Supreme Court of Canada
Wandlyn Motels Limited et al. v. Commerce General Insurance Co. et al., [1970] S.C.R. 992
Date: 1970-06-26
Wandlyn Motels Limited and Charles H. Llewellyn (Plaintiffs) Appellants;
and
Commerce General Insurance Company et al. (Defendants) Respondents;
and
W. Hedley Wilson Limited (Defendant) Respondent.
1969: November 10, 12; 1970: June 26.
Present: Cartwright C.J. and Judson, Ritchie, Hall and Spence JJ.
ON APPEAL FROM THE SUPREME COURT OF NEW BRUNSWICK, APPEAL DIVISION
Insurance—Subscription policy of fire insurance covering company s motels—Agency agreeing to extend coverage to new motel built by company’s principal shareholder—Motel destroyed by fire—Whether insurers bound—Estoppel—Named insured having no insurable interest except in part of contents—Plea of rectification.
[Page 993]
In 1963 W Ltd., an insurance agency, arranged to have a subscription policy issued to insure against fire loss all of the then properties of W Motels Ltd., a company in which L was the principal shareholder. W Motels Ltd. was the named insured and W Ltd. was shown in the policy as agent. W Ltd. continued in many ways to act as agent, and the only agent, dealing with W Motels Ltd. or with L.
Two years later L commenced to build a new motel at Woodstock, New Brunswick. A builder’s risk policy was obtained and the insured named therein were L and/or W Motels Ltd. On March 29, 1966, L and an agent for W Ltd. agreed that the builder’s risk policy would be replaced by the addition of the new motel to the general subscription policy. The following day the motel and its contents were completely destroyed by fire.
The appellants, W Motels Ltd. and L, brought an action claiming $74,510 against the respondent insurance companies, and in the alternative if the appellants were found not to be insured by the respondent insurance companies under the subscription policy the appellants claimed the same amount against W Ltd. on the ground of wrongful warranty of authority to issue coverage in that amount and on the ground of the company’s negligence in failing to perform what the appellants alleged was its duty owing to the appellants of providing the coverage agreed upon and in falsely informing the appellants that the agreed coverage was in effect.
The trial judge allowed the claim against the defendant insurance companies and dismissed the action against W Ltd. On appeal to the Appeal Division, that Court allowed the appeal and dismissed the cross-appeal of the plaintiffs against W Ltd. In this Court, the appellants appealed both against the dismissal of the action against the insurance companies by the Appeal Division and the alternative claim against W Ltd. which had been dismissed both at trial and in the Appeal Division.
Held (Spence J. dissenting in part): The appeal as against the insurance companies should be allowed and judgment entered against each of them for its proportionate share of the sum of $21,810; the appeal as against the insurance agency should be dismissed.
Per Cartwright C.J. and Judson, Ritchie and Hall JJ.: The actions of W Ltd. had the effect of binding the respondent insurance companies as in-
[Page 994]
surers of the building, contents and rentals at Woodstock. W Motels Ltd. had no insurable interest in the property except in that part of the contents owned by it and valued at $21,810. The insurers were liable for their proportionate share of this amount. A case had not been made out for rectification by adding L as an insured.
The finding that W Ltd. did bind the insurance companies disposed of the claim based on breach of warranty of authority. The claim based on negligence failed.
Per Spence J., dissenting in part: There was at the least a representation by estoppel and probably even an implied representation that W Ltd. had authority to add the additional risk in the insuring of the Woodstock motel.
W Motels Ltd. did not have an insurable interest in the new motel, and, therefore, on the policy, as it was written, W Motels Ltd. could not recover. However, the plea for rectification of the policy should be acceded to. The amendment of the subscription policy by the addition of an endorsement covering the Woodstock motel should have covered the exact agreement between L and the agent of W Ltd., and if it was necessary to replace the builder’s risk policy by a policy which named L as an insured person then the endorsement should have added L’s name as an insured and the endorsement should be rectified in order to carry out that intent.
