Insurance Policy or Insurance Contract – Which Has the Final Word?

In Van Huizen et al. v. Trisura Guarantee Insurance Company, 2020 ONCA 222, the Ontario Court of Appeal allowed an appeal of the lower courts decision with respect to an insurer’s duty to defend, because the motion judge overlooked the difference between an insurance policy and an insurance contract. The motion judge found that the appellant insurer had a duty to defend the respondents under the policy of professional liability insurance. The motion judge erred by effectively treating a master policy as the entire insurance contract for all members of the Appraisal Institute of Canada (the “AIC”). This caused the motion judge to conflate two insurance contracts that shared standard terms set out in a master policy.

In this case, the respondent VH, was a professional appraiser and a member of the AIC. He carried on business through a corporation operating under the business style of the other respondent, Hastings Appraisal Services (“Hastings”). The appellant, Trisura Guarantee Insurance Company, issued a master professional liability policy to the AIC, as well as an individual certificate of insurance to VH (“VH Contract”). DB was another professional appraiser and a member of the AIC. He was also insured under the master policy and his own individual certificate of insurance (“the DB Policy”). Under the auspices of Hastings, DB appraised a property. Three claims were brought against him for negligent appraisal, two of which held the respondents vicariously liable for DB’s negligence, as they were employers of DB.

The respondents brought this underlying action against the appellant after it refused to defend and indemnify the respondents with respect to the three proceedings. The appellant moved for summary judgment to dismiss the action on the basis that the VH Contract did not provide coverage to the respondents for the negligence of DB. The motion judge dismissed the motion and held that the appellant had a duty to defend the respondents because the terms, “Member” and “Insured”, were broad enough to include both VH and DB who were insured under the same master policy. As a result, the motions judge concluded that coverage included VH’s individual actions as well as those that flowed from his status as an employer.

Trisura appealed and the appeal was allowed, in part.

The Court of Appeal found that the motion judge erred in finding that the appellant had a duty to defend by limiting his inquiry to the language of the master policy. In doing so, the motion judge treated the master policy as the insurance contract between VH and the appellant, which in turn, led the judge to conflate the VH Contract with the DB Contract. As a result, the motion judge incorrectly treated the master policy as a binding contract between the appellant and all members who had been issued an individual certificate.

The Court clarified the difference between an insurance contract and an insurance policy by demarking that a policy may prove the existence of a contract, but it is the contract itself that gives rise to the legal consequences by setting out terms that govern the relationship between the parties to the contract. It is therefore the insurance contract that must be the subject of interpretation when decoding a party’s obligations under a policy. In this case, each member was required to apply for coverage pursuant to the terms set out in the master policy, but coverage was issued only after assessing each member’s individual risk, and after each paid their own premium. Therefore, each member was bound by the terms in the master policy, but also by the unique terms held within their own individual certificates.

Although the appeal was allowed, the Court held that summary judgment should not be granted to the appellant because there were outstanding triable issues. This case serves as a helpful guide to navigate the common error of conflating multiple policies and contracts in insurance law. Litigators must look to both to determine whether the policy is applicable to each individual pursuant to their distinctive contract.