Canada: A Decision "Of Interest" From The Court Of Appeal OF Quebec

Last Updated: June 6 2012
Article by Alexis Devroede-Languirand and Jonathan Lacoste-Jobin

The notion of insurable interest is fundamental to insurance law as it is at the very heart of the validity of this contract. The lack of insurable interest leads to the nullity of the insurance policy and justifies the insurer's refusal to indemnify its insured1.

In a decision rendered on March 2, 2012, the Court of Appeal upheld a judgment of the Superior Court2, where an insurer refused to indemnify the insured, raising its lack of interest in the property3. The Court held that a debtor had sufficient interest to insure the property subject to an instalment sales contract.


In March 2002, the plaintiff 9111-1963 Quebec Inc. ("9111") purchased equipment pursuant to an instalment sales contract. It insured this property with Temple Insurance Company ("Temple").

In August 2002, 9111 stopped making the monthly payments required under the sales contract. The sellers seized the property before judgment and stored it elsewhere. The seizure was followed a few days later by the filing of a motion to recover the property, which the sellers discontinued a few years later.

On February 13, 2004, a suspicious fire broke out where the insured property was being stored, thereby damaging it. 9111 sent its insurer a notice of loss on the same date. It was admitted that the insured and its representatives had nothing to do with the fire.

Temple then retroactively cancelled the insurance policy that had been issued and refused to indemnify 9111, arguing that it did not have an insurable interest in the property as 9111 never acquired ownership and was not in possession of the goods at the time of the fire.


The issue can be summarized as follows:

  • Was Temple well-founded in retroactively cancelling the insurance policy and refusing the claim based on 9111's lack of insurable interest in the destroyed property?


The Court of Appeal analyzes the relevant provisions of the Civil Code of Quebec with respect to insurable interest4 as well as those pertaining to instalment sales contracts5. Note that article 1746 C.c.Q. provides that an instalment sales contract transfers to the buyer the risk of loss of the property whereas article 1748 C.c.Q. provides that the seller may cancel the contract when the buyer fails to pay the sale price.

The Court also held that the instalment sales contract provided that 9111 had the obligation to contract an insurance policy on the property and that the sellers could take out insurance if 9111 failed to do so.

The bench applied the Supreme Court of Canada decision in Kosmopoulos v. Constitution Insurance Co.6, a landmark case that established the broad and flexible interpretation of the notion of insurable interest7: the moral certainty of advantage or benefit from the property or the prejudice from its destruction is sufficent enough to establish an insurable interest. In the present case, the fact that the nature of the legal relationship between the parties and that 9111 was still indebted toward the sellers as well as the possibility for 9111 to suffer a direct and immediate prejudice as a result of the loss of the property, were considered sufficient to establish an insurable interest:

" [2] In the present case, Respondent 9111 was contractually bound to insure the property and its debt towards the Seller, under the instalment sale agreement (...). It was thus in a position to extract an advantage from the existence of the property and to suffer a direct prejudice as a result of the equipment's damage or destruction."

With respect to the argument based on the seizure before judgment by the sellers, the Court confirms that it is only a protective measure, not a final judgment transferring ownership of the property. Therefore, the temporary dispossession of the property did not affect 9111's insurable interest.


By holding that the notion of insurable interest should be given a broad interpretation, the Court of Appeal confirmed the importance of assessing the insured's economic interest in the property. This position was also adopted by the Superior Court in a recent judgment recognizing the insurable interest of the debtor of a hypothecary loan8.

This decision also shows that physical possession of the insured property is not essential to prove an insurable interest. We believe that this decision could support the thesis that under certain circumstances a good faith possessor who may be susceptible to suffer damages as a result of its loss, may have an insurable interest in such a good9. To our knowledge, this issue has never been specifically examined by a court.


1 Art. 2484 C.c.Q.

2 9111-1963 Québec Inc. v. Compagnie d'assurances Temple Inc., 2010 QCCS 4074 (Jean-Pierre Chrétien, J.).

3 Compagnie d'assurance Temple v. 9111-1963 Québec inc., 2012 QCC A 450 (Duval Hesler, C.J. and Pelletier and Vézina, JJ.).

4 Art. 2414, 2463, 2481, 2483 and 2485 C.c.Q.

5 Art. 1746 and 1748 C.c.Q.

6 [1987] 1 S.C.R. 2.

7 The position adopted by the Supreme Court was reiterated by the Court of Appeal of Québec in Industrielle-Alliance (L') compagnie d'assurance générale v. Crédit Ford du Canada Ltée, [1997] R.R.A. 280 (C.A.).

8 St-Laurent v. Promutuel de l'Est, société mutuelle d'assurances générales, 2012 QCCS 1353 (CanLII).

9 Didier Lluelles, Précis des assurances terrestres, Montreal, 5th edition, Les Éditions Thémis, 2009, p. 165 and 166.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.