In March 2002, the Supreme Court of Canada rendered a judgment in the case Transamerica Life Insurance Company of Canada v. Goulet. Said judgment was of great importance in the insurance law practice an more precisely in the area of life insurance. However, what has really been the impact of this judgment?

1-The facts
Since 1990 the spouse of Mrs. Goulet, Roger Arbic, was insured with the Transamerica Life Insurance Company of Canada( hereafter Transamerica). According to the insurance contract, Mrs. Goulet was designated as beneficiary. In 1994, Mr. Arbic killed himself while attempting to install a bomb in a parked car.
Faced with the refusal of Transamerica to pay, Mrs. Goulet brought an action in the Superior Court.

2-The judicial history
All judgments were rendered according to the Civil Code of Lower Canada and this in accordance with section 4 of the Act respecting the implementation of the Reform. However, those judgments are still relevant today since the applicable dispositions of the Civil Code of Lower Canada have not significantly chance with the new Civil Code.

A- Superior Court
Transamerica argued the notion of public order to justify its refusal to pay Mrs. Goulet.
According to Justice Crépeau, Transamerica cannot use the notion of public order to justify its refusal. The legislature, in adopting section 2481 C.C.L.C (2402 C.c.Q) established the circumstances in which an insurer could rely on public order to refuse to honour a claim.
Furthermore, Justice Crépeau rejected Transamerica's argument based on the intentional fault of the insured. Since section 2563 C.C.L.C. ( 2464(1) C.c.Q.) is found in the section of damage insurance, it does not apply to life insurance.

B-Court of Appeal
The Quebec's Court of Appeal rejected the appeal of Transamerica and maintained the judgment rendered by the Superior Court.
According to the Court of Appeal, Mr. Arbric's acts should not be considered as intentional. No proof was brought in front of the Court that Mr. Arbric had, while installing the bomb, the intention to die. His death was purely accidental.
As for the issue of public order, the Court of Appeal is of the opinion that an insurance company could validly invoke the principle that a criminal cannot profit from its crime to justify its refusal to pay a claim. Therefore, the insured or his estate would not be entitled to recover the indemnity in such a situation.
However, the situation of a beneficiary is completely different because he is a third party. Allowing Mrs. Goulet to benefit from the insurance contract would not allow an insured to profit from his crime:
?The sum insured payable to a beneficiary does not form part of the estate of the insured. Similarly, the contract transferred to the contingent owner does not form part of the estate of the preceding owner.?
Finally, the Court underlined that Transamerica could have included an exclusion in the insurance contract for death resulting from the commission of a criminal offence. Section 2481C.C.L.C (2402(2)C.c.Q) clearly allows such an exclusion clause. Since no clause of that nature existed in the insurance contract, Mrs. Goulet is entitled to receive the indemnity.

C-The Supreme court
The appeal raised two issues:
Has Mr. Arbic committed an act which constitutes an intentional fault that cannot qualify as an insurable risk?
If this is not the case, is there a public order exception that justifies the refusal of Transamerica to pay the indemnity to Mrs. Goulet?

1. The intentional fault
Transamerica submitted that an insurer never insures the intentional fault of the insured.
However, for the intentional fault to be correctly pleaded by an insurer, the latter has to prove that the insured sought not only to bring about the event that is the object of the risk but also to bring about the damage itself. Therefore, the act committed by Mr. Arbic should not be considered as an intentional one, even though he died while committing a crime. He never had the intention to kill himself even if his death was predictable. Considering the absence of a specific exclusion in the insurance contract, the insurance contract is applicable, subject to a public order exception.

2- The public order exception
Transamerica argues that public order operates as a bar to Mrs Goulet's claim. Transamerica submitted that the principle ?no one may profit from his or her own crime? allows an insurance company not to pay the indemnity to a beneficiary when the insured died while committing a crime. According to the Supreme court, unlike causes of nullity, such as false statements and non-disclosure, the above principle does not affect the initial validity of the contract. Rather it is a bar to the right to claim the indemnity provided by the policy , based on a principle of ?social morality?.
Mrs. Goulet submitted that this exception does not exist in Quebec civil law. According to the Supreme court, this argument denies that public order has been defined by Quebec's courts. Civil law has often recognized the authority of the courts to define and create these principles.
However, this principle of public order should not be stretched as suggested by Transamerica. Said principle does not allow an insurance company to refuse to pay an innocent beneficiary who is in a position of a third party in relation to the insured. Therefore, this exception cannot be set up against Mrs. Goulet, who is entitled to the proceeds of the life insurance policy taken by her husband.
To prevent Mrs Goulet from claiming the indemnity, the contract should have contained a specific clause providing that the insurer is not required to pay the indemnity if the insured died during the commission of a criminal offence.

3-The impact of the Supreme Court judgment
Have insurance companies amended their contracts after the judgment of the Supreme Court? According to the information we obtained from the Canadian Life and Health Insurance Association, it seems that insurance companies have not modified their contacts even thought the Supreme Court concluded that it would be legal to specifically exclude death happening during the commission of a criminal offence. The attitude of said insurance companies is welcomed from a moral and social point of view. The beneficiary, an innocent, should not be punished for the acts committed by the insured. ?The Goulet decision, morally acceptable?: YES





Mtre Caroline Tremblay

Pasquin Viens Lawyers, s.e.n.c.r.l.

¹ REJB 2002-28410 (CSC)

² Q.L. 1992, ch.57.

³ Goulet v Transamerica Life Insurance Company of Canada [1996] R.R.A. 1131

⁴ « Every general clause releasing the insurer if any act or regulation is violated is without effect, unless such violation constitutes an indictable offence.?

⁵ ?(?)However the insurer is not liable, notwithstanding any agreement to the contrary, for prejudice arising from the insured's intentional fault.?

⁶ [2000] R.J.Q. 1066.

⁷ 2540(2) C.C.L.C and 2556 C.c.Q.

⁸ 2550(2) C.C.L.C and 2455 C.c.Q

⁹ REJB 2002-28410

¹⁰ 2563 C.C.L.C. and 2464(1) C.c.Q.