Insurance and Professional Liability

In a decision rendered on October 29, 2009 in Hôtels Fairmont Inc. v. Schecter,1 the Quebec Court of Appeal was presented once again with an opportunity to clarify the limits of an insurer’s duty to defend, in a lawsuit set against what was in some respects an unusual factual background.


An American tourist, Karen Schecter, was on a short vacation at a well-known resort in the Charlevoix region of Quebec when she decided to participate in a horseback-riding activity that had been suggested to her by the resort. During her ride, she fell from her horse and hurt her back. She claimed that the resort, as well as the owner of the stable, a certain Mr. Kevin Coutts, was responsible for the accident. She alleged that the accident was caused when the horse she was riding bucked and threw her to the ground.

She also contended that the horse’s behaviour was caused by the presence of a helicopter in which the owner of the stable was flying. One of his horses was missing and he had asked a local helicopter pilot to take him aboard so that they could search for the missing horse by flying over the resort property. In accordance with Mr. Coutts’ instructions, the helicopter thus flew at low altitude over the trail upon which the plaintiff, Ms. Schecter, was riding, thereby throwing the animal into a panic.

In support of her claim, the plaintiff relied upon two distinct sources of liability; first, liability resulting from injury caused by an animal, and second, liability resulting from the presence of the helicopter in which Mr. Coutts was flying in search of the missing animal.

The liability insurers of the stable owner refused to take up his defence, claiming that a clause in their insurance policy excluded coverage for [translation] “liability resulting…from the use…by or for the Insured…of an aircraft.”


On November 11, 2007, the Quebec Superior Court allowed the plaintiff’s action. The Court found that the owner of the stable had been negligent in instructing the helicopter pilot to fly at a low altitude close to a group of beginner horseback-riders, given that he knew or should have known that flying as close as they did could excite the horses.

In the opinion of the Court, the presumption of liability of the owner of the animal provided for in Article 1466 of the Civil Code of Québec was inapplicable, given that it was not the behaviour of the animal per se which caused the injury, but rather the presence of the helicopter and what followed.

In light of the denial of coverage by his liability insurers, the owner of the stable instituted an action in warranty against them in which he sought reimbursement of his defence costs, and indemnification for any award of damages that might be made against him.

As regards the duty to indemnify, the Court accepted the arguments of the liability insurers of the stable owner without reservation. Indeed, according to the Court, the exclusion clause was clear: the insured was not covered if his liability resulted from the use by or for him of an aircraft. The fact that the owner of the stable was not the person flying the helicopter was irrelevant, since the helicopter was clearly being used for his benefit.

Turning to the duty to defend, the Superior Court came to a different conclusion. First, the Court reiterated that the duty of the insurer to defend the insured was distinct from the duty to indemnify the victim. Thus, according to the Court, the [translation] ”position taken by the insurer as to the merits of the claim cannot influence the determination of whether or not there is an obligation to defend the insured.”

The Court continued its analysis by emphasizing that the facts alleged in the plaintiff’s claim gave rise to two bases of liability, the first related to the use of an aircraft, which basis was excluded by the insurance coverage, and the second related to the liability resulting from the behaviour of the animal. According to the Superior Court, the owner of the stable should have been defended by his insurers since the second source of liability alleged was not covered by an exclusion clause. Thus, the insurers were ordered to reimburse all of the insured’s defence costs, despite the Court finding categorically that the exclusion applied in relation to the duty to indemnify.


The resort, the owner of the stable and his liability insurers appealed the decision.

In the recently rendered decision, the Quebec Court of Appeal concluded that the resort and the owner of the stable were jointly liable. According to the Court, the owner of the stable, as a temporary client of the helicopter pilot, had incurred contractual liability, on his own behalf and on behalf of the resort with which he had contracted to offer horseback-riding activities, for the injury suffered by Ms. Schecter.

Regarding the insurance coverage, the Court of Appeal was of the opinion that the exclusion clause relating to the use of an aircraft was clear and should apply. The Court found that even if the owner of the stable was not himself the pilot, it was clear that he had given instructions to the pilot concerning the flight path and had asked him to fly over an area in which a horsebackriding activity was likely to be taking place. The Court of Appeal thus saw no reason to interfere with the decision of the Superior Court as regards the duty to indemnify.

As far as the duty to defend was concerned, the Court of Appeal also adopted the Superior Court’s position that the liability insurers of the stable owner should have taken up his defence, since Ms. Schecter’s claim was based, at least in part, on a presumption of liability of the owner of an animal set out in Article 1466 of the Civil Code of Québec. In that respect, before the Court of Appeal, the owner of the stable maintained that his insurers should have defended him not only in Superior Court but also on appeal. The Court of Appeal, however, saw things in a different light. According to the appeal court, the situation on appeal was quite different in that “the contention that the behaviour of the animal or of its users was the cause of the damage [became] not only secondary, but indeed insignificant to the point of being untenable, having regard to the whole of the evidence.


The Court of Appeal’s refusal to have the stable owner’s liability insurers assume his defence costs is surprising. Granted, there exists little jurisprudence on the duty to defend at the appeal level. The reason is undoubtedly quite simple. It is now well established that if the allegations of the claim could possibly trigger the insurance coverage, the insurer must take up the insured’s defence. It is also well established that the duty to defend is wider in scope than the duty to indemnify. Until an appeal court has decided on the merits of the case, the allegations of the claim remain, regardless of the findings of the judgment in first instance being appealed from. For instance, in Hôtels Fairmont inc. v. Schecter, the Court of Appeal could in theory have disagreed with the trial judge on the issue of the stable owner’s liability based on the negligent use of the helicopter, but have found him liable nonetheless as the owner of the horse. In such a case, would it have been possible to take the position that the stable owner was not entitled to his defence costs on appeal? With respect, it appears that by refusing reimbursement of the stable owner’s defence costs on appeal, the Court decided the question of the duty to defend on the basis of the decision arrived at regarding the duty to indemnify. In so doing, it ignored the allegations of the claim, the merits of which can only be determined once the appeal process is complete.

Such was the position adopted by the Superior Court when deciding a similar question in Sweibel v. Fonds d’assurance responsabilité professionnelle du Barreau du Québec.2 In that case, the Court indicated that before determining whether or not a duty to defend existed, it was necessary [translation] “to give a broad interpretation to the facts alleged in the proceeding, not only in first instance but also on appeal.”

However, two years later, the Superior Court saw things differently in Bédard Dodge Chrysler Ltée v. Compagnie d’assurance M.O.A.C. (C.N.A.),3 in which it concluded that although the allegations of the claim had given rise to a duty to defend in first instance, the reasons of the trial judgment justified the insurer’s decision not to assume the defence of the insured on appeal.


The reasons for judgment of the Court of Appeal in Hôtels Fairmont Inc. v. Schecter reveal that the duty to defend on appeal was not the principal issue before the Court of Appeal, probably owing to its limited financial implications. Nor was it the object of a detailed analysis by the Court of Appeal, which devoted the bulk of its reasons to the question of the stable owner’s and the resort’s liability to the victim, as well as the duty of the liability insurers to indemnify the victim on behalf of its insured. For our part, we do not believe that the issue is settled.

It remains to be seen whether the decision of the Court of Appeal will mark the beginning of a new line of jurisprudence that will redefine the duty to defend at the appeal level.