Canada: The Post-Loss Investigation: The Insured's Obligation To Come Clean

The law provides that following a loss, the insured is obliged to cooperate with the insurer during the latter's investigation, to answer its questions and to inform it of all circumstances surrounding the loss1.

The law also provides that any deceitful representation by the insured entails the loss of the right to be indemnified for the risk to which the misrepresentation relates2.

The recent judgment in the matter of Anderson v. Intact compagnie d'assurances3 deals with the scope of the insured's obligation to cooperate with the insurer during the latter's investigation into the loss.

I. The facts

In March 2014, a fire destroyed the immovable property of Charles Anderson (the "Plaintiff"), who came to Canada as a refugee in the 1990s. He then claimed indemnification under his insurance policy from its issuer, Intact Insurance Company (the "Defendant").

In the course of the Defendant's investigation into the loss, several indicia emerged suggesting that the Plaintiff had purchased the property as a nominee on behalf of either his mother, or a company he had incorporated several years before, or both. The insurer therefore sought information to determine whether the Plaintiff had the requisite insurable interest to insure the property.

The investigation took some two years, due in particular to a lack of cooperation on the part of the Plaintiff, who was reluctant to provide information that he knew was relevant, and to the fact that the explanations he gave were vague and imprecise. Under the circumstances, the Defendant notified the Plaintiff of its refusal to indemnify him.

In his lawsuit, the Plaintiff claimed from the Defendant $350,000, of which $100,000 was for compensatory damages on account of psychological and economic harm, based on allegations that the Defendant was at fault in the way in which it handled his insurance claim.

II. The decision

The Superior Court, presided by Justice Frédéric Bachand, had to determine whether the Plaintiff breached his duty to cooperate with the insurer during its investigation into the loss. The Court's analysis led it to conclude that the Plaintiff did so, and that the Defendant was therefore justified in refusing to indemnify him.

The Court indicated that an insurer must show some leniency towards an insured who is an immigrant to Canada and is unfamiliar with the claims process. The judge was nevertheless of the view that this consideration was of little relevance in this case, as the Plaintiff is an educated man who has been living in the country for some 20 years.

The judge concluded that the Plaintiff contravened his obligations of cooperation, transparency and honesty and that the Defendant was well-founded in refusing to indemnify him on that basis. Despite knowing that the roles played by his mother and his company were central to the Defendant's investigation, the Plaintiff failed to provide information that he knew was relevant for the analysis of his claim.

The judge pointed out that an insured is obliged to cooperate with the insurer by providing it with information, where necessary, allowing it to establish the circumstances surrounding the acquisition of insured property. While the Plaintiff did provide several items of information to the Defendant, he was reluctant to disclose all the relevant facts, and even made assertions he knew to be false.

The judge considered that the Plaintiff's deliberate equivocation amounted to bad faith. He was also of the view that his lack of cooperation caused the Defendant harm, as it was never in a position to determine if its insured had a valid insurable interest. The Plaintiff's actions thus led to the forfeiture of his right to the insurance indemnity.

Justice Bachand refused moreover to allow the Plaintiff's claim for compensatory damages, as he did not consider that the Defendant had acted in bad faith in its handling of the insurance claim. While he acknowledged that the Defendant's investigation was unusually long and complex, in his view the facts of the matter justified such a lengthy process.

* * *

This decision confirms the right of an insurer to refuse to indemnify its insured where the latter evinces bad faith and makes assertions that it knows are false.

The Court of Appeal has already stated that "[TRANSLATION] [i]t is not up to the insured to decide if a statement on its part is necessary, or to choose how the insurer is to conduct its investigation."4 Thus, in order to avoid the adverse consequences of forfeiting its right to indemnification, the insured has every interest in disclosing what it knows and in answering the insurer's questions as forthrightly as possible, particularly since an insurance contract demands the utmost good faith of the parties.


1 Article 2471 of the Civil Code of Québec:
"At the request of the insurer, the insured shall inform the insurer as soon as possible of all the circumstances surrounding the loss, including its probable cause, the nature and extent of the damage, the location of the insured property, the rights of third persons, and any concurrent insurance; he shall also provide the insurer with vouchers and attest under oath to the truth of the information. ... "

2 Article 2472 of the Civil Code of Québec:
"Any deceitful representation entails the loss of the right of the person making it to any indemnity for the risk to which the representation relates. ... "

3 2018 QCCS 3171

4 Intact Assurances inc. v. 9221-2133 Québec inc. (Centre Mécatech), 2015 QCCA 916, para. 17

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.

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