On June 20th, 2008, Superior Court Judge André Prévost rendered an interim judgment during the course of a motion to institute proceedings for payment of an insurance indemnity following a fire in a building insured by ING Canada.
The judgment pertained to a motion to communicate undertakings and to produce financial documents.
The undertakings were made during an examination having taken place well before the Motion to institute proceedings was filed. Certain documents and information were incomplete and deficient. Moreover, despite the repeated requests of the insurer, the insured neglected to provide the financial statements of the three companies of which he was the majority shareholder. More importantly, the insured failed to furnish notices of assessment received from federal and provincial financial authorities, and his personal tax returns covering the three fiscal years preceding the claim.
In short, after several months of follow-up by the insurer, the insured instituted a motion to institute proceedings without having provided the insurer with the required information.
It is important to mention that in light of the undertakings produced, the insurer had sufficient grounds to deny coverage based on suspected arson and that in virtue of serious, precise and concordant presumptions, several elements justified the insurer’s application of section 2464 C.C.Q. The insurer also invoked section 2742 C.C.Q. As such, a letter denying coverage was sent several months before the suit.
In support of its motion to communicate undertakings and to provide financial documents, the insurer pled that it could not properly defend itself without being able to communicate the financial information to its accountant, who was in charge of verifying the financial state, mortgage obligations and the liquidity assets of the insured at the time of the claim.
The Court accepted the insurer’s position and ordered the insured to communicate the undertakings made before the institution of legal proceedings, even though they were made in the course of a statutory examination, i.e. based on the obligation of the insured to collaborate in the course of the investigation by the insurer, as well as the particular clause providing for the insurer’s right to subject its insured to an examination under oath, as provided for in the insurance policy.
In support of his decision, the Honourable Prévost considered the following pertinent elements:
- The information requested [Translation] “was at the heart of the reasons put forth by the insurer for denying the plaintiff coverage”;
- The plaintiff invoked the insurer’s letter denying coverage, stating the reasons provided in the letter;
- The consideration that the information requested would eventually be required from the defendant in the course of the legal proceedings;
- The court must ensure the proper management of the case in accordance with sections 4.1 and 4.2 of the Code of Civil Procedure, concerning the rule of proportionality between the legal proceedings, in terms of the costs and time required, and the nature and ultimate purpose of the action.
- Given the nature of the documents requested, they would not have any effect other than [Translation] “permitting the defendant (i.e. the insurer) to be able to better specify the elements it wished to invoke in the suit, and more so for a proper management of the proceedings.”
It must be emphasized that during the presentation of the motion, ING Canada stated that it did not intend to avail itself of its right to examine before defence, considering the declaration under oath of the insured obtained during the course of the statutory examination. Instead, ING Canada intended to examine the insured only after producing its defence.
The importance of this interim judgment is that an insurer, wishing to obtain undertakings and information that were not communicated following a statutory examination, may proceed by means of a motion should the insured subsequently institute legal proceedings.
In such a case, the insurer does not renounce its right to obtain the undertakings. As such, considering the principle stipulated by the Legislator in section 397 of the Civil Code of Procedure to the effect that a plaintiff may be summoned for examination (on all the facts relating to the action or to communicate and provide a copy of any writing relating to the action), we consider this judgment as providing the option to proceed by means of a motion to communicate documents, even if the defending party does not wish to examine before defence.