Quebec Superior Courtroom Confirms Arbitrability of Insurance coverage Protection Disputes

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Ending years of ambiguous jurisprudence, Justice Gary Morrison confirmed, in 9369-1426 Quebec Inc. (Restaurant Baton Rouge) v. Allianz International Dangers, that Quebec regulation permits the arbitration of disputes underneath an insurance coverage coverage to the exclusion of the courts.

Dealing with enterprise interruption losses resulting from COVID-19, sure Baton Rouge franchisees sought to certify a category motion in opposition to Allianz on behalf of all its insured eating places and bars in Quebec claiming protection underneath a property insurance coverage coverage. On behalf of Allianz, Clyde & Co moved to dismiss the motion and stop certification based mostly on the Coverage’s dispute decision clause, which offered for mediation and/or binding arbitration. Justice Morrison granted the movement and dismissed the motion.

Recourse to Arbitration to the Exclusion of the Courts

Article 3148 of the Civil Code of Quebec (“CCQ”) establishes the private and subject material jurisdiction of the Quebec courts besides in instances the place events have contractually agreed to submit a dispute to both the jurisdiction of a international courtroom or to arbitration. This normal rule is adopted by three particular provisions concerning jurisdiction over client and employment contracts (Article 3149), asbestos and different minerals (Article 3151), and insurance coverage insurance policies (Article 3150). Notably, Articles 3149 and 3151 present that Quebec courts have unique jurisdiction over such issues, such that they can’t be arbitrated.

In regard to contracts of insurance coverage, Article 3150 gives that the Quebec courts even have jurisdiction over a dispute arising out of a contract of insurance coverage the place the Insured or the insured property is positioned in Quebec. In contrast to Articles 3149 or 3151 nonetheless, Article 3150 is silent on whether or not jurisdiction might be waived by the inclusion of an arbitration clause.

On this silence, previous courtroom choices have inadvertently grouped Article 3150 along with Article 3149 and 3151, and in obiter dicta thought-about that, similar to client contracts, contracts of employment, and asbestos associated contracts, insurance coverage insurance policies couldn’t be topic to arbitration clauses regardless that, as famous above, Article 3150 is silent on this query.

For instance, in Development injection EDM inc. v. SNC-Lavalin Development (Atlantic) Inc., 2013 QCCS 5049— which was not an insurance coverage dispute— the Superior Courtroom, in an obiter dictum, inadvertently teams collectively Article 3150 with Articles 3149 and 3151 to search out that the legislature has excluded the recourse to arbitration for all three. In United European Financial institution and Belief Nassau Ltd. v. Duchesneau 2006 QCCA 652, additionally in obiter, the Quebec Courtroom of Enchantment accepted a celebration’s submission that Articles 3149 by means of 3151 forestall the arbitration of disputes. The identical holding can also be present in KOM Worldwide inc. v. Swiednicki, 2018 QCCS 546.

As famous, none of those instances really concerned insurance coverage insurance policies or an train of the courts’ jurisdiction pursuant to Article 3150. All of them seem like based mostly upon a studying of the Supreme Courtroom’s choice in GreCon Dimter inc. v. J. R. Normand inc., 2005 SCC 46, even though Grecon itself clearly species that solely Articles 3149 and 3151 exclude the recourse to arbitration.

Insurances Contracts might be Arbitrated

In distinction, in Baton Rouge, Justice Morrison adopted the one prior authority—in an insurance coverage dispute—on Article 3150: Mega Bloks Inc. v. American Dwelling Insurance coverage Firm, 2006 QCCS 5083. He concluded that in its silence, Article 3150 permits disputes underneath insurance coverage insurance policies to be submitted to decision by arbitration. In doing so, Justice Morrison additionally famous the privileged place the Quebec legislature has granted to different dispute decision within the Code of Civil Process.

This ruling is per the legislative debate on the drafting of Article 3150 in the course of the reform of the Civil Code of Quebec, the place the legislature particularly elected to permit for the arbitration of insurance coverage disputes.

There may be nothing inequitable in Arbitrating insurance coverage disputes

Whereas class actions are an necessary discussion board for in search of entry to justice, the Supreme Courtroom of Canada has continuously dominated that an arbitration clause is to be revered (Dell, Seidel), besides the place it’s used unconscionably to forestall entry to justice (Uber Applied sciences Inc. v. Heller, 2020 SCC 16). It’s as much as the legislature to enact particular laws the place different pursuits, akin to defending customers or staff, are thought-about to be paramount over the freedom of contract.

On this regard, Justice Morrison additionally acknowledged that there’s nothing inequitable in arbitrating an insurance coverage dispute.

A Alternative of District Clause does Not Preclude Arbitration

The opposite notable clarification in Justice Morrison’s judgment is {that a} alternative of district clause can coexist with an arbitration clause. On this case, as is usually the case, the coverage included each an arbitration clause and a alternative of regulation clause which specified that

“The Courts within the Courtroom District wherein the Named Insured is positioned shall have unique jurisdiction in case of a protection dispute.”

Such clauses can seem like contradictory—creating doubtlessly deadly ambiguity as to the events’ intentions. Nevertheless, Justice Morrison adopted the longstanding precept of contractual interpretation to learn each clauses collectively in a matter which preserves them each. In doing so, he decided that the coverage contained each (i) an arbitration clause for decision of disputes and (ii) a alternative of district clause that specified the courts to which events to the arbitration would search help, if obligatory, for the arbitration course of, whether or not to nominate an arbitrator, search emergency aid, or comparable redress.

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