Accordingly, the appeal as against the insurers should be allowed in full.
APPEAL from a judgment of the Supreme Court of New Brunswick, Appeal Division[1], allowing an appeal from a judgment of Pichette J. Appeal allowed in part, Spence J. dissenting in part.
D.M. Gillis, Q.C., for the plaintiffs, appellants.
J. Edward Murphy, Q.C., and E. Neil McKelvey, Q.C., for the defendants, respondents, Commerce General Insurance Co. et al.
H.A. Hanson, Q.C., and D.T. Hashey, for the defendant, respondent, W. Hedley Wilson Ltd.
[Page 995]
The judgment of Cartwright C.J., Judson, Ritchie and Hall JJ. was delivered by
CARTWRIGHT C.J.—The relevant facts and the course of the proceedings in the Courts below are set out in the reasons of my brother Spence which I have had the advantage of reading.
For the reasons given by my brother Spence I agree with his conclusion that the actions of the respondent W. Hedley Wilson Limited had the effect of binding the respondent insurance companies as insurers of the building, contents and rentals at Woodstock under subscription policy No. N.B. 3973. From this it follows that the respondent insurers were prima facie bound to indemnify Wandlyn Motels Ltd. for their proportionate share of the $250,000, the $50,000 and the $35,000 covering the above items. I agree, however, with my brother Spence that Wandlyn Motels Ltd. had no insurable interest in the property insured except in part of the contents.
I am unable to agree that a case has been made out for rectification by adding the appellant Llewellyn as an insured under policy N.B. 3973. To permit this rectification it would be necessary to find that an agreement to add Llewellyn as an insured was arrived at between him and David Wilson at their meeting on the morning of March 29, 1966, and that there was a common mistake in recording this agreement. I can find no sufficient evidence of this. Whatever Llewellyn may have intended the bargain to be, I think it clear that Wilson understood that what was required of him was simply to add the items of property mentioned above to the list of properties covered by the subscription policy; this was what he agreed to do and this was what he accomplished by his memorandum of March 29, 1966, addressed to the Provincial Insurance Agency which is quoted in the reasons of my brother Spence.
It follows that Wandlyn Motels Ltd. was the only insured under the policy and, under the terms of statutory condition 2, quoted by my brother Spence, has no enforceable claim for the loss of the building or of that part of the contents owned by Llewellyn.
[Page 996]
It appears from the report of the adjusters employed by the insurers that part of the contents, consisting of items 13 to 23 inclusive set out in that report, exhibit P. 12, belonged to Wandlyn Motels Ltd. These items total $21,810. The respondent insurance companies are liable to Wandlyn Motels Ltd. for their proportionate share of this amount. It was agreed that if the respondent insurers were liable for their proportionate share of the whole loss their liability in respect of the contents would be as to the Commerce General Insurance Co. $3,750 and as to each of the other five companies $1,500. The total loss being $50,000, it would seem therefore that each would be liable for 2181/5000 of the amounts mentioned. If the parties cannot agree upon the correct figure I would direct a reference to the proper officer of the Supreme Court of New Brunswick to ascertain it.
Turning to the claim of the appellants against W. Hedley Wilson Ltd., the finding that it did bind the respondent insurance companies disposes of the claim based on breach of warranty of authority. As to the claim based on negligence, I agree with the conclusion of Bridges C.J.N.B. that negligence was not established and I am content to adopt his reasons on this branch of the matter.
I would dismiss the appeal as against W. Hedley Wilson Ltd. I would allow the appeal as against the six respondent insurance companies and direct that judgment be entered against each of them for its proportionate share of the sum of $21,810, the amount for which each is liable to be referred for determination to the proper officer of the Supreme Court of New Brunswick if the parties are unable to agree upon it. I would direct that the appellants recover one set of costs of the trial and of the appeal to this Court from the respondent insurers, that the respondent insurers recover one set of costs in the Appeal Division from the appellants and that W. Hedley Wilson Ltd. recover its costs throughout from the appellants.
