The Superior Court of Quebec recently rendered a decision1 based on insurable interest in a case involving a sunken boat, a business man named Bonneau and a convicted drug smuggler known as Grenier.

Bonneau had entered into a finance agreement for the boat and had taken out a policy of insurance.  Bonneau had been paying his insurance premiums and finance payments on the 2 year old Four Winns, model 358 Vista boat when it sank.  Bonneau’s insurer took the position that Grenier was the true owner of the boat and, as a result, Bonneau’s policy was null and without effect ab initio for failing to have an insurable interest.

Bonneau’s evidence was that he purchased the boat outright after trading in an older vessel belonging to his good friend Grenier. However, contradictory paperwork and some other curious facts led the court to conclude otherwise.  The registration and warranty information were completed in Grenier’s name, Grenier was alone on the boat when the coast guard responded to the distress call, Bonneau never went to see the boat after it was pulled from the lake and had not seen the boat before signing the finance agreement. The Court was also persuaded, among other things, by the fact that Bonneau did not know how to captain a boat.  This was in spite of Bonneau’s claim that he had hired a captain – an individual who committed suicide before the trial.

In addition to the court not having the benefit of the captain’s evidence, it also lacked Grenier’s as he was being detained in jail after having being caught drug smuggling by Peruvian authorities and extradited to the US.

Section 2448 of the Civil Code of Quebec provides that insurance of property in which the insured has no insurable interest is null.  In order for the Court to recognize an insurable interest (and in the absence of convincing evidence on ownership), Bonneau had to establish that he suffered direct and immediate prejudice as a result of the loss of the boat.

The lack of evidence on ownership coupled with Bonneau’s credibility issues, led to the Court to conclude that there was no insurable interest and that Bonneau’s economic obligations under the finance agreement and his fulfilment of those obligations were insufficient to create one.  The Court considered Bonneau to be a mere nominee for Grenier, which Quebec courts have previously decided to be incongruent with an insurable interest.

The insurance contract in the name of Bonneau was determined to be null and without effect ab initio and the insurer was only required to refund premiums paid.

At the time of writing we are not aware of whether Bonneau has sought leave to appeal this decision.