Canada Trustco Mortgage Co. v. Co-operators General Insurance Co., (1997) 163 N.S.R.(2d) 241 (CA)

• Judge: Chipman, Pugsley and Flinn, JJ.A.
• Court: Court of Appeal of Nova Scotia (Canada)
• Case Date: November 17, 1997
• Jurisdiction: Nova Scotia
• Citations: (1997), 163 N.S.R.(2d) 241 (CA)

Can. Trustco v. Co-op General (1997), 163 N.S.R.(2d) 241 (CA);

    487 A.P.R. 241

MLB headnote and full text

Temp. Cite: [1997] N.S.R.(2d) TBEd. DE.009

The Co-operators General Insurance Company, a body corporate (appellant) v. Canada Trustco Mortgage Company, a body corporate (respondent)

(CA134758)

Indexed As: Canada Trustco Mortgage Co. v. Co-operators General Insurance Co.

Nova Scotia Court of Appeal

Chipman, Pugsley and Flinn, JJ.A.

November 17, 1997.

Summary:

A mortgagee sued an insurer under a standard mortgage clause in a homeowners' policy claiming indemnity after the mort­gagors' home was destroyed in a suspicious fire. The mortgagee was also covered by a subscription insurance policy which it obtained just before the fire. The insurer denied liability.

The Nova Scotia Supreme Court, in a decision reported 161 N.S.R.(2d) 100; 477 A.P.R. 100, allowed the mortgagee's action. The insurer appealed. The mortgagee cross-appealed.

The Nova Scotia Court of Appeal dis­missed the appeal and allowed the cross-appeal.

Evidence - Topic 2401

Special modes of proof - Presumptions - Specific presumptions - Inference from failure to call available evidence - A mort­gagee sued an insurer under a standard mortgage clause in a homeowners' policy claiming indem­nity after the mortgagors' home was destroyed by fire - On appeal, the insurer argued that an adverse infer­ence should be drawn against the mort­gagee for failing to produce a critical witness - The Nova Scotia Court of Appeal refused to draw an adverse inference - The insurer had experienced counsel who had examined the witness on discovery - Although the witness had been fired by the mortgagee, the insurer could have intro­duced favourable evidence from the dis­covery at trial, framed appropriate ques­tions by way of interrogatory and intro­duced the answers at trial, or subpoenaed the witness to attend trial itself - See para­graphs 20 to 38.

Fraud and Misrepresentation - Topic 4040

Practice - Burden of proof - General - [See Insurance - Topic 3305 ].

Insurance - Topic 2886

Subrogation - Insurer limited to rights of insured - A mortgagee sued an insurer under a standard mortgage clause in a homeowners' policy claiming indem­nity after the mortgagors' home was destroyed by fire - The mortgagee was also covered by a subscription insurance policy - On appeal, the insurer argued that the sub­scription insurers, in exercising their subrogation rights, were governed by the standard mortgage clause - It required "other valid and collectible insurance" on the property, i.e., the subscription policy, to be taken into account in determining the amount payable by the insurer to the mort­gagee - The Nova Scotia Court of Appeal held that the insurer could not reduce its obligation to indemnify the mortgagee - The court reviewed the subscription policy, considered the intention of the parties and held that the subscription policy served as a backstop policy, designed to come into effect at the instant the fire policy was cancelled - See paragraphs 45 to 76 and 87 to 93.

Insurance - Topic 2893

Subrogation - Action by insurer - Condi­tions precedent - Section 172(1) of the Insurance Act provided that the "...insurer, upon making any payment or assuming liability therefor under a contract of fire insurance, shall be subrogated to all rights of recovery of the insured against any person..." - The Nova Scotia Court of Appeal stated that this wording was suffi­ciently broad to embrace ex gratia payment by an insurer - See paragraphs 78 to 82.

Insurance - Topic 2896

Subrogation - Action by insurer - Statutory restrictions - [See Insurance - Topic 2893 ].

Insurance - Topic 2945

Contribution among insurers - Two or more policies covering "same interest" - A mortgagee sued an insurer under a stan­dard mortgage clause in a homeowners' policy claiming indemnity after the mort­gagors' home was destroyed by fire - The mort­gagee was also covered by a sub­scription insurance policy - The Nova Scotia Supreme Court applied s. 169 of the Insur­ance Act - There were two pol­icies in force covering the same interest at the time of loss and, therefore, both insurers had to contribute their rateable proportion of the loss - The insurer appealed the trial judge's interpretation of s. 169 and the mortgagee cross-appealed his finding that s. 169 applied - The Nova Scotia Court of Appeal dismissed the appeal and allowed the cross-appeal - See paragraphs 94 to 111.

Insurance - Topic 2946

Contribution among insurers - Conditions precedent - Two or more policies covering "same interest" - [See Insurance - Topic 2945 ].

