Home > Regions > North America > The Certificate of Insurance: A Mere Formality or an Essential Condition?

The Certificate of Insurance: A Mere Formality or an Essential Condition?

On March 10, 2022, the Honourable Bernard Jolin of the Superior Court rendered a judgment dismissing three Wellington applications filed by Hydro-Québec against Lloyd’s Underwriters [Lloyd’s]: Perrotta c. Hydro-Québec, 2022 QCCS 1125.

Context and Hydro-Québec’s Arguments

In 2016, Hydro-Québec had retained the services of Transelec Common inc. [TCI] as a general contractor to perform certain work on electric poles.

In the contract, TCI undertook to provide to Hydro-Québec a certificate of civil liability insurance covering the construction project. While the work was being carried out, TCI’s civil liability was insured by Lloyd’s. However, Lloyd’s never issued a civil liability insurance certificate to Hydro-Québec.

In June 2019, three lawsuits were filed against Hydro-Québec in relation to a fire that occurred on June 20, 2016, and which damaged a series of connected units located close to the construction area.

Invoking the contract, Hydro-Québec requested Lloyd’s to take up its defence in the three cases: Lloyd’s refused, considering the absence of a certificate of insurance to the benefit of Hydro-Québec.

Hydro-Québec responded with its Wellington applications, alleging that since TCI had to provide a certificate of insurance, and Lloyd’s was insuring TCI, Lloyd’s had to assume Hydro-Québec’s defence. In addition, Hydro-Québec argued that even without such a certificate, its status as insured could be adduced from the combined effect of the insurance policy and the contract, thus allowing it to benefit from the guarantees under the policy. Finally, it argued that since Lloyd’s was aware of the existence of the contract when the policy was issued, it had to accept that the protection was extended to Hydro-Québec, notwithstanding the absence of a certificate.

The Court’s Decision

In support of its Wellington applications, in addition to a dozen exhibits, Hydro-Québec stated in numerous paragraphs some facts challenged by the various parties, especially the work by TCI that allegedly caused the fire.

Lloyd’s attorneys objected to the admissibility of extrinsic evidence by Hydro-Quebec on the circumstances of the execution of the works in relation to either TCI’s or Hydro-Québec’s responsibility. The Court agreed ruling that allowing such evidence would exceed the scope of the summary evidence required for a Wellington application, adding that it is irrelevant to the analysis of the various obligations.

The Court then analyzed the wording of the civil liability policy issued by Lloyd’s to TCI, and in particular “Named Insured”, “Who is insured”, “Blanket Additional Endorsement” and “Insured Contract” and dismissed Hydro-Québec’s position, as it was not specifically named as insured, therefore not satisfying the conditions of the policy.

The Court added that the certificate of insurance is not a mere formality, rather a specific requirement for the policy; that it is how the insurer expresses that it accepts to add an insured to have him benefit from the guarantees under the policy. Accepting Hydro-Québec’s position would ignore the express terms of the policy that require that each new insured be “identified by way of Insurance Certificates”. Nothing allows disregarding this requirement.

Finally, the Court concludes that, as matters stand, the record does not support the conclusion that Lloyd’s knew of the existence of the contract when the policy was issued, and that nothing allows assuming such knowledge. The court further adds that can we come to such a conclusion based on article 2408 CCQ which requires the client and the insured to disclose all known facts that can influence the risk.

Contrary to what Hydro-Québec suggests, the certificate of insurance cannot be considered a simple formality, and the failure to designate Hydro-Québec as an insured under TCI’s liability policy is fatal to its Wellington applications.

In this case, Lloyd’s Underwriters were represented by the author.

L’article The Certificate of Insurance: A Mere Formality or an Essential Condition? est apparu en premier sur RSS – Robinson Sheppard Shapiro.