Coronation Insurance Co. et al. v. Taku Air Transport Ltd. et al., (1991) 131 N.R. 241 (SCC)

• Judge: Cory, McLachlin, Stevenson and Iacobucci, JJ.
• Court: Supreme Court (Canada)
• Case Date: November 28, 1991
• Jurisdiction: Canada (Federal)
• Citations: (1991), 131 N.R. 241 (SCC)

Coronation Ins. v. Taku Air Transport (1991), 131 N.R. 241 (SCC)

MLB headnote and full text

[French language version follows English language version]

[La version française vient à la suite de la version anglaise]

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The Coronation Insurance Company Limited and The Eagle Star Insurance Company Limited (appellants) v. Carol Florence, Andrew R. Florence and Russell A. Florence, infants by their guardian ad litem, Carol Florence (respondents) and Deborah Passarell, Natasha Passarell, Jackelynn Passarell and Rocky Passarell, infants by their guardian ad litem, Deborah Passarell (respondents) and Taku Air Transport Ltd., Robert Carl Berchtenbreiter, infant by his guardian ad litem, Ian D. Izzard; Gerald Abel, the Administrator of the Estate of Ben Abel, Deceased; Ray Frederick Smith and Nora Anias, the Administrators of the Estate of Shelley Smith, Deceased (defendants)

(22157)

Indexed As: Coronation Insurance Co. et al. v. Taku Air Transport Ltd. et al.

Supreme Court of Canada

La Forest, L'Heureux-Dubé, Sopinka,

Cory, McLachlin, Stevenson

and Iacobucci, JJ.

November 28, 1991.

Summary:

Taku Air Transport obtained insurance by misrepresenting its accident record; although the insurers' own records would have revealed the truth. Subsequently, one of its aircraft crashed, killing its five passengers. Taku's insurance covered only four seats. The insurers brought an action in the British Columbia Supreme Court for a declaration that no insurance coverage attached to the aircraft because of two exclusionary clauses in the policy. The conditions were: (1) an exclusion of liability where there was a mis­representation of material fact by the insured and (2) an exclusion of liability where the aircraft was carrying a larger number of passengers than the number of seats insured under the policy. Relatives of the deceased passengers were added as defendants. The relatives applied to the Federal Court of Canada for an order of certiorari to quash the approval of the exclusionary conditions by the Air Transport Committee, alleging that the delegation of regulatory power to the Committee was improper.

The Federal Court of Canada, Trial Divi­sion, allowed the application in a judgment reported 24 F.T.R. 224; 34 Admin. L.R. 36.

Accepting this ruling, the British Columbia Supreme Court in a judgment reported [1989] I.L.R. 1-2458; 37 C.C.L.I. 271, granted the insurers' declaration and found the policy void ab initio. The relatives' counterclaim was dismissed, but they were awarded costs. They appealed and the insurers cross-appealed on costs.

The British Columbia Court of Appeal in a judgment reported [1990] I.L.R. 1-2643; 48 B.C.L.R.(2d) 222; 72 D.L.R.(4th) 184, allowed the appeal and dismissed the cross-appeal, ruling that, where the conditions were invalid and not part of the policy, Taku did not violate the policy. The insurers appealed.

The Supreme Court of Canada allowed the appeal on the ground that Taku breached the policy by carrying too many passengers, thereby vitiating the policy. The insurers could not rely on Taku's misrepresentation about its accident record, because they could easily have verified it and chose not to, to the prejudice of the passengers, who were the intended beneficiaries of the Regulations. Because of this and because of the impor­tance of the issues, the Court awarded costs throughout to the relatives.

Courts - Topic 28

Stare decisis - Authority of judicial deci­sions - Common law - Modification or extension of common law rule - In ex­tending an old judge-made rule of insur­ance law the Supreme Court of Canada characterized what it was doing as a "rea­sonable incremental change" and stated: "... one of the greatest attributes of the common law is its ability to change and to respond to new social pressures and the evolving requirements of the modern com­munity. If that be so, then judge-made law should within appropriate limits advance with the times." - See paragraphs 25 to 40.

Insurance - Topic 726

Insurers - Duties - Duty to investigate applicant's loss record - A small air carrier applied for regulation-mandated insurance and grossly misrepresented its accident record - The insurer had terminated the carrier's insurance a few years before and its name "rang a bell", but the insurer did not check its records, which along with available public aeronautics industry records would have revealed the truth - After a crash the insurer denied liability to deceased passengers' relatives on the ground of misrepresentation - The Supreme Court of Canada held that in such an industry regulated in the interest of public safety with carriers required to have insurance the insurer had a duty to investi­gate the carrier's loss record and could not deny liability on the misrepresentation ground where it breached the duty - See paragraphs 19 to 40.

Insurance - Topic 750

Insurers - Negligence or breach of con­tract - Duty of care - To interested third parties - [See Insurance - Topic 726 ].

