External evidence presented in the context of Wellington Motions in Quebec

Publication March 2016

Quebec law on motions to compel an insurer to defend its insured under a liability policy, also known as “Wellington Motions,” has evolved over the years. The Quebec Court of Appeal recently added to this body of law by rendering a judgment that overturned a Quebec Superior Court decision allowing the introduction of external evidence to support a liability insurer’s denial of coverage.1 The Court of Appeal, in this case, shed more light on how Wellington Motions should be viewed.


The facts

The plaintiffs, the Quebec Government and a school board, were claiming from a series of defendants damages from a fire allegedly caused by welding operations on the roof of a school. One of the defendants, Technologies CII Inc. (CII), was the contractor in charge of installing heating and ventilation components for the school. CII’s work involved some welding operations on the roof, and a fire broke out while CII’s employees were working at the school. The fire caused approximately $16 million in damages.

Northbridge Financial Corporation (the Insurer) was also named as a co-defendant as CII’s insurer. In the context of the proceedings, the Insurer filed its plea stating that there was no coverage for CII for this loss because CII’s employees had breached one of the warranties included in the policy by neglecting to use fireproof screens or blankets during the welding operation. In support of its plea, the Insurer had filed a copy of its statutory examination of CII’s president, who admitted that CII’s employees did in fact breach this warranty.

Shortly after the Insurer filed its plea, CII filed a Wellington Motion to compel the Insurer to defend the claim.

Quebec Superior Court decision2

The first question addressed by the Superior Court was whether the Insurer was allowed to submit “external” evidence to support its denial of coverage based on the breach of warranties. As an example, the Insurer wanted to show, using CII’s president’s statutory examination, that CII’s employees failed to use any fireproof shielding.

The court determined that, in the context of this hearing, the Insurer could provide the court with such external evidence to support its decision to refuse to defend CII. However, the court added, this should be done in a strict and summary procedural context, which must not become a “trial within a trial.” The court therefore concluded that it should look to the evidence already submitted by plaintiffs and the Insurer, including the statutory examination of CII’s president. Moreover, the court held that it should consider as true all the facts that flow from this external evidence.

After a lengthy debate as to whether the warranties included in the Insurer’s policies were indeed known by the insured, the court determined that the Insurer was successfully able to show that its insured had indeed breached one of the warranties in the policy. The court based its finding largely on the statements of CII’s president during his statutory examination. As a result, the court found that the Insurer had no duty to defend the claim made by plaintiffs against CII seeing as, at the stage of the proceedings, it had not been shown that the policy applied to the loss.

Court of Appeal decision

On appeal, the Court of Appeal unanimously overturned the trial judge’s decision. In a very short judgment, the panel found that the first judge should not have concluded, based on the external evidence provided by the Insurer, that the fire that damaged the building was necessarily caused by the welding operations that were the focus of the warranties in the Insurer’s policy.

Moreover, the court found it was not clear from that evidence that CII’s employees were actually conducting welding operations on the building shortly before the fire. More importantly, the Court of Appeal noted its “surprise” at the first judge’s decision to allow external evidence (i.e., most likely referring to CII’s president’s admissions in his statutory examination) to be considered in the context of the Wellington Motion. The court reiterated that only a minimal amount of evidence should be heard at that stage, since the insured is not afforded the right to respond to the evidence put forward by the insurer. The Court of Appeal therefore struck down the first judgment and ordered the Insurer to defend the claim against CII.

Footnotes

1 Technologies CII Inc. v Société d’assurances générales Northbridge, 2016 QCCA 41 (Que. C.A.).

2 Québec (Procureure générale) v Services énergitiques Ecosystem inc., 2015 QCCS 1988 (Que Sup Ct).


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