[Page 997]
SPENCE J. (dissenting in part)—This is an appeal from the judgment of the Appeal Division of the Supreme Court of New Brunswick[2] pronounced on November 27, 1968. By that judgment, the Appeal Division allowed an appeal from the judgment of Pichette J. pronounced on October 7, 1967. In the latter judgment, the learned trial judge had allowed the plaintiffs’ (appellants’ in this Court) claim against six defendant insurance companies (respondents in this Court) and dismissed the action against the defendant W. Hedley Wilson Limited (respondent in this Court).
Charles H. Llewellyn was a contractor and builder building private homes, apartment houses, schools and other types of buildings. During the 1950’s, he began to build motels in New Brunswick. These motels were known as the Wandlyn Motels and up to 1963 he had insured them through various insurance agencies. The motels in each case seem to have been built by Mr. Llewellyn and thereafter the title in them transferred to the Wandlyn Motels Ltd. In one case, the owner of the land and buildings became the Kennedy Rentals Limited, but this circumstance was only discovered after the events with which this action is concerned.
Wandlyn Motels Ltd. was a corporation in which Charles H. Llewellyn owned all but two qualifying shares which were in the name of an accountant and another employee.
In the year 1963, Mr. Llewellyn found that the operation of his motel business and the management of the insurance policies on the various parts of that business were most laborious when the policies were handled through a large number of agents. He therefore conferred with Mr. W. Hedley Wilson, an insurance agent in the City of Fredericton and the president of W. Hedley Wilson Ltd. Mr. Wilson suggested that instead of having a variety of policies and a variety of companies managed by various agents, there should be one policy of the type known as a subscription policy in which many companies carried different stated proportions of the risk so that the one policy would cover the whole enter-
[Page 998]
prise. Mr. Wilson himself did not write such policies so he went with Mr. Llewellyn to the office of the Provincial Insurance Agency (1961) Ltd., in Saint John, a general insurance agency with which Mr. Wilson had done a considerable amount of business. There they conferred with Mr. Hill, the manager. It was Mr. Llewellyn’s insistence that this new type of insurance coverage should not deprive the agencies with which he had dealt previously of the benefit from premiums which the Wandlyn Motels would be called upon to pay. It was Mr. Hill’s opinion that such a result could be attained by having the various policies cancelled and having the agents with whom Mr. Llewellyn had been dealing previously cause their companies to become subscribing members on the new subscription policy. He therefore consulted those agents, chiefly two in number, F.E. Daniels & Sons Limited and Angus-Miller Limited. On these two agencies consenting, the old policies were all cancelled and a new subscription policy known as No. N.B. 3973 was issued under date of September 10, 1963, for a term of thirty-six months. The sum insured by this policy was $1,140,000 and the premium payable under the policy was $13,362. The policy covered the motels and their out buildings and adjuncts situated at three different places: firstly, at Lincoln, New Brunswick; secondly, at Frederic-ton, New Brunswick; thirdly, at Magnetic Hill, Westmorland County, New Brunswick. The named insured was “Wandlyn Motels Limited, Fredericton, N.B.”. On the first page of the policy, in the upper left-hand corner are typed the words:
Agency W. HEDLEY WILSON LTD.
Fredericton, N.B.
From that time on, W. Hedley Wilson Ltd. continued to operate this insurance policy; by that I mean that that company was the only one who conferred with or consulted Mr. Llewellyn or any officer of Wandlyn Motels Ltd. and the only one who took instructions from either of those persons. There were many dealings with the insurance on the various motel properties. Some additional motels were added; the amount of insurance was altered; there were mortgage endorsements added; in short, the usual dealings with insurance
[Page 999]
in an enterprise of considerable size. As I have said, all of these were made by Wandlyn Motels Ltd., almost invariably acting through Mr. Llewellyn, and W. Hedley Wilson Limited, acting either through Mr. Hedley Wilson or through his son, Mr. David Wilson.
