This summary does not constitute a legal opinion. The information it contains may not reflect the current state of the law.
Originating facts of the case
Marc Barrette is a denturist. In 2004, he rented an Audi with the intention of acquiring it at the end of the lease. The vehicle was insured by Canadian Union Insurance Company (hereinafter “Union”).
In February 2006, the automobile was stolen and subsequently found burned in the Roxton Falls area. Mr Barrette filed a claim with his insurer.
In March 2006, he learned that Union transferred the file to Linda Phaneuf of the Investigation Department. In May 2006, he was informed that he would not be indemnified for his loss on the basis of false declarations.
In April 2008, criminal charges were brought against Mr Barrette, then withdrawn in September 2009.
Mr Barrette filed an action against Union and Linda Phaneuf alleging that they had persecuted him. He claimed the indemnity for the loss of his vehicle as well as other damages (including punitive damages).
Defendants argued that the evidence demonstrated that Mr Barrette was involved in the theft of his vehicle, said evidence being:
- Excessive mileage;
- Mr Barrette’s unstable financial situation;
- A chip-enabled key was required to start the engine which was found in his possession;
- None of the auto parts were stolen;
- Mr Barrette refused to pass a polygraph test;
- Conflicting versions regarding the presence of tire marks under the carport.
Superior Court Judgment
Considering that Mr Barrette met his burden of proof by establishing the insurance contract, the ownership of the vehicle, its value and its theft, the Superior Court agreed that the onus was on Defendants to prove on the balance of probability that Mr Barrette was involved in the theft.
The Court answered certain arguments raised by Defendants as follows.
As concerns the excessive mileage and the potential penalty contractually required to pay upon return of the car, Justice Gibeau opined that they are unlikely reasons for theft by the insured.
As to the allegation concerning the chip-enabled key and after having heard the expert testimonies, Justice Gibeau concluded that the thieves may have used a low-boy.
Regarding the fact that no auto parts were stolen, the evidence showed that organized vehicle theft rings sometimes receive "orders" for specific vehicles from clients. If the good is deemed unsatisfactory, it is burned.
Justice Gibeau furthermore reiterated the principle that the Court cannot draw a negative inference from Mr Barrette’s refusal to pass a polygraph test.
As for the presence of tire marks, Justice Gibeau concurred with Defendants’ position that the only way to move the car without the chip-enabled key is with a low-boy. However, if a low-boy was indeed used, it would have damaged the car shelter and left tire marks. Since Mr Barrette was the only one who noticed the tire marks and the car shelter was not damaged, Justice Gibeau concluded that those facts were serious, precise and concordant enough to presume that Mr Barrette was involved in the theft. Mr Barrette was not able to rebut this presumption and his action was therefore dismissed.
Decision of the court of Appeal
Mr Barrette filed an appeal alleging that Justice Gibeau erroneously concluded that Defendants met their burden of proof in establishing his implication in the theft of the Audi.
Mr Barrette’s appeal was partially granted. The Court concluded that the known facts do not clearly and precisely establish that he was involved in the theft. The Court of Appeal underlined the error of law committed by the first instance judge when she concluded that the proof presented by Union reversed the burden of proof and consequently, it was up to Mr Barrette to establish that he had nothing to do with the theft.
The Court of Appeal took the opportunity to reiterate that when dealing with presumptions of facts, the burden of proof is not reversed regardless of whether the facts are serious, precise and concordant. The entire burden rests on the insurer.
Furthermore, the Court of Appeal concluded that none of the parties involved demonstrated the highest level of good faith. In the course of their investigation, Union and Ms Phaneuf took into consideration irrelevant elements and botched the investigation of Mr Barrette’s financial situation. However and as for Mr Barrette, the Court opined that his behavior and certain declarations may have spread suspicions.
For the above reasons, Union was condemned to pay to Mr Barrette the insurance indemnity. However, the latter’s claim for moral and punitive damages was dismissed.
This recent judgment reminds insurers that in the absence of direct proof of the intentional fault of the insured, they will have to establish said fault by serious, precise and concordant presumptions. It is the insurer’s burden of proof and it cannot be reversed. It is not for the insured to demonstrate that he didn’t commit an intentional fault.
This decision also reiterates the importance for an insurer to keep an open mind in the course of its investigation. It may otherwise be condemned to pay moral and even punitive damages. Insurers Beware!