contractor to carry out work on the existing structure of the Palais Montcalm. CFG Construction was retained as a subcontractor to perform the required demolition work. The City required the contractor to obtain builder’s risk insurance. The policy, obtained from Promutuel, named Génitech and the City as co-insured, and the protection was also extended to subcontractors. On February 26, 2005, following the faulty performance of the demolition work, a fire caused significant damage to parts of the existing structure which were not included in the transformation work. On February 22, 2008, the City instituted two actions. The first against Promutuel, for compensation under the builder’s risk insurance policy, and the second against Génitech and CFG, based on their contractual and extracontractual liability. On November 5, 2008, the City withdrew its first action and signed a settlement declaration. SUPERIOR COURT The defendants asked for the dismissal of the action on a preliminary basis on three grounds: the builder’s risk insurance policy applies not only to the items that are the subject of the transformation work, but to all property damaged in relation to the transformation work, including damage to the existing structure of the Palais Montcalm; the City no longer has a recourse against the defendants, because it had withdrawn and filed a declaration of settlement in the first action relating to the same facts and claiming almost identical damages; and since the City was a co-insured under the terms of the builder’s risk insurance policy, it cannot sue the defendants. Applying the same reasoning as the Alberta Court of Appeal in Medicine Hat College (“Medicine Hat”),4the Court held that the subcontractors have an insurable interest on the construction project in its entirety, and that, consequently, the builder’s risk policy covers the entire structure of the Palais Montcalm. In addition, the Court held that the settlement in the first action had the effect of res judicata, because the builder’s risk insurance covers all the damage claimed by the City and the City could not commence a second action based on the same facts. Lastly, the Court added that the City could not sue the defendants due to its status of co-insured. The Court therefore granted the motion to dismiss the City’s action. COURT OF APPEAL The Court confirms that the decision in Medicine Hat is the only Canadian decision on this issue. It reiterates that, in matters of insurance, decisions from other jurisdictions can be considered when they are consistent with the general scheme of civil law.5 However, the Court found that since the Civil Code of Québec contains provisions specific to insurable interests,6 distinctions are likely to be made between civil law and common law. Consequently, the question whether builder’s risk insurance applies to an existing structure must be analysed in light of Quebec civil law. Therefore, the Court held that it is premature to dismiss the action at this stage. As for the other grounds for dismissal, the Court of Appeal held that the first action did not disqualify the second on the basis of res judicata, because the two actions are based on distinct contracts. More specifically, the first action, which was withdrawn, was based on the builder’s risk insurance policy, whereas the second action was based on the contractual liability of Génitech and the extracontractual liability of CFG. Furthermore, the Court found that evidence regarding the circumstances surrounding the settlement declaration may be relevant to the outcome of the dispute, noting, in passing, that the grounds for dismissal are surprising. Indeed, if, as the defendants argue, the builder’s risk insurance covered all the damages caused to the Palais Montcalm, why had the City still not been compensated? In light of the foregoing, and given that motions to dismiss must be considered with caution, the Court of Appeal overturned the decision of the Superior Court, and dismissed the defendants’ motion to dismiss. CONCLUSION Since the motion to dismiss has been set aside, the case continues to follow its course. The interpretation of a builder’s risk insurance policy is especially important for the parties to the contract who must determine which property is truly covered. It will therefore be interesting to see whether Quebec courts will adopt the same reasoning as the common law provinces, or whether civil law principles will influence how the question of insurable interest is addressed in relation to whether builder’s risk insurance extends to an existing structure. _________________________________________ 1 Québec (Ville de) v. CFG Construction inc., 2015 QCCA 362. 2 Ville de Québec v. Génitech Entrepreneur général inc. et al., 2013 QCCS 5042. 3 See the Need to Know newsletter published in October 2014 by Louise Cérat and Odette Jobin-Laberge with the collaboration of Alexandra Dubé-Lorrain in respect to the Superior Court’s decision: “Builder’s risk insurance: Insurable interest and subrogation rights”: 4 Medicine Hat College v. Starks Plumbing & Heating Ltd, 2007 ABQB 691. 5 Optimum, société d’assurances inc. v. Plomberie Raymond Lemelin inc., 2009 QCCA 416, para. 41. 6 Articles 2481 and 2484 C.C.Q.