It is true that many of the endorsements were prepared not by Mr. Wilson or his agency but by the Provincial Insurance Agency (1961) Ltd. and that Mr. Hill in the latter agency submitted to Angus-Miller or to F.E. Daniels & Sons Ltd. the proposed endorsements for their approval; but so far as Mr. Wilson was concerned he knew nothing of this nor did Mr. Llewellyn.
Premiums on the policy were collected by W. Hedley Wilson Ltd. and that agency then divided the premium in accordance with the proportion of the risk taken by the various companies on the schedule and forwarded the cheques for the proportionate amounts of the premiums directly to those agencies, i.e., to Provincial Insurance Agency (1961) Ltd., F.E. Daniels & Sons Ltd., and Angus-Miller Ltd.
In September 1965, Charles H. Llewellyn commenced to build another new large motel at Woodstock, New Brunswick. He obtained the interim financing therefor from the Bank of Montreal and he arranged a mortgage with the Central Trust Company of Canada upon which advances were to be made so soon as the building had been completed. The application for this mortgage, which was in the amount of $175,000, was made to the Central Trust Company of Canada through its local agent in Fredericton which was W. Hedley Wilson Ltd. The land upon which the motel near Woodstock was built had been purchased under an agreement for sale from Frank Wallace and his wife to Oakland Realty, a company name which Charles H. Llewellyn used. In September 1965, Llewellyn Construction, which is a trade name under which Charles H. Llewellyn carried on business, started work on the motel at the Woodstock site. On October 29, 1965, there was obtained through the agency of W. Hedley Wilson Ltd. what is known as a “builder’s risk policy”. This policy, also a subscription policy, was numbered N.B. 13109 and eleven companies were subscribers thereto. None
[Page 1000]
of these eleven companies is amongst the respondents on this appeal. That policy was originally in the amount of $250,000 but it was subsequently reduced by Llewellyn to $150,000. The insured named therein are: Charles Llewellyn and/or Wandlyn Motels Ltd.
In March 1966, when the motel at Woodstock, New Brunswick, was well-nigh completed, the Central Trust Company of Canada was ready to advance on the mortgage which it had granted to Mr. Llewellyn. Since the mortgage was in the sum of $175,000 and the builder’s risk policy was only in the amount of $150,000, Central Trust Company of Canada requested Mr. Llewellyn to increase his insurance to at least the amount of the mortgage. Early on the morning of March 29, 1966, Mr. Llewellyn telephoned to the office of W. Hedley Wilson Ltd. and there spoke to Mr. David Wilson; Mr. Hedley Wilson himself was out of town. Mr. Llewellyn stated that he desired an appointment immediately to consider the insurance and Mr. David Wilson agreed to meet him at 10.15 a.m. in Mr. Llewellyn’s office. There the two men discussed the increase of the insurance and it was agreed that the builder’s risk policy would be replaced by the addition of the new motel at Woodstock to the general subscription policy. It was agreed that the amount of the additional insurance attributable to the building at Woodstock should be $250,000 on the building, $50,000 on the contents, and $35,000 to cover loss of rentals in case of a claim under the policy. I stress the intent of the two men at this time and I quote Mr. David Wilson’s evidence:
Q. And this coverage was to supercede [sic] and replace coverage that was previously on your builder’s risk, and that was agreed?
A. That was agreed.
The matter having been settled, Mr. David Wilson was about to leave Mr. Llewellyn’s office when he, Wilson, paused and asked when the coverage would take effect. Mr. Llewellyn replied, “As of right now”. Mr. Wilson swore that at that point he looked at his watch, noted the time as being 10.55 a.m., and stated: “You can consider
[Page 1001]
it is bound as of now”. Mr. Wilson then returned to his own office and forwarded to the Provincial Insurance Agency immediately by mail a letter produced at trial in which he stated:
MESSAGE
Effective today, add the Woodstock 51 unit motel to the Wendlyn policy in the following amounts.
| Bldg. |
$250,000 |
|
The loss |
| Contents &/ or Equipment |
50,000 |
|
|
| Rental |
35,000 |
|
|
| PP & O |
100,000 |
incl. |
|
| Money & Sec. |
3,500 |
inside |
|
| (Broad Form) |
3,500 |
outside |
|
| Neon Signs |
3,000 |
|
The Board has the rate and we would appreciate endorsement by April 20, 1966.
