Supreme Court of Canada
Ledlev Corporation Ltd. v. New York Underwriters Insurance Co., [1973] S.C.R. 751
Date: 1972-10-18
Ledlev Corporation Ltd. (Plaintiff) Appellant;
and
New York Underwriters Insurance Company (Defendant) Respondent.
1972: May 13, 14; 1972: October 18.
Present: Fauteux C.J. and Abbott, Hall, Spence and Pigeon JJ.
ON APPEAL FROM THE COURT OF QUEEN’S BENCH, APPEAL SIDE, PROVINCE OF QUEBEC
Insurance—Fire—Liability—Subscription Policy issued through an agency—Renewal—One of the insurers refuses to pay its portion—Authority of the agency to bind the insurer—Civil code, art. 1730.
The appellant purchased a building which at the time was insured against loss by fire under a Subscription Policy to which respondent was one of seventeen subscribers. That policy issued through the Agency J was transferred to appellant who, prior to the expiring of the policy, requested and obtained that a renewal Subscription Policy be issued for a three‑year term. This policy was signed by the Agency J on behalf of six of the participants, including the respondent, the other insurers signed the policy each on its own behalf. A letter written by the respondent to the agency some fifteen months prior to the issue of the renewal policy, and authorizing the latter to sign on behalf of the former any Subscription Policy of Insurance after having submitted a wording to the respondent and requested an authorization, was not made known to the appellant.
Two years after the issue of the renewal policy, the appellant’s property was destroyed by fire and all of the participating insurers paid their respective proportions of the loss with the exception of the respondent who declined liability on the ground that the Agency J had not been authorized to bind it as a participant. Appellant was successful at trial but that judgment was reversed by a judgment of the Court of Appeal the latter holding that the agency was not authorized to sign on behalf of respondent and that art. 1730 of the Civil Code did not apply. Hence the appeal to this Court.
Held: The appeal should be allowed.
The provisions of art. 1730 of the Civil Code are applicable in the circumstances of this case. Furthermore, it must be emphasized that the insurance policy
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in issue here was the renewal of one existing policy and that both of these state on their face that they were issued through the J Agency which acted for respondent before the issue of the renewal policy and continued to do so thereafter.
APPEAL from a judgment of the Court of Queen’s Bench[1], Appeal Side, Province of Quebec, reversing a judgment of Mr. Justice Caron. Appeal allowed.
I.J. Halperin, for the plaintiff, appellant.
P. Casgrain Q.C., for the defendant, respondent.
The judgment of the Court was delivered by
ABBOTT J.—Appellant’s claim is for $23,226.62 alleged to be respondent’s portion of the loss under a Subscription Policy of fire insurance—a type of policy under which the risk is shared by several insurers.
The essential facts are as follows. On July 4, 1958, appellant purchased from Sherburn Investment Corporation a large building on Parthenais Street in Montreal which housed a number of manufacturing establishments leased to various tenants. At the time appellant purchased the building, it was insured against loss by fire under a Subscription Policy to which respondent was one of seventeen subscribers. That policy, issued on February 6, 1958, through the Agency of Jennens & Dennis, the predecessor of Jennens, Dennis & Weigens Inc., was transferred to appellant at the time it acquired the property. Prior to the expiring of the policy, appellant was in touch with the Jennens firm to obtain a renewal of the fire insurance coverage on the said building. In due course, a renewal Subscription Policy, effective February 6, 1961, was issued for a three-year term. Jennens, Dennis & Weigens (hereinafter referred to as Jennens) signed the policy on behalf of six of the thirteen participants, including the respondent New York Underwriters
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Insurance Company. Of the remaining seven participants, six insurers signed the policy each on its own behalf, the seventh by J.E. Clement Inc. presumably acting as agent for that insurer. The copy of the renewal policy issued to appellant states on its face that it replaced the policy which expired on February 6, 1961. Both under the original and under the renewal policy the premiums were paid by appellant to the Jennens firm.
The property insured was destroyed by fire on May 25, 1963, some two years after the issue of the renewal policy. The fire loss was adjusted by a firm of Montreal adjusters and all of the participating insurers paid their respective proportions of the loss with the exception of the respondent. Some six months after the loss, following correspondence with the adjusters, the respondent declined liability on the ground that Jennens had not been authorized to bind it as a participant in the renewal Subscription Policy.
The record does not indicate what authority, if any, Jennens had prior to October 16, 1959, to sign subscription policies on behalf of respondent, but on that date respondent wrote a letter to Jennens which read as follows:
NEW YORK UNDERWRITERS
Insurance Company
Quebec Branch 410 St. Nicholas St.,
Montreal 1
S.T. Doyle
Branch Manager Victor 4-2841
Montreal, October 16, 1959
Messrs. Jennens & Dennis,
43 Westminster Avenue, North,
Montreal West, Que.
Dear Sirs: Re-SUBSCRIPTION INSURANCE POLICIES
This is to certify that this letter is our approval that your office is fully authorized to sign on our behalf on any Subscription Policy of Insurance covering any risk, or risks, which we may have authorized.
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It is understood that you will not at any time sign any Subscription Policy of Insurance without first submitting a wording to us and requesting an authorization.
Yours very truly,
S.T. Doyle
STD:AML Branch Manager
The contents of that letter, written some fifteen months prior to the issue of the renewal policy, were not made known to appellant.
Appellant was successful at trial, but that judgment was reversed by a unanimous judgment of the Court of Appeal.
The trial Judge was of opinion that appellant had failed to prove that Jennens had actual authority to enter into the renewal contract, but held that the provisions of art. 1730 of the Civil Code were applicable and maintained the action. The Court of Appeal agreed that appellant had failed to prove actual authority, but went further and held that the proof established that Jennens was not authorized to sign on behalf of respondent, because the latter had refused the risk. There is evidence to support that finding. The Court of Appeal also held that art. 1730 C.C. did not apply, allowed the appeal and dismissed the action.
So far as I am concerned, the sole question in issue before us is whether art. 1730 is applicable in the circumstances of this case. It reads:
1730. The mandator is liable to third parties who in good faith contract with a person not his mandatory, under the belief that he is so, when the mandator has given reasonable cause for such belief.
The terms of the article are clear. Whether it applies in a given case depends upon a determination of what essentially are questions of fact.
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The trial Judge found that appellant was in good faith and that finding of fact was fully justified. As to the second condition contemplated, that is whether respondent has given to appellant reasonable cause to believe that Jennens was authorized to bind respondent under the renewal policy, I agree with the trial judge that this question should be answered in the affirmative.
It must be emphasized that the insurance policy in issue here was the renewal of an existing policy and not a new policy where different considerations might well apply. It is common ground—and indeed common knowledge—that a great deal of insurance of this kind is arranged through agents or brokers who act for both parties to the contract. Indeed the contract and the letter of October 16, 1959, show that it is quite common for subscription policies of this kind to be signed on behalf of the insurer by an agent or broker. In the present case, five insurers, other than respondent, appear to have authorized Jennens to sign the renewal contract on their behalf. Both the original policy and the renewal policy state on their face that they were issued through the Jennens agency, which acted for respondent before the issue of the renewal policy and continued to do so thereafter.
As I have said, I agree with the trial Judge that art. 1730 C.C. is applicable and I would allow the appeal with costs throughout and restore the judgment at trial.
Appeal allowed with costs.
Solicitors for the plaintiff, appellant: Halperine & Morris, Montreal.
Solicitors for the plaintiff, respondent: Byers, McDougall, Casgrain & Stewart, Montreal.