The COVID-19 pandemic has resulted in litigation, particularly in the context of class actions. In 2020, applications for authorization to commence class actions have been made notably against nursing homes,1 insurers2 and airline companies.3
In 9369-1426 Québec inc. (Restaurant Bâton Rouge),4 the respondent, Allianz Global Risks US Insurance Company ("Allianz"), asked that the Superior Court of Quebec decline jurisdiction in favour of mediation and arbitration proceedings, the whole in accordance with the policy.
The petitioner, Bâton Rouge, sought to institute a class action to be indemnified by Allianz on the grounds of business interruption losses which it and the class members would have sustained due to the COVID-19 health crisis. This resulted in a shutdown of economic activities in the province of Quebec. However, Allianz denied coverage on the grounds that the policy did not cover such loss. Furthermore, the latter submitted that the parties were bound by the dispute resolution terms stipulated in the policy which prohibited Bâton Rouge from commencing a class action in the Superior Court of Quebec.
Should the Superior Court of Quebec decline to hear the matter and, instead, refer it to a mediator and arbitrator appointed in accordance with the dispute resolution process stipulated in the applicable insurance policy?
The Superior Court, per the Honourable Gary D.D. Morrison, J.S.C., concluded that it should decline to hear this matter pursuant to the policy's provisions. While the latter provided certain terms regarding the jurisdiction and the commencement of proceedings, in the case of insureds located in Quebec, the Provincial Statutory Conditions Applicable to the Province of Quebec only clause was applicable:
5. Dispute Resolution
In the event that the Insurer and the Insured(s) cannot agree concerning either the coverage or the quantum afforded by this Policy, it is agreed that the dispute shall be resolved in accordance with the dispute resolution process hereinafter described:
a. Mediation with a Mediator mutually agreed by the parties to the dispute. If the parties fail to concur on the choice of the Mediator, a Court shall appoint a Mediator on a Motion by one of the parties.
b. If settlement at Mediation is not possible, the dispute will be referred to Arbitration in accordance with the applicable Arbitration legislation/regulations in the jurisdiction in which the Policy is issued. The decision of the Arbitrator will be binding on all parties to the dispute with no right of appeal.
c. Each party shall bear its own costs and expenses in connection with the dispute resolution process. The costs and expenses of Mediation and Arbitration shall be shared equally by the parties to the dispute. By agreement in writing, the Insurer and the Insured(s) may waive compliance with this section or any part thereof for purposes of a specified dispute.
In light of the above, and pursuant to the rules provided in the Civil Code of Quebec,5 Courts are to abide by the contract's terms. The fact that the dispute concerned the interpretation of an insurance policy did not prevent it from being submitted to arbitration.6 In the case that parties are bound by an arbitration clause, Courts are to defer said dispute to arbitration, unless there is evidence that the arbitration agreement is null.7 The Honourable Gary D.D. Morrison concluded that "on its face, [the wording of the dispute resolution clause] is a mandatory, clear, unambiguous, final and binding arbitration clause."8 Furthermore, contrary to Bâton Rouge's submission, the other clauses in the policy did not create any confusion as to its validity and enforcement.
The Superior Court also dismissed Bâton Rouge's argument as to the scope of the Policy Jurisdiction clause. The latter stipulated that "The Courts in the Court District in which the Named Insured is located shall have exclusive jurisdiction in case of a coverage dispute." The Court concluded that this provision did not concern subject-matter jurisdiction, but rather territorial jurisdiction. As such, it did not create any conflict with the other provisions of the policy.
The dispute resolution clause, which was not illegal or contrary to public order, therefore limited any type of action before the courts. In addition, the Court addressed the validity of a dispute resolution clause considering the petitioner's application to commence a class action:
" The fact that the initial introductive application is one that seeks authorization to institute a class action is of no substantive relevance.
