Caveats to the Aggressive Pursuit of Self-Interest: Revisiting Bhasin and the Good Faith Doctrines

Caveats to the Aggressive Pursuit of Self-Interest: Revisiting Bhasin and the Good Faith Doctrines

In 2014, the Supreme Court of Canada released Bhasin v Hyrnew which recognized a general principle of good faith in contractual performance. The decision highlighted one manifestation of that organizing principle: the duty not to actively deceive. Since Bhasin, there has been some confusion about how far the good faith principle extends. Two recent Supreme Court decisions have provided some clarity:
CM Callow Inc v Zollinger confirmed the expectation that parties will perform a contract without lies or deception. More importantly, it extended the duty of honest performance introduced in Bhasin, noting that inaction or silence can be “cousins in the catalogue of deceptive contractual practices”.
Wastech Services Ltd v Greater Vancouver Sewerage and Drainage District explored the exercise of contractual discretionary powers in good faith. It accepts that parties must exercise contractual discretion reasonably within the context of the agreement reached.
In both decisions, the Supreme Court was careful not to erode freedom of contract. It accepted that contractual counterparties are not required to subvert their own interests to conform to either of the duties clarified in Callow and Wastech.

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Insureds in a Material World: Defining “Material” in the Context of Coverage

Insureds in a Material World: Defining “Material” in the Context of Coverage

Insurance applications can be challenging. The questions are often ambiguous and remembering every piece of relevant information is difficult. However, being diligent is important, as an insurer may deny coverage of a claim if an insured incorrectly answered a question or failed to disclose material information. On the other hand, insureds should be aware that courts will scrutinize claims of inadequate disclosure on a reasonableness basis. Typically, insurers cannot rely on answers to ambiguous questions in application materials unless the nature of the risks those questions sought to elicit is obvious or was brought to the insured’s attention.

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UK Supreme Court Sides with Policyholders in COVID-19 Business Interruption Test Case

UK Supreme Court Sides with Policyholders in COVID-19 Business Interruption Test Case

On January 15, 2021, the UK’s Supreme Court rendered its much-awaited decision on business interruption coverage for COVID-19. In a decision over 100 pages long, the court ruled in favour of policyholders on almost every issue. As of today, there are no reported cases in Canada on the merits of coverage for business interruption losses caused by COVID-19, and this case will likely be positively received by our courts.

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Supreme Court torpedoes Mr. Submarine’s recovery of pure economic loss from allegedly negligent supplier

Supreme Court torpedoes Mr. Submarine’s recovery of pure economic loss from allegedly negligent supplier

On November 6, 2020, the Supreme Court of Canada released a 5-4 decision on recovery of negligently-caused pure economic loss that will be significant for defendants faced with product liability claims where no physical harm or property damage was caused. The majority in 1688782 Ontario Inc v Maple Leaf Foods Inc ruled that economic harm suffered by Mr. Submarine franchisees from a recall of potentially contaminated Maple Leaf sandwich meats was not recoverable in negligence because any danger was directed at consumers, not the franchisees, and there was no legitimate reason to superimpose tort law duties for economic harms over the business relationships already in place. Where pure economic loss claims for negligently-supplied dangerous goods are brought by an appropriate claimant, the Supreme Court also limited the scope of damages that may be recovered.

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British Court issues important decision on Business Interruption coverage for COVID19

British Court issues important decision on Business Interruption coverage for COVID19

England’s Financial Conduct Authority (“FCA”) was largely successful in its test case against eight (8) insurers,[1] with respect to business interruption coverage for infectious disease and/or prevention of access/orders of civil authority. The decision considered 21 policy forms issued by these eight insurers, but FCA’s counsel has suggested that “some 700 types of policies across 60 different insurers and 370,000 policyholders could potentially be affected by the test case.” The 150-page decision considers many issues, and notes that the particular policy wording is important. Subtle differences lead to potentially different results.  However, there are some very important issues decided that appear to have very broad application.

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Novel Case on Data Exclusion Interpreted in Favour of Insureds

Novel Case on Data Exclusion Interpreted in Favour of Insureds

A recent Ontario case appears to be one of the first interpreting a data exclusion often found in liability policies. The case went in favour of the insureds, with the insurer being ordered to defend claims arising out of an alleged security breach on a website owned by Family and Children’s Services of Lanark, Leeds and Grenville (“FCS”). Following the alleged breach, a lawsuit was brought against FCS, and FCS claimed over against Laridae Communications Inc., who had given FCS advice on the design and security of its website. The insurer for FCS and Laridae was ordered to defend all the claims, on the basis that not all of the claims were captured by the policy’s data exclusion.

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Court Awards Commercial Prejudgment Interest Rates on Successful Coverage Claim

Court Awards Commercial Prejudgment Interest Rates on Successful Coverage Claim

In MDS Inc v Factory Mutual Insurance Company, the Ontario Superior Court of Justice recently held that an insurer who wrongfully denied a US$121 million claim must pay prejudgment interest based on the actual cost of borrowing, and not the rates stipulated in the Courts of Justice Act. This decision is one that counsel and adjusters would be wise to carefully consider in any future insurance coverage dispute, as it sets out a number of factors that a Court could consider in deciding whether to award commercial interest rates.

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Concurrent Duty to Defend – A Team Sport

Concurrent Duty to Defend – A Team Sport

In Markham (City) v. AIG Insurance Company of Canada, 2020 ONCA 239, the Ontario Court of Appeal addressed three important elements of the duty to defend, where there is concurrent coverage under two policies: whether there was a concurrent duty to defend given the existence of an “other insurance” clause, the obligation to pay ongoing costs and its allocation, and the right to participate in the defence.

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That’s Cold: Insurer Ordered to Defend Claims Made Against Cold Storage Provider

That’s Cold: Insurer Ordered to Defend Claims Made Against Cold Storage Provider

In Intact v. Clauson, The Alberta Court of Appeal ordered an insurer to defend claims made against the insured’s cold storage business, which was sued when its warehouse thawed and damaged its customer’s food products. This decision is consistent with leading principles of insurance law, which emphasize the importance of reading the contract as a whole when interpreting the meaning of a particular provision, and underlines that it is important to always review the specific words of a policy to determine coverage, not rely on received wisdom about what a policy typically covers.

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Policyholder’s Entitlement to Interest No Less than Other Litigants

Policyholder’s Entitlement to Interest No Less than Other Litigants

In Watt v TD Insurance, the Superior Court of Justice confirmed that interest is payable on judgments against insurers, even where the damages awarded are only to compensate for the loss of chattels. The decision followed an earlier Court of Appeal case that held an insured was entitled to interest notwithstanding that policy limits had already been reached. Together, the two decisions underline that insurance considerations do not negate a policyholder’s entitlement to interest payable under ordinary litigation principles. The implications of the decision are welcomed in all disputes with insurers that fail to indemnify policyholders in a timely manner.

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