The insured's duty to cooperate in a post-loss investigation includes the duty to provide accurate information from the outset.
The insurer's post-loss investigation is an essential component of the indemnification process. Depending on the circumstances, however, it can be complex and give rise to conflict between the insurer and the insured regarding the scope of their respective obligations.
In Anderson c. Intact, compagnie d'assurances, the Court of Appeal of Quebec was specifically asked to rule on the appeal of an insured, whose action against his insurer for payment of an insurance indemnity was dismissed due to his lack of cooperation with the insurer's investigation.
A brief summary of the facts is in order. The insured;s building was damaged by fire. After investigating, the insurer took the position that the insurance policy was null from the beginning — ab initio — because the insured had failed to disclose his true insurable interest in the property.
At first instance, the Superior Court found that because of [translation] "his concealment and many contradictory statements and misrepresentations, the insured intentionally remained vague during the post-loss investigation on the circumstances in which the property was acquired". The trial judge held that this conduct caused injury to the insurer, which led to forfeiture of the right to the indemnity. Consequently, the Superior Court did not declare the policy null ab initio. However, it also ordered the insured to reimburse his insurer for the indemnity paid to his hypothecary creditor in whose rights the insurer was subrogated.
On appeal, the insured contested the forfeiture of his right to the indemnity, and the insurer challenged the absence of a declaration that the insurance policy was null ab initio.
The Court of Appeal first recalled the principles established in Mécatech, setting out the terms of the insured's duty to cooperate with an insurer's investigation – when it is found that the insured is in bad faith in failing to cooperate, and the insurer suffers injury as a result because it cannot properly conduct its assessment. Mécatech1 established that an insured has a positive duty to cooperate, in particular by submitting to a statutory examination or providing a sworn statement. In Anderson, the Court of Appeal added that [translation] "concealment", [translation] "vagueness", and [translation] "contradictory statements or misrepresentations", when intentional, constitute bad faith in the context of the insured's duty to cooperate.
The Court of Appeal also dismissed the insurer's incidental appeal seeking a declaration that the policy was null ab initio, relying on the principle of deference owed to the trial judge's factual conclusions.
Anderson appears to be the Court of Appeal's most recent effort to extend the insured's duty to assist the insurer following a loss. While both judgments concern investigations on the insurable interest in insured property, it should be recalled that the insured's duty to cooperate under article 2471 of the Civil Code of Québec is even broader. It encompasses "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". It therefore remains to be seen how the courts will assess the duty of good faith and the injury suffered by the insurer in a context other than insurable interest.2
2. Recall that article 2484 CCQ provides that "t.he insurance of property in which the insured has no insurable interest is null." The injury resulting from an incomplete investigation is thus well defined.