Under Article 2474 of the Civil Code of Québec (CCQ), insurers are prohibited from taking subrogatory action against members of an insured's household. In a unanimous decision1 this past fall, the Quebec Court of Appeal clarified the scope of this prohibition and confirmed the lower court's dismissal2 of Desjardins Assurances Générales (DAG)'s $500,000 subrogatory action against Promutuel Assurance Lac-St-Pierre – Les Forges (Promutuel).
On March 17, 2004, the home of DAG's insured, Benoît Houde, was destroyed by a fire caused by Mario Nadeau, who was doing work in Houde's home. At the time of the fire, Nadeau was employed as a pipefitter for a large industrial enterprise, but he frequently moonlighted as a plumber for people in the village where he and Houde lived. He earned an undeclared amount of about $1,200 a year from this activity.
Following the fire, DAG made a payment to Houde under Houde's property insurance policy. DAG then filed a subrogatory action against Nadeau and Promutuel, which had issued Nadeau a home insurance policy including civil liability coverage.
The Quebec Superior Court decision
In defence to DAG's action, Promutuel raised three arguments. First, Promutuel argued that Nadeau was Houde's "residence employee" and thus insured under DAG's policy. That being the case, Houde (and DAG, being subrogated in Houde's rights) could not sue Nadeau since insureds under the same policy cannot sue each other. Secondly, Promutuel argued that, as a "residence employee", Nadeau was a member of Houde's household within the meaning of Article 2474 CCQ and therefore a subrogatory action by Houde's insurer against Nadeau was prohibited. Promutuel's third defence to DAG's action was that its own policy with Nadeau contained an exclusion which allowed Promutuel to deny coverage. Indeed, Promutuel argued that the fire was caused by Nadeau's business activities, which were excluded from coverage under the policy issued to Nadeau.
Justice Sylvie Devito of the Quebec Superior Court dismissed Promutuel's first argument that Nadeau was a "residence employee" of Houde. She determined that there was no employer-employee relationship or relationship of subordination between Houde and Nadeau, as Nadeau decided what needed to be done and had ultimate responsibility for how it was done. The judge also noted that, contrary to the intended scope of the protection for persons who are members of an insured's household, as set out in Article 2474, their relationship was not characterized by sufficient intimacy, proximity or continuity to warrant the application of the prohibition on subrogation.
However, Justice Devito agreed with Promutuel's third argument that Nadeau's activities in Houde's home were not a private activity and were therefore excluded from coverage under the home insurance policy issued by Promutuel. She found that since Nadeau regularly performed plumbing work for people in the village, such activities were an extension of his trade as a pipefitter/plumber. Therefore, she allowed DAG's action against Nadeau, but dismissed DAG's action against Promutuel.
The appeal court's ruling
The Court of Appeal confirmed the trial judge's ruling, remarking on Justice Devito's sound analysis of the concept of "residence employee" in the DAG policy. The Court characterized the contract between Nadeau and Houde as a contract for services within the meaning of Article 2098 CCQ, meaning that there was no relationship of subordination between the parties. The Court also remarked that the trial judge had applied the correct test according to the case law in order to determine whether Nadeau was a member of the insured's household by considering the legislator's objective of protecting parties who have a relationship of some intimacy or proximity within the insured's family unit.
With regard to the trial judge's finding on the exclusion from coverage of Nadeau's business activities, the Court of Appeal noted that the exclusion should be construed narrowly and in the insured's favour, in accordance with the prevailing line of authority established by the Court of Appeal on this issue.3 Nonetheless, the Court deferred to the trial judge's assessment of the evidence and found that it was not patently unreasonable for the lower court to have found that Nadeau's work in Houde's home was not a private activity, but an extension of Nadeau's trade as a pipefitter/plumber. The Court thus maintained the dismissal of DAG's action against Promutuel.
"Member of the household" is an evolving notion
This decision of the Court of Appeal clarifies who is a member of an insured's household and is likely to result in more careful scrutiny of the relationship between the person causing the damage and the insured in future cases. It will also be interesting to see how changes in the understanding of what constitutes a "family" will influence the courts' interpretation of the fairly elastic notions of "intimacy" and "family unit".
1 Desjardins Assurances générales inc. c. Promutuel Lac Saint-Pierre — Les Forges, société mutuelle d'assurances générales, 2014 QCCA 1878.
2 Desjardins Assurances générales inc. c. Nadeau, 2012 QCCS 4301.
3 Souscripteurs du Lloyd's c. Alimentation Denis & Mario Guillemette inc., 2012 QCCA 1376, para. 38.
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