At 4.00 a.m. the next day, March 30, 1966, a fire commenced which completely destroyed the motel at Woodstock, New Brunswick. On Provincial Insurance Agency notifying Angus-Miller Ltd. and F.E. Daniels & Sons Ltd., these two agents denied liability on behalf of their principals, the six respondent companies, and this action was commenced. It is agreed by all parties that the proportion of the loss which will have to be paid by the respondent insurance companies, if they are liable under the policy, will be $74,510, and that amount of damages is admitted by all the respondents.
The appellants, Wandlyn Motels Ltd. and Charles H. Llewellyn, claim for that amount against the respondent insurance companies, and in the alternative if the appellants were found not to be insured by the respondent insurance companies under policy No. N.B. 3973 the appellants claim the same amount against W. Hedley Wilson Ltd. on the ground of wrongful warranty of authority to issue coverage in that amount and on the ground of the company’s negligence in failing to perform what the appellants allege was its duty owing to the appellants of providing the coverage agreed upon and in falsely informing the appellants that the agreed coverage was in effect.
[Page 1002]
At trial, Pichette J. allowed the claim against the defendant insurance companies with costs and dismissed the action against W. Hedley Wilson Ltd. with costs but allowed the plaintiff to add the costs paid to the defendant W. Hedley Wilson Ltd. to those which were due from the defendant insurance companies.
On appeal to the Appeal Division, that Court allowed the appeal and dismissed the cross‑appeal of the plaintiffs against W. Hedley Wilson Ltd.
In this Court, the appellants appealed both against the dismissal of the action against the insurance companies by the Appeal Division and the alternative claim against W. Hedley Wilson Ltd. which had been dismissed both at trial and in the Appeal Division.
The respondents’ reply to the claim of the appellants in all Courts may be summarized very briefly. It is two-fold: firstly, that W. Hedley Wilson Ltd. had neither expressed nor implied power to bind them on the policy and that neither appellant can prove any agency by estoppel; and, secondly, that even if such agency, expressed, implied or by estoppel, could be proved by the appellants, the named insured was Wandlyn Motels Ltd. and that insured, not being the owner of the property covered by the policy, had no insurable interest.
I turn to consider the first defence, namely, that W. Hedley Wilson Ltd. had no power to bind the six defendant companies (respondents in this Court). Certainly, prior to the arrangements which gave rise to the execution of policy N.B. 3973, W. Hedley Wilson Ltd. did not act as either general or local agent for any of the six companies nor for either Angus-Miller Ltd. or F.E. Daniels & Sons Ltd., the general agents of one or the other of those companies. However, when that policy was executed, the execution took place after a conference between Mr. Llewellyn, Mr. W. Hedley Wilson and Mr. Hill, when Mr. Llewellyn had expressed the desire that these agents should continue to have the benefit of a proportion of the premiums from the new subscription policy which was to replace the many old policies. Mr. Hill did consult the officers of those two agencies, i.e., F.E. Daniels & Sons Ltd.
