Consol.-Bathurst v. Mut. Boiler Ins. Co. (1979), 32 N.R. 488 (SCC)
MLB headnote and full text
Consolidated-Bathurst Export Ltd. v. Mutual Boiler and Machinery Insurance Co.
Indexed As: Consolidated-Bathurst Export Ltd. v. Mutual Boiler and Machinery Insurance Co.
Supreme Court of Canada
Martland, Ritchie, Pigeon, Dickson, Beetz, Estey and McIntyre, JJ.
December 21, 1979.
Summary:
This case arose out of a claim by a manufacturer under a business accident insurance policy. Due to corrosion in the pipes in 3 heat exchangers the manufacturer’s plant was shut down and the manufacturer suffered consequential losses of $158,289. The insurer refused the manufacturer’s claim because the policy defined accident so as to exclude damage caused by corrosion. The trial court dismissed the manufacturer’s action against the insurer. The manufacturer appealed to the Quebec Court of Appeal.
The Quebec Court of Appeal dismissed the appeal. The manufacturer appealed to the Supreme Court of Canada.
The Supreme Court of Canada allowed the appeal, set aside the judgments of the Quebec courts and directed judgment in favour of the manufacturer for $158,289. The Supreme Court of Canada held that the insurer was liable because the exclusionary clause did not specifically exclude indirect or consequential losses caused by corrosion.
Ritchie, Martland and McIntyre, JJ., dissenting, in the Supreme Court of Canada, would have dismissed the appeal and would have affirmed the judgment of the Quebec Court of Appeal.
Insurance – Topic 5370
Property insurance – Business accident insurance – Exclusions – A paper products manufacturer insured its property against loss caused by accident – Due to the corrosion of pipes in 3 heat exchangers the manufacturer’s plant was shut down and the manufacturer suffered consequential losses of $158,289 – The Supreme Court of Canada held that the insurer was liable for the insured’s consequential losses because an exclusionary clause, while excluding corrosion from the meaning of “accident”, did not specifically exclude indirect or consequential losses caused by corrosion.
Insurance – Topic 1858
The insurance contract – Interpretation of contract – Ambiguity, construction to produce a fair result – The Supreme Court of Canada stated that in determining the intention of the parties to an insurance contract, if the words will bear two constructions, then the words should be interpreted to produce a reasonable, sensible and fair result (see paragraphs 12 and 41).
Insurance – Topic 1861
The insurance contract – Interpretation of the contract – Contra proferentem rule – The Supreme Court of Canada referred to the contra proferentem doctrine and stated that an exception or limitation drafted by an insurer which creates a doubt in its application should be construed against the insurer (see paragraphs 11 and 40).
Cases Noticed:
Pense v. Northern Life Assurance Co. (1907), 15 O.L.R. 131 (C.A.), refd to. [paras. 11 and 40].
Indemnity Insurance Company of North America v. Excel Cleaning Service, [1954] S.C.R. 169, refd to. [paras. 11 and 40], dist. [paras. 26 and 55].
Stevenson v. Reliance Petroleum Limited; Reliance Petroleum Limited v. Canadian General Insurance Company, [1956] S.C.R. 936, refd to. [paras. 11, 25, 40 and 54].
Cornish v. Accident Insurance Company (1889), 23 Q.B. 453 (C.A.), refd to. [paras. 11 and 40].
Authors and Works Noticed:
Cheshire and Fifoot’s Law of Contract, 9th ed., page 152 [paras. 11 and 40].
Counsel:
Guy Desjardins, Q.C., for the appellant;
Marcel Cinq-Mars, Q.C., for the respondent.
This appeal was heard by MARTLAND, RITCHIE, PIGEON, DICKSON, BEETZ, ESTEY and McINTYRE, JJ. of the Supreme Court of Canada at Ottawa, Ontario on March 13, 1979.
The judgment of the Supreme Court of Canada was delivered on December 21, 1979 and the following opinions were filed:
ESTEY, J. – see paragraphs 1 to 15 (English language judgment) and paragraphs 30 to 44 (French language judgment).
RITCHIE, J., dissenting – see paragraphs 16 to 29 (English language judgment) and paragraphs 45 to 58 (French language judgment).
PIGEON, DICKSON and BEETZ, JJ. concurred with ESTEY, J.
MARTLAND and McINTYRE, JJ. concurred with RITCHIE, J.
