Quebec Court of Appeal affirms referral of business interruption insurance matter to arbitration

A matter was proper for arbitration because the applicable policy’s arbitration clause was intended to apply in Quebec, while its forum clause was intended to apply in common law provinces and territories, the Quebec Court of Appeal has ruled.

In 9369-1426 Québec inc. (Restaurant Bâton Rouge) c. Allianz Global Risks US Insurance Company, 2021 QCCA 1594, the appellant brought an insurance claim for business interruption because of the COVID-19 pandemic. Upon denial of the coverage, the appellant applied for authorization to institute a class action on behalf of those insured in similar circumstances.

The respondent sought to refer the appellant’s application to arbitration based on a mediation-arbitration clause found in the part of the policy titled “Provincial Statutory Conditions Applicable to the Province of Quebec only.”

The appellant opposed, citing a second dispute resolution clause, included in the part of the policy called “General Terms and Conditions,” that addressed the resolution of coverage disputes by the courts of the place where the insured lives.

The Superior Court of Quebec, ruling in the respondent’s favour, held that there was no conflict between the two disputed clauses of the policy.

The Superior Court found that the second clause related to territorial jurisdiction rather than subject-matter jurisdiction, that the competence-competence principle would not prevent the judge from making a final determination on the mediator’s jurisdiction and the arbitrator’s appointment under the mediation-arbitration clause and that the mediator and arbitrator were both empowered and competent to act in the matter, to the court’s exclusion.

The Court of Appeal of Quebec dismissed the appeal. It held that the applicable standard of appellate review was correctness and that the judge was correct to analyze the appellant’s objection to arbitral jurisdiction fully.

The appellate court then ruled that the judge was correct to refer the matter to arbitration, as the dispute fell within the purview of the policy’s “Provincial Statutory Conditions Applicable to the Province of Quebec only.”

The appellate court held that the policy’s relevant provisions were ambiguous since the coverage disputes involving those insured in Quebec appeared to fall within the ambit of both the arbitration clause and the forum selection clause and in the policy’s language regarding which clause ought to prevail.

However, the appellate court stated it could easily resolve this ambiguity. The appellate court ruled that the forum selection clause was meant to apply only in common law provinces and territories, while the arbitration clause was meant to apply in Quebec.

The appellate court said that this finding was supported by contextual elements, by the rule that specific language would generally prevail over general language and by the rule calling for an interpretation to avoid any conflict while ensuring that both clauses can be given some effect.

Lastly, the appellate court said that contra proferentem was not applicable because that rule would only apply if an ambiguity were still unresolved after other rules of interpretation have been applied, which is not true in this case.