[Page 1003]
and Angus-Miller Ltd., and did obtain their agreement for the cancellation of the old policies and for the issuance of a new subscription policy placing their clients, the respondent insurance companies, on the risk, and F.E. Daniels & Sons Ltd. and Angus-Miller both executed the new policy N.B. 3973 for their clients the respondent companies. That new policy, as I have pointed out, was issued showing W. Hedley Wilson Ltd., Fredericton, New Brunswick, as being the agent. That was the policy which these two agents, on behalf of their companies, authorized W. Hedley Wilson Ltd. to deliver to the assured Wandlyn Motels Ltd. Thereafter, as I have pointed out, in many ways W. Hedley Wilson Ltd. acted as the agent, and the only agent, dealing with Mr. Llewellyn or with Wandlyn Motels Ltd. It is true that only as to two rather inconsequential endorsements W. Hedley Wilson Ltd. alone prepared and executed the endorsements and that in other cases the endorsements were executed by Provincial Insurance Agency (1961) Ltd., F.E. Daniels & Sons Ltd. and Angus-Miller Ltd. In my view, that is not indicative of any requirement that the latter three agencies were required to execute such endorsements and that only their execution made the endorsements binding. On the other hand, one could not imply that as to the two small endorsements the various insurance companies including the six respondent companies were not bound. They never took any such positions. It is more probable that in the case of an endorsement of a serious nature such as the addition of new risks the three general agents felt it proper to execute the endorsement in order to indicate to their client companies that they were giving the matter their personal consideration and decision.
Under these circumstances, there was certainly no express agency granted to W. Hedley Wilson Ltd.; however, were it necessary to so hold, I would find that the agency had been implied in the conduct of the parties and certainly there is a representation of that agency to the insured Wandlyn Motels Ltd. Wandlyn Motels Ltd. had acted on that representation and has altered its position relying on that representation. Therefore, I am ready to conclude that there was at the least a representation by estoppel and probably
[Page 1004]
even an implied representation that W. Hedley Wilson Ltd. did have the authority to add the additional risk involved in this litigation, that is, the risk entailed in the insuring of the new motel at Woodstock, New Brunswick. I am of the opinion that this conclusion is in accordance with the test as outlined by Kerwin J., as he then was, in World Marine & General Insurance Co. Ltd. v. Leger[3], and in so far as agency by estoppel is concerned, the situation meets the test outlined in Bowstead on Agency, 12th ed., p. 10.
In my view, the defence that the named insured had no insurable interest is a much more serious hurdle for the appellants. The named insured in policy N.B. 3973 is “Wandlyn Motels Ltd., Fredericton, N.B.” Statutory condition 2 of the policy reads:
2. Unless otherwise specifically stated in the contract, the insurer is not liable for loss or damage to property owned by any person other than the insured, unless the interest of the insured therein is stated in the contract.
As I have said, at the time of the action of W. Hedley Wilson Ltd. to cause to be added to policy N.B. 3973 the risk as to the motel at Woodstock, the land on which the motel had been constructed was owned by the appellant Llewellyn solely. The mortgagee was the Central Trust Company of Canada. It was certainly intended that the title to the property should be transferred by Llewellyn to his company Wandlyn Motels Ltd. but no such transfer had yet been carried out and there was no agreement in writing providing for such transfer. It was said in the evidence that the directors of Wandlyn Motels Ltd. had passed a resolution that a motel should be built in Woodstock, New Brunswick. As I have said, with the exception of two qualifying shares held by employees, Charles H. Llewellyn was the only shareholder in Wandlyn Motels Ltd.
According to the adjuster’s report, Wandlyn Motels. Ltd. were the owners of equipment and
[Page 1005]
chattels in the motel to the amount of $21,810. As mentioned earlier, Wandlyn Motels Ltd. did not own the building and did not own the other contents. The appellants argued that this ownership of the shares in Wandlyn Motels Ltd. by Llewellyn and the ownership by Wandlyn Motels Ltd. of the contents to the extent which I have outlined gave Wandlyn Motels Ltd. an insurable interest in the whole of the property purported to be insured. The appellants cite, inter alia, Keefer v. Phoenix Insurance Co. of Hartford[4]. In that case, however, an unpaid vendor who, by agreement with the purchaser, had insured the property which was sold, was held to be entitled to recover the full value of the loss although his own interest as an unpaid vendor was limited to part of that value. In that case, the unpaid vendor had an interest in the whole property, although that interest was a proportionate one. In the present case, Wandlyn Motels Ltd. had a legal interest, at any rate, only in the equipment and no legal interest in the building or the lands upon which it stood.