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  • Legal newsletter for business entrepreneurs and executives, Number 22

    SOMMAIRE GST/QST Election: Get Ready for 2015 “Laying Yourself Bare” to Get the Best Insurance Coverage! Clear Communication Between the Client and the Insurance Broker: The Key to Success   GST/QST Election: Get Ready for 2015Carolyne Corbeil and Emmanuel Sala Generally, certain corporations or partnerships within a same group who are engaged exclusively in commercial activities, may make intra-group supplies of taxable goods or services without having to collect or remit the GST/QST otherwise applicable to such supplies. This tax relief is possible thanks to the joint election made under subsection 156(2) of the Excise Tax Act (Canada)1 (“ETA”) and the first paragraph of section 334 of the Act Respecting the Québec Sales Tax (“QSTA”)2 (hereinafter the “section 156 election”). More specifically, by making this election, the consideration for most supplies of taxable services or goods between the qualifying corpora­tions of the same group is deemed to be nil (certain types of supplies are excluded from the section 156 election, particularly a supply by way of sale of real prop­erty). Recently, following the tabling of the 2014 federal budget, several major amendments were made to the section 156 election, including the fact that cor­porations benefitting or seeking to benefit from this election will henceforth be required to file it with the tax authorities on or after January 1, 2015, failing which the election will not be valid. Similarly, Quebec’s 2014-2015 budget announced that amendments would be made to the same election under the QSTA for purposes of harmonizing the QST with the GST. According to the current provisions of the section 156 election, “specified mem­bers” of a “qualifying group”, as defined by the ETA, may file the election jointly. Generally speaking, a specified member is a corporation resident in Canada or a “Canadian partnership” which is a GST/QST registrant, and which is engaged exclusively in commercial activities. A qualifying group is a group of corpora­tions each member of which is closely related for purposes of the ETA.3 Closely related members include, in particular, two corporations one of which, either directly or indirectly, holds not less than 90% of the value and number of shares of the other corporation (i.e. parent-subsidiary), or sister corporations of which not less than 90% of the value and number of shares are held by the same person. Currently, the section 156 election is made or revoked by the members of the qualifying group on a prescribed form (i.e. Form GST25), which need not be filed with the appropriate tax authorities, but simply kept in the records of the corporations concerned in the event of an audit. The section 156 election remains in effect until it is revoked by the parties, or when one of the corporations ceases to be a member of the qualifying group. Moreover, it is important to mention that, where a new specified member joins the qualifying group, the section 156 election must be amended in order to be valid in respect of any supplies made to or by this new member. Conversely, where supplies are made to or by a corporation that has left the group (for example, following a reorganization in which the percentage of share ownership in said corporation has changed) the section 156 election automatically ceases to be effective and the GST/QST becomes applicable to the taxable supplies. According to the proposed amendments to the relevant provisions of the ETA, in order to be effective for GST/QST re­porting periods subsequent to January 1, 2015, the section 156 election, or revoca­tion thereof, must henceforth be filed with the appropriate tax authorities before the first day on which any of the parties to the election must file its GST/QST return for the period. For example, if one mem­ber of the group has a monthly reporting period, the entire group must file their section 156 election with the tax author­ities by no later than February 28, 2015, if supplies are made on January 1, 2015. However, the amendments to the ETA give some relief to corporations already having a section 156 election in effect prior to 2015 by enabling them to file the election with the appropriate tax author­ities by no later than December 31, 2015 instead. It is important to note that having a valid section 156 election in your file for 2014 has no effect on your obligation to submit the section 156 election on the prescribed form to the tax authorities at some time between January 1, 2015 and December 31, 2015. Lastly, please note that the section 156 election cannot be filed prior to January 1, 2015, since it will not be recognized by the tax authorities. Consequently, where the group of corporations makes an unofficial section 156 election (i.e. where the parties act as if an election was made, without signing the prescribed form), it will henceforth only be valid if it is presented to the tax authorities in accordance with the pre­scribed requirements. In conclusion, the new requirements for filing the section 156 election present an excellent