Some policyholders purchase professional fees coverage as an extension to their insurance policy's general coverage grant. Professional fees coverage is meant to reimburse an insured for the expense of hiring professionals to assist in quantifying a loss and putting a claim together to satisfy an insurer's requirements. Ontario's Superior Court of Justice recently released a decision addressing who controls the decision of whether such professionals will be retained and have their fees covered by the insurance policy.
In Be In Christ Church of Canada O/A Welland Brethren in Christ Church v Intact Insurance Company,(1) a fire occurred at the premises of the church. The church held a valid insurance policy with Intact Insurance Company that also provided coverage for professional fees. The church reported the fire loss to Intact, which retained a construction company to prepare a scope document which resulted in three quotes from contractors that ranged from C$1.2 million to C$1.9 million to perform the work to repair the church.
After Intact proposed to pay the church the lower estimate for the repairs, the church retained a professional quantity surveyor, Lakeland Consulting Inc, to review the accuracy of the scope document. Lakeland concluded that the appropriate estimate for the repairs to the church was in fact C$2.9 million and invoiced the church more than C$22,000 for its services.
The policy required that the church deliver detailed proof of loss to Intact setting out quantities, costs, actual cash value and particulars of the amount of loss claimed. However, the critical wording that was the subject of this dispute concerned the professional fees extension:
This Form is extended to cover reasonable fees charged by auditors, accountants, lawyers, architects, surveyors, engineers or other professionals retained by the Insured, for the purpose of producing or certifying particulars or details of the Insured's business and that are required by the Insurer in connection with loss or damage caused to insured property by an insured peril.
This extension only applies to necessary and reasonable fees paid to professionals for producing and certifying any information that may be required by the Insurer in order to arrive at the loss payable under this Form.
This Extension does not include the fees and cost of public adjusters.
Intact argued that the policy provided coverage for professional fees only for those professionals who Intact required. The church asserted that coverage was provided for professional fees so long as the church retained a professional to obtain the particulars that Intact required. The issue before the court was whether the specific professional services had to be required by Intact for such fees to be covered under the professional fees extension.
Before disposing of the issue, the court outlined the principles applicable to policy interpretation as set out by the Supreme Court in Ledcor Construction Ltd:(2)
- Where the language of the insurance policy is unambiguous, effect should be given to that clear language, reading the contract as a whole.
- Where the policy's language is ambiguous, general rules of contract construction must be employed to resolve that ambiguity. These rules include that the interpretation should be consistent with the reasonable expectations of the parties, if that interpretation is supported by the language of the policy.
- Only if ambiguity remains after the above principles are applied can the contra proferentem principle be employed to construe the policy against the insured.
The court found the professional fees extension ambiguous, as there were two possible interpretations:
- Read literally, it could mean that it was the fees, and not the services of the professionals, that were required by Intact that were covered.
- Read another way, it was the particulars or details of the church's business that was required by Intact and coverage was for the fees of professionals retained by the church to obtain this information.
Intact contended that the fees of the professional and the retainer of the professional were synonymous. In other words, 'fees' meant 'retainer' of the professionals, so it was the retainer of those professionals that Intact required, that was meant by the policy. The court noted that if 'retainer' and 'fees' were synonymous terms, that suggested that the professional fees extension was ambiguous. In applying Ledcor Construction Ltd, the court held that it was reasonable that the church had expected that the provision would provide the church with coverage to retain experts to assist it in providing that required information to Intact. The court also found that it was reasonable that Intact would expect that the church might require such assistance from professionals. Accordingly, the court ordered Intact to pay Lakeland's fees.
This decision should have broad application. The court acknowledged that even though professional fees extension language varies from insurance policy to policy, the underlying assumption is that insureds retain the discretion to hire a professional to assist in detailing a loss. Even though Intact argued that the policy gave Intact that discretion, the court rightfully noted that such a proposition is both incompatible with the reasonable expectation of the parties and an unreasonable interpretation of the provision. Simply put, if an insured is paying a premium for extended professional fees coverage, it does not make sense that the insurer would then be able to prevent the insured from hiring a professional by saying that it controlled the decision.