 The class action provisions contained in the Code of Civil Procedure are merely of a procedural nature. They do not modify substantive law. Nor do they create competence for the Superior Court over certain disputes where the parties have lawfully decided to exclude it."9
According to the Court, the nature of the claim was not outside of the mediator or arbitrator's jurisdiction. Indeed, contrary to Bâton Rouge's submission that Allianz's denial of coverage constituted an abuse of right, the Court concluded that this was insufficient to invalidate the dispute resolution clause.
Bâton Rouge contended that, in the event the Court granted Allianz's motion, the result would be that each insured would have to abide the dispute resolution process provided in the policy. However, this would discourage them given the length and costs involved. The Court stated that it "will not comment on all possible outcomes, however, the equity argument raised by Bâton Rouge is insufficient to overcome what is a valid dispute resolution process. In fact, Bâton Rouge does not actually plead that it is invalid per se. [Furthermore.], competence is a matter of public order. It is not a matter of equity."110
Should the Court immediately determine the competence of a mediator and arbitrator to act in the matter of Bâton Rouge's personal claim?
The Court concluded that it is within its jurisdiction to determine this issue.
In general, pursuant to the principle of competence-competence, Courts will let arbitrators determine the issue of jurisdiction. However, "where the matter of jurisdiction is one of law or mixed fact and law, the court can, when possible on summary and superficial examination, immediately decide jurisdiction, and this in respect of the principle of proportionality."111
In this instance, the Court was already seized of this issue given the declinatory exception submitted by Allianz. The Honourable Gary D.D. Morrison concluded that this solution was in conformity with the Code of Civil Procedure whereby a Court can intervene and determine the role of the mediator and the competence of the arbitrator. For this reason, the mediator and arbitrator were to be appointed in conformity with the dispute resolution clause provided in the policy.
In light of the above, the Superior Court of Quebec granted Allianz's motion and referred the parties to a mediator and arbitrator in accordance with the dispute resolution process stipulated in the policy. The application for authorization to institute a class action was therefore dismissed.
In this case, the Superior Court concluded that in the presence of an arbitration clause, Courts are to decline jurisdiction. The takeaway here is that the fact that a party wishes to commence a class action is irrelevant when dealing with an arbitration clause. Indeed, class actions are a procedural vehicle which do not impact substantive law. In addition, insurance disputes regarding the interpretation of a policy may be submitted to arbitration.
In its decision, the Superior Court dismissed the petitioner's argument that the length and costs involved in mediation/arbitration proceedings would discourage insureds from exercising their rights. While the Court ultimately dismissed Bâton Rouge's argument, which was predicated upon equity, it stated that it would not comment on all possible outcomes. Arbitration clauses are to be enforced. However, it will be interesting to see if parties will attempt to set them aside by invoking principles of accessibility to justice.
1. Barbara Schneider, es qualité de liquidatrice de la succession de Feu Mary Schneider (Née Kaplan) c. Centre d'hébergement et de soins de longue durée Herron Inc., S.C.Q. 500-06-001060-207
2. Centre Dentaire Boulevard Galeries d'Anjou inc. c. L'Unique Assurances Générales inc., S.C.Q. 500-06-001054-200
3. Alain Lachance c. Transat A.T. inc. et Transat Tours Canada inc. et Air Canada et Société en commandite Touram (Vacances Air Canada), S.C.Q. 500-06-001052-204
4. 9369-1426 Québec inc. (Restaurant Bâton Rouge) c. Allianz Global Risks US Insurance Company, 2021 QCCS 47
5. Articles 2638 and 3148(2) C.C.Q,
6. Article 3150 C.C.Q.
7. Article 622 C.C.P.
8. 9369-1426 Québec inc. (Restaurant Bâton Rouge) c. Allianz Global Risks US Insurance Company, supra, para. 27.
9. 9369-1426 Québec inc. (Restaurant Bâton Rouge) c. Allianz Global Risks US Insurance Company, supra, para. 42-43.
10. 9369-1426 Québec inc. (Restaurant Bâton Rouge) c. Allianz Global Risks US Insurance Company, supra, para. 55-56.
11. 9369-1426 Québec inc. (Restaurant Bâton Rouge) c. Allianz Global Risks US Insurance Company, supra, para. 63.
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