opportunity for reviewing the relevance, and especially the eligibility, of such election that one has made to date. Since it is impossible to file the section 156 election in advance, it is strongly recommended that one set a reminder to do so in the new year. ________________________________1 ETA (R.S.C.,1985), c. E-15.2 CQLR c T-0.1.3 We will not describe the concept of “closely related” under the ETA in detail herein, or its application to partnerships, since the complexity thereof would exceed the scope of our text. Please contact the authors should you require more information. “Laying Yourself Bare” to Get the Best Insurance Coverage! Clear Communication Between the Client and the Insurance Broker: The Key to SuccessJonathan Lacoste-Jobin with the collaboration of Léa Pelletier-Marcotte, student-at-law It is before the occurrence of a loss that businesses should ensure they have adequate insurance coverage which meets their needs and their specific characteristics, and which is adapted to the market in which they operate. This can save them a lot of trouble. However, it can be difficult to find your way in the world of insurance; hence the interest in doing business with a broker whose mandate is to assess the client's needs and offer insurance coverage which best fits those needs. Brokers have a two-tiered duty of advice toward their client.1 On the one hand, they must personally gather the information that will enable them to offer their clients a product meeting their specific needs. On the other hand, they must adequately inform and advise their clients so that they can make informed and considered decisions.2 The broker must therefore be able to describe the insurance product being offered as accurately as possible, while also clearly explaining its terms, ­conditions and exclusion.3 The broker [translation] "is not a mere vendor or conduit between the insured and the insurer, but an insurance pro­fessional."4 He must be proactive in the pre-contractual period, that is, before the insurance policy is issued, for example, by informing himself of the nature of the business and its insurance needs. He must also stay abreast of the needs of his clientele after the conclusion of the contract and make adjustments as those needs change. However, this duty to advise is largely dependent on the nature of the mandate given to him by the client, the client's general conduct, and the information provided5.It is therefore important for the client to act diligently in his interactions with the broker. Since the broker recommends an insurance product based on the informa­tion provided to him, the client should ac­curately describe the nature of the activ­ities and characteristics of his business. It is not up to the broker to guess the client's needs, but rather the client to communicate his expectations to the broker. While the broker's primary duty is to advise, the client's duty is to inform his broker accurately and unambiguously of what he needs6. One should also keep in mind that the broker does not necessarily have the requisite knowledge to handle all the as­pects of a file. For example, the appraisal of the value of the property being insured is not within the purview of the broker. The client is responsible for obtaining an accurate appraisal, preferably by a certified appraiser, so that the broker can obtain sufficient insurance coverage7. We also recommend that the client pay attention to the documents provided by the broker, including the coverage sum­maries as well as the insurance policies, and properly understand their terms and conditions before signing them. In case of uncertainty, many problems can be avoided by asking questions and requiring clarifications8. It is also import­ant to properly document your file and keep records of the various exchanges with your broker for future reference, particularly since losses often occur many months or even years after your discussions with the broker. In summary, the basis of proper insurance coverage is clear communi­cation to your insurance broker of the specific needs of your business and its activities. When in doubt, do not hesitate to ask questions and require any necessary clarifications. As the saying goes: too much is always better than not enough! ________________________________1 See the Act Respecting the Distribution of Financial Products and Services, chapter D-9.2; Code of ethics of the Chambre de la sécurité financière (D-9.2, r. 3); Regulation Respecting the Issuance and Renewal of Representatives’ Certificates (D-9.2, r. 7) and the Regulation respecting the pursuit of activities as a representative (D-9.2, r. 10).2 125057 Canada inc. (Tricots LG ltée) c. Rondeau, 2011 QCCS 94 (C.S.).3 Baril c. L’Industrielle Compagnie d’assurance sur la vie, [1991] R.R.A. 191 (C.A.).4 Ibid.5 2164-6930 Québec Inc. c. Agence J.L. Payer Compagnie Ltée, [1996] R.R.A. 549 (C.A.).6 Les marbres Waterloo Ltée c. Gérard Parizeau ltée, [1987] R.R.A. 938 (C.A.).7 See, for example, Renaud c. Promutuel Dorchester, société mutuelle d’assurances générales, [2006] R.R.A. 641 (C.S.).8 For example, 2751-9636 Québec Inc. c. Cie d’assurance Jevco, [2004] R.R.A. 954 (C.S.).