Insurance - Topic 3305

Payment of insurance proceeds - Actions - Defences - False statement by insured respecting claim - A mortgagee sued an insurer under a standard mortgage clause in a homeowners' policy claiming indem­nity after the mortgagors' home was destroyed by fire - The mortgagee was also covered by a subscription insurance policy which it obtained just before the fire - The insurer denied liability, arguing, inter alia, that the mortgagee's proof of loss was fraudulent because it failed to disclose the existence of other insurance - The Nova Scotia Supreme Court held that the insurer had not satisfied the heavy burden of producing clear and satis­factory evidence that the mortgagee, through its employees, acted wilfully and knowingly to claim the bene­fit of coverage to which the corpor­ation was not entitled - The Nova Scotia Court of Appeal dismissed the insurer's appeal - See paragraphs 20 to 26 and 39 to 44.

Insurance - Topic 6052

Fire insurance - Defences - Fraud or false statements - Proof of loss - [See Insur­ance - Topic 3305 ].

Insurance - Topic 6053

Fire insurance - Defences - Existence of other insurance - [See Insurance - Topic 2886 ].

Interest - Topic 5008

Interest as damages (prejudgment interest) - Prejudgment interest - Entitlement - A mortgagee sued an insurer under a stan­dard mortgage clause in a homeowners' policy claiming indemnity after the mortg­agors' home was destroyed by fire - The mort­gagee was also covered by a sub­scription insurance policy which it obtained just before the fire but failed to refer to this coverage when it completed the proof of loss for the insurer - The Nova Scotia Supreme Court stated that "[p]rejudgment interest is intended to compensate the plaintiff for the failure of the defendant to make prompt settlement of the sum ulti­mately found to be due and owing." - It held that both parties were responsible for some delay and ordered that interest on the award be paid for the period commencing 60 days after the proof of loss was filed - The Nova Scotia Court of Appeal dis­missed the insurer's appeal - See para­graphs 112 to 115.

Cases Noticed:

National Bank of Greece (Canada) et autres v. Simcoe & Erie General Assur­ance Co. et autres, [1990] 2 S.C.R. 1029; 115 N.R 42; 32 Q.A.C. 250, refd to. [para. 17].

National Bank of Greece (Canada) v. Kat­sikonouris - see National Bank of Greece (Canada) et autres v. Simcoe & Erie General Assur­ance Co. et autres.

Panzera et al. v. Simcoe & Erie Insurance Co. et al. - see National Bank of Greece (Canada) et autres v. Simcoe & Erie General Assur­ance Co. et autres.

Levesque v. Comeau, [1970] S.C.R. 1010; 5 N.B.R.(2d) 15, dist. [para. 28].

Midland Doherty Ltd. v. Rohrer and Cen­tral Trust Co. (1983), 62 N.S.R.(2d) 73; 136 A.P.R. 73 (T.D.), refd to. [para. 35].

Angus v. Clifford, [1891] 2 Ch. 449 (C.A.), refd to. [para. 39].

Short v. Guardian Insurance Co. of Canada (1984), 62 N.S.R.(2d) 1; 136 A.P.R. 1 (C.A.), refd to. [para. 40].

Bank of Nova Scotia v. Commercial Union Assurance Co. of Canada (1993), 123 N.S.R.(2d) 58; 340 A.P.R. 58 (C.A.), refd to. [para. 53].

King v. Victoria Insurance Co., [1896] A.C. 250 (P.C.), refd to. [para. 83].

Industrial Development Bank v. Fayad et al. (1976), 5 A.R. 451; 71 D.L.R.(3d) 152 (C.A.), appld. [para. 99].

Conrad v. Snair et al. (1996), 150 N.S.R.(2d) 214; 436 A.P.R. 214 (C.A.), refd to. [para. 117].

Statutes Noticed:

Insurance Act, R.S.N.S. 1989, c. 231, sect. 169(1) [paras. 48, 95]; sect. 169(2) [para. 48]; sect. 172(1) [paras. 46, 81].

Authors and Works Noticed:

Orkin, Mark M., The Law of Costs (2nd Ed.) (1996 Looseleaf Ed.), p. 2-28 [para. 119].

Perell, Fraud: Elements of Deceit and Fraudulent Misrepresentation (1996), 18 Adv. Q. 23, p. 26 [para. 42].

Counsel:

Clarence A. Beckett, Q.C., for the appel­lant;

W. Dale Dunlop, for the respondent.

This appeal and cross-appeal were heard on October 7, 1997, before Chipman, Pugs­ley and Flinn, JJ.A., of the Nova Scotia Court of Appeal.

On November 17, 1997, Pugsley, J.A., delivered the following judgment for the Court of Appeal.