A Recent Superior Court Decision Saves an Insurer’s Subrogatory Action

On April 20 the Quebec Superior Court rendered a decision1 holding that the refusal by the insured to submit to a pre-trial examination does not constitute grounds for the dismissal of a subrogatory action brought by the insurance company. 

In 2013, a fire destroyed the home of the insured under a policy issued by the plaintiff, Chartis Insurance Company of Canada (“Chartis”). After indemnifying the insured, Chartis instituted subrogatory proceedings against the defendant S.C.E. Électrique Inc. (“SCE”).

SCE sought to examine the insured on discovery. However, the insured were by then residing in Costa Rica, and despite several attempts by Chartis to persuade them to cooperate, the examinations never took place. 

Several orders were issued in 2014 and 2015 imposing timelines for holding the examinations, the last of which, rendered on July 31, 2015, imposed a final deadline of August 31, 2015, following which SCE was authorized to file a motion to dismiss the action. That order was appealed, but the appeal was dismissed. 

The deadline came and went, and SCE then filed a motion to have the subrogatory action dismissed pursuant to articles 51 and following of the Code of Civil Procedure (the “CCP”). It was this motion that was dealt with by the Court in its April 20 decision. 

The Court first of all specified that it had no criticisms to make of either Chartis or its counsel regarding the difficulties experienced in trying to schedule the examinations. 

Then, basing itself on the Quebec Court of Appeal’s decision in Canadienne générale, compagnie d’assurance c. Automobile 200 Inc.2, the Superior Court concluded that the insured’s refusal to submit to an examination was not tantamount to a refusal to cooperate on the part of the insurer, given that the latter was party to the proceedings and the insured were not. The Court also held that the insured could not be considered to be agents of the insurer. Thus, while there was no question that SCE had the right to examine the insured, their refusal to cooperate could not be considered an abuse of process on the part of Chartis pursuant to articles 51 and following of the CCP. 

This judgment is consistent with the principles developed by the courts regarding CCP articles 51 and following. The case law recognizes that a judge must be prudent before prematurely putting an end to legal proceedings, even where the plaintiff’s theory of the case appears to be weak3. It would thus be contrary to this obligation of prudence for the judge to take away the plaintiff’s right of action when its own conduct and proceedings show no signs of being abusive within the meaning of those CCP provisions. 

This decision also sheds new light on the limited extent to which the insurer can be equated with the insured in subrogatory proceedings. While on the legal level the adage is that the insurer “steps into the shoes” of the insured, that is not the case on the procedural level.

 Article 1651 of the Civil Code of Québec (the “CCQ”) provides that the subrogee, in this case the insurer, does not have more rights than the subrogor, i.e. the insured. On the procedural level, the Court found however that the insured could not be considered to be agents of the insurer. The latter’s action was therefore not dismissed because of the insured’s refusal to submit to an examination, even though the insurance policy generally obliges the insured to cooperate with the insurer in recovering the amount of the indemnity paid to the insured. 

A situation such as this obviously entails evidentiary difficulties for the parties. While the burden of proof in a lawsuit involving a fire is on the plaintiff, there are other situations where the defendant is presumed to be at fault or liable. In such cases, the inability of the defendant to examine the subrogated insurer’s insured would considerable hamper its defence. 

The specific situation considered in this decision resulted in an unavoidable injustice for the defendant. While Quebec law provides measures to compel individuals to submit to an examination, such as a subpoena, in other countries achieving this result is much more complicated. New technologies may well facilitate remote examinations, but the witness must still be willing to cooperate. Furthermore, if Chartis’ insured were to appear at trial without having been examined, this would create an additional difficulty for SCE, which would then have to request an adjournment to supplement its evidence. 

This decision thus raises several questions that remain unanswered by the current rules of procedure. It must be borne in mind, however, that the law as applied in the case law tends towards protecting the victim, such that, as a matter of principle, a third party at fault is not allowed to take advantage of a contractual misunderstanding between an insurer and its insured after the insured has been indemnified. In that sense, this decision restates that principle and is consistent with the case law on motions to dismiss.

1 Compagnie d’assurances Chartis v. SCE Électrique Inc., 2016 QCCS 1804
2 1996 CanLII 5732
3 Charles-Auguste Fortier Inc. v. 9095-8588 Québec Inc., 2014 QCCA 1107, Cosoltec Inc. v. Structure Laferté Inc., 2010 QCCA 1600 (CanLII). Aliments Breton (Canada) Inc. v. Bal Global Finance Canada Corporation, 2010 QCCA 1369.

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