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  • Supreme Court of Canada agrees to hear Réjean Hinse appeal

    On March 20, 2014, the Supreme Court of Canada granted Réjean Hinse leave to appeal a decision involving an action in damages he brought against the federal authorities, represented by the Attorney General of Canada.In 1964, Mr. Hinse was wrongly convicted of taking part in an armed robbery and ordered to serve fifteen (15) years in prison. He was acquitted by the Supreme Court of Canada in 1997, thirty-three (33) years later.After he was acquitted, Mr. Hinse sued the City of Mont-Laurier, the Attorney General of Quebec and the Attorney General of Canada solidarily. He settled out of court with the City of Mont-Laurier and the Attorney General of Quebec.On April 13, 2011, the Superior Court granted his action and ordered the Attorney General of Canada to pay him close to $5.8 million1. The Quebec Court of Appeal reversed that decision on September 11, 2013, ruling that Mr. Hinse had not met his burden of proving fault on the part of the federal authorities2.The upcoming Supreme Court of Canada decision will have a significant impact on the rights of victims of legal errors and the liability of the authorities responsible for them, but it could also establish guidelines for evaluating the damages suffered in this type of case.________________________________1 Hinse v. Québec (Procureur général), 2011 QCCS 1780.2 Canada (Procureur général) v. Hinse, 2013 QCCA 1513.

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  • The Robinson Case: The Final Chapter

    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.

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  • Legal newsletter for business entrepreneurs and executives, Number 19

