Can an insurer who is being sued by its
insured for failing to pay out an indemnity implead or force the
intervention of a third party that is potentially responsible
for the loss?
This question was dealt with in Kingsway General
Insurance co, Underwriters at Lloyd’s, Nicolas Smith and
Lombard General Insurance Company of Canada v. Duvernay Plomberie
et Chauffage Inc1, a decision rendered by the Court of Appeal
of Quebec on May 14th, 2009 by Honourable Marie-France Bich. This
decision notably distinguishes between a recourse in warranty
and a forced intervention of a party.
The facts in this case at Bar are relatively
simple: Kingsway, Lloyd’s and Lombard (hereafter «the
insurers») insured property belonging to Sanum Knit Products
Ltd (hereafter «Sanum»). On January 16th 2006, a major
water leak takes place at the commercial premises of Sanum following
some plumbing work done on the eve of the accident by Duvernay
Plomberie et Chauffage (hereafter Duvernay «Plomberie»).
Sanum notified its insurers and the latters
immediately took certain measures in order to limit the damages
and paid out 6 875, 50$. However, along the way, the insurers
discovered that Sanum and its representatives made false declarations
regarding the condition of the plumbing pipes prior to the incident
as well as the circumstances surrounding the leakage, the state
of the premises, the work done by Duvernay Plomberie and the condition
of the goods prior to the incident. The insurers therefore decided
not to honour Sanum’s insurance claim.
In April 2007, Sanum files a Motion to Institute
Proceedings against its insurers only and not against Duvernay
Plomberie who had done work on the eve of the accident.
In March 2008, the insurers institute a recourse
in warranty/third party defendant against Duvernay Plomberie and
later amend their action in order to include allegations and conclusions
aimed at forcing Duvernay Plomberie’s intervention in the
main action brought by Sanum.
The parties do not agree on this course of
action and decide to bring the issue before the Superior Court.
The trial judge sided with Duvernay Plomberie and dismissed the
insurers’ Amended Motion to Institute Proceedings in Warranty
and Forced Intervention basing itself on the following cases:
Agripak Ltd. v. Compagnie d’assurances Guardian du Canada2
and Gagné v. La Garantie, compagnie d’assurance3.
Sanum’s insurers appealed the decision
of the Superior Court and asked the Court of Appeal to allow the
action in warranty or the forced intervention of Duvernay Plomberie.
Recourse in warranty or forced intervention
of a party
The Court of Appeal distinguishes between a
recourse in warranty and a forced intervention of a party as provided
for at article 216 c.c.p. which reads as follows:
216. Any party to a case may implead a third
party whose presence is necessary to permit a complete solution
of the question involved in the action, or against whom he claims
to exercise a recourse in warranty.
Citing Honourable Justice Baudouin in CGU v. Wawanesa, compagnie
mutuelle d’assurances4and the Honourable Justice Lajoie
in Allard v. Mozart Ltée5, the Court of Appeal highlights
the well established principles regarding the distinction between
a recourse in warranty and the forced intervention of a third
party, whose presence is necessary to permit a complete solution
of the question involved in the action:
[…]
A recourse in warranty only allows the responsible party to exercise
a counterclaim against the perpetrator of the damages. A forced
intervention simply aims to join a new defendant to the proceedings
as instituted in order to resolve the dispute and favour a complete
solution thereof within a single debate. Forced intervention is
therefore merely an extension of the legal relationship which
already exists between the parties involved in the original proceedings
to a third party6.
[…]
A party involved in a trial may implead a third
party whose presence is necessary to permit a complete solution
of the question involved in the action; forced joinder of a party
or third party intervention amounts to the addition of a new defendant
or a new plaintiff so that the final judgement in a case may determine
the rights of all interested parties or allow for a complete solution
of the question as opposed to providing partial solutions in different
proceedings7.
[Our translation]
Following an analysis of the procedures in
the court file and the interpretation of the notion of «necessity»,
the Court of Appeal arrives at the conclusion that the presence
of Duvernay Plomberie was indeed «necessary» to permit
a complete solution of the question involved in the action. Honourable
Justice Bich thus concluded, even if the suits did not originate
from the same source of action. Indeed, the original action brought
by Sanum was based on the insurance contract while the sought
forced intervention is of the nature of a civil liability claim
against Duvernay Plomberie. On the subject, Honourable Justice
Bich decides as follows:
[…] It is true that by recognizing the
possibility of impleading the respondent, as the appellants wish
to do, we further expand the notion of necessity, considering
the fact that Sanum’s claim is aimed at enforcing an insurance
contract, whereas the point of the forced intervention is to obtain
a ruling regarding the respondent’s civil liability as it
relates to the accident, which appears a priori to be a different
dispute…8
[Our translation]
Although case law has yet to establish the
scope of the notion of «necessity», the Court of Appeal
accepts to broaden this notion considering the specific facts
in this case, notably Duvernay Plomberie’s alleged wrongdoing.
The court of Appeal states that:
[…] it is suitable to reach beyond the
idea that we have of what is necessary to permit a complete solution
of a question pursuant to article 216 c.c.p. in order to both
avoid the multiplication of procedures all revolving around one
same situation or factual cause (in this particular case, the
occurrence of water damage at Sanum’s commercial office)
and avoid contradictory judgements. This is certainly compatible
with the principles conveyed by the Code of civil Procedure, notably
article 2, particularly since the 2003 Reform, which clearly seeks
to promote a better management of legal affairs and a better use
of resources while limiting procedures as well as suits.9
[Our translation]
Conclusion
Honourable Justice Bich refuses the action
in warranty recourse but permits the forced intervention of Duvernay
Plomberie at the level of the main action brought by Sanum against
its insurers, while recognizing that this way of doing closely
resembles an anticipated subrogation claim which is a controversial
judicial topic:
[…] Of course, I am well aware that this
solution makes it so that the joinder of parties appears to be
an anticipated subrogation claim, a topic on which case law is
divided.
There in fact exists a controversy on whether
an insurer, in a case like the one before us, who has not yet
paid out an indemnity and is therefore not yet subrogated…
to the rights of the insured against a third party, can call this
third party in warranty…10.
[…]
Yet, the idea of an anticipated subrogation by the insurer is
not totally foreign to our case law which has found the way to
get around certain procedural obstacles…11
[Our translation]
By proceeding as such, the Court of Appeal
allows all potential responsible parties of a loss to be implicated
together in the same case.
However, the Court of Appeal specifies that
this expansion of the forced intervention was made possible because
of the specific facts of this particular case, among which, the
fact that Duvernay Plomberie’s wrongdoing was alleged by
Sanum in the main action:
[…] This case is quite peculiar and calls
for a solution which, in some regards, may appear to break the
usual rules, but, at the end of the day, allows us to solve a
practical problem that is hard to overcome while remaining compatible
with the idea of an economically sound and efficient management
of legal resources12
[Our translation]
This way of doing is consistent with this era
of promoting the accessibility to justice and accelerating the
legal process.
Amélie Pasquin
Gwyn Okorie
Garceau Pasquin Viens, LLP
1.2009 QCCA 926
2.[2008] R.R.A. 394 (C.S.).
3.B.E. 99BE-456 (C.Q.).
4.[2005] R.R.A. 312 (C.A.).
5,[1981] C.A. 612
6.op.cit, note 1, p.8.
7.op.cit., note 1, p.9
8.op.cit., note 1, p.14
9.op.cit., note 1, p.14
10.op.cit., note 1, pp.17 et 18
11.op.cit., note 1, p.7
