A year ago, Quebec Superior Court admonished the “seemingly impenetrable world of insurers to open their eyes” after it ruled that an insurance company must pay beneficiaries $1.5 million because it failed to properly reveal exclusions in an insurance policy.
Justice Jean-Yves Lalonde warned insurers that they must clearly indicate exclusions or clauses, particularly clauses dealing with suicide, that reduce coverage under an appropriate heading or risk having the exclusion clause declared null and void.
“It’s a ruling that changes the state of law on this issue as it is the first judgment that has annulled a suicide clause,” noted insurance law expert Jacqueline Bissonnette.
“What’s new is that the ruling stipulates that the suicide clause should be included in the same way as the other exclusions. That’s what’s new, and that if it’s not included, the policy will be cancelled and the exclusion will be considered to be unwritten,” added Bisonnette, a Montreal lawyer with Poudrier Bradet Avocats and Chair of the executive of the insurance and civil litigation section of the Canadian Bar Association, Quebec branch.
In Quebec, insurance exclusion clauses are governed by article 2404 of the Civil Code of Quebec which sets out that insured must be able to easily identify exclusion or reduction of coverage clauses by an appropriate heading clearing indicated in the text of the policy. But the Civil Code also has a provision aimed at protecting insurers against policyholders tempted to take out an insurance only to commit suicide shortly thereafter. Under article 2441, insurers can refuse payment if the suicide occurs within two years of signing the contract but only if it was expressly stipulated that coverage would be excluded in such a case.
The Quebec Court of Appeal upheld the lower court decision. The purpose behind article 2404 is to clearly indicate to the insured the limitations of the coverage provided and to draw the insured’s attention to the existence of any coverage limitations. “Its purpose is not to protect the insured from obscure, illegible, or confusing clauses,” said Quebec Appeal Court Justice Christine Baudouin in Beneva inc. c. Bolduc, 2024 QCCA 589.
But contrary to what the trial judge concluded, article 2404 does not require that every clause related to every type of coverage be grouped in the same location.
Rather under article 2404, every exclusion or reduction clause relating to the same coverage must be grouped under the same appropriate heading so that they are easier to locate, which was not the case here. The derogation from article 2404, a public order provision, means that the exclusion clause is null, concluded the Appeal Court.