    CONTENT  Notifying your insurer of potential legal proceedings : A sensible measure which may help you avoid significant costs! The ABCs of Managing >Absenteeism at WorkNOTIFYING YOUR INSURER OF POTENTIAL LEGAL PROCEEDINGS: A SENSIBLE MEASURE WHICH MAY HELP YOU AVOID SIGNIFICANT COSTS!Jonathan Lacoste-JobinCompany directors sometimes have the reflex of minimizing the importance of a letter of demand or of the threat of a legal action. Fearing, for example, to see their insurance premiums increase, they sometimes decide not to notify their insurer of potential legal proceedings. This can have significant consequences and cause problems that a simple notice could have avoided.OBLIGATION TO NOTIFY THE INSURERParticularly in liability insurance matters, the insured has the obligation to notify his insurer as soon as he becomes aware of any loss, as provided under article 2470 of the Civil Code of Québec. Such is the case, for example, upon receipt of a letter of demand. If the insured neglects to notify his insurer, the insurer may, in certain circumstances, refuse to respect its own obligations.This article also provides that the insured must declare any loss “which may give rise to an indemnity”, that is, which would be covered under the insurance policy. Once again, it is best to play it safe. In fact, it is not for the insured to determine whether a loss is covered or not1. When in doubt, it is therefore prudent to notify the insurer as soon as possible upon a loss occurring, the receipt of a formal notice or a legal action.A timely notice will allow the insurer to investigate, meet with the appropriate witnesses, visit the site, hire the necessary experts, etc. It will also allow the insured to more quickly be informed of the position of the insurer as to insurance coverage.Failing to receive such a notice, an insurer sustaining injury therefrom may set up against the insured any clause of the policy providing for forfeiture of the right to indemnity. A liability insurer could thus refuse to cover the loss and refuse to defend its insured against legal proceedings.COSTS OF DEFENCEOne of the main obligations of the insurer in liability insurance matters is that of defending its insured against any proceedings covered by the insurance policy. Article 2503 of the Civil Code of Québec provides that the costs and expenses resulting from actions against the insured, including those of the defence, judicial costs, lawyers’ and expert fees, are borne by the insurer, over and above the proceeds of the insurance. This obligation is all the more important since the costs of defending a legal action may escalate rapidly even if the amount claimed is not very high.With this in mind, it is therefore prudent and advisable to notify the insurer as soon as possible in order to have him assume these costs, irrespective of the amount claimed and the chances of the proceedings being successful.DEMONSTRATION OF INJURY SUSTAINED BY THE INSURERTo invoke a late notice, the insurer must however demonstrate that it suffered an injury therefrom. It may assert, for instance, that it was prevented from investigating and that the site of the loss has been disturbed between the event and the time it received the notice2. The disappearance of exhibits or evidence which would have allowed to establish the loss, exonerate the insured or involve a third party, the death of some witnesses, etc. may also constitute an injury to the insurer3.Although the courts require from insurers convincing demonstration of the injury sustained, failure to notify the insurer may be fatal to the claim of an insured, even if he successfully defends the liability proceedings instituted against him.4CONCLUSIONAn insured has the obligation to notify his insurer of a loss as soon as he becomes aware of it. Upon receipt of a letter of demand or a notice whereby he may incur liability, the insured should notify his insurer accordingly. Failure to do so may result in the insurer refusing to take up the defence of the insured and thus put him in a position where he has to incur significant costs which he may have avoided. It is always better to be safe than sorry.________________________________1 Marcoux v. Halifax Fire Insurance, [1948] S.C.R. 278; Androutsos v. Manolakos, J.E. 2000-2046 (C.S.).2 Union canadienne Compagnie d’assurance v. Bélanger [1998] R.R.A. 685 (C.A.).3 LEMAIRE, M., Du délai d’avis et de la prescription en assurance : quelques problèmes, Développements récents en droit des assurances (2001), Service de la formation permanente du Barreau du Québec, Yvon Blais, 2001, online: EYB2001DEV220.4 Axa Boréal Assurances inc. c. Université Laval J.E. 2003-540 (C.A.); See also Gagnon v. Ratté [1996] R.R.A. 766 (C.S.).THE ABCs OF MANAGING ABSENTEEISM AT WORKMarie-Hélène JolicoeurINTRODUCTIONAbsenteeism brings with it high costs for employers, leading to losses in efficiency, productivity and even the demoralization of staff. In such a context, the employer must act quickly. This text provides an overview of the basic principles applicable to absenteeism.1The obligation to perform work is the foundation of the employment contract.2 The employer can expect work to be performed in a consistent manner and for such work to be of sufficient quality.However, a wide range of laws apply to the issue of absenteeism, sometimes making it difficult for employers to make sense of them all and to fully understand the scope of their managerial rights. In a unionized environment, such managerial rights are of course limited by the terms of the collective agreement.Generally speaking, an employer is entitled to be informed of the health of its employees , meaning that he or she may be provided with access to certain medical information. In addition, the employer has not only the right, but also the duty, under various occupational health and safety laws, to ensure that such an employee is capable of performing his or her work. The employer is also entitled to be informed of the reasons for the employee’s absence, to assess whether such justifications are reasonable, and, if necessary, to take disciplinary action.There are two forms of absenteeism, and each must be managed in a different way.UNJUSTIFIED ABSENTEEISMUnjustified absenteeism can leave the employee open to sanctions in accordance with the principle of escalating sanctions (verbal notice, written notice, short suspensions, lengthy suspensions, and dismissal).Unjustified absences are absences which are neither authorized nor justified, and include absences taken under false pretences. There are also other violations which are related