The Chief Justice of New Brunswick, in giving reasons in the Court of Appeal in the present case, cited Welford & Otter Barry’s Fire Insurance, 4th ed., 1948, at pp. 22-3 as follows:
Where the assured is the owner of such object, possessing the whole legal property in it, he has undoubtedly an insurable interest in it, and a part owner is in the same position. An insurable interest is not, however, confined to the interest arising from ownership; it includes every kind of interest that may subsist in or be dependent upon an object exposed to danger from fire. It need not, therefore, be a legal interest, an equitable or beneficial interest of any kind being equally insurable. It must, nevertheless, be more than a mere expectation, however probable.
I am ready to accept the statement made by that learned author.
In so far as the shareholding situation of Wandlyn Motels is concerned, it should be noted that this is not an attempt by a shareholder who was named as an insured in a policy to recover on a loss which occurred to a property owned by
[Page 1006]
a corporation of which he was the main shareholder. Such was the situation in Macaura v. Northern Assurance Co.[5] Rather, it is an attempt by a corporation to recover on a policy in which it was the named insured and which purported to cover property that was not owned by the corporation. I am of the opinion, however, that the principle has been well established that shareholding does not give an insurable interest and I think it equally established that a corporation has not an insurable interest in property owned by its principal or even its sole shareholder. It was the intention of both Mr. Llewellyn and of the Wandlyn Motels Ltd. that the property should be transferred to Wandlyn Motels Ltd. but, as I have said, the latter had not even an equitable interest at the time of the policy nor at the time of the fire. Therefore, I think it must be concluded that the Wandlyn Motels Ltd. had not an insurable interest in the motel which was destroyed in this fire, and, therefore, on the policy, as it was written, Wandlyn Motels Ltd. cannot recover.
Paragraph 7 of the statement of claim of the plaintiffs, however, reads:
On the 29th day of March, 1966, the defendant, W. Hedley Wilson Limited through its agent David J. Wilson did cause a binder notice to be forwarded by mail to Provincial Insurance Agency, Saint John, New Brunswick, advising of the addition of the Woodstock motel building and property to Subscription Policy N.B. 3973. If the said Subscription Policy N.B. 3973 was not actually amended to provide coverage for the plaintiffs for the Woodstock motel building and property, the plaintiffs claim rectification of the said policy to give effect to the said agreement and undertaking made by the defendant W. Hedley Wilson Limited, the agent of the defendant insurance companies, thereby adding the Woodstock motel building and property as an additional location and also adding Charles H. Llewellyn as a named insured.
The learned trial judge, in his reasons for judgment, said:
I must accordingly find that the plaintiffs had an insurable interest in the property at Woodstock, N.B. and the said policy should be rectified to give
[Page 1007]
effect to the intention of the parties and to include Charles Llewellyn as a named insured in the said policy.