Insurance - Topic 1724

Insurance contract - Breach by insured - Effect of - An air carrier's aircraft crashed, killing the five passengers - The carrier's insurance policy covered only four seats - The Supreme Court of Canada held that the carrier's breach of the policy by carry­ing too many passengers vitiated the policy and rendered the relatives of the passen­gers unable to recover - See paragraphs 41 to 49.

Insurance - Topic 2492

Applicant's duty of disclosure - Fraudulent omission - [See Insurance - Topic 726 ].

Insurance - Topic 2505

Applicant's duty of disclosure - Excuse for nondisclosure - Facts of a public character or notoriety - [See Insurance - Topic 726 ].

Insurance - Topic 3308

Payment of insurance proceeds - Actions - Defences - Breach of clause or warranty - [See Insurance - Topic 1724 ].

Insurance - Topic 9742

Aviation insurance - Risks - Insurer's duty - [See Insurance - Topic 726 ].

Insurance - Topic 9751

Aviation insurance - Risks - Exclusions - Passengers exceeding insured seats - [See Insurance - Topic 1724 ].

Practice - Topic 7029

Costs - Party and party costs - Entitle­ment - Successful party - Exceptions - Novel or important point - A small air carrier applied for regulation-mandated insurance and grossly misrepresented its accident record - The insurer issued a policy without checking the carrier's loss record - Both its own and available public aeronautics industry records would have revealed the truth - A crash killed five passengers - Under the policy only four passengers could be carried - Relatives of the passengers claimed under the policy - The Supreme Court of Canada ultimately dismissed the claim because the policy was violated by carrying too many passengers, but the carrier was found to have breached a duty to check the carrier's loss record - Because of this and because the issues were of public importance, the Court awarded costs to the relatives throughout - See paragraphs 52 to 57.

Practice - Topic 7105

Costs - Party and party costs - Special orders - Against party whose error caused litigation - [See Practice - Topic 7029 ].

Cases Noticed:

Florence v. Air Transport Committee (1988), 24 F.T.R. 224; 34 Admin. L.R. 36, consd. [paras. 13, 60].

Carter v. Boehm (1766), 3 Burr. 1905; 97 E.R. 1162, consd. [para. 25].

Canadian Indemnity Co. v. Canadian Johns-Manville Co., [1990] 2 S.C.R. 549; 115 N.R. 161; 33 Q.A.C. 161, appld. [paras. 36, 68].

Roberge v. Bolduc, [1991] 1 S.C.R. 374; 124 N.R. 1; 39 Q.A.C. 81, consd. [para. 57].

Ford v. Dominion of Canada General Insurance Co., [1991] 1 S.C.R. 136; 121 N.R. 158; 71 Man.R.(2d) 157, appld. [para, 68].

Statutes Noticed:

Aeronautics Act, R.S.C. 1970, c. A-3, sect. 17 [para. 23].

Aeronautics Act Regulations, Air Carrier Regulations, C.R.C. 1978, c. 3, sect. 20.3(1), sect. 20.3(3), sect. 20.4 [para. 22]; sect. 161 [para. 23].

Aeronautics Act Regulations, Air Transport Regulations, SOR/88-58, sect. 7(3)(d) [paras. 50, 66].

Aeronautics Act Regulations, Canadian Aviation Safety Board Regulations, sect. 3(1), sect. 5(3) [para. 34].

Air Carrier Regulations - see Aeronautics Act Regulations.

Air Transport Regulations - see Aeronau­tics Act Regulations.

Canadian Aviation Safety Board Regula­tions - see Aeronautics Act Regulations.

Insurance Act, R.S.B.C. 1979, c. 200, sect. 26(1) [paras. 12, 61].

National Transportation Act, R.S.C. 1970, c. N-17, sect. 3 [paras. 20, 67].

Counsel:

Stephen D. Gill and Eric M. Lane, for the appellants;

J.J. Camp, Q.C., Gary V. Lauk, David Church and Shawn Neylan, for the re­spondents.

Solicitors of Record:

Lane, Allen, Toronto, Ont., and Edwards, Kenny & Bray, Vancouver, B.C., for the appellants;

Ladner, Downs, Vancouver, B.C., for the respondents Florence;

Lauk & Associates, for the respondents Passarell.

This case was heard on June 21, 1991, at Ottawa, Ontario, before LaForest, L'Heureux-Dubé, Sopinka, Cory, McLachlin, Stevenson and Iacobucci, JJ., of the Supreme Court of Canada.

On November 28, 1991, the judgment of the Supreme Court of Canada was delivered in both official languages and the following opinions were filed:

Cory, J. (La Forest, L'Heureux-Dubé and Iacobucci, JJ., concurring) - see paragraphs 1 to 58;

McLachlin, J. (Stevenson, J., con­curring) - see paragraphs 59 to 64;

Sopinka, J. - see paragraphs 65 to 69.