to absenteeism, such as the failure to provide notice of an absence or of the fact that one will arrive late to work (even where such absence/ tardiness is justified), the unjustified and unauthorized abandonment of one’s position, the refusal to provide a valid medical certificate upon request, or the falsification or fabrication of a medical certificate.Where absences are repeated or combined with other violations, the sanction will be more severe.Note that, in the absence of specific clauses in the collective agreement on this subject, an absence for “personal reasons” is not justified.JUSTIFIED ABSENTEEISMJustified absenteeism is involuntary. In such a case, the employer’s management of the employee will be administrative rather than disciplinary in nature.For example, an employee may be absent on numerous occasions, all of which may be justified, particularly if the absences have been authorized by the employer for a valid reason (e.g., health problems), or were permitted by statute (Act Respecting Industrial Accidents and Occupational Diseases,3 Act Respecting Labour Standards4) or the collective agreement.This type of absenteeism can sometimes justify dismissal. For this to be the case, the following five (5) elements must generally be demonstrated:1) The absenteeism is excessive and lasts for a significant amount of time.In this respect, it is useful to compare the employee’s rate of absenteeism with the average rate of absenteeism within the company. While there is no magic number, an absenteeism rate fluctuating at a minimum of about 20% over a period of three (3) or four (4) years can be considered excessive.52) Little likelihood of improvement in the foreseeable future.If the employee’s absenteeism is primarily or entirely due to a single cause (e.g., chronic illness), medical evidence will be necessary and must address the prognosis, among other things. The instructions to the medical expert must be well-written so that he or she can provide a complete and substantiated opinion. Where the absence is due to multiple causes, such evidence is not required.3) The absenteeism has consequences for the business.It is advisable to document the effects of the absenteeism both on the workplace (e.g., work overload) and on the costs that it entails (e.g., overtime, new hires).4) The employee is informed of the problem and of the risk of losing his or her job.It is appropriate to meet with the employee to ensure that he or she is aware of, and to require him or her to resolve, the absenteeism problem. The employee should be informed that his or her employment may be terminated if his or her attendance does not improve.5) The employee has a disability or “handicap”6 and the employer is not able to accommodate him without undue hardship.If the employee has a “handicap” within the meaning of the Charter of Human Rights and Freedoms,7 the duty to accommodate will be triggered. For example, physical musculoskeletal limitations, alcoholism, drug addiction, bipolar illness, depression, and anxiety may all constitute “handicaps”. The employer will therefore have a duty to attempt to find a reasonable accommodation. The employee, his union, where applicable, and his colleagues must also be involved in this process. However, the employer will be relieved of its obligation if it can demonstrate that it is not possible to accommodate the employee without experiencing undue hardship. Undue hardship may result from the impact of the accommodation on other workers or from the significant costs the business may incur given its size and financial resources.MEDICAL CERTIFICATEThe employer is not entitled to require medical certificates on a systematic basis, but rather must have a legitimate interest and valid reasons for doing so. Such reasons may include:  repeated or chronic absenteeism; where questionable reasons are given for the absence; to evaluate an employee’s ability to return to work following a prolonged absence; to evaluate the employee’s ability to perform the work where there are valid reasons for doubting his or her ability (e.g. repeated falls, disorientation, blackouts).To be valid, the medical certificate must be signed by a physician and must refer to the specific dates of the absences. A mere statement that the employee was seen by a physician is insufficient.8 The employer may require a detailed medical certificate indicating a diagnosis.9CONCLUSIONWe invite you to clearly inform your employees of the company’s expectations as they relate to attendance ( punctuality, notice of absences or tardiness prior to the beginning of one’s shift, compliance with the work schedule, and the obligation to remain at one’s station for the entire shift, etc.). Employees should also be informed that they may be required not only to justify their absences, but also to provide a valid medical certificate if they cite their health as the reason for their absence.________________________________1 This text was taken from a presentation on the management of absenteeism given by Carl Lessard and Marie-Hélène Jolicoeur on November 13, 2013 at the offices of Lavery de Billy. It is not a legal opinion, nor is it comprehensive in its coverage of this issue, providing only an overview of the basic principles that apply.2 Article 2085 of the Civil Code of Québec, SQ, 1991, c. 64.3 CQLR, chapter A-3.001.4 CQLR, chapter N-1.1.5 For example: Syndicat des métallos, section locale 7625 et Dyne-A-Pak inc., D.T.E. 2012T-212.6 Section 10 of the Charter of human rights and freedoms, CQLR, chapter C-12.7 CQLR, chapter C.-12.8 Aliments Cargill et Travailleuses et travailleurs unis de l’alimentation et du commerce, section locale 500 (TUAC), D.T.E. 2010T-817 (T.A.).9 Syndicat des travailleuses et travailleurs du Pavillon St-Joseph (CSN) et Pavillon St-Joseph, D.T.E. 2010T 754 (T.A.), upheld by the Superior Court (2011 QCCS 3426).

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  • To What Extent are Insurers Required to Cover Premises where Criminal Activities are Conducted?

    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.

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  • The insurer's duty to defend and indemnify: a new judgment of the Quebec Court of Appeal

    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.

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  • When a tree falls: The Supreme Court of Canada confirms the large and liberal interpretation that must be given to Quebec’s Automobile Insurance Act

    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.

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