The learned justices of the Appeal Division found it unnecessary to deal with rectification as they had come to the conclusion that W. Hedley Wilson Ltd. had no power to bind the respondent companies. I have, however, come to the opposite conclusion, therefore, I must consider the plaintiffs’ plea for rectification. It is appropriate to refer again to the circumstances under which this purported addition of the Woodstock motel was made to the subscription policy N.B. 3973. As I have already pointed out, there existed on that Woodstock motel a builder’s risk policy in which the named insured were Charles H. Llewellyn and/or Wandlyn Motels Ltd. On March 29, 1966, it was the agreement between Mr. Llewellyn and Mr. David Wilson that the builder’s risk policy which had been numbered N.B. 13109 should be cancelled and should be replaced by the addition of the loss on the newly constructed building to the subscription policy, N.B. 3973. Both Mr. Llewellyn and Mr. David Wilson thought that result had been attained when they parted on March 29, 1966, and Mr. David Wilson immediately forwarded his letter to the Provincial Insurance Agencies Ltd. to this effect. It would seem, therefore, that the amendment of the policy N.B. 3973 by the addition of an endorsement covering the Woodstock motel should have covered the exact agreement between the two men, and if it was necessary to replace the builder’s risk policy by a policy which named Mr. Llewellyn as an insured person then the endorsement should have added Mr. Llewellyn’s name as an insured and the endorsement should be rectified in order to carry out that intent. Rectification of an insurance policy is a well established step in the administration of justice. In F.J. Laverty’s work, The Insurance Law of Canada, 2nd ed., 1936, at p. 50, the learned author says:
It is well established that policies of insurance, like other instruments, will be reformed by equity, so as to conform to the intention of the parties, in cases of mutual mistake…
Rectification may take place even after a loss on any claim: Harley v. Canada Life Assurance Co.[6],
[Page 1008]
and rectification as to the identity of the assured person may take place: Hough v. Guardian Fire and Life Assurance Co. Ltd.[7]. In the latter case, the rectification was also made after the loss had been sustained.
Laverty, in his statement, continues:
Where reformation is sought after loss the Court will give judgment, if plaintiff succeeds, for the amount of the policy, where the equity and law jurisdictions are merged, rather than go through the useless form of rectifying the policy.
Counsel for the respondent companies submits that one cannot rectify a non-existing document and that the endorsement as requested by Mr. Wilson, in his letter to the Provincial Insurance Agency on March 29, 1966, never was executed. The answer, of course, is once Mr. Wilson agreed that the coverage had been granted, as he did so in his words to Mr. Llewellyn, then the insurance was in effect and a document may be presumed although it did not physically exist, and it is this document which may be rectified.
For these reasons, I would accede to the appellants’ plea for rectification of the policy and would direct that the endorsement to cover the Woodstock, New Brunswick, motel loss be amended to show as an insured Charles H. Llewellyn.
I would, therefore, allow the appeal with costs and would restore the judgment at trial giving to the appellants judgment against the various respondent companies in the amounts set out in the notice to admit facts dated May 9, 1967, and which was agreed to by all parties at trial, totalling $74,510.10, together with one set of costs. In view of this conclusion, I need not consider further the alternative claim by the appellants against W. Hedley Wilson Ltd. except as it relates to the matter of costs.
At trial, Pichette J. dismissed the claim against W. Hedley Wilson Ltd. with costs but permitted the plaintiffs to add such costs as they might pay
[Page 1009]
to that defendant to the costs which they could claim against the defendant insurance companies. By the judgment of the Appeal Division, the action was dismissed as against all defendants with costs throughout. Although the action as against W. Hedley Wilson Ltd. must be dismissed, I am of the opinion that this dismissal should be without costs in any of the proceedings. It must be remembered that W. Hedley Wilson Ltd. had full knowledge of the circumstances that Charles H. Llewellyn was the owner of the premises and not Wandlyn Motels Ltd. and, indeed, had not only issued the builder’s risk policy naming Mr. Llewellyn but had applied, on his behalf, for a mortgage from the Central Trust Company. If this was not in the mind of Mr. David Wilson personally when he purported to add an endorsement to the subscription policy to cover the Woodstock motel property naming as an insured Wandlyn Motels Ltd. only then it should have been. The knowledge was in his firm. I am of the opinion that had the appellants not succeeded against the respondent insurance companies they could well have succeeded as against W. Hedley Wilson Ltd. and therefore the dismissal of the action as against that respondent should be without costs throughout.
Appeal allowed in part with costs, Spence J. dissenting in part.
Solicitors for the plaintiffs, appellants: Cochrane, Stevenson, Sargeant & Nicholson, Fredericton.
Solicitors for the defendants, respondents, Commerce General Insurance Co. et al.: Murphy, Murphy & Mollins, Moncton.
Solicitors for the defendant, respondent, W. Hedley Wilson Ltd.: Hanson, Gilbert & Hashey, Fredericton.